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Hoagland et aL r. The New York, Chicago and St. Louis Railway Co.

The legal implication of the covenant is, that the land- • lord has an adequate title to the estate created by the leas'', and that he will permit the tenant to enjoy, without disturbance or interruption, the interest, title or privilege demised, subject to all such rights as are expressly, or by necessary implication, reserved to the lessor. It becomes important, therefore, to inquire into the nature of the right or privilege granted to the lessees by the lease in question; and to ascertain the rights expressly or impliedly reserved to the lessor. The subject-matter of the lease was so much of the surplus water not required for navigation, to be taken by the lessees from the Wabash and Erie Canal, as should be adequate to propel a designated amount of machinery in their mills. The decisions of this and other courts establish beyond question, that the lessor, by the terms of the lease in question, assumed no obligation to maintain the canal in repair, or to keep it in such a condition as that a surplus of water above that needed for navigation should be available. The lease imposed no obligation whatever to furnish or supply the lessees with water. It did nothing more than confer upon them the privilege of using the surplus water whenever and so long as there should be a surplus above that employed in navigation. Indeed, it is apparent from the face of the lease, that both parties contemplated that the supply of water might become partially or wholly inadequate. In the event of such a contingency, the lease made provision for a corresponding reduction or suspension of rent. Both parties recognized the fact that the canal was constructed for the purpose of commerce. It was built for purposes of navigation, and intended to be used primarily as a line of intercommunication. Neither party, at the time of the lease, apparently contemplated the abandonment of the canal for the purposes for which it was constructed. Hence, no provision was made restricting the lessor from using all the water for purposes of navigation, nor from entirely abandoning the canal at pleasure, or requiring that it should be kept

Hoagland et aL v. The New York, Chicago and St Louis Railway Co.

in repair. The character of the work was such that the right of the State and its grantees to use all the water, or to abandon the enterprise entirely, was necessarily incident to the situation. By their lease, the lessees simply obtained the privilege of using for motive power at their mill wheels so much of the surplus water, passing through the canal, as was not necessary to carry out the primary purpose for which the work was constructed. The State and its grantees, who succeeded to its rights and liabilities, had the right to resume the use of all the water, or to abandon the canal entirely at pleasure. Whether they exercised the right of abandonment, or resumption, the effect upon the privilege granted to the lessees was the same. In neither event did the lessor become liable to any other consequence than the inability to collect rent from the lessees. Hubbard v. City of Toledo, 21 Ohio St. 379; Fox v. Gncinnati, 104 U. S. 783; Sheds v. Selden, 7 Wall. 416. As was in effect said by the court in Fishback v. Woodruff, 51 Ind. 102, the lessees took the lease subject to the use of the canal and to all the vicissitudes which might attend a public work of this character, such as dilapidation, destruction, abandonment. They could not suppose that the State or its grantees would keep up the canal for the purpose of furnishing them water-power if it became inexpedient to maintain it as a public work. It necessarily follows that the privilege granted to the lessees was at all times subject to two contingencies. The prime contingency was, that all the water flowing through the canal might be employed for the purposes of navigation; the other was, that the canal might become out of repair and be abandoned as a public work entirely. In either event, the privilege of the lessees was subordinate to the requirements of the public, or liable to be cut off entirely, unless by the mere grace of the State and its grantees. The covenant for quiet enjoyment, which the law annexed to the lease in controversy, was, therefore, such that so long as the canal was used for purposes of navigation, and while there was, during Hoagland et al. v. The New York, Chicago and St Louis Railway Co.

the period it was so used, a surplus of water above that which was required for navigation, the lessors agreed that they would do no such acts as would interrupt or deprive the lessees of its enjoyment. This was the extent of the covenant, because the privilege granted, and to which the covenant related, extended no further. So long, therefore, as the owners do no act in violation of this covenant they can not be liable for a breach of the covenant of quiet enjoyment.

The canal having been abandoned for purposes of navigation, possibly the grantees of the State, had they so elected, might have kept it in such a conditiou of repair as to have afforded water-power for mills and manufactories. It is abundantly settled, however, that they were under no obligation to do so. Trustees, etc., v. Brett, 25 Ind. 409; Skillen v. Water-Works Co., 49 Ind. 193; Fishback v. Woodruff, supra; Elevator Co. v. Cincinnati, 30 Ohio St. 629; Commonwealth v. Pennsylvania R. R. Co., 51 Pa. St. 351.

The question remains, had the State or its grantees the right to devote the canal and its bed to some other use, which would interrupt the flow of water, or were they under obligation, having abandoned it for purposes of navigation, to permit it to remain idle and unoccupied?

Having reached the conclusion that the lessors were not prohibited by the terms of the lease from using all the water in the canal, nor from abandoning it entirely for purposes of navigation, it necessarily follows that, in the absence of any <jontractual obligation, they had the right to appropriate the abandoned canal to any other use which they saw fit, if they could do so without invading or appropriating any of the lessees' property, which had lawfully been placed upon the lots appurtenant to the canal.

The appellants, impliedly at least, concede that the State 'and its grantees had the right to abandon the canal as a public work. Having the right to abandon it for that purpose, it never could have been intended that the lease should deVol. 111.—29

Hoagland et at. v. The New York, Chicago and St. Louis Railway Co.

prive the owners of the property of the right to substitute another line or mode of transportation instead of that originally projected. To give the lease that effect would be to subordinate public interests to merely private convenience, the lessees, as we have seen, having acquired no continuing interest in the water of the canal.

The State invested its grantees successively with the same rights in the canal which it possessed when it transferred the work to the board of trustees. The trustees and their grantees acquired the rights of the State, and assumed its obligations, and none other. Hubbard v. City of Toledo, supra.

It would have been a barren security for the creditors of the State if they had been compelled to accept, in pledge of what the State owed them, a public work which had already proved unprofitable, and which they might abandon, but could never use for any other purpose, because certain leases of surplus water had been made. These leases, it must be remembered, too, were subordinate to the liens of the State's creditors. The lessees were, therefore, bound to take notice of the prior rights lawfully acquired at the time they took their leases. Those who acquired title under the pledge made by the State took all the rights of the State with precisely the same obligations as it owed in respect to outstanding leases.

The State, having come under no other covenant to the lessees except that it agreed not to interfere with their privilege of using the surplus water, not needed for navigation, so long as the canal was in operation for that purpose, had the right in the public interest to abandon the work or devote it to any other public use. Its grantees have the same right. Commonwealth v. Pennsylvania R. R. Co., supra; Fox v. Cincinnati, supra.

It does not appear that the railway company has invaded:my of the appellants' property rights, or encroached upon the property leased, otherwise than by the obstruction of the canal. There is nothing in the cases of French v. Gapen, and

Hoagland el aL v. The New York, Chicago and St. Louis Railway Co.

Spears v. Gapen, 105 U. S. 509, in conflict with what has been herein decided.

In one of those cases a contractor for the construction of certain portions of the canal was, by the terms of an agreement made with the State, to be paid for his work in water rents. It was held that the contractor acquired a property right in the rents of the water-power, which he rendered available; and that the State became a trustee to collect and pay the rents to him until his debt was liquidated. In the other, a valuable privilege of a mill-owner was rendered useless by the construction of the canal. The canal commissioners agreed, in consideration that the mill-owner would release all claims, awards and judgments in his favor against the State, that the State would supply him in lieu of his privilege so destroyed with a certain amount of the surplus water from the canal. It was held that when the State transferred the canal to the board of trustees, the latter took it subject to the prior obligation of the State to the contractor and mill-owner, respectively.

The conclusion at which we have arrived is that the appellee is not liable upon the facts stated, and as the court below arrived at a like conclusion, its judgment is affirmed, with costs.

Zollars, J., did not participate in the decision of this cause.

Filed May 10, 1887.

On Petition For A Rehearing.

Elliott, J.—We have again examined the questions presented in this case, and we can find no reason for receding from our former opinion. It still seems clear to us, that the lease under which the appellants claim did not convey any other right than that to use the surplus water not required for the purposes of navigation. The changed circumstances of which counsel so often speak did not enlarge the subject

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