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In neither of the two cases last cited was there any notice to the corporation of the pledge of the shares of its stock, and all that was said by the court in either case has reference to such a condition of things; and the expressions of the court are in harmony with and much like those of the courts generally when discussing the consequences of a failure of the first grantee or mortgagee to record his conveyance where subsequent purchasers in good faith had parted with their property in reliance upon the apparent ability of the grantor to convey or pledge. As to such cases, all that is said in these two Connecticut cases may be fully conceded, but the rule of their decision furnishes quite completely the distinction which shows that the present case is not within the purpose of the statute, and not affected by it, if the claim of the bank that the Hotchkiss & Upson Company had actual notice of the pledge of its stock before the incurring of any liability by Hotchkiss to it is sustained by the proof. It would seem to admit of much doubt whether a debt or liability incurred by positive malfeasance of an officer of the corporation was a debt within the meaning of the statute. The natural inference to be gathered from the language of the statute and the nature of the subject would seem to be that the debts referred to were such as would arise upon an actual contract, for it would be in such cases that the question whether any reliance had been placed by the corporation or any other person upon the state of the records and files in the office of the corporation would arise.
If we are right in supposing that the statute was enacted simply for the purpose of giving notice, it would seem to follow that it had no reference to a case like this, where the liability arises only upon an implied assumpsit founded on a tort. But, passing this question, we proceed to the other branch of the case, and consider the question whether the Hotchkiss & Upson Company had actual knowledge of the pledge of the shares to secure the $15,000 note. That Hotchkiss, the president of the company, had notice, necessarily follows from his having been a participant in the transaction of borrowing the money and pledging the stock. He appears from the evidence to have had, jointly with Upson, the management of the business affairs of his corporation. Whether the knowledge that he had was notice to his company, in view of the fact that in committing the act of embezzlement he was acting in hostility to the interests of the company, may be doubted; yet no such question arises in regard to the knowledge which Upson had of the condition of that stock, which knowledge was acquired prior to the incurring by Hotchkiss of his liability to the company. It appears from the evidence that upon an occasion when Upson, who was the treasurer of the company, was at the bank in October, 1886, for the purpose of discounting notes indorsed by the Hotchkiss & Upson Company, in a conversation between him and Mr. Bourne, the cashier of the bank, the subject of Hotchkiss' dealings with the bank and his pledge of this stock was distinctly brought forward and canvassed with much interest by both of the participants in that interview; and Mr. Bourne testifies that he at that time showed Upson the
book "showing the amount we had loaned Mr. Hotchkiss, and I stated to him the collateral which we held for the loan of $15,000. He took a memorandum of some of the items which I had called his attention to, and thanked me for doing so. Said he would look the matter up, and report to me. He did report to me in a few days, and said that, while some of the notes were not regular Hotchkiss & Upson Company business, the transactions were kept properly upon the books, and that the matter was all right, or would be fixed all right." This indicates also that Upson had knowledge that Hotchkiss had dealings with the bank on his private account, which were mixed up with the company's business. And Upson himself testifies that at one interview, the date of which he could not state, he asked Mr. Bourne "if Hotchkiss had any other liabilities there, and he told me he had some personal loans secured by collateral." He does not essentially contradict Bourne, and his testimony as a whole seems rather to lend confirmation to Bourne's testimony than otherwise; and the testimony of Hotchkiss tends also to show that the fact that this pledge of stock had been made as collateral to the $15,000 note of Hotchkiss was a matter of conversation between Upson and Hotchkiss at the company's office. Upon the whole testimony in reference to the knowledge by Upson at the time when Hotchkiss' defalcation began of the fact that the stock had been pledged, we cannot entertain any doubt whatever, and we quite agree with the court below in holding that the company had notice in fact. Adopting the rule which the counsel for the appellant quotes from 17 Am. & Eng. Enc. Law, 140, tit. "Officers, Private Corporations," that "the notice, to be binding upon the corporation, must be notice to the agent acting within the scope of his agency, and must relate to the business, or, as most of the authorities have it, the very business, in which he is engaged, or is represented as being engaged, by authority of the corporation. It must be the knowledge of the agent coming to him while he is concerned for the corporation, and in the course of the very transaction which is the subject of the suit, or so near before it that the agent must be presumed to recollect it," we conclude that, notwithstanding that the principal business which was being transacted between Bourne and Upson, in October, 1886, was the business of the Hotchkiss & Upson Company with the bank, and that the consideration of Hotchkiss' business with the bank was only incidentally brought forward, yet that it was so connected with the business in hand, and about which their interview took place, that the information then gathered by Upson was such as he was likely to have remembered during the period which ensued, and while Hotchkiss was appropriating the funds of the company; and that his knowledge ought to be imputed to the company. We cannot help feeling conscious that there may be an incongruity in a discussion leading to the establishment of this proposition with what seems to us the obvious purpose of the Connecticut statute, for the reason that, as before stated, it seems doubtful to us whether the statute has any application to a liability incurred in the way v.68F.no.1-6
in which that of Hotchkiss was; but we have followed the main lines adopted by counsel in the argument, assuming that the statute applies not only to express obligations, but also to implied liabilities resulting from tort, and are unable, upon any view of the case, to reach a different conclusion from that reached in the court below, sustaining the lien of the bank. The result is that the decree of
the court below should be affirmed.
MANHATTAN TRUST CO. v. SIOUX CITY CABLE RY. CO. (HUNGERFORD, Intervener).
(Circuit Court, N. D. Iowa, W. D. May 28, 1895.)
STREET RAILROADS-LIEN OF JUDGMENT FOR PERSONAL INJURIES-IOWA STATUTE.
The Iowa statute (McClain's Code, § 2008), making a judgment against any railway corporation, for injury to person or property, a lien superior to that of mortgages on its property, does not apply to street-railway corporations.
This was a suit by the Manhattan Trust Company against the Sioux City Cable Railway Company to foreclose a mortgage. C. A. Hungerford intervened, claiming priority over the mortgage for a judgment recovered by him.
Swan, Lawrence & Swan, for complainant.
T. F. Bevington and P. A. Sawyer, for intervener.
SHIRAS, District Judge. The question presented by the petition of the intervener is whether a judgment, rendered against a street-railway company for personal injuries, has priority over the lien of a mortgage upon the corporate property; or, in other words, are street railways to be included within the words "any railway corporation," as the same are used in section 2008, McClain's Code Iowa, which declares that "a judgment against any railway corporation for any injury to any person or property, shall be a lien within the county where recovered on the property of such corporation, and such lien shall be prior and superior to the lien of any mortgage or trust deed executed since the 4th day of July, A. D. 1862"? It cannot be questioned, on the one hand, that a company engaged in operating street cars upon lines of rails laid down along the streets. of a town or city, for the transportation of passengers, is, in one sense, a railway corporation, nor, upon the other hand, that there is a marked and recognized distinction between street-railway lines and those engaged in the general passenger and freight traffic of the country. This distinction is well stated by Judge Caldwell, in Williams v. Railway Co., 41 Fed. 556, wherein it is said:
"The difference between street railroads and railroads for general traffic is well understood; the difference consists in their use, and not in their motive power. A railroad, the rails of which are laid to conform to the grade and surface of the street, and which is otherwise constructed so that the public is not excluded from the use of any part of the street as a public way; which runs at a moderate rate of speed compared to the speed of traffic railroads; which carries no freight, but only passengers, from one part of a thickly popu
Iated district to another, in a town or city, and its suburbs, and for that purpose runs its cars at short intervals, stopping at the street crossings to receive and discharge its passengers,-is a street railroad, whether the cars are propelled by animal or mechanical power. The propelling power of such a road may be animal, steam, electricity, cable, fireless engines, or compressed air, all of which motors have been, or are now, in use for the purpose of propelling street cars."
The fact that the form of power used for the propulsion of the cars is not now held to be the controlling factor in determining whether a given line of railway is to be deemed a street or general traffic line is emphasized by the act of the general assembly of the state of Iowa approved April 24, 1890, which enacts that:
"All cities and incorporated towns, including cities acting under special charters, shall have the power to authorize or forbid the construction of street railways within their limits, and may define the motive power by which the cars thereon shall be propelled, including animal, electricity, steam, or other power, whether now known or hereafter utilized."
Without further elaboration, it will be assumed that there is a marked distinction and difference between street-railway lines and corporations and general traffic lines and corporations, and, as it is not questioned that the Sioux City Cable Railway is a street railway, the point in dispute resolves itself into the question whether, in the legislation of the state, the terms, "railroad or railway lines, or corporations operating railroads or railways," should be held to include street railways, when the latter class is not specifically named. The section of the Code already cited, declaring that judgments against any railway corporation for injuries to persons or property shall be prior and superior to the lien of any mortgage or trust deed executed since the 4th day of July, 1862, forms part of chapter 5, tit. 10, McClain's Code Iowa, which includes the legislation in regard to railways. An examination of the 147 sections of this chapter shows that in none of them are street railways named, and at least 137 thereof show affirmatively, by the nature of the provisions thereof, that it was not the intent to include street railways therein, and it is therefore the fair inference that the entire chapter was intended to apply only to the other class of railways. Thus in this chapter it is enacted that every corporation operating a railway shall, at all highway crossings, construct cattle guards, and erect signboards; must connect its line by means of a Y with all intersecting lines, and receive and draw the cars of all connecting lines; must stop not less than 200 feet from any other line of railway intersected or crossed; and must give signals, by bell or whistle, beginning at least 60 rods from all highway crossings, of the approach of all trains. The application of these and similar provisions of this chapter would be practically a prohibition of the running of street cars. The chapter further provides for the assessment of railways by the state executive council; provides for the establishment of a board of railway commissioners, and declares its powers and duties; and it has never been claimed that these provisions extend to street railways. The contention that the provisions of chapter 5, tit. 10, of the Code, are not applicable to street railways, finds support in the fact that in other chapters of the Code, wherein the words "railways or
railroads" are used, we find coupled therewith the words "street railways," whenever the latter are intended to be included.
in section 623, it is declared that cities and incorporated towns "shall also have the power to authorize or forbid the location and laying down of tracks for railways and street railways on all streets," etc.; and in construing this section in the case of Sears v. Railway Co., 65 Iowa, 742, 23 N. W. 150, the supreme court of Iowa said:
"In the grant of power, both railways and street railways are mentioned. There is, then, a statutory implication that they are not the same, but that there is a material difference between the two; and that a grant of the power to authorize one would not necessarily include the other. The limitation or qualification of such power, it will be observed, is thus expressed in the statute: 'But no railway track can thus be located and laid down' until the damages to the abutting owner is ascertained and compensated. As thus used in the statute, does 'railway track' mean or include 'street railway track' operated by horse power? We think not. 'Railway track,' as generally understood, means only a track on which steam is used as the motive power, and it will be presumed that the general assembly used such words in that sense, unless the context or subject-matter contemplated by the statute requires that a different meaning than that in ordinary use should be adopted."
The distinction in question is also recognized in section 2492, McClain's Code, wherein it is provided that inflammable oils shall not be burned in any lamp, vessel, or stationary fixture, “in any passenger, baggage, mail, or express car on any railroad any street railway car." There are a number of other sections in the Code which deal with the subject of street railways in express terms, and it is thus made clear that in the legislation of the state there is recognized to be a marked distinction between corporations engaged in the transportation of passengers and freight over lines of railway extending beyond the limits of cities and towns, which are not subject, except in minor matters, to any control by the city authorities, but are governed and controlled by the general laws of the state, and corporations created to construct and operate lines of railway in city and town streets, and which are largely, as to location, mode of operation, rates of fare, and the like, subject to the control of the city or town authorities. It cannot be denied that there is, in fact, a distinction between the two kinds of railways, and an examination of the statutes of the state shows that such a distinction is recognized in the legislation of the state, and that in general the term "railroad or railway" is used to designate the former class, and the words "street railway or railroad" the latter. From this it follows that, unless the context or subject-matter of a particular statute shows the contrary, the presumption is that the legislature did not intend to include street railways in the general term "railroad or railway." This is the rule given us in Sears v. Railway Co., 65 Iowa, 742, 23 N. W. 150, and is not inconsistent with the decision of the supreme court in City of Clinton v. Clinton & L. H. Ry. Co., 37 Iowa, 61, wherein it was, in effect, held that a corporation engaged in operating a horse railway through, between, and in the cities of Clinton and Lyons was not a street railway, and therefore came within the class designated in the general right of way act, then forming part of chapter 55, art. 3, Revision. In Freiday v. Transit Co. (Iowa) 60 N. W. 656, the