US SUPREME COURT DECISIONS

This Court has jurisdiction in error over a judgment in a suit in a state court determining the effect to be given to a sale of the property in controversy by order of a district court in bankruptcy. Factor's Insurance Co. v. Murphy, 111 U. S. 738, on that point cited and applied.

The authority of the proper courts of the United States in bankruptcy to adjudicate a railroad company bankrupt and to administer its property under the Bankrupt Act is regarded as settled by the practice and decisions of the circuit court in several circuits

A grant by a municipal corporation to a railway company of a right of way through certain streets of the municipality, with the right to construct its railroad thereon and occupy them in its use, is a franchise which may be mortgaged and pass to the purchaser at a sale under foreclosure of the mortgage.

There is nothing in the laws of Louisiana which forbids such transfer of a franchise to use and occupy the streets of a municipality by a railroad corporation.

All franchises of a railroad company which can be parted with by mortgage, pass to the assignee of the company in bankruptcy, and may be sold and transferred to a purchaser at a bankruptcy sale.

This was a writ of error to bring under review a decree of the Supreme Court of Louisiana reversing a decree of the Fifth District Court of the Parish of Orleans.

The Canal Street, City Park & Lake Shore chanrobles.com-red

Page 114 U. S. 502

Railroad Company was a corporation organized under the general law of the State of Louisiana. By an ordinance of the City of New Orleans, numbered 2,264, administration series, dated August 6, 1873, the city granted to the corporation named the right of way from the neutral ground in Basin Street, by certain other designated streets, and along the embankment on the western side of the Orleans Canal, to the lake shore, the termini and the entire route being within the city limits. The route upon which the road was to be built was subsequently modified by ordinance numbered 2,548, administration series, dated March 25, 1874. The company constructed and used a railroad upon the right of way so granted. In the year 1876, upon a petition in bankruptcy filed by Edward B. Hampson and another, the railroad company was adjudicated bankrupt by the District Court of the United States for the District of Louisiana. Besides other property and assets surrendered by the bankrupt were

"the railroad track, all and singular, built in pursuance of the charter of the said company, and the various grants and privileges conferred upon said company by the City of New Orleans, . . . including the roadbed of main tracks and branches, and all rights and appurtenances of said railroad tracks, as well as rights of way thereto attached, . . . and all the franchises and appurtenances"

of said company.

On November 29, 1876, the assignee in bankruptcy applied to the bankruptcy court for an order to sell the property above described, and other assets of the company free and clear of all encumbrances, and on May 19, 1877, the court made the order prayed for and directed the sale to be made on the following terms: "One-third cash, and the balance on one and two years' credit, to be secured by mortgage on the property sold." On July 14, 1877, the property was sold by the special master appointed by the court to Thomas H. Handy. The sale was afterwards confirmed by the court and a deed made by the master to the purchaser for the railroad and

"all the right of way, powers, privileges, immunities, and franchises conferred and granted by the City of New Orleans to the Canal Street, City Park and Lake Railroad Company,"

by chanrobles.com-red

Page 114 U. S. 503

the ordinances above mentioned. At the same time and by the same act, Handy gave a mortgage on the property conveyed to him, to secure his notes given for two-thirds of the purchase money. The mortgage contained the pact de non alienando.

On January 31, 1878, a new railroad company was organized under authority of the general corporation law of Louisiana bearing the same name, to-wit, the "Canal Street, City Park and Lake Railroad Company," and having the same objects and purposes as the company which had been adjudicated bankrupt. To this new company, Handy, on August 16, 1878, conveyed by public act the property heretofore described purchased by him at the bankruptcy sale of the original Canal Street, City Park and Lake Shore Railroad Company, and the purchaser assumed the mortgage of Handy and his agreement to pay the balance due from him on his purchase of the property.

Before this conveyance, the City of New Orleans, by an ordinance numbered 4,523, administration series, dated May 22, 1878, had granted to the second Canal Street, City Park and Lake Railroad Company the right of way upon which to lay a railroad through and on the same streets and along the same route as had been previously granted by ordinance to the first Canal Street, City Park and Lake Railroad Company.

Both Handy and the railroad company, to which he sold the property, made default in the payment of the mortgage debt, and at the suit of Elizabeth Strathman and another, holders of one of the mortgage notes made by Handy, a writ of seizure and sale was issued, and the property described in and covered by the mortgage was seized and sold to Moses Schwartz and Brother, and afterwards conveyed to them by the sheriff, by deed dated April 4, 1879.

In the meantime, on March 31, 1879, the present plaintiff, the New Orleans, Spanish Fort and Lake Railroad Company, had been organized under the general law of the state for the organization of corporations, and on April 9, 1879, Schwartz and Brother sold and conveyed to the last-named railroad company the railroad,

"with all and singular the right of way, powers,

Page 114 U. S. 504

privileges, and immunities and franchises conferred and granted by the City of New Orleans to the Canal Street, City Park and Lake Railroad Company"

by the ordinance of August 5, 1873, as amended by the ordinance of March 24, 1874, being the same property bought by Schwartz and Brother at the mortgage sale.

On November 15, 1879, George Delamore, one of the defendants, recovered a judgment in the Fifth District Court for the Parish of Orleans for $5,720 against the Canal Street, City Park and Lake Railroad Company, being the second company above mentioned organized under that name. Delamore, on the 11th day of November, 1879, caused execution to issue on this judgment, which, on the 18th of November, the sheriff for the Parish of Orleans levied on a certain frame building or structure, known as "The Pavilion," being on the Bayou St. John at or near the entrance thereto into the Lake Pontchartrain, and also on

"all and singular the right of way, the powers, privileges, immunities, and franchises conferred and granted by the City of New Orleans to the Canal Street, City Park and Lake Railroad Company, under and by virtue of an ordinance of the City of New Orleans, being No. 4,523 of the administration series, adopted by the Common Council of the City of New Orleans on the 21st of May, 1878."

Thereupon the plaintiff, the New Orleans, Spanish Fort and Lake Railroad Company, filed the bill in this case in the Fifth District Court for the Parish of Orleans against Delamore and the sheriff, the prayer of which was for a writ of injunction against the defendants to restrain them from advertising or selling, or offering for sale the property so levied on, as above stated. The Fifth District Court allowed the injunction as prayed for, but on final hearing so modified it as only to restrain the seizure and sale of the rights and franchises enjoyed by the plaintiff, which it acquired from Moses Schwartz, and decreed that the plaintiff be quieted in the enjoyment and possession of the said road, right of way, powers, privileges, immunities, and franchises enjoyed by it and conferred upon it by ordinance of the City of New Orleans, and dissolved the injunction so far as it restrained the sale of property known chanrobles.com-red

Page 114 U. S. 505

as the pavilion. From this decree both parties appealed to the Supreme Court of Louisiana, which by its decree restored the injunction which enjoined the sale of the pavilion, and dissolved the injunction which enjoined the sale of rights and franchises of the New Orleans, Spanish Fort and Lake Railroad Company. The sole ground upon which the court based its decision and decree dissolving the injunction was that by the proceedings in the bankruptcy court and the sale made by its order, Handy, the purchaser, did not acquire the right of way and the privileges and franchises granted to the bankrupt corporation by the City of New Orleans, but that the same, upon the adjudication in bankruptcy, reverted to the city.