Brief for the Respondent in Opposition — St. Louis & San Francisco R. Co. v. Spiller

lage

Pratrew oad TTTTy peee |

Gretemment of FACTS, 26 ccc cece ceeeneeeeeteeeeeeeees x)

Matters of fact omitted in petitioners’ statement of

S| PPP PEP EELELELELELILIE Lit 5

Pires 5

Meroe 5

Third 6

Pests ccc cccccccccceccveccesscccecsceveseeeeese .

Analyste of petitioners’ statement of alleged boldingse

of United States Cireuit Court of Appeals... ”

Poa 1 ”

Teeat 2 ”

Poet 2 LD

Poa 4 Ww

Preiat > iZ

Pout 6 12

Aaaly eae of pretitiomers reacome relied on for writ

of cottpot att . a

Pom 1 3

Point 2 4

Feit 3 Bs

Pronet 4 16

Poets 5 and 6 iy

Poet 7 i7

Prmmramaney of ened termcwmne telocul cm is

Aawly ete of boiet ie eapqpott of pectition 1”

Aaalyete of epewifie clan: advanced by petitioners

@ Court of Apgewle 19

Aaalyess of petitioners’ etateement ae to alleged ral

mae of the Curt of Apaerale

ii

Analysis of petitioners’ statement of the case in their

brief, which includes specification of assigned errors

RIE a Sick cone GAs Shae ema Boeke bee iekasstes

I. The collection by the carrier of the published

tariff rate (the lawful rate) does not prevent

the shipper from securing reparation for the ex-

action of an unjust and unreasonable rate be-

cause such exaction is ipso facto unlawful both

under section 1 of the act and under the common

DUE onsancuetdweenhs beaNeowhneswkseesedeckses

Il. The kind of identification and tracing of the

fund required as a basis for the enforcement of »

trust ex maleficio. The earmarking doctrine has

DUR SE Noh eek Gn ecan winds beeeseesvocs

Ill. The provisions of the Commerce Act for the

collection of overcharges by action is not incon-

sistent with a subsequent suit to impress a trust

ex maleficio after the award of the Commission

of reparation has been affirmed by a judgment

of the United States Supreme Court..........

(1) Diseussion of alleged conflict of decision in

instant case with prior decisions of United

States Cireuit Court of Appeals, Eighth Cir-

GEES se eccvsseves ebeeenssneeesioe'e pakewe vee

IV. The interest on a reparation judgment runs

from the time of the payment of the excess

charges, as settled by the repeated decisions of

the Interstate Commerce Commission approved

by the United States Supreme Court..........

V. Respondents were entitled to have their claims

allowed as preferential claims............ Saene

Wa, MND. “Dock anh Genebiwleeeecinsetiwsecess

21

»

»

38

65

ili

INDEX TO AUTHORITIES AND CASES.

Act to Regulate Commerce, Section 1.............. 23

Angle v. Chicago, St. Paul & C. Rwy. Co., 151 U.

tt eee ac idabbe cas ans cawie beers eds 36

Arkansas Fuel Co. v. C. M. & St. P. Ry. Co., 16 I. C.

TE sacs Gh edvin ssa seh évsresanssecceee 24

Baer Bros. Mere. Co. v. D. & R. G. R. R. Co., 233 U.

S. 479, 1. ¢. 486-7, 58 Law Ed. 1055, 1. ¢. 1060...... 55

Barksdale et al. v. Finney et al., 14 Grattan 338.... 63

Broom on Legal Maxims (8th Ed., p. 101 et seq.).... 62

Butler v. Western German Bank, 159 Fed. 116, 1. ¢.

Re Se ee ee |) 61

Cattle Raisers Association of Texas v. M. K. & T.

Ry. Co. et al., 11 I. C. C. Rep. 296, 1. c. 352........ 8

Central National Bank of Baltimore v. Connecticut

Mutual Life Insurance Co., 104 U. S. 54, 26 Law

OS RE Sg el er er ree ee 40, 61

C. B. & Q. R. R. Co. v. Merriam and Millard Co.,

cn aa aweheesines esac s0tasesskdsen see 32

City of Litchfield v. Ballou, 114 U. S. 190, 29 Law

MT in Ciavacnecuuec aces ebewewtav + «es 45

Converse v. Sickles, 44 N. Y. Supp. 1080 (affirmed in

I nk una Gw'cu-w aenedbe pASwendhes se 63

Darnell-Taenzer Co, v. Southern Pacific, 221 Fed.,

ECU CiUGlnuauwedewaad drs yeinvissscvevses 27

Dayton-Goose Creek Ry. Co. v. U. S. 263 U. S. 455.. 66

Empire State Surety Co, v. Carroll County, 194 Fed.

33 (U.S. CC. A. Sth Circuit)................ 47

Ex parte Dale & Co., L. R., 11 Ch. D. 773.......... 42

‘ederal State Bank v. McFarlin, 257 Fed. (U. S. C.

es ac claceccecccece 50

Frelinghuysen v. Nugent, 36 Fed. 229, 239.......... 43

Harrigan v. Gilchrist, 99 N. W. 909.............. 63

iv

Hart v. Ten Eyck, 2 Johns. Ch. 62, 1. ¢. 108.......... 43

Louisville & Nashville R. R. Co. v. Sloss-Sheffield

Steel and Iron Co., U. S. S. C. Advance Opinions,

Law Ed. 4, December 15, 1925, page 94, 1. c. 101.... 28

Love v. North American Co., 229 Fed. 103........ 11, 56

Matthews v. Forslund, 112 Mich. 591.............. 63

Mercantile Trust Co. v. St. Louis & San Francisco

Bird Ce, BO FOG MI iaok scien cht inns aadnssccess 36, 63

*Mills v. Lehigh Valley R. R. Co., 238 U.S. 473...... 26

Pennsylvania Railroad Company v. International Coal

Mining Company, 230 U. S. 184................. 29

Peters v. Bain, 133 U. S. 670, 33 L. Ed. 696..........38, 43

Phillips v. Grand Trunk Ry. Co., 236 U.S. 662...... .26, 55

Pomeroy’s Equity Jurisprudence, Vol. I, See. 423.... 62

Richardson v. New Orleans Debenture Redemption

Co., 102 Fed., p. 785 (C. C. A., Sth Cir.)........... 37, 61

Robinson v. Baltimore & Ohio Railroad Company, 222

BY. BB sca hhnnc kes nec ivvesevseateee seins 30

Schuyler v. Littlefield, 232 U. 8S. 707, 58 Law Ed. 806. 47

Scullin Steel Co. v. North American Co., 255 Fed. 945

(0. & CC. C.. Ay Cth Ciremit) oi. ccc cvcccccenenss 50

Smith v. Mottley, 150 Fed. 266 (C. C. A., 6th Circuit),

2 Err tT eer rr ret rr res ere 44

Smith v. Township of Au Gres, 150 Fed. 257, 1. ¢.

260-265, 9 L. R. A. (n. s.) 876, and 80 C. C. A. 145

COR UIE os hoes 50's cae Whi aniceces ies excesses 42

Southern California Ry. Co. v. Rutherford et al. (Cir-

cuit Court, Southern District of California, June

90, 1604), GB Pied, Li 6. TOT. TB. oc cvs cusvscsienss 62

Southern Pacifie Co. v. Bogert, 250 U. S. 482........ 63

Southern Pacifie Company v. Darnell-Taenzer Co., 245

ye errr rry rrr Perey rrr rr ye here 25, 27

Sugar Refining Company v. Fancher, 145 N, Y. 552,

l. ¢. 561

7

Sweet v. The Montpelier Savings Bank & Trust Co.,

ee ee O54 Oy MOR ews ue dad veeres be ew eh 63

Standard Oil Company of Kentucky v. Hawkins (C.

(. A., 7th Cireuit), 74 Fed. 395, 1. ¢. 395-402... .48, 54, 63

Terre Haute and I. R. Co. v. Cox, 102 Fed. Rep. 825

eT SA MS FP i cees pie ves esraenvenaaweees 38

Texas & Pacifie Ry. v. Abilene Cotton Oil Co., 204 U.

DES Neos ceed eh seen bie wud nun eeswaeeduak 27, 29

Titlow v. McCormick, 236 Fed. 209, |. e. 214, 215..... 51

Toledo, A. A. & N. M. Ry. Co. v. Penn. Co. et al.,

Traders’ Bank v. Fraser, 162 Mich. 315, 1. ec. 318..... 63

U. S. National Bank of Centralia v. City of Centralia,

940 Fed. 93 (U. S. C. C. A, 9th Circuit).......... 52

ue Cee ek, FOR, BE 5 aes sh cpee-seadsveuvab ae’ 62

U. S. v. Koenig Coal Co., U. S. S. C. Adv. Opinion,

May 1, 1926, No. 12, p. 488, 1. c. 490............. 49

Weideman v. Newton Arms Co., 271 Fed. 302, 304 (C.

Nee 8 Re er ae re 51

Williams v. Young, 81 Atlantic 1118.............. 63

Winfield v. Alva Security Bank, 232 Fed. 847 (U.S.

arn. i CDG sb wk Wie A ou a hon aw meek ae

rr wo i ns ivaG hwe naw een ee avec ee eiura

IN THE

SUPREME COURT OF THE UNITED STATES,

OCTOBER TERM, 1926,

ST. LOUIS AND SAN FRANCISCO 5

RAILROAD COMPANY and ST.

LOUIS-SAN FRANCISCO RAILWAY

COMPANY,

Petitioners, $ No, 577,

VS.

E. B. SPILLER et al.,

Respondents. |

BRIEF OF RESPONDENTS IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES CIRCUIT

COURT OF APPEALS FOR THE

EIGHTH CIRCUIT.

FOREWORD.

This case involves the right of certain cattle shippers

to receive preferential payment under a reparation judg-

ment rendered by this Court affirming the award of the

Commission, in the ease of Spiller et al. v. Atchison,

Topeka & Santa Fe Railway Company, 253 U. 8. 117,

against nine carriers, eight of whom, presumably, have

paid the judgment of this Court. During the pendency

of these proceedings before the Commission for an award

of reparation, which originated in an advance by certain

carriers of cattle rates in the year 1903 to the extent of

_—,

3 cents a hundred from Southwestern points to various

markets, the St. Louis & San Francisco Railroad Com-

pany, one of the carriers, went into the hands of Re.

ceivers on May 27, 1913, under consent proceedings

(Rec., p. 11). This Railroad Company, its Receivers

and its successor, have, at all times, contested the

right of the shippers (respondents herein) to obtain

reparation for these excess charges. The history of this

litigation is well set out in the opinion of the United

States Cireuit Court of Appeals in this case (Rec., pp.

699 to 704), and shows that, from 1905 to date, respond-

ents have been diligently endeavoring to recover from

these petitioners the excess charges, paid by them and

condemned by the Commission in its reparation orders

and by this Court in its judgment supra.

Petitioners in their application do not contend that, if

the excess charges were unlawfully collected from re-

spondents, the Court of Appeals was in error in applying

the doctrine of trust ex maleficio as to such excess

charges, provided such fund was sufficiently identified

and traced. Their contention is that because the excess

charges were collected under the published tariff they

were, therefore, ‘‘lawfully’’ collected, and for that rea-

son there was no basis for the application of the trust

ex maleficio doctrine. The decision of the Distriet Court

proceeded upon this theory, namely, the alleged lawful

collection of the excess charges, and did not discuss the

question of the identification or tracing of the funds (Ree.,

a ‘ves

pp. 199 to 222, opinion of District Court). Previous to

this opinion, the same Court had written a memorandum

opinion granting leave to the respondents to intervene

in the receivership suit of petitioners (Ree., pp. 57-58),

which intervention asserted the right to preferential pay-

ment by reason of the trust ex maleficio doctrine, and

at that time the defense, namely, the denial of the ap-

plication of the trust ex maleficio doctrine by reason of

the published rate, was urged and considered by the

Court; the Court, however, wrote the memorandum opin-

ion granting leave to file intervening petitions (Ree., pp.

57-58) which is as follows:

‘*Filed February 12, 1921.

‘Sanborn, Cireuit Judge:

‘‘In view of the opinion in Love v. North American

Company, 229 Fed. 123, and of the averments of the

applicants, that on account of the necessity of first

establishing their claims by the findings and orders

of the Interstate Commerce Commission they could

not have enforced them in the foreclosure proceed-

ings at any time before February 1, 1916, the limit

of the time fixed for presenting claims by the or-

ders in those proceedings; that they have been dili-

gently establishing these claims by necessary litiga-

tion before the Interstate Commerce Commission,

the Distriet Court and the Supreme Court, and that

they notified the attorneys for the purchasers at the

foreclosure sale before they paid for the purchase of

their claims and their intention to press them, the

Court is not persuaded that they are barred in this

ae ee

court of equity from a presentation and considera-

tion of their claims either by the orders limiting the

time within which claims were to be presented in the

foreclosure proceedings or by the inexcusable laches

of the applicants.’’

It is obvious that, if the published rate theory, now and

then urged by Petitioners, precluded Respondents from

establishing their claim on the basis of a trust ex male-

ficio, then the application, at that time, should have been

denied, because that objection was continuous and, if

valid, was as fatal when the interventions were allowed,

as it was when the District Court’s decision was ren-

dered. If that theory is sound, then there could be no

reparation under the Commerce Act as developed, infra.

a

STATEMENT OF FACTS.

The statement of facts in the petition under paragraph

I, ‘Statement of Matter Involved,’’ pp. 2 to 10, both in-

clusive, omits some important facts, found by the Special

Master and affirmed by the United States Cireuit Court of

Appeals in its opinion in the instant case. (Report of

Special Master, Ree., pp. 123-178, and opinion of the

United States Cireuit Court of Appeals, Rec., pp. 699-

722.)

These omitted matters are as follows:

First. That under the accepted plan of reorganization

the stockholders of the St. Louis & San Francisco Rail-

road Company (hereafter called the Frisco Company), put

into receivership by consent decree, were to receive, and

did receive, more than forty-five million dollars of the

stock of the new company (St. Louis-San Francisco Rail-

way Company), as representing their equity in the prop-

erty, without the payment of anything therefor. This is

found to be a fact by the decision of the United States

Cireuit Court of Appeals (Rec., p. 702).

Second. That the intervenors received no offer of any

kind for their claims in the reorganization, though offers

were made to all other creditors, both secured and unse-

cured, the reason, no doubt, being, as stated in the opinion

of the United States Cireuit Court of Appeals that the

proceedings to obtain the award and enforce it was:

**Againet the cometagt cqpypeition of the selbend

company, ite Reewivere amd the fallway come

thelr claime had bere ectabicded Ge DMs

Cornet ated im the Sequtomne Court of the Dante Saran

(Ree, p. P21)

Ard the Court aleo cand.

'Tivtemmets alll teem cient Chee altthestiers ie Bent the heed

toed commen bee Mew wcewe soted Ube tiellway ctennngpiens

fought these deanands of interweneee The exllnuy

Commpany, Utoongh ite attedweyea mendbarted Whe nero

im the Sepureeme Comet of the Dented Siteten BF wit

eewen that thee iedewwemscnbe were elbvened aie peeberierenitl

amd comesetemdtly diligend we bitagucnte wend We > Bin,

p. 707)

TE wrod Ber aeemeifncd ly dtaromeietemd be atetdke get eiftos

intertemore whew heut claims wees Bernenage stent yanettonny’ bs

fared pertenetiemtly cremated

Third. lt ie cotablicked by the reed ewe Gat, OP

ALL TIMES AFTER THE EXCESSIVE PampoET

CHARGES WERE COLLECTED AND DOWR To Tee

RECEIVERSHIP, THE BAILSOAD COMPANY Bad

IN ITS TREASURY MONEY I* EkOESE OF THe

CLAIMED OVERCHARGES AND THAT IT TERED

Opinien of the T. & Clr, Oh of Agee, & Pree) Bit

cape care )

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Reger SET) te alle arene cue Te le ineeniaie

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Se

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‘Die Spee! Wines cites Giete fe. ge OP) teem tte

HORE Hem Me Ieee ieee Catan eg

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Sete ER el) cn ee Se

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S aielahaiesbelaiheeiel saben i. a

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Se eee ce ee

OH Che lines oP doe onetM | ffm gi,

WE Hite aHONIE Bneitigl Gee die daemons ge

oem acet mnantied Arig: Ae gel WR catenmieh Gree ee,

ay

eal

Fourth. The Special Master in his report (Ree., p. 162)

finds that the Interstate Commerce Commission stated its

conclusion in its opinion in the case of Cattle Raisers

Association of Texas v. M. K. & T. Ry. Co. et al, 11

I. C. C. Rep. 296, 1. ¢. 352, as follows:

‘*Tt has been found that the advances made during

the year 1903, as shown by the appendix, were unjust

and unreasonable, and that the present rates are un-

just and unreasenable by the amount of said ad-

vanees. The deiendants should, therefore, be required

to cease and desist from the maintenance of these

ae?" *

‘*All questions of reparation are reserved.’’

Subsequently, upon petition of the respondents to re-

open this matter before the Commission, on April 14,

1908 (13 I. C. C. Rep. 418), the Commission reaffirmed its

position of August 16, 1905, and again pronounced the

rates excessive and unreasonable by the amount of the

said advances (Opinion of the U. S. Cir. Ct. of Apps,

Ree., pp. 699-700), and entered an order to that effect,

which shows that the Commission, despite the fact that

these rates were published, continuously condemned them

as unjust and unreasonable to the extent of the 3-cents-

per-hundredweight advance, which the Commission by its

reparation award directed the carriers to pay.

This brings us, therefore, to a consideration of the

grounds advanced in the petition for the issuance of a

writ of certiorari in this case, and to the arguments and

authorities offered in support thereof,

ee en

STATEMENT OF ALLEGED HOLDINGS OF UNITED

STATES CIRCUIT COURT OF APPEALS.

(Petition, p. 7.)

On pages 7 to 10 of the petition are set out the alleged

holdings of the Cireuit Court of Appeals in the instant

ease, Which respondents assert require some correction.

These holdings are set out under six heads.

Point 1 asserts that the Court held that intervenors are

not barred from presenting their claims by laches, either

(a) by reason of their delay, or

(b) by reason of failing to file their cl: ims, as required

by the interlocutory decree entered in the receivership

ease.

Point 2 states the holding of the Court in regard to the

construction of the terms of the interlocutory and final

decrees and the order of confirmation of sale, and the hold-

ing that intervenors were entitled to present their claims,

after the expiration of the time limited thereby.

Since in the brief no attempt was made to discuss either

the prope ‘ion of laches or the effect of the construction

of the terms of said decrees and order of confirmation, it

is safe to assume that these two points have been aban-

doned by petitioners. The reasoning of the Court in its

opinion on these two points (Rec., pp. 704-710) as to

laches, and (Ree., pp. 710-714) as to the construction of

aiitiiun

said decrees, is so conclusive that we merely refer the

Court to the reasoning of the opinion on these two points

to show that there is no merit in them.

Point 3, page \ contains a misstatement of the Court's

holding in regara to the action of the Commission, as

above pointed out, because it asserts that the Commission

afterwards found the excess rate charges to be unjust and

unreasonable and hence unlawful, and that the finding of

the Court that the railroad company became a trustee

ex maleficio for the benefit of intervenors of such money

so collected, was based upon the alleged said subsequent

finding of the Commission.

On the contrary, the Court specifically held, as above

stated, that, since the excess charges were unjust and un-

reasonable, they were, ipso facto, unlawful when collected,

under section 1 of the act, that they were exacted under

duress, under the compulsion of the statute, section 6, re-

quiring the published tariff rate, and that said charges

were condemned by the Commission as unjust and un-

reasonable by its decisions above referred to, both prior

to their collection and subsequent thereto (Ree., pp. 715-

716, and Ree., pp. 699-700).

Peint 4 also contains an omission of facts found as the

basis of the Court’s holding. It omits any reference what-

ever to the fact, above set out, as to the $300,000.00

always carried by the railroad company in its treasury

and paid over to the Receivers and held by them, and the

=)

$5,000,000.00 sum paid over by the Receivers to the re-

organized railway company. It also omits the fact that

there were no other claimants to this fund except in-

tervenors and a man named Love (Love v. North Ameri-

can Co., 229 Fed. 103), whose claim was paid under the

judgment of the United States Cireuit Court of Appeals

of the Kighth Cireuit (Ree., pp. 718-721; report of Special

Master, pp. 150-151). And that after the payment of

such claim there was still in the treasary of the railroad

company at all times an amount of money largely in ex-

cess'of claims of intesvenors, which was turned over to

the Receivers, as above stated; it also omits the further

fact found by the Court that no offer of any kind was

made to the intervenors, although offers were made to

all other creditors of the Frisco Company, both secured

and unsecured, and that the railroad company, prior to

receivership, during receivership and subsequent thereto,

and its successor at all times consisten.ly opposed the

claims of intervenors; it also omits the fact that under

the decree requiring the Receivers to list all claims as-

serted against the railroad company or i. Receivers the

Receivers failed and refused to list intervenors’ claims. The

petition makes no reference to the service of the Commis-

sion’s reparation order upon the railroad company or its

Receivers, which is required by the Commerce Act, and

presumably was served. This point also omits the fact

that the stockholders of the old railroad company re-

—

ceived over $45,000,000.00 of common stock in the new

company at par without paying one cent therefor (Lec.,

pp. 702-721; report of Special Master, p. 147).

Point 5 states that the Court held it was not inconsist-

ent to file a bill against the railroad company as trustee

ex maleficio for the excess freight charges when, prior

thereto, an action at law for damages against the carrier,

based on an order of reparation of the Commission, had

been filed, and that such action was not such an election

of remedies as defeated the right of intervenors to charge

the railroad company as trustee ex maleficio, after the

reparation claims had been reduced to judgment in the

United States Supreme Court.

Under section 16 of the Act, the petition is upon the

order, attaching it, and it is prima facie evidence, and

the section further provides that: ‘‘A petition for the

enforcement of an order for the payment of money shall

be filed in the District Court * * * within one year * * *.”

Thus, the suit and judgment were, upon the orders of the

Commission, directing the payment of the unlawful rates

collected.

Point 6, page 10, states the holding of the Court in re-

gard to the preferential claims of intervenors, held by

the Court to be superior to the rights of other creditors,

including bondholders, and adjudged to be prior m lien

and superior in equity to the refunding mortgage and

general lien mortgage of the St. Louis & San Francisco

=

Railroad Company and directed to be enforced against

the property conveyed to the St. Louis-San Francisco

Railway Company as assignee of the purchasers at the

foreclosure sale had in the consolidated receivership ease,

and that said claims should he collected with interest

from August, 1, 1916. This point likewise omits any ref-

erence to the fact, found by the Court, that the Railroad

Company, its Receivers and successors, at all times, re-

tained the money of the shippers and persistently con-

tested their claims.

Petitioners, on pages 10, 11 and and 12, ‘“‘REASONS

RELIED ON FOR ALLOWANCE OF WRIT OF CER-

TIORARI,”’ set out seven reasons for the purpose of

bringing this application within the statute governing

the issuance of writs of certiorari by this Court, namely,

_ See. 240 (a) of the Judicial Code, as amended Feb-

ruary 13, 1925 (Chap. 229, See. 1, 43 Stat. 938; See.

1217, U. S. Comp. Stat. Cum. Supp. 1925), and Rule

39 of this Court, adopted June 8, 1925, effective July

1, 1925, 69 Law Ed. U.S. Sup. Ct. Repts. APPENDIX,

pp. 1192-1193, amended June 7, 1926, West Reporter,

U. S. Ad. Opinions, July 1, 1926.

Analyzing these said reasons, it will be observed:

That Point 1 is based upon the alleged subsequent find-

ing of the Commission as to the rate being unjust and un-

reasonable, and avers that, when the rates were collected,

they were the regular and legally established rates, and

further avers that the Court in holding that such rates

nition

were wrongfully and unlawfully collected, had decided

a federal question in a way in conflict with the applicable

decisions of this Court.

It will be observed, as pointed out, supra, that the

claim that the opinion was based upon said alleged ‘‘sub-

sequent finding’’ is absolutely contrary to the holding of

the Court. As to the alleged federal question, namely, that

the rate was lawfully collected because in accordance with

the published tariff, it will be pointed out, infra, in the

argument that the holdings of this Court are to the exact

eontrary.

Point 2, page 10, is based upon the holding of the Court

as to the trust ex meleficio doctrine arising from the col-

lection of rates, thereafter found by the Commission to be

unjust and unreasonable (the legally published rates at

the time of collection), and avers that the Court had de-

cided an important question of general law (the trust ex

maleficio doctrine) in a way untenable and in conflict with

the weight of authority, and has decided an important

question of federal law (the collection of unjust and un-

reasonable rates, despite the published tariff) which has

not been, but should be, settled by this Court.

It will be observed that the same erroneous premise as

to said alleged subsequent finding is contained in point 2

as in point 1, and it will also be observed that it is not

denied that, if the excess charges were unlawful, because

unjust and unreasonable, as found by the Commission (its

— oo

award affirmed by the judgment of this Court) and con-

demned by section 1 of the act, then the proper basis ex-

ists for the application of the trust ex maleficio doctrine.

Point 3, pages 10 and 11, relates to the holding of the

Court to the effect that it was not necessary for intervenors

to prove that the identical money that they had paid had

been placed in a separate account, or to trace the identical

fund in the hands of the carrier, in order to become pre-

ferred creditors, and stated that in so holding the Court

had decided a question of general law in a way untenable

and in conflict with the weight of authorities, and partic-

ularly in conflict with decisions of other Cireuit Courts of

Appeal on the same matter.

This is an erroneous statement of the holding of the

Court, which is in harmony with the great weight of au-

thority on this point, including the decisions of this

Court, and is a correct application of the law to the facts

found by the Court in its opinion. We have pointed out,

supra, the exact facts upon which this holding of the

Court was predicated, all of which are omitted from the

statement of facts of petitioners and from their argu-

ment. There is not the slightest reference to the

$300,000.00 held at all times by the old railroad com-

pany in its treasury and paid over by it to the Receivers

and the sum of over $5,000,000.00 paid by the Receivers

to the new railway company.

This is pointed out, supra.

=

Point 4, page 11, relates to the question of remedy and

avers that the Court, in holding that the provision in the

Commerce Act for enforcing reparation is not exclusive

and did not preclude a bill to charge the railroad company

as trustee ex maleficio, decided an important question of

federal law, which has not been, but should be, settled by

this Court.

This matter is considered very fully by the Court in its

opinion (Ree., pp. 718-719), where the Court cites the fa-

mous Abilene Cotton Oil Company case, 204 U. S. 426-446,

discussing the provision in section 22 of the act providing:

‘‘And nothing in this act contained shall in any way

abridge or alter the remedies now existing at common law

or by statute, but the provisions of this act are in addi-

tion to such remedies.”’

The Court of Appeals points out that the right to im-

press a trust upon the fund must necessarily follow the

establishment of the reparation claimed and that there

could be no inconsistency nor could there be an election

of remedies under the circumstances and that the inter-

vention of respondents was in aid of the judgment of this

Court, affirming the Commission’s award of reparation, to

secure the payment thereof. No execution could issue

upon the judgment of this Court because of the status of

the property transferred under the receivership foreclos-

ure. Therefore, unless the bill to impress the trust could

be maintained, respondents, fortified with the judgment of

a= 17

this Court, would have been without remedy. The de-

cision of the Court of Appeals is an exact application of

the settled law to the facts of this case, in harmony with

the Act and decisions of this Court.

Point 5, as to laches, page 11, and Point 6, as to the

meaning of the decrees in the reecivership suit, are not

argued in the brief and are, therefore, we assume, not

relied on.

As pointed out supra, these two points are so completely

answered by the opinion of the United States Circuit

Court of Appeals that they have been abandoned.

Point 7, page 12, relates to the holding of the Court that

interveners have established preferential claims, superior

to the rights of other creditors, to the extent of the judg-

ment obtained by them against the Railroad Company in

the District Court for the Western District of Missouri,

with interest thereon from August Ist, 1916, and avers

that this holding decided an important question of general

law in a way untenable and in conflict with the weight of

authority.

The holding of the Court on this point harmonizes with

the great weight of authority, and especially with the de-

cisions of this Court, as pointed out, infra, in the argu-

ment.

The rights of Respondents, established by the judgment

of this Court, would be as ‘‘idle as a painted ship upon a

painted ocean,’’ if not made effective by the decree herein

entered.

— =

No one who has any just claim can be hurt by this de-

cree as pointed out by the Court in its opinion (Ree., p.

721):

‘‘Other creditors, bondholders, mortgagees, stock-

holders acquired no interest of any kind in these ex-

cessive and unjust charges. Preferential allowance of

the claims arising therefrom takes nothing from them

to which they are entitled. The Railway Company

received the property of the Railroad Company sub-

ject to these claims if allowed by the Court, as we

have before pointed out, and hence suffers no wrong.

Every consideration of equity and fair dealing de-

mands that these claims should not be lost in a

labyrinth of technicalities.”’

The petition concludes with the averment that the de-

cree of the Cirenit Court of Appeals is erroneous and that

this case should be certified; prayer accordingly.

Summarizing the seven above points, it will be observed

that it is asserted that the Court decided in Point 1 a ques-

tion of Federal Law in conflict with the decisions of this

Court. In Point 2, a question of general law in conflict

with the weight of authority and a question of Federal

Law which has not been but should be settled by this

Court; in Point 3 a question of general law in conflict with

the weight of authority; in Point 4, a question of Federal

Law, which has not been but should be settled by this

Court: and in Point 7, a question of general law, in con-

flict with the weight of authority.

_—

Not a single reason has been adduced for granting the

writ of certiorari in this ease. The motive for this appli-

eation is delay and more delay, and this is made manifest

by the history of this controversy now drawn out to the

extent of twenty-one years—to use Lord Thurlow’s vivid

expression, ‘‘to pluck the last hair from the tail of pro-

crastination.’’

We now pass to the ‘‘Brief in Support of Petition.’’

After referring to the two cases below, pages 15 and 16,

District Court opinion, and U. S. C. C. A. opinion, peti-

tioners set out the ‘‘Grounds on which jurisdiction of this

Court is invoked.”’

Under paragraph 2 of this head are set out ‘‘The spe-

cific claims advanced and rulings made in the lower court

which are relied upon as a basis of this Court’s jurisdic-

tion.”’ Then under paragraphs (a) to (f), both inclusive,

pages 16 and 17, are set out the specific claims advanced

by petitioners in the Court of Appeals.

The two first points, (a) and (b), viz., laches and mean-

ing of decree, have been abandoned in the brief. The next

points are: (c) Denial that the Railroad Company became

trustee ex maleficio by collecting the ‘‘freight charged

at the rates then legally in effect’’; (d) denial that inter-

vener could invoke the trust-fund doctrine; (e) the asser-

tion that said trust-fund theory was inconsistent with

and abrogated by the Commerce Act, and by the exclusive

remedies for collection by reparation prescribed by that

act; (f) that interveners’ claims were not a preferred debt

_

of the railroad company, and, if allowable at all, could

only be established as general unsecured creditors’ claims,

On page 17 of petitioners’ brief, paragraphs 1 to 6, both

inclusive, are set out the alleged rulings of the Circuit

Court of Appeals.

Paragraphs 1, laches, and 2, meaning of the decree,

are not argued in the brief, and are therefore presumably

abandoned. Paragraphs 3 to 6, both inclusive, are sub-

stantially the same as paragraphs 3 to 6, pages 9 and 10

of the petition, analyzed and discussed, supra, and con-

tain the same errors of fact, viz., omissions of essential

facts above pointed out, and constitute, we believe, a very

distorted statement of the holdings of the Court of Ap-

peals. Nothing is easier than to convict a court of error

by asserting an abstract holding and not giving the essen-

tial facts upon which that holding is based. It is easy to

knock down a straw man.

On page 18 of the brief is set out, under paragraph 3,

the statutory provision under which this Court’s juris-

diction is invoked, Section 248 of the Judicial Code, as

amended February 13, 1925, and under paragraph 4, page

18, eases believed to sustain the jurisdiction of this Court,

four in number, all of which will be discussed, infra, un-

der the Argument.

—

ini Go

“STATEMENT OF THE CASE”’ (Page 19) IN BRIEF.

The statement adopts the statement in the petition.

It is followed by ‘SPECIFICATION OF ASSIGNED

ERRORS INTENDED TO BE URGED,”’ page 19.

The specification of errors contains eight grounds.

Paragraphs 5, as to laches, and 6, as to the meaning of the

decree, are presumably abandoned in the brief, as pointed

out supra, and will not be argued.

Points 1, 2, 3 and 4 are an abbreviation of points 1, 2, 3

and 4 under the head, ‘‘REASONS RELIED ON FOR

ALLOWANCE OF THE WRIT OF CERTIORARI,”’

pages 10 and 11 of the petition, all of which have been

heretofore discussed, and contain even in a larger degree

omissions of important matters of fact, found in the opin-

ion of the U. S. C. C. A., and pointed out supra, and

are all predicated upon misconceptions of the holdings of

the court below.

Points 7 and 8, page 19, are the same as point 7, page

12, of the petition, under the head, ‘‘ REASONS RELIED

ON FOR ALLOWANCE OF THE WRIT OF CERTI-

ORARI.”’

Following the Specification of Errors is the Argument,

under five heads, pages 20 to 35, both inclusive.

i

vi G ies

ARGUMENT.

i.

In the Brief of the argument counsel for Petitioners, in

substance, makes the same points that are set out in

‘‘Reasons Relied on for Allowance of the Writ of Cer-

tiorari.’’? In the first point they contend that the decision

of the Circuit Court of Appeals held that the collection

of legally-established rates becomes wrongful and un-

lawful because such rates are subsequently found by the

Commission to be unjust and unreasonable and _ such

holding is in conflict with the applicable decisions of this

Court.

This is an erroneous statement of the decision and

holding of the Cireuit Court of Appeals. The Circuit

Court of Appeals did not hold that the rates became

wrongful and unlawful because such rates were subse-

quently found by the Commission to be unjust and un-

reasonable. The Cireuit Court of Appeals decided and

held that these rates to the extent of 3 cents a hundred

pounds were wrongful and unlawful, because they were

unjust and unreasonable at the time they were collected.

The Cirenit Court of Appeals did not hold that the rates

became unlawful because the Commission found them

unjust and unreasonable either before or after they were

collected, but because they were unjust and unreasonable.

a.) 1: pe

The Cireuit Court of Appeals held that they were ipso

facto unlawful, because to the extent that they were un-

just and unreasonable they were unlawful both at common

law and under section 1 of the act itself.

The actual holding and decision cf the Cireuit Court of

Appeals is not in conflict with the decisions of this Court,

but is in harmony with the decisions of this Court and

with the Act to Regulate Commerce itself.

Section 6 of the act was enacted to insure uniformity

and to prevent discrimination of all kind, and, of course,

we concede that, so long as the rate remains a published

rate, the carrier must collect it and the shipper must

pay it. But, because this is true, it by no means follows

that a published unjust and unreasonable rate is a lawful

rate.

Section 1 of the Act (effective in 1905) provided:

‘*All charges made for any service rendered or to

be rendered in the transportation of passengers or

property, as aforesaid, or in connection therewith,

or for the receiving, delivering and handling of such

property shall be reasonable and just, and every

unjust and unreasonable charge for such service is

prohibited and declared to be unlawful’? which was

declaratory of the common law. (Bold-face type ours.)

In all the earlier cases for reparation before the Inter-

state Commerce Commission the carriers made the con-

tention that reparation could not be ordered because the

a Ee

carrier, when it collected the published rate, was collect-

ing the legal rate, and, therefore, had a right to retain

everything it collected under the published tariff, because

when it collected the legal rate it obtained complete title

to the entire amount collected.

It will be interesting to note how the Interstate Com-

merce Commission disposed of that contention. In the

case of Arkansas Fuel Co. v. C. M. & St. P. Ry. Co., 16

I. C. C. Reports, p. 97, the Commission said:

‘‘It has been said that the word ‘legal’ looks more

to the letter and ‘lawful’ to the spirit of the law; that

‘legal’ imports rather than the forms of law are ob-

served and the rules prescribed obeyed, and the word

‘lawful’ that the act is rightful in substance. The

two words may aptly be used as illustrative of the

distinction that we have attempted to draw in the

cases cited. It is provided in section 6 of the act

that no earrier shall collect or receive a greater or

less compensation than the rates specified in the

tariff in effect at the time of the movement. Other

provisions of law make it a misdemeanor for the car-

rier to depart from the published rate. In dealing

with shippers the earrier is therefore required to

conform the freight charges actually collected to the

amount fixed in its published tariffs. In that sense

the published rate in effect at the time of the move-

ment is, therefore, the legal rate. It is what the let-

ter of the law requires the shipper to pay and the

earrier to collect.

‘‘But the first section of the act, following the rule

of the common law, declares that all charges for serv-

— a

ices rendered by a carrier in the transportation of

passengers or property shall be reasonable and just.

It also declares every unjust and unreasonable charge

for such a service to be unlawful. In publishing a

rate or schedule of rates the carrier therefore acts

under this admonition of the statute. * * * While

it may be, and indeed is, the legal rate—the rate that

must be paid by the shipper and collected by the ear-

rier because it is the published rate—the mere publi-

cation cannot make a rate lawful that is unreason-

able and excessive.”’

The underlying and basic idea of reparation is that the

collection of an unjust and unreasonable rate is unlawful.

If it were not unlawful, then the carrier, when it collected

it, would obtain both the legal and equitable title to the

unjust and unreasonable rate and could hold it as against

the shipper and as against the world.

This holding of the Circuit Court of Appeals, instead

of being in conflict with the decisions of this Court, has

been sustained many times by this Court. In the case of

Southern Pacifie Company v. Darnell-Taenzer Co., 245

U.S. 531, the excessive freight charge had been passed

on by the shipper to the conswmer, and it was contended

by the rrilroad company that the shipper had suffered no

loss. This Court said:

‘The plaintiffs suffered losses to the amount of the

verdict when they paid. Their claim accrued at once

in the theory of the law and it does not inquire into

later events. * * * THE CARRIER OUGHT NOT

=

TO BE ALLOWED TO RETAIN HIS ILLEGAL

PROFIT, and the only one who ean take it from him

is the one that alone was in relation with him, and

from whom the carrier took the sum.’’ (Black caps

ours.)

If the exactions had not been unlawful, the claims could

not have accrued at the time the exactions were made.

The carrier receives the ‘‘illegal profit’? when the ex-

action is made.

In the ease of Mills v. Lehigh Valley R. R. Co., 238

U. S. 473, the Interstate Commerce Commission found

that the shipper was entitled to the excess charges as

reparation. It was contended by the railroad company

in this case that this was not a finding that the shipper

had been damaged. The Court said on page 481 of the

opinion:

‘‘What the Commission decided was that the ship-

pers were entitled to reparation; that is, to be made

whole, to be compensated for a loss because of an

illegal and unreasonable exaction * * *.”’

In the case of Phillips v. Grand Trunk Ry. Co., 256

U. S. 662, a recovery was denied because suit had not

been filed within the time fixed by the statute. The Court

said, on pages 665-6:

‘*But while every person who had paid the rate

could take advantage of the finding that the advance

was unreasonable, he was obliged to assert his claim

—< po

within the time fixed by law. When the overcharge

was collected a cause of action at once arose and the

shipper at once had the right to file a complaint or

to intervene in proceedings instituted by others.’’

The cause of action at once arose because the exaction

was unlawful, at the time it was made.

The Cireuit Court of Appeals, in the case of Darnell-

Taenzer Co. v. Southern Pacific, 221 Fed., 1. c. 894, which

came to this Court and was decided in Southern Pacific

Company v. Darnell-Taenzer Co., 245 U. S., supra, said:

‘‘Cases of excessive and unreasonable rates differ

from discriminating charges in the fact that in the

latter there is nothing unlawful in the charging and

receiving of the higher or published rate on which the

demand for reparation is based; the unlawfulness is

in giving a lower rate to someone else. On the other

hand, the charging of an excessive and unreasonable

rate is ipso facto unlawful.’’

In the case of Texas & Pacific Ry. v. Abilene Cotton

Oil Co., 204 U. S. 426, the Court said:

‘‘Although an established schedule of rates may

have been altered by a carrier voluntarily or as the

result of the enforcement of an order of the Commis-

sion to desist from violating the law, rendered in ac-

cordance with the provisions of the statute, it may

not be doubted that the power of the Commission

would nevertheless extend to hearing legal complaints

for awarding reparation to individuals for wrongs

—

unlawfully suffered from the application of the un-

reasonable schedule during the period when such

schedule was in force.’’

Of course, a wrong cannot be unlawfully suffered, if the

act which causes the wrong is a lawful act.

This Court, in the recent case of Louisville & Nashville

R. R. Co. v. Sloss-Sheffield Steel and Iron Co., U. 8. S.C.

Advance Opinions, Law Ed. 4, December 15, 1925, page

94, 1. ec. 101, held ‘‘the tariff rate, although unlawful be-

cause excessive, was, as between the shipper and carrier,

the only legal rate.’’ (Bold-face type ours.)

All of these cases of this Court were reparation cases

and all of them hold that the exaction of an unjust and

unreasonable rate is an unlawful exaction and unlawful at

the time it is made. As the Master well said in his re-

port (Ree., p. 165):

‘‘Tt can make no difference that in the interest of

uniformity a shipper, before he can bring his action

to recover, must secure a finding of the extent to

which the rate is unreasonable and unjust. The basic

act itself is unlawful. The prescribed procedural

steps cannot affect the situation.’’

The procedural steps provided to determine the extent

to which a rate was unjust and unreasonable were pre-

scribed by Congress to insure uniformity.

The cases from this Court, cited by Petitioners, in sup-

port of their proposition, are not in conflict with the

— ro

holding and decision of the Court of Appeals on this

point, as a brief analysis will demonstrate.

In the case of Pennsylvania Railroad Company v. Inter-

national Coal Mining Company, 230 U. 8. 184, the shipper

was attempting to recover, first, the amount of the differ-

ence between the rebate allowed to the plaintiff and the

amount of the rebate allowed to another shipper; and,

second, the difference between the tariff, or published rate,

and the tariff, or published rate, less the rebate made to

another shipper. The Court held that as to the first at-

tempted recovery the parties were particeps criminis and

that they would be left where they were. On the second

proposition the Court held that the amount of the differ-

ence between the tariff rate and the tariff rate, less the

rebate allowed the other shipper, was not evidence of the

amount of the plaintiff’s loss, and that, since he had not

made any other proof of loss, there’could be no recovery.

The question as to whether or not a published, unjust and

unreasonable rate was unlawful at the time of its collee-

tion was not before the Court at all, and the Court simply

announced the familiar doctrine that a published rate was

the legal rate in the sense that it was the only rate that

could be charged by the earrier and collected from the

shipper.

As we have already seen, the case of Texas and Pacific

Ry. v. Abilene Cotton Oil Co., 204 U. 8S. 426, where it con-

siders the point involved here, ruled that the application

of unreasonable schedules during the period, when such

—

schedule was in force, afforded the shipper grounds for

legal complaint and a recovery for wrongs unlawfully

suffered from such application.

However, the real point decided in the Abilene Cot-

ton Oil Company case was that, in order not to destroy

one of the objects of the Act to Regulate Commerce,

which was to secure uniformity and to prevent discrimina-

tion of all kinds, the shipper must first go to the Inter-

state Commerce Commission to have the extent to which

any given rate is unreasonable, established.

The case of Robinson v. Baltimore & Ohio Railroad

Company, 222 U. S. 506, involved a question of whether

a shipper could sue the carrier direct to recover the ex-

cess which he claimed to have paid under a rate at-

tacked as unjustly discriminatory. The Court quoted at

length (1. ¢. 510-511) the famous Abilene Cotton Oil case,

supra, holding that such right on the part of the shipper

would be inconsistent with the purpose of the act and

followed the rule there announced. The quotation from

this case in Petitioners’ brief (p. 22) stops at a very con-

venient point. They have put a period after the word

‘‘effect.”’ In the opinion a comma follows the word

‘‘effect,’’ and the rest of the sentence is as follows:

“* * *

invested the Interstate Commerce Com-

mission with authority to receive complaints against

rates so established, and to inquire and find whether

they were in anywise violative of the prohibitions of

the act, and, if so, what, if any, injury had _ been

=

done thereby to the person complaining or to others,

and further authorized the Commission to direct the

carrier to desist from any violation found to exist,

and to make reparation for any injury found to have

been done. Provision was also made for the en-

forcement of the order for reparation by an action in

the Cireuit Court of the United States if the carrier

failed to comply with it.’’

Of course, this decision is not in conflict with the de-

cision of the Cirenit Court of Appeals. It is in harmony

with that decision and the decisions, supra, of this

Court.

Following this quotation in their brief (p. 22), counsel

for Petitioners make an odd assertion. They say: ‘‘No

order was or could have been entered by the Commission,

in August, 1925, requiring a railroad company to cease

and desist from collecting the rates held to be unreason-

able for the future.’’ It is true that no order was made

requiring the carriers in this case to cease and desist.

The finding of the Commission was that an order should

be made requiring them to cease and desist from col-

lecting the rate to the extent which the Commission ha

found it to be unreasonable. Undoubtedly it did not

make an order reguiring the carrier to cease and desis’

from collecting the unjust and unreasonable rate because

of the filing of the petition by the shippers for additional

findings, but no one ever contended that the Commis-

sion did not, at that time, have power to make such an

order, although it is true that’ the Commission did not,

— 32 —

at that time, have the right to fix rates, because it only

got that right under the Hepburn Act, which went into

effect, August 29, 1906.

The opinion of Judge Sanborn (288 Fed. 612, 1. «.

629-30) is, of course, no authority for the proposition that

the decision of the Circuit Court of Appeals reversing

Judge Sanborn is in conflict with the decisions of this

Court. Judge Sanborn’s decision is clearly in conflict

with the decisions of this Court.

This opinion undertakes to create an impossible con-

flict between Sections 1 and 6 of the Act, and then de-

clares that ‘‘such an absurdity ought to be rejected.”’ As

often construed by this Court in cases, cited herein, there

is no conflict between requiring the carrier to collect the

published tariff rate and the right of the shipper to repa-

ration for an unjust and unreasonable charge.

There is no real conflict between the decision of the

Court of Appeals in this case and its decision in the case

of C. B. & Q. R. R. Co. v. Merriam and Millard Co., 297

Fed. 1. In the last cited case the question involved was

whether or not reparation could be recovered, in advance

of a finding, or without a previous determination by the

Interstate Commerce Commission, of the extent to which

a rate was unjust and unreasonable. In that case the In-

terstate Commerce Commission had found a published rate

to be unjust and unreasonable for the future and fixed a

rate for the future which would be just and reasonable.

There had been no determination by the Interstate Com-

—

merce Commission that the published rate would be unjust

and unreasonable, up to the time that the new rate under

the order of the Commission was to go into effect. The

Court simply follows the Abilene Cotton Oil Co. case and

held that, until the Commission had declared the existence

of a right to reparation, an action in the courts to recover

reparation could not be maintained. :

In this point and in the Specification of Errors and in

the ‘‘Reasons relied on for the allowance of the writ,”’

petitioners’ counsel persistently refer to the finding of the

Commission made ‘‘subsequently’’ to the collection of

these unlawful exactions. As a matter of fact, the Com-

mission, before any of these unlawful exactions were made,

to wit, August 16, 1905, had found these rates to be unjust

and unreasonable and, therefore, unlawful, so that in this

ease the carriers continued to collect the unjust and un-

reasonable rate not only in the teeth of section 1 of the

statute, declaring their action in that regard unlawful,

but in the teeth of a positive and unequivocal finding of

the Interstate Commerce Commission.

II.

In the second point of their brief of the argument coun-

sel for the Petitioners combine the second and third

“Reasons Relied on for Allowance of Writ of Certiorari’’

and the second and third points in their Specification of

Errors. They say in the second point that the decision

of the Circuit Court of Appeals that the railroad com-

ae ee

pany became chargeable as trustee ex maleficio of the

excessive charges collected by it, and that the trust fund

doctrine could be invoked by the Respondents is erro.

neous and in conflict with the decisions of this Court,

with the decisions of the same Circuit Court of Appeals

and with the decisions of other Cireuit Courts of Appeal

on the same matter.

It should be borne in mind that this contest is really

between the shippers on the one side and the railway

company on the other. The stockholders of the old rail.

road company, under the findings of the Master (Ree,

p. 147) and under the findings of the Circuit Court of

Appeals (Rec., p. 702) received over $45,000,000.00 par

value of the stock of the new railway company without

paying anything therefor. The Circuit Court of Appeals

(Rec., p. 718) said it is established hy the record here

that at all times after the excessive freight charges were

collected and down to the receivership the railroad com-

pany had in its treasury money in excess of the claimed

overcharges and that it turned over to the Receivers

some $300,000.00 and that under the doctrine of the Love

ease it will he presumed that the money exacted by duress

from the intervenors and their assignors for unjust and

excessive freight rates was a part of the money in the

treasury of the company which passed to the Receivers.

No one else claimed any part of the $300,000.00 so turned

over to the Receivers by the railroad company except

Love, the complainant in the case of Love et al. v. North

— oe

American Company et al., 229 Fed. 103. His Honor, Judge

Sanborn, decided that Love was not a preferred creditor.

This same Circuit Court of Appeals reversed the decision

of Judge Sanborn and held that Love was a preferred

creditor and the petitioners paid the judgment directed

in favor of Love by the Cireuit Court of Appeals, but

after this payment there was still at all times in the

hands of the Receivers over $300,000.00 and turned over

by them to the new Railway Company, a sum greatly in

excess of the claims of Respondents. The Circuit Court of

Appeals in this case followed the Love case, pointing out

that there was no substantial distinction between this case

and the Love case. The facts in this case, found by the

Cireuit Court of Appeals and by the Master, are that the

railroad company commingled the moneys unlawfully ex-

acted from the shippers with their own, From the time of

the first unlawful exaction, down to and including the date

of the appointment of the Receivers, the railroad company

had in its treasury a sum largely in excess of the claims

of these respondents plus the claim of the complainant in

the Love case. It was contended by counsel for peti-

tioners in the Cireuit Court of Appeals that because re-

spondents did not trace every dollar of the illegal exac-

tions into this bank or that bank and did not show that

it remained there, they had not traced their money. The

railroad company did deposit their funds in several dif-

ferent banks, but, suppose they had kept their money in

several different boxes today, one day taking money out

an

of one box and paying it out and another day taking

money out of another box and paying it out, but always

having in their boxes a sum in excess of the trust fund,

would not the presumption be indeed that the railroad

company had acted honestly and had paid out its own

money, leaving in the boxes money belonging beneficially

to respondents? What the Cireuit Court of Appeals did

in this case was to treat all of the boxes as one box. It

held that since the railroad company always had in its

treasury an amount in excess of the trust fund, the trust

could be enforced on such excess. This decision prop-

erly understood is not in conflict with the decisions of

this Court or with the decisions of the Courts of Appeals.

In the case of Angle v. Chicago, St. Paul & C. Rwy. Co.,,

151 U. S. 126, this Court said it is familiar doctrine that

the party who acquires title to the property wrongfully

may be adjudged a trustee ex maleficio in respect to that

property.

In the case of Mercantile Trust Co. v. St. Louis & San

Francisco Rrd. Co., 69 Fed. 193, which arose under an

earlier receivership of this railroad, the Court, in that

case (p. 197), said of this situation:

‘*Two-fifths of all the money that went into the

treasury of the company for fares of passengers rep-

resented unlawful and illegal exactions. That money

it still has. No portion of it has been returned to the

persons who were illegally forced to pay it. The sums

illegally exacted from the interveners have never been

—

returned or tendered to them. It required eight years

of litigation for the interveners to establish their own

and the rights of the public in the premises. * * *

When, as sometimes happens, a railroad company de-

sires to avoid the payment of debts and obligations

incurred in the operation of its road, or to reduce the

wages of its employes below a fair and reasonable

compensation for their services—there are not many

such companies, but occasionally there is one—it secks

the aid of a friendly creditor, through whose agency

it is quickly placed in the hands of a receiver, and im-

mediately a court of equity is asked and expected to

do the mean things which the company itself was

unable or ashamed to do. But it is believed this is

the first instance in which a court of equity has been

asked to become, in effect, something bordering very

closely on a receiver of stolen goods, and urged to

hold the ill-gotten gains in trust for the guilty party,

and refuse to make restitution even of the smallest

portion of them to the persons from whom they were

unlawfully taken. High considerations of public

policy, not less than the plainest principles of equity

and justice, demand that the property of the defend-

ant company in the custody of the Court as a trust

fund should be made to respond to the payment of

these judgments.’’

Also vid Richardson v. New Orleans Debenture Re-

demption Co., 102 Fed., p. 785 (C. C. A. 5th Cir.).

In commingling this trust money with its own money,

the Railroad Company violated its duty as trustee, and the

courts, in order to correct this situation, indulge every

—_ sn

presumption for the beneficiary. The proposition that no

such narrow doctrine as that contended for by counsel

for petitioners exists is shown by the case of Terre Haute

and I. R. Co. v. Cox, 102 Fed. Rep. 825 (U. S. C. C. A. 7).

In that case the Railroad Company commingled the trust

fund with its own in its treasury. The Court said:

‘‘But it is insisted by the Indianapolis Company

that the excess of operating expenses over the earn-

ings of the Peoria Railroad necessitated and justified

the withholding of the thirty percentum, and the ree-

ord shows that a large sum of money came into the

hands of the Receiver as a part of the estate at the

time of their appointment. We may, therefore, we think,

safely assume that that portion of the earnings which

otherwise would have gone to the Peoria Company

came into the hands of the Receivers, either as money

at the time they took possession of the road, or as a

benefit in virtue of the fact that they were consumed

in the general operating expenses of the Indianapolis

Company.”’

The Court, in this last-cited case, quoted from Peters vy.

Bain, 133 U. S. 670, 33 L. Ed. 696. Formerly the equitable

right of following misapplied money or other property

into the hands of parties receiving it depended upon the

ability to identify it. The equity attached only to the

very property misapplied. This right was first extended

to the proceeds of the property, viz., to that which was

procured in place of it by exchange, purchase or sale, and

if it became confused with other property of the same kind

—

_— wae

so as not to be distinguishable without any fault on the

part of the possessor, the equity was lost. Finally, how-

ever, it has been held as a better doctrine that confusion

does not destroy the equity entirely, but converts it into

a charge upon the entire mass, giving the party injured

by the unlawful conversion a priority of right over the

other creditors of the possessor in this case; that, when

the railroad company commingled these unlawful exac-

tions with their own money, the shipper’s equity became

a charge upon the entire mass in the treasury of the com-

pany. It makes no difference that part of the money may

have been deposited in one bank to the railroad’s credit

and part in another. No matter how many banks it may

have been deposited in, the railroad company remained

in control of it and, at all times, the money was in the

treasury of the railroad company, as was held by the Cir-

cuit Court of Appeals. The narrow contention of counsel

for petitioners would take us back to the old rule that

every dollar had to be earmarked. The Circuit Court of

Appeals, in the ease of Terre Haute I. R. Co., supra, said:

“Clearly, then, the Indianapolis Company in its

own right could not oppose the restoration of these

moneys to the Peoria Company.”’

The railroad company clearly in that case could not

oppose the restoration of these moneys to the Peoria Com-

pany and neither can the railway company in this case to

respondents. Not only did the amount in the treasury,

a

from the time these unlawful exactions were made, exceed

the trust fund; not only did the railroad company turn

over to the Receivers a sum greatly in excess of these un-

lawful exactions from its treasury, but there never was a

time, after the appointment of the Receivers, that the

moneys in their treasury did not greatly exceed the trust

fund, as was found by the Master and the Circuit Court

of Appeals. The Receivers turned over to the railway

company over $5,000,000.00, after paying all operating

charges, all taxes, interest on bonded indebtedness and

after taking up car trust certificates issued before the

receivership.

The above principles were declared in the leading case

of Central National Bank of Baltimore v. Connecticut

Mutual Life Insurance Co., 104 U. S. 54, 26 Law Ed. 693,

in which the syllabus was written by Mr. Justice Mat-

thews, the author of the opinion. The syllabus (para-

graph 3, page 694) is as follows:

‘“‘That, so long as trust property can be traced and

followed into other property into which it has been

converted, the latter remains subject to the trust, and

that if a man mixes trust funds with his own, the

whole will be treated as the trust property, except so

far as he may be able to distinguish what is his own,

are established doctrines of equity and apply in every

ease of a trust relation, and to moneys deposited in a

bank account, and the debt thereby created, as well

as to every other description of property.’’

— }

This proposition is discussed in the opinion, 26 Law

Ed, i. e. 699-701. The Court reviews the English cases on

this subject and points out that the original doctrine, re-

quiring money to be earmarked, or specifically identified,

had been abandoned in cases of trust relationship. The

Court cites the opinion of Vice-Chancellor Sir W. Page

Wood, as follows (1. ¢. 699):

‘Vice-Chancellor Sir W. Page Wood, in Frith v.

Cartland, 2 Hem. & M. 420, said that Pennell v. Deffell

rested upon and illustrated two established doctrines.

One was that ‘So long as the trust property can be

traced and followed into other property into which it

has been converted, that remains subject to the trust.’

The second is, ‘That if a man mixes trust funds with

his own, the whole will be treated as the trust prop-

erty, except so far as he may be able to distinguish

what is his own.’ ”’

Again the Court said (1. ¢. 700) (after quoting the opin-

ion of the Master of the Rolls, Sir George Jessell, as set

out in the rule announced in the headnote above):

‘‘He adopts the principle of Lord Ellenborough’s

statement in Taylor v. Plumer, 3 M. & S. 562, that ‘It

makes no difference in reason or law into what other

form different from the original the change may have

been made, whether it be into that of promissory

notes for the security of money which was produced

by the sale of the goods of the principal, as in Scott

v. Surman, Willes 400, or into other merchandise, as

in Whitcomb v. Jacob, 1 Salk. 161, for the product or

— 42 —

substitute for the original thing still follows the nature

of the thing itself, as long as it can be ascertained to

be such, and the right only ceases when the means of

ascertainment fail.’ But he dissents from the applica-

tion of the rule made by Lord Ellenborough when the

latter added, ‘which is the case when the subject is

turned into money and confounded in a general mass

of the same description,’ for equity will follow the

money, even if put into a bag, or an undistinguishable

mass, by taking out the same quantity. And the doe-

trine that money has no earmark must be taken as

subject to the application of this rule. The Court of

Appeals had previously applied the very rule as here

stated in the case of Birt v. Burt, reported in a note to

Ex parte Dale & Co., L. R., 11 Ch. D. 773.”’

The Court further added that the principles, above

enunciated, had been illustrated by many cases in the

United States, citing and analyzing a number of such

cases, l. ce. 700.

This case on this point has been cited and followed by

this Court, by the lower federal courts and by nearly all

of the state courts. It would be useless to attempt to give

this vast mass of citations, but, in addition to the cases

of Cox and Richardson, above quoted, citing and follow-

ing this case, we refer to the two following cases: Smith

v. Township of Au Gres, 150 Fed. 257, 1. ec. 260-265, 9

L. R. A. (n. s.) 876, and 80 C. C. A. 145 (6th Circuit).

This case contains an excellent discussion of the doctrine,

above announced, and quotes (1. ¢. 261) from the opinion

a em

of Chancellor Kent in Hart v. Ten Eyck, 2 Johns. Ch. 62,

l. e. 108, as follows:

“Tf a party having charge of the property of others

so confounds it with his own that the line of dis-

tinction cannot be traced, all the inconvenience of the

confusion is thrown upon the party who produces it,

and it is for him to distinguish his own property, or

lose it.’’

This is as strong a statement of the rule of presumption

as ean be found on this subject and amply supports the

presumption invoked both in the Love case and in the

instant case.

The ease of Standard Oil Company of Kentucky v.

Hawkins (C. C. A., 7th Cirenit), 74 Fed. 395, 1. ¢. 395-402,

reviews the authorities on this subject and cites and

follows the rule announced in the Central National Bank

case, supra. The Court traces the history of this doctrine,

citing the English authorities and their application in the

American decisions. The Court cites (1. ¢. 401-2) the opin-

ion of Mr. Justice Bradley in Frelinghuysen v. Nugent, 36

Fed. 229, 239, which language is quoted with approval in

Peters v. Bain, 133 U. S. 670, 693, in which he points out

and disapproves the old equitable doctrine as to the

necessity of exact identification of a trust fund or trust

property commingled with others, and adds:

‘Finally, however, it has been held as the better

doctrine that confusion does not destroy the equity

= a

entirely, but converts it into a charge upon the entire

mass, giving to the party injured by the unlawful

diversion a priority of right over the other creditors

of the possessor.’’

The Court (1. ¢. 402) cites numerous cases, announcing

the same proposition, and states that the Central National

Bank rule had been followed in Peters v. Bain, 133 U. S.

670.

The principles above stated have an even stronger ap-

plication to the facts in the instant case, because in the

eases above quoted the trust doctrine arose out of con-

ventional agreements of the parties, whereas, in the in-

stant case the money of the shippers was extorted under

duress and under the compulsion of the statute, and, under

the theory of the Reparation Provision of the Commerce

Act, constituted a trust fund, which must be restored to

the shipper.

In the case of Smith v. Mottley, 150 Fed. 266 (C. C. A,

6th Circuit), 1. ¢. 268, the Court again discusses the com-

mingling of trust funds and the rights of the beneficiary.

The Court refers to the Au Gres case, decided by it (150

Fed. 267), and reannounces the same doctrine, citing ad-

ditional cases in support thereof.

The Court said (1. ¢. 268) that it was shown that three

times the amount of the trust fund claimed remained in

the bank from the time of payment to the time of the

assignment and came to the trustee. The Court added:

—

‘‘The burden of showing that his property has been

wrongfully mingled in a mass of the property of the

wrongdoer is upon the owner; but, when this is done,

the burden shifts to the wrongdoer. It is for him to

distinguish between his own property and that of the

innocent party’’ (citing a number of cases).

The cases cited by counsel for petitioners are not in

conflict with the decision of the Cireuit Court of Appeals

in the instant case. When the different states of facts

are considered, those cases are in harmony with the de-

cision of the Cireuit Court of Appeals.

In the case of City of Litchfield v. Ballon, 114 U. 8S. 190,

29 Law Ed. 132, the city had issued bonds which this

Court held to be void, because they were issued in viola-

tion of the state Constitution. Thereupon, the purchaser

of the bonds brought a suit in equity on the theory that,

notwithstanding the bonds were wholly invalid, the city

was in possession of the money, received for the bonds, or

its equivalent in property identified as having been pro-

cured with the proceeds of the bonds. The evidence

showed that the money represented by the proceeds of the

bonds had long since passed out of the hands of the city.

However, the evidence showed that some of the proceeds

of the bonds had gone into a water works plant. A large

part, however, of the money, which had gone into the

water works plant, was obtained by taxation, or from

other resources of the city. It was not ascertainable how

much. The land, on which the work was constructed, was

— on

purchased before the bonds were issued. The streets,

through which the pipes were laid, were public property

into which no money of the complainants had entered. In

connection with the allegations in the bill that the city

was in possession of the money, the Court said (1. ¢. 133);

‘“‘The money received by the city from Ballou has

long passed out of his possession and cannot be re-

stored to complainant. Neither the specific money

nor any other money is to be found in the safe of the

city or anywhere else under its control.’’

Speaking about the tracing of the money into the

water works property, this Court used the language set

out in petitioners’ brief. In this case respondents have

traced their money into the treasury of the railroad com.

pany and from the treasury of the railroad company into

the hands of the Receivers, and from the hands of the Re-

ceivers into the hands of the railway company, and have

showed that the stockholders of the old railroad company

obtained over forty-five million ($45,000,000.00) dollars of

the stock of the new railway company without paying

anything for it.

Here respondents’ money can be reclaimed and deliv-

ered without taking others’ property with it and without

injury to other persons, or interfering with others’ rights.

Moreover, the decree of the lower court appealed from in

this Ballou ease did not proceed upon the trust fund

theory. It found a debt from the city to Ballou and

—

— pn

impressed a lien upon the water works plant for the pay-

ment of that debt. This Court held that that was as much

within the condemnation of the. constitutional provision

as the express contracts evidenced by the bonds.

The case of Schuyler v. Littlefield, 232 U. S. 707, 58 Law

Ed. 806, simply announces the familiar doctrine:

“‘Trust funds deposited by a trustee in his indi-

vidual bank account are dissipated if the mingled

fund is at any time wholly depleted, and cannot be

treated as reappearing in sums subsequently deposited

to the same account.’’

The next case cited is Empire State Surety Co. v. Car-

roll County, 194 Fed. 593 (U.S. C. C. A., 8th Cirenit).

In this case Judge Sanborn (1. c. 604-605) undertakes to

announce the rules governing the enforcement of a trust

against the proceeds of an insolvent estate in the hands

of a receiver. After announcing the general rule:

“It is not sufficient to prove that the trust property

or its proceeds went into the general assets of the

insolvent estate and increased the amount and the

value thereof which eame to the hands of the Re-

ceiver’’ (citing 1. ¢. 604 and a number of cases),

the Court stated (1. ¢. 605) the second rule on this sub-

ject, which is as follows:

‘Proof that a trustee mingled trust funds with

his own and made payments out of the common fund

—

—

is a sufficient identification of the remainder of that

fund coming to the hands of the Receiver, not ex-

ceeding the smallest amount the fund contained sub-

sequent to the commingling (Board of Com’rs y,

Strawn, 157 Fed. 49, 51, 84 C. C. A. 553, 555, 15 L. R.

A, [n. s.] 1100; Weiss v. Haight & Freese Co. [C. C.),

152 Fed. 479; American Can Co. v. Williams, 178 Fed.

42, 423, 101 C. C. A. 634, 6387) as trust property, be-

cause the legal presumption is that he regarded the

law and neither paid out nor invested in other prop-

erty the trust fund, but kept it sacred (Board of

Com’rs v. Patterson [C. C.], 149 Fed. 229, 282; Spo-

kane County v. First National Bank, 68 Fed. 979, 16

CC. Ca. Gh”

This rule fits the facts found in the instant case, viz.,

the $300,000.00, at all times held by the carrier, the Re-

ceivers and successor, and accords with the finding of the

Circuit Court of Appeals in this case (Ree., p. 718), that

the excess freight rates collected by the carrier were part

of the moneys in the treasury of the company, which

passed to the Receiver.

The next case cited is the case of Winfield v. Alva Se-

curity Bank, 252 Fed. 847 (U. S. C. C. A., 8th Circuit).

In this case the complainants had purchased forged notes

from the cashier of the Alva Bank. The complainants had

credited the Alva Bank with the purchase price of these

notes. Subsequently, these credits were entirely exhausted

by drafts and there was no evidence that any part of the

. fund ever reached the Alva Bank. What was said by the

—

a ee

Court in this Alva Bank case, after finding that there was

no evidence that any of the proceeds of the forged notes

ever reached the bank, may have been right on the facts

in that ease, but is not authority on the facts in this case.

Whatever may have been the principles announced in that

case, they are clearly inapplicable to a reparation case

like this, the principles governing which have been stated

by the United States Circuit Court of Appeals in this and

the Love case. Certainly the robust morality of the

opinion of the United States Cireuit Court of Appeals in

the instant case must appeal to all fairminded persons.

One of the deep-seated convictions of Congress, as re-

flected by its legislation, namely, the Carmack Amend-

ment, and the Elkins Act, designed ‘‘to eut up by the

roots every form of discrimination, favoritism and in-

equality’? (U. S. v. Koenig Coal Co., U. S. S. C. Adv.

Opinion, May 1, 1926, No. 12, p. 488, 1. ¢. 490), and by the

provisions of the Commerce Act, was to protect the ship-

per in the wholly unequal fight with the earrier. It is

very easy for the carrier to get the shipper’s money, and

Congress, as shown by its legislation, as construed by this

Court, is determined that the shipper shall get it back,

and has even gone to the extent of authorizing the assess-

ment of attorneys’ fees in favor of the defrauded shipper.

It is the clear intent of Congress, as shown in the Com-

merce Act, to restore to the shipper all unjust and unrea-

sonable charges, plus interest from the date of payment,

and attorneys’ fees, thereby penalizing the carrier and

—

—_ ee

predisposing the carrier to treat the shipper fairly and

not litigate his just claims with him, in season and out

of season, day and night, Sundays and_ holidays, fers

period of twenty-two years, during which time an oppor-

tune financial receivership is invoked to entirely defeat

the shipper, though the stockholders of the railroad com-

pany in receivership are enriched at the expense of its

creditors to the extent of over forty-five millions of

dollars.

The next case cited is the case of Federal State Bank

v. McFarlin, 257 Fed. (U.S. C. C. A. 8th Cir.).

This case involved the distribution of assets of a bank-

rupt grain company and merely announces the general

proposition, citing the Carroll Company and Alva Bank

cases, supra, that a claimant, whose property has helped

to swell the general assets of a party, subsequently becom-

ing bankrupt, has no prior right in those general assets

without specific identification or tracing of the claimant's

property.

There was no proof that a large fund claimed by no one

except the interveners was carried at all times by the

zankrupt company, both before and after bankruptcy.

The next ease cited, Scullin Steel Co. v. North American

Co., 255 Fed. 945 (U.S. C. C. A., 8th Cirenit), merely an-

nounces the proposition that, where there is collusion and

fraud between the agent of the shipper and the agent of

the carrier, and the carrier had no notice of such fraud

and was not enriched by it, the money so siphoned from

the shipper could not be treated as a preferred claim over

other creditors of the carrier.

The next case cited is Weideman v. Newton Arms Co.,

971 Fed. 302, 304 (C. C. A., 2nd Circuit), in which the

Court held that, where a trust claim-was asserted on the

ground that money had been secured from claimant by

the false representations of a corporation, it was necessary

to show, first, that such representations were relied on,

and, second, trace their money into some particular prop-

erty or fund which came into the hands of the Receiver;

and it is not sufficient to show that it was used by the

corporation generally in its business.

In that case the Court pointed out (1. ¢c. 303) that the

cash on hand had fluctuated down to zero, with liabilities

of $400,000.00, and that all that claimants could prove was

that their money was spent in carrying on the business or

procuring certain articles of machinery and the like, whick

ultimately passed into the Receiver’s hands (1. ¢. 304).

How ean this holding fit the facts in the instant case?

The next case cited is Titlow v. MeCormick, 236 Fed.

209, 1. e. 214, 215. This ease involved the distribution of

the assets of an insolvent bank, where a trust was asserted

by one claimant. This case cites and follows (1. ¢. 211) the

Schuyler case, 232 U. S. 707, analyzed supra. This case

also announces the doctrine (1. ¢. 214) that, where a trust

fund has been commingled with other funds, still claimant

is entitled to recover if there remained in the possession

of the bank a sum of money equal to the amount due him,

winemTat

Sti inc Bitlis Gi che RR SEL

a

“IT BEING THE PRESUMPTION OF THE LAW

THAT, IF MONEYS HAD BEEN DISBURSED OUT 0?

SUCH FUND, IT WAS THE MONEY WHICH THE

BANK HAD THE RIGHT TO PAY OUT, AND NOT

THE MONEY WHICH WAS ENTRUSTED TO ITINA

FIDUCIARY CAPACITY.’’ (Black caps ours.) Again,

1. e. 215, the Court announces the same rule, quoting the

ease of Brennan v. Tillinghast, 201 Fed. 609-614 (C. C. A,

6th Cireuit), where the Court declared that, when trust

funds were mingled with other funds there was a_pre-

sumption of law ‘““THAT THE SUMS FIRST DRAWN

OUT WERE FOR THE MONEYS WHICH THE TORT

FEASOR HAD A RIGHT TO EXPEND IN HIS OWN

BUSINESS, AND THAT THE BALANCE WHICH RE-

MAINED INCLUDED THE TRUST FUND WHICH HE

HAD NO RIGHT TO USE.”’ (Black caps ours.)

In the Titlow ease the Court applied this principle and

established a trust to the extent of the unexpended de-

posit.

In the instant case, we repeat, there was always over

$300,000.00 in the treasury of the carrier upon which inter-

veners’ trust lien remained, and which was not dissipated

in any manner, and upon which no other claimant asserted

rights.

The last case cited on this point is the case of U.S.

National Bank of Centralia v. City of Centralia, 240 Fed.

93 (U. S.C. C. A., 9th Cireuit). This case involved the

_—

distribution of the assets of an insolvent bank in a re-

ceiver’s hands, and announces (1. ¢. 95) this proposition:

‘‘The law impresses a trust upon funds (trust funds

so misapplied, that is commingled with other funds)

and to the extent that the said money or any portion

thereof, either in its original or a substituted form,

can be traced into the fund which came into the pos-

session of the Receiver, the appellee is entitled to a

preference over the general creditors’? (citing the

Titlow, Schuyler and Brennan cases, supra).

The Court held in the Centralia case that there was no

proof that claimant’s moneys ever came to the Centralia

bank or were traceable to any fund that came to the Re-

ceiver’s hands, and, therefore, there could not be any re-

covery upon the trust theory. How this case applies to

the facts of the instant case, we cannot conceive.

Since the provisions of the Commerce Act require uni-

formity as between shippers, the same uniformity is re-

quired in the enforcement of reparation—a restitution of

money unlawfully taken by the carrier from the shipper.

This restitution presupposes priority of payment and nec-

essarily establishes the basis for the enforcement of the

trust ex maleficio doctrine, when a carrier, owing repara-

tion to a shipper, has gone into the hands of a receiver.

If this were not true the basic uniformity required by the

Commerce Act would be destroyed, because the solvent

carriers, participating in the collection of an unlawful

rate from the shipper, condemned by the act as unjust and

a §4

unreasonable, would be forced to make restitution;

whereas, the carrier in the hands of a receiver, adminis.

tered by a court of equity, would appropriate the repara-

tion due the shipper, and thereby create a preference and

advantage to the carrier in the hands of a receiver anda

discrimination against the shippers on such road. No

wonder that Judge Caldwell, in the case of Mercantile

Trust Company v. St. Louis and San Francisco Railroad

Co., above quoted, 69 Fed. 193, 1. ¢. 198, indignantly de-

nounced such effort of the carrier (a prior receivership

of this same railroad company) to escape reparation lia-

bility via the receivership route. The Commerce Act is

just as applicable, as shown by its provisions, to carriers,

operated by receivers, as to the corporation performing

the carrier’s service, and the same equality of duties, re-

sponsibilities and uniformity of rates applies under the

provisions of the act to the receiver of the carrier as to

the carrier not in receivership. As to the general obliga-

tion of the receiver to pay claims and do exact justice as

to a preferred claimant, asserting a trust, vid. Standard

Oil Co. v. Hawkins, 74 Fed. 395, 1. ¢. 402.

The receiver of a carrier cannot in equity be the ageney

to accomplish prohibited discrimination and the destrue-

tion of the basic uniformity in rates, prescribed by the

act, by refusing to recognize a reparation order of the

Commission, affirmed by the judgment of this Court. It

is because of the rule of uniformity that the proceeding

to have the rate declared unreasonable, therefore unlaw-

— vor

ful, with consequent reparation to the shipper, is not a

proceeding of a private nature, but of a public nature, so

as to afford the foundation of an order for repayment to

all shippers affected, though not parties to the proceeding.

Baer Bros. Mere. Co. v. D. & R. G. R. R. Co., 233

U. S. 479, 1. e. 486-7, 58 Law Ed. 1055, 1. e. 1060;

Phillips v. Grand Trunk R. R. Co., 936 U. S. 662,

1. ec. 665, 59 Law Ed. 774, |. ¢. 776.

The whole effect of Petitioners’ argument is that there

is no basis for the application of the trust ex maleficio

doctrine because of the alleged fact that the excess

charges were ‘“‘lawfully’’ collected from the shippers, he-

eause under the published tariff. We have shown by re-

peated decisions of this Court that this contention is an

obvious fallacy and the collection of such unjust and un-

reasonable charges is not and could not be ‘‘lawful,’’ be-

eause such holding would destroy the basic right to repa-

ration. With this fallacious premise exploded, it is not

denied by petitioners that a trust ex maleficio did arise.

The chief remaining question, therefore, is whether or

not there has been a sufficient identification and tracing

of the exeess charges, paid by the shippers, to authorize

their recovery in the manner and form decreed by the

United States Cireuit Court of Appeals, and this is dis-

cussed fully, supra.

—_—

ALLEGED CONFLICT WITH PRIOR DECISIONS OF

THE UNITED STATES CIRCUIT COURT OF

APPEALS, EIGHTH CIRCUIT.

Two of the grounds advanced for the granting of the

writ of certiorari is that the decision of the Circuit Court

of Appeals in this case is in conflict with other decisions

of the same Circuit Court of Appeals, both as to the trust

fund theory and identification of the fund. As we have

heretofore showed, when the facts in this case are ana-

lyzed and differentiated from the facts in those other

cases, there is no conflict. The case of Love v. North

American Company, 229 Fed. 103, is the only case decided

on facts identical with the facts in this case.

The controlling principle in the Love ease is cited and

approved by the opinion of the United States Circuit

Court of Appeals in the instant case (Rec., p. 717), quot-

ing from the Love case, 999 Fed. 103, 1. e. 106, and in said

opinion of the United States Circuit Court of Appeals in

this case (Rec., p. 718) the Court adds that the Love ease,

‘is the latest expression of this Court on the subject,

and is authority for the proposition that in order to

establish a trust in a railroad company for the benefit

of the shipper as to freight charges, wrongfully ex-

acted, it is not necessary to show that the identical

money received has been placed in a separate account

or to trace the identical fund.”’

aw §7

The Court further cites from the Love case (Ree., p.

717):

“The question now might be properly asked, to

whom do the excessive charges received by the Frisco

Company for the transportation of freight belong?

They certainly do not belong to the general creditors

of the Trisco Company, nor to the bondholders, nor

the Frisco Company, itself. Without qnestion they

belong to the shippers. We must not be deceived as

to the true status of this claim, nor allow the bond,

or the fact that the claim is presented by the Corpo-

ration Commission, to blind us to the fact that the

claim is one due to the shippers for excessive charges

paid by them to the Friseo Company for transporta-

tion of freight. The shippers not only paid the lawful

charge, but they did more. They paid an excessive

charge. That payment was an illegal exaction, and,

as against the railroad company, and volunteers, like

the Receivers, the money belonged to the shippers

after the payment the same as before. It will be pre-

sumed that it was a part of the money in the treas-

urer of the company which passed to the Receivers.

That money came into the hands of a court of equity.

What ought such a court to have done with it? Surely

it could do nothing but direct that it be returned to

the shippers to whom it belonged. It having been

paid to the bondholders, or for permanent hetterment

of the property for their benefit through the ageney

_of a court of equity, that court, as a court of con-

scienee, ean do no less than direct its restoration.”

The Court carefully considered the Carroll County case,

194 Fed. 593-604, and the various other cases, now cited

=

by the petitioners in this application. Counsel for peti-

tioners attempt to distinguish the Love case from this

ease. They made this same attempt before the Master and

before the Cireuit Court of Appeals and advanced the

same points. The answer of the Master is found on pages

175-177 of the record. The Cireuit Court of Appeals held

that there was no substantial distinction between the in-

stant case and the Love case when the same points were

reargued before it. As heretofore stated, when the facts

in the various cases are considered, there is no conflict

between the decision of the Cireuit Court of Appeals in

this case and prior decisions of the same court; but con-

ceding, arguendo, which we deny, that there is such con-

flict, still, under the rules of this Court, such conflict

would be no ground for granting a writ of certiorari,

The Cireuit Court of Appeals in this case pointed out

that there was no conflict between its opinion in this ease

and any of its prior decisions and followed the Love ease,

announcing that the doctrine of the Love case was correct

and should be and would be followed.

III.

Paragraph III of the brief, page 30, announces this

proposition:

‘“‘The trust fund theory is inconsistent with, and

is abrogated by, the exclusive remedy for collection

of overcharges prescribed by the Act to Regulate

=

Commerce; and the decision of the Circuit Court of

Appeals that the equitable remedy is not inconsistent

with the remedy by reparation is erroneous.’’

This proposition is discussed at length in the opinion

of the United States Cireuit Court of Appeals (Ree., pp.

718-721). The Abilene case is there discussed (Ree., pp.

718-719). The opinion of the District Court, 988 Fed., |. e.

630, on this point, was carefully considered by the United

States Cirenit Court of Appeals. The purpose of the

Commerce Act and of the other acts of Congress regulat-

ing carriers, as above stated, is to give the shipper full

relief in recovering excess charges, and so these acts have

been construed by this Court.

The Ballou ease, 114 U. S. 190-194, has been discussed

supra and it is not necessary to reanalyze it.

The Keogh, 260 U. S. 156, here cited, was also cited by

petitioners under the head of jurisdiction. It supports

neither the jurisdictional proposition nor the question of

the asserted exclusive remedy for collection of over-

charges, prescribed by the Act to Regulate Commerce,

which petitioners insist abrogates the trust fund theory.

In the Keogh ease a suit was filed under Section 7 of

the Antitrust Act, and the only question (1. ¢c. 161) was

whether there was a cause of action under section 7. The

charge in that case was that the carriers had combined

to fix rates for the transportation of excelsior and flax

tow, and that Keogh, plaintiff, had been damaged under

section 7 by such alleged combination, because deprived

—_ =

of the benefit of competitive rates, and that the elimina-

tion of competition had increased his rates. The Court

held, through Mr. Justice Brandeis, that there was no

right of action in that case, because there was nothing to

show that plaintiff was damaged by the alleged combina-

tion. The Court pointed out with great care (1. e. 165):

‘It (the claim of plaintiff) is not like those cases

where a shipper recovers from the carrier the amount

by which its exaction exceeded the legal rate (South-

ern Pac. Co. v. Darnell Taenzer Co., 240 U. S. 531, 2

Law Fd. 451).’’

The Court again, in this case (1. ¢. 163}, declared:

“The legal rights of shipper as against carrier in

respect to a rate are measured by the published rate.

Unless and until suspended or set aside, this rate is

made, for all purposes, the legal rate, as between

earrier and shipper. The rights, as defined by the

tariff. cannot be varied or enlarged by either contract

or tort of the earrier’’ (citing a number of cases).

The Court in this case, on the prior page, 162, points out

what rates are legal under the Act to Regulate Commerce,

and states:

‘‘Under section 8 of the latter act the exaction of all

illeval rate makes the earrier liable to the ‘person in-

jured thereby for the full amount of damages sus

tained in consequence of any such violation,’ together

with a reasonable attorney’s fee. Sections 9 and 16

=

provide for the recovery of such damages, either by

complaint before the Commission or by an action in

a federal court.”

From these excerpts it is perfectly apparent that the

Court had in mind the distinction between the legal pub-

lished rate and the rights of a shipper to recover from a

carrier the amount by which its exaction exceeded the

legal rate.

In the Keogh case no question of election of remedies

was considered and there was no diseussion of the alleged

abrogation of the trust fund theory by sections 9 and 16

of the Commerce Act. The same observation applies to

the Ballon ease, 114 U. S. 190-194, cited under this point.

The last case cited under this point is Butler v. Western

German Bank, 159 Fed. 116, 1. e. 117 (U.S. C. C. A., 5th

Cirenit), in which the distribution of the assets of an

insolvent bank was involved, and the Court held that

interest was not recoverable on the fund withheld, and,

also, that, where a bank, known by its officers to be in-

solvent, collected money for a customer and mingled the

same with its own funds which, to an amount larger than

the sum received, passed it to the bank’s Receiver in in-

solveney, the eustomer, though unable to trace the identi-

eal money into the Receiver’s hands, was entitled to re-

cover from the Reeeiver an amount equal to that collected,

citing and following the above-quoted case of Richardson

v. New Orleans Deb. Red Co., 102 Fed. 780, based upon

the Central National Bank ease, 104 U. S. 54. Not one

a

of the above cases discusses the points involved in the

instant case, or the effect of Section 22 of the Commerce

Act, providing, in substance, that the remedies provided

, by the act shall not in any way abridge or alter the rem.

‘ edies now existing in common law or by statute, but the

' provisions of the act are in addition to such remedies,

Furthermore, not a single one of these cases discusses

election of remedies or the fundamental maxims of equity

; governing in this case,

The fundamental basis of reparation under the Com-

merce Act has been discussed, supra, and no repetition is

(legal), and the corresponding equitable maxim, ‘‘ Equity

j needed. The two maxims, ‘‘Ubi jus, ibi remedinm”

%

Y

4 will not suffer a wrong without a remedy,’’ have been

F

cited and applied innumerable times by the federal and

state courts. They are two corner stones of well-ordered

jurisprudence and absolutely essential to cut through the

‘labyrinth of technicalities’? and do justice. See the fol-

: lowing authorities:

Broom on Legal Maxims (8th Ed., p. 101 et seq.),

citing the celebrated case of Ashby v. White,

2d Ld. Ryam. 953, and also the famous opinion

of Chief Justice Marshall in the case of Mar-

bury v. Madison, 1 Cr. 137, 2d L. Ed., p. 60;

Pomeroy’s Equity Jurisprudence, Vol. I, See. 423;

Toledo, A. A. & N. M. Ry. Co. v. Penn. Co. et al.

54 Fed. 746, |. e. 751, 752;

Southern California Ry. Co. v. Rutherford et al.

(Cireuit Court, Southern District of California,

June 30, 1894), 62 Fed., |. e. 797, 798;

= =

Harrigan v. Gilchrist, 99 N. W. 909;

Mercantile Trust Co. v. St. Louis & San Fransisco

Ry. Co., Ogden et al., Interveners, 69 Fed. 193;

Sweet v. The Montpelier Savings Bank & Trust Co.,

69 Kan. 641 (77 Pac. 538);

Matthews v. Forslund, 112 Mich. 591;

Barksdale et al. v. Finney et al., 14 Grattan 338;

Williams v. Young, 81 Atlantic 1118;

Traders’ Bank v. Fraser, 162 Mich. 315, 1. e«. 318;

Converse v. Sickles, 44 N. Y. Supp. 1080 (affirmed

in 161 N. Y. 666);

Sugar Refining Company v. Fancher, 145 N. Y. 552,

l. e. 561.

Some of the cases, just cited, also announce the proposi-

tion that a judgment at law is, in many cases, not such an

election of the remedy as will preclude a bill in equity to

impress a trust, because there is no inconsistency what-

ever between the two proceedings.

In conclusion on this point the case of Southern Pacific

Co. v. Bogert, 250 U. S. 482, is partienlarly strong on the

proposition that there is no election of remedies, when the

relief subsequently sought is of a different character and

in aid of the original rights.

Also, see on this point, the case of Standard Oil Co. of

Ky. v. Hawkins, 74 Fed. 395, 1. ¢. 397-399, in which the

doctrine of election of remedies is discussed at length and

it is held that resort to a prior remedy will not preclude

claimant from filing a bill to impress a trust upon the

fund.

/

—

Also see the reasoning of the Cireuit Court of Appeals

on this point (Ree., pp. 718-719), which is very convine-

ing.

ZF;

The fourth paragraph of the brief, page 33, announces

this proposition:

“The decision of the Cirenit Court of Appeals al-

lowing interest on respondents’ claims from a date

subsequent to the date of appointment of the Re-

ceivers is erroneous.”’

The right to interest in this case, upon the reparation

judgments entered, is settled by the Sloss-Sheffield case,

citing many authorities and quoted, supra (u. 8S. 8. ¢.

Ad. Opin., Law. ed. No, 4, Dee, 15, 1925, 1. e. 103).

The Receivers continued to contest the claims of re-

spondents and continued to withhold their money from

them and the railway company continued to contest the

claims of the respondents and is now contesting their

claims,

The Receivers stand in the shoes of the carrier and in

withholding the trust fund elect to pay interest thereon,

if the Court subsequently deerees that such must be re-

turned,

The Receivers, at any time, could have terminated their

obligation to restore the trust fund and their obligafion

to pay interest thereon by making restitution. This, like-

—

a

wise, is true of the new railway company, which obtained

the fund from the Receivers.

Since they elected to continuously litigate a preferred

claim, they must now pay interest, particularly since, as

pointed out in the opinion of the United States Circuit

Court of Appeals in this case, no one has any just claim

to this trust fund except respondents, and, therefore, no

one can be prejudiced by the payment of principal and

interest.

A

Point V of the brief, page 34, announces this proposi-

tion:

“The decision of the Cireuit Court of Appeals that

respondents were entitled to have their claims allowed

as preferential claims superior to the claims of other

creditors, including the bondholders, is erroneous.’’

This proposition is not argued in Petitioners’ brief and

it involves the consideration of the entire case, which is

completely covered in the diseussion in this brief, supra.

_ CONCLUSION.

In conclusion, we believe that it has been demonstrated

that no grounds for the issuance for a writ of certiorari

in this ease have been shown by petitioners.

The trust fund doctrine in this case is well supported

by the recent decision of this Court in the case of Dayton-

— 66 —

Goose Creek Ry. Co. v. U. S., 263 U. S. 455, in which the

Court construed the recapture clause of the Transporta.

tion Act and held that as to the excess the carrier never

had title. Necessarily the same principle applies to excess

freight rates collected under a published tariff, because

prohibited by the Commerce Act as unjust and unreason-

able.

We have an abiding conviction in the justice of re-

spondents’ claims, and, though the course of this long

litigation would seem to indicate that at some time there

had been some doubt as to the collection of these claims,

and that technicalities would triumph over justice, we

now feel certain that the long-delayed rights of these

cattle shippers will be sustained by this tribunal and that

the application for certiorari, will be denied.

Respectfully submitted,

S. H. COWAN,

DAVID A. MURPHY,

JOHN A. LEAHY,

WALTER H. SAUNDERS,

Attorneys for Respondents.

SS + NU yA Je cot Qe a,