maintained. The practical effect of this decree was to destroy the water company's right to possess and operate the plant which it had conveyed to the plaintiff. It had no power thereafter to collect and use the income of the company from any source to pay the taxes annually assessed against the property, to continue its value as a going concern, or to do any act necessary to prevent it from being entirely wasted and destroyed. Under both the expressed and implied conditions of the mortgage executed by this company, the trustee had an undoubted right to take possession of this property, and save it for the benefit of the bondholders, who were most vitally interested in its continued existence. But the defendant city contends that the decree of the state court which annulled the contract as to the waterworks company is also conclusive and binding as to the interest of the trustee, and that the latter is equally, under said decree, without the right to use the streets of said city for the purpose of maintaining and operating the waterworks. But this decree can have no such effect. In a case involving the same question the Circuit Court of Appeals for the Sixth Circuit, in Louisville Trust Company v. City of Cincinnati, 76 Fed. 296, 22 C. C. A. 334, has said:

"That these street easements originate in certain statutes of the state of Ohio and certain ordinances of the city of Cincinnati does not affect their character as contracts entitled to the protection afforded by the Constitution of the United States. The grant of a right to enter upon and occupy a public street with the necessary tracks, poles, wires, and equipment of an electric street railway is a grant of a typical easement in property, and as such is a contract_right, capable, in the absence of express restrictions, of being sold, conveyed, assigned, or mortgaged, and is therefore a right entitled to all the protection afforded other property or contract rights. Such a grant as we had occasion to decide in Detroit Citizens' Street Ry. Co. v. City of Detroit, 22 U. S. App. 570-580, 12 C. C. A. 365-372, and 64 Fed. 628, 635, 26 L. R. A. 667, may be for a time longer or shorter than the corporate life of the company receiving it; the duration of the estate being dependent upon the terms of the grant and the power of the grantor to make it. We then said there was nothing in the nature of the property rights involved in a grant of an easement in the streets for street railway uses which distinguishes it from the property acquired by a corporation in the exercise of its franchises."

In Railroad Company v. Delamore, 114 U. S. 501, 5 Sup. Ct. 1009, 29 L. Ed. 244, it was held that a grant by a municipal corporation to a railway company of a right of way through certain streets of the city, with the right to construct its railway thereon, and maintain and occupy them in its use, is a franchise which may be mortgaged, and would pass to a purchaser at a sale under a foreclosure of the mortgage. There is nothing in the law of Ohio which in any way contravenes the right of a railway company to mortgage its street easements, or which would prevent such easements from passing to a purchaser at foreclosure sale. It therefore follows that the complainant under the mortgage mentioned has acquired the substantial right in the street easements of the mortgagor company, and cannot be deprived of this security by a proceeding directly impeaching their validity and duration without being made a party thereto. It is true that a grantor can transfer no greater estate or interest than he has, and that the title in the grantee's

hands must be subject to all the burdens and limitations which rested upon it at the time of the conveyance. But in Keokuk & W. R. Co. v. Missouri, 152 U. S. 301-314, 14 Sup. Ct. 592, 597, 38 L. Ed. 450, Mr. Justice Brown, in delivering the opinion of the court, said: "While a mortgagee is privy in estate with a mortgagor as to actions begun before the mortgage was given, he is not bound by judgments or decrees against the mortgagor in suits begun by third parties subsequent to the execution of the mortgage, unless he, or some one authorized to represent him, like a trustee of a mortgage bondholder, is made a party to the litigation, although it would be otherwise if the mortgage were executed pending the suit or after the decree."

Hassall v. Wilcox, 130 U. S. 493, 9 Sup. Ct. 590, 32 L. Ed. 1001; Southern Bank & Trust Co. et al. v. Folsom et al., 75 Fed. 929, 21 C. C. A. 568.

The mortgage under which the complainant was trustee was executed before the suit in the state court was begun, and we think there is no reason why a mortgage of property interests, such as the street grants claimed by the mortgagor company, should be concluded by a decree to which only the mortgagor was a party, than if the mortgage had been on a different character of estate. See Baltimore Trust and Guarantee Co. v. Mayor, etc., of City of Baltimore (C. C.) 64 Fed. 153.

In the more recent case of Columbia Ave. Sav. Fund, etc., Co. v. City of Dawson (C. C.) 130 Fed. 152, Judge Pardee, of this circuit, held that a mortgagee was not privy to or bound by a judgment against the mortgagor rendered in a suit commenced after the mortgage was given, and to which he was not a party. This case was, on appeal, reversed upon another point, but the above holding was in no wise disturbed.

Demurrant relies upon the case of New Orleans Water Works Company v. Louisiana, 185 U. S. 342, 22 Sup. Ct. 691, 46 L. Ed. 936, but this case involved nothing more than the right of a state to revoke a charter of incorporation granted under its laws, or to recall the right to be a corporation, which belonged to the stockholders of the corporation, a right that was not assignable, and in which the creditors of the corporation could have no interest. The creditor has the right and does rely for the satisfaction of his debt. against the corporation upon the appropriation or sale of whatever property of any character the corporation may possess. In effecting a satisfaction of his debts, either by sale under execution or in the foreclosure of a mortgage, the property passes from the corporation, and purchasers at a foreclosure sale do not take the right to be a corporation which belonged to the stockholders constituting the corporation when property was sold. When, therefore, the decree of the court terminated the corporate existence of the New Orleans Waterworks Company, the rights of its creditors, as said by the court in that case and cases cited, were not affected. The other rule applies where the decree operates against property belonging to the corporation itself that is assignable in its character, and is subject to appropriation in the payment of whatever debts the company may owe.

There are a great number of cases holding that grants by municipal corporations to railway companies, water companies, and other such public corporations to use streets in the construction and operation of their works constitute easements or property which are assignable in their nature, and as such within the protection of the Constitution of the United States. Some of the cases are cited in the opinion of the court in Louisville Trust Company v. Cincinnati, before referred to, and the decision in that case resulted from the distinction stated.

It was declared by Mr. Justice Bradley in Memphis and Little Rock Co. v. Railroad Commissioners, 112 U. S. 609, 5 Sup. Ct. 299, 28 L. Ed. 837, in which case he stated:

"The franchise of being a corporation need not be implied as necessary to secure to the mortgage bondholders, or the purchaser at a foreclosure sale, the substantial rights intended to be secured. They acquire the ownership of the railroad, and the property incident to it, and the franchise of maintaining and operating as such. And the corporate existence is not essential to its use and enjoyment. All the franchises necessary or important to the beneficial use of the railroad could as well be exercised by natural persons. The essential properties of corporate existence are quite distinct from the franchises of the corporation. The franchise of being a corporation belongs to the corporators, while the powers and privileges vested in and to be exercised by the corporate body as such are the franchises of the corporation. The latter has no power to dispose of the franchise of its members, which may survive in the mere fact of corporate existence after the corporation has parted with all its property and all its franchises."

In State v. Water Company, 61 Kan. 547, 60 Pac. 337, it was held that, notwithstanding the fact that the charter of the mortgagor company had been forfeited at the suit of the state, the purchaser at a foreclosure sale took and had the right to operate franchises granted by the city for the construction and use of the waterworks involved. The reasons for this conclusion are clearly stated in the syllabi of the case:

"(1) Corporations-Franchise from City-Right to Mortgage. A corporation organized under the laws of Kansas for the purpose of furnishing the inhabitants of a municipality with water had granted to it, by an ordinance of the city, the right to occupy its streets for the laying of pipes, erecting hydrants, and other privileges usually enjoyed by water companies, for the period of twenty years. The company executed a mortgage on all rights, privileges, and franchises granted to it by the state, together with all its property used in and about the maintenance of a waterworks plant, and income, rents, profits, and emoluments derived therefrom, including revenue from all sources, to secure the payment of certain bonds. Held, that the mortgage created a valid incumbrance upon its property, including all rights to supply the city and its inhabitants with water derived under the ordinance mentioned.

"(2) Secondary Franchises may be Alienated. Corporations cannot sell or mortgage those franchises received from the state which confer power upon them to exist as artificial bodies, but those franchises denominated as secondary, which include the privileges granted by a city to a water company with the right to take tolls, etc., may, under our statute, be lawfully alienated or incumbered."

In City Water Company v. The State, 88 Tex. 600, 32 S. W. 1033, the statement of the case showed that before the institution of the quo warranto proceeding a receiver had been placed in possession of the property of the company by the United States Circuit Court for the Western District of Texas. In the suit brought

by the state the water company pleaded this fact in abatement, but the plea was overruled for the reasons thus stated by the court:

"The franchise or right to be a corporate body is a right vested in the stockholders, and not in the corporation itself; and the property or rights of the stockholders are not affected by the receivership or by any action of the court with reference thereto. Where a corporation is placed in the hands of a receiver, and is not dissolved, although it may be insolvent in fact, after the property has been sold to another person, such corporation may reacquire the property which formerly belonged to it by purchase from the person who bought it of the receiver, and will take it free from claims against the receiver to same extent as this vendor held it so exempt."

It was further said:

"If the receiver cannot convey to any person the right to exist as a corporate body by virtue of the charter of appellant, then we cannot understand how the forfeiture or destruction of that existence can affect legally the rights of property in the receiver. If the receiver were to sell the property, the corporation still existing, the purchaser would acquire all the property rights that the corporation has, with all such franchises and easements as were necessary for the use of the property. Threadgill v. Pumphrey, 87 Tex. 573, 30 S. W. 356. If the corporation be dissolved pending the receivership, the receiver would continue to enjoy the easements of the corporation, and. upon sale being made of the property, its franchises necessary to the use of the property, such as the right to use the streets, granted by the city, would vest in the purchaser. If the charter of appellant corporation be forfeited, and the receiver shall sell the property of the corporation, the purchaser would acquire all the rights of every kind that could be conveyed if the corporation were still in existence. Therefore we conclude that as a matter of law the judgment of the court declaring a dissolution of the corporation can have no effect upon the value of the property, nor upon the rights of the receiver, nor can it in any way impair or interfere with the jurisdiction of the United States Circuit Court."

See Fiske's Estate, 111 N. Y. 66, 19 N. E. 233, 2 L. R. A. 387. A street railway company had been granted the right to occupy and use certain parts of Broadway, in the city of New York, and the franchise thus acquired was assigned to secure the mortgage indebtedness of the company. Subsequent to this the Legislature of the state of New York passed an act dissolving the street railway corporation. The claim in behalf of the state was that the dissolution of the corporation operated to terminate the rights. of the corporation and of the trustee representing the bondholders to use the street franchise, but it was held:

"That, while the annulling act was constitutional and valid, its effect was only to take the life of the corporation; that the corporation took through its grant from the city an indefeasible title in the land necessary to enable it to construct and maintain a street railway in Broadway, and to run cars thereon, which constituted property; that all its property including street rights or franchises, also its mortgages and valid contracts, including the traffic contract, survived its dissolution."

In this connection it may be said that creditors accepting assignments of such street easements as security for their debts take them subject to forfeiture on a failure to comply with the conditions upon which they were granted. Farmers' Loan & Trust Company v. Galesburg, 133 U. S. 156, 10 Sup. Ct. 316, 33 L. Ed. 573. But it cannot be said that the assignee's interest can be forfeited and annulled except upon due process of law and a hearing, as was ac

corded in that case. What was said by the Court of Appeals of New York in People v. O'Brien, 111 N. Y. 36, 18 N. E. 692, 2 L. R. A. 255, 7 Am. St. Rep. 684, is pertinent in this connection:

"The contention that securities representing a large part of the world's wealth are beyond the reach of the protection which the Constitution gives to property, and are subject to the arbitrary will of successive legislatures, to sanction or destroy at their pleasure or discretion, is a proposition so repugnant to reason and justice, as well as the tradition of the Anglo-Saxon race in respect to security of the rights of property, that there is little reason to suppose that it will ever receive the sanction of the judiciary; and we desire in unqualified terms to express our disapprobation of such a doctrine. Whatever might have been the intention of the Legislature, or even the framers of our Constitution, in respect to the effect of the power of repeal reserved in acts of incorporation upon the property rights of a corporation, such power must still be exercised in subjection to the provisions of the federal Constitution."

In conclusion of this proposition it is not inappropriate to say that the bondholders whose money had been borrowed and used with the consent and acquiescence of the city in the original construction and all subsequent extensions and improvements of the waterworks system were the parties most vitally interested in the contract, which constituted the very life of these works. In the absence of any constitutional provision guarantying the protection of vested property interests, the simple dictates of common justice. would require that these parties should be heard before destroying that property upon which they depended for a return of their money. The investment was a large one, and was necessarily made upon faith in the city's implied promise not to revoke the franchise without a fair and impartial hearing being accorded to all parties interested therein.

The bill filed in this case does not question the validity of the decree announced in the state court, or seek to review the same in any respect whatever. On the contrary, it admits that the decree has canceled the contract so far as the water company is concerned, and deprived that company of the right to further maintain and operate the works under the contract. But the claim is-and it is a substantial one-that the Constitution of the United States stands in the way of the operation of this decree against the interests of the plaintiff, who was not a party to the suit in which it was pronounced.

In American Water Works & Guarantee Co. v. Home Water Co. (C. C.) 115 Fed. 172 to 178, it was held that, where a municipal corporation, by contract entered into by legislative authority, grants the use of its streets for waterworks, the grantee could not be deprived of property thus acquired without due process of law; and this constitutional protection extended to mortgagees to whom the rights had been conveyed. The constitutional provision guarantying due process of law avoids all decrees operating on the rights of parties who were not given their day in court. See Burns v. R. Co. (C. C.) 15 Fed. 183; Ex parte Ulrich (D. C.) 42 Fed. 588, 597; Chicago, B. & Q. R. Co. v. Chicago, 166 U. S. 226, 17 Sup. Ct. 581, 41 L. Ed. 979; Baltimore & O. R. Co. v. Voigt, 176 U. S.