proceedings in the federal courts under which that company claims title. This, it would seem, was such an assertion of a right and title under an "authority exercised under the United States" as gives this court jurisdiction to re-examine the final judgment of the state court. Rev. St. § 709.

In Dupasseur v. Rochereau, 21 Wall. 130, 134, 135, which was a suit to subject certain lands in satisfaction of a debt secured by mortgage, and for the amount of which debt judgment had been obtained, the defense was rested upon the ground that the defendant purchased the property at a sale made under a judgment of the circuit court of the United States for the Eastern District of Louisiana in a named case, "free of all mortgages and incumbrances, and especially from the alleged mortgage of the plaintiff." This defense was not recognized by the supreme court of Louisiana, and the case was brought to this court by writ of error. One of the questions considered was as to the jurisdiction of this court under the act of February 5, 1867, which gives a writ of error to the highest court of a state in which a decision in the suit could be had, "where any title, right, privilege or immunity is claimed under or authority exercised under the United States, and the decision is against the title, right, privilege or immunity specially set up or claimed under such authority." Rev. St. § 709 (14 Stat. 385). Mr. Justice Bradley, delivering the opinion of the court, said: "Where a state court refuses to give effect to the judgment of a court of the United States rendered upon the point in dispute, and with jurisdiction of the case and the parties, a question is undoubtedly raised which under the act of 1867 may be brought to this court for revision. The case would be one in which a title or right is claimed under an authority exercised under the United States, and the decision is against the title or right so set up. It would thus be a case arising under the laws of the United States establishing the circuit court and vesting it with jurisdiction, and hence it would be within the judicial power of the United States, as defined by the constitution; and it is clearly within the chart of appellate power given to this court over cases arising in and decided by the state courts." Having disposed of the question of jurisdiction, the court then inquired whether the state court, in overruling the defense, had given proper validity and effect to the judgment of the circuit court of the United States. Upon this point the court said: "The only effect that can be justly claimed for the judgment in the circuit court of the United States is such as would belong to judgments of the state courts rendered under similar circumstances. Dupasseur & Co. were citizens of France, and brought the suit in the circuit court of the United States as such citizens; and, consequently, that court, deriving its jurisdiction solely from the citizenship of the parties, was in the exercise of jurisdiction to administer the laws of the

state, and its proceedings were had in accordance with the forms and course of proceeding in the state courts. It is apparent, therefore, that no higher sanctity or effect can be claimed for the judgment of the circuit courtof the United States rendered in such a case under such circumstances than is due to the judgments of the state courts in a like case and under similar circumstances. If by the laws of the state a judgment like that rendered by the circuit court would have had a binding effect, as against Rochereau, if it had been rendered in a state court, then it should have the same effect, being rendered by the circuit court. If such effect is not conceded to it, but is refused, then due validity and effect are not given to it, and a case is made for the interposition of the power of reversal conferred upon this court. We are bound to inquire, therefore, whether the judgment of the circuit court thus brought in question would have had the effect of binding and concluding Rochereau, if it had been rendered in a state court. We have examined this question with some care, and have come to the conclusion that it would not."

The same question was again before this court in Crescent City Live-Stock Co. v. Butchers' Union Slaughter-House Co., 120 U. S. 141, 146, 7 Sup. Ct. 475, which was an action for malicious prosecution; the defense being that the existence of probable cause had been previously determined by a judgment in the circuit court of the United States. It was contended that the supreme court of the state failed to give proper effect to that judgment, and thereby denied to the defendant a right arising under the authority of the United States. The case came here upon writ of error, and the jurisdiction of this court to review the final judgment was sustained. Mr. Justice Matthews, speaking for the court, said: "It must, therefore, be conceded that the sole question to be determined is, did the supreme court of Louisiana, in deciding against the plaintiffs in error, give proper effect to the decree of the circuit court of the United States, subsequently reversed by this court? It is argued by the counsel for the defendant in error that this does not embrace any federal question; that the effect to be given to a judgment or decree of the circuit court of the United States sitting in Louisiana by the courts of that state is to be determined by the law of Louisiana, or by some principle of general law as to which the decision of the state court is final; and that the ruling in question did not deprive the plaintiffs in error of any privilege or immunity specially set up or claimed under the constitution or laws of the United States.' But this is an error. The question whether a state court has given due effect to the judgment of a court of the United States is a question arising under the constitution and laws of the United States. and comes within the jurisdiction of the federal courts by proper process, although, as was said by this court in Dupasseur v. Roch

ereau, 21 Wall. 130, 135, 'no higher sanctity or effect can be claimed for the judgment of the circuit court of the United States rendered in such a case, under such circumstances.' Embry v. Palmer, 107 U. S. 3, 2 Sup. Ct. 25. It may be conceded, then, that the judgments and decrees of the circuit court of the United States, sitting in a particular state, in the courts of that state, are to be accorded such effect, and such effect only, as would be accorded in similar circumstances to the judgments and decrees of a state tribunal of equal authority. But it is within the jurisdiction of this court to determine in this case whether such due effect has been given by the supreme court of Louisiana to the decrees of the circuit court of the United States here drawn in question. The decree of the circuit court was relied upon in the state court as a complete defense to the action for malicious prosecution, on the ground that it was conclusive proof of probable cause. The supreme court of Louisiana, affirming the judgment of the inferior state court, denied to it, not only the effect claimed, but any effect whatever."

According to these decisions, and in view of the statute giving this court authority to re-examine the final judgment of the highest court of a state denying a right specially set up or claimed under an authority exercised under the United States, it is clear that we have jurisdiction to inquire whether due effect was accorded to the foreclosure proceedings in the circuit courts of the United States under which the plaintiff in error claims title to the lands and property in question.

The plaintiff in error contends that the state court did not give due effect to the decrees of the circuit courts of the United States in the suits instituted by Roosevelt and Fosdick, in that it did not recognize as paramount the rights acquired under those decrees by the purchasers of the property in question, but postponed or subordinated those rights to a lien upon such property, which, it is alleged, was created or attempted to be created while those suits were pending, and while the property was in the actual custody of those courts, by receivers, for purposes of being administered.

Did Lynde, under the circumstances stated in the finding of facts, acquire a good title, as between himself and the mortgagor company, and the companies which succeeded it by consolidation, to the 36 bonds purchased by him from Newbold & Son, as well as the right to claim the benefit of the mortgage executed to Parkhurst? Referring to the facts recited in the finding. the supreme court of Ohio said: "Plaintiff in error contends, among other things, that the facts thus stated show that neither the maker of these bonds, nor the consolidated companies into which it became merged, consented to the sale or delivery of the bonds, and, as an owner cannot be deprived of his property without his consent, no title passed. It is

true that these bonds were negotiated to Newbold & Son without the knowledge of consent of the company; but such consent and knowledge is not indispensable to pass the title to negotiable instruments. Where this class of paper, complete in form and transmissible by delivery, is placed by the maker or owner in the custody of one who is thereby clothed with an apparent power of disposition, and the custodian avails himself of the opportunity thus afforded him to negotiate it to an innocent party; the title of the holder is not to be tested by principles applicable to stolen securities, but by principles properly applicable to the transaction as it actually occurred. That the title to negotiable securities may pass by virtue of such a transaction as the finding of fact shows occurred in respect to the negotiation of the bonds in question is, we think, clear upon principle, and sustained by authority. Railway Co. v. Sprague, 103 U. S. 756; Fearing v. Clark, 16 Gray, 74. Independently of the rules of law designed to protect and give, currency to negotiable paper, those principlesof natural justice universally applicable to the affairs of mankind, when applied to this transaction, would seem to demand the protection of the defendant in error as against the maker of the bonds and all who stand in its shoes. He was wholly free from fault in connection with the transaction. Each bond contained a declaration of its transmissibility from hand to hand by mere delivery. He found them for sale, before they were due, in the market where such securities are usually offered for sale, and bought them at their fair market value without notice of any infirmity in their title. Soon thereafter he took them to the Union Trust Company, in New York City, the agents of the makers, specially appointed to register its bonds, and caused them to be registered in his name on its books. What more could even the highest degree of prudence or diligence demand of him? On the other hand, the maker of the bonds, a railway company, capable of acting through agents only, placed these bonds in the custody of its president, an agent clothed with high, though possibly not clearly-defined, powers. The bonds were perfect obligations, bearing on their face a certificate of authentication by the trustee. and containing an express declaration of their transmissibility from hand to hand by mere delivery. He was, up to and long after the time these bonds were negotiated, continued as president of the different consolidated companies as they were successively formed. The companies thus held him out to the world as one who could be trusted to transact matters of importance. Under these circumstances, what can be found tending to excite a doubt in the most cautious mind respecting his power to dispose of bonds so intrusted to him? If the maker of these bonds, and those who must abide by its title, can shift the responsibility and consequent

loss resulting from this transaction from themselves to the holder of the bonds, it must be by the application of some stern rule of law founded upon considerations of public policy." Railway Co. v. Lynde, 55 Ohio St. 23, 45, 44 N. E. 396

The state court adjudged that there was no rule of law arising out of the public policy of the state, as manifested by state legislation, that required it to deny to the holders of these bonds the rights and privileges pertaining to commercial paper purchased in good faith in the ordinary course of business. Assuming that this question of general law was correctly determined by that court, we are now to inquire what effect, if any, the proceedings in the foreclosure suits instituted by Roosevelt and Fosdick in the circuit courts of the United States had upon the right of Lynde, as the bona fide holder of the 36 bonds, to the security furnished by the Parkhurst mortgage.

We have seen that when Lynde purchased the 36 bonds, to secure which, with other bonds, the Parkhurst mortgage had been previously executed, the property described in that mortgage, and here in question, was in the actual custody of the circuit courts of the United States, by receivers appointed in the foreclosure suits brought by Roosevelt and Fosdick. The contention of the plaintiff in error is that the property was a fund in those courts to abide the event of the litigation in them, and that, pending the proceedings in those courts and their actual possession of the property, it was impossible that Lynde, by purchasing the 36 bonds, could have acquired any lien thereon which the law would recognize and enforce.

The principal authority cited in support of this contention is Wiswall v. Sampson, 14 How. 52, 68, in which it was held that, while real estate is "in the custody of the court as a fund to abide the result of a suit pending, no sale of the property can take place, either on execution or otherwise, without the leave of the court for that purpose." If the rule were otherwise, the court said, the whole fund might pass from its hands before final decree, and the litigation become fruitless.

We do not perceive that the principle announced in Wiswall v. Sampson controls the determination of the present case. If there had been any attempt by suit to enforce the lien given by the Parkhurst mortgage by an actual sale of the property in question pending the proceedings in the foreclosure suits, it may be that the principle announced in that case could have been invoked, and the sale would have been ineffectual to pass tltle to the purchaser. But nothing was done by Lynde, after the institution of the foreclosure suits and pending proceedings therein, which was inconsistent with or tended to defeat the object of those suits. He only purchased the bonds in question, and such purchase was not hostile to the possession by the circuit courts in the foreclosure suits of

the property mortgaged to secure them, simply because by such purchase he succeeded to an interest in the Parkhurst mortgage. The foreclosure suits proceeded to a final decree without any attempt to interfere with the custody and control of the property for the purposes avowed in those suits; for the bill filed by Roosevelt and Fosdick showed upon its face that no relief was asked as against the Parkhurst mortgage or the bonds secured by it. It was distinctly found, and it is not disputed, that the Roosevelt-Fosdick suits were for the foreclosure of the mortgage in which they were named as trustees. "but not affecting the Parkhurst mortgage aforesaid, or the bonds thereby secured." And by the final decree in those suits the mortgaged property was directed to be sold subject to the outstanding bonds prior in lien to the Roosevelt-Fosdick mortgage, and to all other, if any, paramount liens thereon. The Parkhurst mortgage was prior in date to the Roosevelt-Fosdick mortgage, and the decree in the foreclosure suits expressly declared that nothing contained in it should "in any manner affect, prejudice, or preclude the holders of said paramount liens, or any of them, but that said decree should be without prejudice to the rights of them, and each of them." Thus, the decree expressly saved the rights of those who held bonds secured by mortgage prior in date to the mortgage to Roosevelt and Fosdick. It bound only the defendants in the foreclosure suits, and all persons claiming or to claim under them or any of them, subsequent to the institution of those suits. Strictly speaking, the lien that attended the 36 bonds purchased by Lynde did not arise after the institution of the foreclosure suits, although Lynde's purchase was pending the proceedings in those suits, and while the property was in the hands of receivers. That lien had its origin in the execution and delivery of the Parkhurst mortgage, and the authentication by the trustee of the bonds named in it; and, when any of those bonds became the property of a bona fide holder, the lien given to secure them related back to the date of the mortgage, which was long prior to the institution of the foreclosure suits. Besides, Parkhurst, the trustee in the prior mortgage, was not made a party to the foreclosure suits, and neither he nor those whose interests he was appointed to represent were bound by the decree or any of its provisions. The rule is well settled that a sale of real estate under judicial proceedings concludes no one who is not in some form a party to such proceedings. United Lines Tel. Co. v. Boston Safe-Deposit & Trust Co., 147 U. S. 431, 448, 13 Sup. Ct. 396. It would seem, therefore, clear that the pendency of the foreclosure suits did not interfere with the negotiation or transfer of the bonds secured by the prior Parkhurst mortgage; nor did the decree in those suitsimpair in any degree the lien created by the Parkhurst mortgage, which antedated the

mortgage to Roosevelt and Fosdick. The mere purchase of the 36 bonds by Lynde, and the acquisition by him in consequence of such purchase of an interest in the Parkhurst mortgage, cannot be regarded as hostile to the possession taken by the circuit courts of the United States of the property embraced by the Roosevelt-Fosdick mortgage for the purpose of selling it in satisfaction of the debts secured by that mortgage, but subject to prior paramount liens, such as the lien created by the Parkhurst mortgage.

We are of opinion, for the reasons stated, that the state court did not fail to give due effect to the several decrees in the circuit courts of the United States in the foreclosure suits instituted by Roosevelt and Fosdick, when it held that those decrees did not prevent the defendant in error from claiming the benefit of the lien created by the mortgage to Parkhurst to secure the payment of the bonds purchased by Lynde from Newbold & Son.

The judgment below is affirmed.

1. A case involves a federal question, which sufficiently appears, where the pleadings show that plaintiff claims rights in property formerly owned by the state, under a conveyance authorized by an act of the legislature, and that - defendant claims conflicting rights under a -subsequent contract with the state, ratified by the legislature, and the record shows that the validity of the later contract and act was sustained by the state court.

2. The fact that a case involving the question -of the impairment of a contract by state legislation is disposed of by the state court upon a construction of the contract does not deprive the supreme court of jurisdiction to review such decision, it being the duty of that court in such cases to determine for itself the proper construction of the contract upon which the plaintiff relies.

3. Rev. St. § 709, does not require a federal right to be "specially set up and claimed," to authorize the supreme court to review a state decision in a case in which there was drawn in question the validity of a state statute, on the ground that it impaired the obligation of a contract, and the decision was in favor of its validity.

was one

4. An act of the South Carolina legislature authorized the sale and conveyance of the Columbia Canal and its appurtenances, subject to certain conditions, among which that the state should be furnished free of charge with 500 horse power of water power on the line of the canal. It also contained a further proviso that "the right of the state to the free use of the said 500 horse power shall be absolute." Held. that such proviso was not limited by prior acts relative to the canal by which water power had been reserved for the

use of the state penitentiary, but that the word "absolute," as used therein, meant "unrestricted and unconditional," and the state might. without impairing the rights of the grantee, grant the right to third parties to use any part of the water power so reserved.

5. Whether in such case a lease by the state of the water power so reserved carried with it, as an incident, the right to the lessee to erect certain buildings or other structures on lands appurtenant to the canal, is not a federal question, and its determination by the state courts cannot be reviewed by the supreme court.

In Error to the Supreme Court of the State of South Carolina.

*This was a complaint, in the nature of a bill in equity, filed in the court of common pleas for Richmond county by the Columbia Water-Power Company, as plaintiff, to enjoin the Columbia Electric Street-Railway, Light & Power Company from using certain water power for the propulsion of its cars, lighting its lamps, and furnishing power motors, also from entering upon plaintiff's lands and erecting thereon its buildings, works, and machinery, and also requiring the defendant to remove such as had already been erected, and for the payment of damages.

The bill set forth that a structure known as the "Columbia Canal" begins above the city, passes through the city near the western boundary, and empties into the Congaree river just beyond the limits of the city, passing around the shoals and falls in said river, and, when constructed and in use, made a continuous communication between the Broad and Congaree rivers; that the canal was begun by the state as a public work in the year, 1824, and for the purpose of its construction certain lands were purchased within the limits of the city, through which the canal was to be carried and constructed; that the canal was used for purposes of navigation for some time, and remained, with the lands described, the property of the state until February 8, 1882, when the general assembly of the state, by an act of that date, authorized and directed the canal commission to transfer the canal, with the aforesaid lands, to the board of directors of the state penitentiary, with all the rights and appurtenances thereto acquired by the state; that the board was authorized and directed to, and subsequently did, take possession of the canal and lands, and proceeded with the work of enlarging and developing the canal, expending large sums of money for that purpose, and widened and enlarged its banks, and remained in the full possession thereof until December 24, 1887, when the general assembly passed an act (the material portions of which are printed in the margin)1

1 Act Dec. 24, 1887.

Section 1. Be it enacted by the senate and house of representatives of the state of South Carolina, now met and sitting in general assembly, and by the authority of the same, that the board of directors of the South Carolina penitentiary are hereby authorized, empowered and required to transfer, assign and release to the board of trustees of the Columbia Canal,

"to incorporate the board of trustees of the Columbia Canal, to transfer to said board the Columbia Canal with the lands held therewith, with its appurtenances, and to develop the same" (19 St. at Large S. C. p. 1090); that by section 1 of the act the board of directors of the penitentiary was authorized to transfer and release to the board of trustees of the canal the canal property and its lands, with their appurtenances, and that the same should vest in the trustees for the use and benefit of the city of Columbia; that such transfer was made and possession taken by the board of trustees, and the property so remained in their possession until the date and year hereinafter mentioned.

That by section 21 of the above act the board of trustees was declared a corporate body, and was authorized, among other things, to purchase, sell, or lease lands adjoining the canal, useful for the purposes of the canal, and to sell or lease the water power of the canal, subject to such rules and regulations as It should prescribe, and that by virtue of

hereinafter created and provided for, the property known as the Columbia Canal, together with the lands now held therewith, acquired under the acts of the general assembly of this state with reference thereto or otherwise, all and singular the rights, members and appurtenances thereto belonging; and upon such transfer, assignment and release all the right, title and interest of the state of South Carolina in and to the said Columbia Canal and the lands now held therewith, from its source at Bull's sluice through its whole length to the point where it empties into the Congaree river, together with all the appurtenances thereunto belonging, shall vest in the said board of trustees for the use and benefit of the city of Columbia, for the purposes hereinafter in this act mentioned, subject, nevertheless, to the performance of the conditions and limitations herein prescribed on the part of the said board of trustees and their assigns: provided, that should the said canal not be completed to Gervais street within seven years from the passage of this act all the rights, powers and privileges guaranteed by this act shall cease, and the said property shall revert to the state.

Sec. 2. That the said board of trustees are hereby authorized and directed, for the development of the said canal, to take into their possession the said property with all its appurtenances; and for the purpose of navigation, for providing an adequate water power for the use of the penitentiary and for other purposes herein named, they are hereby authorized, empowered and directed to improve and develop the same.

*

*

*

Sec. 7. That the board of trustees shall, within two years from the ratification of this act, complete the said canal so as to carry a body of water 150 feet wide at the top, 110 feet wide at the bottom and 10 feet deep from the source of the canal down to Gervais street, and furnish the state, free of charge, on the line of the canal. 500 horse power of water power, to Sullivan Fenner or assigns 500 horse power of water power, under his contract with the canal commission, and to furnish the city of Columbia 500 horse power of water power at any point between the source of the canal and Gervais street the city may select; and shall, as soon as is practicable, complete the canal down to the Congaree river a few yards above the mouth of Rocky Branch: provided, that the right of the state to the free use of the said

such act the trustees became entitled to the exclusive franchise and right to sell or lease the water power developed by the canal for manufacturing and other industrial purposes, without let or hindrance, and without the right of any person or corporation to interfere or interrupt in any manner the use of such water power, save and except it should provide a certain amount of water power to certain persons and parties in said act nominated and mentioned, and that no person or corporation had a right to divert, disturb, impede, or interfere with the flow of water down the said canal.

That by the twenty-third section of this act, as amended by the subsequent act of December 24, 1890 (20 St. at Large S. C. p. 967), the board of trustees was given full power and authority to sell, alienate, and dispose of the canal, its lands and appurtenances, to any person or corporation, subject to all duties and liabilities imposed by the act, and to all contracts made by the board, prior to such transfer, upon the approval and consent of

Sec. 21. The said board of trustees shall be, and is hereby, declared a body politic and corporate. Its corporate name shall be "Board of Trustees of the Columbia Canal." Its officers shall be a chairman, and a secretary and treasurer. It shall have a corporate seal; may make and enforce its by-laws for its government; may purchase, sell or lease lands adjoining the canal useful for the purposes of the canal; may sell or lease the water power of the canal subject to such rules and regulations as it shall prescribe, having first provided for the state with 500 horse power of water power at the penitentiary, and 500 horse power of water power for Sullivan Fenner or his assigns, and 500 horse power of water power for the city of Columbia; may sue and be sued, plead or be impleaded under their corporate name, and exercise such other powers as re herein before granted, and shall fix such compensation for the services of the secretary and treasurer as they may deem proper.

Section 23 as Amended by Act Dec. 24, 1890 (20 St. at Large S. C. 967).

Sec. 23. That the said board of trustees, as soon as they have fully developed the said canal and secured the payment of the debts contracted by them in its development, they shall turn over the canal, with all its appurtenances, to the city of Columbia. But the said board of trustees shall have full power and authority, before the said canal has been fully developed and completed and turned over to the city of Columbia, to sell, alienate, and transfer the same and all its appurtenances, the lands held therewith, and all the rights and franchises conferred by this act on said board of trustees, to any person or corporation, subject, however, to all the duties and liabilities imposed thereby, and subject to all contracts, liabilities, and obligations made and entered into by said board prior to such sale and transfer, upon the approval and consent of nine members of the city council of the city of Columbia; and before such sale, alienation and transfer is made thirty days' notice of the offer to purchase and the terms thereof shall be given to the council of the city of Columbia. Approved December 24, A. D. 1890.