50 F. 313 -

BOUND V. SOUTH CAROLINA BY. 00.

813

1. T. Smythe, for navigation Brawley & Barnwell, for receiver.
   SIMONTON, District Judge. On the 7th October, 1889, by an order of his honor, JUdge BOND, D. H. Chamberlain was appointed temporary receiver of the South Carolina Railway Company, at the suit in behalf of holders of second mortgage. bonds. At the same time, by the same order, in the same suit, he was directed to take charge, as receiver, of the assets and property of the New York & Charleston Warehouse & Steam Navigation Company. This last-named defendant is a corporation under the law of South Carolina. It had close relations with the South Carolina Railway Company, holding and controlling the connection between its depots and the ocean. The majority of the stock in the navigation company was in the name of the railway company. They had the same president. At the return of the rule to show cause, issued when the temporary receiver was appointed, a large number of the mortgage bondholders and stockholders of the navigation company came before this court, and concurred in the application to make the temporary receiver permanent receiver, against the protest of the president and corporation. This appointment was made. No final hearing has been had in the cause, nor have the exact relations between these two corporations been decided. The New York & Charleston Warehouse & Steam Navigation Company, besides owning wharves and warehouses in Charleston, was authorized by its charter to own or charter steam or other vessels, and to use them in transporting merchandise and passengers between Charleston and New York and elsewhere. 17 St. at Large S. C. p. 628. The company, as such, never owned any vessels, but, being it controlling stockholder in the New York & Charleston Steamship' Company, its steamships were used between Charleston and New York, and the petitioner was the general freight and passenger agent of the warehouse and navigation com pany, stationed at New York. EvidenUyit was engaged in business as a common carrier. The contract with the petitioner was in writing. The engagement began 1st January, 1886. Its term ended 1st January, 1891, but, after 30th April, 1887, either party could terminate it after .six months' notice in writing. Salary, $10,000 per annum. In 1887 all the steamships of the steamship company were sold and taken off the line, the navigation -company losing its control over them. In May, 1888, the petitioner, having given the six-months notice required by contract, severed his connection with the navigation company, and brought this action in one of the courts of New York for $5,280.33, about six months' salary. In January, 1890, he obtained a verdict, and entered judgment in the sum .of $2,791.66 and costs. He now sets that up. He avers that the navigation company is solvent. It was solvent at the time he contracted with it, and up to the time it went into the hands of the receiver, but the recent loss of all Clyde's business has made it insolvent. At least, its income does not pay its expenses. Interest was paid on its mortgage bondsdil January, 1891. No cash dividend bas been paid to stock-
   

holders since 18th March, 1886;" Some surp1ushonds were divilied among them in March, 1887. The claim of the petitioner is this: He is a creditor, whose contribuHort! kept'the 'nl1vigat\on rcompany· a rgoing concern. his debt nCeraed, funds propedyapplicableto it were divellted to pay bond creditors; 'and' stOokholders, ,and hehas.·an requity requiring its restoration. 'FhenaVlgl'tioncompany, .dnring his service and. theaoorual of his demand;was a common cll;)'rier. He relies'upon,the ourrent of cases beginning:witb Schall, 99 U. S. 235, there being no difference in principle, between the case of arai1rbnd company and this case, the pnblicbeing interested in keeping ,the, company a going concern. Before noticing the other questians.in -the case, this will be met. It has never'yet been squarely decided by the supreme cou,rt. Wood v. SUift-TJepO,;,t Co;, 128 U. ,So 421, ,9 Sup. Ct. Rep. 131.. But the doctrine of Foatlirlk v·.Schall yet ,been applied in anycaee except that of a railroad.,Id. Why1?,:"AU the;CRses go upon the ground that a railroad ilNl'peculiar proprerty'Qf a plilblic nature, discharging a great public work. . Nt> railroad designe4 for 8ny ·pUblic benefit can be buUt without the aetirve interposition and of the sovereign power. It is necessary..not only to furnish the money to construct. it; it is more essential to secUre the land uponwhieb it is to be constructed. This requires the exercise of the right ofeminent domain. Without it, money would be powerless. Railroads connect distant point!l. That they are common carriers is but a. small pad of office. They are not only the arteries of trade; they civilize, develop, and enrich large sections of country; cities, towns, and villages, farms, and factories, spring up on their line; they make intercommunication of vital jBl.portance to thou$ands; they>are the meaosef transporting troops,rnunitionE! of war, and Bupplies,pronioting and preserving tranquillity in times of peace, connecting ana creating. strawgic points in times of war; they are public highways.Puhlicinterest, the highest public interest, requires that when constructed they be kept up; be. kept, as. the phrase is, a "going concern." ,The cost· of biilildingand maintaining them is enormous. Tbe state and national governments so far have not been able to .build railroads required by the necessities of our country. Subscriptions to the stock in very few cases furnish money enonghto ;blilildthem. Capitalists are invited to assist in investing in the railroadbbhds. SOjhi order to construct a railroad, two parties Iriust concur,-thli.' stockholders and capitalists, who put in tbe money and the work; the sovereign power, which contributes the right of eminent domain. Withont, the money and withQutthis soverei?:D right, the road Cannot he ];luUt.The consideration which moves the sovereign to bestow this high' ilovereign prerogative-the right of eminent domain :-is the public use of. fhe'railroad. when built; that it remain of use; 'that it be and concern. To this end the first application of its must be made. Thest6ckholder subscribes, and the bondholder lends his money, with knowledge of thia. Neither of them can get until the current expenses are:·paid. Upon this asi

BOUND ·· SouTH CAROLINA BY. CO.

315

surance, all persons who furnish labor and supplies are encourag&<! to give credit to the railroad, and to contribute to keeping it a going concern; and if, perchance, through inadvertence, or for any other cause, any portion of the earnings have been applied to interest or dividends, leaving current expenses unpaid in whole or. part, this is a diversion which the court will certainly correct. Railroads are of public concern, not simply because they benefit the publiCi the sovereign power has way.in which none but the contributed to thl3irconstructio/.l sovereign can contribute, and they are devoted to a public use. It does not follow, because other kinds of property are of great benefit to the public, they also come within this category, and are devoted to a public use,and, as such,that the courts will see that they are maintained. t'This public use," says Justice BREWER, leis very different from a publio interest in the Budd v. People, 12 Sup. Ct. Repi 478. The publio use arises when the sovereign power is essential to the enterprise, and is exercised because of lluchuse. This consideration does not exist in the case of a steamship company, or of any common carrier by water, or of any warehouse company. There are no sovereign, exclusive privileges granted to this navigation company. Anyone can be a common carrier. If the business be profitable, anyone can inaugurate and carry on business between New York and Charleston. The field is open for competition. The act of incorporation is not essential to the business. The public have no special interest in keeping up this company. Of course, the public have an interest in it, as the public have in every kind of business. "No man liveth to himself alone, and no man's property is beyond the touch of another's welfare. Everything, the manner and extent of whose use affects the well-being of others, is property in whose use the public have an interest." BREWER, J., 8upra. But this does not necessarily give the publio the right to control such use. The principles established in Fosdick v. SchaU, and the cases following it, do not apply to the case made by the petitioner. There are other questions made in the case, but for the present let· it rest here. Although the petitioner has no equity to be paid in priority to the mortgage creditors, he has a valid claim. Let an order be taken establishing this claim as that of a general creditor, in the amount of the principal and interest and oosts of his judgment.

316
W:ALTEa8

et 01.

fJ. ANGLO-AMERICAN MORTGAGE

&

TRUST

Co.

(Cire-wlt Court, D. Nebraska. AprU

W, 1&92.)

'

ibnt'duI'l'

!.'

2. ..

',., ,<ielver . " .

A'<iirouit judge' has authority to hear at chambeni iii motion· to discharge a reOil' PBESIDENT, .

AT CHAMBERS-DISCHiRGE Oil' RECEIVERS.

8.

The president of a corporation has no power, without the authority of the directorsor siOckholders, to, consent to the· appointment of a; receiver to wind up the af.. fairs at the corporatioll.
S.uli!:":"'RECEIVEBS-DIS(JHARGB.

.' The'I1l'esident, seoretary, and treasurer of a. corporation being about to be turned out ot,oftlce. by.the directors, the two ftled a bill alleging that the company was insolvent, and ll.skinll' the appointment of a receiver to wind up its affairs. The president immediately appeared in court, and consented thereto in behalf of the company. Tlle reoe,i.ver was thereupon appointed, without any consideration of thEt bill, and without the oourt's attent,ion. being oalled to the president's want of authOrity to enter oonsent.' HeW, that' the receiver would be disoharged on the ap:plication of the directors i it appearing that the bill was entirely Without merit, and that the proceeding was tnstituted for the purpose of wrecking the company, and obtaining control of its business.

.

In Equity. Bill by Edwin H. Walters and Joseph V. McDowell Mortgage & Trust Company for the appointagainst the mjtnt of a receiver. Heard at chambers on motion to discharge the receiver. Granted. JohnL. Webster and H. D· .Estabrook, for complainants. James Gardner Olarkapd John P. Breen, for defendant. CALDWEI,L, Circuit Judge. L. W. Tulleys was president, John V. McDowell secretary, and Edwin H. Walters treasurer, of the AngloAmerican Mortgage & 'rrust Company; The governing body of the corporationconsisted of a ,board of seven, directors, A majority of the dil1ectors; and a majority il,l :value of the stockholders, were in favor of removing Tulleys, McDowell, apd Walters 'from the offices held by them, I:t;ispectively, in the:compaUY. The board of directors.and stockholders had ren;l.Oval, or were about to do so, when McDowell and Walters filed the bill in this case,.alleging that the. company was insolvent, 8.J)dpralYing .for the appointment ofa receivel' .andthe winding up of the affairs of the cOJlporation. The bill was filed hy them as stockholders; McDowell being the owner of 12 and Walters the owner of 5 shares of the capital stock of the company, of the par value of $100 per share. The capital stock of the company is $99,250. Tulleys, the president of the company, without the authority or knowledge of the directory or the stockholders, voluntarily appeared in court the same day the bill was filed, and filed an answer in the name of the company, confessing the allegations of the bill, and consenting to the appointment of a receiver. The court, supposing that the answer was filed by the authority of the corporation, entered an order appointing a receiver, as prayed for in the bill, and consented to in the answer filed by its president, Tulleys. As soon as the board of directors of the company were advised of the filing of the bill, and of the appointment of the receiver.