Weir v. Morden, 125 U.S. 98 (1888)

This was a bill in equity to restrain the alleged infringement of reissued letters-patent No. 8914, dated September 30, 1879, for an improvement in railroad frogs, the original patent, No. 215,548, dated May 20, 1879, having been issued on an [p. 99] application filed February 4, 1879, to Frederick C. Weir, the complainant. In his specification the patentee described the invention generally as follows:

“ And this defendant, further answering, says, on information and belief, that he is the original and first inventor of a U-shaped plate in combination or connection with a railroad frog, and that said invention was securer! to him by said letters-patent of the United States No. 173,804 and No. 205,- 496, and that by virtue of said letters-patent he has the sole [p. 103] and exclusive right to said U shape in a railroad frog, and that, while the complainant is engaged in the manufacture and sale of railroad frogs, he uses a V-shaped plate so secured to your defendant, as before stated, and in said manufacture and sale has copied from defendant’s invention in substantial and material parts secured to defendant by his letters-patent aforesaid and in infringement of the same; and this defendant, in this connection, would state that prior to the filing of complainant’s bill he, the defendant, filed a bill in this honorable court against said complainant for infringement of his said letters-patent No. 173,804 and said wrongful acts, and praying relief on account of said wrongful acts by the complainant, which said bill is now pending against him in this court. Some days after this defendant filed his bill as aforesaid, the said complainant filed his bill, seeking thereby, as defendant is advised and states, on information and belief, to harass and annoy defendant in his said suit and to delay accounting to defendant for said wrongful acts of him, the said complainant.”

The question of infringement depends upon the proper construction of the second claim. The proof shows that the defendants did not infringe either the first or the third. They did not form and connect the two rails, making up the angular point as a part of the frog, so that one of the rails "would extend unbroken and uncut directly across the path of the [p. 104] other, and in itself make a solid end to the point with a full-width flange overlapped by the flange of the other rail, thus affording a double thickness and avoiding the cutting away of the flanges, as was customary. If there is an infringement, it consists in the use of the channel irons of a U shape, uniting the two centre rails, forming the V-shaped point of the frog, to each other, and the two thus united to the two diverging rails on each side by means of bolts or rivets passing through the webs of the rails and the sides of the channel bars. The question was disposed of by the Circuit Court in favor of the defendants, as follows:

“ ‘ In place of cutting away both the flanges of the rails B B', so as to make a joint between the two rails midway between the lines of the angle of the frog, as is common now and, I may say, usually practised, I continue the flange of the rail B, of full width, intact clear along the junction of the two rails to the point where it strikes the flange of the outer rail, [p. 105] as shown in Fig. 3, which is almost immediately under the point X' of the frog, and I swage up the flange I1 of rail B' on one side, as shown in Figs. 5 and 3, so that it lies over the flange of rail B, this flange of rail B' being cut away angularly on the edge to properly meet the line of the web Z»2 of the rail B.’

The construction of the second claim contended for by the appellant is, that it embodies separately and distinctly that part of the invention which, in the general description in the preliminary part of the specifications, is stated to be “ an improved manner of connecting the two rails of the point together and to channel-iron pieces, to which the outer rails are connected,” without reference to the manner in which the two rails of the point are formed, so as to constitute the first part of the invention. If this construction be admitted, the second claim would cover every case of two centre rails joined to form the V-shaped point, which were united to outside diverging or wing rails by means of channel irons of a U shape, bolted or riveted, as therein described, without reference [p. 106] to the manner in which the two centre rails were combined to make the angular point or V shape. In our opinion, the construction placed upon this claim by the Circuit Court is right, and is required by the language of the specifications and claim. The claim does not on its face profess to cover a mere mode of connecting, by means of U-shaped channel irons, the intermediate with the external rails. It is in form a claim for a combination of parts, which together constitute a frog of peculiar construction. The elements of that combination, as stated in the claim, are, first, the two centre rails B B' joined to form the V-shaped point; second, the outside diverging or wing rails; third, the channel irons of a U shape uniting the centre rails together, and also to the outside or wing rails, so that the whole shall constitute a frog with the characteristics imparted by the features of this combination. This coincides with the statement contained in the brief of counsel for the appellant, who say, speaking of the invention as described in the second claim:

The claim refers specifically to the “ two centre rails B Bf joined to form the V-shaped point.” This points explicitly to the drawings, on which the two centre rails are designated by the letters, and also to the mode in which they are shown by the drawings and the description in ¿he specification to be joined, and excludes the idea of constructing a frog, such as is [p. 107] intended to be covered by the second claim, of any other centre rails than those thus pointed out and described. The patentee by this mode of description and of claim has made the centre rails, formed and connected in the manner described to make up the V-shaped point, an essential part of the invention intended to be secured by the second claim.

If this construction of the second claim needed corroboration, that would be found in the state of the art at the time of the alleged invention, as shown by the proof in the present case. The frogs exhibited in evidence as infringements of the complainant’s patent were manufactured by the defendants, as [p. 108] they claimed, under patent No. 148,264, dated March 3, 1874, issued to George Thomas and William Miller, under whom they claim, and also under patent No. 173,804, dated February 22, 1876, issued to Morden, one of the defendants, as inventor. Morden’s patent of February 22,1876, showed a connection of the wing rails for use as frogs by means of a U-iron or “ trough plate,” the upturned sides of which “ are made to conform to the curve of the side rails, as well as to the form of the neck and base of the rails, and are firmly secured to the neck of the rails by bolts or rivets.” Instead of holding the V-shaped point in place by the use of channel irons, he provided a V-shaped recess in the channel or trough plate into which the point of the frog was inserted and held; but in applying his device to railroad crossings instead of switches, he used channel or U-shaped irons to connect the points and wing rails. It is true, as suggested by counsel for the appellant, that a crossing of railroad tracks is a very different device from a switch, where the latter is used by means of a frog to shift the engine and train from one line of tracks to another; but the use of channel irons is analogous in the two cases, and it would require no more than ordinary mechanical skill to transfer the channel irons used upon a crossing to firmly hold the parts in place, to a similar use in a frog to unite firmly in their respective positions the centre rails with the exterior rails.

The Little Rock and Fort Smith Railroad Company was incorporated by the State of Arkansas, January 22, 1855, to uild and operate a railroad in that State from Little Rock, y the way of Van Buren, to Fort Smith. The Mississippi, uachita and Red River Railroad Company was also incorporated by the State on the same day, to build and operate a railroad from the Mississippi River near Gaines’ Landing, [p. 110] Iio OCTOBER TERM, 1887.

In this statute the tax provided for in § 7 was to be imposed by the legislature from time to time, but on the 10th of April, 1869, another act was passed, “ to provide for paying the interest of the bonds to aid in the construction of railroads,” by which it was enacted that the interest on all bonds issued under the act of 1868 should be made payable on the first day of April and the first day of October in each year, and it was made the duty of “ the auditor of public accounts, on or before the first day of June in each year,” to “certify [p. 112] to the treasurer the amount of bonds issued to each railroad company, the amount of semi-annual interest that will accrue thereon — that is to say, the amount of interest the State will have to pay on the first day of October of that year, on the bonds issued to each of said railroad companies — and the amount of tax required from each of said railroad companies to pay the same, which tax shall be deemed due and payable on the thirtieth day of June of that year.” Similar provision was also made for the interest falling due in April. Upon the receipt of a certificate from the auditor, it was made the duty of the treasurer to “ cause notice to be served upon each railroad company, on or before the twentieth day of June,” or the twentieth day of December, as the case might be, “ in each year, specifying the amount of tax to be paid, which amount shall be the interest on said bonds for the said period, and demanding payment of the same into the treasury” at the appointed time. If default occurred in the payment of the tax, and it continued for sixty days, it was made the duty of the treasurer, “ through the attorney general, to make and file a petition, under the seal of the treasurer’s office, in the Pulaski Chancery Court, setting forth the amount due and the fact of such default, praying the issue of the writ of sequestration contemplated in said act, and the appointment of a receiver, to be named in said petition, to receive in his behalf the revenue and income of said company, for the purpose specified in said act, which writ shall issue upon the filing of the petition for the same.” Upon the issue of the writ so ordered, the receiver therein named was required to “ take possession of all the income and revenues of the defaulting company, with authority to demand and receive all moneys coming to the same from the operation of such road; ” and it was further made “ the duty of all officers of said company to return all moneys to him, for receiving which he may require the submission of all necessary books, papers, and accounts to him, and may examine any and all persons under oath, and any person making false returns, or failing to pay over moneys, shall be deemed guilty of a misdemeanor, and any person swearing falsely shall be declared guilty of perjury.” Section 5 of this act was as follows:

“ It is hereby certified that the State of Arkansas is indebted unto the Little Rock and Fort Smith Railroad Company, or bearer, in the sum of one thousand dollars, lawful money of the United States of America, redeemable at the city of New York thirty years from the date hereof, with interest at the rate of seven per cent per annum, payable semiannually, in the city of New York, on the first day of April and October in each year, on the presentation of the proper coupons hereto annexed. The faith and credit of the State are hereby solemnly and irrevocably pledged for the payment of the interest and redemption of the principal of this bond. Issued in pursuance of an act of the General Assembly of the State of Arkansas, approved July 21, 1868, entitled ‘An act to aid in the construction of railroads,’ the said act having been [p. 114] submitted to and duly ratified by the people of the State, at the general election held November 3, 1868.

Interest was paid on the state bonds up to and including April 1, 1873. Default having been made in the payment of interest upon the bonds issued under the railroad mortgage, a suit was begun by the trustees, May 12, 1874, for the foreclosure. To this suit the State was not a party, but in the bill the fact that state aid had been granted to the company was set forth, and the prayer was for a sale “ subject to the lien of the State of Arkansas, if your honor shall find and decree that any lien existed in favor of said State prior to the lien created [p. 115] by said deed of mortgage.” Upon this bill a decree was rendered pro confesso, directing a sale of the mortgaged property, but making no decision and giving no directions as to the suggestion of a lien in favor of the State. Under this decree the property was bought by a committee of the bondholders for a nominal sum, and they organized a new corporation under the laws of Arkansas by the name of the Little Rock and Fort Smith Railway, to take the title, the original bondholders, or such of them as elected to come in, being the stockholders. Afterwards the property purchased was conveyed to the new corporation.

No interest was paid on the state bonds after April, 1873, and at its May term, 1877, the Supreme Court of the State decided that the bonds were void, because issued in violation of one of the provisions of the Constitution of the State. Arkansas v. Little Rock, Mississippi de Texas Railway, 31 [p. 116] Arkansas, 701. On the 29th of May, 1874, the legislature repealed the act of April 10, 1869, being the act above mentioned, “to provide for paying the interest on bonds issued to aid in the construction of railroads.”

It cannot be denied that the bonds were issued as “ a loan of state credit,” and that the original companies were bound to hold the State harmless from all liability on the amounts taken by them respectively. This might be done by paying to the State at the times specified the taxes imposed under the law, either in money or in the bonds and coupons of the State at par, or by paying at any time the whole amount of principal and accrued interest then unpaid, in money or in the bonds of the State loaned in aid of railroads or the coupons thereon. Such is the express provision of § 7 of the act of 1868. The bonds were bonds of the State, “ pure and simple.” They carried on their face no express obligation of the railroad company to the holder. The promise made by the company on the acceptance of the bonds was to pay the State, not the bondholder. The failure of the company to meet its obligations to the State did not operate in any manner to relieve the State from its liability on the bonds. The debt of [p. 118] the state still remained and was the only debt the bonds expressed on their face. The debt of the company was to the State for the bond, not to the bondholder on the bond. Payment to the State discharged the obligation of the company.

It is true that the requisition provided for is called a tax in [p. 119] the statute, but that does not make it a tax in the ordinary sense of that term. By statute in Arkansas, “all property, whether real or personal,” except such as shall be “ expressly exempted,” is “subject to taxation,” and must “be entered on the list of taxable property for that purpose.” Gantt’s Dig., § 5048. Each owner is required to list his own property, (§ 5066,) and, when valued in the way provided by law, the county clerk is “ to make out ... a complete list or schedule of the taxable property in his county, and the value thereof,” placing each separate lot or tract of real property opposite the name of its owner. The aggregate Value of the personal property of each owner is also to be set opposite his name. § 5133. This being done, the clerk is to enter the amount of taxes imposed upon each parcel of property, and deliver the list to the proper officer for collection. §§ 5137, 5139. It is then provided by § 5153 that “the lien of the State for the taxes levied for all purposes in each year shall attach to all real and personal property on the first Friday after the first Monday in October in each year, and shall continue until such taxes, with any penalty that may accrue thereon, shall be paid.” Taxes upon personal property, if not paid by the owner, may be collected by distraint. § 5173. faxes on land, not voluntarily paid, are to be collected by a sale of the property. §§ 5185 to 5188.

Is there anything, then, in the rest of the statute from .which the creation of a lien may be reasonably implied? Before the loan could be obtained it was necessary for the company to make a statement to the Board of Bailroad Commissioners, setting forth its charter and organization, a map of its line, and the progress made in construction, its financial condition and resources, and for it to furnish such other information as the case might require. The board was also to inspect the road from time to time, and to indicate to the governor how the aid was being used and applied. If [p. 121] improperly used, the governor was authorized to withhold all or any part of the bonds, and to take such other steps as he might deem proper, to the end that the bonds should not be squandered. Any action of that. kind on the part of the governor was to be reported to the General Assembly, which was empowered to take such steps as might be necessary to protect the interests of the State. If the company failed to complete its road within the time limited by the statute, it was to forfeit its charter and franchises to the State. In all this we see no intention of establishing a lien on the road as security for the loan which was actually made. A right to forfeit a charter and its franchises for not completing that which had been begun does not necessarily imply a prohibition against a sale or incumbrance of property acquired before a forfeiture was in fact enforced. The taking away of the franchises may, under some circumstances, affect the value of the property in the hands of a purchaser, but it cannot ordinarily deprive him of his title. A forfeiture of the charter does not necessarily transfer the road built under it to the State, or give the State any rights therein.

The whole matter, therefore, depends, so far as the act of 1868 is concerned, on the operation and effect of § 8, which provides that if the company fails to pay “ the taxes imposed ” by § T, “it shall be the duty of the Treasurer of State, by writ of sequestration, to seize and take possession of the income and revenues of said company until the amount of said defaults shall be fully paid up and satisfied, with costs of sequestration, after which said treasurer shall release the further revenues of said company to its officers.” The act of 1869 provides the machinery for obtaining this writ of sequestration and carrying it into effect, through a receiver to be appointed by the Pulaski Chancery Court. This receiver is authorized to demand and receive all moneys coming to the company from the operation of the road. To accomplish this it was made the duty of the officers of the company to return ad moneys to him, with power on his part to require the submission to his inspection of books, papers, and accounts, and to examine persons under oath. Operating expenses were [p. 122] to be paid by the receiver, on the approval of the Treasurer of State, out of the moneys turned over to him, and only the surplus or net proceeds applied in discharge of the tax. When the tax was satisfied the treasurer was required to “ account with said company, and withdraw said receiver from the management of its affairs.”

We do not understand that the case relied on warrants any such conclusion. Its facts were peculiar. The Pacific Railroad was mortgaged to the State of Missouri to secure a loan of state aid bonds amounting to $7,000,000. It was unfinished and more money was needed for its completion. Authority was then given the company by the State to issue more bonds for that purpose, to be secured by a first mortgage on a part of the line, which should be superior in lien to that already existing in favor of the State as security for the original loan. Under this legislation a fund commissioner was appointed, who had acquired, by authority of the statute, for the security of the State, “ complete control of the earnings and income arising from the property.” In this condition of affairs the State was invaded by armed forces during the late civil war, and while the invasion continued much of the property belonging to the company, including bridges, depots, machine shops and track, was destroyed. To raise the money to repair these damages and put the road again in a condition for use, the company applied to the county of St. Louis for a loan of $700,000 of county bonds. In aid of this application tne [p. 123] legislature of Missouri passed a statute authorizing the county to issue the bonds, “ under such conditions as may be agreed upon between the said County Court and the Board of Directors of the Pacific Bailroad Company,” and directing that “ the fund commissioner of the Pacific Railroad, or such person as may at any time hereafter have the custody of the funds of the said railroad company, shall, every month after said bonds are issued, pay into the county treasury of St. Louis County, out of the earnings of said Pacific Railroad, $4000, and $1000 additional in each month of December, to meet the interest on the said seven hundred bonds; said payments to continue until said bonds are paid off by said Pacific Railroad.” This act was accepted by the railroad company, and the bonds were loaned by the county to the company, under a special arrangement in accordance with its provisions. The fund commissioner had at the time full control of the earnings and income under the provisions of the previous statute. What was done under these circumstances was held to be “ not a simple, naked covenant to pay out of a particular fund; but the act, being accepted by the parties interested, operated as an equitable assignment of a fixed portion of the fund — an assignment which became effectual without any further intervention upon the part of the debtor, and which the party holding the funds of the company, whether the fund commissioner, or some other person, could respect without liability to the debtor for so doing. It was an arrangement based on a valuable consideration, which neither the State nor the company, nor both, nor parties claiming under either, with notice, could disregard without the assent of the county, expressed by those who had authority to bind it. It was an engagement to pay out of a specially designated fund, accompanied by express authority to its custodian to apply a specific part thereof to a definite object, in the accomplishment of which all the parties to the arrangement were directly interested.” In other "ords, it was a specific appropriation by statute of a fixed and definite portion of the future earnings of the railroad to a parlcular purpose, with an express statutory provision for a custodian of the earnings as they accrued, whose duty it should [p. 124] be to apply this specified portion in this specified way. No further action of the company was required. The law made it the duty of the custodian of the earnings of the road, whoever he might be, to use this definite amount thereof in this definite way and in no other way whatever, so long as the debt remained. The effect of this was to charge the road as a road, into whosesoever hands it might come, with the payment of this amount of money each month out of its current earnings. If the earnings came into the hands of the person or corporation owning the road for the time being, and the payments were not made as the law required, then some other custodian of the earnings — some other trustee — could be appointed by the proper judicial tribunal, who would obey the law in that behalf.

always in equity the property of the county, and the remedy applied was only such as wras necessary to enable the county to reduce its own property to its own possession. Here, however, the writ of sequestration is given as a means of enabling the State to collect a debt, not to recover possession of its property. True, in the process of sequestration the State is authorized, through its receiver, to demand and receive the moneys coming to the company from the operation of the road, but this is for the purpose of enabling the State to subject that particular kind of property belonging to the company to the payment of its debt, not to get possession of anything which actually belonged to the State irrespective of its rights under the sequestration proceedings. It is true, also, that in executing its writ of sequestration, the State could, through its receiver, direct the officers of the company as to the disposition of the current earnings of the road, and thus to a certain extent assume the management of the company’s affairs. This was not, however, for the purpose of enabling the State to get possession of its own property, but of compelling the company to apply its property to the payment of its debts. Certainly, if A owes B a debt, and agrees that if the debt is not paid at maturity B may apply to a proper judicial tribunal for a receiver to collect the rents of a certain building which he then owned, and apply them on the debt until it is discharged in full, it would not be claimed that B had acquired a lien on the building, or even on the rents, until he had at least commenced proceedings to subject the rents under the agreement. The agreement alone did not make the rents the property of B, or charge the building as security for their payment to him. The rents belonged to A until default in the payment of the debt, and until B took steps to reduce them to possession. If in the meantime the building should be sold by A there would be no rents which B could subject under his agreement, because it was only rents due to A himself that he could give B the right o collect. In KetchunrCs case the earnings of the road to the extent that they had been specifically appropriated to the counyof St. Louis never did belong to the company after the bonds were accepted, and the grant of the earnings was in equity a [p. 126] grant of such an interest in the road as was necessary to produce the earnings. Hence, a conveyance of the road afterwards to one with notice was necessarily subject to the prior equitable charge on the road which had been created in favor of the county. But here there was never any grant of earnings, and consequently there was never any grant of an equity in the road. The case stands precisely as it would if, instead of a writ of sequestration, it had been agreed that the Pulaski Chancery Court might, on application of the Treasurer of State, issue an ordinary writ of fieri facias to subject the property of the company to the payment of the amount which was then due. No one could properly claim that in such a case any lien in favor of the State existed which would prevent an alienation of its property by the company before steps were taken to get the execution. The writ of sequestration actually provided for was to issue as an appropriate form of execution to subject any “income and revenue” which the company then had to the payment of its debt then due, and in the income and revenue of the company that might be thus subjected was included “ all moneys coming to the same from the operation of such road,” that is to say, the road in aid of the construction of which the loan of credit was made. But if there were then no moneys coming, or which could be rightfully made to come, to the company from the operation of the road, then there was nothing of that kind of property which could be subjected to the writ. And they neither could come, nor be made to come, to the company unless the original company to which the loan was made and by which the obligation was incurred either owned the road itself or had passed it to another, coupled with a condition that its earnings should be subject to the writ, or something equivalent.

We agree with counsel for the appellants, that if, on an examination of the statutes, read in the light of the circumstances which surrounded the legislature at the time of their enactment, it appeared to have been the intention to charge the road of the company as a road with a liability for the repayment of the loan to be made, it would be the duty of a court of equity to do everything in its power which was [p. 127] necessary to enforce that charge. And it may also be true that the courts ought to construe the statutes liberally with a view to the establishment of such a charge as against the company itself or those claiming under it, because, if the charge was actually created by the statutes, those dealing with the company were bound to take notice of it. But after a careful consideration of the statutes, and construing them liberally in favor of the State, we have been unable to find that any such intention did in fact exist. There was a plain and simple way in which such a lien could be created, and that was by providing in express terms for it. That way had been adopted by the State in a statute passed March 18, 1867, and it was the way usually adopted by other States when granting similar aid to their own companies. The wide departure which Arkansas made in this statute from the accustomed form of proceeding, both at home and elsewhere, is strongly indicative of an intention to waive security any further than it was embraced in the reserved power of sequestration. The constitution of the State gave authority to issue bonds in aid of such works of internal improvement if assented to by the people. If the people gave their consent, then the bonds when issued became a debt of the State, and there was power in the General Assembly, under the constitution of 1868, to levy taxes for their payment, if necessary.