ÆäÀÌÁö À̹ÌÁö
PDF
ePub

was null and void, alleged that the East Tennessee, Virginia &*Georgia Railroad Company was a purchaser with notice of the illegality, and then proceeded as follows:

"And your orator charges that the said state of Georgia held the said property, after the seizure thereof, as a trust for the payment of the obligations of the said the Macon and Brunswick Railroad Company to the extent of the avails of a sale of the said property to be made for the interest of all creditors of said company, with the privilege unto the said state of protection, first, out of said avails, of its own indorsement of the bonds of said company; that the said state, in and by the resolution aforesaid, declared its indorsement of the bonds held by your orator to be not binding on it, and in advance of demand upon it by your orator refused thereby to pay the said indorsement, or to enforce its said privilege of protection of said indorsement from the avails of said property so in its hands; that your orator thereby became at least entitled to the advantage of the said mortgage lien of the said state for his protection, to have the said property sold with proper regard to his interests and the interests of his fellow bondholders, to be allowed to participate freely with all other lienors of the said railroad at the sale of the said railroad property by his said trustee in bidding upon said property, and paying therefor in the bonds held by him, hereinbefore mentioned, with due regard to the protection of any and all prior liens and the costs and expenses of sale.

"And your orator shows that in and by the said resolutions under which said sale was made, and under color of which the said trustee for your orator became possessed of the said railroad property, the said state of Georgia gave notice of its intention to commit a breach of trust by excluding your orator from participation in said sale on equitable terms with the holders of the first mortgage bonds, by excluding your orator, by the provisions thereof, from participation in the avails of said sale or any benefit therefrom by announcing openly to the world its intention to sell the said road in its own interest rather than in the interest of the creditors of said company, and by divers other acts and announcements, all concurring to demonstrate positively to the world that the said trustee had determined to exclude your orator from any benefit under the said trust, and that it would not regard or protect in any respect the interests of your orator and his fellow bondholders in the said sale or distribution of avails.

"And your orator shows that in point of fact the said state of Georgia, at the said sale, did commit the said breach of trust according to its previously announced intention, did exclude your orator and his fellow bondholders from their rights of equitable protection at sale by bidding and paying the bonds held by them, did sell the said road

in a manner contrary to the interests of the creditors generally of the said road for a very small part of its real value, the price nominally bid therefor being one million dollars, and the real value thereof being four million dollars, and did sell the road to itself for said price, in its own interest, and without regard to the interests of the beneficiaries of the trust, including your orator, and thereupon, in equity, held the said property as a trust for you orator, and subject to his lien for the payment of his said bonds.

"And your orator avers that the said the East Tennessee, Virginia and Georgia Railroad Company and the East Tennessee, Virginia and Georgia Railway Company had full notice in the purchase of said property made by each of the said breach of trust by said trustee, and took the said property subject to the duties and liabilities of said trustee towards your orator,-that is to say, with the lien of your orator unaffected and undischarged by the sale of said property made by said trustee in breach of his fiduciary duty,-and that the said last-mentioned company now holds said property as trustee for your orator, and subject to your orator's lien for the payment of the said indebtedness to him."

The East Tennessee Company answered the supplemental bill, stating the various conveyances through which the title had finally come to be vested in itself, and asserting the validity thereof. All the facts above stated appear on the face of the pleadings and exhibits. Before the sale was made by the state, John P. Branch, a holder of bonds of the same series as those held by these complainants, had filed a bill in the circuit court of the Southern district of Georgia, asking for an injunction to prevent the sale, but the application was denied. Branch v. Railroad Co., 2 Woods, 385, Fed. Cas. No. 1,808. Branch had also taken a decree pro confesso against the Macon & Brunswick Railroad Company, and he was allowed to intervene below, and become a party to the present suit, in which he claims the same rights as those asserted in the original and supplemental bill. The cause was submitted to the court on bill, answer, and exhibits, and resulted in a decree of dismissal. The case was then brought here by appeal.

Chas. N. West, W. W. Montgomery, D. H. Chamberlain, and John Howard, for appellants. George Hoadly, for appellees.

Mr. Justice WHITE, after stating the case, delivered the opinion of the court.

The case of the appellants rests upon two distinct legal propositions. The first one asserts their right to be subrogated to a mortgage security taken by the state of Georgia, and, by virtue of such subrogation, to enforce the mortgage against the property of the railway company. The other proposition is that they are direct mortgage cred

Itors, and have a specific mortgage lien upon the property of the company.

A right of subrogation, such as is here claimed by the appellants, does not involve any direct lien in favor of the creditor, resulting from his position as such. It only exists in consequence of his being, as a creditor, entitled to enjoy certain rights which are vested in the surety at the time the subrogation is claimed. This principle is fundamental. and its application is fatal to the complainants. As the creditor's right to subrogation depends on the existence, in the surety, of the rights to which subrogation is sought, it follows that, after the surety has parted with the thing given him for his protection, the creditor can have no subrogation to such thing. In the present case, when the subrogation was claimed, the state had divested herself of all her rights, under the mortgage of indemnity, by selling the mortgaged premises, and had applied the proceeds of the sale to the payment of the debt Wuch the mortgage was given to secure. She had no longer any rights of her own, therefore no subrogation could be derived through her. Aside from this consideration, in order to enforce equitable subrogation against a surety, he must be made a party to the cause. The state of Georgia is not, and cannot be, without her consent, impleaded. All the foregoing doctrine was applied and carefully stated in Chamberlain v. Railroad Co., 92 U. S. 299, where, speaking through Mr. Justice Field, the court said: "Whatever right the plaintiff had to compel the application of the lands received by the state to the payment of the bonds held by him, it was one resting in equity only. It was not a legal right arising out of any positive law, or any agreement of the parties. It did not create any lien which attached to and followed the property. It was a right to be enforced, if at all, only by a court of chancery against the surety. But. the state being the surety here, it could not be enforced at all, and, not being a specific lien upon the property, cannot be enforced against the state's grantees. Where property passes to the state, subject to a specific lien or trust created by law or contract, such lien or trust may be enforced by the courts whenever the property comes under their jurisdiction and control. Thus, if property held by the government, covered by a mortgage of the original owner, should be transferred to an individual, the jurisdiction of the court to enforce the mortgage would attach. as it existed previous to the acquisition of the government. The Siren, 7 Wall. 158, 159. But where the property is not affected by any specific lien or trust in the hands of the state, her transfer will pass an unincumbered estate."

The appellants must therefore rely for the maintenance of any rights they may possess upon their second proposition, which is to the effect that the bonds which they hold were

secured by the statutory mortgage created by the act of 1866, and that the mortgage rights thus existing were not affected by the sale made by the state in 1875, but are yet subsisting, and may be enforced against the mortgaged property in the hands of the present defendant. It is obvious that, if the statutory mortgage created by the act of 1866 was solely for the indemnification of the state, and not for the security of the bondholders, the latter, whatever may be their indirect rights by subrogation, cannot directly avail themselves of the statutory mortgage. Chamberlain v. Railroad Co., 92 U. S. 299; Tennessee Bond Cases, 114 U. S. 663, 5 Sup. Ct. 974, 1098. In order, therefore, to give them the relief which they seek, the statutory mortgage must be treated as having been given to secure the holders of the bonds. But, if this view be taken, the claim here asserted is untenable. If there be a mortgage in favor of complainant's bonds, it must result from the terms of the act of 1866; but these bonds were not issued under that act, and owe their existence to the authority conferred by the act of 1870. This act reserved no mortgage, and the bonds of relator, having been issued under it, do not purport to be secured by mortgage. The claim that they are so secured is deduced from this contention: The act of 1870, it is asserted, purported to be an amendment to the act of 1866; therefore the provisions as to mortgage found in the act of 1866 were incorporated into and became a part of the act of 1870. Between 1866 and 1870, however, the following amendment to the constitution of Georgia was adopted, and it was in force when the act of 1870 was passed:

"The general assembly shall pass no law making the state a stockholder in any corporate company; nor shall the credit of we state be granted or loaned to aid any company without a provision that the whole property of the company shall be bound for the security of the state, prior to any other debt or lien, except to laborers; nor any company in which there is not already an equal amount invested by private persons, nor for any other object than a work of public improvement."

Under these provisions, if we were to construe the act of 1870 as desired, the result would be to make that act clearly violate the amendment to the constitution just cited; for, if the statutory mortgage secured the bondholders, then the bonds issued under the act of 1866 were necessarily secured by a first mortgage, and those issued under the act of 1870 by a second. This conclusion can be avoided only in one or the other of two ways: First. By contending that the incorporation of the provisions of the act of 1866 into the act of 1870 made the bonds issued under the latter act equal in rank of mortgage with the bonds issued under the former. But to admit this contention would make the act of 1870 void, because it would, if thus construed, impair the obligations of the contract made

420

with the holders of the bonds first issued. Or, second, by contending that, inasmuch as the mortgage created by the act of 1866 was in favor of the state, and not in favor of the bondholders, the issuance of the bonds of the second series simply increased the aggregate amount of the state's liability, and that there was no difference between the two in rank of lien and mortgage, since the state held both the first and the second series, and the two were practically issued under one act. But this would be an assertion that the statutory mortgage created by the act of 1866 was solely for the benefit and indemnification of the state, and that the holders of the bonds were not directly interested therein. If this position be assumed, it defeats the complainants, as we have already seen.

However, it is claimed that, even if the state's indorsement of the bonds issued under the act of 1870 was in violation of the Constitutional amendment, the only result is to render the indorsement void, and thus the bonds are left outstanding as valid contracts of the railroad company, secured by the statutory mortgage reserved in the act of 1866. This contradicts the plain text of that act, since it only purported to reserve a mortgage in favor of bonds indorsed by the state. And, besides, if this argument were adopted, it would render efficacious a legislative violation of the constitutional amendment, since it presupposes that there was power in the general assembly to allow the mortgage security, which had been taken by the state solely in order to secure the bonds she had guarantied, to be transferred to others as a means of securing bonds to which her guaranty could not be constitutionally afixed. In other words, tuat the state, having a first mortgage security, which she had taken to secure bonds, of which she was an indorser, could vitiate such security by allowing others to participate in the benefits thereof, and thus do by indirection what the constitution forbade her to do directly.

Nor does the case of Railroad Cos. v. Schutte, 103 U. S. 118, sustain this argument of the appellants. There the state of Florida issued her bonds to aid the railroads, securing herself by a first mortgage on the roads, and taking in exchange bonds of the companies. It was certified on the state bonds that they were protected by a first mortgage "as security for the holders thereof." The bonds, thus drawn, were indorsed by the railroad companies, and issued by them. The obligation of the state was found unconstitutional, but it was held that, inasmuch as the railroad companies had indorsed the bonds thus drawn, they had guarantied the existence of the mortgage, and the holders of the bonds were therefore entitled, as against them, to insist upon the validity of the mortgage, and to assert legal rights by virtue thereof. the present case there is no mention of the existence of a mortgage on the face of ne bonds declared on by the complainants; nor

In

is there any statement of such mortgage in the act of 1870, under which they were issued. The claim here is merely that a mortgage resulted from the statute passed in 1866, which statute in express terms reserves a mortgage only for such bonds as are indorsed by the, state. The case relied on involved no question of the existence of a mortgage, but*the* point at issue was whether an admittedly existing mortgage could be enforced against the corporations. Here, on the contrary, the question is whether the mortgage under the act of 1866 ever existed quoad the bonds issued under the act of 1870.

ue.

These conclusions are decisive of the cause, but other considerations, which affect the merits of the controversy, are equally fatal to the appellants. It cannot be doubted that, even if the bonds issued under the act of 1870 were secured by the statutory mortgage reserved by the act of 1866, they were second in rank, and therefore their holders were junior mortgage creditors. Nor can it be gainsaid that the statutory mortgage conferred upon the state a power to sell the mortgaged property. This power was exercised in 1875. The grounds upon which it is asserted that the sale was void are: First, that before the sale it was announced that only bonds of the issue of 1866 would be received in payment, and that at the sale it was declared that such bonds would only be received at their market valThere is no averment in the bill that the first mortgage creditors complained of these requirements, nor does it contain any allegation that the holders of the second series of bonds, who are now championing the rights of the first mortgage creditors, bid at the sale, or in any way manifested their willingness to free the property from the first mortgage debt. The rights of the second mortgage creditors were necessarily subordinate to the paramount rights of the creditors first in rank. The property of the company had been for nearly two years under seizure, the default having occurred in 1873. It was the plain duty of the second mortgage creditors, if they were interested in preventing the sale, and wished to tender their bonds in payment, to bid a sufficient amount to lift the prior incumbrance. only is there no averment that they did this, but the bill contains an assertion that, in the event the mortgage indemnified only the state, then equality of rank existed between the holders of the second and the holders of the first series of bonds; and upon this alleged equality the complainants, as holders of the second series, base their claim to: participate ratably in the distribution of the: purchase money, and thus infringe upon the unquestioned rights of the bondholders under the act of 1866.

Not

The other ground of attack upon the sale was the incapacity of the state to purchase at her own sale, which, it is claimed, resulted from the fact that the statutory mort

425

gage reserved by the act of 1866 made the state a trustee for the bondholders. Conceding this, the state was both a trustee and a mortgagee, and she had a direct individual interest in the property, by reason of her indorsement on the bonds. The general assembly of the state of Georgia had expressly authorized the governor to bid in the property, on behalf of the state, in case there was no bid sufficient to protect the outstanding obligation which bore the state's indorsement. Even if this provision be considered inapplicable upon the ground that the state could not lawfully bid at the sale under a power conferred upon herself by herself, the complainants' position would be untenable. It is conceded that the settled doctrine in Georgia is that the purchase by a trustee is not absolutely void, but merely voidable, at the option of the cestui que trust. Worthy v. Johnson, 8 Ga. 236. Let us suppose, for the sake of argument, that the cestuis que trustent in this case were the holders of the bonds which were issued under the act of 1866 and of those which were issued under the act of 1870. The bill contains an averment that the holders of the first class surrendered their bonds to the state after her purchase of the property, and that she has discharged her liability under her indorsement upon their bonds. In retiring these bonds the state paid off the first mortgage debt, not only to the extent of her bid, but to nearly twice its amount. The action of the first mortgage creditors in accepting the extinguishment by the state of their securities and the mortgage by which they were secured was, in effect, a ratification of the sale, and established its legal validity, so far as they were concerned.

Under these circumstances, conceding that the second series of bonds were secured by a second mortgage, their holders cannot equitably be allowed to avoid the sale without tendering reimbursement of the amount of the first mortgage. Their claims were subordinate to those of the holders of the first series, and they have no recourse until the latter are paid, and it would be grossly inequitable to allow them to avoid a sale which has been ratified by those who were primarily interested in the price resulting therefrom, without compelling them, as a prerequisite, to do equity by protecting the first incumbrancers. Collins v. Riggs, 14 Wall. 492; Jones, Mortg. § 1669; Pom. Eq. Jur. § 1220 et seq. Instead of doing this, although nearly two years had elapsed between the sale and the filing of the bill, the complainants assert that their bonds are, in the contingency last stated, equal in rank of mortgage lien with those of the holders of the first series, and hence that they are entitled to an equal participation in the proceeds of the mortgaged property. Indeed, in the discussion at bar, the contention was advanced that the retirement of the first mortgage bonds by the state, after her purchase,

extinguished the prior mortgage by which they were secured, and that, the sale being voidable at the instance of complainants,an option which their bill asserts,-the second mortgage, which was held by them, has thus become first. No offer to pay the amount of the first mortgage was made prior to the purchase of the property by the defendants, and their title cannot now be divested, even if such an offer were made. We think the complainants are not entitled to the relief which they claim, and that the property passed to the defendants free from any lien under the statutory mortgage arising from the act of 1866 or 1870, even if from the latter any such mortgage ever re sulted. Affirmed.

(156 U. S. 296)

EMERT v. STATE OF MISSOURI.
(March 4, 1895.)
No. 120.

CONSTITUTIONAL LAW-INTERSTATE COMMERCE—

PEDDLER'S LICENSE.

Rev. St. Mo. § 6471, declaring any person who deals in selling goods, by going from place to place to sell the same, to be a peddler, and section 6472, prohibiting peddling without a license, which section 6473 provides shall state how the dealing is to be carried on, and which, by section 6479, must be exhibited on demand of a sheriff, collector, constable, or citizen householder of the county, is not an invasion of the power of congress to regulate interstate commerce, as applied to one who, as agent of a manufacturer in another state, thus sells and delivers sewing machines which he has with him at the time of soliciting purchases. 15 S. W. 81, 103 Mo. 241, affirmed.

In Error to the Supreme Court of the State of Missouri.

This was an information, filed July 27, 1889, before a justice of the peace in the county of Montgomery and state of Missouri, for a misdemeanor, by peddling goods without a license, in violation of a statute of the state, contained in chapter 137, entitled "Peddlers and Their Licenses," of the Revised Statutes of Missouri of 1879, the material provisions of which are copied in the margin, and which is re-enacted as chapter 125 of the Revised Statutes of 1889.

1 Sec. 6471. Whoever shall deal in the selling of patents, patent rights, patent or other medicines, lightning rods, goods, wares or merchandise, except books, charts, maps and stationery, by going from place to place to sell the same, is declared to be a peddler.

Sec. 6472. No person shall deal as a peddler without a license; and no two or more persons shall deal under the same license, either as partners, agents or otherwise; and no peddler shall sell wines or spirituous liquors.

Sec. 6473. Every license shall state the manner in which the dealing is to be carried on, whether on foot, or with one or more beasts of burden, the kind of cart or carriage, or, if on the water, the kind of boat or vessel, to be employed.

Sec. 6476. Any person may obtain a peddler's license by application to the collector of the county in which he intends to carry on his

*297

[ocr errors]

• The information alleged that the defendant on June 26, 1889, in that county, "did then and there unlawfully deal in the selling of goods, wares, and merchandise, not being books, charts, maps, or stationery, by going from place to place, in a cart or spring wagon, with one horse, to sell the same, and did then and there, while going from place to place to sell said goods, wares, and merchandise aforesaid, unlawfully sell one sewing machine to David Portucheck, without then and there having a license as a peddler, or any other legal authority to sell the same; against the peace and dignity of the state."

The defendant pleaded not guilty, and was adjudged to be guilty, and sentenced to pay a fine of $50 and costs. He appealed to the circuit court of the county; and in that court the parties, for the purpose of dispensing with evidence, agreed in writing, signed by their attorneys, that the case might be decided by the court on the following agreed statement:

"(1) That for more than five years last past the Singer Manufacturing Company has been, and still is, a corporation duly organized under the laws of the state of New Jersey, and a citizen of that state.

"(2) That on and prior to June 26, 1889, E. S. Emert, defendant, was in the employ of said Singer Manufacturing Company, on a salary for his services, and at said time, in pursuance of said employment, was engaged in going from place to place in said Montgomery county, Missouri, with a horse and wagon, soliciting orders for the sale of Singer sewing machines, having with him in said wagon a certain New Singer sewing machine, which on said day he offered for sale to various persons at different places in said county, and that on said day the defendant did find a purchaser for said machine, and did sell and deliver the same to David Portucheck, in said county.

"(3) That said Singer machine in question was manufactured by said Singer Manufacturing Company at its works in the state of New Jersey, and that said sewing machine belonged to, and was the property of, said company, and that it was forwarded to this state by said company, and by it delivered to the defendant, as its agent, for sale on its account, and said machine was sold on account of the said manufacturing company;

trade, by paying the amount levied on such li

cense.

Sec. 6477. There shall be levied and paid, on all peddlers' licenses, a state tax of the following rates: First, if the peddler travel and carry his goods on foot, three dollars for every period of six months; second, if one or more horses or other beasts of burden, ten dollars for every period of six months; third, if a cart or other land carriage, twenty dollars for every period of six months; fourth, if in a boat or other river vessel, at the rate of one dollar per day for any period not less than five days; and such license may be renewed, at the expiration of the first license, for any period not greater than six months, on payment of fifty cents a day, the number of days to be specified in such li

that said machine was of the value of fifty dollars; that the defendant had no peddler's license at said time."

The court adjudged that the defendant was guilty as charged in the information, and that he pay a fine of $50 and costs. The de feudant moved for a new trial, because the facts in the agreed statement constituted no offense, and because the statute on which he had been charged and convicted, being chapter 137 of the Revised Statutes of 1879, was in contravention of section 8 of article 1 of the constitution of the United States, and void in so far as it affected him. The motion for a new trial, as well as a motion in arrest of judgment, was overruled; and the defendant, upon the ground that a constitutional question was involved, and assigning as errors the same causes as in his motion for a new trial, appealed to the supreme court of the state, which affirmed the judgment. 103 Mo. 241, 15 S. W. 81.

The defendant sued out this writ of error, which was allowed by the presiding judge of that court upon the ground that there "was drawn in question the validity of a statute of, or an authority exercised under, said state, on the ground of their being repugnant to the constitution of the United States, and the decision was in favor of such their validity."

S. N. Taylor and Lawrence Maxwell, Jr., for plaintiff in error. R. F. Walker, Atty. Gen. Mo.

Mr. Justice GRAY, after stating the case, delivered the opinion of the court.

From early times in England and America, there have been statutes regulating the occupation of itinerant peddlers, and requiring them to obtain licenses to practice their trade.

In Tomlin's Law Dictionary are these definitions: "Hawkers. Those deceitful fellows who went from place to place, buying and selling brass, pewter, and other goods and merchandise, which ought to be uttered in open market, were of old so called; and the appellation seems to grow from their uncertain wandering, like persons that, with hawks, seek their game where they can find it. They are mentioned in St. 33 Hen. VIII. c. 4." "Hawkers, pedlars, and petty chap

cense. Any county court may, by an order of record, require all peddlers doing business in their county to pay a license tax, not greater than that levied for state purposes.

Sec. 6478. Every person who shall be found dealing as a peddler. contrary to law or the terms of his license, shall forfeit, if a foot peddler, the sum of ten dollars; on one or beasts of burden, twenty-five dollars; in a cart or other land carriage, fifty dollars; in a boat or other vessel, one hundred dollars.

more

Sec. 6479. Every peddler shall, upon the demand of any sheriff, collector, constable, or citizen householder of the county, produce his license, and allow the same to be read by the person making the demand; and, in default thereof, shall forfeit the sum of ten dollars.

867.

« ÀÌÀü°è¼Ó »