MAYNAllD V. GRANITE STATE PROVIDENT ASS'N. 435

MAYNARD, Atty. Gen., v. GRANITE S'1'ATE PROVIDE:\,T ASS'N et at

(Circuit Court of Appeals, Sixth Circuit. :March 7, 1899.)

1';0. 540.1. C01\STITUTIONAT, LAW-PRIVILEGES AND IMMV1\ITIES-DISTRIBUTJ01\ OF As-

SETS CORPORATIONS.An amendment of the bU'lding association laws of Michigan (Pub.

1895, No. 269, p. 580) Imposes certain conditions on corporations or-ganized in other states to entitle them to engage in business in the state.Section 27 provides that the authority of any such association may berevoked at any time, in which event the attorney genenl1 shall instituteproceedings to wind up its business in the state, and that "stoekholdersand creditors in this state of such foreign eorlloration shall have a firstlien on all assets in this state of such foreign corporation, and the busi-ness in this state of sueh foreign eorporation shall be dosed suchreceiver, and its assets eonverted into moncy, to satisfy the claims ofsuch stocl,holders and ereditors." A mutual building assoeiation of an-other state, engaged in business in Michigan, became insolvent. Its au-thority in that state was revol,ed, and proeeedings wme brought by theattorney general under sueh statute. The only ereditors in the state,verI' shareholders. and it held certain mortgage assets covering prop-erty therein. Held that. as against shareholders who were l'Psidellts andcitizens of other states, the provision of the sta tute giving llreferpnce tocitizens of }fiebig"an in the distrilmtion of assets therein was invalid, asin violation of 2 of article 4 of the constitution of the "LnitedStates, declaring that citizens of each state shall be entitled to all priv-ileges and immunities of eitizens in the several states.

2. FOREIGN BUILDI1\G ASSOCIATIONS-PIWTECTIO:'< OF LOCAL SHAREHOLDERS.The requircments of such statute, so far as valid, are fulfilled where

the association is being wound up by the courts in the state of its organ-ization, by a decree in the :\liclligan suit requiring the to turnover the proceed.s of the Michigan assets when collected, less the eostof collection, to the general receiver. on his exeeution of a suftieient bondto secure to the :\1iclligan shareholders their pro rata of the total assets.

Appeal from the Circuit Court of the United States for the EasternDistrict of Michigan.1'his is an appeal from a decree of the circuit court of the Eastern district

of Michigan, denying the relief prayed. by the attorney general of :\Iichiganin a bill in equity filed by him in a :\1iehigan state court against the G'raniteState Provident Association, a corporation of New Hampshire. 'fhe hill waRremoved from the state court to the eourt lJelow on the ground of diversecitizenship. '1'he object of the bill was to wind up the affairs and businessof the defendant association in Mkhigan, under the llroYisions of the statuteof :Michigan, hereinafter set forth, on the ground that its licensl' to do busi-ness in the state of Michigan had been duly revoked. The bill prayed forthe appointment of a receiver, the collection of the YIichigan assets, thl'distribution of the proceeds pro rata among tll e creditors and stockholdersof the association resident in Michigan. and, after the paynwnt of their claimsin full, the turning over of the remainder of the aSRets to one David A. Tag-gart, the assignee of the insolvent defendant association, who had been ap-pointed by the supreme court of New Hampshire under a statute of thatstate. Taggart, the New Hampshire assignee, apjJeared In the canse bypetition averring that he had been apllointed under the laws of New Hamp-shire to wind up the affairs of the association, which had been dedared in-solvent by the supreme court of New Hampshire; that, as such assignee, hehad received from the ofticers of the association notes payable in New Hamp-shire due the association for money loaned and secured by mortgages onreal estate in Miclligan; that, by the direction of the sUjJreme court of NewHampshire, he had turned over the notes and mortgages to the receiver of

4il6 ,92· FEDERAL REPORTER.

HlP comt lwlow for collection, treating the suit below as one ancillary to the()JJP winding HI) t11'e association in New Hampshire. In his petition he prayedUta t the Ill'occeds of the notes, when collected, less the expense of collection,might be turned over" to him for distribution pro rata to all' the creditors andthe stockholders of the association, wherever resident, in accordance with thelaws of Xew Hampshire and the by-laws of the association. The circuitcourt denied the prayer of the bill that tl,re proceeds of the note and mortgagesshould be distributed, first, among the Michigan creditors and stockholders.but direGted the receiver to collect them, and, after deducting a sufficient sumfor the expense of collection, to turn the proceeds over to the New Hamp-shire association for a ratable distribution to all tne shareholders of the asso-ciation, taking a bond from the assignee conditioned upon the payment of theproper part of the proceeds of all the assets of the association to the :\livl1igancreditors and shareholders. I

The defendant the Granite State Provident Association was a corporatiOllorganized under the laws of New Hampshire in 1881. It had other pow-ers under its charter, but the only one we are here concerned with wasits power to carryon business as a building association on the mutualplan. For seven years prior to 1895 the defendant association did busi-ness as a building association in Michigan, without restriction by ;\1ichiganlaws. In 1895, the legislature of Michigan amended the general buildingassociation law by adding several sections making it unlawful for any cor-poration organized under the laws of any other state to engage in the busi-

of a building and loan association until it should comply with cer-tain requirements of the act which included filing a copy of its act of in-corporation, and paying a franchise fee. Section 27 of the amendment pro-vided that "the secretary of state may at any time, for reasonable causes.with tl;te concurrence of the attorney general, revoke the authority of anyforeign corporation to do business in this state; and in such event the attor-ney general shall take proceedings to wind up the business of such foreigncorporation in this state, and a receivel' may be appointed for the assets ofsuch foreign corporation in this state. Stockholders and creditors instate of such foreign corporation shall have a first lien on all assets in thisstate of such foreign corporation, and the business in this state of such foreigncorporation shall be closed by such receiver, and its assets converted intomoney, to satisfy the claims of such stockholders and creditors."It appears from the agreed statement of facts that on September 3, 1895,

the date when the association took out its license under the foregoing act.it had then issued 7,506 shares of stock, and it had tbenplaced loans securedmortgage upon Michigan real estate in the amount of $67,925; that, after thedate of its license under the law of 1895, it issued 3,009 shares of stock toMichigan shareholders, and made further loans upon Michigan real estateamounting in the aggregate to $10,300. It further appears that it has nocreditors in the state of ;\iichigan except the stockholders, and that, if thenotes now held by the receiver were to be applied upon the Michigan sharegalone, it would pay them, in full, and would leave a small surplus to beturned over to the New Hampshire assignee. If, however, the Xl'w Hamp-shire assignee is permitted to' use the proceeds of the notes secured by mort-gages on Michigan real estate in the ratable distribution to the stockholdersof the association, wherever resident, there will be paid but about 50 percent of the amount due upon the shares. By the by-laws of the association.adopted May 16, 1895, it was provided, among other things. that the tren8-urer should have the custody of all the securities and funds of the n8socia-tion, and that all certificates of shares. notes, bonds, or contl'acts for thepayment of money, and all payr;.lents of money, should ,be payable at thehome office of the association in the city of ::YIanchester, and should be gov-erned by the laws of New Hampshire. The notes which have been turnedover by the assignee to the receiver were all made payable in New Hamp-shire. Upon this state of facts, the circuit court held-First. that the aet ofJune 4, '1895, could not and (lid not affect the contract between the associa-tion and the holders of the 7,500 shares of its stock taken before the passageof the act, because otherwise .it would impair the obligation of an existingcontract in New Hampshire; (2) that the owners of the other 3,000 shares,

MAY"ARD V. GRANITE STATE PROVIDENT ASS'N. 437taken after the of the act, in to the contract of member-ship',' which provides for a ratable distribution of assets, must be held to havewaived by such subscription all right to the preference secured to them bythe statute; (3) that the statute, in giving preference to stockholders, didnot extend the privilege to shareholders or members of mutual associationswho could not properly be described as (4) that, if the termincludes shareholders in mutual companies, then the assets are tobe devoted to the payment to the )iichigan shareholders of only "that alUountwhich they have engaged to aceept, viz. whatever dividend is justly amieiluitably due them upon the final settlement of the affairs of the companyand the distribution of its assets upon the basis of the equality of said share-holders with other members of their elass, in whatever state resident"; (5)that the notes and mortgages upon Michigan land securing thpm were madepayable in New Hampshire, were held by the association there, and werenot assets in )lichigan, and that, therefore, there were no assets subject tothe operation of the act of lS95; and, finally, (H) tloat the act of lSU5 is in-"alid, under the eonstitution of Miehigan (seetion :!O. art. 4), whieh providesthat "no law shall embrace more than one object, which will be expressed inits title."The petition for removal filed jointly by the Granite State Provident Asso-

ciation and David A. 'l'aggart, assignee, states: "That Fred A. :Ylaynard.lItrorney general liS aforesaid, was at the time said suit was instituted, and"till is, a citizen of the state of and his official residence is at

Ing'ham county, in said state, and that said suit was instituted inthe Ingham county circuit court, such circuit being in the Eastern districtof )Iichigan; that the c:omplainant the saill bill in the interest ofthe members of the Granite State Provident Association, who are residentsand citizens of the state of :YIichigan, and who were members of said asso-ciation, and residents and citizens of )Iiehigan at the time of the filing of sahlbill of complaint; that these defendants, the Granite State Provident Asso-cintion and Dayi<l A. Taggart, were at the time said suit was commencel\.amI ever since haye hepn, and now are, citizens of the state of New Hamp-shin', nnd residlmts of the state of :'\ew Hampshire. the said company beingincorporated under the laws of the state of i\ew Hampshire. (3) That til('bill of eomplaiut was filell to secure to thc members of said association. a"aforesaid, who werc residents nnd citizens of the state of )!ichigan, a firstdnim and Upn upon the assets of said association located in the state of)lichigan, and a prl'fe]'ence oyer memhers of said assoeiation, who are not['('sidents or citizens of the state of )Iiehigan." In the first paragraph of tlll':IlISWP]' of the two dl'fendants they admit the truth of the first paragraph ofsaid complainant's bill of complaint, "that 1,'red A. :\:[aynard is the attorneygpneral of the state of ):[jchigan, and that he flied said bill of complaint inbehalf of the shareholders of the Granite State Provident Association, livingin the state of Michigan, and who are citizens of the said state of :\Iiehigan."By the eleventh ayerment of the answer the defendants admit "that loans ofmoney had been made by said Granite State Provident Assoeiation to share-holders, who were residents and citizens of the state of )Iichigan, upon mort-gages given upon property in the said state of Michigan, as security for suchloans, to the amount of eighty thousand dollars and upward. But they allegethat substantially all of said stock was sold to shareholders, and loans madeto shareholders in the state of ):liehigan, prior to September 8, 18H5; and theyallege that said :\'Iichigan shareholders in said assoeiation have only the sameinterest in the assets of said association, wherevm' the same may be situ-ated, as the other shareholders who are residents of other states of the Union.<12\ And these defendants, further answering, a<lmit in substance the thir-telenth paragraph of said bill of eomplaint; that the shareholders of said as-sociation residing in the state of )Iichigan purchased shares, and madf. pay-ment in good faith. And also these defendants allege that the shareholdersof saiel association, residents of other states than that of :\Iichigan, also pur-chased shares of stock in said association in good faith, and are entitled tothe same protection upon their shares, from the proeeeds that may be realizedfrom the assets of said association, as the shareholders residing in the state

Miehigan." In the fourteenth paragraph the defendants allege "that the

438 92 FEJ;lERAL REPORTER.

title of. said assignee, under the order of the supreme court of the state ofNew Hampshire, was ample to, enable and authorize him to enforce claimswherever and in whatever, states they might exist, or have been contracted,so as to do full justice to not only the shareholders in the state of Michigan,but the shareholders of said association in any and every state of the Union."In the fifteenth paragraph the defendants deny "that the shareholders of saidassociation, residents and citizens of the State of Michigan, are entitled toany more of the proceeds of said association, or any different amount, thanshareholders of said association, residents and citizens of other states of theUnion or other countries. They further deny that the shareholders of said

residing in the state of Michigan, are entitled, as claimed by saidhill of complaint, to the full payment of the amount that shall be found duethem, if there shall be sufficient assets In the state of Michigan, before anyof the proceeds of the assets In Michigan shall be turned over to the defend-ant, assignee. or can be applied upon the claims and obligations of the share-holders of other states of the Union." In the petition which Taggart filedin the conrt below for the transfer of the funds, he says: "Your petitionerfurther alleges and shows that the position taken by said complainant is un-jnst, inequitable, and ought not to be sustained by this court, and all moneyscollected from Michigan securities, whether fl'om notes and mortgages, turnedover to said receiver by your petitioner, or other assets in the state of}fichigan. should be paid over by the Michigan receiver, less the cost of col-lecting, for the following reasons: (3) Because, as your petitioner is advisedand believes, if the construction of said act placed upon it by said complain-ant is correct. then such act is in violation of both the federal constitutionand the constitution of the state of Michigan, in this: that it impairs the ob-ligation of contracts; that It discriminates between citizens of the state of

and citizens of other states, and does not give to citizens of otherstates than Michigan, shareholders In said association, the privileges andimmunities of citizens of the state of Michigan."Birney Hoyt, for appellant.Moses Taggart, for appellees.Before TAFT and LURTON, Circuit Judges, and SEVERENS,

Dil'!trict Judge.

TAFT, Circuit Judge (after stating the facts as above). We thinkthe decree of the circuit court must be affirmed on the authorityof the decision of the supreme court of the United States in Blake v.

19 Sup. Ct. 165, announced December 12, 1898, Mr. JusticeHarlan delivering the opinion. That was a writ of error to thesupreme court of Tennessee from a decree entered in the lattercourt upon a creditors' bill exhibited against an insolvent foreignmining and manufacturing corporation authorized to do businessunder the laws of Tennessee in that state, and having assets therein.The writ of error was sued out by certain of the creditors, who werenonresidents of Tennessee and residents of other states, to reverseso much of the decree as accorded priority of payment out of theassets to creditors resident in Tennessee, in accordance with a stat-ute of Tennessee, which, after providing that such foreign corpora-tions should be subject to the same process for the collection ofdebts due from them as natural persons, enacted as follows:"Nevertheless, creditors who. may be residents of this state shall have a

priority in the distribution of assets, or subjection of the same or any partthereof, to· payment of debts over all simple contract creditors, being resi-dents of any other country or countries."Two of the plaintiffs in error, it appeared, were residents of Ohio,

and did business in that state. In the intervening petitions of those

MAYNARD V. GRANITE STA'rE PROVIDENT ASS'N. 439

creditors, it was averred that the plaintiffs in the general creditors'bill, residents of Tennessee, claimed priority of right in the distri-bution of the assets of the insolvent corporation over other creditorsof the corporation, "citizens of the United States, but not of tlw'state of Tennessee." The plaintiffs in error attacked the validity·of the Tennessee statute on the ground that it was in violation ofthe provision of the second seetion of article 4 of the constitutionof the United States, declaring that the citizens of each state shallbe entitled to all privileges and immunities of citizens in the severalstates. The court considered the preliminary objections-First, that,as the statute only referred to residents, there was no oecasion to·consider whether it was repugnant to the provision of the nationalconstitution relating to citizens; and, secondly, that it did not suffi-ciently appear that the complaining plaintiffs in error were citizensof other states, so that they could raise the question. The court saidthat although the allegations might not be sufficient to show thatthe individual plaintiffs in error were citizens of Ohio, within themeaning of the statute regulating the jurisdiction of the circuitcourts of the L'nited States, they might be accepted as sufficient forthat purpose in the present case, no question having been made inthe state court that the individual plaintiffs in error were not citi-zens, but only residents of Ohio. Coming, then, to the other prelim-inary objection, the court said:"Looking at the purpose and seope of the Tennessee statute, it is plain that

the words 'residents of this state' refer to those whose residence in Tennesseewas such as indicated that their permanent home or habitation was there,without any present intention of removing therefrom, and having the inten-tion, when absent from that state, to return therpto; such residenee as apper-tained to or inhered in citizenship. And the words, in the same statute,'residents of any other country or countries,' refer to those ""hose respectivehabitations were not in Tennessee, but who were citizens, not simply resi-dents, of some other state or country. It is impossible to believe that th\'statute was intended to apply to creditors of whom it could be saicl that theywere only residents of other states. but not to creditors who were citizens ofsuch states. The state did not intend to place creditors, citizens of otherstates, upon an equality with creditors, citizens of Tennessee, and to givepriority only to Tennessee creditors over creditors who resided in, but were noteitizens of, other states. The manifest purpose was to give to all Tennessepcreditors priority over all creditors residing out of that state, whether the lat-ter were citizens or only residents of some other state or country. Any otherinterpretation of the statute would defeat the object for which it was enacted."

After discussing the meaning of the words "privileges and immuni-ties," and pointing out that citizens of other states might legally dobusiness with a foreign corporation domesticated in the state of Ten-nessee, the court said:"If a state should attempt by statute regulating the distribution of the

property of insolvent individuals among their creditors, to give priority tothe claims of such individual creditors as were eitizens of that state over theelaims of individual creditors, citizens of other states, such legislation wouldhe repugnant to the constitution, upon the ground that it withhpld from citi-zens of other states, as such, and because they were such, privileges grantedto citizens of the state enacting it. Can a different principle apply, as betweenindividual citizens of the several states. when the assets to be distributedare the assets of an insolvent, private corporation laWfully engaged in busi-.ness and having the power to contract with eitizens residing in states other

440 92 FEDERAL REPORTER.

than the one in which it is located? It is an established rule of equity that,when, a corporation becomes insolvent, it is so far civilly dead that its propertymay be administered as a trust fund for the benefit of its stockholders andcreditors (Graham v. Railroad Co" 102 U. S. 148, 161), not simply of stock-holdlJrs and creditors residing in a particular state, but all stockholders andcreditors of whatever state they maybe citizens. * '" * These principlesobtain, no doubt, in Tennessee, and will be applieq.. by its courts in all ap"propriate .cases between citizens of that state, without making any distinctionbetween them. Yet the courts of that state are forbidden by the statute inquestion to recognize the right in equity of citizens residing in other statesto participate upon terms of equality with citizens of Tennessee in the dis-tribution of the assets ·of an insolvent, foreign corporation lawfully doingbusiness in that state. We holdsHCh discrimination against citizens of otherstates to be repugnant to the second section of the fourth article of the con-stitution of the United States, although, generally speaking, the state has thepower to prescribe the conditions upon which foreign corporations may enterits territory for purposes of business. Such a power cannot be exerted withthe effect of defeating or imparting rights secured to citizens of the severalstates by the supreme law of the land. Indeed, all the powers possessedby a state must be exercised. consistently with the priVilege and immunitiesgranted or protected by the constitution of the United States. '" * * 'IV!!adjudge that, when the general property and assets of a private corporationlawfully doing business in a state are in course of administration hy tJwcourts of such state, creditors who are citizens of other states arc entiilpd.under the constitution of the United States, to stand upon the salllewith creditors of like class who are citizens of such state, and cannot JJe de-nied equality of right simply because they do not reside in that state. butare citizens residing in other states of the Union. The individuaJ pJailltifl'sin error were entitled to contract with this British corporation lawfully doingbusiness in Tennessee, and deemed and taken to be a corporation of that statl';and no rule in the distribution of its assets among creditors couJd be applil'llto them as resident citizens of Ohio, and because they were not residE'uts ofTennE'ssee, that was not applied by the courts of Tennessee to creditors oflike character who were citizens of Tennessee."

·We think the case at bar is governed by the principles adjudicatedin the case from which have quoted. It appears quite as clearlyfrom the record in this case that the, nonresident shareholders ofTennessee are citizens of ,other states in the Union as it did in theBlake Case that the individual plaintiffs in error were citizens ofOhio. The expression "stockholders and creditors in this state,"contained in the Michigan statute, must be given the same construc-tion as the words "creditors resident of the state of Tennessee," inthe Tennessee statute, were given by the supreme court, and for thesame reasons. Indeed, it is not denied, but it is expressly claimedby counsel for the complai,nant, that it was the intenti()n of the stat-ute to give a preference to citizens of the state of Michigan overcitize,ns of other states. The Blake Case concerns a discriminationbetween resident and nonresident creditors. ';rhe statute whose valid-ity is at issue in the case at bar concerns not only creditors, butshareholders. "Ve do not see, however, that this creates any sounddistinction. The parties in interest here are really creditors of theassociation to which they belong. It is a mutual association withrespect to Which shareholders occupy the relation both of stockholdersand creditors. But, even if it were not so, the principles announce(lby the supreme court in· the Blake Case necessarily cover the caseof stockholders as well as creditors. Anyone in any state had theright to become a stockholder or shareholder in the defendant cor-

MAYNARD V. GRANITE STATE PROVIDENT ASS'N. 441

poration. There was no restriction attempted by the law of Michi-gan or the law of any other state upon the residence of stockholders.The equity of stockholders to share in the assets of the corporationwhen it is being wound up is junior to that of creditors, but it isnone the less to be protected as a privilege and immunity under theconstitution of the United States. Mr. Justice Harlan, in referringto the equitable principle that requires the assets of a corporationcivilly dead to be administered as a trust fund, says that it is atrust fund for the benefit, not simply of stockholders and creditorsresiding in a particular state, but of all stockholders and creditors ofwhatever state they may be citizens. Nor is the present case withinthe exceptions and qualifications of the rule which the supreme courtdeemed it wise to state in the Blake Case. Mr. Justice Harlan said:"It may be appropriate to observe that the objections to the statute of '1'en-

nessee do not necessarily embrace enactments that are found in some of thestates requiring foreign insurance corporations, as a condition of their cominginto the state for purposes of business, to deposit with the state treasurer fundssufficient to secure policy holders in its midst. Legislation of that characterdoes not present any question of discrimination against citizens forbidden bythe constitution. Insurauc'e funds set apart in advance for the benefit of homepolic;r holders of a foreign insurance company doing business in the state area trust fund of a specific kind to be administered for the exclusive benefit ofcertain persons. Policy holders in other states know that those particularfunds are segregated from the mass of property owned by the company, andthat they cannot look to them, to the prejudice of those for whose special ben-efit they were depostted. '1'he present ease is not one of that kind. Thestatute of 'I'ennessee did not make it a condition of the right of the British cor-poration to come into Tennessee for purposes of business that it should at theoutset deposit with the state a fixed amount, to stand exclusively or primarilyfor the protection of its '1'ennessee creditors. It allowed that corporation, aftercomplying with the terms of the statute, to conduct its business in Tennesseeas it saw fit, and did not attempt to impose any restriction upon its makingcontracts with or incurring liabilities to citizens of other states. It permittedthat corporation to contract with citizens of other states, and then, in effect,provided that all such contracts should be subject to the condition (in case thecorporation became insolvent) that creditors residing in other states shouldstand aside, in the distribution by the Tennessee courts of the assets of thecorporation, until creditors residing in Tennessee were fully paid,-not out ofany funds or property speelfically set aside as a trllst fund, and at the outsetput into the custody of the state, for the exclusive benefit, or for the benefitprimarily, of Tennessee creditors, but out of whatever assets of any kind thecorporation might have in that state when insolvency occurred. In otherwords, so far as Tennessee legislation is concerned, while this cOl'porationcould lawfully have contracted with citizens of other states, those citizens can-llot share in its general assets upon terms of equality with citizens of thatstate. If such legislation does not deny to citizens of other states, in respectof matters growing out of the ordinary transactions of business, privilegesthat are accorded to it by citizens of Tennessee, it is difficult to perceive whatlegislation would effect that result."

So, in this case, had the legislation of Michigan provided that, asa condition of the defendant association's doing business in the stateof )lichigan, it should deposit a fund with the state treasurer or otherstate officer to be used for the securitv of resident stockholders orcreditors of the state of Michigan, such a provision would not havebeen in violation of the fourth article of the federal constitution.Such, indeed, was the character of the legislation adjudged to bevalid in the case of Lewis v. Association, 98 vVis. 203, 73 N. W.

442 92 FEDERAL. J;tEPORTER.

i93, where a 'foreign building assoCiation was required by the lawof Wisconsin to deposit $100,000 o( its security with the state treas-urer in trust for the redemption of the obligation of the associa,tion to persons residing in Wisconsin; those obligations includingthe payment of shareholders in the building association.vVe hold, therefore, that, in its operation against the other share-

holders of the defendant assoeiation, residents and citizens of otherstates than Michigan, the section of the Michigan statute relied onis invalid. because it violates the second section of the fourth articleof the constitution of the United States. We further hold that, ina case where the whole corporation is being wound up in the stateof its incorporation, the collection of the Michigan assets by a Mich-igan receiver, and the direction to him to turn the same over tothe New Hampshire assignee, less the cost of collection, on the lat-ter's giving a sufficient bond to secure to Michigan shareholderstheir pro rata of the total assets, fulfills the requirements of theMichigan statute in so far as the same is valid. 'l'he decree of thecircuit court is affirmed.

=--==

UNITED STATES, to Use of SABI:;\E & E. T. RY. CO., v. HYATT et al.

(Circuit Oourt of Appeals, Fifth Circuit. February 7, 1899.)

Xo.749.

CNI'l'ED STATES-BOND OF CONTRACTOR FOR PUBLIC WORK-FREIGHT CHARGESON MATEIUAL.A bond required by the United States from a contractor for pUblic

work, under the act of August 13, 18W (28 Stat. 278), conditioned that thecontractor shall promptly pay all persons who supply labor and materialsin the prosecution of the work, docs not cover a charge by a railroad forfreight on materials which are loaded and unloaded by the contractor,such charges being neither for labor nor materials, within the meaningand purpOse of the act.

vVrit of Error to the Circuit Court of the United States for theEastern District of Texas.This suit was brought by the Sabine & East Texas Railway Com-

pany, in tpe name of the United States, on a bond which F. A. Hyatt& Co. executed to the United States. The railway company claimsthat F. A.Hyatt & Co. are indebted to it for transportation charges,and that· the principals and sureties on the bond just mentioned areliable for the indebtedness. A jury was waived in the trial court.The judge made findings of fact and Jaw., His findings of fact are, in substance, as follows:F. A. Hyatt & Co., having, on January 4, 1895, entered into a contract

with the United States to do certain work in the construction of East Jetty,at Sabine Pass, Tex.. furnished a bond to the United States in the sum of$30,000, for the faithful performance of their contract. This contractors'bond was executed on January 5, 1895, with J. '1'. Munson and J. B. )Ic-Dougall as sureties. It contained a stipulation, under the act of congressapproved August 13, 1894 (28 Stat. 278), that "F. A. Hyatt & 00. shall beresponsible for all liabilities incurred in the prosecution of the work, forlabor and materials, and shall promptly make payment to all personsing him or them labor or materials in the prosecution of the work." It was