Said note is indorsed on back as follows:

"In consideration of the granting at my request, hereby made, of the loan evidenced by the within note, I hereby guaranty to the Bank of America, of the city of New York, its successors, indorsers, or assigns, the prompt payment of the said loan, and hereby consent that the securities for the said loan may be exchanged or surrendered from time to time, or the payment of said loan extended, without further notice to me or assent from me, and that I will remain bound upon this guaranty, notwithstanding such changes, surrender, or extension. The Ohio Falls Car Man'f'g Co., "By J. L. Smyser, Pt."

The petition asserted a lien, under the Kentucky statute, prior in right to any mortgage made by said company. The Central Trust Company, as mortgagee under both mortgages, demurred, in so far as any relief was sought against the mortgages. This demurrer was sustained, and the petition dismissed so far as it sought priority of satisfaction or asserted any lien against the property of the railway company.

Fairleigh & Straus, for appellant.

Butler, Tillman & Hubbard and Pirtle & Trabue, for appellees. Before TAFT and LURTON, Circuit Judges, and HAMMOND, J.

After stating the foregoing facts, the opinion of the court was delivered by LURTON, Circuit Judge.

In the view we take of this case, it becomes unnecessary to consider the fact that this petition was not filed within 60 days after the appointment of the receiver, which appellee contends was essential to the preservation of the statutory lien, under section 5 of the act of March 20, 1876. Neither is it necessary to decide whether freight cars are "materials or supplies," within the meaning of the Kentucky act.

It is clear that before the railway company's note was made and discounted, July 31, 1893, the car company had no complete lien on the property of the railway company. The statute only gave a lien upon the occurrence of some one of the situations mentioned. None of the conditions upon which the statutory lien depended had arisen, transpired, or occurred. At most, it had a possibility of a lien should its claim remain unpaid until the property of its debtor should be "assigned for the benefit of creditors," or should "come into the hands of any executor, administrator, commissioner, receiver of a court, trustee, or assignee, or shall in any wise come to be distributed among creditors, whether by operation of the law, or by the act of such company, owner, or operator in such business." The plain purpose of the act was that furnishers of material or supplies should be preferred in the distribution of the assets of an insolvent company over mortgages or other incumbrances theretofore or thereafter created. But this lien did not actually attach so long as the property remained in the hands of the debtor railway company, and was managed and operated by it on its own account. The most that can be said is that such a creditor, prior to the happening of one or other of the conditions mentioned in the statute, had an unfixed right in the property of the debtor, amounting, at most, to an inchoate lien, which could be perfected upon the occurrence of one or other of the conditions precedent named in the

statute, and the beginning of legal proceedings for its declaration and enforcement within the time and in the manner prescribed by the statute. But if we assume that it had, for the security of the balance due on its account, an inchoate lien, then it seems clear that this incipient security was lost as the legal result of the transaction stated as occurring July 31, 1893. The facts concerning the arrangement and settlement of that date are reasonably subject to but two constructions, either of which is fatal to the lien now asserted. One interpretation, entirely reasonable and consistent with the facts stated in the petition and shown on the face of the note made to the Bank of America by the Ohio Falls Car Manufacturing Company, is that the balance due by the railway company to the car company for freight cars was paid and discharged with money borrowed from the Bank of America, the proceeds of the car company's note, secured by its mortgage bonds deposited as collateral, and further secured by the guaranty of the car company. The car company thereby secured the immediate payment of an open account, and, though it assumed a liability as surety for the railway company, yet such arrangements are not unusual nor inconsistent with an intent that the old account should be paid and discharged. Whether its position was better or worse in respect of security after this settlement is debatable. It had, at least, a collateral security in the second mortgage bonds deposited with the bank, to which, by subrogation, it would be entitled in case, as surety, it was compelled to pay the note. The value of this collateral may have been the subject of doubt; nothing is averred in the petition concerning their value.

But it is not necessary to decide this case upon the question of payment. We prefer to rest our decision upon the ground that, if it be assumed the car company had a complete or an incipient lien, that lien was waived. If it be, as appellant has affirmed in its petition and urged in argument, that the note of the railway company was, in legal effect and intent, executed to the car company, or to the Bank of America for the use of the car company, the latter must be regarded as having thereby contracted for a new security. Appellant cannot be heard to say that, when the note was made to the bank, as payee, this was only done to accommodate the car company, and is to have no greater legal consequence than if the note had been made to the car company as payee, without adopting the entire agreement nominally made between the bank and the railway company. To contend that the requirement that the note should be secured by a deposit of mortgage bonds and by a lien on all securities owned by it in the bank's possession, or which should thereafter come to its possession, as well as upon any balance to its credit as a depositor, was a requirement of the bank, and not an agreement between the railway company and the car company for a new security, is wholly inconsistent with its contention that the bank was but the nominal payee. The agreement to take a note secured by a deposit of the railway company's second-mortgage bonds was an agreement for a new security, inconsistent with the

lien now asserted, and consistent only with an intent to waive the inchoate lien dependent upon the Kentucky statute. The vague offer to file the bonds thus contracted for, as a security "subject to such disposition as the court may direct," cannot operate to revive a lien waived as a consequence of an agreement for a security inconsistent with the lien sought to be restored and enforced. Central Trust Co. v. Richmond, N., I. & B. R. Co., 15 C. C. A. 273, 68 Fed. 90– 94; Grant v. Strong, 18 Wall. 623.

The decree sustaining the demurrer of the Central Trust Company is, for the reasons given, affirmed.

UNITED STATES v. LOUGHREY et al.

(Circuit Court of Appeals, Seventh Circuit. February 8, 1896.)

No. 139.

1. PUBLIC LANDS-RAILROAD GRANTS-NONPERFORMANCE OF CONDITIONS SUBSEQUENT.

The act of June 3, 1856, granting lands to the state of Michigan to aid in the construction of a railroad, was a conveyance in præsenti, subject to be defeated by nonperformance of the conditions upon which the grant was made. These conditions were conditions subsequent, the nonperformance of which could be taken advantage of only by the United States; and, even after the time limited for performance, the title would remain in the state until some action was taken by the government declaring the forfeiture, and reinvesting itself with the title. 8. SAME-TRESPASS-CUTTING TIMBER.

Where lands granted to a state to aid in railroad construction have become forfeitable to the United States for nonperformance of conditions subsequent, the unauthorized cutting of timber therefrom gives the government no right of action, unless, before the cutting, it has actually declared a forfeiture, and reinvested itself with the title; otherwise, the cause of action is in the state, and remains therein, notwithstanding a subsequent declaration of forfeiture by congress. Schulenberg v. Harriman, 21 Wall. 44, followed.

Error to the Circuit Court of the United States for the Eastern District of Wisconsin.

This was an action at law by the United States against Charles Loughrey and Miles H. Wheeler to recover the value of certain timber cut from lands which were included in the grant made to the state of Michigan by the act of congress of June 3, 1856, to aid in the construction of railroads. The case was tried to the court on an agreed statement of facts, and judgment was given for defendants. Plaintiff brings error.

The plaintiff in error sued the defendants in error in trover for timber cut from the N. 1⁄2 of the N. W. 4 of the N. E. 14 of section 13, township 44 N., of range 35 W., in the state of Michigan. The complaint charges the cutting of the timber by one Joseph E. Sauve, and that he removed from the lands 80,000 feet of timber so cut, and left the balance skidded upon the lands. The defendants are charged as purchasers from Sauve. The amount of timber cut by Sauve is alleged to have been 600,000 feet, and the time of the cutting in the winter of 1887-88, and prior to the 1st day of March, 1888. The case was tried by the court, without a jury, upon facts stipulated as follows: "First. The defendants, prior to the 1st day of March, 1888, cut

and removed from the north half (1⁄2) of the northwest quarter (N. W. 1⁄44), and the northwest quarter (N. W. 4) of the northeast quarter (N. E. 4), and the southeast quarter (S. E. 14) of the northeast quarter (N. E. 1⁄44), of section thirteen (13), in township forty-four (44) north, of range thirty-five (35) west, in the state of Michigan, four hundred thousand (400,000) feet of pine timber, and converted the same to their own use. Second. That such cutting and taking of said timber by the defendants from said land was not a willful trespass. Third. That none of the lands in question were ever owned or held by any party as a homestead. Fourth. That the value of said timber shall be fixed as follows: That the value of the same upon the land or stumpage, at $2.50 per thousand, board measure; that the value of the same when cut and upon the land, $3 per thousand, board measure; that the value of the same when placed in the river was $5 per thousand, board measure; that the value of the same when manufactured was $7 per thousand, board measure. Fifth. That the lands above described were a part of the grant of lands made to the state of Michigan by an act of the congress of the United States, approved June 3, 1856, being chapter 44 of volume 11 of the United States Statutes at Large, and that said lands were accepted by the state of Michigan by an act of its legislature approved February 14, 1857, being Public Act No. 126 of the Laws of Michigan for that year, and were a part of the lands of said grant within the 'six-mile limit,' so called, outside of the 'common limits,' so called, certified and approved to said state by the secretary of the interior, to aid in the construction of the railroad mentioned in said Act No. 126 of the Laws of Michigan of 1857, to run from Ontonagon to the Wisconsin state line, therein denominated the 'Ontonagon and State Line Railroad Company.'" Dated October 14, 1892. The finding of facts by the court was in accordance with the foregoing stipulation, with the additional finding that said railroad was never built, and said grant of lands was never earned by the construction of any railroad. And, as conclusions of law, the court found: "First. That the cause of action sued on in this case did not, at the time of the commencement of this action, and does not now, belong to the United States of America. Second. That the defendants are entitled to judgment herein for the dismissal of the complaint upon its merits." No exceptions were taken to the court's findings of fact, and no requests to find were made. Exceptions were only taken to the conclusions of law found by the court, and to its failure to find other and contrary conclusions.

J. H. M. Wigman, for the United States.
W. H. Webster, for defendants in error.

Before WOODS and SHOWALTER, Circuit Judges, and BUNN, District Judge.

BUNN, District Judge, after stating the case as above, delivered the opinion of the court.

We think the conclusions of law found by the court are fully supported by the adjudged cases. The act of congress of June 3, 1856, constituted a conveyance in præsenti of the lands in question to the state of Michigan. By that act the state of Michigan took the title to the lands, subject, of course, to be defeated by nonperformance of the conditions upon which the grant of lands was made. Until there occurred a breach of these conditions subsequent, the title would remain in the state of Michigan, and a trespass upon the lands would be one for which an action would lie by the state; and, even though the conditions upon which the grant was made might never have been complied with, the title would not revert to the government until some action should be taken by the government or by congress declaring the forfeiture,

and taking back the lands. No such action was taken by congress in this case until after the acts complained of were committed, and even then it does not appear that the act of congress included the lands in question. No one had a right to complain of the nonaction by the government in failing to declare a forfei ture and reinvest itself with the title to the lands; and, until it did so, the title remained in the state. As the record shows title out of the government by an act conveying title in præsenti from and after June 3, 1856, it was incumbent upon the plaintiff in error to show that it had declared a forfeiture, and reinvested itself with the title, before the time of the cutting of the timber in the winter of 1888. This it has not done. The only attempt to show a reinvestment of title in the government is by the act of March 2, 1889 (25 Stat. 1008), passed a year after the trespass was committed by Sauve; and that act does not appear by its terms to cover the land in question. That act declared a forfeiture of lands coterminous with the uncompleted portion of the railroad, in aid of which the grant of 1856 was made, and there is nothing in the record to show whether it covered these lands or not; so that there is no evidence that the government has ever resumed title to the lands from which the timber was cut. But, even if the act were broad enough to cover the lands in question, it would still appear that, when the cutting and removal of the timber was done, the title was in the state of Michigan, and might always remain there. Moreover, there was no attempt on the part of congress to take back more than the title to the lands, or in any way to invest itself with the right to sue for trespasses committed while the title was out of the government.

A construction was placed upon the act of June 3, 1856, by the supreme court in Iron Co. v. Cunningham, 155 U. S. 354, 15 Sup. Ct. 103, following the cases of Schulenberg v. Harriman, 21 Wall. 44; U. S. v. Southern Pac. R. Co., 146 U. S. 570, 13 Sup. Ct. 152, and U. S. v. Northern Pac. R. Co., 152 U. S. 284, 14 Sup. Ct. 598. In the opening of the opinion by Mr. Justice Brewer, on page 371, 155 U. S., and page 103, 15 Sup. Ct., the court says:

"The act of June 3, 1856, was a grant in præsenti; and when, by the filing of the map of definite location, the particular tracts were identified, the title to those lands was vested in the state of Michigan, to be disposed of by it in aid of the construction of a railroad between Ontonagon and the Wisconsin state line. The lands were withdrawn from the public domain, and no longer open to settlement by individuals for pre-emption or other purposes. Although there was a provision for the forfeiture of the lands if the road was not completed within ten years, such provision was a condition subsequent, which could be enforced only by the original grantor, the United States; and until, in some appropriate method, it asserted its right of forfeiture, the title remained in the state of Michigan or the corporations upon which, from time to time, it conferred the benefit of the grant."

In Schulenberg v. Harriman, 21 Wall. 44, a similar act, passed on the same day, granting lands to the state of Wisconsin for similar purposes, was under consideration, and the same ruling was made. That case, like this, involved a contest over pine logs cut upon the land while held by the state, and it was held that the