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puted item of $22.10, which the court should have directed as a mere clerical act, and entered judgment for the plaintiff for the balance due on the note and account.
It results that the judgment of the circuit court must be reversed, and the cause remanded, with directions to proceed in conformity with this opinion.
On Petition for Rehearing. The petition for rehearing assumes that the opinion of the court, holding that the contract on which the counterclaim is predicated is not enforceable for want of mutuality, should be withdrawn for the reason that such question does not properly arise on the record, and was not, therefore, argued by counsel for the defendant in error. This criticism is not well founded, either in fact or law. At the close of all the evidence the plaintiff in error moved the court for an instructed verdict in its favor. Among the grounds stated in support of the motion is the following:
"Because the plaintiff [i. e., the proponent of the counterclaim] has affirmatively shown a failure of consideration on the part of the defendant for the contract sued upon."
“Plaintiff in error assigns as error the action of the court in overruling the motion made by plaintiff in error at close of all the evidence in the case that the jury be instructed to find a verdict in its favor."
In the closing paragraph of the brief of the plaintiff in error it is urged that:
"In our judgment the whole case was determinable upon the motion to direct the verdict. Because that motion was overruled and the court by its instructions determined as a matter of law in its interpretation of the contract that defendant in error might recover damages on its counterclaim, we confidently believe the question involved in this case should finally be determined in this court, and the judgment of the court below reversed."
The lack of mutuality in the reciprocal obligations of the alleged contractors negatives the existence of a valid consideration for the promise of one of the parties. Forsooth counsel for the plaintiff in error may have laid especial stress in his argument upon some proposition of law which he conceived to be important and controlling did not warrant the court in disregarding other errors reasonably within the terms of an exception or an assignment of errors.
That counsel does not fully recognize and urge a principle of law in argument which is embraced within the pleadings or presented in the record cannot preclude the court from giving due consideration and application to a rule of law which is determinative of the controversy. Indeed, an appellate court would fail to heed the wholesome maxim, “Interest reipublicæ ut sit finis litium,” should it fail to take notice, when reasonably presented, of a settled principle of law the application of which ends the litigation. Rule 11 of this court (150 Fed. xxvii), respecting the assignment of errors, declares that "the court, at its option, may notice plain errors not assigned.” This proviso was and is intended, in the interest of justice, to reserve to the appellate court the right, resting in public duty, to take cognizance of palpable error on the face of the record and proceedings, especially such as clearly demonstrate that the suitor has no cause of action. "Where parties have produced all their evidence, and the court has received it, and they have rested their case at the trial, they have thereby admitted, and in that way estopped themselves from denying, that they can do no more to overcome the objection that the evidence is insufficient to sustain a verdict in their favor, because the question of the sufficiency of the evidence always arises before the submission to the jury, and it is the province and duty of the court to determine it.” Bank of Havelock v. Western Union Telegraph Co., 141 Fed. 522-527, 72 C. C. A. 580, 4 L. R. A. (N. S.) 181.
In support of the motion for rehearing counsel have extensively gone into a review of the case in the attempt to show that the opinion of the court improperly held that the contract in question was unilateral, placing much stress upon the contention that the testimony of Mr. Lange tended to show that a part of his undertaking under the arrangement between the parties was that he should, by his experience and labor, extend the field for the sale of the cigars to be furnished by the plaintiff in error, thereby creating a larger market for them, and that he performed in this respect his undertaking. Let it be so conceded. But how does this obviate the stubborn fact that whether or not he would maintain that field and demand, occupy or abandon it, or cease, ad libitum, to send in any orders, or betake himself to some other field of operation and employment, were wholly optional on the part of the defendant in error? The plaintiff in error, on such election by its purchaser, was without remedy. It could not compel the proposed purchaser to want any cigars. It could not ship a box of cigars, except as ordered by the purchaser. As shown in the opinion, both parties so recognized the situation and acted upon it when the defendant in error directed that the orders already in be not filled. That such a contract is one-sided, wanting in that mutuality essential to its enforcement, is settled in this jurisdiction.
The petition for rehearing is denied.
CITY OF LOUISVILLE v. CUMBERLAND TELEPHONE & TELE
(Circuit Court of Appeals, Sixth Circuit. July 24, 1907.)
1. COURTS-JURISDICTION OF FEDERAL COURTS-FEDERAL QUESTION.
When the jurisdiction of a federal court depends upon the case being one arising under the Constitution or laws of the United States, the facts necessary to make such a case must be plainly shown upon the record, and it is not enough that such question may arise.
[Ed. Note. Jurisdiction in cases involving federal questions, see notes to Bailey v. Mosher, 11 C. C. A. 308; Montana Ore Purchasing Co. v.
Boston & M. Consol. Copper & Silver Min. Co., 35 C. C. A. 7.] 2. CONSTITUTIONAL LAW-IMPAIRMENT OF CONTRACTS-UNAUTHORIZED ACTION
A federal court is without jurisdiction of a suit to enjoin the enforcement of a municipal ordinance, on the ground that it impairs the obligation of a contract or deprives complainant of property without due process of law, in violation of the Constitution of the United States, when the bill
alleges that no power had been granted to the municipality by the Constitution or Legislature of the state to pass such ordinance, the prohibi
tion of the federal constitution being against state action only. Appeal from the Circuit Court of the United States for the Western District of Kentucky.
The following is the opinion of Evans, District Judge, of the Circuit Court:
This case has been argued upon defendant's demurrer to the bill of complaint and upon complainant's motion for a temporary injunction, and it is important at the threshold to ascertain what is the real scope of the bill, for, when we have done that, the questions raised at the argument will require little discussion. A careful consideration of it has led me to the conclusion that the bill, after showing the nature and extent of complainant's business in Louisville and the rights it claims under its articles of incorporation, in substance and effect avers that defendant has enacted a certain ordinance whereby it undertook to fix the maximum rates which complainant might charge its patrons in the city; that the city had no lawful power to fix other than reasonable rates; that the rates fixed by the ordinance were unreasonably low; that the enforcement of the ordinance would, for that reason, practically confiscate the plaintiff's property; and that thus it would be deprived thereof by the city without due process of law, and in violation of the fourteenth amendment to the Constitution of the United States. This is the fundamental ground for the relief asked, whatever argumentative details may be urged in the pleading.
1. The judiciary act gives the Circuit Courts jurisdiction of actions which arise under the Constitution or laws of the United States, and it is obvious that the relief sought in this instance is based upon a claim made under the Constitution of the United States. There could scarcely be found a plain, adequate, and complete remedy at law against the city. Indeed, it is difficult to conceive of any form of action at law which would be available to the complainant for remedying the alleged wrong it complains of. There does not therefore seem to be any reasonable doubt either of the jurisdiction of the court or of the proposition that, if the averments of the bill be true, it states a ground for equitable relief. The cases of Chicago, etc., Ry. Co. v. Minnesota, 134 U. S. 458, 10 Sup. Ct. 462, 33 L. Ed. 970, Reagan v. Trust Co., 154 U. S. 399, 14 Sup. Ct. 1047, 38 L. Ed. 1014, Railway Co. v. Gill, 156
'. S. 619, 15 Sup. Ct. 484, 39 L. Ed. 567, Covington, etc., Co. v. Sandford, 164 U. S. 578, 17 Sup. Ct. 198, 41 L. Ed. 560, and Smyth v. Ames, 169 U. S. 166, 18 Sup. Ct. 418, 42 L. Ed. 819, seem to leave no room for doubt upon either of the two propositions just indicated. Neither of those propositions, however, could be maintained if the sole claim made by the bill was that the Constitution and laws of Kentucky did not give the defendant the power to pass the ordinance complained of. If that were all, no question would arise under the Constitution or laws of the United States, and the action would not be based upon any federal question. Mayor, etc., v. Holst, 132 Fed. 901, 65 C. C. A. 449; New Orleans v. Benjamin, 153 U. S. 424, 14 Sup. Ct. 905, 38 L. Ed. 764; Hamilton Gas, etc., Co. v. Hamilton City, 146 U. S. 258, 13 Sup. Ct. 90, 36 L. Ed. 963. But we think the bill, fairly considered, does not admit of that construction. It is clearly founded upon the claim that the rates fixed would deprive the complainant of the benefits of its property and turn those benefits over to others, thus confiscating it without due process of law, and thus basing complainant's right of action upon the Constitution of the United States, and not upon the law or the Constitution of Kentucky.
But it is insisted that, as the bill avers that the ordinance is void because the city council had no legislative or constitutional power to enact the ordinance, no cause of action is stated, and authorities are referred to, among them the opinion of Judge Grosscup in People, etc., Co. v. City of Chicago (C. C.) 114 Fed. 388. If the averments referred to were the entire claim of the conplainant, there might be some force in the contention ; but it is by no means all. As already indicated, the fundamental claim is that the city cannot confiscate the complainant's property by taking the benefits thereof from the
complainant without due process of law; that the city can only fix reasonable rates under the contract between it and complainant; and that without authority it has passed the ordinance which is claimed to be void. The mere fact that the ordinance is void or invalid or unauthorized would be no ground for denying the relief. On the contrary, it is because the ordinance is asserted to be invalid and to be violative of the federal Constitution that the relief prayed for is asked. If the order be valid and authorized, then the city had the right to enact it, and that would end the matter. In the case last referred to Judge Grosscup said: “My jurisdiction of the case does not extend to that question [namely, the interpretation of the state statutes], unless its decision one way or the other is a necessary predicate of the constitutional question involved.” In that case it was not such a necessary predicate, but here it is, because the very question to be determined is whether the passing and enforcing of the ordinance would deprive the complainant of a constitutional right. The cases of Hamilton Gas, etc., Co. v. City of Hamilton, 146 U. S. 258, 13 Sup. Ct. 90, 36 L. Ed. 963, and Savannah, Thunderbolt, etc., Ry. v. Savannah, 198 U. S. 392, 25 Sup. Ct. 690, 49 L. Ed. 1097, especially the former are much in point upon the jurisdictional question.
Assuming the averments of the bill to be true, a case for equitable relief is shown, and the demurrer will be overruled.
2. We come now to the motion for a temporary injunction pendente lite. A case like this usually cannot be determined upon demurrer, for the court would hardly feel authorized to conclude at that stage that the rates are in fact unreasonable and confiscatory. All that it will now decide is that, as the sworn averments of the bill stand undenied, they should be regarded, for the purposes of the motion, as prima facie true. This being so, it is a fair exercise of discretion to preserve the present status by enjoining the enforcement of the ordinance until the issue can be made up and steps taken fully to ascertain all the facts that should have a bearing upon the matter to be determined. The propriety of such a course will become apparent when we consider the rule which should govern such cases. That rule, we think, is fairly and very accurately stated in the recent work on the Law of Railroad Rate Regulation by Nagel, section 312 of which is as follows:
“The reasonableness of the schedule as a whole depends as has been seen, upon whether it yields a fair return to the carrier. This is largely a mathematical question. The carrier is entitled, first, to pay all expenses, which
. would include both the actual expenses of operation and also certain annual charges that must be paid before any real profit can be realized. He is entitled furthermore to gain a fair profit on his capital invested. The determination of the actual amount of the capital invested may be a matter of some difficulty. Once determined, the rate of profit upon that amount of capital is a question which will be determined, generally speaking, by the ordinary business profit of the time and place. A schedule of rates will be reasonable from the point of view of the carrier if it yields him a net profit equal to that which would be realized, as a business question, from any other business where the capital and the risk were the same."
True, in terms, this relates to carriers, but there can be no difference in the applicable principle. This rule must guide us in the further progress of the case, and it will demand a very full investigation of all the facts.
It was insisted at the argument with great earnestness that the bill only covers an attempt to enjoin prosecutions for crimes, and authorities were read in that connection. Upon the general proposition, of course, there can be no doubt so far as federal jurisprudence is concerned. Fitts v. McGhee, 172 U. S. 516, 19 Sup. Ct. 269, 43 L. Ed. 535, was most relied upon; but, while it states the general doctrine, a careful reading of the opinion will show that it was based solely upon the ground that the suit was substantially an action against the state of Alabama, and for that reason could not be maintained. The other provisions in the judgment directed were incidental to the main proposition. There was nothing said in that case in conflict with the doctrines laid down in the opinion in the cases to which we first referred, and all of which were referred to in Smyth v. Ames, 169 U. S. 466, 18 Sup. Ct. 888, 43 L. Ed. 197. Another case cited was Camden, etc., Co. v. Catlettsburg (C. C.) 129 Fed. 422; but the second of the syllabi to it correctly shows that
the distinction there taken was that, while you might not enjoin prosecutions already begun, there was no difficulty about enjoining certain forms of effort to begin prosecutions in cases like this. While a criminal action already begun may not be enjoined, yet if the city of Louisville, its officers, employés, agents, or others, should seek to enforce an ordinance held, prima facie, to be void, we see no reason why all of them or any of them may not be enjoined from attempting to do so by instituting prosecutions for its enforce ment, especially where there are as many as 10,500 patrons, as it appears there are here, and where as to each one of them a prosecution might possibly be begun, thus making it most oppressive. This phase of the matter was discussed in L. & N. R. R. Co. v. McChord (C. C.) 103 Fed. 226.
It is also urged that, as the ordinance has actually been passed, no remedy is available to the complainant as against the city. The action of the city in the premises could not be enjoined before it was complete.
fore it was complete. In the precisely analogous case of McChord v. L. & N. R. R., 183 U. S. 483, 22 Sup. Ct. 165, 46 L. Ed. 289, the Supreme Court held that merely threatening to fix rates could not be enjoined, but that parties must wait until rates are fixed, and then apply for an injunction against carrying the schedules into effect, if they wished to test the question. It would be most remarkable if the city could pass a void and oppressive ordinance, and then lie back and say: "We have acted. Make the most of it. We are out of reach.” The very measure which the city enacted is the thing the complainant seeks to invalidate. The action of the city alone gave that measure vitality and force. Its power alone can enforce it. In order to prevent its enforcement the city must be reached. So that, we think for the present the city, its officers, agents, employés, and all other persons who may have knowledge of the injunction, should be restrained, and all such may become amenable to the process of the court if they attempt to enforce the ordinance until the question of its validity is finally passed upon. All the injunction can do is to preserve the present status. It is by no means a final determination of the questions involved.
We see no reason why a temporary injunction pendente lite in the form indicated should not be granted, and the motion therefor is sustained.
A. E. Richards and A. B. Bensinger, for appellant.
LURTON, Circuit Judge. This is a bill filed in the Circuit Court to restrain the enforcement of a municipal ordinance regulating charges for telephone service in the city of Louisville, on the ground that the ordinance was violative of the obligation of a contract between the complainant and the city, and also on the ground that the rates prescribed were unreasonable, unjust, and confiscatory, and, if enforced, would deprive complainants of their property without compensation and without that due process of law guaranteed by the fourteenth amendment. An injunction pendente lite was allowed upon the averments of the bill, and from this order the city of Louisville has appealed under the seventh section of the Court of Appeals act, as amended by Act April 14, 1906, c. 1627, 34 Stat. 116. The propriety of the preliminary injunction must turn here upon the question of the jurisdiction of the Circuit Court. There was no jurisdiction by reason of diversity of citizenship; the complainant being a business corporation created under the laws of Kentucky, and the defendant a municipal corporation of the same state. Jurisdiction was invoked upon the contention that this is a suit arising under the Constitution or laws of the United States. That the bill does aver that the ordinance impairs the obligation of a contract and is also an attempt