If that is true, the appellants cannot complain. Central Trust Co. v. East Tennessee, V. & G. R. Co., 26 C. C. A. 30, 80 Fed. 624; St. Louis, A. & T. H. R. Co. v. Cleveland, C., C. & I. R. Co., 125 U. S. 658, 675, 8 Sup. Ct. 1011, 31 L. Ed. 832. The question is one which must involve a careful examination of the books of the railroad company by persons expert in such matters. The master's report, standing as it does upon an erroneous principle of law, is of little or no value. The exception pointing out this error should have been sustained. The decree confirming the master's report, so far as it found there had been no diversion of income, will be reversed, and the causes of Winfield S. Gregg, The Adams & Westlake Company, the Louisville & Nashville Railroad Company, and the Baltimore & Ohio Southwestern Railroad Company will be remanded to the circuit court, with directions to reopen the master's report upon the question of diversion of income, and refer same, with leave to both parties to take additional evidence. The costs of this appeal in the four cases mentioned will be paid by the receiver. The decree in the cause of the Columbus Terminal Company, and of G. H. Stewart, and of Harrison, Olds & Henderson will be affirmed, with costs. (109 Fed. 230.) MONSARRAT v. MERCANTILE TRUST CO. et al. (Circuit Court of Appeals, Sixth Circuit. May 7, 1901.) Nos. 853, 872. 1. RAILROADS-FORECLOSURE OF MORTGAGE-PREFERENTIAL DEBTS. A provision of an order appointing a receiver for a railroad in a foreclosure suit directing him to pay traffic and mileage balances which had accrued within six months, while it entitled another company to preferential payment from the income of the receivership of a claim for a balance on mileage sold over its road by the defendant company and redeemed within six months, does not convert such claim into one against the receivership, entitled to absolute payment from the corpus of the mortgaged property in preference to the mortgage debt. 2. SAME-MILEAGE REDEEMED BY OTHER COMPANIES DURING RECEIVERSHIP. A railroad company which has authorized a second company to issue tickets or mileage over its line is bound by its obligation to the holders to redeem the same, and look to the issuing company for settlement, notwithstanding the latter's insolvency; and an agreement by its receiver to pay the amount of such mileage as shall be taken up after his appointment does not convert the claim, which was a debt of the company, into one of the receivership. Appeals from the Circuit Court of the United States for the Southern District of Ohio. James H. Hoyt, for Monsarrat. Lawrence Maxwell, Jr., for Robinson. Morrison R. Waite, for Mercantile Trust Co. and Metropolitan Trust Co. Before LURTON, DAY, and SEVERENS, Circuit Judges. LURTON, Circuit Judge. These two cases have been heard together, and involve the same question. The appeal of Monsarrat, as receiver of the Columbus, Hocking Valley & Toledo Railway Company, in cause No. 853, is from a decree dismissing an intervening petition filed by him against Joseph Robinson, successor to S. M. Felton, as receiver of the Columbus, Sandusky & Hocking Railroad Company, praying a decree against Robinson, as receiver, upon an account for $7,522.64. Monsarrat was appointed receiver of the Hocking Valley Company by the court below, February 24, 1897. Under an arrangement entered into between him, as receiver, and the defendant the railroad company, mileage tickets were issued by Monsarrat, as receiver, good over the railroad of the railroad company, and by the latter company good over the line operated by Monsarrat, as receiver. June 2, 1897, Felton was appointed receiver of the railroad company. At that time many mileage books were outstanding, which had been sold by the railroad company, good over the Hocking Valley Line. Monsarrat, as receiver, continued, after the appointment of a receiver for the railroad company, to accept these outstanding mileage books when presented upon his railroad. He now claims that, after crediting all mileage coupons sold by him and honored by the railroad company, or its receiver, a balance is due him, as receiver, of $7,522.64. Much the larger part of this accrued during March, April, and May, 1897, being for mileage coupons taken up by Monsarrat before a receiver was appointed for the defendant railroad company. Appellant insists that the whole claim is a liability of the receivership, and the object of his intervention was to have it so declared and paid. The decree from which appellant has appealed was one holding that the receiver was not liable on account of mileage books issued by the railroad company prior to his appointment as receiver. In this conclusion we concur. The contention that the balance due on this mileage account when a receiver was appointed for the defendant railroad company became a liability of the receiver by virtue of the order made when the receiver was appointed is unsound. That order was the usual order made in such cases directing the receiver to pay labor, supply, and material claims, and "traffic or mileage balances," which had accrued within six months. Conceding that the order included the balance due on this mileage account, still it does not follow that the claim became thereby a receiver's debt. In the case of Gregg v. Trust Co. (a case against the same receiver, and decided at this term) 109 Fed. 220,1 we had occasion to pass upon the legal effect of that order, it being there contended that every claim within the terms of that order was thereby preferred over the mortgagees in the corpus of the mortgaged estate. We then held that, while the receiver would have been protected if he had paid out of the earnings of the receivership the claims embraced within the order, yet the order did not vest in any of the claimants an absolute right of payment out of the corpus of the mortgaged estate in preference to the mortgagees, and that if, in default of income out of which the receiver might comply with 1 48 C. C. A. 318. the order, creditors should seek to displace mortgages resting upon the corpus of the railroad, the mortgagees were entitled to be heard. The case of Railroad Co. v. Wilson, 138 U. S. 501, 506, 11 Sup. Ct. 405, 34 L. Ed. 1023, was cited as an express authority. If this was a right conclusion, it clearly follows that such an order did not have the effect of converting debts of the railroad company into debts of the receiver. It is next said that Mr. Felton, the predecessor of the appellee in the receivership, shortly after his appointment agreed that, if ap pellant would exercise care in rejecting mileage books presented by other than the original owners, he would honor whatever mileage he took up. This statement had manifestly no reference to the account for coupons taken up before he became receiver. Its utmost effect was to promise payment for coupons thereafter taken up. This limits its application to about $1,400 of the account here involved. As this mileage was sold by the railroad company while acting as the agent of the appellant, so far as the mileage books were receivable over the railroad operated by Monsarrat, the railroad company came under obligation to account to appellant whenever such mileage was used on his railroad. The obligation of appellant to receive such mileage books when presented for fares was a fixed contractual obligation towards every holder of mileage books, and was in no wise affected by the subsequent appointment of Felton as receiver; and the remedy of appellants for mileage so used on his railroad was against his agent, the railroad company, which sold the ticket. Cowen v. Winters, 37 C. C. A. 628, 96 Fed. 929. The undertaking by the receiver to assume this obligation of the railroad company to the appellant for such outstanding mileage cannot operate to convert this claim into a debt of the receivership. The receiver had no such authority, either under the order made when he was appointed or under his general authority as receiver. In cause No. 872 the appellant sought to set off a liability to Robinson, receiver, by the claim preferred independently under the intervention from which cause No. 853 is an appeal. In both cases the court held that the claim was a liability of the railroad company, and not a liability of the receivership. That the claim is one of the class entitled to a preference in the income, we have no doubt. Appellant, in No. 853, has assigned it as error that the petition was dismissed, when it should have been entertained so far as to permit the claim to share in any distribution of income arising under the receivership. To this extent, and for this purpose only, the decree may be modified so as to allow the claim to be established as a preferential debt, with leave to share in any fund which shall arise from surplus earnings of the receivership. The decree in No. 872, denying this claim as a set-off, is affirmed, with costs. Costs in No. 853 will also be paid by appellant, as re ceiver. (109 Fed. 239.) UNITED STATES v. PRICE TRADING CO. et al. (Circuit Court of Appeals, Eighth Circuit. April 19, 1901.) No. 1,468. 1. PUBLIC LANDS-CUTTING OF TIMBER BY RAILROAD COMPANY-CONSTRUCTION OF STATUTE. Under Act March 3, 1875 (18 Stat. 482), granting to railroads a right of way through the public lands of the United States, a railroad company constructing its line in conformity with its provisions, and which is thereby given the right to take timber from public lands adjacent to be used in the construction of its road, is authorized to take timber from lands adjacent to any part of its completed main line for use in the original construction of a branch line which it is authorized by its charter to build, although such branch is not constructed for several years after the main line. 2. SAME TIMBER WRONGFULLY CUT-SUBSEQUENT SALE FOR AUTHORIZED USE. Where timber has been wrongfully cut from public lands of the United States, and while in the hands of a purchaser has been claimed as the property of the United States by its agent, the title of the government cannot be devested by a subsequent sale of the timber by such purchaser to a railroad company for use in the construction of its road, although the company would have had the right to cut it for such purpose had it been standing. 3. SAME-CUTTING OF TIMBER FROM MINERAL LANDS-REGULATIONS GOVERN ING. The regulations prescribed by the secretary of the interior, under and pursuant to Act June 3, 1878 (20 Stat. 88), authorizing the cutting of. timber from public mineral lands in certain states and territories for building, agricultural, mining, or other domestic purposes, which regulations require "every owner or manager of a sawmill, or other person felling or removing timber under the provisions of this act," to keep a record showing by whom such timber was cut, from what lands, evidence of mineral character, to whom the timber was sold, and for what purpose, etc., and to take from each purchaser a written certificate, under oath, that the purchase is made for his own use, and for an authorized purpose, contemplate the keeping of such records only by persons who, like the proprietors of sawmills, make a business of cutting timber on mineral lands and selling it, or who are engaged to a considerable extent in such business, and they do not apply to settlers engaged chiefly in other pursuits, who cut small quantities of timber from mineral lands which they occupy, and who barter the same to a trader, with the understanding that it will be resold to other farmers or ranchmen in the vicinity for domestic uses, so as to render such cutting or sale unlawful, although the prescribed conditions are not complied with. Sanborn, Circuit Judge, dissenting. 4. SAME-STATUTE GIVING RIGHT TO CUT TIMBER FROM MINERAL LANDS-REPEAL BY IMPLICATION. The right given by Act June 3, 1878 (20 Stat. 88), to citizens of the states of Colorado and Nevada, and the territories, excepting Washington, to cut timber from public mineral lands for certain domestic purposes, was not affected by the act of the same date (20 Stat. 89) for the sale of timber lands in the states of California, Oregon, Nevada, and in Washington territory, and which prohibited the cutting of timber on any public lands in those states and territory with intent "to export or dispose of the same," as amended by act of August 4, 1892 (27 Stat. 348), by striking out the names of the states and territory therein named, and inserting in lieu thereof the words "public-land states." The first act was special, and designed for the benefit of the residents of states and territories in many parts of which timber is scarce, and the amendment to the second act must be construed as authorizing the sale of timber lands in all other public-land states, and not as repealing by implication the privileges conferred by such special act. 5. APPEAL-DECISION-DISREGARD OF ERROR. It is only where there is no doubt that an error committed on the trial of a cause was without prejudice, and that a second trial must result in the same judgment, that an appellate court may disregard such error, and affirm the judgment rendered. Per Sanborn, Circuit Judge, dissenting. 6. PUBLIC LANDS-ACTION FOR UNLAWFUL CUTTING OF TIMBer-Defense. To sustain a defense to an action by the United States to recover the value of timber conceded to have been cut from public lands, and which was purchased by defendant from sundry persons who cut the same, on the ground that the cutting was authorized and lawful, under Act June 3, 1878 (20 Stat. 88), and the regulations prescribed by the secretary thereunder, the defendant must prove (1) that the choppers who felled and removed the timber were bona fide residents of the state; (2) that the land from which it was cut was of strictly mineral character; (3) that such land was not subject to entry under existing laws of the United States, except for mineral entry; and (4) that the choppers sold the timber to citizens and bona fide residents of the state for the legitimate use of such purchasers for building, agricultural, mining, or other domestic purposes. Each of these facts is essential to such defense, without regard to whether rule 4 of the regulations requiring a record to be kept is applicable to the case, and the erroneous direction of a verdict for defendant in such a case cannot be held without prejudice, where the evidence in the record leaves a question for the jury upon either one of such facts. Per Sanborn, Circuit Judge, dissenting. In Error to the Circuit Court of the United States for the District of Utah. The United States instituted this action on May 12, 1899, against the defendants in error to recover the value of 12,346 fence posts, of the value of $987.68, alleging, in substance, that the posts had been unlawfully cut and removed from government lands. The case was tried principally upon an agreed statement of facts, from which we cull the following admissions: The Price Trading Company is a mercantile corporation. A. Ballinger is its secretary. At the time alleged in the complaint the Price Trading Company had possession of 10,253 cedar posts, which had been cut upon the unsurveyed lands of the United States from six to ten miles in a northerly direction from the town of Price, county of Carbon, in the state of Utah, by residents of said county, and the same had been purchased by the trading company from such residents for the sum of eight cents each in merchandise. The persons who cut and removed said posts knew that the lands from which they were cut were public lands of the United States, but they kept no record of the timber so cut and removed, in accordance with governmental regulations on that subject, and at the time the same were sold to the trading company they exacted no express agreement from the purchaser that the same should only be used for building, agricultural, mining, or other domestic purposes, within the state of Utah. It was understood, however, and was the expectation of the parties, at the time of the sale, that the posts were purchased for the purpose of being sold to ranchmen in Carbon and other adjoining counties for the purpose of fencing agricultural and grazing lands. The posts were in the possession of the trading company for some time prior to April 20, 1899, and up to that time were held by the trading company with the intention of selling them for the purpose last mentioned. On March 20, 1899, while the posts were in the possession of the trading company, it was notified by a special agent of the general land office that the United States was the owner of the posts, and it was further notified not to sell or otherwise dispose of the same. On April 20, 1899, the Rio Grande Western Railway Company, by an instrument in writing, appointed the trading company its agent to obtain and deliver to the railway company 9,053 of the posts |