CITY OF NEW ORLEANS 'V. PAINE.

835,

otberposition than it now occlipips, you will ,conclnde that its position nOWr marks position in 1769, wh,en the grant was made., . r "Having thus satislied yourself as to the tru·· southern shore line of the lake at tbe date of the grant, you will run It blank compass line;wilhout marking or measuring thesam.., from the most southern point of slrch line, so ascertained, in a west course. ,to the lower side line of the Fontenot claim, hert-tolore direct..d to be extt-nd..d froll) tile south line of T. 10 S., R. 6 E.; you will at slIch point of int..rsection estalJlish tbe lower back comer of the grant and of the Fontl'not claim. "From that point you will prolong the line west, marking and measuring the sallie, to the ul'p,.r siele line of McDlJIIOKh, as surveyed by John Kap, estahlishing a corner at the intersection of the lower side Ime of t1lat clailll, and taklllg counections with all township aud section lines, and establishing cornEll'S at such intersections." On the 24th February, 1890, the foregoing instructions were thus modified: "The secretary having held, as I am now advised by the romm:ssioner, that such back line should lIot run west from the south(lru extremity of Lake as will be perp..ndicuMaurepas, but should rUII therefrom on such a lar to the axis of the Dupal'dgrant, your former instructions are modified as follows: " Having satisfied yourself of the trne position of the lake, as dirt'cted in your former instructions, you will run the back line thert'from on a compass direction which will be lit right angles to aline which would run through the centi-r of the Fl'ench grant. But this center line or axiS of the grant need not itself be run on the ground. Its course will be a mean between the courses of the upper llnd lower .side lines of the grant, as heretofore established, and to be t'stablisht-dby you, as heretofore directt-d. "In running such back line, )'on will mark it; establish corners on it, and take {'onnections of other lines it may intersect, as ht'retofore instructt'd, in evel'y respect as though no other change had been made in your former instructions, except as to the course of the same." The appellee, as deputy surveyor, made the surver under these instructions, reported the same to the SUl'veyor general's office, showing thnt he had thoroughly examined the lake and its shores. and had taken the affidavits oothe of all the old and reliable settlers he could readily find. which affidavits he made a part 01 his returns; that he could form no definite conclusion from his examination and the estimates of the settlers as to where the shore liue of the lake wall at the date of the grant; that the only thing which seems certain is that it was then a long way from where it now is. And he further says: "In fixing upon the distance of 104.87 chains. I have tried to adort a location which wHuld probably give the claims all the depth they are entitled to, without extending them so far as SOUle of the evidence would require." Against the adoption of this survey, HOD. John McEnery, as agent for the state of Louisiana, and W. H. Rogers, attorney general of Louisiana, and Messrs. J. L. Bradford and C. W. Holcomb, attorneys for the cities of New Orleans and Baltimore, and others, protested. The report orthe survey, with diagrams, plats, transcript of the field notes, the affidavits made part of the returns. and the protests above mentioned.

836

FEDERAL REPORTER,

vol. 51.

were all transmitted to the commissioner of the land office .for his action thereon, and on the. 23d. of January, 1891, the commissioner, in a letter surveyor general, after reviewing the record, says: l'In view of the foregoing. and of the condition expressed in the cOntract

V"

partial payments as the survey progresses. I hereby accept the suras fa·r as herein considered; and as the several points Qfobjection to the of some establiSlJ,ed in this survey. asset forth in the protests above mentioned, will nf'cessariJydemand a further.consideration by thispftlce, you are directed to withhold the filing of the triplicate plats from the office until you are further advised in regard thereto."

to the decision of the department of January 6, 1888, in the case of The State of LO'l1{i,Bian,a VS. John Mcl)prwgh etal., 6. Dec. Dep. Int. 473, asking for a intel'pretation of aaid decision the following question: 'Did the aforesaid decision fix absolutely the starting point for the determination of back line of the McDonogh and claims at t1;le . most southern point of Lake Maurepas, as it existed at the date of the decision?' "In the .«;a!le above refe1'1'64 to, the held thattbe deptb of this be ascertained 1:11 finding a depth equal to Ol.'corresponding with the depth of the river; that is. by drawing a.line 'tllf,oug,b of from front to rear, terminating at point of o.f a line at right angles thereto. so as to touch the lowel'lt porn-tof tile southern spore of the lake.' . . · .. I find nothing in this decision to. inqiclUietbatit was the intention of the an al! to wbether tbe shore of. the lake had 1?eenchange,4; slilce 1769" but"on the .contrary, it seems to be clearly indicated lake, as it should be. fixed absolutely as the starting point todetel'Il).ine the.back line of said grant. you wip instruct the surveyor general accordingly."

The matter was submitted to the secretary of the interior for his decision;'and on the 14th of May, 1891, the flen acting secretary gave his decision, addressing the commissioner of the land office: "Sm: r am in receipt of your letter of March 20,1891, calling attention

upon

The theQ ,acting of the land onjhe 21st May, 1&91,8eot hia inatructiqnsJpthe l;lurveyorgeneral, in which he says:
...It is sutlicient to state! that the inclosed decisiondirect!l that the sou.thel'll shores of. as It no.w exists, shaH be absolutely as the starting point to determine t,he baclfli'ne of the aforesaid claims. * *' * Yon will, therefore, at yoUr earliest· convenience, prepare a contract and bond, with special instructions, for the execution of the work and forward the same to thisotlice for examination and iapproval!'

·

'

.;'"

")"

·

.

'.

II,

'Thereupon the surveyor general made a second contract with appellee as deputy surveyor, taking bond, as before, for the survey and location of the back lirieof this grant, giving special instructions, in accordance with the secretary's last ruling for the work, which contract, bond, and specialinsttUctions were approved by the commissioner of the land ficeJuly 10,:1,891. To prevent the obliterating of the former survey, and the making of the new survey, COritemplated by this second .contract with,and:special instruotions tOI. the appellee as deputy surveyor, the bill in thiscl1se was .exhibitedin the Circuit court, and a restraining order granted as prayed for by appellant. The bill for injunction comingon for hearing on the,2d February, the prayer for injunction

CITY OF NEW ORLEANS ". PAINE.

837·

was denied, and the restraining order that had been issued dissolved: This action of the circuit court accepted as a final decree, the appellant prayed for an appeal to this court, which was granted by the circuit court, and, under rule 93, the injunction as contained in the restraining order was continued in force. The appellant contends "that the law did not require the surveyor general, or the commissioner, to file the approved plat of the survey of the Dupard grant in the local land office, and that therefore their with" drawing it from such filing did not constitute a lawful retention by either of any control or authority over the plat or grant," and that the courts have jurisdiction to review and pass upon the subject-matter, and to protect the private rights of appellant against misconstruction of the law by the officers of the land department; that the first survey made byappel" lee, under the decision of the secretary of January 6,1888, and in compliance with the instructions of the surveyor general, having been approved by the surveyor general, separated appellant's land. he:d under a completed grant by former governments, from the public main, and exhausted the power of the executive arm of the government over this grant, and that the subsequent action of the secretary of the interior transcended his authority. Counsel for appellant cites the case of U. S. v. Stone, ?- Wall. 525 j and presses it in his oral argument as supporting his contention. In that case it appears that the land in q'Jestion had been surveyed for a military reservation by orders of the secretary ot' war in 1854, and thEj survey had been approved by the president. In 1861 the of the interior ordered surveys to be made of the lands in question, which was done, "and, everything having gone through the usual forms; patents passed the great seals, and having been signed by the were duly delivered to the patentees. In 1862 the secretary of the interior decided that tlie patents had been issued without legal.. a\l-7 thority, and he declared them void and revnked. However, to proceed rightly, the United States filed a bill in the federal court for the in which the land was situated against the holders of the patents, to have therp judicially decreed to be null, and the instruments themselve$ delivered up for cancellation. The trial court g-ave the decree asked for, and the holder of the patent appealed to the supreme court. That court held that"The secretary of thp interior. jn 1861, transcended his authority when he attempted 00 override the acts of his predecessor." "The patent is but the evidence of a grant, and the officer who issues it acts ministerially and not judicially. But one officer of the land office is not competent to cancel or annul the act of his predecessor. That is a judicial act. and requires the jUdgment of a court." This case, and numerous others which the diligence of counsel hall presented to us, and which have had due consideration, show that when the action of the land department is complete and finished in any giyen matter, when the last act in the series essential to the transfer of title

has beelFperrdttrled, the power of theexooutive departmentis exhausted , and private 'rights thereby conferred 01.' evidenced immediately come under the protection of the judicial department, and the' COLlrts then have jurisdiction' "To corrt'ctmistakes, or to relieve ngainst. frauds and im\lositions. and in
cases where it Is clear that those officers [of the land department] have. by mistake of tile law, given to one man the land which, on the undisputed facts, helonged to another. to give appropJiate relief." Moore v. Robbins, 96 U. S. 530, U;{J. ,v. SI:hu1'Z, 102 U. 8.878; JohUNon v. Towsley, laWall. 72.

All tht'secases and many others an'MUnce or assume that while the officers of the government are in the discharge of· their duties, in dealing with the question in what manner a silrvey of the pUblic domain shall be mnde, thecoilrts will not interfere by injunction or mandamus. We understan(lappellant's counsel to concede that the calls of this grant as set out in the original instrument are such as to require that there should be an authorized survey to fix the lines and separate the land embraced in this grant from the public domain,and that the land department was the proper authOrity to direct antI approve such a survey; and of this we have no d(mbt. And while the making of such survey was still in progress it remained subject to the ultimate control of the sE'cretary of the interior.· And it would seem to result from the very nature of the case that the secretary must retain authority to construe any former orders of h{sdepartment so far as to determine whether the commissioner of the land office and the surveyor general and the surveyors in the field have properly executeqsuch former oruers until that execution il:l completed. In:thi8 CBJ'lethe survey was made and return made of it to the surveyor general's offiCe in New Orleans. It Was made in accordance with his instructions. He it, but, in accOl'dance with the usual mode of procedure, he forwarded the report of the survey, with his approval, and with the .protel3ts against it, to the commissioner. of the land office for his action; and the commissioner, approving only so far as disbursements had been D:iade, reserved the question as to the correct location of the rear line of the grant for further consideration and ad vice. Thereupon the matter was referred to the sE'cretary, and he was thus called on by the duties and powers of his office to construe the decision of his predecessor, made 6th January. 1888. There is nothing in that decision to indicate that there was present in the secretary's mind Rny 8uggestion that the southern shore of the lake had changed its position 8ince the date of the grant. It is therefore entirely silent on thtl question which has so exercised the surveyor general and the parties in interest as. to '''het.her the Il,}.ost southern point of Lake Maurepas, as it existed at the dale of the grimt, or as it existed at the date of the decision, or as it should exist at the time of the survey, was to limit the depth of this gratlt.. No such question is reJerred to in that decision. But, assUIiling that the secretary must have meant the most southern point as it existed at the date of the gral?t, and that there is evidence that the po8ititm of the southern shore line of the lake has materially changed, and

CITY OF' NEW ORLEANSV. PAINE,

839

that its position in 1769 might still be ascertained or reasonably apl'roximated, still the determination of this point, as it would greatly affect the area of the grant. would involve the exercise of such responsible discretion as would require that the matter should proceed subject to the ultimate control of the chief officer of the department. If there did not appear to have been any change inthe position of the lake, no such question could arise. If a change appeared to have taken place, and no satisfactory evidence coulrl be obtained to fix its different location in 1769, or at any time since that date, there would seem to be no room for question that its present position must control. If, however, the surveyor in the field, on evidence which failed to satisfy his own mind, adopted a conjectural point, and the surveyor general approved the survey made 011 that basi.:; against the protest of parties. interested, the matter must come in the usual course of such proceedings to the commissioner of the land office, and from him to the secretary of the interior, unless the decision, not of the fortI.er secretary, for that is silent, but of the contract surveyor in the field, approved by the surveyor general, must in this particular case be held to be final on the subject, which we understand to be the contention of appellant's counsel. But, with all respect, in our opinion no sound reason or semblance of authority has been offered or has occurred to us why in this case the decision of these subordinate officers should be final. When we take into view the fact that, in one form or another, this matter had been pending for nearly a century before January 6, 1888,it must be conceded that no undue delay has been indulged since that time in directing, considering, and acting on the survey required by the decision and order of the secretary of that date. Whether the construction of that order, announced by the present secretary of the interior, is in entire harmony with its terms and effect, we do not feel called on by this case to decide. We are of opinion that the matter of fixing the rear line of this survey on the ground was still, and is still, an unfinished proceeding, and the proper subject for the further action of the political department of the government. It follows that the decree of the circuit court refusing the injunction must be affirmed and the restraining order dissolved. Cragin v. Powell, 128 U. S. 691, 9 Sup. Ct. Rep. 203, and cases and statutes cited in that opinion. And it is so ordered.

840
UNION

FEDERAL REPORTER,

vol. 51.

LoAN&. TRUST CO.

v.

SOUTHERN CALIFORNIA MOTOR ROAD CO.

(Oircuit Oourt, S. D. OaUfornia.September 12, 1892.)
1. OORPOJUTIONB-BoNDs-PURCRASE

A person purchasing bonds of a corporation from itl'l president and one of its directors inquired of its vice president, secretary, and attorney as to their validity, and was .informed by each that the bonds were regularly issued and sold, and were valid. The books of the corporation showed that the bonds were authorized to be 801d for $85,000, that such director's name was entered as the purchaser, and that be was credited with that sum. Held, that the purchaser from the director was an innolJt\nt purchaser, Bnd the corporation was estopped to deny the validity of the bonds,asagainst him.

BY DIRECTORS-ESTOPPEL.

2, SAMe.

ACQrporation which, with the knowledge and consent of all its stockholders, sells Cle1'tainof its bonds to its directors, 101' less than par, but for their full actual value, ill estopped from questioning the validity of the sale, either as against such direotors or their assignees. S.' SAME-NEGOTIABILITY OF .BoNDB. In a bond payable at a fixed date, a provision that the obligor may, at its option, redeeql the same, before maturity at any.date when the semiaunual interest is due, does not render the bond so uncertain, as to time or amount, as to deprive it of its negotiable Quality, under the provisions of Civil Vode Cal. §§ 3087-3089, 3091, 3093.
SAME-V4LIDITYOF IslluANaE-OoNsTITUTJONAL LAW.

4.

COIJ,st. Cal. art. 12, § 111 providing tha.t the stock and bonded indebtedness of corporations shall not be" ncreased" withcut the consent of the person holding the larger amount of the stocll;, does not apply to thE:> first creation of bonded indebtedness.

5. CHATTEL MORTGAGES-V4LIDlTl"-ROLLING STOCK. , .Under Civil Code Cal. § 291\5, a mortgage of railroad rolling stock is a chattel

mortgage, and ill void as against a subsequent attacbment, when not executed and 'recorded in the manner prescribed, or accompanied by the affidavits of good faith , required by section 2957.

In Equity. Suit by the Union Loan & Trust Company against the .8outhernOalifornia Motor Road Oompany to foreclose a mortgage. Decree of foreclosure and sale. For prior reports, see 49 Fed. Rep. ,267, and 51 Fed..Rep. 106. Brunson, Wilson & Lamme, for complainant. W. P. Gardiner, for intervener A. S. Garretson. R. F:. Houghton and O. N. Fox, for defendant Southern Californif Motor R. Co· . W. J. Ourtis and Chapman & Hendrick, for First Nat. Bank of Sau Bernardino. Frank F. OBter, for defendant W. S. Hooper. Byron Waters, for defendant D. S. Dorn. Charks D. Houghton, for Mary A. Franklin. Ourtis, OBter Ourtis, for San Bernardino Nat. Bank. Ross, District Judge. If the evidence now presented in this case was the same as that before the court at the time of the former decision herein, the conclusion of the court would be the same; for I am satisfied that the decision then rendered, upon the facts as then made to appear, was in all things correct. After that decision was announced, the court, for good cause shown, opened the case for further proofs. The pleadings were amended, and the evidence taken de novo, upon which

tJNION LOAN & TRUST CO.

v. SOUTHERN

CALIFORNIA :MOTOR ROAD CO.

841

the case has been again argued. and submitted. The present record' makes manifest the fact that the case was not at first well tried, and that the evidence then taken did not disclose the full and true facts of the case. It is, of course, upon the record as now presented that the court must base its present decision. The suit is one in equity, brought to foreclose a mortgage executed by the defendant motor road C'ompany to the complainant, as trustee, to secure the payment of 300 of its bonds, each for the sum of $1 ,000, witb interest. The case shows that before the organization of the motor company one R. W. Button was the owner of certain franchises and rights of way for, and was engaged in the construction of, a motor road from the city of San Bernardino to the town of Colton, in San Bernardino county. He had the road partly built, and, in connection with it, a street railroad line in the citv of San Bernardino. Some or all of the' parties to the arrangement ne;t mentioned were desirous of securing an' extension of the road to Riverside, with the view, mainly, of increasing the value of lands in which they were interested. Negotiations between them and Button resulted in an agreement by which a corporation should be formed with a capital stock of 10,000 shares, of the par value of $100 each, to acquire the property from Button, and to extend the road to Riverside; Button to receive for his plant 5,000 of the shares, and to se113,000 of them at an agreed price to the following named par· ties. and in the following proportions: To George L. Joy, 500 shares;, to R. B. Taylor, 1,000 shares; to Samuel Merrill, 500 shares; and to John A. Merrill, G. W. Kanavel, A. H. Naftzger, and John J. Hewitt, 250 shares each. Accordingly, the defendant motor road company was incorporated under the laws of the Rtate of California, with a capital stock of 10,000 shares, of the par value of $100 each, by Samuel Merrill, R. W. Button, John J. Hewitt, A. H. Naftzger, G. W. Kanavel, George L. Joy, R. B. Taylor, John A. Merrill, H. C. Rolfe, and E. W. Freeman; and to this corporation the Button franchises and plant were sold and conveyed, he receiving in consideration thereof 5,000 shares of the stock of the corporation, 3,000 of which he transferred to Joy, Taylor, Kanavel, Naftzger, Hewitt, and Samuel and John A. Merrill in the proportions above stated; and he conveyed to H. C. Rolfe 100 his remaining shares, in consideration of legal services, and to E. W. Freeman 50 shares. The board of directors of the corporation then con-, sisted of Samuel Merrill, H. C. Rolfe, John J. Hewitt, G. W. Kanavel, George L. Joy, John A. Merrill, and R. W. Button; Samuel Merrill being president. In February, 1888, Taylor took the place of Joy Oll" the board of directors, and succeeded Merrill as president. In addition to the 5,000 shares of stock thus issued to Button for his property interests, and so distributed, there were 600 shares subscribed, the stock for which was not then issued, but upon which there was paid $30,000. The road was but a skeleton, and was but partly built. To build, extend, and equip it required money, and how to obtain the money was the question. The evidence shows that all of the stock then subscribed or issued was held by Taylor, Button, Hewitt, Kanavel, Rolfe,Free-

842,

I'

FEDERAL REfORTER

t

vol. 51.

man,JQy, Naftzget:, and Samuel Bald John A. MerrilL ,.In this conlIition qfaff!lirs a meeting of the pOllru of directors of the corporation was held on the 18th day of Janijary, 1888, at -which wal> presented the written consent and request of the holders of more than two thirds of the stock of the corporation" that the board of directors of said corporation borrow $300,000, in such manner as may seem to them best, first mortgage security bonds or other security or evidences of debt as they may deem proper." The stockholders signing this consent and request were R. B.Taylor, H. C. Rolfe, Samuel Merri1l, John A. Merrill, R. W. Blltton, and E. W. Freeman. Accordingly, the board at the same session adopted what is designated in its minutes as "Order No. 36," and which is as follows: "Whpreas. it is desirous for this company to secure a loan of $300.000 for the of t>xtt>ndingand mOI'6 fUlly equipping its prt>llent road. be it ordel'ed that the board of directors Itert'by authorize its president and secretary to secul'e a loan for the benrfit of this company of the slim of $300,000, in the following manner: 'fo, issue in due forin 300 bonds, with interest coupons, which shall be of the denomination of $1.000 each, numbered. r6spl'ctively, frum number one to number three hundred. inclusive. 811ch bonds and coupons Shall be substantially in the following form: [Sptting forth the form of tl,Je bpnds ,and coulons.] And it is further ordered that s,ald bontls are to be secured by a first or deed of trust on the property of tile said company, substantially as eUlImerated in the above bonds. with the usual covenants lind agreements to rully spcure the payment of said bonds, and to be eXl'cuted under the corpOl'ate seal of this comJlany; and the presiden6alld secretary Bre hereby authorized to sign such first, mortgage or deed of trilst to the Union Loan ,& Trust Company of City, in the state of Iowa, as trustee for the holders and owners of the bonds secured thereby. * * *" All of the directors of the corporation, then consisting of Samuel Merrill,J.J. Hewitt, John A. Merrill, G. W. Kanavel. R. B. Taylor, R. W. Button, and H. C; Rolfe, were present and voted for this order. The next day, to wit, January 19, 1888, the board of directors 8gain met, at which five of the seven directors were present, namely, n,; B. Taylor, R. W. Button, John A. Merrill, H. C. Rolfe, and S8Illuel M.:errill; and at this meeting there was adopted, unanimously, what is designated as" Order No. 39," which is as follows: '''Be it ordered that thill company place one thousand shares of the capital stock. lind one hundred of its iJonds of the denomination of one thousand dollars each. numbered from one to oue hundred, both inclusi ve. in the bands of Geo,rge L. Joy, who is hereby appointedtrustee of this company for the selling of said stock and bonds. and he is hereby authorized to sell all or somuch thereuf as may be, necessar)' to procure one hundred thousand dollars in cash ; lind the president secretary are herebv authorized to issue such stock and bonds, and del1vel' the llame to George L:Joy as such trulltee." While the end sought,naJDely, tht I>ecuring of money for the use of the corporation, waE! Sllme. it will be observed that her,e was a departur!'l on oUhe board of directors from the, method proposed in the written QOusent to the issuanqeof bonds, and from that declared ill the order of the board dire9ting their issue. But the stock-

UNION LOAN & TRUST CO. V. SOUTHERN CALIFORNIA MOTOR ROAD CO.

843

holders remained the same, to wit, the ten already named, five of whom voted as directors for the resolution to sell. Four others, Freeman, Joy, Naftzger, and Kanavel, testify that they knew of and approved of it, and the remaining stockholder, Hewitt. bought bonds under the resolution. The evidence clearly shows that the needed money could not be borrowed upon the bonds secured by mortgage or trust deed on the company's property; that neither the bonds nor stock, nor both together, were slllable in the market upon the terms proposed, nor upon any terms; and that, if the road was to be built, extended, and equipped at aU, it was to be done by money furnished in some way by those directly interested in it. Joy sought to sell the bonds and stock directed tIl be sold by the resolution of January 19, 1888, but it was not easy to be done. None of the stockholders wanted to buy, and it was impossible to sell to any outsider. Finally, Taylor agreed to take 30 of the bonds and 300 shares of the stock, and to pay therefor $30,000; Samuel Merrill to take 25 of the bonds ami 250 shares of the stock, and to pay therefor $25,000; John J. Hewitt to take 9 of the bonds and 90 shares of the stock, and to pay therelor $9,000; and S. H. Ferris to take 3 of the bonds and 30 shares of the stock, and to pay there or $3,000. The bonds had not then been printed, and, because of a subsequent mistake in the lithographing of them, thp-re was It good deal of '<lelny in their execution. In the mean time, to enable the company to construct its road, Taylor advanced money to pay tor the iron and other material, upon the understanding and agreement that it was to be credited on his purchase of the 30 bonds and 300 shares of stock. He so paill $28,659.1.5, and the balance of the $30,000 to the company direct, less a small slim allowed him for expelJ!'es incurred in attending to the company's business. There can be no doubt of the truth of this, for the testimony of the witnl'sses is corroborated by the introduction in evillence of the checks, boob, accounts, etc. The testimony as now presented clearly shows, also, that, for the 25 bonds and 250 shares of stock sold by Joy to Samuel Merrill, the la Uer paid $2.5,000 in cash; for lhe 9 bonds and 90 shares of stock sold by Joy to Hewitt, the latter paid $9,000 in cash; awl for the 3 bonlls and 30 shares of sloc·k sold by Joy to Ferris, the latter )laid $3,000 in ,cash,-all of which the delen,lant corporation received and appropriated to its own use. Upon the fNrner hearing of this case the facts in respect to these 67 bonds and 670 shares of stock did not so appear. On the contrary, it then appeared that those bonds and shares of stock were sold and delivered to Taylor, Merrill, Hewitt, nnd Ferris in consideration, in large part, of pre-existing indebtedness of the defendant corporation to those partieR, contrary to the resolution the sale, and contrary to the provisions of theconsbtution of the state in respect to the issuance of such. bonds. It furthermore then appeared that the purchase by Taylor, Merrill, Hewitt, and Ferris was in accordance with a secret understanding with Joy, which was magnified hy the circumstance, re;erred to in the opinion of the court thell delivered, that aiter they acquired thew, the Loaru of directors 01' which Taylor was then president, at a·

8H

FEDERAL REPORTER,

vol. 51.

meeting atwhieh he was present, passed an order, for which he voted, to cancel 1500£ the original issue of 300 bonds; thus apparently increasing the value of the bonds beld by himself and the other directors. In that connection the court there said, and properly said, that, while di. rectors are not debarred by reason of their position of trust from purchasing the bonds of the corporation, their dealings are subject to the careful scrutiny of a court of equity, which will not permit them to stand, unless entirely fair and honest. It now appears, however, that there was no secrecy about the sale by Joy to Taylor, Merrill, Hewitt, or Ferris, but, on the contrary, that each of those parties purchased the bonds and stock with reluctance, and only because no one else would buy them. It further appears that when Taylor, Merrill, Hewitt. and Ferris agreed to buy. and did buy, the 67 bonds l:ind 670 shares of stock, it was understood that the corporation, through its officerl'l, would endeavor to find some one to buy or loan money upon ,them. and that, in that event, Taylor, Merrill, Hewitt, and Ferris would surrender the bonds and stock so bought by them,upon the refunding of the money paid by them therefor, with interest. It is impossible to read the testimony given upon the present hearing, and consider it in connection with the original papers, books, etc., introdnced in evidence, without being convinced, not only that there was no fraud in the sale by Joy of the 67 bonds and 670 shares of stock to Taylor, Merrill, Hewitt, and Ferris, but that those parties bought the bonds and stock reluctantly, and only because no one else would. And, in respect to the cancellation of 150 of the 300 bonds, it appears that, subsequent to the sale of the 67' bonds and 670 shares of stock by Joy to Taylor, Merrill, Hewitt, and Ferris, and pursuant to the understanding had at the time that, if the company could find some one to purchase or loan money upon them, those purchasers would surrender the bonds and stock upon the refunding of the money paid by them therefor, with interest,Button and Taylor opened negotiations with a Mr. Alberger, of , San Francisco, who represented that he could either sell 150 of the or procure a loan of $100,000 thereon; and, at Alberger's suggestion, the board of directors of the defendant corporation, at a meeting held August 13, 1888, adopted and authorized the following letters prepared by him: " W. U. AZberger, Esq" 828 Montgomery st., San Francisco, Oalif.: You a're authorized on the part of this company to sell $150,000 of its first mortgage gold.i:londs, at the rate of 90 % of their par v&lue, with accrued interest. TlIe tot.al amount of bonds authorized to be issued is $300,000; but we will cancel and destroy the remainder ($150,000) of said issue, leaving only $150,000 in existence. Should 'any different form of bond be required to meet the demands of the market, we will promptly cause the same to be executed upon the plan and prOVision of the present mortgage. Thessid bonds are to be sold by Jan nary I, 1889.
"Dated £his 9th day of AU(JU8t, 1888.

[Signed] "R. B. TAYLOR, President." W. G. Albe1'gerl Esq., 328 Mont{/ome1'l1 St., San Fmncisco, Calif;:' You a,re ,autl:\odzedtp negotiate for this company a loan of $100,000, for, one year
I."

UNION LOAN & TRUST CO. '/J. SOUTHERN CALIFORNIA MOTOR ROAD CO.

845

from date. with the pri:vilege of paying the sa'me sooner. U desired. for which we will give the company's note, with $150.000 of the first mortgage bonds {)f this company as collateral security thereto. The rate of interest shall not exceed 7 % per annum, and the company shall have the privilege of paying the same after six months from the date of said loan. The present mortgage provides for the issue of $300,000 of such bonds. but we will cancel and destroy the remaining $150,000 in existence.
" IJated A.ugust 9th, 1888.

[Signed]

"R. B. TAYLOR. President."

The draft of thel'e letters was prepared, as has been said, by Alberger himself, who declined to undertake to effect either the contemplated sale Qr loan, unless 150 of the bonds were canceled. Accordingly, at the same session, the board of directors passed an order for the cancellation Qf 150 of the bonds, numbered from 151 to 300, both inclusive, none ·Qf which had been issued, and they were accordingly canceled, And in anticipation of such sale or loan, and in pursuance of the understanding under which Taylor, Merrill, Hewitt, and Ferris purchased the 67 bonds and 670 shares of stock from Joy, the board of directors, at the same session, adopted what is designated" Order No. 65," which is as as follows: "Be it ordered that the secretary issue orders on the treasurer as follows, to wit: Samuel Merrill $25,000 R. B. Taylor 30,000 J. J. Hewitt 9,000 S. H. Ferris 3,000 -Togetherwitb separate orders, hereafter to be issued for the accrued in-terest. at a rate hereafter to be agreed upon said respective amounts." The cancellation of the 150 bonds and the foregoing order No. 65 were suspicious circumstances, when considered in connection with the facts as made to appear on the former hearing, but, in view of the facts now shown. they are not evidence of any fraud on the part of the directors, however irregular the passage of order No. 65 may have been. Nothing -came of the Alberger mutter, and none of the orders on the treasurer mentioned in order No. 65 were drawn. The 67 bonds and 670 shares of stock remained in the hands of Taylor, Merrill, Hewitt, and Ferris, their assignees. Twenty-eight of the bonds still remain in the hands of Merrill and Ferris; that is to say, 25 in the hands of Samuel Merrill, ;and 3 in the hands of Ferris. The 30 purchased by Taylor were assigned by him to the intervener, Garretson, as collateral security for $25,000, loaned by him to Taylor, and have been since held by Garretson; and the 9 purchased by Hewitt were sold by him, for value, to H. J. Rudisill: 'Who thereafter assigned them as collateral security for a loan of $4,500, made to him by the Farmers' & Merchants' Bank of Los Angeles, which subsequently assigned them to H. W. Hellman, who now holds them. The mere fact that the 67 bonds and 670 shares of stock sold to Taylor, Merrill, Hewitt, and Ferris were sold forless than their face value .does not render the sale invalid. Fogg v. Blai,', 139 U. 8.118,11 Sup.

1.846

.0:; Ii

I'lWElU.If

vol. 51.

the ,case leaves no room to doubt that stock sold: for all tbeywere worth, and that named would 'buy them at all. As tbe directvalue for them, and the money was received by the corpo*ation and, appropriated to its oWli use, and ,,11 this, as the record shows, with the actual knowledge and approval of all of the then stockholders, the same princi pIes that cause a court of equity to scru tinize with care all dealings of the directors with the trust property, to the end that none. be permitted to stand that are not perfectly fair and honest, estops the corporation and its 8tockholders J'rolu questioning sMh a sale. Holding, as I do, in'view of the present record" that the 67 bonds were valid in the hands of Taylor, Merrill, Hewitt, and Ferris, it follows that such 'of them as\veresubsequently assiglied to Garretson and Hellman are 'also valid in their hllnds, withou.t reference to whether they could otherwise be regarded as hontLflde holders for value ; for the law is that they .can avail themselves of .the position of the previous holders for value, 'without the nect'ssity of showing themselves to be innocent holders for value. Montclair v. IM.msdell, 107 U. S. 147, ,2 Sup. Ct. Rep. 391. Joy, being unable to seH any more of the bonds nnd stock, returned the remaining 33 bonds and 330 shures of stock to the defendant cor,poratiou. It appeared upon the former hearing of the case that 33 of the bonds were subsequently pledged by the prer,ident of the defendant corporation to the San Bernardillo Nationnl Bank, as collateral security fot a pre-existitlg indebtednElss of the corporation of $13.000. And the court lleldsuch a lJledge to be in violation of provisiilO of the conBtitution of the state of Cali:ornia which declares that "no corporation shall issue stock or bond,S eXt:ept for money'paill, labor done, or property actullily received, anti all fictitious increase of stock or indebtelh.ess '·shall be void." Section n, art. 12, Const. Clll. But the present record shows the fact to be otherwise, and as follows: On or about January 3, presidf'I1t llnd spcretllry of the defend,ant corporation, pursu:mt to a resDlution of its board of directors there,to.ore \.laSHed, nuthorizing the president to borrow for the benefit of the . corporation moneys not exceeding in all $100,000, nnd to pledge as cflllateral security ll)r the repayment of such loans, with interest, the bonds oHM corporntion, appliedon.ils behalf to the San Btmlllrdino National Bank 'for a 108n of $U5,000, agreeing to 33 of the bonds of the tlorporlltionas collatt'ral security for its repayment, with intert'st. The bank const'ntedto make the loan upon that spcurity, and placed the money credit of the corporation, with which it already Imd lin acC()Unl,llnd whichlponey the corporation drew lind approprilltell. As ,the '83 bOllds "",ere in Iowa llt the time of the loan, the president and ,secttltary executed II written agreement that they wpuid deliver them to thebanltwithin30dnys,which was ilone; The loan was actually made on ,the strength of the security of the: 33 bonds, and a court of equity -l!!l1O'uJd:Soregardit. In: view of these facts, inno just sense can they Le . regarded as having been pledged as collateral security for a pre-existitig .j,ndlJbt.eJness.The evidericieaow before tbe' court, therefore. removes
()f

UNION LOAN & TRUST GO. II. SOUTHERN CALI1l'ORNIA MOTOR ROAD CO.

$47

the ground upon which, bythe'(orrrler decision herein, those 33 bonds were held to be invalid; and they must now be held to be valid tionsto the extent of satisfying the unpaid balance of the note executed for the $15,000 loan. In respect to the remaining 50 of the 150 bonds, the case shows that, on the 5th of October, 1888, the board of directors of the motor company adopted" Order No. 72," which reads as follows: "Be it ordered. and it is hpreby orderpd. that R. B. Taylor. the president of this board. st'l1 50 bonds of this company now issued, from 68 to 117, both inelusive, for the sum of $35,000." Taylor took the 50 bonds mer'inned in this order, and went to Sioux City, Iowa, to sell them. The 1act3 in relation to that matter, 8S loade to appear upon the former hearing of the case, were stated in the opinion of the court then delivered: .. He there sold them to S. A. Garretson for $35,000, which money .Taylor received froID Garretson" and turned over to the motor company. Before Garretso,n would buy the bonds, however, he required of Taylor his note for the same amollnt · as a guaranty that the bonds were all right;' and Taylor further agret'd that. if be could, he would subseqnently take the bonds him· self. He did 110, and, in lieu of the bonds whiehbe received from GalTetson, gave 8S security for his $<15,000 note to Garretson clll;tain of. his own." The present record shows that the real facts in respect to that negotiation between Taylor and Garretson were not as then made to appear. Garretson did agree to buy the 50 bonds from Taylor, and to pay therefor $35,000, and Taylor supposed he would do so; but before the sale was consummated Garretson backed out, not thinking the bonds a good investment. Taylor afterwards concluded to take them himself at the price fixed in the resolution of the board of directors authorizing him to sell them, to wit, $35,000. This sum he paid. to the defendant corporation therefor less $16.000, which he had shortly theretofore advanced to it, and which was allowed him as a credit on the purchase. Whether or not the fact that a part of the money that madeoup the consideration of $35,000 for·the 50 bonds had been advanced to andre· ceived by the corporation before the sale of them to Taylor would affec. their validity in his hands need not be determined. The records of the corporation showed that the 50 bonds had been sold to Taylor for $35,000, and that he had paid that sum therefor; and, as a matter of fact, the corporation had received that amount of money from him, and appropriated it to its own use, although, as has been said, $16,tlOO of the amount had been so received shortly prior to the sale. But the question here is as to the validity of those bonds in the hands of Toberman, who acquired them from Taylor, and who is their present holder. The case shows that Toberman, who was an entire stranger to all ot the foregoing transactions, bad certain lands owned by him in what was then Los Angeles county,advertised 101' sale in the newspapers. Taylor saw the advertisement, and wrote to Toberman, saying he had some bonde and stock he would like to exchange for some of the land. That commenced the negotiations between them, which culminated, in the course

848

FEDERAL REPORTER,

vol. 51.

ora month or 80, in the puroha.seby Toberman of the 50 bonds from Taylor lit 90 cents on the dollar, which Toberman paid by conveying to Taylor real estate of that "alue. Before making the purchase Toberman inquired of the vice president, attorney, and secretary of the cor· poration as to the validity of .the bonds, and was informed by each of them'thatthey were regularly issued and suld, and were valid; and the corporation ,showed that they were authorized to be sold records of for $35,000;;that Taylor was a.ntered as the purchaser of them, and was credited with the sum of$35,000 in payment therefor. Whatever might be held inregard to these bonds if in the hands of 'raylor, there is no of couD,sel that Toberman's purchase was not made ground for the in go()d faith and for value. The accounts subsequently rendered by Taylor to the corporation, as weIhs other circumstallces connected with the case, would be factors in determining the status of thebol1ds in his hands; but Idbnotseethat they affect Toberman.. In myopiriion, the corporation is estopped to Q,El'rlY their yalidity in the hands of the latter. It iSial;l;ono.", urged on behalf oLtha motor company that the qonds in question were not negotiable instruments, and therefore that any defense tha.t could be made against them in the hands of the original holders can be made 'aBagainst allsubsequent holders. Each of the bonds in suit, after containing the promise to pay $1,000 on the 1st day of January, 1908 contains the following ,clause: "Or at 'the option of the obligor, this bond may be fully paid and redeemed at any time after the 1st day Of January, 1893, at the maturity of the semiannual installment of interest. But, if this bond shall be redeemed before its full maturity as aforesaid, notice OfSllCh intended redemption shall be. given holder thereof, either personally.or by written notice, sixty days prior to the. time of such redemption. or by publication in a daily newspaper of general circulation, publiShed iii the city of San Francisco, for at least sixty days prior to the time of such redemption."
It is contended on the part of the corporation that this clause rendered the contract uncertain as to the time of its fulfillment, and uncertain as to the amount which should be paid on it. In support of the point, 3093, Civil Code Cal., the first the court is referred to of which declares: "A negotiable instrument is a written promise or request for the payment of a certain sum of money to order or bearer, in conformity to the prbvisions oHhis article;" the second, that it must not contain any condition not certain of fulfillment; the third, that the person to whose order it is made payable must be ascertainable at the time the instrument is made; and the fourth,that such instrument "must not contain any other contract than such as is specified in this article," to wit, article 1, c. 1, tit. 15, pt. 4,div. 3, Civil Code Cal. But counsel mak· ing the point did not cite the intermediate section 3091 of the same Code, which reads as follows: "A nEJgotiable instrument may be with or with. ortt dltte, and with or without designation oftime or place of payment." The clause in question:only confers upon the obligor the privilege of paying the bOnd before the ultimate date fixed in it, and, considered in eonaection with the context, renders the instrument similar to a promis-

umON LOAN &I: TRUST CO. V. SOUTHERN CALIFORNIA MOTOR ROAD CO.

849

, sory note payable on or before a certain designated date. Assuming that, in the determination of this question, this court must be governed by the law of California, there is no difficulty in the way of holding such instruments negotiable. The case of Adams v. Seaman, 82 Cal. 636, 23 Pac. Rep. 53, is not in point. The promissory note that was there held nonnegotiable contained a "condition not certain of fulfillment," namely, a promise to pay an attorney's fee in the event a suit should be brought, and. upon the further condition of the employment of an attorney; both of which conditions the court held were uncertain of fulfillment. In support of the position that the bonds in question were not negotiable, there are also cited cases in which it was held that a provision reservingtd'the payee of a note the right to extend the time of payment indefinitely renders such notts nonnegotiable. But, clearly, such cases are ndt applicable to a like the present, where the ultimate time of payment named in the bond must certainly come. As already observed, the clilus\'lin question, considered in connection with the context, renders the instrument similar to a promissory note, made payable on or before aoertain designated day. The supreme court of Massachusetts held in several cases such a note nonnegotiable, but in the later case of Union Catile! Co. v. International Trust Co., 149 Mass. 492, 21 N. E. Rep. 962, certain bonds there in question were held negotiable which were in terms mlitiesubject to the conditions oEan agreement between the cattle the trust company, whereby it was" provided that a sinkcompany ing fund of not less than $50,000 nor more than $100,000 in each year shalL be applied. to the purchase or drawing at par of said bonds, and that the whole issue may be drawn at par on November 1,1891, or any coupon day thereafter." The court said: "We t:hio-k that these bonds are negotiable by virtue of Pub. St. c. 77, § 4, as well as by custom, notWithstanding the condition referred to in them, and that they appear to be bonds which were intended to be bought and sold in .;he market." In Riker v.Manufacturing Co., 14 R. 1. 402, it was contended that the reservation in a promissory note of a right to pay the note before maturity, in installments of not less than 5 per cent. of the principal thereof, at any time the semiannual interest becomes payable, renders the note nonnegotiable for two reasons, namely: (1) Because the time of payment is uncertain; and (2) because the amount to be paid is uncertain. But the court held against the position, saying that if the time named in the note must certainly come, although the precise day may not be specified therein, it is sufficiently certain as to time, and that the maxim, id certum est quod certum reddi polest, applied. In Bank v. Skeen, 14 S. W. Rep. 732, the supreme court of Missouri, in respect to a note made payable on or before a certain named day, said that, having in view the reasons on which the negotiability of instruments are founded"It would seem obvious that a certainty of ultimate payment promised should not be considered impaired by the intervention of an option, in favor of the -maker, to discharge his obligation at an earlier time; The paper still date when the promise to pay must be performed. It is nC) v.51F.no.13-54

850

.U)

iii

.,. 'FEDERAL REPOR'rttR,

vol. 51.

more uncllrtain,for :practical purposes, thana bill for example, ·at eight,' 01' ·06 neither of. wb,ich .phrasps has ever been ,r t?diminish, In MattiBon',v: Marks, 31 Mich. 421, in regard to a similar note, Judge COOLEY" speaking, for the court, said:, "The,le'glll.rigbtR of the holder are clear, and certain. The note, isd ue at the time filled; And; is not Que before. True, the maker mayvay BOOneI' if shall put,the eXerciseof th\8 optionwQuld be a payment in ad\'ance of the to pay. and nothing more. Notps like this are common in transactio liS. and we ate Dot \\ware that their negotiable quality is everquestioned in business deali ngs." ' The is equally applicable to the bonds in question in thepte,stlllt 'and I, it wQl,1ld be, a su'rpri..e to the business as to.,tlle professlO'n, if they Bpould held non" ,'T'· " ," , ' It is (lontended that all of the b,onds in questiot;lsre absolutely void, without the conse!)t of the llersonsholding the lll-rger amou"t ip stock of the corporation, given ata called f()r that ·. 9' ,which 69, pays' publi? reason ofseQtlOn the COllstltutlOn otCahforma, whiCh IS
lUI

Ii.' ',',..," " ,'.... " ,

I.'\lIa11 stock or exceptfol', ,naney .pald, labor done, or PI'PPllrty,actul\UYxrceived. and aU .fictitious o(stock or indebtedneB"s stock and Indebtedness?! corpurations &ha11 nut bt?'t.*reased exce),t lD pursuance general law, not WIthout the consentoHhepel'llonlJ holding the larger alnount invalneiof the Btock. at a meeting. caned for that purpose, giving sixty days'publicnotice, IlS may be provided lIy law." It will ,be observed that the inhibition of the last clause, of the foregoing pTovisionis against the'''inl1rease'' of the 'stock and bonded indebtednessof eorporati0tls; It is said that this includes the first issue of bonds. If so, it also includes the first issue of stock. If such was the intention oithe frarne,l'S of the constitution, it was not expressed. To give the provision the!meaning contendlld for would. in effeet, be to jnject J i11to it the ,w,ord which cannot be done. .The courts have no more, power to add to thlln they have to take (rom the provisions ofthe constitution, The case of Ewing v. Miningao.,56 Cal. 649, cited by counsel inaupportof their position, does not all, support it. There the attell;lpt mlitde to increase the capital stoqk of the corporation in contr1\ventionof.the of the relerred to. Nor did the statuteexisti!)g f!,t,.tlle time of the issuance of the bonds in q any to be give!) ofijle intentiol'l to such " ' , .The defendant .:First of San Bernardin!> asserts. a prior lien to that upon the and stock of the motor ;foal! by certain which, prior to the of this duly levied UPO!) such rolling stock in actions, the motorcotnpany on various promissory notes, and in which actions judgments were, subsequently

UNION LOAN c\ TRUST

SOUTHERN CALIFORNIA MOTOR ROAD CO.

851

rendered for the bank. In California it is provided by statute that chattel mortgages mllY be made upon, among other thinp;s, "locomotives, engines, and other stock of a railroad." Civil Code, § 2955. The next section prescribes the form of such mortgages; and by section 2957 it is provided that"A mortgage of personal property is void. as against creditors of the mortgagor and subsequent purchasers and incumbrancE'rl! of the property ill good faith and for vallie. unless (1) it is accompanit'd by the affidavit of llll the parties thereto that it is made in good faith, and without any design to hinder, delay, or defraud creditors; (2) it is acknOWledged or proved, certified and recorded, in like manner as grants of real eslate." The complainant's mortgage was not accompanied by any affidavit, credfor which reason it is claimed to he void as against the itor of the IPotor company, in so far as concern3 the rolling stock. In regard to the nature of the rolling stock of a railroad, the cases, where there are no legislative provisions on the subject, are very conflicting. Many of them will be found referred to in Jones on Railroad commencing at section 154. In concluding his observations upon them, that author says: "While there are manyanil strong arguments for holding that rolling stock United is a part of the relllty,-and this vit'w seems to have the support of Stliles ('oul'ts,-the weight of authur ty in tilt' seems to he against that pllsition. There is, hllwevt'r, no hope that any uniform rille upon the subject Will soon ut' arl'iVt'd at by lhe courls without the aid of legislative enadment. It is of the highest importance that the validity Ilf mllrtga'.!;t's intended tOlllllbrace the rolling and otllt'r t1l'l'sonal prllpl'rty of a railroad :;;hOllid not be lel't til thl-' uncel'lain deeision Ilf the l'Olll'ts; for, in the prest'llt slate of the law, it Ulust, at least, be regarded as uncertain how the qnestiun wlluld be determined uy any cuurt, nut uuunu by precedent or a statllte." ld. § 170. In California, as has been seen, the statute dpfines what property shall be to a chattel mortgage, and inclutles" locomotives, engines, Rnd other rolling stock of a railroad." And it declares that a ulJon such property is void as against cretlitors of the mortgagor and subsequent purdlllsurs and inculuurancers of the property in good hlith and for value, unless it is accompllllied by the required affidavit and recorded in the prescribed way. The IJower 01 the to rl'gulate the mode by which property situaterl within the state shall be illcllmbered and conveyed cannot be doubted. The attachmellt liens of the defendant bank must thprefore be held ,superior tocolllpillinant's mortgage. The judgment lien of the defelldant Mary A. Frullklin was suhsequent, aud therefore subordinate, to the mortgage. A ut'cree of foreclosure and sale will Le entered in accordance with the views above exprcsseu. .

852

FEDEHAL REPOR'£ER,

vol. 51.

CITY OF CARLSBAD

et ale v.

TIBBETTS

et al.,

(Cwcuit Court, D. Massachusetts. August 16, 1892··1
1.

EQUITY PLEAI>ING-ALLEGATlONS Oll' CITIZENSHiP-PRAYER lI'OR PROCESS.

A bill may be dismissed by the court, on its own motion, where the proper allegations as to citizenship of the parties are not contained in the Introductory part, aud are not pointed out by counsel elsewhere in the bill, or where the prayer for snbpcena does not contain the names of the defendants, as required by the rules.

2.

TRADll:-MARKS-INlI'RINGEMENT-DEOEPTIVE REPRESENTATIONS.

Independently of any right of complainants to the exclusive use, as a trade-mark, of the name applied by them to their product, the sale by defendants of, a deleterious'substance, represented by the latter to De in part or in whole the same substance in which com plainants are dealing, aud of which they are the sole nroducers, al1dwhich is admittedl;r of It beneficial character, will be restrained.

In ,Equity. Bill by the city of Carlsbad and others against S. Tibbettsaud others for infringement of trade-marks. He,ard on demurrer to amended bill. Demurrer overruled. Theintroductory part of t,he bill, as originally filed, was as follows:

"To th'e Honorable the JUdges of the Said Cotwt: The city of Carlsbad, a municipality of Bohemia, in the empire of Austria, JUlius Schottlander. and ven, Elizaothers, to wit" Bruno :::lch6ttlimder, i:3aloSchottlander, Augusta beth Oliven, D<:>rathea Cohn, Pacully, MalvineKorn,Paullt Heymann, descendants and" heirs of Laebel Schottlander, deceased, trading as Loebel Schottlandel,', citizens of the empire of Austri&, doing business in the city ofCarlshad, the said city of Carlsbad and Loebel Schottlander acting herein by their in fact and agents, the Eisner & Mendelson Company, of the city of Philadelphia and state of Pennsylvania, in the said United States of America, and the said Eisner & Mendelson Company, a corporation duly organized under the laws of the state of :Pellnsylvania, doing and i,n the city of New York, exclusive business in the city licensees for the United States. of America for the Carlsbad water and the Cadsbad Sprud'elSa12;, complainants. bring this their bill of complaint against the said S. Tibbetts and W. W. Lacey, trading as S. Tibbetts & Co., S. Tibbetts, George Burwell, and W. W. Lacey, residents of said district of Massachusetts, and dOing business in the city of Boston, defendants, and thereupon your orators cornplain,and say."
The bill contained allegations showing the acquisition by the city of Carlsbad of exclusive, prOpl'ietal'yrights to the mineral springs at said city, and to the waters thereof, ,and the crystalline salts produced by e,"aporation of the water of the Sprudel spring, and also to the use of the name "CarlaliJad,"as applied to the water, and salts; the acquisition by the firm of Loebel Schottlander" of the exclusive right and license of. hotling and exporting t{1e water, and of exporting the Carlsbad Sprudel Salz, as manufactured and put up by the city of Carlsbad; the adoption for said salts of the distinctive name "Carlsbad Sprudel Salz," and its use upon the distinctive bottles, labels, and wrappers in which the salts were sold; that the salts had become well known under the dIstinctive name of "Carlsbad Salz," or "Carlsbad Sprudel Salz," and said trade-