Opinion of the Court.

prived of the fire service of which the mains were a part, and they were not to be disturbed until Shelton or the water company were able to connect their works with those mains and continue the efficiency of the service by the new works when in successful operation; and the successful erection of those works and the accomplishment of the things required by the ordinance were a condition to the sale of the mains. The agreement as to the mains was therefore a conditional contract, and such delivery as was made under it was a conditional delivery. The city's mains were never disturbed in its streets, except to the extent of making connections with the mains subsequently laid by the water company and the attachment of some new hydrants. The valuation of the mains and the adoption of such valuation by the council amounted to no more than if their value had been stated at a definite sum in the agreement in regard to them. The letter of the mayor, written, in fact, after his term of office had expired, and antedated, stating that the mains had been delivered by the city to the water company, was of no effect; and, even if it had been written by him during his term of office, it was simply the expression of a legal opinion, and was not within the line of his official duty, without a special authority from the council.

(9) After the passage of the ordinance of June 1, 1885, rescinding the contract between the city and the water company, the city forcibly disconnected its mains from the system of mains laid by the water company, and restored the system of fire protection which it had enjoyed before the water company constructed its works.

(10) The period within which the water company was required to complete its works and put them in successful operation expired in August, 1884. It failed to comply with its contract, and acknowledged that failure. It then resorted to the sinking of gang wells, which it completed in November, 1884; but they also failed as a source of supply. The city showed great patience and forbearance, and waited more than eight months after August, 1884, and then passed the repeal-, ing ordinance of June 1, 1885.

Opinion of the Court.

(11) The recaption of the mains, which were only conditionally in the possession of the water company under a conditional sale, and which conditions had not been complied with by Shelton and his assigns, was therefore rightful; and the water company can have no right to restitution, nor had it any legal right to a further extension of time, for further experiments in respect to a new source of water supply.

(12) As to the question whether the plaintiffs in the crosssuit are entitled to any relief which could not be granted to the water company, the effect of the decree, sale and deed in the foreclosure suit was to vest in the purchasers at the sale the equitable interest of the trustee and of the bondholders, and all the legal interest of the water company. Before the decree, the bill of foreclosure had been dismissed as against the city, and its interests were in no manner affected by the foreclosure. The foreclosure suit, having been initiated and brought to a conclusion while the present suit of the city against the water company was pending, was, as to tllis suit, a proceeding pendente lite; but the plaintiffs in the cross-suit stand as the representatives of the bondholders, and the equities of the latter should be considered in fixing the terms of the decree. The bond bonders, as between them and the water company, were bona fide purchasers of the bonds. The water company and its agents holding the bonds for sale in 1884 and 1885, prior to May 20th, 1885, represented that the works of the water company were in successful operation, and that it had complied, when the bonds were sold, with all the conditions of its contract with the city; and, the bonds being negotiable, there was no proof of any notice to any of their purchasers which would affect their validity. The bonds and the mortgage, however, were in no sense obligations of the city, nor was it a party to their issue; and it did not become in any manner responsible for any part of the debt created by the bonds. The letters written by the city engineer, the city attorney, the chairman of the water committee, the mayor of the city and perhaps other officers, cannot operate as an estoppel on the city, because they were not written in pursuance of direct authority and were not within the

Opinion of the Court.

official duty of those officers. They tend, however, to show the bona fides of the purchases made by the bondholders; and the plaintiffs in the cross-suit cannot have imputed to them the actual bad faith which may be inferred as against Shelton and the water company in regard to the construction of the works, the water supply and the management of the affairs of the water company. They can have, however, no greater right than the water company would have had, to be restored to the possession of the city's mains, and to be permitted by the city to further experiment in regard to securing a supply of water and complying with the contract.

(13) The city never paid any interest upon the bonds. The first payment of interest was made by the water company, and the fact of such payment was made known to some of the purchasers before they would purchase the bonds. The mortgage provided for the direct payment of hydrant rents to the trustee, to be applied in payment of interest; but no payment was ever thus made by the city to the trustee. That fact was known to the trustee, and, it being the agent of the bondholders, such knowledge was imputable to them. The water company afterwards defaulted in the payment of interest, and the foreclosure proceedings were had upon the basis of a default made in the payment of interest due February 1, 1885. The bondholders knew or were chargeable with knowledge that there was a default in the payment of interest early in 1885 and a long time before June 1, 1885; and they also had knowledge of the existence of trouble between the city and the water company.

(14) There was a clause in the mortgage providing that if the water company should fail to perform any of its agreements contained in the mortgage it should be lawful for the trustee to take possession of the mortgaged property, and operate it as a mortgagee in possession, for the benefit of the bondholders, and during such possession to make all needful repairs and replacements in the mortgaged property, and to receive the rents and profits therefrom until foreclosure. This could have been done at least as early as February, 1885, when there was a default in the payment of interest. The trustee,

and the bondholders for whom it was acting, failed to take such possession; and the plaintiffs in the cross-suit are not entitled to the relief prayed in their cross-bill, while the city is entitled to have the ordinance of May 12, 1883, annulled.

(15) The decree cancelling the franchise ought not to be unconditional, however, but should be conditioned that the city, or some person or corporation authorized by it, should pay into court, for the use of the plaintiffs in the cross-suit, the reasonable cash value of the mains constructed by the water company, the machinery, the stand-pipe, the enginehouse, the land on which the same are located, and perhaps other property, to be ascertained by a master, and also an equitable amount in satisfaction of water rents.

The city excepted to this report, and the trustee also excepted to it. The case was heard before Judge Gresham, and his opinion is reported in 34 Fed. Rep. 675. He concurred generally with the master in his views of the case, and said: "The purchasers of the bonds knew that, unless water was furnished in quantity and quality as called for by the contract, nothing would be due from the city for water rents. A different ruling would be equivalent to holding that by adopting the resolution of December 6, 1883, the city guaranteed the payment of interest which would thereafter accrue on the bonds. The city did nothing of the kind, nor is it believed that the purchasers of the bonds invested their money believing that this resolution amounted to such guaranty. By the trust deed or mortgage the Farmers' Loan and Trust Company and the bondholders succeeded to the rights of the water company. If this were a suit between the city and the waterworks company I should grant the relief prayed for without allowing anything for water furnished, for none was furnished in compliance with the contract. But the controversy now is between the city and persons representing the bondholders, and I think it equitable that the city should pay them a reasonable compensation for the water which was furnished up to the time it resumed possession of the old mains. I do not think the bondholders' committee is entitled to the old mains. They were not sold to Shelton unconditionally and absolutely.

Opinion of the Court.

They were sold to him to be used in a particular way and for a particular purpose, and to be paid for by water furnished under the terms of the contract. Shelton and his successor, the water company, having failed to comply with the contract, although afforded ample time to do so, the city was authorized to resume possession of its old mains and protect its inhabi tants as best it could against fire."

On the 2d of May, 1888, the court entered a decree adjudg ing that the contracts granting the franchise to Shelton and his assigns and providing for the sale of the water mains, and the ordinance of May 12, 1883, and all rights, franchises and privileges granted thereunder, were annulled and cancelled, and the property in the water mains was revested and confirmed in the city; dismissing the supplemental and cross-bill of Parrish, Bond and Benson; ordering the city to pay to them a reasonable sum for water used from December 1, 1883, to June 1, 1885, and referring it to a master to ascertain such sum; and dividing the costs of the suit equally between the city and the plaintiffs in the cross-suit. The Farmers' Loan and Trust Company and the plaintiffs in the cross-suit prayed an appeal to this court from that decree..

The master, on the 13th of June, 1888, reported the sum to be paid, as the value of the use of the water, at $3000. The plaintiffs in the cross-suit excepted to this report, and on the 13th of June, 1888, the court overruled their exceptions, confirmed the report, and directed the city to pay into court for the use of the plaintiffs in the cross-suit the sum of $3000. From that decree, and from the prior decree of May 2, 1888, the plaintiffs in the cross-suit and the Farmers' Loan and Trust Company prayed an appeal to this court.

The appellants urge that the Circuit Court erred (1) in not dismissing the bill for want of equity, because the conditions of the contract were conditions subsequent; (2) in not holding that the city was estopped by the resolution of December 6, 1883; (3) in not dismissing the bill on the merits, on the ground that the water company was not in default; (4) in holding that the city had a right to repossess itself of the old mains which it had sold to Shelton and through him to the