« ForrigeFortsett »
exceeded the two thirds allowed by the char-
"Do the facts alleged in the answer, that the holders of the notes, as directors of the company, in the management of its affairs, contracted indebtedness beyond the limit prescribed by the articles of incorporation, and caused the mortgage to be executed to secure the amount due them, defeat their security and give other creditors a right to share in the proceeds of the property mortgaged? We do not understand counsel for the defendants to claim that a debt of the corporation beyond the prescribed limits of its indebtedness is invalid, and, if held by a director of the corporation, cannot be enforced for that reason alone. It may be that a director would be answerable to stockholders or others for negligence or mismanagement of the affairs of a corporation whereby debts were contracted in excess of the limitation prescribed in the articles of incorporation; but it cannot be claimed that such a debt, for a consideration received by the corporation, cannot be enforced against it."
cers of the corporation a personal liability for the amount thereof.
Light is thrown upon the condition of the law of the state of Iowa, on the question now before us, by a decision of the supreme court of that state, wherein it was called upon to consider issues arising from the identical contracts which are involved in this case. The cause was adjudged in the supreme court of Iowa, after the decision of the trial court in this cause, and after that of the circuit court of appeals. Without deciding that the construction given the statute by the supreme court of the state of Iowa at the time and under the circumstances stated is necessarily controlling on this court, such interpretation, conceding that it is not controlling, is manifestly relevant for the purpose of elucidating the previous decisions of the supreme court of Iowa, and as indicating what was the settled law of that state at the time the contract in question was entered into, and prior to the time when the controversy which this case presents originated in the courts of the United States. The decision in question is Beach et al. v. Wakefield et al. (1898) 76 N. W. 688 (not yet reported in the official reports of the state of Iowa). The case as stated in the report thereof was this: Beach, a subcontractor, commenced "It is averred that the directors unlaw-proceedings to establish and foreclose a mefully contracted indebtedness of the corporation in excess of the limit prescribed by its articles of incorporation. But this has nothing to do with the directors' claims in controversy. As we have before said, they may be liable to proper parties for their negligence or unlawful acts, but honest contracts made with them are not defeated thereby."
Again, referring to the same subject, the court said (p. 702):
In Warfield and Others v. Marshall County Canning Company (1887) 72 Iowa, 666, where a debt had been confessedly contracted by a corporation in excess of its charter limitation, confining the power of the corporation to create a debt to a sum not exceeding one half of the capital stock actually paid in, the court, in considering the legal consequences of such excessive debt, said (p. 672):
"The proposition is stated by counsel, but it is not, we think, insisted upon, that the mortgage is ultra vires because the articles of incorporation provide 'that it shall be competent to mortgage the property of the company to the amount of not exceeding one half of the capital stock actually paid in.' This question was determined adversely to appellant in Garrett v. Burlington Plow Co.
It follows then that at the time of the issue of the bonds in favor of the Trust Company of North America, and of the execution of the deed of mortgage by which such bonds were secured, the supreme court of the state of Iowa had in two cases declared the law of that state to be that a debt contracted in excess of the maximum limitation stated in the charter, in virtue of the provisions of the statute requiring that such maximum limit should be fixed, was not void, although the consequence of contracting a debt beyond the limitation might be to entail upon the offi
chanic's lien on a depot built by the Termi-
"A distinction is to be taken between contracts like this and those which, independent of statute, are in violation of public policy. The creation of this indebtedness involved no moral turpitude. The making of the mortgage did not disable the corporation from performing its duties to the public. The Terminal Company had a right to incur a debt, and to execute a mortgage to secure it. The only ground of complaint is that it went further than the law permitted. Of this the state may complain, but the Terminal Company cannot; nor can any person whose rights are derived through the Terminal Company and who acquired such rights with knowledge of the mortgage lien."
Again, in commenting on the same subject, the court said (p. 695):
"We are aware that the security has been held invalid, and a right of recovery thereon
denied, in many cases where an action has been permitted upon the common counts. But we think these cases will be found to involve contracts which were absolutely void, and not, as in the case at bar, voidable only. This distinction is clearly preserved in the cases. In Garrett v. Burlington Plow Co. supra, the indebtedness exceeded the charter limit of the corporation, and the creditors had notice *thereof when the transaction took place; and yet a right of recovery was allowed and the lien of the mortgage upheld." Recurring to the legal consequence, under the Iowa statute, of contracting a debt in excess of the statutory limit, the court said (p. 695):
"It is said, further, that the plea of estoppel can be urged only in favor of the innocent, and that the bondholders here are not of that class, for they are held to notice of the corporate power of the Terminal Company. This rule has been applied in cases where the act done was wholly void because of an absolute want of power to sustain it, and in cases where considerations of public policy intervened. Here, as repeatedly said, the act is voidable only. The statute does not even impose a penalty therefor."
The argument, then, reduces itself to this: Although it was conclusively settled by the decisions of the state of Iowa at the time the contract in question was entered into, that a debt contracted by a corporation in excess of the statutory limitation was in no sense of the word void, but on the contrary was merely voidable, we nevertheless should, in enforcing the state statute, disregard the construction affixed to it by the supreme court of the state of Iowa, and hold that the act of the corporation in exceeding the limit of debt imposed by the statute or fixed in the charter in compliance with the statute was absolutely void. But to so decide would violate the elementary rule previously referred to, under which this court adopts and applies the meaning of a state statute as settled by the court of last resort of the state. As, then, under the Iowa law the fact that the corporation contracted a debt in excess of the charter or statutory limitation did not render the debt void, but, on the contrary, such debt, by the settled rule in Iowa, was merely voidable, and was enforceable against the corporation and those holding under it, and gave rise only to a right of action on the part of the state because of the violation of the statute, or entailed, it would seem, a liability on the officers of the corporation for the excessive debt so contracted, it follows that the whole foundation upon which the errors assigned in this court must rest is ]without support in *respect of Federal law, and therefore the decrees below were correctly rendered.
It is claimed, however, that this court is not obliged to follow the Iowa decisions interpreting the statute of that state, because it is assumed that those decisions proceed alone upon the principle of estoppel. Estoppel, it is argued, is a matter of general, and not of local, law upon which this court must form an independent conclusion, even although in doing so it may disregard the rule
established in the state of Iowa by the su preme court of that state. Whatever, it is argued, may be the rule in state courts, in this court it is settled that a corporation cannot be estopped from asserting that it is not bound by a corporate act which is absolutely void, citing, among other cases, Pullman's Palace Car Co. v. Central Transp. Co. 171 U. S. 138 [ante, 108]; California National Bank v. Kennedy, 167 U. S. 362 [42: 198]; McCormick v. Market National Bank, 165 U. S. 538 [41: 817]; Central Transp. Co. v. Pullman's Palace Car Co. 139 U. S. 24 [35: 55].
But we are not called upon in the case before us, to decide the question thus raised, since it rests upon an assumption that the court of Iowa has decided that the corporation was by estoppel prevented from complaining of a void act. But the supreme court of Iowa has not so decided. On the contrary, while in the course of its opinions it has referred to the doctrine of estoppel, it expressly, in the cases cited, made the application of the doctrine depend upon the legal conclusion found by it, that the act of a corporation in contracting a debt in excess of the statutory limit was not void, but merely voidable, and for this reason the corporation, or those holding under it, could not be heard to assail the act in question. The decisions of this court which are relied upon considered the application of the doctrine of estoppel to corporate acts absolutely void, and not its relation to contracts which were merely voidable. Whether, as an inde pendent question, if we were enforcing the Îowa statute, we would decide that the issue of bonds by a corporation in excess of a statutory inhibition was not void, but merely voidable, need not be considered, since, as we have said, in applying an Iowa law, we follow *the settled construction given to it by[118) the supreme court of that state.
It necessarily follows that the decrees of the Circuit Court and of the Circuit Court of Appeals were correct, and both are therefore affirmed.
Argued and Submitted January 25, 1899. was no suggestion in the pleadings, or during Decided February 20, 1899.
N ERROR to the Supreme Court of the State of Washington to review a judg ment of that court affirming a judgment of the Superior Court of King County, Washington, in an action brought by Dixon to recover damages for personal injuries sustained by him by reason of the negligence of one Backus, predecessor of the defendant, Bausman, as receiver, etc. The judgment of the trial court was rendered in favor of the plaintiff upon a verdict for $10,000. Writ of error dismissed.
See same case below, 17 Wash. 304. The facts are stated in the opinion. Mr. Frederick Bausman for plaintiff in error.
Messrs. John E. Humphries, Edward P. Edsen, William E. Humphrey, Harrison Bostwick, and C. E. Remsberg for defendant in error.
 *Mr. Chief Justice Fuller delivered the opinion of the court:
Dixon brought an action in the superior court of King county, Washington, against Bausman, receiver of the Ranier Power & Railway Company, to recover damages for injuries sustained by reason of defendant's negligence. The complaint alleged that the Ranier Power & Railway Company was a corporation organized under the laws of Washington, and engaged in operating a certain street railway in the city of Seattle; that June 13, 1893, one Backus was duly appointed by the circuit court of the United States for the district of Washington receiver of the company, and qualified and served *as such until February 11, 1895, when he was succeeded by Bausman; and that the injury of which plaintiff complained was inflicted in the course of the operation of the railway, on June 15, 1893. The answer denied that Bausman's predecessor in office had employed Dixon, and that Dixon's injuries were caused by negligence; and set up contributory negligence as an affirmative defense. The action was tried by a jury and a verdict rendered in favor of Dixon, the jury also returning answers to certain questions of fact specially propounded. A motion for a new trial was overruled and judgment entered on the verdict, and the cause was carried to the supreme court of Washington, which affirmed the judgment (17 Wash. 304); whereupon this writ of error was allowed.
We are unable to find adequate ground on which to maintain jurisdiction. The contention of plaintiff in error seems to be that because of his appointment as receiver the judgment against him amounts to a denial of the validity of an authority exercised under the United States, or of a right or immunity specially set up or claimed under a statute of the United States. It is true that the receiver was an officer of the circuit court, but the validity of his authority as such was not drawn in question, and there
the trial, or, so far as appears, in the state supreme court, that any right the receiver possessed as receiver was contested, although on the merits the employment of plaintiff was denied, and defendant contended that plaintiff had assumed the risk which resulted in the injury, and had also been guilty of contributory negligence. The mere order of the circuit court appointing a receiver did not create a Federal question under section 709 of the Revised Statutes, and the receiver did not set up any right derived from that order, which he asserted was abridged or taken away by the decision of the state court. The liability to Dixon depended on principles of general law applicable to the facts, and not in any way on the terms of
We have just held in Capital National Bank of Lincoln v. The First National Bank of Cadiz, 172 U. S. 425 [ante. 502], that where the receiver of a national bank was  party defendant in the state courts, contested the issues on a general denial, and set up no claim of a right under Federal statutes withdrawing the case from the application of general law, this court had no jurisdiction to revise the judgment of the highest court of the state resting thereon; and, certainly, an officer of the circuit court stands on no higher ground than an officer of the United
Defendant did not deny that he was amenable to suit in the state courts; he did not claim immunity as receiver from suit without previous leave of the circuit court, and could not have done so in view of the act of March 3, 1887, chap. 373 (24 Stat. at L. 552); all the questions involved were questions of general law, including the inquiry whether one person holding the office of receiver could be held responsible for the acts of his predecessor in the same office; and the judgment specifically prescribed that the "said amount and judgment is payable out of the funds held by said Bausman as receiver of said company, which come into the hands of said receiver and are held by him as receiver, and funds belonging to the receivership which are applicable for that purpose, which may hereafter come into the receiver's hands or under direction of the court appointing such receiver."
Section 3 of the act of March 3, 1887, provides that "every receiver or manager of any property, appointed by any court of the United States, may be sued in respect of any act or transaction of his in carrying on the business connected with such property, without the previous leave of the court in which such receiver or manager was ap pointed; but such suit shall be subject to the general equity jurisdiction of the court in which such receiver or manager was ap pointed, so far as the same shall be neces sary to the ends of justice." It is not denied that this action was prosecuted and this judgment rendered in accordance therewith.
The writ of error is dismissed.
J. K. MULLEN and Charles D. McPhee, | in that court was that "if the loss of the
Plffs. in Err.,
WESTERN UNION BEEF COMPANY.
(See S. C. Reporter's ed. 116-123.)
plaintiff's cattle was in consequence of dis-
The regulations of the Secretary of Agri
Review of a state judgment-highest state culture were as follows:
Regulations Concerning Cattle Transportation.
United States Department of Agriculture, Office of the Secretary,
Washington, D. C., February 5th, 1891. To the Managers and Agents of Railroad and Transportation Companies of the United States, Stockmen and Others:
In accordance with section 7 of the act of Congress approved May 29, 1884, entitled "An Act for the Establishment of a Bureau
Argued and Submitted January 18, 1899. of Animal Industry, to Prevent the ExportaDecided February 20, 1899.
N ERROR to the Court of Appeals of the of that court which affirmed a judgment of the District Court of Arapahoe County, Colorado, in favor of the defendant, the Western Union Beef Company, in an action brought to recover damages for the loss of stock occasioned by the communication of an infectious disease from the cattle of the defendant to those of the plaintiff. Writ of error dismissed.
See same case below, 9 Colo. App. 497.
Statement by Mr. Chief Justice Fuller: This was an action brought by Mullen and McPhee against the Western Union Beef Company, in the district court of Arapahoe County, Colorado, to recover damages for loss of stock occasioned by the communication from cattle of defendant to cattle of plaintiff's of the disease known as splenetic or Texas fever, by the importation into Colorado of a herd of Texas cattle, in June, 1891, and suffering them to go at large, in violation of the quarantine rules, regulations, and orders of the United States Department of Agriculture, in accordance with the act of Congress approved May 29, 1884, entitled "An Act for the Establishment of a Bureau of Animal Industry," etc., 23 Stat. 31, chap. 60; and the act approved July 14, 1890, 26 Stat. 287, chap. 707; and in violation of the quarantine rules and regulations of the state of Colorado. The trial resulted in a verdict for defendant, on which judgment was entered. Plaintiffs sued out a writ of error from the court of appeals of the state of Colorado, and the judgment was affirmed, whereupon the present writ of error was allowed."
The court of appeals held that the question of violation by defendant of the quarantine rules and regulations of the state need not be considered because "upon sufficient evidence, it was settled by the jury in defendant's favor;" that "no question of negligence generally in the shipment and management of the cattle is presented by the record;" and that the theory on which the case had been tried below and was argued
tion of Diseased Cattle, and to Provide
the act of Congress approved July 14. 1890,
of February to the 1st day of December,
[Here followed a series of stringent rules concerning the method to be pursued in transporting cattle from the infected districts.]
United States Department of Agriculture,
Washington, D. C., April 23d, 1891. Notice is hereby given that cattle which have been at least ninety days in the area of country hereinafter described may be moved from said area by rail into the states of Colorado, Wyoming, and Montana for grazing purposes, in accordance with the regulations made by said states for the admission of southern cattle thereto. Provided:
1. That cattle from said area shall go into said states only for slaughter or grazing, and shall on no account be shipped from said states into any other state or territory of the United States before the 1st day of December, 1891.
2. That such cattle shall not be allowed in pens or on trails or ranges that are to be occupied or crossed by cattle going to the eastern markets before December 1, 1891, and that these two classes shall not be allowed to come in contact.
3. That all cars which have carried cattle from said area shall, upon unloading, at once be cleaned and disinfected in the manner provided by the regulations of this department of February 5th, 1891.
4. That the state authorities of the states
of Colorado, Wyoming, and Montana, agree |
The court, after stating that the territory
*"Third. It shall have jurisdiction, not final, in cases where the controversy involves a franchise or freehold, or where the construction of a provision of the Constitu tion of the state, or of the United States, is necessary to the decision of the case; also, the judgments of county courts. in criminal cases, or upon writs of error to Writs of peals shall lie to review final judgments, error from, or appeals to, the court of ap
within the same time and in the same manner as is now or may hereafter be provided by law for such reviews by the supreme
And it was then ruled that the regulations were not binding, as it was not shown that the state had agreed to them; that they were not authorized by the statute; that "the second provision undertakes to regulate respect of its jurisdiction under these secThe supreme court of Colorado has held in the duties in relation to them [the cattle], tions, that whenever a constitutional quesof the persons by whom they might be re- tion is necessarily to be determined in the moved after their arrival in the state, and adjudication of a case, an appeal or writ of it is upon this provision that the plaintiffs' error from that court will lie; that "it matreliance is chiefly placed. After becoming ters but little how such question is raised, domiciled within the state their management whether by the pleadings, by objections to would be regulated by its laws and not by evidence, or by argument of counsel, provided the act of Congress. Any violation of the the question is by some means fairly brought Federal law in connection with the cattle into the record by a party entitled to raise would consist in their removal. The dispo-it:" but "it must fairly appear from an exsition of them afterwards was not within amination of the record that a decision of the scope of the statute. [9 Colo. App. 497], such question is necessary, and also that the question raised is fairly debatable (Trimble it appears by the record that a case might v. People, 19 Colo. 187); and also that "when well have been disposed of without construing a constitutional provision, a construction of such provision is not so necessary to a determination of the case as to give this court jurisdiction to review upon that ground" (Arapahoe County Comrs. v. [McIntire] State Board of Equalization, 23 Colo. 137) ; and, again, that "unless a constitutional question is fairly debatable, and has been properly raised, and is necessary to the determination of the particular controversy,
49 Pac. 425.
Messrs. T. B. Stuart and W. C. Kingsley for plaintiffs in error.
Messrs. C. S. Thomas, W. H. Bryant,
and H. H. Lee for defendant in error. ₪19) *Mr. Chief Justice Fuller delivered the opinion of the court:
We are met on the threshold by the objection that the writ of error runs to the judgment of the court of appeals, and cannot be maintained, because that is not the judgment of the highest court of the state in which a decision could be had.
not exist." Madden v. Day, 24 Colo. 418.
The supreme court of Colorado is the high-appellate jurisdiction upon that ground does est court of the state, and the court of appeals is an intermediate court, created by an act approved April 6, 1891 (Sess. Laws Colo. 1891, 118), of which the following are
"Section 1. No writ of error from, or appeal to, the supreme court shall lie to review the final judgment of any inferior court, unless the judgment, or in replevin the value found, exceeds two thousand five hundred dollars, exclusive of costs. Provided, this limitation shall not apply where the matter in controversy relates to a franchise or freehold, nor where the construction of a provision of the Constitution of the state or of the United States is necessary to the determination of a case. Provided, further, that the foregoing limitation shall not apply to writs of error to county courts."
"Sec. 4. That the said court shall have jurisdiction:
"First. To review the final judgments of inferior courts of record in all civil cases and in all criminal cases not capital.
"Second. It shall have final jurisdiction, subject to the limitations stated in subdivision 3 of this section, where the judgment, or in replevin the value found, is two thousand five hundred dollars, or less, exclusive of costs.
This record discloses that defendant insisted throughout the trial that the acts of Congress relied on by plaintiff's were unconstitutional if construed as authorizing the particular regulations issued by the Secretary.
When plaintiffs offered the rules and regulations in evidence, which they contended defendant had violated, defendant *objected to their admission on the two grounds that they were not authorized by the acts of Congress, and that, if they were, such acts were unconstitutional. The objection was overruled and defendant excepted.
The regulations having been introduced in evidence, plaintiffs called as a witness, among others, a special agent of the Department of Agriculture, who was questioned in respect of their violation, to which defendant objected and excepted on the same grounds.
At the conclusion of plaintiffs' case, a motion for nonsuit was made by defendant, the unconstitutionality of the acts under which the regulations were made being again urged, and an exception taken to the denial of the motion.
The trial then proceeded, and, at its close, defendant requested the court to give this instruction: "The court instructs the jury