such holders of stock,, stockholders in the South Georgia & Florida Company, did not continue to occupy the position of vendors, with a vendor's lien for the purchase price of the property sold, and were not entitled to assert a right of attachment upon that road in preference to the claims of subsequent creditors of the Atlantic & Gulf Railroad Company, the vendee. Ibid.

§ 1520. The Atlantic & Gulf Railroad Company had power to mortgage its existing and after-acquired railroad, including such a road as it was authorized to build from T. to A. Instead, however, of building such road itself directly, it procured its construction by arrangement with and purchase from the South Georgia & Florida Company. Held, that such road was an after-acquired road covered by the mortgage. Ibid. See § 1728.

§ 1521. Under power to sell all the franchises, road and equipment of a railroad company, a part thereof may be sold. Ibid.

§ 1522. Vendors of a railway, who accept preferred stock in another company in payment for it, lose their lien as vendors for the purchase price of the road and become shareholders merely in the other company. Ibid.

§ 1523. Money is not part of the property of a railway company so as to pass by sale under foreclosure. Strang v. Montgomery & Eufaula R. Co., §§ 1608-10.

§ 1524. Cars, engines, etc., placed on a railway by a receiver to keep up the rolling stock are part of the property of a road, and pass to a purchaser thereof under a mortgage foreclosure. Ibid.

§ 1525. A legislative declaration, that a particular railroad shall be a public highway, means that it shall be open to the use of the public with their own vehicles. Lake Superior, etc., R. Co. v. United States, §§ 1587-97.

§ 1526. When congress, in granting lands in aid of a railroad, declares that it shall be and remain a public highway for the use of the government of the United States, it means that the government shall have the right to use the road, but not that it shall have the right to require its transportation to be performed by the railroad company; and when this right of the use of the road is granted "free from all toll or other charge for transportation of any property or troops of the United States," it only means that the government shall not be subject to any toll for such use of the road, but does not entitle the government to have troops or property transported by the companies over their respective roads free of charge for transporting the same. Ibid.

§ 1527. A grant of a right of way without reservation or exception is a grant in præsenti, and operates from the date of the grant. Railroad Co. v. Baldwin. §§ 1598–99.

§ 1528. After a right of way through public lands has been granted to a railway company, all persons acquiring title to lands along its line take them subject to that grant, although the grant be to a foreign railway corporation. Ibid.

1529. The president's order of March 7, 1864, fixing the initial point of the Iowa branch of the Union Pacific Railroad at a "point on the western boundary of Iowa," established the terminus of the road on the east bank of the Missouri river in Iowa. Union Pac. R. Co. v. Hall, $ 1600-1604.

§ 1530. In 1871 and 1872 the Denver & Rio Grande Railway Company, by its engineers, made a "close preliminary" survey of a right of way through Grand Cañon of the Arkansas, marking the line with stakes and mapping it with such exactitude that curves and details of the line could have been added by the engineer in his office without further survey, had it been so desired. Some work of grading, etc., was done at the same time by employees of the company in the cañon. Held, that this was not such a location and appropriation of the right of way as vested a title thereto in the Denver company. But that such title vested when, a few years later, the company completed its road through the cañon, and when it then completed the location and appropriation, the title, previously imperfect, acquired precision, and by relation took effect as of the date of the grant. From the date of this preliminary survey for several years the Denver company did no work in the cañon, but was busy constructing other portions of its system, all in contemplation of ultimately building the road located in the cañon. In 1878 the Cañon City Railway Company took possession of the cañon and enjoined the Denver company from building its line therein. Held, that the possession taken by the Denver company by its preliminary survey entitled it to complete its road as laid out through the cañon, although the Cañon City company must be permitted under act of congress to occupy the cañon in common with the Denver company for railway purposes, and this even though the Cañon City company was in fact acting in the interest of a third company, the Atchison, Topeka & Santa Fe company. Railway Company v. Alling, § 1605–7. § 1531. The obligation of the Union Pacific Railroad Company to repay to the government of the United States the interest paid by the latter upon bonds issued by it in aid of the railway company does not arise until the maturity of such bonds. United States v. Union Pacific Railroad Co., §§ 1611–16.

§ 1532. Section 5, act of congress, 1862, relating to the Union Pacific Railroad Company, authorized the issue and delivery of United States bonds to that company, and gave a lien on the property of the corporation for the ultimate redemption of such bonds, principal and interest. Ibid.

1533. The United States government obligated itself to pay the interest on such bonds in the first instance.

Ibid.

§ 1534. The obligation of the Union Pacific Railroad Company, as shown by section 6, act of congress, 1862, relating to bonds issued by the United States in aid of that company, is: 1. To pay said bonds at maturity. 2. To allow the government to retain the compensation due the corporation for services rendered, and apply the same to the payment of the bonds and interest until the whole amount is fully paid. 3. To pay over to the government, after the road shall have been fully completed, five per cent. of the net earnings of the road, to be appropriated to the payment of the bonds and interest. Ibid.

§ 1535. It appearing that prior to November 6, 1869, the entire road of the Union Pacific Railroad Company had in separate sections been reported by it, under the oath of its president, as being completed and furnished as a first class railroad in accordance with the requirements of the acts of congress chartering the company, and that upon the strength of these representations, and the corresponding reports of the commissioners appointed to examine the several sections, it had been accepted by the president, and that the company had received its entire subsidy of government bonds, save about $160,000, and had received an order for the issuing of patents for its grant of public lands to the extent of one-half thereof, said $160,000 in bonds and the other half of the land grant being withheld by the United States government under an agreement with the company, made in April, 1869, as security for the more perfect completion of certain parts of the work. Held, that the road must be considered as completed on November 6, 1869, it being at that time practically open for business; although subsequently, in 1874, another commission was appointed by the president to examine the road in order to ascertain that all the imperfections, as a security for the removal of which any part of its land grant had been withheld, were removed. This was not the date which should be taken for the completion of the railroad. Held, further, that the duty of the company to account to the government for five per cent. of its net earnings commenced on the 6th of November, 1869. Held, further, that by receiving bonds from the government which were only to be delivered to the railroad company upon the completion of its road, the company was estopped from denying that its road was completed. Union Pacific R. Co. v. United States, SS 1617-20.

§ 1536. "Net earnings of the railroad," as applied to the Union Pacific Railroad, means the net earnings of the road as a railroad, including the telegraph and all earnings and income derived from the railroad proper and all the appendages and appurtenances thereof, including its ferry and bridge at Omaha, its cars, and all its property and apparatus legitimately connected with the railroad, including compensation accruing to the company for services performed for the government; but not including the income or profits of the Union Pacific Railroad Company as the holders of public lands, nor a sum representative of money earned in the carriage of "company freight." If this means freight for the transportation of the company's own property over its own road, it ought not to be put down as a receipt, unless the same amount is also embraced amongst the expenses on the other side of the account. Ibid. $ 1537. Net earnings are the excess of gross earnings over the expenditures defrayed in producing them, aside from and exclusive of the expenditure of capital laid out in constructing and equipping the works themselves. Ibid.

§ 1538. In ascertaining net earnings, expenditures for station buildings, shops, etc., are charges which may properly be deducted from gross earnings, especially as such expenditures were in the case at bar actually paid therefrom, and were not carried to capital account. Ibid.

§ 1539. In determining what are net earnings of a railway company it is proper to deduct from the gross earnings the items forming the construction account or improvements, and additions to track, etc., those constituting the equipment account, or replacing and rebuilding rolling stock, machinery, etc., and those showing expenditures for real estate purchased for depot grounds, etc., and expenses for same; provided such expenditures were actually made out of the gross earnings and not raised by the issue of bonds or stock. It is not proper, in ascertaining net earnings, to deduct from the gross earnings the items of a depreciation account or expenses not charged up, meaning by this the amount necessary to put the road in proper repair, but which was not actually expended for that purpose; nor should expenses of the land department be allowed, or interest on funded debt prior to the government lien, nor, in the case of the Pacific railroads, fifty per cent. government earnings withheld. United States v. Kansas Pacific k'y Co., §§ 1621-22.

§ 1540. The net earnings of a railroad company while in the hands of a receiver are in the

custody of the court and are to be distributed among its creditors. They do not pass to a purchaser under a foreclosure sale of the railroad. Strang v. Montgomery & Eufaula R. Co., SS 1608-10.

§ 1541. It is discretionary with railway directors either to charge to construction account every item of expense, and every part and portion of every item which goes to make the road or any of its appurtenances or equipments better than they were before, or to charge to ordinary expense account and against earnings, whatever is taken for this purpose from the earnings, and is not raised upon bonds or issues of the stock. The latter method is deemed the most conservative and beneficial to the company, and operates as a restraint against injudicious dividends, and the accumulation of a heavy indebtedness, and probably, in the case of the Union Pacific Railroad Company, the true interest of the government, as well as of stockholders, will be subserved by encouraging a liberal application of the earnings to the improvement of the works. Union Pacific R. Co. v. United States, §§ 1617-20.

§ 1542. All payments of interest on the bonded indebtedness of a company should be charged to capital interest account and not to current expenditures; though payable out of earnings before any dividends can be made to stockholders, they cannot be deducted for the purpose of ascertaining the net earnings of the road. Ibid.

§ 1543. Expenses of lands and town lots department and taxes on lands and town lots are expenses properly belonging to the land department of a railroad company. They are entirely distinct from its expenses as a railroad company, and should not be deducted from its gross earnings in order to ascertain its net earnings. Ibid.

§ 1544. The interest on the first mortgage bonds of the Union Pacific Railroad Company, which were preferred by act of congress to those issued by the United States as a subsidy to the company, should be paid out of the net earnings of the company before the five per cent. of such earnings reserved to the government should be paid. Ibid.

§ 1545. While as to its entire line the Kansas Pacific Railway Company, in the words of the ninth section of the act of 1864, is "entitled to all the benefits and subject to all the conditions and restrictions of the act," and is bound to furnish transportation and telegraphic accommodation to the government on the usual terms, yet the subsidy bonds granted to the company being granted only in respect to the original road, terminating at the one hundredth meridian, form a lien upon that portion only, and the five per cent. of the net earnings to be paid on account of the principal and interest of such subsidy bonds, is only demandable on the net earnings of said portion and not out of the net earnings of the portion beyond the one hundredth meridian, running to the city of Denver. United States v. Kansas Pacific R'y Co., SS 1621-22.

§ 1546. The subsidy bonds granted to the Kansas Pacific Railway Company upon the first three hundred and ninety-three and fifteen-sixteenths miles of its road are not a lien upon its whole line to Cheyenne, nor are five per cent. of the net earnings of the entire line applicable to the payment of said bonds, that portion of the line west of the one hundredth meridian having been built under charter granted to the Denver Pacific Railway Company. United States v. Denver Pacific R'y Co., § 1623.

§ 1547. The contract between the United States government and the Pacific railway companies required them to pay both principal and interest upon certain of their bonds when the principal should mature, unless the debt should be sooner discharged by the application of one-half the compensation for transportation and other services rendered for the government and five per cent. of their net earnings, as specified in the charters. In 1888, May 7th, an act of congress was passed substantially requiring the companies, in the management of their affairs, to set aside a portion of their current income as a sinking fund to meet this and other mortgage debts when they matured. The sinking fund was to be deposited with the secretary of the treasury of the United States and to be invested in the public funds of the United States. Held, that the establishment by congress of such a sinking fund in the United States treasury, for the payment of future maturing debts of the Pacific railway companies, was not a payment of such debts, nor in any sense an impairment of the contract between the companies and the government. That it was immaterial that the secretary of the United States treasury was made the sinking fund agent or that the investment of such funds was required to be in United States bonds; nor was it objectionable that one-half of the earnings for services rendered to the government by the railways were required by such act to be put into the sinking fund, inasmuch as the government were not relieved from payment for such services; hence concluded that the sinking fund act of 1868 relative to Pacific railways was a reasonable and constitutional enactment, warranted by the reserve power in congress to amend or alter the charters of the Pacific railway companies, and that there was no difference between the Central Pacific and the Union Pacific Railway Companies in so far as their regulation by such sinking fund act was concerned. Sinking Fund Cases, §§ 1624-69.

§ 1548. The establishment of a sinking fund by the act of May 7, 1868, by congress, does

not conflict with the original state charter granted to the Central Pacific Railway Company by California. Ibid.

§ 1549. The Union Pacific Railway Corporation is a creature of the United States government. It is a private corporation created for public purposes, and its property is to a large extent devoted to public uses, and it is subject to legislative control so far as its business affects the public interest. Ibid.

§ 1550. The United States government has reserved control of the Pacific railway charters. Ibid.

§ 1551. Investigation having developed that the board of directors of the Union Pacific Railroad Company had made contracts for building the road, and for running Pullman cars on it, and for mining its coal lands and purchasing the coal so mined, which were a fraud upon the company; that these contracts allowed exorbitant prices for work done and material furnished; that otherwise they were very advantageous to the other contracting parties and injurious to the company; that in all of them the directors, or a controlling majority of them, were interested adversely to the company; that, in fact, they were, in the name of the company, making contracts with themselves as the other party, congress passed an act, March 3, 1873, requiring the attorney-general of the United States to bring suit in a United States circuit court against the Union Pacific Railroad Company and persons who had received:

(1) Capital stock of the company without paying for it in money. (2) Other property of the company unlawfully and contrary to equity. (3) As profits or proceeds of contracts for construction, money or other property which ought in equity to belong to the corporation. (4) Persons who have wrongfully received from the United States bonds, moneys or lands which ought in equity to be accounted for, or paid to it or to the company. Held, that this was a constitutional exercise of congressional power, although the act authorized the process of the court in which such suit should be brought to run outside of the district wherein such court was located, so as to reach parties resident in any part of the United States, and although it permitted causes of action to be joined which, without the sanction of an act of congress, would have rendered the bill multifarious; that the act was intended not to change the substantial rights of the parties to the suit which it authorized, but to provide a specific method of procedure, and that the bill must be limited by the provisions of the act, both as to the grievances on which it counted and the relief which it sought.

It appearing that the persons guilty of the frauds were officers of the corporation during the pendency of the litigation, that it, under their management, was opposing any decree looking to the restoration to it of any money or property of which these persons had defrauded it, and that if any decree against them should be rendered it would in all probability be satisfied and released by the company, without requiring any money or property to be paid thereon, held, that the court would not make any decree against such persons for the benefit of the corporation. Although such decree might well be rendered for the benefit of a few innocent, bona fide shareholders, they were not before the court, and anything collected under such decree (if it were made) would in all probability never be distributed among them by the fraudulent directors still in control of the company, hence no decree for the benefit of such shareholders would be made. Held, that the United States government was entitled to no decree because moneys were due to it for unpaid interest upon its bonds issued for the benefit of the company, such interest not being due from the company until the bonds matured (U. S. v. U. P. R. R. Co., 91 U. S., 72), except to the extent of one-half the compensation for transportation services performed for the United States, and five per cent. of the net earnings of the road, which were to be annually laid by as a sinking fund to extinguish the company's debt to the United States; that the fact that the United States government was a large creditor of the railroad company gave it no right to come into equity for preventive relief to secure the collection of the sums of which the company had been defrauded, in order to provide means in advance to satisfy the government's lien under its mortgage. As a creditor, the United States had no right to interfere between the company and those with whom it had dealt.

The cases wherein a government could, as a trustee for the public, enforce the proper use of the property and franchises granted to a corporation for the benefit of the public, fall under two heads: (1) Where municipal, charitable, religious or eleemosynary corporations, public in their character, had abused their franchises, perverted the purpose of their organization, or misappropriated their funds, and as they, from the nature of their corporate functions, were more or less under government supervision, the attorney-general proceeded against them to obtain correction of the abuse. (2) Where private corporations, chartered for definite and limited purposes, had exceeded their powers, and were restrained or enjoined in the same manner from the further violation of the limitation to which their powers were subject. Held, that the Union Pacific Railroad Company was but a railroad company with the

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ordinary powers of such corporations - -a private corporation (Railroad Company v. Peniston, 18 Wall., 5),—and, as such, not within the first class described, and therefore not subject to the remedy therein pointed out; that if the United States was a trustee, it must be either of the defrauded stockholders or of the public. If of the former, such stockholders were capable of asserting their own rights, to secure which, in this suit, no provision had been made, and if the trust concerned related to the rights of the public in the use of the road, no wrong is alleged capable of redress in this suit, or which required such a suit to redress. United States v. Union Pacific Railroad Co., §§ 1670–81.

[NOTES.-See §§ 1682-1842.]

MISSOURI, KANSAS & TEXAS RAILWAY COMPANY v. TEXAS & ST. LOUIS RAILWAY COMPANY.

(Circuit Court for Texas: 10 Federal Reporter, 497-504.)

Opinion by McCORMICK, J.

STATEMENT OF FACTS.- The complainant, in its bill and amended bill, avers in substance that it is a corporation duly organized under the laws of Kansas, and as such is also authorized, by act of the legislature of Texas, to extend its railroad and telegraph through Texas; that it is now engaged in extending its lines of railroad through Texas, having portions thereof in operation, and other portions located and in process of construction; that in January last it located its line through McLennan county and into the city of Waco, approaching the line of the Central Railroad at that point on a tract of land known as the Norris land, and in March last obtained from the proper party full title to the right of way over said land on complainant's said located line, and is now engaged in constructing its main line and side track on said Norris land, on said right of way; that defendant is a corporation created by the laws of Texas, and is also constructing its railroad through McLennan county and into the city of Waco, having originally located its line so as to approach said Central Railroad at a point some distance west of the point on the Central where complainant's line intersected the Central; that complainant's line crosses defendant's line at the distance of a little less than one mile from its intersection with the Central line, and from said point of crossing complainant's line, and defendant's line as originally located, gradually diverge from each other as they respectively approach the Central Railroad's line; that complainant and defendant were proceeding with the construction of their respective railroads on their respective lines as so originally located; that defendant failed to obtain the consent of the said Central road to have its railroad crossed at the point where defendant's line, as originally located and being constructed, would have crossed said Central road, and thereupon the defendant changed the location of its road so as to bring the same nearer to complainant's line, and to cross the Central at a point only a few feet west of the point at which complainant's line crosses said Central; that by said change of location, which change was made after complainant located its line, and had procured its said right of way on said Norris land, and was engaged in the construction of its said tracks thereon, complainant was disappointed in its purpose of effecting its connection with said Central road by putting in a "Y" on the west of complainant's line, leaving the space on the west thereof to be occupied by the defendant's main and connecting tracks; that, after some work had been done by defendant on its changed line, the defendant undertook, without first obtaining or asking complainant's consent, and without making, or offering to make, any compensation therefor to complainant, to cross said complainant's main and side tracks, and right of way on said Norris land, and extend its