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and thus work a gradual confiscation of the property belonging to the plaintiff.

We think that under the circumstances the decree should be reversed and the case remanded with instructions either to refer it to a commissioner for further findings, with leave to take additional testimony if that be deemed necessary, showing the terms and duration of the alleged agreement between the two companies, and how far it was acted upon by them, or that the court should itself undertake this investigation and make like findings. The decree of the Circuit Court is






No. 75. Argued November 28, 1905.—Decided January 2, 1906.

Section 1255 of the Code of North Carolina of 1883 provides that mortgages

of corporations shall not exempt the property mortgaged from execution for judgments obtained in the state courts against the corporation for torts and certain other causes. A corporation constructed a plant for supplying a city with water, having received exclusive authority therefor from the city. It executed two mortgages, under the foreclosure of the second of which its plant was sold, subject to the first mortgage, to a new corporation, which then executed a further mortgage. Subsequently judgments were rendered in actions brought by property-owners against the new corporation for damages caused, as charged in the complaints and recited in the judgments by its negligence. On foreclosure of the outstanding mortgages the holders of these judgments were given priority over the mortgagees, notwithstanding the contention of the latter that the property owners had no contractual relations with, or right to maintain these actions against, the water company, that the judgments were not conclusive, the mortgagees not being parties thereto, and that only the equity acquired by the new company was subject to any judgment lien. In affirming the decision, held that:

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Under the statute the mortgagees agreed to accept the judgments as conclu

sive of the amounts due. And the record, showing that negligence was alleged in the complaints and adjudged by the state court, discloses

judgments in actions of tort. One may by contract acquire an opportunity for acts and conduct in which

parties other than those with whom he contracts are interested and for

negligence in which he is liable to such other parties. While a citizen may have no individual claim against a company contract

ing to supply water to a city for its failure to do anything under the contract, he may have a claim against it, after it has entered upon a contract and is engaged in supplying the city with water, for damages resulting from negligence and in such a case the action is not for breach of contract

but for a tort. Section 1255 is not a penal statute, but remedial, and should be liberally

construed to give effect to the intent of the legislature to make the property of corporations security against its torts, and imposes upon the plant of a corporation responsibility for torts which cannot be avoided by a conveyance to a new corporation.

SECTION 1255 of the Code of North Carolina of 1883 reads:

“Mortgages of incorporate companies upon their property or earnings, whether in bonds or otherwise, hereafter issued, shall not have power to exempt the property or earnings of such incorporations from execution for the satisfaction of any judgment obtained in the courts of the State against such incorporation, for labor performed (nor for material furnished such incorporation), nor for torts committed by such incorporation, its agents or employés, whereby any person is killed or any person or property injured, any clause or clauses in such mortgage to the contrary notwithstanding.”

This was subsequently amended by leaving out the matter enclosed in brackets.

In 1887 a corporation was organized under the laws of North Carolina, which soon after secured the passage of an ordinance by the city of Greensboro, giving to it the exclusive right to the use of the streets, sidewalks and public grounds for the purpose of constructing, operating and maintaining a complete system of waterworks. A later ordinance provided that "said water company shall be responsible for all damage sustained by the city, or any individual or individuals,

200 U.S.

Argument for Petitioners.

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for any injury sustained from the negligence of the said company, either in the construction or operation of their plant."

The corporation constructed the waterworks and also executed a mortgage or deed of trust, conveying its entire property and plant to secure the payment of fifty thousand dollars of bonds. A subsequent mortgage or deed of trust was foreclosed and the title to the property passed to a new corporation, subject to the lien of the first mortgage. After its purchase the new corporation executed a further mortgage or deed of trust. Subsequently two fires occurred, destroying property belonging to the respondents. Actions were commenced in the Superior Court of Guilford County by the owners of the property destroyed against the new corporation and judgments recovered, the judgment entries each reciting that the recovery was "for the injury and damage done him by the negligence of the defendant.” 128 N. Car. 375. Proceedings having been commenced in the Circuit Court of the United States to foreclose the existing mortgages, a decree was entered and a sale made. Thereupon the judgment creditors intervened, insisting that in the distribution of the proceeds they were entitled to priority over the mortgage liens by virtue of the statute above referred to. The Circuit Court decided in their favor. 115 Fed. Rep. 184. Its judgment was taken on appeal to the Court of Appeals, from which court the case was brought here on certiorari.

Mr. Archibald H. Taylor and Mr. John Peirce Bruns, with whom Mr. W. P. Bynum was on the brief, for petitioners:

The state court had no power to determine the question of the liability of the mortgagees to answer out of their estate to the judgment creditors, but the sole jurisdiction for the decision of these questions is with the United States court, which had taken jurisdiction of the property and of all of the parties. The decision of the state court that a water company was liable to property owners for losses by fire, by reason of its contract with

Argument for Petitioners.

200 U.S.

the city, and that this liability was in tort, was only made after the rights of all parties had accrued.

Judgments in state courts against corporations of which the United States courts for sufficient cause have taken jurisdiction for the purpose of selling their property, distributing proceeds and ascertaining liens, have no validity against mortgagees of such corporations, who have properly invoked or obtained the jurisdiction of the United States court, unless the latter court, on examination of the facts upon which such judgments were obtained, itself pronounces such judgment valid, and awards and enforces such claim. Brooks v. Burlington R. R., 101 U. S. 443; Wisconsin v. Pelican Ins. Co., 127 U. S. 292; Central Trust Co. v. Condon, 67 Fed. Rep. 103; Trust Company v. Cincinnati, 76 Fed. Rep. 296; Trust Company v. Bridges, 57 Fed. Rep. 753; Trust Company v. Hennen, 90 Fed. Rep. 595; Hassell v. Wilcox, 130 U. S. 503.

In determining the validity or nature of the cause of action upon which the judgments were recovered in the state court, neither the court below nor any United States court could accept the decision of the state court in these proceedings, because the questions are of general jurisprudence which a United States court must decide for itself. Curtis' Jurisprudence, 234; Burgess v. Seligman, 107 U. S. 33; Swift v. Tyson, 16 Pet. 18; Rowan v. Runnels, 5 How. 134; Steamship Co. v. Insurance Co., 129 U. S. 397; B. & 0. R. R. v. Baugh, 149 L'. S. 368; Venice v. Murdock, 92 U. S. 494; Railroad Co. v. Lockwood, 17 Wall. 357; Railroad Co. v. National Bank, 102 U. S. 14; United States v. Peters, 5 Cranch, 115; Pease v. Peck, 8 How. 600; Folsom v. Ninety Sir, 159 U. S. 626.

The only question presented is, what was the decision obligatory upon the United States court below and this court, after these fires had taken place and prior to the decision of the first case arising out of them, and there could have been none other, than that the water company was not liable, either in contract or in tort. If so the cases decided after the rights of all parties had accrued, cannot change the law of the United States courts.

200 U. 8.

Argument for Petitioners.


Lake Shore R. R. v. Prentice, 147 U. S. 101; Knox County v. National Bank, 147 U. S. 92.

The doctrine of United States courts and of all the state courts, with one exception, and of the English courts in respect to the causes of action asserted by these intervenors, the respondents here, against the defendant, the Greensboro Water Supply Company, supplying water under ordinance or contract to the city, is that such company is not liable for its failure to furnish adequate and proper supply to a citizen not having a direct contract with the company itself, for damage to his property, whether the suit be founded on contract or tort. 2 Dillon Mun. Corp. 975; Trust Co. v. Salem Water Co., 94 Fed. Rep. 240. In Lumber Co. v. Paducah Water Co., 12 S. W. Rep. 554; S. C., 13 S. W. Rep. 249, there were private contracts; and Nichols v. Water Co., 44 S. E. Rep. 292; Atkinson v. Water Works Co., 2 Exch. 445; Davis v. Water Works Co., 54 Iowa, 60; Gas Company v. Louisiana Co., 115 U. S. 651; Vrooman v. Turner, 69 N. Y. 480; Becker v. Water Works Co., 79 Iowa, 419; Britton v. Water Works Co., 81 Wisconsin, 48; Hayes v. Oshkosh, 33 Wisconsin, 314; Nickerson v. Hydraulic Co., 46 Connecticut, 24; Eaton v. Water Co., 37 Nebraska, 546; Beck v. Water Works Co., 11 Atl. Rep. 300; Stone v. Water Co., 4 Pa. Dist. Rep. 431; Phrenix Ins. Co. v. Trenton Water Co., 42 Mo. App. 118; Howsmon v. Water Co., 119 Missouri, 304; S.C., 24 S. W. Rep. 784; Fitch v. Water Co., 37 N. E. Rep. 982; Foster v. Water Co., 3 Lea, 42; Ferris v. Water Co., 16 Nebraska, 44; Fowler v. Water Co., 83 Georgia, 219; Mott v. Manufacturing Co., 48 Kansas, 12; Bush v. Water Co., 43 Pac. Rep. 69; Wainwright v. Water Co., 78 Hun, 146; House v. Water Co., 31 S. W. Rep. 179; Waterworks Co. v. Brownless, 10 Ohio, 620; Wheeler v. Cincinnati, 19 Ohio, 19;Taintor v. Worcester, 123 Massachusetts, 311; Van Horn v. Des Moines, 63 Iowa, 447; Howard v. San Francisco, 51 California, 52; Black v. Columbia, 19 S. Car. 412; Mendel v. Wheeling, 28 W. Va. 262; Manufacturing Co. v. Water Works. Co., 113 Louisiana, 1091; Blunk v. Water Supply Co., 71 Ohio St., 250; Wilkinson v. Water Co., 78 Mississippi, 401.

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