which bound that stock as defined in the act of May 20, 1836, and that the state, in equity and good conscience, should surrender the same to the secretary of treasury.

Edmund Waddill, U. S. Atty., and H. H. Wells, for the United States.

Frank S. Blair, Atty. Gen., for Board of Public Works.

HUGHES, J. I am now to pass upon the question of constructive notice as affecting the state of Virginia. I refer to my opinion delivered on the original hearing of this cause on October, 6, 1882, filed in the papers of the cause, and reported in 4 Hughes, 545; S. C. ante, 609, as showing the grounds on which I held that Alexandria was bound to deliver 3,500 shares of the canal stock in all, 2,000 in addition to those formerly deposited, to the United States. It will be seen that one of the questions at issue in that litigation was whether Alexandria, by depositing all the stock which she owned on the third. of March, 1837, and at the time of the deposit, had not fully complied with the requirements of the statute? This was a pretension strongly supported by the fact that the secretary of treasury, by not having demanded a deposit of more than 1,500 shares, had seemed to adopt and act upon that view of the subject. But I held, on all the proofs, that the act had contemplated the deposit of 3,500 shares, and therefore that Alexandria was bound to make further deposit of the remaining 2,000 shares due. I also declared in that case, which. declaration, however, was then but a dictum, that Virginia could not be required, even if she were a party to the suit, to return any part of the 2,720 shares which she had purchased from Alexandria in 1847. The ground of this declaration was stated to be that Virginia was not made cognizant of the fact of Alexandria not having an equitable right to dispose of as many as 2,720 shares of the canal stock as she did dispose of; that fact not having been brought home to the mind of the legislature of Virginia when it passed the act authorizing the exchange of state bonds for these shares, which was made.

Now that Virginia, in the corporate person of her board of public works, has been made a party to this suit, and that point is especially under litigation, and has been argued, I find no cause to change that opinion. Conceding, for the sake of argument, that the act of congress of March 3, 1837, being part of a public act, did affect Virginia with constructive notice that the shares then held by Alexandria in the canal company, when delivered to the secretary of treasury, would be liable to the trust defined in the previous act of May 20, 1836; yet it is certain that such notice only embraced the express contents of the act, and such other facts as, upon reasonable inquiry, were suggested or implied by the act. As an instrument of constructive notification, interfering with the freedom of commercial dealing, the act was to be strictly construed. Third persons could not be expected to know all its history,-all the considerations which inspired its passage, and its relations to all the bonds of Alexandria Canal

Company, which at any time, however remote in the future, Alexandria might own; nor were third persons bound to look through a period of 44 subsequent years, and to anticipate the litigation instituted in this court in 1881, to determine how many shares of canal stock congress had intended that Alexandria should deposit with the secretary of treasury. The act gave notice that the stock then held by Alexandria should be deposited; inquiry would have developed that the number of shares then held was 1,500, and that these were deposited. The act gave notice that within 10 years from its date the secretary should sell all the stock which the act had required to be deposited; inquiry would have disclosed that after the expiration of the 10 years Alexandria held 3,500 shares, more or less of it possibly repurchased at the secretary's sale. The reasonable inference was that stock held after March 3, 1847, was not affected by the act of 10 years previous, nor by the trust which it defined and imposed. In short, it is plain to me that the act of March 3, 1837, was not such in terms, nor the proceedings of the secretary such, under it, as to convey notice to Virginia that any part of the 2,720 shares which she purchased in 1847 from Alexandria was affected by a trust which could invalidate her title. Indeed, as before suggested, that question was not actually settled, even as against Alexandria herself, until the decree in this cause, before mentioned as having been entered on October 6, 1882. Such being the state of things as to constructive notice, there is no proof that the legislature of Virginia, or her board of public works, had actual notice of the status of the stock which she purchased from Alexandria, in its relation to the congressional act of March 3, 1837. I believe it is not pretended by counsel that there was actual notice in any degree or form. Virginia is therefore an innocent and bona fide holder, for full consideration paid, of the whole 2,720 shares of canal stock now held by her board of public works. She has equitable title to it, and she has, besides, the legal title in and lawful possession of it.

Besides the foregoing consideration, it may be added that the deposit of stock provided for in the congressional act of March 3, 1837, was an executory contract. The trust established upon the stock was not to attach until it had been actually deposited, "with proper and competent instruments and conveyances in law to vest the same in the secretary of the treasury." Until so deposited and legally transferred, Alexandria, though bound in equity to deliver a certain portion of it to the United States, was in law at liberty to transfer and sell it, and make good title to it to any bona fide purchaser for valuable consideration who was not cognizant of her obligations respecting it. As the case stands, the United States has an equity to have 1,220 shares of the canal stock once owned by Alexandria transferred to the secretary of treasury, unless they have lost their equity by sleeping for more than 40 years upon their rights. On the other hand, Virginia has an equity to have the whole 2,720

shares of the stock which she purchased in good faith and without adverse notice, from Alexandria, and has also the legal title derived by legal transfer, and by quiet possession of more than 30 years. Her right therefore must prevail.

Entertaining these views on the merits of the case, it was useless for me to go into the question of jurisdiction raised at bar, or into the question how far governments and states are bound by the laches of their public offices, or by the lapse of time.

The petition of the United States must be dismissed.

DILLARD and another v. PATON and others.

(Circuit Court, W. D. Tennessee. March 15, 1884.)

1. CONTRACTS-SALE-EXCHANGE ASSOCIATIONS-RULES AND REGULATIONS-EF

FECT OF NON-OBSERVANCE.

Where merchants form voluntary associations "to establish just and equitable principles, uniform usages, rules, and regulations, which shall govern all transactions" between the members, parties dealing with each other, who are members, make the rules and regulations a part of their contract, and the courts will enforce them as such; but this only when they are observed by the members involved in the controversy; for the habitual non-observance by them in their dealings with each other will abrogate the particular rule violated, and relegate the contract to the ordinary rules of law governing it.

2. SAME-COTTON EXCHANGE OF MEMPHIS-RULE 9-RISK OF LOSS BY FIRE.

Where two members of the Cotton Exchange of Memphis, in their dealings with each other, for a series of years paid no attention on either side to a rule of the exchange which provided that delivery of cotton should not be considered final until the cotton was paid for, the contract involved in this suit should not be governed by the rule of the exchange, but by the general law. Where, therefore, a sale of 270 bales was made by sample, an order given by the seller to the warehouseman to deliver to the buyer, the warehouseman and the buyer weighed the cotton, the buyer sampled it, approved 268 bales, and rejected two, put his "class" and "shipping" marks upon it, and gave written directions to his drayman to remove it from the shed, held, that the title passed to the buyer when these things were done, and a loss by fire before removal from the warehouse was his loss, although the cotton had not, at the time of the fire, been actually paid for.

3. SAME-CONSTRUCTION OF THE RULE-WAIVER.

Where the rule of the Cotton Exchange of Memphis provided "all cotton shall be received within five working days from date of sale. The weighing and examining of cotton shall constitute a confirmation of sale, but delivery shall not be considered final until paid for,-the factor's policy of insurance to cover until delivered and paid for; payment being considered final act of delivery," it seems that a transaction under this rule is not an executory agreement to sell when payment is made, but that it is mere stipulation for the security of the seller, which enables him at his option to refuse to part with the posession until payment is made. But, whatever be the proper construction of the rule, where parties by an habitual course of dealing with each other had wholly disregarded it on both sides, and the seller in the particular transaction, as in all others, delivered unconditionally, and without restraint as to possession and use, and manifested no concern about securing payment through the rule, held, that this amounts to waiver by the seller of a stipulation solely for his benefit, and the risk of loss by fire passed with the title to the buyer on actual delivery to him. This waiver by the seller need not be in express terms, but may be fairly inferred from his conduct and acts.

FINDING OF FACTS.

This case, by stipulation of the parties under the statute, was submitted to the court without a jury. The court found the following to be the material facts:

I. The plaintiffs and defendants are members of the Memphis Cotton Exchange, an incorporated association, the purposes of which are thus described by its constitution:

"ARTICLE II.-PURPOSES.

"Section 1. The purposes of this association shall be to provide and maintain suitable rooms for a cotton exchange in the city of Memphis; to adjust controversies between members; to establish just and equitable principles, uniform usages, rules, and regulations, and standards for classifications, which shall govern all transactions connected with the cotton trade; to acquire, preserve, and disseminate information connected therewith; to decrease the risks incident thereto; and, generally, to promote the interests of the trade, and increase the facilities and the amount of the cotton business in the city of Memphis."

II. Among other things, not necessary to mention, the constitution also contains the following:

"ARTICLE VIII.-DUTIES OF MEMBERS.

"Section 1. Every member, upon admission, pledges himself to abide by the constitution, and also by all by-laws, rules, and regulations of the exchange."

III. The rules and regulations for the sale and transfer of cotton prescribed by the association are as follows:

"1. All resampling, or examination by boring, shall be performed after cotton shall have been weighed.

"2. All cotton must be examined and received by the purchaser before removal from its place of storage.

"3. The seller of cotton is entitled to his samples, but, when required by the buyer, shall allow him to take them to his office for the purpose of comparison, and when that is done shall return them, and a failure to do so will forfeit his right in the future to remove them from the office of the seller.

"4. Three hundred pounds shall constitute the minimum weight of a merchantable bale of cotton, and the buyer shall have the right to reject all bales below that weight; but if received an allowance of four dollars per bale shall be made to the buyer.

"5. Six ties only shall be permitted on each bale, unless an allowance is made of two pounds for every tie above that number.

"6. All seedy, mixed, fraudulently packed, and damaged cotton may be rejected, and must be done at its relative value in the list purchased; but the grade of the cotton by marks shall be given to the buyer at the time of sale, or before the day of delivery, if required by him, and cotton sold by samples must be delivered accordingly, unless rejected for causes above stated.

"7. The practice of examination by boring cotton, which prevails in this market, before passing of same, is understood to be the rule as to the manner of receiving, and relieves the seller from any liability for reclamation on mixed, fraudulently packed, or damaged cotton.

"8. All cotton shall be understood to be in good order; but if not, it shall be repaired within twenty-four hours from the time of delivery, and if not done within that time the necessary repairs may be made by the buyer at

the expense of the seller. No claims for repairs shall be allowed after the removal of cotton from its place of storage.

"9. All cotton shall be received within five working days from date of sale. The weighing and examining of cotton shall constitute a confirmation of sale, but delivery shall not be considered final until paid for. The factor's policy of insurance to cover until delivered and paid for; payment being considered final act of delivery.

"10. No order for the delivery of cotton is transferable without the knowledge and consent of the seller."

IV. When rule 9 of the cotton exchange was under consideration by the association it did not contain the last clause, viz., "payment being considered the final act of delivery." But a resolution was adopted appointing a committee to confer with the board of underwriters "to gain information regarding the insurance of cotton under process of delivery," and upon such conference a report was made that "after a lengthy discussion as to the indorsement and acceptance of rule 9 by the board of underwriters," a committee was appointed by that body to meet the directory of the exchange, "in order that rule 9 may be so amended, if thought proper, as to harmonize the different views." Whereupon the matter was discussed between the directors and the underwriters' committee, and resulted in adding the above clause to the rule, its acceptance by the underwriters, and at the same time the adoption by them of the following resolution: "Resolved, that our policies on cotton in sheds as now written provide all the security to the assured which they require, therefore additional legislation on the subject is superfluous."

V. The plaintiffs are cotton factors, and the defendants cotton brokers or buyers, doing business in the city of Memphis; and at the time of the transaction in controversy in this suit were members of the cotton exchange, while the above provisions of the constitution and by-laws were in force.

VI. The plaintiffs and defendants bargained with each other for the sale and purchase of 270 bales of cotton, selected by sample, and identified by certain marks upon the bales and samples. The cotton was at the time, with other cotton of the plaintiffs', stored in a public warehouse in Memphis. The date of this bargaining was on the seventeenth and eighteenth of October, 1882.

VII. The plaintiffs, as soon as the bargain was made, sent to the warehouseman, according to the usual course of business, written orders for its delivery to the defendants, specifying the lots and marks corresponding to those upon the samples, of which orders the following is a specimen: "MEMPHIS, TENN., Oct. 17, 1882. Merchants' Cotton Compress & Storage Co. will please deliver to A. A. Paton & Co. nineteen bales of cotton, of the following marks and numbers. DILLARD & COFFIN."

VIII. Upon the receipt of these orders the warehousemen turned out the lots of cotton specified, and aligned them in the yard of the shed for convenience of examination, weighing, and marking. On Saturday, October 21, 1882, the agents of the defendants appeared at the shed, and the weigher of the warehouse, jointly with the weigher of the defendants, weighed this cotton, each taking down the weights and agreeing as to the weight of each bale; whereupon the borers of the defendants examined each bale by boring with the auger, and the "classer" of defendants sampled and classed it, two of the bales being rejected and discarded from the lot. These agents of the defendants then marked the cotton with the "class" and "shipping" marks of the defendants, and, according to the usual course of business, placed upon a hook, kept for the purpose outside the warehouse office, a written direction to defendants' drayman to remove the cotton to the place designated therein. It was the habit of defendants' drayman to come to the shed whenever, in the