form, of the action, and it were folly to hold that its effect was changed merely because the name or the form of the action had been changed, so long as the same class of wrongs was entitled to the same remedy upon allegations substantially the same. And the fact that an act might give rights to two different kinds of action, to which different statutes of limitation would apply, is not an argument that the one-year statute of limitations is inoperative. It seems to me that the wrongs complained of in this case gave a remedy by but one action at law, an action on the case; and if the plaintiff has invoked the equity jurisdiction of this court in order to prevent a multiplicity of actions, or to have an accounting, and for these reasons alone, or for any other reason of like character, the essential nature of the action is unchanged, and equity only gives a different forum for the same cause of action, and there is no different cause of action, whether it be in law or in equity. Morawetz, in discussing the right of a shareholder on behalf of a corporation to sue the directors for damages occasioned by their misconduct, says: "A suit of this character is brought to enforce the corporative or collective rights, and not the individual rights, of the shareholder. It may therefore be properly regarded as a suit on behalf of the corporation. The essential character of a cause of action remains the same. Thus a legal right of action would not be treated as an equitable one, or become governed by the rules applicable to equitable causes of action as to limitations, etc., because the shareholder brought suit in equity." 1 Mor. Priv. Corp. § 271. And the same was virtually held in Hayden v. Thompson, 17 C. C. A. 592, 71 Fed. 60; Carroll v. Green, 92 U. S. 509. I am clearly of the opinion that the operation of the state statute is not defeated by the provisions of section 1047 of the Revised Statutes of the United States, because, in my judgment, this federal statute is not applicable. Whether the bill be regarded as seeking to recover for damages caused by a breach of duty at common law, in equity, and under the statutes of the United States, as it distinctly avers, or merely for a breach of duty under the statute, this is not a suit for a penalty, but for damages. The statute does not give a liquidated amount by way of penalty, but provides for exact compensation to whoever is damaged by its breach. In Stephens v. Overstolz, 43 Fed. 465, the question whether the statute was penal or remedial was presented and decided. There Justice Miller held that the statute was remedial, and not penal, since the extent of the liability is the amount of the damage. It follows from these views that the demurrer to the bill should be sustained; and it is so ordered. TOWLE v. AMERICAN BUILDING, LOAN & INVESTMENT CO.1 (Circuit Court, N. D. Illinois. January 4, 1897.) BUILDING AND LOAN ASSOCIATIONS-POWER TO ACCEPT DRAFTS-NEGOTIABLE INSTRU MENTS. A building and loan association is not liable upon a draft fraudulently accepted by its vice president, even at the suit of an innocent holder, since such associations have no power to accept drafts. In Equity. Suit by Marcus M. Towle against the American Building, Loan & Investment Company. A receiver having been ap pointed, the firm of Grommes & Ullrich filed a petition praying that the receiver be directed to pay them the amount of a certain accepted draft. Winston & Meagher, for petitioners. GROSSCUP, District Judge. The hearing under consideration is on the petition of Grommes & Ulrich, co-partners, the answer of the receiver thereto, and the stipulation entered into between the peti tioners and the receiver respecting the facts covering the case. From these pleadings and the stipulation it appears that on the 4th of October, 1893, the American Building, Loan & Investment Company, through its vice president, purported to accept a draft, at 60 days, for the sum of $1,608.47, drawn upon it by one George Montgomery, in favor of the petitioners. Like drafts had been previously drawn by the same Montgomery, and accepted by the vice president of the society, in the name of the society. Upon inquiry by the petitioners, the vice president informed them that Montgomery was a creditor of the society, and the draft presumably accepted in the payment of such credit. As a matter of fact, no indebtedness existed to Montgomery. The arrangement was, unquestionably, a device between the vice president of the society and Montgomery, under which Montgomery, on the credit of the society, would obtain credit from the petitioners and others. So far as the facts disclosed by the pleadings and stipulation go, both the society and the petitioners are involuntary victims to this fraud, and one or the other must bear its pecuniary loss. Corporations act through their officers, and will not be heard to deny such officers' authority in a given instance where such instance is within the general field of their authority. In other words, the public dealing with a corporation, through its officers, is not required to know such officers' authority for the special transaction in hand; it is enough to know that such transaction is presumably under the gen eral authority conferred. The corporation extending the authority, not the public dealing upon the face of it, must suffer the loss if there is any abuse of it by the officer in the particular transaction in hand. This rule is founded upon the essential conveniences of commercial and corporate life, and is only holding that party liable 1 Reported by Louis Boisot, Jr., Esq., of the Chicago bar. for losses growing out of abuses of power who has it easiest in hand to prevent such abuses, either by the employment of none but honest agents, or the creation of a system of counterchecks or inspection that will speedily disclose any disposition to abuse, their trusts. But corporations are not bound by the abuse of its officers when such act of abuse is wholly and clearly outside the field of the corporation's power. Neither the president nor the directory of a corporation can do such acts as the corporation itself has no power to do. The law of estoppel does not enlarge corporate pow er, and, in consequence, corporate liability. Where the powers of the corporation stop, the powers of its officers also stop, and that point of limitation the public are bound at their peril to know. The acceptance of the draft under consideration is nothing more nor less than a promise to pay, at a future date, the sum named. Has the society the power, under the law, to execute promissory notes? It is not a commercial nor a banking institution, with the general powers incident to such concerns. It cannot borrow money, nor loan money, except such as is paid in by its members in the manner pointed out by the law, nor engage in any general business transactions. Its sole function is to consolidate the small savings of the many, and, by a system of unified loans, secure advantages to each contributor that he could not, perhaps, individually obtain. To this process of consolidation, and of loaning out the gatherings thereof, and their collection again with the interest thereon for redistribution, with such incidental powers as are necessary to make the process effective, the authority of the corporation is strictly confined. The usefulness of such corporations and their safety depend upon such strict limitation. To grant them, by judicial implication or intendment, a wider amplitude of power, would destroy the only safe assurance on which they are granted. What phase of this process demands or justifies the execution of promissory notes, or other evidences of indebtedness? Money actually obtained by such corporation can, of course, be recovered back on the equitable doctrine of money had and received. But, in view of the purposes for which this corporation was organized, what phase of its duties demands that it should have the right to execute promises to pay in the future? Of course, if a loose rein is to be given to their management, occasions may be easily pointed out when the creation of indebtedness by the execution of promissory notes might become advantageous. But the loose rein is the very thing the legislature intended to prohibit, and a tight rein is the only safe conduct the courts can adopt. This, the public dealing with them, or their officers, must either know or find out. My opinion is that the society itself had no power, in law, to execute the acceptance under consideration, and that, therefore, the act of the vice president is ultra vires. The decree will be against the petitioners. 78 F.-44 GRAND TRUNK RY. v. CENTRAL VERMONT R. CO. (Circuit Court, D. Vermont. February 10, 1897.) LEASE OF RAILROADS-PROVISION FOR PAYMENT OF NET EARNINGS TO BONDHOLDERS— RECEIVERSHIP. Where the lease of a railroad provided for the payment of the net earnings to mortgage bondholders, who were creditors of the lessor, that agreement be tween the lessor and lessee, having been assented to by the bondholders, op erated as an irrevocable assignment to them of the net earnings. And, while the lessee was obligated to pay out of the gross earnings certain prior claims before paying anything to bondholders, yet, the holders of those claims having let payment be made to the bondholders first, they became common, unsecured creditors of the lessee, and, a receiver having been appointed, they are not entitled, as against the bondholders, to have their claims paid out of earnings accruing after the appointment of the receiver; there being nothing to show that the gross earnings prior to the receiver's appointment-out of which no net earnings have ever been paid to bondholders, and which are still in the hands of the lessee-are not sufficient to pay their claims. Wager Swayne and William B. Hornblower, for Charles Parsons, petitioner. Alric R. Herriman, for three banks, petitioners. Louis Hasbrouck, for Ogdensburgh & L. C. R. Co. Thomas Spratt and Frank Loomis, for New York Central R. Co., second bondholders. Benj. F. Fifield, for Central Vermont R. Co. WHEELER, District Judge. When the receivers in this case were appointed, March, 20, 1896, the Ogdensburgh Railroad, as a leased line assigned to the defendant, passed into the hands of the receivers. Afterwards, on petition of Charles Parsons, holder of mortgage bonds of that road dated April 1, 1880, the net earnings were directed to be set apart to be disposed of according to the rights of those interested therein. Since then about $11,000 of earnings before the receivership, collected by the receivers after, and about $125,000 net earnings since the receivership, have been so set apart. Now those interested in those funds have been heard as to the disposal of the same. The lease or agreement of the Ogdensburgh road provided, among other things (article 2): "All of the gross receipts, including rents of its lands and buildings, of or from the business and traffic of or upon the said railroad and other property of said party of the first part during the continuance of this agreement, embracing all such gross receipts heretofore earned by and due the said party of the first part, but not yet received by it, shall be received and collected by said party of the second part, and shall be disposed of by it, as hereinafter stated." By article 3, the lessee was to keep the road and rolling stock and property in good order and condition, pay taxes, expenses of meetings of directors and stockholders; "to assume, conduct, and pay the expenses of any and all litigations now pending, wherein the said party of the first part is a party or interested, and to pay any and all judgments that may have been, or may ultimately be, recovered against said party of the first part therein"; to assume all obligations of the party of the first part that might thereafter be incurred, either by statute or common law, as common carriers, warehousemen, or otherwise. agreed that: And by article 5 the lessee, or party of the second part, First. To "All the gross earnings, income, and receipts of or from the business, traffic, and rents of said railroad and other property, and referred to in art. II. of this agreement, shall in each year, and annually during the continuance of this agreement, be applied and disposed of by the party of the second part as follows: the purposes, payments, and discharge of the obligations mentioned and specified in art. III. of this agreement, and to the other expenses in the maintenance, operation, use, development, and improvement of the said railroad and other property of the said party of the first part hereby transferred to said party of the second part, and the payment of the floating indebtedness now due from said party of the first part, mentioned and specified in the schedule hereto annexed, marked 'Schedule B.' Second. To what has been retired, and is not now material. Third. To the payment punctually when due, and in full, of the interest on the bonds issued and to be issued by the party of the first part, which interest is at the rate of six per centum per annum, and is payable semiannually on the first days of April and October in each year, * * not exceeding said limit of $3,500,000 in amount, and the interest thereon, not to exceed the rate of six per centum per annum." * * * Parsons is a holder of a large part of these bonds. Schedule B specifies, among other things, "all accounts of supplies of every kind furnished for said railroad." What have purported to be the net earnings under this lease have been paid over to those bondholders to October 1, 1895, and none have been paid over since that time. One note of the lessor of $15,000, guarantied by the Central Vermont Railroad Company, was made to the Ogdensburgh Bank, and another of $10,000 to the Farmers' National Bank of Malone, said to have been given for the purpose of paying the expenses of litigations which the lessee assumed under article 3, and a like note of $10,000 to the Welden National Bank, said to have been given for the payment of supplies under Schedule B, have not been paid, and are in judgments against the Ogdensburgh. Many claims against the Central Vermont Railroad Company for operating expenses prior to the receivership, amounting to about $15,000, are now outstanding; also, large claims, which have been made for liabilities as common carriers and warehousemen, are still outstanding, and one has, in October, 1896, gone into judgment. The principal questions made now are as to whether these claims, or any of them, are to be provided for out of this fund so set apart by the receivers, on the petition of Parsons, before payment is to be made to him therefrom. The obligations by which the Central Vermont Railroad Company, as assignee of the lessee, became bound to pay these claims now said to be prior to the claims of the bondholders, were absolute on the part of that company, and became at once its debt, to be paid fully, without reference to the amount of earnings which might be received from the Ogdensburgh road. No payment to the bondholders was to be made, or obligation to them incurred, except as to and from what should remain of the gross earnings after paying these prior claims. A suggestion has been made that the lessor and the lessee could at any time control the disposition of these earnings, without reference to the claims of bondholders, because the bondholders were not parties to the instrument of lease, but acquired their rights under the mortgage. As to this, however, the lease or agree |