BOARD OF COM'RS fl.

179

for all injuries resulting from its unless it Is operating the road in the name of the lessor." Wood, Ry. Law, § 490.

This principle has the express sanction of the court of appeals of the state of New York in two well-reasoned cases: Ditchett v. Railroad Co., 67 N. Y. 425; Miller v. Railroad Co., 125 N. Y. 118, 26 N. E. Rep. 35. The distinction between public duties imposed by law and the right of one injured through the negligence of the lessee is recognized by the courts of Maine. Mahoney v. Railroad Co., 63 Me. 69. In Nugent v. Railroad Co., 80 Me. 62, 12 At!. Rep. 797, the court fully discussed this distinction, saying:
"And herein, as we think. lies the true distinction which marl,s the dividing line of tlle lessor's responsibility. In other words, an authorized lease. without any exemption clause, absolves the lessor from the tocts of the lessee resulting from the negligent ,)peration and handling of its trains and the general management of the leased road, over which the lessor could have no control. But from an injury resulting from the negligent omission of some duty owed to the public, such as the proper construction of its road, station houses, etc., the charter company cannot, in the absence of statutory exemption, discharge itself of legal responsibility. Railroad Co. v. Curl, 28 Kan. 622. 11 Amer. & Eng. R. Cas. 458."

The distinction was pointed out very clearly by Judge Brewer in Railroad Co. v. OUTI, 28 Kan. 622. To the same effect is Briscoe v. Railway Co., 40 Fed. Rep. 274. See, also, Railway Co. v. Washington, (Va.) 10 S. E. Rep. 927, 43 Amer. & Eng. R. Cas. 688. The conclusion is that the Nashville & Decatur Railroad Company is not liable, and the circumstances under which it was joined as a defendant are such as to make it the duty of this court to hold that it was made a defendant solely for the purpose of depriv. ing the only real defendant of its light of removal. The motion to remand will therefore be overruled.
BOARD OF COM'RS OF MORGAN COUNTY v. BRANHAM et at (Circuit Court, D. Indiana. July 25, 1893.) . No. 8.735.
PRINCIPAL AND SURETy-DISCHARGE OF SURETY-ADVANCE PAYMENTS TO CONTRACTOR.

A contract provided for a payment of 85 per cent. of the total cost ot the completed work when it was, in the opinion of the party of the first part, half completed; such percentage to be carefully estimated by the engineer of said party, but such payment not to eXct!ed $7,480. The party of the first part, relying on the fraudulent representations of the party of the second part that the work was half completed, made a payment of $10,046.68. Held, that this discharged the sureties on the bond of the party of the second part.

At Law. Action on a bond by the board of county commissioners of :M:organ county, Ohio, against George F. Branham and Enos Hege, principals, and William G. Wasson and Henry C. Adams, sureties. Heard on demurrer by Wasson and Adams to the complaint. Demurrer sustained. Harding & Hovey, for· complainant. Hawkins & Smith, for defendants.

180

FEDERAL REfORTER,

vol. 57

BAKER, District Judge. This is an action on a bond executed by Branham and Hege, as principals, and Wasson and Adams, as sureties, to the board of county commissioners of Morgan county, Ohio. The suretie.s, Wasson and Adams, demur to the complaint on the ground that the same does not state facts sufficient to constitute a cause of action against them. The facts disclosed by the complaint, so far as material to the determination of the question raised by the demurrer, are as follows: A contract in writing was entered into between the plaintiff, as party of the first part, and Branham and Hege, as party of the sec· ond part, by the terms of which the latter agreed to furnish the material and do the work specified therein. That part of the contract having reference to the payments for the work is as follows:
"Payment for sald work is to be made as follows, to wit: When said work shall have been, in opiniOn of party of first part, half completed, said party of first part, or Its engineer, shall carefully estimate the work completed, and pay the party of the second part a sum of money equal to 85 % of the cost of the completed work, as agreed upon herein: provided, said sum shall not exceed the amount of $7,480.00. And on the completion of the entire work, and Its acceptance by party of first part, then full and complete payment, as herein provided for, shall be made to party of the second pRrt."

Branham and Hege, as principals, and Wasson and Adams, as sureties, executed to the plaintiff the bond in s)lit, for the faithful performance of the contract. Branham and Hege entered upon the construction of the work contracted for, and prosecuted the same until they had completed about one-third part thereof, when they falsely and fraudUlently represented to the plaintiff, through its board of county commissioners, that they had fully completed the one-half part or more of said work, and asked to be paid therefor the sum of $10,046.68. The plaintiff, relying upon these false and fraudulent· representations, thereupon paid to them said sum of As a matter of fact, Branham and Hege had not completed more than one-third part of said work, and thereupon they abandoned said work and contract, and neglected and refused to proceed with the same, and left it uncompleted. The plaintiff was compelled to, and did, complete said work, at a cost, in excess of that provided for in the contract, of $13,429.56. The contention on behalf of the sureties is that they have been released bcause the plaintiff, without any estimate having been made by it or.its engineer to asceTtain whether one-half of the work had been completed, paid to Branhan and Hege $10,046.68,-a sum largely in excess of the amount to which they would have been entitled if they had actually completed one-half of the work,-and because, at the time the payment was made, Branhan and Hege had not completed of the work, and hence were not entitled to receive any payment whatever. It is well settled that a surety is bound only by the strict terms of his engagement, and, as he assumes the burdens of the contract without sharing its benefits, he has the right to prescribe the exact terms upon which he will enter into an obligation, and to insist

BOARD OF COM'RS V. BRANHAM.

181

upon his discharge if those terms are not observed. An innocent surety is always a favorite subject of legal protection. State v. Cutting, 2 Ohio St. 1; Raymond v. Whitney, 5 Ohio St. 201; Hall v. Williamson, 9 Ohio St. 17. It is not a question whether he is harmed or benefited by a disregard of the terms to which he has assented. Miller v. Stewart, 9 Wheat. 681; Manufacturing Co. v. Kimmel, 87 Ind. 560; Post v. Losey, 111 Ind. 74, 12 N. E. Rep. 121. Where, by the terms of the contract, the principal is to be paid by the debtor or obligee in installments, and the payments are made in advance of the time specified in the contract, the surety will be discharged. Brandt, Sur. (Ed. 1878,) § 102; Id. § 371. Calvert v. Dock Co., 2 Keen, 639, is a case similar to the one at bar. One Streather contracted to build certain works for the dock company, and to furnish the materials. The company was to pay the agreed price of £52,200 in installments, to wit, three-fourths of the costs of the work done to be paid for every two m(mths, on the certificate of the company's engineer, and the residue on the completion of the contract. Warburton and Laycock became sureties upon the bond of Streather for the performance of the contract. Streather entered upon the work, but failed to complete it, and finally abandoned it, and suit was instituted upon the bond. Streather had been paid, from time to time, more than three-fourths of the estimated cost of the work performed, and it was held that thereby the sureties were released. In the course of his opinion, Lord Langdale, M. R., said:
"In this case the company were to pay for three-fourths of the work done very two months. The remaining one-fourth was to remain unpaid for till the whole was completed; and the effect of this stipulation was, at the same time, to urge Streather to perform the work, and to leave in the hands of the eompany a fund wherewith to complete the work, if he did not; and thus it materially tended to protect the sureties. What the company did wal:> perhaps calculated to make it easier for Streather to complete the work, if he acted with prudence and good faith; but it also took away that particUlar ilort of pressure which, by the contract, was intended to be applied to him. And the company, instead of keeping themselves in the situation of debtors, having in their hands one-fourth of the value of the wock done, became creditors to a large amount, without any security; and under the circumstances I think that their situation, with respect to Streather, was so far altered that his sureties must be considered to be discharged from their suretyship."

Leeds v. Dun, 10 N. Y. 469, is a case where the defendant was sued for the price of certain goods sold by the plaintiff to one Woodcock on the credit of the defendant's guaranty. The instrument signed by the defendant stipulated that he would be responsible for the payment of certain bills of goods to be sold on a credit of six months. The goods were sold in part on a credit of six months, and in part on a credit of four months, and it was adjudged that the guarantor could not be holden for any part of the goods so sold. The court, in the course of its opinion, says:
"The recitals in this instrument show, and with every precision, the contract into which the defendant proposed to enter. It was optional with the plaintiff's firm to accept the proposition, and enter into the contract, or to

vol. 57,
r,e:fulile. it, If they oontract,. they could only .do so on the terms by the :rt theydld n(lt COipplywith the terms so proposed, 'there was nocontJ:act' 'there was no meeting j)fmin,ds between the pal'tles. The contract proposed-by the defendant was to gUaranty the payl1J.ent Of debt to. be'contractlild ,by. a third person upon certain terms. The c\)wpllance with tholle terms. formed the only consideration of the defendant's 'contract. The plaintiff's firm did not comply with the teJjns, for they sold a 'part of the goods ordered upon a credit of four months, instead of six months," . .

Bragg v. :Shain, 49 Cal. 131, is a case wherein a church society contractell with Shain for the erection of a church, and was to pay for the work and materials $31,850, in installments, payable on the 1st day of each month, to the amount of 75 per cent. of the value of the materials furnished and work done during the preceding month, a,nd the remainder was to be paid when the work was com. pleted. '. One Bonnet became surety for Shain for the faithful performanCe of the contract, During the progress of the work the society paid Shain more than the 75 per cent. provided for in the contract. While the work was under way, Bragg, Tobin, and Bonnet furnished Shain materials which were used in the construction of the building, and for which Shain neglected to pay, and they filed liens, and the present suit was instituted to enforce these The trial cou;rt decided against Bonnet, holding that, as he was he could not enforce his lien against the society. surety for On appeal,' BQnnet. contended that as Shain had been paid' by the society more than the 75 per cent., in violation of the terms of the contract, he was released as surety; and this contention was sustained by the court, which held that the failure of the society to retain in its hands the one-fourth part of the contract price, as stipulated in. its contract with Shain, operated as a discharge of Bonnet as The case of Taylor v.Jeter, 23 Mo. 244, was as follows: A. .agreed to furnish material and erect a building for B., and LB. agreed to pay A. specified sums at particular stages in the progress of the work, the remainder to be paid 60 days after the completion of the building, and its acceptance by B. Upon this contract, C. became surety for A. The bUilding was completed and accepted by' B., and although B. received notice, before the completion of the building, of the filing of various mechanics' liens thereon, he paid the contract price to A. before he was bound by the contract to pay the same. B. afterwards had to pay the liens, and sued C. on the contract; but it was held he could not recover, ashe had released C. by paying A. before he was bound to do so. The case of Simonson v. Grant, 36 Minn. 439,31 N. W. Rep. 861, is similar, in its essential features, to the case of Taylor v. Jeter, supra. :F'ollowing the cases hereinbefore cited, the court held that the surettes upon the bond were to be considered as released. In the course of its opinion the court says:
"In such cases the surety, may be deprived of the inducement which the principal would bave to perform the contract in due time, as the contract required." "
i

BOARD Ol!' COM'RS V. BRANHAM.

183

In the case at bar, over $10,000 were paid to the principals before, by the terms of the contract, they were entitled to receive anything. Such a gross· departure from the terms of the contract, to the prejudice of the sureties, operates to release them from the bond in suit, unless the false and fraudulent conduct of the principals in procnring the payment deprives the sureties of the right to take advantage of it. In Bebont v. Bodle, 38 Ohio St. 500, it is held, where a principal debtor, by falsely and fraudulently representing to the creditor that his snrety has consented to an extension of time for payment, procures from the creditor an agreement for such extension in consideration that interest be paid, such agreement is, as to the creditor, fraudnlent; and he may, npon discovery of such fraud, even after the period of extension has expired, repudiate such agreement, and sue upon the original contract, withont refunding or tendering back the interest paid under such invalid agreement. It is rudimentary that fraud vitiates all contracts; and if the plaintiff was indnced to make the payment to the principals by their false and fraudulent representations, without any fault or negligence on its part, it may well be that the sureties would be precluded to invoke such payment as a ground for their release from the bond in suit. But such is not the situation of the plaintiff. The contract provides that:
"When said work shall have been, in opinion of party of first part, half completed, said party of first part, or its engineer, shall carefully estimate the work completed, and pay the party of the second part therefor a sum of money equal to eighty-five per cent. of the cost of the completed work, as agreed upon herein: provided, said sum shall not exceed the amount of seven thousand four hundred and eighty dollars."

By the terms of the contract the plaintiff, or its engineer, was required carefully to estimate the amount of work completed before making any payment. The performance of this duty was important, for the protection of the sureties. But, if the plaintiff had the right to rely on the representations of the contractors, that would have been a justification for the payment of no \Uore than $7,480; so that the fraudulent representations, relied on, afford no excuse for the payment to the contractors of the sum of $10,0i!6.68. In no just sense can it be claimed that the plaintiff was induced to make the payment by the fraudulent representations of the contractors. It had no right to rely on such representations, and it was bound, either in person or by its engineer, to make the estimate. of the work done for itself. If the plaintiff was misled, it was through its own fault, and the failure to perform what was required of it by the contract. In such case, it cannot shift the consequences of its own fault and want of care onto the sureties. Manufacturing Co. v. Kimmel, 87 Ind. 560. In the opinion of the court, the demurrer must be sustained, and it is so ordered.

184

:FEDERAL REPORTER,

vol. 57.

In re BONNER.

(CIroult Court, N. D. Iowa, E. D. August 15, 1893.)
I.

UNITED STATES COURT IN THE INDIAN TERRITORy-IMPRISONMENT IN STATE PENITENTIARY.

The United States court In the IndIan Territory has no power to order that a sentence of Imprisonment for one year shall be executed In a state penitentiary, as Imprisonment in such an Institution is lImIted by Rev. St. U. S., § 5541, to sentences for a period longer than one year. In 1.'0 Mills, 10 Sup. ct. Rep. 762, 135 U. S. 263, followed.

2. HABEAS CORPus-LEAVING PRISONER TO REMEDY BY ApPEAL.

On' habeas corpus, th3 petitioner sought his release on the sole grotlml that the UnItl'<! States court In the IndIap'rerritory had erred In directing a sentel;lce of Imprlsonment for one year to be executed in a state penitentIary, but made no complaint as to the jurisdiction of that comt over theo'frense or over the person, nor as to the legality of the. proceedings whi<:hresulted In the verdict. Held, that as the erroneOUS direction coultl have J:wen cOfl'ectcd in the trial court, had attention been called thereto, and still,mig;ht be corrected by the circult c(lurt of appeals, the prisoner should be left to hIs remedy by writ of en"Or, and hlsdischarge refused. Following Ex parte Frederlch, 13 Sup. Ct. Rep. 793, 149 U. S. 70.

At Law. Petition by John Bonner for a writ of habeas corpus. Writ refused. Johnson, Cruce & Cruce" for petiti<>ner. C. L. Jackson and Stryker, for the United States. SHIRAS, District Judge. A petition for the issuance ·of a writ of habeas corpus, on behalf of John Bonner, was filed some time since, in which it was averred that the petitioner was illegally restrained of his liberty by the warden of the Iowa state penitentiary, at Anamosa, Iowa, in pursuance of a sentence imposed by the United States court in the Indian Territory, which, it was claimed, is illegal and void. Upon the filing of the petition, an order was issued to the warden uf the penitentiary, directing him' to make a return showing by what authority he held the petitioner in custody, which return was duly made, .showing that the petitioner was imprisoned in the penitentiary by virtue of an order made by the United States court for the Indian Territory, directing that a sentence of imprisonment for a period of one year, pronounced against the petitioner for the crime of larceny, should be carried out by confining the petitioner in the Iowa state penitentiary, at Anamosa. The question whether a writ for the discharge of the petitioner should be issued was set down for hearing on July 27th, and counsel have submitted briefs upon the question involved; the position taken by counsel for petitioner being that the court in the Indian Territory could not lawfully sentence the petitioner to imprisonment in a penitentiary for a period of one year. On behalf of petitioner, reliance is placed upon the case of In re Mills, 135 U. S. 263, 10 Sup. Ct. Rep. 762, in which the supreme court had occasion to consider the extent of the jurisdiction of the United States court in the Indian Territory, in determiniug whether the creation of that court had deprived the United States district