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that it clearly appears that the rule can be put in motion only by an act of the creditors and debtor jointly.
The mere filing of two or more petitions, one of which avers a prior act of bankruptcy, cannot put in action the enforcement of this rule. By reference to the rule, it will be seen that there are two things absolutely necessary to bring this rule in force: First, two or more petitions must be filed by creditors against a common debtor, alleging separate acts of bankruptcy committed by said debtor; and, second, “the debtor shall appear and show cause against an adjudication in bankruptcy against him on the petitions." Rule 7, Collier on Bankruptcy (6th Ed.) p. 638.
It will be noted that the plural is used, and reference is made to petitions, and not to a petition or any one of these two or more petitions. There being two petitions only in this case, to bring in action this rule, it was necessary for the debtor to answer both of these petitions. Had there been three petitions, it would have been equally necessary for the debtor to have answered all three of the petitions. In fine, if the debtor does not appear and show cause on all of the petitions, the cause proceeds as it would in the ordinary course of legal procedure, without regard to the rule. It follows, therefore, that the answer of the debtor and his demand for a jury must be stricken from the files : First, because the answer does not controvert the allegations of both petitions; and, second, because of the grounds averred in the motion of the creditors filing the second petition, to wit, that the said answer of the bankrupt is insufficient, in that it does not controvert the allegations of bankruptcy alleged in the second petition.
It is true that the debtor denies that he committed any act of bankruptcy as alleged in said petition, and, if this were all, it would be treated as a sufficient answer or denial of bankruptcy, but the debtor goes further, and endeavors to set out such facts upon which this denial is predicated, and those facts, when construed, construing the pleading more strongly against the pleader, in reality admit the insolvency of the debtor, and also admit the acts of bankruptcy averred in the second petition, but seeks to avoid them by stating that they were done without any intention of preferring his creditors.” To permit a debtor to bring in issue before a jury the intention alone, with which the debtor, while insolvent, permits any creditor to have a preference, would be to permit him to present an issue not warranted by the bankrupt law. Where an insolvent debtor transfers to one of his creditors personal property sufficient in value to satisfy the debt in full, his intent to prefer such creditor over his other creditors,” necessary to make such transfer an act of bankruptcy, will be presumed; the preference being the natural result of the transfer. Johnson v. Wald et al., 93 Fed. 640, 35 C. C. A. 522; Rex Buggy Co. et al. v. Hearick et al., 132 Fed. 310, 65 C. C. A. 676, and numerous other cases there cited.
It is contended by the debtor that he should be permitted to contest any one of the petitions alleging acts of bankruptcy that he may desire, and this contention is urged, in that he does not desire to be adjudicated a bankrupt upon any untrue averment. The debtor has a right to bring in issue such a question as this, but not in this manner, for he has confessed the acts of bankruptcy averred in the first petition. If he is adjudicated a bankrupt upon a petition stating acts of bankruptcy of which he was not guilty, he would still have his day in court after adjudication, by taking action to cause such adjudication to be annulled or vacated. This right is provided for and conserved under rule 7.
It must not be forgotten that it is the creditors who filed the second petition, who have filed the motion to strike from the files the answer of the debtor, Harris, and his deinand for a jury. With the answer of the debtor and demand for a jury stricken from the files, we have left only the two petitions and the contest thereof, filed by the creditors Epstein and the Southern Art Glass Company. With the contest by the debtor out of the way, rule r has no application whatever in these proceedings, and hence it follows that the two petitions filed by the creditors must be considered in the order of their filing.
It is therefore ordered, adjudged, and decreed that the first petition filed by the creditors on the 6th day of June, 1907, and the answer thereto filed by Jacob Epstein, one of the creditors, be, and the same are hereby, referred to the referee in bankruptcy at Birmingham, to wit, Alex C Birch, with instructions to give notice and set a day to take testimony on the issues raised by the said first petition and the creditor's answer thereto. It is further ordered, adjudged, and decreed that the said Alex C. Birch report the evidence to the judge of this court at Huntsville, on or before the 25th day of July, 1907, that on such evidence adjudication be made or not as the same may warrant. A11 proceedings and questions in relation to the second petition, and the answer thereto, are held in abeyance until the final hearing on the first petition.
ST. LOUIS & S. F. R. CO. v. HADLEY, Atty. Gen., et al. (and 17
No. 2,988. 1. EQUITY-PLEADING-SUPPLEMENTAL BILL.
Where suits by railroad companies to restrain the enforcement of a state statute fixing freight rates, on the ground that it was confiscatory and unconstitutional, were pending in a federal court at the time of the enactment of a second statute fixing passenger rates, the question of the constitutionality of the second act may properly be raised and determined
in the pending suits on supplemental bills. 2. COURTS-FEDERAL AND STATE COURTS-PRIORITY OF JURISDICTION.
Where bills were tendered for filing in a federal court pursuant to no tice previously given, and while leave was not then granted because of the absence of defendants, restraining orders were issued by the court based thereon, the court obtained jurisdiction over the subject-matter of the suits from such time, which was not ousted by the institution of suits in a state court subsequently, but before the formal filing of the bills.
[Ed. Note.-For cases in point, see Cent. Dig. vol. 13, Courts, SS 1346,
1347.] 3. SAME-JURISDICTION OF FEDERAL COURTS-SUITS TO ENJOIN ENFORCEMENT
OF STATE STATUTE.
A federal court of equity has jurisdiction of suits to determine the constitutionality of state statutes regulating railroad rates which are at
tacked on the ground that the rates fixed are unremunerative to the railroad companies, and that their effect, if enforced, will be to deprive the companies affected of their property without due process of law, and such suits are appropriate means for determining the question.
[Ed. Note.—For cases in point, see Cent. Dig. vol. 13, Courts, $$ 820, 823.
Jurisdiction in cases involving federal question, see notes to Bailey v. Mosher, 11 C. C. A. 308; Montana Ore Purchasing Co. v. Boston & M. C.
C. & S. Min. Co., 35 C. C. A. 7.] 4. CARRIERS-STATUTE REGULATING RAILROAD RATES-PRELIMINARY INJUNC
TION TO RESTRAIN ENFORCEMENT.
Preliminary injunctions to restrain the putting into effect of a state statute fixing maximum rates of passenger fares on railroads denied to await a demonstration of the reasonableness or unreasonableness of such rates by actual trial for a reasonable length of time.
Herbert S. Hadley, John Kennish, Sanford B. Ladd, and F. W. Lehmann, for defendants.
McPHERSON, District Judge. These cases were argued on Saturday and taken under advisement until this time. The situation is such that I must decide the questions to-day. Limited as the time has been, I have an abiding conviction of what should be done, even if the reasons therefor may not be stated with the fullness that the importance of the matters requires. I have been much aided by the arguments, which were strong, eloquent, and powerful, by counsel representing both sides, and, as it seems to me, every phase of the questions was so illuminated by the arguments that all possible questions are at an end of debate. The real question here is : Has this court jurisdiction over the passenger fare law of 1907 of the Missouri Legislature, by which it is declared that the legal fare be two cents per mile? A question connected with that is whether the buis tendered are supplemental bills to those filed in the 18 cases two years ago to enjoin the enforcement of the freight tariff law of 1905 now pending before the master.
A supplemental bill usually is where there has been some change in the rights or status of the parties which must be carried forward by a supplemental bill, and usually, when a supplemental bill is thus allowed, matters can be brought in which could have been covered by an amendment to the original bill
. These discussions as to supplemental bills, as well as to other bills, are exceedingly technical. It seems to me that the test is, not so much in the way a pleading is styled, as what the allegations of the pleading are. Formerly, discussions as to various bills in equity gave rise to great delay; the results being that years and years would elapse before a chancery case could be concluded. Looking back at those old discussions, it now seems to have been a folly to thus waste the time and energies of the judges and of counsel in determining such technical questions. Such must have been the belief of the Supreme Court when a code of rules in equity was established; the purpose no doubt being to get rid of the old technicalities which served no useful purpose. By the adoption of the rules in equity, we have a system of fact pleading, covering almost every phase of equity pleading and practice; and it is only when some question of practice is not covered by the rules that we go back to see what the practice of the High Court of Chancery in England was, and then not as positive rules, but as furnishing just analogies. Rule 90 thus providing was adopted in the year 1842, and the Supreme Court has decided that, when we go to the English Chancery practice, we must take the practice as it existed in England in 1842, when this rule was adopted. By rule 57 it will be seen that the supplemental bill is allowed when any material event has happened after the filing of the original bill. In 1905, the Legislature of Missouri enacted a maximum freight tariff statute as to several commodities. The railways contested the validity of that statute in the 18 actions above referred to, and these actions are still pending. By the act of 1907 the Legislature declared that all railways should charge but two cents per mile per passenger. It seems to me that this is an event happening since the institution of the original suits, and an event that is germane to the original controverted questions. But I do not deem it of much importance to determine whether the pleadings tendered for filing are supplemental bills, or whether they are original bills.
On Tuesday, the 11th inst., the complainants gave notice of filing these bills on Friday, the 14th inst. On Thursday, the 13th inst., the railway companies asked leave to file them. Solely out of courtesy to the Attorney General, who was not then present, this was refused, but the court on its own motion issued restraining orders to keep the matters in statu quo. At the time fixed, Friday the 14th inst., the matter was again delayed for a day at the request of the Attorney General; he still being absent. And on that day bills were filed in the state courts at Saint Louis and Kansas City; the purpose being, as it is said, to bring about the enforcement of this statute in question. And the argument now is that, as these cases were filed in the state courts on Friday the 14th inst., the day before the arguments were had in this court, the same subject-matter was pending in the state courts, and that the state courts would take jurisdiction to the exclusion of this court; the cases being there first pending. But the above statement of facts shows that the cases were pending in this court from Tuesday, the 11th inst., and that orders were made on Thursday, the 13th inst., the day before the cases were lodged in the state courts. If these matters could not be covered by supplemental, they could be covered by original, bills, and they were presented prior to the institution of the cases in the state courts. It is not material whether these supplemental bills, so called, are full and complete as original bills. Defects could be cured upon exceptions or demurrers, or by complainants on their own motion before the filing of an answer. Nor is it material whether these pleadings are filed in the original cases or separately docketed, because, if separately docketed, they will at once for trial purposes be consolidated with the old cases pursuant to section 921 of the Revised Statutes [U. S. Comp. St. 1901, p. 685]. And whether the contention of counsel for the state officers be technically correct or not, the contention is without substantial merit as to the rights of the parties. These pleadings should be filed and regarded as having been filed on Tuesday, the 11th inst.
The fixing of rates by the Legislature is presumptively correct, and the railway companies have the burden of proof of showing that the statute is not remunerative. That the fixing of rates is a legislative act, all agree; but that such rates must be reasonably remunerative cannot longer be discussed. The railways are entitled to cost and a reasonable profit, and no fair-minded man disputes it. How to arrive at the cost and a reasonable profit is a most difficult problem. But, if the statute is challenged, it must be ascertained, and this ascertainment can only be by judicial proceedings, and must be determined by the courts, and ultimately by the Supreme Court of the United States. No skill of the draughtsman by the use of words or phrasing can take this question from the courts. It can never be settled in a criminal case by arresting ticket agents and conductors. The Supreme Court in the end must have the evidence with the right to make the ultimate findings of fact. There is but one orderly and seemly way, and that is in equity with the right of appeal to the Supreme Court, as has been said by that court over and over again. All contentions that the courts of the state can decide these questions as well as can the United States courts is not a question for argument, because it is a question of jurisdiction, and in my judgment in these cases this court has jurisdiction, and, having jurisdiction, the jurisdiction should be exercised.
There seems to be much feeling in the minds of many as to where these cases should be adjudicated, but why the feeling I do not understand. And yet I recall the historical facts that at various times since the organization of this government the feeling has run high as to whether the federal or state courts should adjudicate matters of importance to the public. No one doubts that the states have a right to manage their own local affairs, and to have matters growing out of their own local affairs determined by their own courts. But it is too late to seriously complain, because the United States courts take and exercise jurisdiction under the constitutional provision providing for the courts, and the enactments thereunder. The United States courts, regardless of the citizenship of the parties, will take and exercise jurisdiction in actions of a civil nature when the provision of the United States Constitution is invoked, as has been done in this case. The Constitution provides for this, and Congress has provided the procedure. The commerce clause of the United States Constitution has been invoked, as is the fourteenth amendment. These are national questions, and the Supreme Court will hold the scales of justice with the evidence before it, and why there should be any excitement or feeling about this is beyond my comprehension. I do not know, and of course do not state, that the state Legislature has wronged these railways, because that is the question to be decided when deciding the merits of the case. The railways say that they are being wronged, and they should have a hearing, and the hearing should be on the evidence, and that evidence carried in the record to the Supreme Court. And if upon the evidence the railways are being compelled to transact business at a loss, no one ought to doubt but that the Supreme Court will hold the statute void. If the rates fixed are remunerative, no