the Joliet Iron and Steel Co., without any delivery of any other property described in said contract to the receiver, and without any right existing for him to demand or receive any portion of said property. * * * And at the time said contract was made the Joliet Iron and Steel Co. was in fact insolvent, and ever since has been insolvent." A copy of the contract between the receiver and the Joliet Company is attached to and made a part of the answer, from which it appears the contract was made in January, 1876, for the delivery of certain iron rails by the company to the receiver in March, April and May, 1877. The certificates were issued on the same day the contract was entered into in payment therefor, but no part of the rails were ever delivered or tendered to the receiver.

A demurrer to the answer was overruled, and plaintiff appeals.

E. S. Bailey, for appellant; Cook & Richman, for the South St. Louis Iron Co.

SEEVERS, J., delivered the opinion of the court: We have been advised that the authority of the court to make the order in question is denied by certain parties in interest who are not represented on this appeal. We are not advised as to the facts and circumstances before the court when the order was made; therefore that question has not been considered. The authority of the receiver to issue the certificates owned by the South St. Louis Iron Co. is not questioned. The only contested matter before us is as to his authority to issue, and the validity of those owned by the plaintiff. A solution of this question requires a consideration to some extent, at least, of the nature and extent of the powers of a receiver, and the construction of the order of the court.

Counsel for the appellant insist that if a court undertakes to build a railroad by an order entered of record, and directs a receiver to superintend such construction, and authorizes him to do and perform all acts and things necessary to be done to build the road; to borrow money, make contracts, incur debts and issue certificates; that such order should be subject to the same rules of construction as a like power granted by the board of directors to a superintendent of construction. The correctness of this proposition, thus broadly stated, admits of serious doubt.

Ordinarily the duties of a receiver of a railroad only "comprise the operation and management of the road; the payment of current expenses and the application of the residue of the earnings and receipts to the extinguishment of the indebtedness, to secure which the receiver was appointed. The receiver is seldom authorized to enlarge the operations of the company or to extend its line of road, his functions being usually limited to the management of the property in its existing condition for the protection of creditors and subject always to the supervision of the court." High on Receivers, § 390. As to such matters the receiver no doubt possesses all the incidental and necessary power to effectuate the object of his appointment in the absence of any specific directions from the court. The details of the business intrusted to him must

of necessity be left to his discretion. But he is uniformly regarded as an officer of the court, and being such the fund or property intrusted to his care is regarded as in the custody of the law; the "court itself having the care of the property by its receiver, who is merely its creature or officer having no powers other than those conferred by the order of his appointment or such as are derived from the established practice of courts of equity." High on Receivers, § 1.

In construing the order it must be borne in mind it confers upon the receiver extraordinary and unusual powers, which, however, it will be assumed, were necessary and proper for the preservation and protection of the property committed to his charge.

He was authorized to "put those portions of such line already constructed, or partly constructed, in good order and condition, and to this end he was empowered to borrow money and incur indebtedness, which was made a "first lien on the entire line of said railroad, including the road bed, right of way, rolling stock, taxes, income and earnings of said road," including all other acquired property. Under such a grant we are constrained to believe the claimed right or power should appear in express terms, or possibly it would be sufficient if it appeared by necessary implication.

Now, while it is true the receiver is authorized todo and perform all the acts necessary to be done and performed to construct such line of railroad;" yet the means to this end, as we think, are fixed and defined in the order. "For such purpose (the construction contemplated) the receiver is expressly authorized to issue certificates for money borrowed, material furnished, labor performed, or on account of contracts made by him for or on account of the construction or completion of said road or any part thereof." The receiver, being an officer of the court, has no implied powers other than those derived from the order of the court. Such being true, we think it clear he could not issue certificates which would constitute a first lien on the road except for money borrowed, material furnished, or labor performed.

When the material was furnished or labor performed he was authorized to issue the certificates in payment therefor, and not until then. And if he made a contract for the construction of the road he might issue certificates as the material was furnished or the labor performed, and on the completion of the road he could issue his certificates in final payment. But the power is not conferred to issue certificates in payment for material not furnished or labor not performed. On the contrary, we are of the opinion, it fairly appears he was prohibited from so doing. If the necessity existed for enlarged powers, they should have been applied for. Cases have been cited by counsel where courts have expressly authorized their receivers to issue negotiable securities, but such are not applicable.

It is insisted, however, that the certificates are negotiable, and as the plaintiff is an innocent holder for value they are not subject to the equities between the parties thereto. No adjudicated case precisely in point has been cited by counsel.

As the certificates on their face state they were "issued under and by virtue of certain provisions of an order duly entered by the District Court of Clinton county, Iowa, on July 27, 1876," the plaintiff is chargeable with notice of all such order contains. Whether under the order the receiver had the power to issue negotiable securities, or for property agreed to be delivered at a future day, were legal questions which the plaintiff was bound to dertermine at his peril. The receiver's authority was bounded and limited by the order. He had no general powers, except such as could be derived therefrom. It is true he had the power to issue certificates, but this was not unlimited. It was only in certain cases he could do so. And being an officer of the court and vested with the care of property in his charge as such officer, we think the plaintiff was bound to know whether these certificates were issued in accordance with the terms and contingencies contemplated by the order.

We conclude, therefore, the plaintiff is not such a holder as will cut off the equities existing between the original parties to these certificates. Affirmed.

FEDERAL COURTS-STATE ATTACHMENT LAWS.

LEHMAN v. BERDIN.

United States Circuit Court, Eastern District of Arkansas, April Term, 1878.

Before HON. HENRY C. CALDWELL, District Judge.

1. THE CIRCUIT COURTS OF THE UNITED STATES give effect to the attachment laws of the state, and are bound by the construction placed upon such laws by the supreme court of the state.

2. GIVING OF BOND DOES NOT PREVENT TRAVERSE OF AFFIDAVIT FOR ATTACHMENT.-The execution by the defendant in the attachment, in order to regain possession of the property attached, of a bond, under section 416 of the Code of Arkansas, conditioned to "perform the judgment of the court," does not estop the defendant from traversing the affidavits for attachment, and defending against the attachment in every respect as if such bond had not been executed and the property had remained in the hands of the officer.

3. IF THE ATTACHMENT IS NOT SUSTAINED, the plaintiff, though he recover judgment for his debt, can not resort to the bond to compel payment of such judgment.

The plaintiffs brought suit against the defendant on a promissory note, and sued out an attachment on the alleged grounds that the defendant had sold, and was about to sell his property with the fraudulent intent to cheat his creditors. The marshal levied the writ on certain property of the defendant, who thereupon caused a bond to be executed to the plaintiffs, conditioned as required by section 416, Gantt's Digest, which section reads as follows: "If the defendant, at any time before judgment, causes a bond to be executed to the plaintiff, by one or more sufficient sureties, to be approved by the court, to the effect that defendant

shall perform the judgment of the court, the attachment shall be discharged, and restitution made of any property taken under it, or the proceeds thereof."

At this term the defendant filed an affidavit under section 457, Gantt's Digest, denying the statement of the affidavit upon which attachment issued. The plaintiffs have filed a motion to strike from the files defendant's affidavits, controverting the grounds of attachment.

Cohen & Cohen, for plaintiffs; Wassell & Moore, for defendant.

CALDWELL, J.:

The reasons assigned in support of the plaintiffs' motion to strike from the files the defendant's traverse of the grounds of attachment are, that the execution by the latter of the bond under section 416, Gantt's Digest, operates (1) to discharge the attachment; (2) estops the defendant from contesting the validity of the attachment on any grounds, or for any purpose; and (3) renders the obligors in the bond liable absolutely for the amount of any judgment the plaintiffs may recover in the action, without reference to the question whether the attachment was rightfully or wrongfully sued out. There are adjudged cases in some of the states that seem to support this view. Hoezilligg v. Donaldson, 2 Met. 445; Imman v. Stratton, 4 Bush. (Ky.) 445; Deerolf v. Winterfield, 24 Wis. 143; Endress v. Ent, 18 Kas. 236; Payne v. Snell, 3 Mo. 409; Kennedy v. Morrison, 31 Tex. 207.

But the question is one in which the law of this state, as construed by the supreme court of the state, furnishes the rule of decision to this court. The question has not been before that court since the adoption of the code, but it arose under prior statutes, which were the legal equivalent of section 416 of the code. Under the revised statutes of this state, the defendant in an attachment suit might retain the property attached upon giving bond conditioned "that he will pay and abide the judgment of the court, or that his security will do the same for him," and it was further provided that "when the defendant shall have filed the bond, as required in the last preceding section, the attachment shall be released, and the suit proceed as other suits at law." Sections 13 and 14, chapter 17, Gould's Digest.

In Delano v. Kennedy, 5 Ark. 457, the question was presented, whether giving the bond provided for by these sections precluded the defendant from pleading in abatement the want of a sufficient attachment bond, and the court held it did not, and that the legal effect of giving such bond was to discharge the property from the lien of the attachment and substitute the defendant's bond in its stead; that in all other respects the rights of the parties in the attachment proceeding remained the same as though no bond had been given, and the property had remained in the hands of the officer. Chief Justice Ringo dissented from the judgment of the court, and, in his dissenting opinion, states very concisely the views maintained, respectively, by the majority and minority of the court. He said: "The majority of this court, if I correctly

understand their opinion, hold that the legal operration of this act of the defendant's is to release so much of the attachment only as operates upon and binds their property, by substituting, instead thereof, the bonds and personal security taken by the sheriff, but that it has no effect whatever upon the attachment bond filed by the plaintiff. I hold that the legal operation thereof is to release the whole attachment, and place the parties to the action, respectively, in the same situation as if the original process had been a writ of capias ad respondam, instead of an attachment, and that the proceedings in the writ thenceforward must be the same as if no such bond had been given, and no process other than a capias issued."

In Childress v. Fowler, 9 Ark. 159, the court was asked to review the ruling in the case of Delano v. Kennedy, supra, and, in view of the dissent of the chief justice in that case, it did so, and after full argument reaffirmed the doctrine in that case, in an elaborate opinion, concurred in by all the judges, and which concludes in this language: "We therefore hold that the execution of the bond, authorized by the 13th section, does not impair any of the defendant's rights of defense, and that, after its execution, he may defend the action either by plea in abatement, interposed in apt time and in due form, or by plea in bar in the same manner, in every respect as if he had not executed the bond and had suffered the property attached to remain in the hands of the sheriff."

After these decisions were pronounced, and by act of March 7th, 1867, the attachment law of the state was amended so as to allow the defendant to put in issue the truth of the plaintiff's affidavit to procure the attachment, thus making the law in this respect what it now is under the code; and this amendatory act further provided that the defendant might "give bond to dissolve the attachment." And section six declared: "That the conditions of bonds of persons dissolving attachments shall hereafter be, that he will appear and answer the plaintiff's demand at such time and place as by law he should, and that he will pay and abide the judgment of the court."

It will be observed that the language of this section, like that of the revised statutes, is better calculated to support the plaintiffs' contention than is the language of section 416. And in the case of Wood v. Carlton, 26 Ark. 662, the very question before the court was presented to the supreme court of the state for its determination. The defendant, whose property had been attached, had given the bond required by the act of March 7, 1867, and the court below had thereupon declared the attachment" dissolved." Afterwards the defendant filed his plea denying the truth of the plaintiff's affidavit upon which the attachment was issued. The court say: "The plaintiff urges on the court that the giving of the bond precludes all inquiry into the truthfulness of the affidavit. If it be admitted that the defendant, after giving bond, can not question the truthfulness of the original affidavit, the result is that the plaintiff, by his perjury, is allowed to hold the principal and his sureties for the amount of his judgment." And after

entering into a forcible argument to show that such a construction of the statute would not be in harmony with the objects and purposes of the attachment law, and would favor the unscrupulous creditor, and result prejudicially to conscientious creditors and honest debtors alike, the court in conclusion say that after the execution of such bond, "the defendant may show, at any time before judg. ment, that the original affidavit is not true." These authorities are decisive of the question in this state. It is argued that the Kentucky ruling on the question should be followed by the courts in Arkansas, because the code of the latter state is a copy of the code of the former, and the section under discussion identically the same in both.

If the section of the code in question was new law in this state, there would be some force in the suggestion; but, as we have seen, this provision is in legal effect precisely what the former law of the state was-is, in fact, a mere re-enactment of the old law; and if the legislature is to be credited with legislating in reference to knowledge of the decisions of the courts upon this question, the presumption must be indulged that they were more familiar with the decisions of their own courts than with those of a sister state, and that they did not, by simply re-enacting a statute of the state, intend to change its meaning, or adopt an exposition of such statute by the courts of a sister state opposed to the views of the supreme court of their own state.

Moreover, the provision is not peculiar to the Kentucky code, but was found in the codes of New York and Ohio, and probably other states, before its adoption by the former state (see sections 199 and 212 Ohio code, and 240 and 241 New York code); and the construction of the section by the New York and Ohio courts is in harmony with the decisions in this state, and opposed to the view of the Kentucky courts.

Under the New York code the attachment may be discharged upon the execution of a bond by the defendant, conditioned that the sureties "will, on demand, pay to the plaintiff the amount of judgment that may be recovered against the defendant in the action." Sec. 241 New York code. A defendant whose property had been attached, gave bond conditioned as required by the section last above quoted; the attachment was thereupon discharged. Afterwards the defendant filed his motion and affidavits to vacate the attachment proceedings, on the ground that sufficient facts to authorize its issue did not exist at the time it was granted, and the court entertained this motion and sustained it, and an order was made vacating the attachment proceedings. Plaintiff in the action recovered judgment for his debt, and it remaining unpaid, suit was brought on the bond given by the defendant to procure the discharge of the attachment, and the court held that the attachment haying been set aside upon the ground stated, the consideration for the execution of the bond had failed, and that it could not be enforced. Bildersee v. Aden, 10 Abb. Pr., N. S. 163.

And the previous rulings in that state were to the same effect. Caldwell v. Colgate, 7 Barb. 253;

Homan v. Brinckerhoff, 1 Denio, 184. And the same doctrine is maintained in Ohio. Fortman v. Rottier, 8 Ohio St. 553; Alexander v. Jacoby, 23 Ohio St. 358. In the case last cited the court say: "The interest of a party may imperatively require that his property shall be released from a wrongful attachment without delay. May he not, in such case, promptly procure the discharge of the attach ment by payment of the claim on which it is founded, or by executing an undertaking according to statute, and thus arrest the threatened ruin without abandoning his rights to redress for the injury already done?" And the court declares the execution of such bond "can not be regarded as an admission of record that the order of attachment was rightfully obtained."

The Louisiana code provides that the defendant may have the property released upon the execution of a bond, conditioned "that he will satisfy such judgment to the value of the property attached as may be rendered against him in the suit." And the uniform ruling in that state has been that the giving of such bond does not preclude the defendant from afterwards contesting the validity of the attachment, on the ground that it was obtained on a false allegation, or upon any other sufficient ground. Pailhes v. Roux, 14 La. 83; Love v. Voorhies, 13 La. Ann. 549; Myers v. Perry, 1 Id. 372; Brinegar v. Griffin, 2 Id. 154; Avet v. Albo, 21 Id. 349. When a bond is given under section 406, the property is not discharged from the lien of the attachment; the defendant may lawfully retain possession of it, but until the attachment is disposed of it can not be again attached or levied upon, except subject to the prior levy, and the defendant can not sell it divested of the lien of the attachment. Hagan v. Lucas, 10 Peters, 400; Drake on Attachment, sec. 331. And if the attachment is sustained the court must, in addition to rendering judgment for the debt, condemn the property attached to be sold to satisfy the judgment, (Sections 455 and 456 Gantt's Digest; Goss v. Williams, 46 Ind. 253); and now, under the act of November 10, 1875, may at the same time assess the value of the property; and "render further judgment that in case said property shall not be delivered, etc.," execution shall issue against the sureties, etc.

When the bond is given under section 416, the property attached is discharged absolutely from the lien of the attachment, and the bond stands as security to the plaintiff in lieu of the property; and if the plaintiff recovers judgment for his debt, this alone does not give him a right to enforce the bond; but he must also, in order to bind the obligors in the bond, have judgment sustaining the attachment (sec. 456), and he is then, under the act of 1875, entitled to a judgment against the defendant and his sureties in the bond for the amount recovered and costs. In such case the property attached is not condemned to be sold, because it has been released from the lien of the attachment and the bond substituted in its place; and this is all the difference in legal effect between a bond executed under section 406, and one executed under section 416. Bell v. Western, etc., Co., 3 Met. (Ky.) 558; Goss v. Williams, supra.

In neither case can the plaintiff resort to the security of the bond, unless his attachment is sustained; and in neither case is the defendant estopped from showing, at the proper time and in the proper manner, that the attachment was procured, upon false allegations of fact or otherwise, in violation of law. Sections 456, 457, Gantt's Digest. Bildersee v. Alden, supra; Delano v. Kennedy, supra; Childress v. Fowler, supra; Ward v. Carlton, supra; Pailhis v. Roux, supra; Cadwell v. Colgate, supra; Homan v. Brinkenhoff, supra; Alexander v. Jacoby. supra.

If the defendant is estopped from contesting the attachment, after giving bond under section 416, the estoppel will apply as well after the execution of the bond under section 406; for, so far as relates to the effect of the defendant's bond on his right to contest the attachment, there is no difference in the two sections.

The condition of the bond is that the defendant will" perform the judgment of the court;"—judgment of the court upon what and for what? The answer is found in section 456: "Upon the attachment being sustained the property attached or its proceeds, or the securities taken upon the attachment, shall be applied," etc.

The judgment, then, which the defendant's sureties must "perform " is a judgment, that the plaintiff rightfully attached the defendant's property for the debt found to be due, and is therefore entitled to the security resulting from the attachment-in other words, a judgment sustaining the attachment-a judgment which would reach the property attached, if no bond had been given. Goss v. Williamson, 46 Ind. 253; Inbusch v. Farwell, 1 Black. 572, 573.

Indebtedness alone is no ground for attachment; other facts must concur to render the attachment lawful, and giving this bond, does not in this state supply the place of these other facts, nor estop the defendant from denying their existence.

The motion to strike out the defendant's affidavits traversing the attachment is overruled.

CONSTRUCTION OF AN AUTHORITY TO RECEIVE PAYMENT.

The recent decision of Mr. Justice Fry in Pearson v. Scott, 13 L. T. N. S 747, is an authority upon several points connected with the rule that an agent to receive payment is only authorized to receive it in cash, as well as upon the effect of the usage in enabling him to receive payment by a settlement on account.

As a general rule the owner of goods sold is entitled to receive the price of those goods, unless by improper conduct on his part he has enabled some other person to appear as owner, and by that means to impose on a third person without any fault of that person. Hence the three questions put by Mr. Justice Bayley, in Baring v. Corrie, 2 B. & Ald. 137, 146, to determine whether an owner is entitled to claim payment of goods sold by his agent to a person who claims to set off against the price a debt due to him from the agent, are:

first, did the plaintiff enable his agent to appear as proprietor of the goods, and to practice a fraud upon the defendant? secondly, did the agent practice a fraud? and thirdly, did the defendant use due care and diligence to avoid such fraud?

A person who knows another to have in his hands or under his control moneys belonging to a third person, cannot deal with those moneys for his own private benefit, when the effect of that transaction is the commission of a fraud on the owner. Hence, where a receiver of an estate, who had a private account at his bankers, opened another there under the name of the estate, under such circumstances as to inform the bankers that the money which would be paid in to that account would belong to the owner of the estate, and the receiver drew a cheque on the estate account and paid it into his private account, the court held that the bankers were liable to repay the amount to the owner of the estate: Bodenham v. Hoskyns, 21 L. J. 864 Ch.; 2 D. M. & G. 903.

Baron Alderson in Barker v. Greenwood, 2 Y. & C. Ex. 414, stated, as a settled rule, that "an agent with a general account like this is only bound to receive payment in such a way as thereby to put it in his power completely to discharge the duty he himself owes his principal. If, therefore, he is bound to pay the whole over to the principal, he must receive it in cash from the debtor, and a person who pays such an agent, and who means to be safe, must see that the mode of payment does enable the agent to perform his duty."

In Todd v. Reid, 4 B. & Ald. 210, decided in 1821, which was an action by the assured against an underwriter, an attempt was made to set up the defence that it had been the practice at Lloyd's for many years to settle lossses in accounts between the broker and the underwriter. Upon this custom the argument was founded that the money so allowed in account between the broker and underwriter was equivalent to payment to the assured. The court, however, held that the broker, as agent of the underwriter, was only entitled to receive payment in money, and that no usage could sanction such a practice as that relied on.

The last case is reported very briefly, but a similar question again came before the King's Bench in Bartlett v. Pentland, 10 B. & C. 760, in 1830. "In this case," said Mr. Justice Bayley, "the company knew at the time when the policy was effected that it was effected for the benefit of the plaintiff; and a loss having occurred, they were bound to pay that loss, either to the plaintiffs themselves, or to some person who was duly authorized by the plaintiffs to receive it; and in making the payment to a third person it was their duty to see whether he was authorized or not. Here the company, knowing who the principals were, might have paid the broker by accepting a bill payable to the order of the principals, and by adopting that course would have been perfectly secure. But if, instead of making the payment in that way, they make the payment to the broker in a manner which gives the latter an opportunity of misapplying the money, then, as the broker was not authorized to receive payment in

that way, it was done at the peril of the underwriters." The case of Russell v. Bangley, 4 B. & A. 395, was quoted to show that if the name of the underwriter was struck off the policy, and the assured forebore to call for payment within the period warranted by the usage of the trade, the underwriter might be discharged. Lord Tenterden qualified this rule by stating that it applied only where the name was struck of with the assent of the assured.

Scott v. Irving, 1 B. & Ad. 605, another decision of the King's Bench in the same year, affords a further illustration of the principles of the above cases. There the loss was settled in part by the underwriter setting off in account against it a debt due to him from the broker for premiums, and as to the residue by payment to the broker in cash. The underwriter then crossed his name from the policy. The broker became bankrupt. The court held that the plaintiff was entitled to recover the amount allowed in account between the broker and the underwriter. The statement of the law by Mr. Justice Taunton is exceedingly clear. "It is fully settled by Todd v. Reid, and Bartlett v. Pentland sup.," said his Lordship, "that the underwriter, in order to be discharged must pay the broker in money, and that the latter can not make a set-off between him and the underwriter payment to the assured; and there are no particular circumstances to take this case out of the general rule. Russell v. Bangley, sup., is very similar to the present case, although this is distinguishable in two circumstances. The plaintiff here has dedelayed proceedings for a considerable time after being informed of the state of accounts between the broker and the underwriter. But the defendant's situation has not been altered by that circumstance, and again the defendant's name in the policy is cancelled in the present case. But it was not said in Russell v. Bangley that the fact is conclusive; and here the defendant was not cognizant of it. The payment of £54 was a good part payment. It was not made contrary to the contract; for though it was stated in the written adjustment that the loss was payable in one month, it might be paid in a less pericd." In Campbell v. Hassell, 1 Stark. 233, the payment was in direct contradiction to the original contract.

Baring v. Corrie, 2 B. & Ald. 137, which was decided in 1818, was an action to recover the price of goods. The defence was that the defendants bought them of brokers, against whom they had a counter-claim. From the evidence it appeared that the plaintiff's brokers acted as merchants also, but the defendants did not make any inquiry whether they acted in the particular transaction as brokers or merchants, nor were they required to sign a bought note. "Now," said Chief Justice Abbott, "without entering into the question whether or not, under such circumstances, the bargain could be enforced, it is quite sufficient to say that the ordinary course of dealing was not pursued, and that enough appears to show that the defendants negligently abstained from making those inquiries which they ought to have made. I think, therefore, that they ought not