O. TEL. CO.
INTERSTATE TEL. CO. v. BAImMORE & O. TEL. CO. OF BALTIMORE COUNTY et d.
Wircu1t Court. D. Ma11lWina: June 8. 1892.)
aSOLVENCY OF AGENT-LIABILIT.Y OF PRINCIPAL TO
THIRD PARTIES. The B. & O. R. R. Co., having power to transact a general telegraph bnsiness, lind being the owner of an extensive telegraph system, caused the Telegoraph Company of Baltimore County to be incorporated with a small capital, and in its name made a contract with the complainant. For breach of that contract the complainant recovered judgment against the Telegraph Company of Baltimore County. The B. &0. R. R. Co. sold out its whole telegraph system to the Western Union Telegraph Company, and the Telegraph Company of Baltimore County was left without 8ssets of any kind, and became insolvent. Held, that as the railroad company was the sole stockholder of the Telegraph Company of Baltimore County, and appointed its officers, and held it out as having authority to contract with regard'to the whole systeID owned by the railroad company, the Telegraph Company of Baltimore County was a mere agent of the railroad company, a mere name, in fact, under which the railroad company conducted its telegraph business, and that, under the circUlDlltances of this case, a court of· equity had jurisdiotion to decree that the railroBli company. as principal, should pay complainant's judgment against its agent, from which it had taken all the property which it had represented that· its agent controlled. (BlIZuwus by t"M Court.)
In Equity. Creditors' bill. Decree for complainant. Munnikhuysen &; Bond. for plaintiff. J. K. Gbwenand Charles J. M.Gwinn. for defendants.
MORRIS. District Judge. This is a creditors' hill filed by the Interstate Telegraph Company seeking, in equity, to obtain payment of a judgment against the Baltimore & Ohio Tp,legraph Company of Baltimore County for $25,133.75, which it recovered on the law side of this court, April 19, 1890, and execution upon which has been returned nulla bona. The judgment was recovered for damages sustained by the complainant company for the breach of a contract which it had made with the Baltimore & Ohio Telegraph Company of Baltimore County, dated December 15, 1885, and a supplemental agreement, dated November 30, 1886, by which contracts the Interstate Telegraph Company agreed to build, equip, operate, and maintain certain lines of telegraph in Michigan and Ohio, in: consideration of an agreement for an exclusive interchange of telegraph business with the ger.eral telegraph system connecting the various leading cities of the United States, which the Baltimore & Ohio Telegraph Company of Baltimore County was at the dates of said agreements stated therein to be engaged in operating and extending. It appears from the testimony and from the admissions of the pleadings that about. 1877 the Baltimore & Ohio Railroad Company, having a system of telegraph poles and wires located along its railroads and maintained for use in its railroad business, began extending its telegraph system for general commercial telegraphing, and thatin 1882, by act of the Maryland legislature, (Act 1882, c. 231,) it obtained auv.51F.no.3-4
thority. to .<l91 a general compa?y, on September 30, 1884, owned 6,8136 rruJes of poles; and 47,417 11'11les of wire; that the Baltimore &; Oh'io Telegraph Company of Baltimore County was incorporatedwith a capital of $100,000, November 2, 1885. by seven corporators',btit'that aIl'the capital stock was subscribed by the Baltimore & Railroad Company, and always belonged exclusively tp it until November,2, and the corporators and officers of said telegraph company were employes of the railroad company, and appointed by it. It appears, in fact, that the said telegraph company was but a department or bureau of the Baltimore & Ohio Railroad Company. and an agent in the name of which it made the contracts for extending its system and operatini1;its telegraph lines. It appears that there w.as an ex,pectation that the Baltimore & Ohio 'l'elegraph Company of Baltimore County wouldlWquire defined rights of property in the system uPJ;>y the Baltimore & Ohio RaiIroad Company. and would 'pity for it by the delivery to the raiIroadcompany of bonds to the of $6.000,000, ,secured by mortgage of the property to be acquired by the telegraph company, but this expectation was never carried into effect. It appears that in October, 1887. the telegraph system thus owned and controlled was of the value Of $8.00.0,000. as stated in the answer of the Baltimore & Ohio Railroad CompanYi that on October 15, 1887. the Baltimore & Ohio Railroad Company entered into an agreement with the Western Union Telegraph Company to transfer to it all said telegraph proPerty, rights. ,and franchises for $,1;>,900.009 of the stock of the Western Union Telegrl,l-ph Company, and the paYfllent by it. to the Railroad Company of the sum of $60.000 a year for Western Union Telegraph Company also agreeing to and save the rll*oad company from all obligations, loss, or damage, on account of any act, default, Of omission of the Western or the Baltimore & Ohio Telegraph Company of Baltimore c:ounty, or any state or subtelegraph company by: it. or. by the railroad company, or controlled?Y :<>vvnershlp ofsto(lk, ()r otherwise. It appears ,that thu\:l acqu.lr:ip.g :the whole ·Baltimore, ·Ohio telegraph sYStfl\ll> the railroad ·· Telegraph Company wa,s, put into posses$ion of it,alld thtlre'llpQIl consolidated and comi:>iP,rd, it with its ()WJ;1 and. th'e I3altimore & Ohio Telegraph. CpP1:pany of Baltimore ,Qojlnty withouta[l,Ypropertyor assets of and becanle a:t ,once insolvent and unai?le to perform its or pay its debts. :The 'complainant. prays th!Lt the Baltimore & Ohio Railroad Compatly !pay be decreep to be madeli!J,ble. for the debts .anll, contracts of ¥ll1qre & 0Hip,Telegraph pompanyof BaIti ll10re entered into by It Ils the agEltltQf the ra,ilroad company 2, 188&, and the said railr()ad decreed to hold October 15, the funds arising from the sale by it ofproperty()f the Baltimore & Ohio '.['elegraph Oompa[lY of BaItim()re County .in .trust. for all the ,cre4HoI'S of said telegraph company who became SUCh. bjv'irtue. ofcontracts
INTERSTATE TEL. CO. 'D. BALTIMORE & O. TEL. CO.
madepr,i9;r ,to saic.l sale, and that a receiver of saic.l telegraph company be appointed. . The two grounds of defense most strongly urged on behalf of the Baltimore . & Ohio Railroad tCompimy are (1) that the chattel property 'sold and transferred to the Western Union Telegraph Company was its own property, and n'ever was the property of the l?altimore & Ohio Telegraph Company of Baltimore County; (2) that, if it be conceded that the Baltimore & Ohio Telegraph Company of Baltimore County was its in making the contract upon which the complainant recovered its judgment, the complainant, having elected to sue, and having obtained judgment at law against the agent, cannot now in this suit sue the principal. In answer to the first defense, it is quite evillent from the ccmtract .of December 15, 1885, which was the 'cause of action upon which the judgment was recovered, that the Baltimore & Ohio Telegraph Company of Baltimore County was held out as having the fullest control and power to contract with regard to all the telegraph lines of the Baltimore & Ohio telegraph system. By the contract itself, it was expresHJy stipulated that these lines should be considered to include all the territory of the United States (except that portion to be covered by the lines agreed to be built by the Interstate Telegraph Company its!)l!) during the five years for which the business connection was to continue; and it waH expressly agreed that. if during that time the ownershilJ or control 01 the lines of the Baltimore & Ohio svstem should be transferred to any other com pany, provision for the p;otection of the interests of the Interstate Company should be made. The .contract was signed by D. H. Bates, as president and general manager of the Baltimore & Ohio Telegraph COllJpany of Baltimore County, but Mr. Bates states that he was employeli and paid by the Baltimore & Ohio Railroad Company to manage its gelleral telt'graph business, and that, although nominally its preiiident, he has no knowledge of there ever having been any meeting of any perSfms claimiug to be directors or officers of the Baltimore & Ohio Telegraph Company of Baltimore COUllty. Upon this state of facts it is evident that, the Balti1I10re& Ohio Railroad Company having, in the name of its agent, made the contract in December, 1885, to continue for five years, it did, in October, 1887, put it out of its own power, and out of t.he power of its agent. to perlorm the contract by selling out the whole telegraph system controllellby it to another corporation, which absorbed it; no provision having been niade for the protection of cOl1llJlainant's interests. as had been stipulated for. 'rhe agent was thus stripped of all the telegrnph property and rights constituting, as was stated in the contract, "a general telegraph system connecting the various leading cities of the United States," nqli which the answer of the railroad company avers was of the .value of 88 1000,000, and as to which the contract assumed that the agent had the right to make a contract which established a connection tocontin,\le. for five year8. The railroad received the price of the properly, nnll Jeft those who had cuntracted with its agent to seek such,relllcould discover.
" It is dear that it was for the benefit of the railroad which was the. actual owner of the whole telegraph system, that the contract with the was made, and that the railroad company was liable on the as principal, and it does not appear that the facts present a case in a creditors' suit in equitv, the general common-law rule is appllcable, by which a creditor who' has sued and obtained judgment against an agent is held to be deprived of the right to proceed against the principal. Even at law, it may be doubted whether the rule is as firmly settled as it is sometimes stated. In Maple v. Railroad 00.,40 Ohio St. 313, the court said:
in his decision in P1'iestly v. Fernie, 3 Hurl. & C. 977, places his decision. upon the additional consideration that the judgment against the agent altered the situation of the prinCipal. We are also cited to Whart. Ag. § 473. The author cites Priestly v. Fernie, but adds: · There is much reason for the position that the mere taking of judgment against the agent, under such ,circumstances, should not, when the jUdgment is unsatisfied, extinguish tbe debt.' "
It would certainly seem that in equity, to be binding, such an election should be made with full knowledge of the relationship between the parties. In this case the relationship between the railroad companyand the Baltimore & Ohio Telegraph Company of Baltimore County was so obscured, by plans and expectations which were never carried out, 'by the operation in the telegraph company's name of a wide·spread and rapidly extendirtg telegraph system which did not belong to it, although the railroad company held the telegraph company out as controlling it, and by the statements in the railroad company's published reports with regard to telegraph arrangements betweeri the two companies, which were only in progress, and never were consummated, that it was itUpossible to discover'just what that relationship was, especially after the telegraph company was practically obliterated by the action of the railroad company. .Before the sale to the Western Union Company the railroad company asserts that'the Baltimore & Ohio Telegraph Company of Baltimore County Was solvent, and able to pay its debts and obligations; and it appears that by that sale, the proceeds of which the'tailroadcompany received, itlifal'l stripped of its property and agency, artd was left powerless to fulfill the contracts made in its nlime. Whetherthe raiIroadeompany and the Telegraph Company of Baltimore County are to be considered in this lit'igation principal and agent, or the railroad company as the sole stockh6lder of a corporation of which it was also creditor, in any Cl,lse thettansiwtiQn, in so far as it deprived thedompIainant in this case of the pavment of its claim, was inequitable, and' the means by which the 'i'lis'ultwas effected were such as to give jurisdiction in equity, and to require'the interposition of the court to grant relief by decreeing the railroad company liable for the liebt. Thejudgu1ertt against the telegraph 66Iiiparty might be held not to settle the rights of ant 'agairi'sttherailroad company if therailroarl company had not intervened or participated in any way in the defense of the Rctionillwhich
MORRIS V. GRAHAM.
the judgment was obtained; but that defense is not raised by the auswer, and quite possibly could not be made. In my opinion, the complainant is entitled to a decree against the Baltimore & Ohio Railroad Company for the amount of its judgment.
March 21, 1892.)
(O£rcuit CoUrt, S. D. Fl·orida.
SERVICE OF 8UMMONS-WAIVER-ApPEARANCE-REMOVAL OJ!' CAUSE.
Where defendants euter a special appearance in the state court tor the purpose of contesting the validity of service, and sUbsequently remove the cause to a federal court, such removal, even though it should be considered as equivalent to a general appearance, does not preclude the court from examining the legality of the. original service; for, while a general appearance is a waiver of mere irregularities of service, the court may at any time dismiss the caae for auy illegality rendering the service void. A bill to remove cloud from title to real estate lying in a state is not au action in personam, to which personal service is necessary, and the state has authority to provide for service upon nonresidents by publication.
SAME-REPEAL OF STATUTES.
Act Fla. 1881, providing for personal service upon residents of the state not resIdin!! in the county where the suit was brought, repealed by implication the act of 1828, which authorized service upon such persons by publication. Act Fla. 1885, providing for service by publication for four weeks upon nonresi. dents of the state, persons whose residence is unknown, and persons who are absent from the state, or who conceal themselves so that service cannot be had, applies to all persons not reached by the act of 1881, and repeals by implication the act of 1828 as to all such persons. As this act is therefore the only one in force relating to service by publication, and as it requires publicatian for the same period both as to citizens of Florida and citizens of other states, there is no ground for the contention that it is unconstitutional, as denying tocitizen8 of other states the same priVileges and immuniti allowed to ls citizens of Florida.
SAME-CONSTITUTIONAL LAW-NONRESIDENTS-EQUAL PRIVILEGES.
In Equity. Bill by George W. Morris against Graham & Hubbel and ·others to remove cloud from title. The cause was commenced ill a state court, and subsequently removed to this court. '1'. M. Shackleford, for complainant. Arthur F. Odlin, for respondents.
LOCKE, District Judge. Defendants herein entered a special appearance in the state court for the purpose of contesting the validity of service, and before the question was decided removed the cause to this .court, leaving that question still pending. It is now strongly urged by complainant that the removal of the case into the United States court was equivalent to a general appearance, and waived any right of objection to the insufficiency of service or summons; citing and relying upon ,Sayles v. Inmrance Co., 2 Curt. 212; Tallman v. Railroad Co" 45 Fed. Rep. 156;' Bushnell v. Kennedy, 9 Wall. 387,393; Sweeny v. Coffin, 1 Dill. '13, 75; Edwarda v. Insuru,nce Co., 20 Fed. Rep. 452; and Water Co. v.