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til the question of issuing them and the question of the location of the reservoir or reservoirs, whether above or below the city, should first be submitted to the qualified voters of the corporation at an election held for that purpose and approved by a majority of the

votes cast.

"shall be and remain forever" exempt from taxes does not constitute a contract, but was passed subject to a general statute of the state that all statutes shall be subject to amend

therein plainly expressed.

ment or repeal unless a contrary intent be 2. Neither the charter of a municipal corporation, nor any legislative act regulating the use of property held by it for governmental or public purposes, is a contract within the meaning of the national Constitution.

[No. 152.]

Submitted January 18, 1899. Decided Feb- chap. 897, p. 317. ruary 20, 1899.

to N ERROR to the Court of Appeals of the

I of that court affirming a judgment of the Campbell Circuit Court of that State in favor of the Commonwealth of Kentucky for the possession of certain lands on which the waterworks of defendant, the City of Coving ton, are situate, and sustaining the validity of the taxation of the waterworks property. Affirmed.

"The facts are stated in the opinion. Messrs. William Goebel and W. S. Pryor for plaintiff in error.

Messrs. W. S. Taylor, Attorney General of Kentucky, and Ramsey Washington for defendant in error.

[232]. *Mr Justice Harlan delivered the opin

ion of the court:

The plaintiff in error, a municipal corporation of Kentucky, insists that by the final judgment of the court of appeals of that commonwealth sustaining the validity of certain taxation of its waterworks property it has been deprived of rights secured by that clause of the Constitution of the United States which prohibits any state from passing a law impairing the obligation of contracts. That is the only question which this court has jurisdiction to determine upon this writ of error. U. S. Rev. Stat. § 709. By an act of the general assembly of Kentucky approved May 1st, 1886, the city of Covington was authorized to build a water reservoir or reservoirs within or outside its corporate limits, either in the county of Kenton or in any county adjacent thereto, and acquire by purchase or condemnation in fee [233]*simple the lands necessary for such reservoirs, and connect the same with the waterpipe system then existing in the city; to build a pumping house near or adjacent to the Ohio river, and to provide the same with all necessary machinery and appliances, together with such lands as might be needel for the pumping house, and for connecting it with said reservoir or reservoirs. § 21.

The declared object of that legislation was that the city and its citizens might be provided with an ample supply of pure water for all purposes. To that end the city was authorized and empowered, by its board of trustees, to issue and sell bonds to an amount not exceeding $600,000, payable in not more than forty years after date, with interest at a rate not exceeding five per cent per annum, -such bonds not, however, to be issued un

By section 31 of that act it was provided that "said reservoir or reservoirs, machinery, pipes, mains, and appurtenances, with the land upon which they are situated, shall be and remain, forever exempt from state, county, and city tax." Ky. Acts 1885-6,

A subsequent act, approved February 15th, 1888, authorized the city, in execution of the provisions of the act of 1886, to issue and

000. Ky. Acts 1887-8, chap. 137, p. 221.

The scheme outlined in these acts received the approval of the majority of the votes cast at an election held in the city, and thereafter bonds to the amount of $600,000 and $400,000 were issued in the name of the city and disposed of.

The proceeds of the bonds were duly applied by the city in building water reservoirs, in constructing the requisite approaches, pipes, and mains, in acquiring the lands necessary for the reservoirs and for its approaches and connections, in erecting a pumping house and providing it with necessary machinery and appliances, and in buying land for a pumping house and the con-[234] nection thereof by pipes and mains with the reservoirs.

The entire works upon their completion passed under the control of the city, which managed the same until March 19th, 1894, by the commissioners of waterworks, under the act of March 31st, 1879, chap. 121 (Ky. Acts 1879, p. 93); and since March 19th, 1894, they have been controlled under the act of that date, chap. 100, by a board, subject to such regulations as the city by ordinance might provide. Ky. Acts 1894, p. 278. By the latter act it was also provided that the net revenue derived from its waterworks by any city of the second class-to which class the city of Covington belongs-should be applied exclusively to the improvement or reconstruction of its streets and other public ways.

When the above act of May 1st, 1886, was passed there was in force a general statute of Kentucky, passed February 14th, 1856, which provided, as to all charters and acts of incorporation granted after that date, that “all charters and grants of or to corporations, or amendments thereof, and all other statutes, shall be subject to amendment or repeal at the will of the legislature, unless a contrary intent be therein plainly expressed: Provided, That whilst privileges and franchises so granted may be changed or repealed, no amendment or repeal shall impair other rights previously vested;" and that "when any corporation shall expire or be dissolved, or its corporate rights and privileges shall cease by reason of a repeal of its charter or otherwise, and no different provision is made by law, all its works and property, and all debts payable to it, shall

be subject to the payment of debts owing by
it, and then to distribution among the mem-
bers according to their respective interests;
and such corporation may sue and be sued
as before, for the purpose of settlement and
distribution as aforesaid." 2 Ky. Rev. Stat.
121.

This statute was not modified by the general revenue statute of May 17th, 1886, which took effect September 14th, 1886, and became part of chapter 68 of the General Statutes of 1888. It constitutes § 1987 of the Revision known as the Kentucky Statutes of 1894. Nor has it been changed by any subsequent legislation in Kentucky. [235] *The present Constitution of Kentucky, adopted in 1891, contains the following provisions:

"§ 170. There shall be exempt from taxation public property used for public pur

poses.

By the Kentucky Statutes of 1894 it is provided:

"§ 171. The general assembly shall provide by law an annual tax, which, with other resources, shall be sufficient to defray the estimated expenses of the commonwealth for each fiscal year. Taxes shall be levied and collected for public purposes only. They shall be uniform upon all property subject to taxation within the territorial limits of the authority levying the tax; and all taxes shall be levied and collected by general laws. "§ 172. All property not exempted from Referring to section 170 of the present Contaxation by this Constitution shall be as- stitution of Kentucky, declaring that "there sessed for taxation at its fair cash value, es- shall be exempt from taxation public proptimated at the price it would bring at a fair erty used for public purposes," the court of voluntary sale; and any officer or other per- appeals of Kentucky in this case said: "It son authorized to assess values for taxation was followed by necessary statutory enactwho shall commit any wilful error in the per-ments, which, however, could neither curtail formance of his duty, shall be deemed guilty nor enlarge exemption from taxation as preof misfeasance, and upon conviction thereof scribed by the Constitution; and according shall forfeit his office, and be otherwise pun- ly, in section 4020, Kentucky Statutes, ished as may be provided by law." adopted for the purpose of carrying out the provisions of section 170, is the identical language we have quoted. As it was manifestly intended by both the Constitution and statute to make subject to taxation all prop-[237] erty not thereby in express terms exempted, it results that, unless the waterworks property of the city of Covington be, in the language or meaning of section 170, 'public property used for public purposes,' it must be held, like similar property in cther cities, subject to taxation, and the special act of May 1st, 1886, stands repealed. Assuming, as a reasonable and beneficial rule of construction requires us to do, that the phrase 'for public purposes' was intended to be construed and understood according to previous judicial interpretation and usage, there can be no doubt of the proper meaning and application of it, for in the cases cited and others where the question of subjecting particular property of cities to taxation arose, the words 'for public purposes' had been held by this court to mean in that connection the same as the words for governmental purposes,' and so property used by a city for public or governmental purposes was held to be exempt, while that adapted and used for profit or convenience of the citizens, individually or collectively, was held to be subject to taxation; and, recognizing and applying that distinction, waterworks property

"§ 4020. All real and personal estate within this state, and all personal estate of persons residing in this state, and of all corporations organized under the laws of this state, whether the property be in or out of this state, including intangible property, which shall be considered and estimated in fixing the value of corporate franchises as hereinafter provided, shall be subject to taxation, unless the same be exempt from taxation by the Constitution, and shall be assessed at its fair cash value, estimated at the price it would bring at a fair voluntary sale."

In the year 1895 certain lands acquired under the above act of May 1st, 1886, and constituting a part of the Covington Waterworks, were assessed for state and county taxation, pursuant to the statutes enacted after the passage of that act, and conformably as well to the Constitution of Kentucky if that instrument did not exempt them from taxation. The taxes so assessed not having been paid, those lands after due notice were sold at public outcry by the sheriff (who by law was the collector of state and county revenue), and, no other bidder appearing, the Commonwealth of Kentucky purchased them for $2,187.24, the amount of the taxes, penalty, commission, and cost of advertising.

The present action was brought by the commonwealth to recover possession of the property so purchased.

The principal defense is that the provision in the act of May 1st, 1886, that the reservoir or reservoirs, pumping house, machinery, pipes, mains, and appurtenances, with the land upon which they are situated, "shall be and remain forever exempt from state, county, and city taxes," constituted, in respect of the lands in question, a contract between the city of Covington and the commonwealth of Kentucky, the obligation of which was impaired by the subsequent legislation to which reference has been made.

"§ 4022. For the purposes of taxation, real estate shall include all lands within this state and improvements thereon; and personal estate shall include every other species and character of property, that which is tangible as well as that which is intangible." "4026. The following property is exempt from taxation: Public property used for public purposes. [236] *This act repealed all acts and parts of acts in conflict with its provisions except the act of June 4th, 1892, providing additional funds for the ordinary expenses of the state government, and the act amendatory thereof approved July 6th, 1892.

of a city has been invariably treated by this and appurtenances, with the land upon
court as belonging to the latter class, and which they were situated, should be forever
consequently subject to state and county tax-exempt from state, county, and city taxes.
ation. In our opinion, the property in ques- But such a provision falls short of a plain
tion is under the Constitution subject to tax- expression by the legislature that at no
ation, and the statute enacted in pursuance time would it exercise the reserved power of
of it operated to repeal the special act of May *amending or repealing the act under which[239]
1, 1886."
the property was acquired. The utmost
that can be said is that it may be inferred
from the terms in which the exemption was
declared, that the legislature had no purpose
at the time the act of 1886 was passed to
withdraw the exemption from taxation; not
that the power reserved would never be ex-
erted, so far as taxation was concerned, if
in the judgment of the legislature the pub-
lic interests required that to be done. The
power expressly reserved to amend or repeal
a statute should not be frittered away by
any construction of subsequent statutes
based upon mere inference. Before a statute

particularly one relating to taxationshould be held to be irrepealable, or not subject to amendment, an intent not to repeal or amend must be so directly and unmistakably expressed as to leave no room for doubt; otherwise, the intent is not plainly expressed. It is not so expressed when the existence of the intent arises only from inference or conjecture.

The views we have expressed as to the power of the legislature under a reservation made by general statute of the right to amend or repeal are supported by many adjudged cases. Tomlinson v. Jessun, 15 Wall. 454, 457 [21: 204, 205]; Maine C. Railroad Co. v. Maine, 96 U. S. 499, 510 [24: 836, 841]; Atlantic & G. Railroad Co. v. Georgia, 98 U. S. 359, 365 [25: 185, 188]; Hoge v. Richmond & D. Railroad Co. 99 U. S. 348, 353 [25: 303, 304]; Sinking Fund Cases, 99 U. S. 700, 720 [25: 496, 502]; Greenwood v. Union Freight R. Co. 105 U. S. 13, 21 [26 L. ed. 961, 965]; Close v. Greenwood Cemetery, 107 U. S. 466, 476 [27: 408, 412]; Spring Valley Waterworks Co. v. Schottler, 110 U. S. 347, 352 [28: 173, 176]; Louisville Gas Co. v. Citizens' Gas Co. 115 U. S. 683, 696 [29: 510, 515]; Gibbs v. Consolidated Gas Co. 130 U. S. 396, 408 [32: 978, 984]; Sioux City Street Railway v. Sioux City, 138 U. S. 98, 108 [34: 898, 902]; Louisville Water Co. v. Clark, 143 Ú. S. 1, 12 [36: 55, 58]. In Tomlinson v. Jessup, above cited, referring to the reserved power to amend and repeal, this court said: "The

We are of opinion that the exemption from taxation embodied in that act did not tie the hands of the commonwealth of Kentucky so that it could not, by legislation, withdraw such exemption and subject the property in question to taxation. The act of 1886 was passed subject to the provision in a general statute of Kentucky above re-object of the reservation, and of similar ferred to, that all statutes "shall be subject reservations in other charters, is to prevent to amendment or repeal at the will of the a grant of corporate rights and privileges legislature, unless a contrary intent be in a form which will preclude legislative intherein plainly expressed." If that act interference with their exercise, if the public any sense constituted a contract between the interest should at any time require such incity and the commonwealth, the reservation terference. It is a provision intended to in an existing general statute of the right to preserve to the state control over its conamend or repeal it was itself a part of that tract with the corporators, which, without contract. Griffin v. Kentucky Ins. Co. 3 that provision, *would be irrepealable and[240] Bush, 592 [96 Am. Dec. 259]. The city ac- protected from any measures affecting its obcepted the act of 1886 and acquired under ligation. There is no subject over which it it the property taxed subject to that reser- is of greater moment for the state to prevation. There was in that act no "plainly serve its power than that of taxation. expressed" intent never to amend or to re- Immunity from taxation, constituting in peal it. It is true that the legislature said these cases a part of the contract with the that the reservoirs, machinery, pipes, mains, government, is, by the reservation of power

However much we may doubt the soundness of any interpretation of the state Constitution implying that lands and buildings are not public property used for public purposes when owned and used under legislative authority by a municipal corporation-one of the instrumentalities or agencies of the state, for the purpose, and only for the purpose, of supplying that corporation and its people with water, and when the net revenue from such property must be applied in the improvement of public ways, we must as sume, in conformity with the judgment of the highest court of Kentucky, that section 170 of the Constitution of that commonwealth cannot be construed as exempting the lands in question from taxation. In other words, we must assume that the phrase "pub[238]lic purposes" in that section means "governmental purposes," and that the property here taxed is not held by the city of Covington for such purposes, but only for the "profit or convenience" of its inhabitants, and is liable to taxation at the will of the legislature, unless at the time of the adoption of the Constitution of Kentucky it was exempt from taxation in virtue of some contract the obligation of which is protected by the Constitution of the United States.

The fundamental question in the case, then, is whether at the time of the adoption of that Constitution the city of Covington had, in respect of the lands in question, any contract with the state the obligation of which could not be impaired by any subsequent statute or by the present Constitution of Kentucky adopted in 1891. If the exemption found in the act of 1886 was such a contract, then it could not be affected by that Constitution any more than by a legislative enactment.

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such as is contained in the law of 1841, sub- | contends,-there would still be no ground for
ject to be revoked equally with any other holding that the city had in the act of 1886
provision of the charter whenever the legis- a contract within the meaning of the Con-
lature may deem it expedient for the public stitution of the United States. A municipal
interests that the revocation shall be made. corporation is a public instrumentality es-
The reservation affects the entire relation tablished to aid in the administration of the
between the state and the corporation, and affairs of the state. Neither its charter nor
places under legislative control all rights, any legislative act regulating the use of
privileges, and immunities derived by its property held by it for governmental or pub-
charter directly from the state." So in lic purposes is a contract within the mean-
Railroad Co. v. Maine, above cited: "By ing of the Constitution of the United States.
the reservation in the law of 1831, which is If the legislature choose to subject to taxa-
to be considered as if embodied in that act tion public property held by a municipal cor-
[one subsequently passed], the state retained poration of the state for public purposes, the
the power to alter it in all particulars con- validity of such legislation, so far as the na-
stituting the grant to the new company, tional Constitution is concerned, could not
formed under it, of corporate rights, privi- be questioned.
leges, and immunities. The existence of the
corporation, and its franchises and immuni-
ties, derived directly from the state, were
thus kept under its control."

*

*

In New Orleans v. New Orleans Water Works Co. 142 U. S. 79, 91 [35: 943, 947], after referring to previous adjudications, this court said that the authorities were full In our consideration of the question of and conclusive to the point that & municipal contract we have assumed, in harmony with corporation, being a mere agent of the state, the judgment of the court of appeals of Ken- "stands in its governmental or public char tucky, that the property in question was held acter in no contract relations with its sovby the city only for the profit or conven- ereignty, at whose pleasure its charter may ience of its people collectively, that is, in its be amended, changed, or revoked without the[242} proprietary, as distinguished from its gov- impairment of any constitutional obligation, ernmental, character. There are cases ad- while with respect to its private or proprie judging that the extent of legislative power tary rights and interests it may be entitled over the property of municipal corporations, to the constitutional protection." Chancelsuch as incorporated towns and cities, may lor Kent, in his Commentaries, says: "In depend upon the character in which such respect to public or municipal corporations, property is held. Mr. Dillon, in his work which exist only for public purposes. as on Municipal Corporations, says: "In its counties, cities, and towns, the legislature, governmental or public character, the corpo- under proper limitations, has a right to ration is made, by the state, one of its in-change, modify, enlarge, restrain, or destroy struments, or the local depositary of certain them; securing, however, the property for limited and prescribed political powers, to the uses of those for whom it was purchased. be exercised for the public good on behalf A public corporation instituted for purposes of the state rather than for itself. In this connected with the administration of the respect it is assimilated, in its nature and government may be controlled by the legislafunctions, to a county corporation, which, as ture, because such a corporation is not a conwe have seen, is purely part of the govern- tract within the purview of the Constitution [241]mental machinery of the sovereignty which of the United States. In those public corcreates it. Over all its civil, political, or porations there is, in reality, but one party, governmental powers, the authority of the and the trustees or governors of the corpolegislature is, in the nature of things, su- ration are merely trustees for the public." 2 preme and without limitation, unless the Kent, Com. 12th ed. p. *306. Dillon says: limitation is found in the Constitution of the "Public, including municipal corporations, particular state. But in its proprietary or are called into being at the pleasure of the private character, the theory is that the pow- state, and while the state may, and in the ers are supposed not to be conferred, primar- case of municipal corporations usually does, ily or chiefly, from considerations connected it need not obtain the consent of the people with the government of the state at large, of the locality to be affected. The charter but for the private advantage of the compact or incorporating act of a municipal corporacommunity which is incorporated as a dis- tion is in no sense a contract between the tinct legal personality or corporate individ-state and the corporation, although, as we ual; and as to such powers, and to property shall presently see, vested rights in favor of acquired thereunder, and contracts made third persons, if not indeed in favor of the with reference thereto, the corporation is to corporation, or rather the community which be regarded quo ad hoc as a private corpora- is incorporated, may arise under it. Publi tion, or at least not public in the sense that corporations within the meaning of this rule the power of the legislature over it or the are such as are established for public purrights presented by it is omnipotent." I poses exclusively, that is, for purposes conDill. Mun. Corp. 4th ed. pp. 107, 108, § 67, nected with the administration of civil or of and authorities cited. local government, and corporations are public only when, in the language of Chief Justice Marshall, 'the whole interests and franchises are the exclusive property and domain of the government itself,' such as quasi corporations (so-called), counties and towns or cities upon which are conferred the powers

If, however, the property in question be regarded as in some sense held by the city in its governmental or public character, and therefore as public property devoted to public purposes, which is the interpretation of the state Constitution for which the city

of local administration. Subject to constitutional limitations presently to be noticed, the power of the legislature over such corporations is supreme and transcendent; it may, where there is no constitutional inhi[243]bition, erect, change, divide, and even abolish them, at pleasure, as it deems the public good to require." 1 Dill. Mun. Corp. 4th ed. p. 93, § 54.

In any view of the case there is no escape from the conclusion that the city of Covingtion has no contract with the state exempting the property in question from taxation, which is protected by the contract clause of the national Constitution.

Lake County v. Graham, 130 U. S. 674, 32
L. ed. 1065; Lake County v. Rollins, 130 U.
S. 662, 32 L. ed. 1060; Dixon County v.
Field, 111 U. S. 83, 28 L. ed. 360; Hedges v.
Dixon County, 150 U. S. 182, 37 L. ed. 1044.
The court erred in holding that the bonds

Ferceiving no error in the record of which
this court may take cognizance, the judg-in controversy were valid obligations of Lake
ment is affirmed.

v.

HARRY H. DUDLEY.

county.

Buchanan v. Litchfield, 102 U. S. 278, 26
L. ed. 138; Litchfield v. Ballou, 114 U. S.
190, 29 L. ed. 132; Doon Twp. v. Cummins,

BOARD OF COUNTY COMMISSIONERS
OF THE COUNTY OF LAKE, COLO-142 U. S. 366,35 L. ed. 1044; Nesbitt v. River-
RADO, Petitioner,

side Independent Dist. 144 U. S. 610, 36 L.
ed. 562; Sutliff v. Lake County Comrs. 147
U. S. 230, 37 L. ed. 145; Graves v. Saline
County, 161 U. S. 359, 40 L. ed. 732.

The court erred in holding that Lake coun-
ty could, by receiving the benefit of and pay.
ing the interest on the bond issue in contro-
versy, validate the same.

(See S. C. Reporter's ed. 243-255.) Coupons of bonds of a corporation, payable to bearer, suable in Federal courts-one who is not the real owner cannot bring the action.

Marvin v. Ellis, 9 Fed. Rep. 367; Coffin v. Haggin, 11 Fed. Rep. 219; Fountain v. Angelica, 12 Fed. Rep. 8; Farmington v. Pillsbury, 114 U. S. 138, 29 L. ed. 114; Detroit v. Ďean, 106 U. S. 537, 27 L. ed. 300; McLean v. Valley County, 74 Fed. Rep. 389.

1. Coupons of bonds made by a county, payable to bearer, are excepted by the judiciary act of 1888 from the general rule that an assignee of a chose in action cannot sue unless his assignor can in a Federal court.

The court erred in refusing to hold the bonds in controversy void because they created a debt by loan in one year greater than that allowed by the Constitution of Colorado.

Marshall County Supers. v. Schenck, 5
Wall. 772, 18 L. ed. 556; Clay County v.
Society for Savings, 104 U. S. 579, 26 L. ed.
856; Anderson County Comrs. v. Beal, 113
U. S. 227, 28 L. ed. 966.

2. One who is not the real owner of coupons, but in whom the apparent title was collusively put, without his knowledge or request, merely to make a case cognizable by a Federal court on the grounds of diverse citizenship, cannot bring an action on them in such court.

[No. 177.]

See same case below, 49 U. S. App. 336. The facts are stated in the opinion. Messrs. George R. Elder, Charles S. Thomas, W. H. Bryant, and H. H. Lee, for petitioner:

The court erred in holding that under the testimony in this case Harry H. Dudley was a bona fide holder for value of the coupons in controversy, and entitled to bring suit thereon.

The payment of interest will not validate a municipal bond issue without authority of law.

Graves v. Saline County, 161 U. S. 359, 40 L. ed. 732; Merchants' Bank v. Bergen County, 115 U. S. 384, 29 L. ed. 430.

Messrs. John F. Dillon, Edmund F. Richardson, Harry Hubbard, John M. Dillon, and Daniel E. Parks, for respondent: The plaintiff was a bona fide holder, or enArgued December 14, 15, 1898. Decided titled to the rights of a bona fide holder, of February 20, 1899. the coupons in question.

Douglas County Comrs. v. Bolles, 94 U. S.

ON WRIT OF CERTIORARI to the United 104, 24 L. ed. 46; Montclair v. Ramsdell, 107

U. S. 147, 27 L. ed. 431.

States Circuit Court of Appeals for Eighth Circuit to review a judgment of that court reversing the judgment of the Circuit Court of the United States for the District of Colorado in favor of defendant in an action brought by Harry H. Dudley, plaintiff, against the Board of County Commissioners of the County of Lake, Colorado, a governmental corporation, to recover the amount of certain coupons of bonds issued by that corporation. Judgment of Circuit Court and of Circuit Court of Appeals reversed, and cause remanded for a new trial and for fur-L. ed. 431; Douglas County Comrs. v. Bolles, ther proceedings. 94 U. S. 104, 24 L. ed. 46; Marion County Comrs. v. Clark, 94 U. S. 278, 24 L. ed. 59; Cromwell v. Sac County, 96 U. S. 51, 24 L. ed. 681; San Antonio v. Mehaffy, 96 U. S. 312, 24 L. ed. 816; Nauvoo v. Ritter, 97 U. S. 389, 24 L. ed. 1050.

A bona fide holder is a purchaser for value without notice, or the successor of one who was such a purchaser.

McClure v. Oxford Twp. 94 U. S. 429, 24 L. ed. 129.

If any previous holder of the bonds in suit was a bona fide holder for value, the plaintiff can avail himself of such previous holder's position without showing that he has himself paid value.

Montclair v. Ramsdell, 107 U. S. 147, 27

The recital in the bonds is conclusive in favor of the bona fide holder that the debt limit prescribed by the statute and by the Constitution has not been exceeded.

Marcy v. Oswego Twp. 92 U. S. 637, 23 L.

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