author: Mr.. Chief Justice TANEY

text:
    Mary Bein, and Richard Bein, her Husband, G. S. Hawkins, and James M’Masters, Plaintiffs in error, v. Mary Heath.
    The proper condition of an injunction-bond is “ to answer all damages which the defendant may sustain in consequence of the injunction being granted.”
    Where a bond was given in order to obtain an injunction to suspend proceedings, under an order of seizure and sale, and the condition was that the principal and sureties “would pay to the plaintiff, in the case of seizure and sale, all such damages as he may recover against us, in case it should be decided that the said injunction was wrongfully obtained,” this bond was irregular-.
    It conformed to the Louisiana practice, by which, if an injunction be dissolved judg- ' ment is at once given for the debt, interest, and damages, against the principal and sureties in the injunction-bond.
    But the equity practice in the courts of the United States is regulated by the laws of Congress', and the rules of this court made under the authority of an act of Congress ; and- one of those rules is, that, when not otherwise directed, the practice in the High Court of Chancery, in England, shall be followed.
    According to these rules, a court of equity cannot, when it dissolves an injunction, give judgment, at the same time, against the obligors. It merely orders the dissolution, leaving the obligee to proceed fit law against the sureties, if he sustains damage from the delay occasioned by the injunction.
    This case was brought up, by writ of errpr, from the Circuit Court of tbs United States, for the Eastern District of Louisiana.
    It was aq action brought by the defendant in error upon an injunction-bond, and was a consequence of the case of Bein et al. v. Heath, reported in 6 Howard, 228.

      A brief recital of the circumstances may be necessary.
    In May, 1838, Mary Heath lent some money to Mary Bein, the wife of Richard Bein, and took a mortgage upon the separate property of the wife to secure the payment of two notes, one for $10,711.71, and the. other for $535.50.
    In 1840 Richard Bein applied for the benefit of the insolvent law, notwithstanding which the interest upon the loan continued to be paid to Mary Heath, until 1842.
    The interest then becoming in arrear, Mary Heath applied for, and obtained, a writ of seizure and sale of the mortgaged property in May, 1843.
    Bein and wife then filed a bill in the Circuit Court of the United States for the Eastern District of Louisiana, to^set aside the mortgage, upon the ground that it was- not executed conformably to law, and praying for an injunction to suspend proceedings, under the order of seizure and sale. On the 28th June, 1843, the court passed the order directing the injunction to issue as prayed, upon the complainants giving a bond with certain sureties named in the order, to answer all damages which the defendant in that suit might sustain in consequence of said injunction being granted, should the same be thereafter dissolved.
    On the 21st of June, 1843, a bond was executed in the penalty of $3,000, signed by Mary Bein, G. S. Hawkins, and James MeMasters; but instead of the condition being in the manner prescribed by the court, it was as follows: —
    “ Now the condition of the above obligation is, that we, the above bound Mary Bein, Gilbert S. Hawkins, and James MeMasters,'sureties, will well and truly pay to the said Mary Heath, the defendant in said injunction and plaintiff in said case of seizure and sale, all such damages as she may recover against us, in case it should be decided that the said injunction was wrongfully obtained.
    Signed, M. Bein,
    G. S. Hawkins,
    James McMasters.”
    Upon the trial of the cause in the Circuit Court, that court decided that the mortgage was well executed, and dissolved the injunction. Bein and wife appealed to this court. It came up for hearing at January term, 1848, and is reported in 6 How. 228. This court haying affirmed the judgment of the Circuit Court, the order of seizure and sale became released from the injunction, and was executed by the marshal. The mortgaged property was sold for only $7000.
    In December, 1848, Mary Heath brought a suit, by wav of petition, upon the injunction-bond, alleging that.she was greatly damaged by the wrongful issuance of said injunction; that she encountered long delays in obtaining any portion of the sum due to her; that she incurred many and heavy expenses in consequence of the said injunction, and was subjected to great vexation and trouble.
    That she is entitled by law to damages, at the rate of ten per cent, per annum upon the amount enjoined; that she has paid various large sums to lawyers for their professional services in defending said injunction, and in getting the same dissolved, viz., to Messrs. Ellmore & King, attorneys at law, seven hundred dollars ; to John R. Grymes, attorney at law, five hundred dollars; to J. W. Smith, five hundred dollars; ajad to attorneys and counsellors in Washington to attend the argument of the case in the Supreme Court — to Walter Jones, attorney at law, two hundred and fifty dollars, and to-Bradley, Esq.,' attorney at law, two hundred and fifty dollars.
    That the trouble and labor of the petitioner was an injury to her of at least one thousand dollars.
    That the damages thus caused to the defendant, as above alleged, amount to about eight thousand six hundred dollars, which the said Mary Bein and the said Gilbert S. Hawkins are bound in solido to pay to the petitioner, by virtue of the foregoing allegations, and the bond signed by them to- the extent of three thousand dollars. As the damages greatly exceed the amount of the bond, the petitioner is entitled to judgment against the defendant for the whole penal sum of the said bond, viz., for three thousand dollars, with interest from the date of judicial demand.
    To this petition the general issue was pleaded, and in May, 1849, the cause came on for trial before the court, a jury being waived by agreement.
    Two bills of exceptions were taken to rulings of the court in admitting certain evidence, as follows:

      Circiiit Court of the United States, Fifth Circuit.

    Be it known, that on the trial of the above suit, the counsél for the plaintiff, to maintain the allegations of his petition, offered to prove by witnesses the amount of fees paid by the plaintiff to Elmore & King, J. R. Grymes,. and J. W. Smith, Esqrs., her attorneys in the court below, in the suit in chancery of Bein and wife against said Heath, and in the proceedings had in the seizure and sale obtained by said Heath against said Bein, which said seizure and sale were enjoined in said suit in chancery, to the introduction of which the defendants, by their counsel, objected,, on the ground that the employment of said counsel by said plaintiff occurred before the issuing of the', injunction and executing and filing of the injunction-bond in the suit, and be? fore the said defendants had incurred any obligation to pay any damages, interest, or costs in said suit.
    And at the same time and place the said plaintiff, to maintain the allegations in her said petition, offered to prove by an attorney at law the supposed value, of the legal services rendered by the counsel for the plaintiff, iñ the said chancery suit in the Supreme Court of the Uriited States; to the introduction of which said evidence the defendants, by their counsel, objected, on the ground that no evidence could be offered of a quantum meruit, under the issue formed between the parties aforesaid, the' plaintiff in her petition having pleaded the payment to said counsel of~a specific sum of money as their fees. But the court being of the opinion that all of said evidence was admissible, received the same. Whereupon the counsel for the defendant excepted to both rulings of the court as contrary to law,'and prays that the bill of exceptions may be signed and sealed, and made a part of the record, which is accordingly done.
    Theo. H.’Me Caleb, [seal.] .

      U S. Judge.

      Circuit Court of the United States, for the Fifth Circuit cmd District of Louisiana.

    Be it known, that on the trial of this suit the plaintiff, by her counsel--, to maintain the allegations of her petition, offered to prove that a large portion of the rent of the mortgaged premises, for the sale of.which she had issued against Mary Bein her executory process, has not been paid over to her by the tenant to whom the premises had been leased before the issuing of the injunction to stay said process 5 to the introduction of which evidence the defendants, by their counsel, objected •as irrelevant to the issue joined, and because the court had appointed the marshal of the United States the receiver to collect said rent, and to hold the same subject .to the final judgment of the court; and that the loss of said rent constituted no part of the damage sustained by the plaintiff by the issuing of the injunction, for which'the defendants are legally liable on the injunction bond sued on; but the court being of the opinion that said evidence was admissible, received the same. To the admission of which said evidence the defendants, by their counsel, except and pray that this their bill of exceptions may be signed, sealed, and made a part of the record, which is done.
    Theo. H. McCaleb, [seal.]

      U. S. Judge*

      On the 14th of May, 1849, the court pronounced its judgment, and after sundry proceedings which it is not necessary to state, on the 15th of June, 1849, the judgment was signed as follows:

      Judgment.

    Mary Heath v. Mary and Richard Bein et al. } No. 1751.
    The parties herein having waived the jury and submitted this case to the court, after argument on the evidence, id the court being satisfied from the evidence, that the plaint)', has suffered damages from the injunction obtained by Mary Bein and her husband, to a greater extent than the amount of the penalty in the bond sued on, and that the plaintiff is entitled to recover in this suit to the extent of the penalty of the bond against the defendants in solido:

    It is hereby ordered, adjudged, and decreed, that the plaintiff have judgment against Mary Bein and Gilbert 8. Hawkins, and James McMasters, in solido, for the sum of three thousand dollars, with interest from the second day of December, A. D. 1848, until paid, and costs of suit.
    Judgment rendered 14th May, 1849.
    Signed 15th June, 1849.
    Theo. H. McCaleb, [seal.]

      U. S. Judge.

    On the 19th of June, the court passed the following order:
    On motion of — Eggleston, Esq., of counsel for defendants, and on his representing to the court that the said defendants felt aggrieved at the judgment herein rendered on the 15th instant, and that they desire to have a writ of error, that the proceedings may be reyiewed in a higher court, it is ordered, that a writ of error be, and the same is, hereby allowed to the said defendants, returnable to the next term of the Supreme Court of the United States, on their furnishing bond with S. W. Oakey, as surety, in the penal sum of four thousand six hundred dollars, conditioned as the law requires.
    Upon this writ of error, the case came up to this court.
    It was argued by Mr. Coxe, for the plaintiffs in error, and Mr. Bradley, for the defendant.
    Mr. Coxe, for the plaintiffs in error,
    made the following points
    1. Under the law of Louisiana, no action of debt will lie upon an injunction bond for the purpose of fixing the damages. The act of 25th March, § 3, p. 102, declares that, on the trial of injunction, the surety on the bond shall be considered as -a party plaintiff in the suit;, and, in case the injunction is dissolved, the court, in the same judgment, shall condemn the plaintiff and surety, jointly and severally, to pay the defendant interest at the rate of ten per centum, &c. McMillen v. Gibson, 10 Louis. Rep. 518, 519. This statute always received a rigorous construction, De Lizardi v. Hardaway, 8 Rob. 21. Where the sum enjoined carries the highest conventional interest, further interest will not be allowed on a dissolution. See, also, McCarty v. McCarty, 19 Louis. 200; Dabbe v. Hernken, 3 Rob. 125; Erwin v. Bank of Louisiana, 5 Louis. Ann. Rep.; Maxwell v. Mallard, Ib. 702.
    2. In an action on a penal bond, and especially against suteties, no damages can be recovered, except such as are proved to have resulted from a breach of the condition; and such breach must be distinctly averred in the pleadings.
    The condition of the bond in this case is, to pay M. H. all such damages as she may recover against us, in cáse it should be decided that the said injunction was wrongfully obtained; No breach of this condition is alleged or proved. It obviously was framed with a view to the Louisiana, statute. The damages must have been ascertained in the suit in which the injunction was obtained; and then the payment of such damages as shall have been awarded may be recovered on failure to pay them. The fees paid to the Louisiana counsel were allowed to be. proved, although, as the first exception shows, they were paid to them as attorneys, not only in the suit in chancery in which the injunction was obtained and the injunction-bond given, but also in the proceedings had in reference to the seizure and sale. These proceedings were anterior to and independent of the injunction, and the fees paid in them cannot, under any proper pleadings upon any form of an injunction-bond, constitute. an item of damage to be recovered in an action upon such bond.
    The item for fees paid to the counsel in the Supreme Court, was inadmissible upon two grounds. 1st. The plaintiff, in her petition alleges that the injunction was dissolved by the decree of the Circuit Court. The injunction was, in fact, dissolved July 27, 1844. At that day, the responsibility of the obligors was fixed; for the damages sustained up to that time from the ' injunction they were answerable, but for none accruing subsequently, in the further progress of the cause, 2d. The petition avers that the sum of two hundred and fifty dollars was paid to each of the Washington counsel; the exception shows that plaintiff offered to prove, by an attorney-at-law, the supposéd value of the legal services rendered by the counsel in the (Supreme Court. This was objected to, but the objection was overruled. We submit that this was error. It is in express contradiction of the decisions in Louisiana. In Brashiers v. Wilkins, 9 Rob. 57, it was ruled that one who has obtained a dissolution of the injunction cannot recover for attorney’s fees as special damages, where, the evidence does not show that any was actually paid, but only the value of the services. Rhodes v. Skolfield, 10 Rob. 133. No counsel fees allowed as special damages where none proved to have been paid.
    3. The non-payment of the rents by the tenant of the mortgaged premises constitutes no breach of the condition of the injunction-bond,'for which the obligors are responsible. These' parties never became sureties for the tenant; they never understood that he should, pay any thing to the plaintiff. The petition in this case charges no such obligation, and avers no breach of it. The charge, has no foundation in law.
    The exception, howevér, sets forth as a specific ground of ex-r ception that the court had appointed the marshal to be the receiver to collect these rents, and to hold the same subject to the final judgment of the court. To enforce this item of claim against these parties would be to make them, by a most strained construction of their bond, sureties for the tenant that .he would pay his rent, and then sureties for the marshal that he should faithfully discharge his trust.
    . Upon each and every of these grounds, it is submitted that the judgment of the Circuit Court should be reversed.

      Mr. Bradley, for the defendant in error,
    contended:
    That, by the laws: of Louisiana, the party suing out an injunction shall be answerable for all such damages as may have been sustained by the defendant, in case it should be decided that the injunction had been wrongfully obtained. Co. Prac. art; 304.
    By the act of 25th March, 1831, (Greiner’s Dig. art. 1602,) it is further provided that, on the trial of an injunction, the surety on the bond -shall be condemned with the principal in the same judgment, in case the injunction shall be dissolved, to pay interest at the rate of ten per cent, per annum on the amount of the judgment, and not more' than twenty per "cent, damages, unless damages to a greater amount be .proved.
    ' After an injunction issues against an order of seizure and sale, no proceedings can take place, under the latter process until the injunction is finally disposed of. And, if the plaintiff, be. nonsuited, he may take a suspensive appeal therefrom, on giving his bond for a sum exceeding one half the amount of the judgment against him. And in case the plaintiff, in the order of seizure, attempt to sell under it, he may be restrained by a writ of prohibition from the Supreme Court, until the injunction suit be finally disposed of in that tribunal. State v. Judge Buchanan, 19 La. 171. A suspensive appeal is defined in arts. 575, 578, Lou. Co. Prac.
    In this case, the proceeding was to subject real estate to sale, and the .bond was taken in time, within-ten days after the execution of the judgment, in a sum directed by the judge, under article 578.
    The injunction was not finally disposed of by this court until January term, 1848,' and no action could be maintained on the bond until after that dissolution, .
    The remedy may be by action on the bond, and it is sufficient to allege the order of seizure and sale, the interruption of its texecution by the injunction; its dissolution, the damages sustained thereby by the plaintiff, and the failure of the principal and his surety to comply with their engagement Penniman v. Richardson, 3 La. 103; Florance v. Nixon, Ib. 291; and see 2 Rob. 180, lb. 213.
    The damages claimed are for long delays in obtaining any portion of the sum due to her; many and heavy expenses in consequence of the injunction, and great vexation and trouble.
    She shows that the property mortgaged sold for the sum of seven thousand dollars only, leaving a large amount still due; and that she paid large sums to attorneys and counsel for professional services in defending the said injunction suit.
    By law, in the discretion ,of the judge, she is entitled to damages not exceeding twenty per cent, on the amount of the judgment enjoined. If she diaims more she must plead it specially,' and prove it. Landry v. L’Eglise, 3 L. R. 221. And counsel-fees may be allowed as special damage, over and above the twenty per cent. Ib.; Benton v. Roberts, 3 Rob. 226; Ricard’s heirs v. Heriart, 5 La. 245; Wilcox v. Bundy, 13 La. 381; Pargrout v. Morgan, 2 La. 102.
    The allowance of special damages and interest is within the discretion of the court. Arnous v. Lessessier, 12 La. 126. And where it appears plaintiff is acting wholly in bad faith in suing out an injunction, he will be visited with the full measure of damages and interest. Selby v. Merrienneaux, 11 La. 485. And counsel fees may be allowed, although they have not in fact been paid. Brown v. Lambeth, 2 Lou. Ann. Rep. 822. Farrar v. The New Orleans Gas-Light Company, Ib. 873.
    There could be no objection to the admissibility of the proof in the second branch of the first- exception. Although the claim was for a specific sum, it was not founded on an express contract or agreement between Mrs. Heath and Mrs. Bein and her securities.- It was for the court to say whether the sums paid were reasonable or not; and if the plaintiff had proved that she had paid a specific sum for the services of the counsel, she would not necessarily have been entitled to that, but only to so much as the judge should find wab reasonable.
    But, in the absence of proof of the payment of a specific sum, it was clearly competent for her to show what would be a reasonable allowance.
    In regard to the second exception, it seems quite clear that the evidence objected to was admissible to show the damages which the plaintiff had sustained by the injunction. The basis of the law, allowing damages beyond interest, is indemnity. It is intended not only to secure the payment of the interest and costs, but the consequential injuries'resulting from the unjust obstruction of legal process, and, for the trouble, expense, and actual loss. Now, part of the injury here, was clearly occasioned by the plaintiff’s interference by this injunction, which, in its-progress, caused the loss of those rents, the receipt of which might have gone far to diminish the amount of the debt and interest, and thereby the loss has been enhanced beyond the penalty of the bond.
    And, finally, the whole question of fact was tried by the court. The interest alone, at ten per cent., would amount to much more than the whole penalty of the bond; and damages at'twenty per cent., would be equal to two thirds, and the counsel fees paid and proved, added to this, also exceed it; and whether the judgment is for interest or for damages, justice has been done between the parties by the judgment; and the evidence which was admitted can have done no harm to the plaintiff in error, and could not have affected the decision one way or the other.
   Mr.. Chief Justice TANEY

delivered the opinion of the court.

This is an action on an injunction-bond given by Mary Bein, one of the plaintiffs in error in a suit in equity in the Circuit Court' of the United States for the Eastern District of Louisiana, in which Bein and wife wére complainants, and Mary Heath- the present defendant in error, the respondent.

It appears that Mary Bein executed certain promissory, notes for the'payment of a large sum of money, and mortgaged her separate and individual property to secure the debt. These notes and the mortgage became the property of Mary Heath, as the legal representative of Sherman Heath, who loaned the money for which they were given, and who died before any proceedings were instituted to. recover it.

' The • notes not being paid, Mary Heath obtained a -writ for the seizure and sale of the mortgaged premises, according to the laws of Louisiana. And Bein and wife thereupon filed their bill in the Circuit Court of the United States, setting forth that the separate property of Mary Bein, which had been seized, was not legally or equitably chargeable with the payment of this debt, and praying an injunction to stay the sale. It is unnecessary to state the grounds on which the complainants asked relief, as the merits of that controversy are not involved in the present suit. The court passed the order directing the injunction to issue, as prayed, upon the complainants giving a bond with certain sureties named in the order, to answer all damages which the defendant in that suit might sustain in consequence of said injunction being granted, should the same be thereafter dissolved.

The bond was given in the penalty, and with the sureties, mentioned in the order. -But, instead of making the condition such as the court had directed, which was the proper one, according to established chancery practice, the complainants adopted, we presume, the form used in the State courts of Louisiana, in cases where the law requires an injunction-bond to stay execution on a judgment or order of seizure and sale. The condition is as follows:

“ Now, the condition of the above obligation is, that fire, .the above bounden Mary Bein, and Gilbert S. Hawkins, (and) James McMasters, sureties, will well and truly pay, to the said Mary Heath, the defendant in said injunction, and plaintiff in said case of seizure and sale, all such damages as she may recover against us, in case it should be decided that the said injunction was wrongfully obtained.”

. The injunction,' however, was issued by the clerk upon the filing of this bond. And the suit proceeded to final hearing, - when the court passed the following decree:

“ This cause came on for trial on the 29th day of May, 1844, and was argued by counsel; wherefore, in consideration of the law and the evidence, and the rules and principles of equity being in favor of the respondent, Mary Heath, it is ordered, adjudged, and decreed, that the complainant fie dismissed with costs. And it is further ordered, adjudged, and decreed, that the injunction granted in this case be dissolved, and the respondent be allowed to proceed with the writ of seizure and sale granted, in accordance with the prayer of her original petition.”

The complainants appealed to this court, and, after argument by counsel, the decree of the Circuit Court was affirmed, with costs. And, thereupon, the present defendant in error brought the suit which is, now before us, upon the injunction-bond hereinbefore stated, to recover certain damages stated in her petition, for which she alleges the obligors in' that bond are liable. The suit is by petition, in the usual- form of Louisiana practice, and the judgment of the Circuit Court being in favor of the plaintiff in that suit, the plaintiffs in error, who were defendants in the court below, have brought the case before this court.

It appears, from the exceptions, arid the judgment in the case, that the Circuit Court regarded this bond as the same in principle with the bond required by the laws of Louisiana, where an injunction is obtained to stay execution upon an order for the seizure and sale of mortgaged property; and therefore considered this bond as creating the .same obligations and giving the same rights to parties as if it had been given under the laws of the State. And by these laws, when the party obtains an injunction, and fails to support it at the trial, judgment is given against him and his sureties for the debt, interest, and damages, at the time the injunction is dissolved, and it forms part of the same judgn ,ent. 8 Rob. 20. The sureties in the bond are treated as parties to the suit; and the amount of interest and-damages which the court may award by their judgment is regulated by the laws of the State. It is with reference to -this mode of proceeding that the injunction-bond in question appears to have been framed; and it is to this judgment, as prescribed by the laws of the State, that the condition must refer, when .it binds the obligors to pay all such damages the obligee might recover against them, in case it. should be decided that the injunction was wrongfully obtained. There must be a recovery, that is, a judgment against them, before the condition is broken, and before any proceeding could be had upon the bond.

Now, there is manifest error in subjecting the parties to an injunction-bond, given in a proceeding iri equity in a court of the United States, to the laws of the State. The proceeding in a circuit court of the United States in equity is regulated by the laws of Congress, and the rules of this court made under the authority of an act of Congress. And the 90th rule declares that, when not otherwise directed, the practice of the High Court of Chancery in England, shall be followed. The 8th rule authorizes the Circuit Court, both judges concurring, to modify the process and practice in their respective districts. But this applies only to forms of proceeding and mode of practice, and certainly would not authorize the adoption of the Louisiana law, defining the rights and obligations of parties to an injunction-bond. Nor do we.suppose any such rule has been adopted by the court. And if it has, it is unauthorized by law, and cannot regulate the rights or obligations of the parties.

And when an injunction is applied for in the Circuit Court of the United States sitting in Louisiana, the court grant it or not, according to the. established principles of equity,.and not according to the laws. and practice of the State in which there is no court of chancery, as contra distinguished from a court of common law. And they require a bond, or not, from the com,plainant, with sureties, before the injunction issues; as the court, in the exercise of a sound discretion, may deem it proper for the purposes of justice. And if, in the judgment of the court, the principles of equity require that a bond should be given, it prescribes the penalty and the condition also. And the condition prescribed by the court in this case, but which-was not followed, is the one usually directed by the court.

In proceeding upon such a bond, the court would. have no authority to apply to it the legislative provisions of the State.' The obligors would be answerable for any damage or cost which the adverse party sustained, by reason of the. injunction, from the time it was issued until it was dissolved, but to nothing more. They would certainly not be liable for any aggravated interest on the debt, nor for the debt itself, unless it was lost by the delay, nor for the fees paid to the counsel for conducting the suit.

But the bond, in the case before us, is not one to pay the damages which the opposing party should sustain by reason of the injunction, but it is to pay the damages that might be recovered against them; obviously referring, we think,'to the practice in Louisiana aboye mentioned. A court proceeding, according to the rules of equity, cannot give a judgment against the obligors in an injunction-bond when it dissolves the injunction. It merely orders the dissolution, leaving the obligee.to proceed at law against the sureties, .if he sustains damage from the delay occasioned by the injunction. This was done by the Circuit Court in the former suit between' the parties. No judgment was or could be given against the obligors for debt Or damages, and none were recovered against them previously to the institution of this suit. The contingency on which they agreed' .to pay, has not, therefore, happened, and the condition of the bond is not broken, and consequently no action can be maintained upon it. It would be against the well-established rule of the chancery court to extend the liability of the surety, by any equitable construction, beyond the terms of his yon-tract. And, in a proceeding upon the bond, the liability of the principal obligor cannot be extended beyond that of the surety.

In this view of the case, it is unnecessary to examine the questions which have been raised as to the Lousiana laws in relation to injunction-bonds. The, judgment of the Circuit Court must be reversed, and a venire de novó awarded.

Order.

This cause came on to be heard on the transcript of the record, from the Circuit Court of the United States for the Eastern District of Louisiana, and was argued by counsel. On consideration whereof, it is now here ordered and adjudged by this court, that the judgment of the said Circuit Court in ' this cause be, and the same is hereby, reversed, with costs; and that this cause be, and the same is hereby, remanded to the said Circuit Court for further proceedings to be had therein, in conformity to the opinion qf this court.


source: Caselaw Access Project

author: Mr. Justice CURTIS

license: Public Domain

text:
    Peleg Wilbur, appellant, v. Samson Almy.
    Where there were two trustees of the property of insolvents, and one of them made an assignment, but the other neither joined in it nor assented to it afterwards, the assignment was void.
    And in the present case, also, the assignee appears to have received an assignment of the property only as security, until its profits should pay a debt due to him by the insolvents. That debt being extinguished, he has no right, as owner, to claim an account of further profits from the holder of the property.
    This was an appeal from the Circuit Court of the United States for the District of Rhode Island, sitting as a court of equity.
    The facts in the case are stated in the opinion of the court, to which the reader is referred.
    It was argued by Mr. Rockwell and Mr. Johnson for the appellant, and Mr. Bradley for the appellee.
    The following are the points made, by the counsel respectively, upon each of which numerous references were made to the evidence in the record.
    Points by the counsel for the appellant.
    I. The assignment to the plaintiff, Almy, was void. Charles Low and Thomas R. Hazard were the assignees of R. G. Hazard & Co., and the conveyance to Almy was made by R. G. Hazard and R. G. Hazard & Co., and assented to by Thomas R. Hazard.alone, but was never authorized nor assented to by Charles Low, the other assignee. 2 Story’s Eq. Dig. 521, § 1280; Ex parte Rigby, 19 Ves. 463; 1 P. Wms. 241; 3 Atk. 584; Lewin on Trusts, 265; 1 Cruise’s Dig. 455; Sinclair v. Jackson, 8 Cow. 543, 553-554, 582-584.
    II. The assignment to the plaintiff, Almy, of 9th March, 1830, was not an absolute assignment, either of the contract or. of the interest of the parties in the machinery. It was a conditional assignment to secure a debt, which debt has since been paid.
    III. Messrs. Low and Fenner owned one half of the contract of R. G. Hazard & Co., with Lippitt, and of the interest in the machinery; and as R. G. Hazard & Co. owned only the one half, neither Almy nor their assignees could convey more -than that half.
    The record in the case of Hunt & Fenner «. Hazard & Co., furnishes conclusive evidence that Low & Fenner paid for, and owned, one half of the contract and machinery.
    The record, in that case, to' show the fact of the payment, and the application of the amount, is clearly admissible and conclusive. 1 Stark. Ev. 183, § 57, 188, § 58, 189; Green v. New River Company, 4 T. R. 590; Floyd v. Brown, 1 Rawle, Rep. 121; March v. Pier, 4 Rawle, 273, 285; 4 Cow. & Phil. Ev. 1281, n. b.; Adams v. Broughton, 2 Str. 1078; Curtis v. Grant, 6 Johns. 168; Livingston v. Bishop, 1 Johns. 290; Farwell v. Hilliard, 3 N. H. Rep. 318; Gilmore v. Carr, 2 Mass. 171; Ward v. Johnson, 13 Mass. 148; Lechmere v. Fletcher & Co., 1 C. & M. 623, 634, 635; 1 Greenl. Ev. 631, § 527; 2 Phil. Ev. 3.
    The fact that Low & Fenner owned one half of the contract and machinery, is also shown by the testimony of a number of witnesses.'
    The plaintiff, therefore, receiving from the assignee of Hazard & Co. only one half of the machinery, and not being authorized, or purporting to'act for Low & Fenner, could not, in any event, recover more than one half of the value of it.
    “A part owner, who sues alone, is entitled to recover, unless the defendant plead in. abatement; but he cannot recover more than the value of his own share.” 3 Stark. Ev. 1165; 2 Phil. Ev. ch. 15; 4 Cow. & Phil. Ev. 229; Brown v. Hodges, 1 Salk. 290; 2 Wms. Saunders, (ed. 1825,) p. 136; Addison v. Overend, 6 T. R. 766, 770; 7 T. R. 279; Wheelwright v. Depeyster, 1 Johns. 472, 485; Brotherson et al. v. Hodges et al. 6 Johns. 108; Bradish v. Schenck, 8 Johns. 151; Rich v. Penfield, 1 Wend. 380; Gilbert v. Dickinson, 7 Wend. 449.
    IV. R. G. Hazard & Co., and S. Almy, their'successor under the contract with Lippitt-, have received the entire amount of the cost of the machinery, either from Low & Fenner or Lippitt; and neither of them, when this suit was brought, had any interest in it.
    V. The course pursued by the plaintiff not only shows that he considered himself, as having no further interest in the machinery or contract, but precludes him from setting up such interest,'if he had any.'
    1; He concealed, from Christopher Lippitt' the execution of the agreement between himself and Hazard & Co., although he wrote to Lippitt the day after the execution of the agreement, and although he had agreed to act as his agent and friend.

      2. After the execution of the contract, he declares' that he is using the machinery to secure a debt, and when ■ he ceases to supply cotton to the mill, states that his debt is paid, and claims no interest in, or' lien on, the machinery; and from that time, September 11,1832, to 1836, he never sees the machinery, or goes near the mill, nor communicates-with Lippitt or any one' else, nor ever claims to be the owner of it, or to have any interest in it.
    3. Although the machinery was conveyed by Lippitt to ■’Wilbur and the other mortgagees, on the 8th -December, 1835, he makes no claim of any kind in relation to it, until the 15th Oc-' tober, 1836, more than ten months,- when Hazard professes to make a' claim in his behalf. November 25, 1836, he makes a demand for. the machinery; and from that time to October, 1840, ■nearly four years, says and does nothing on the subject. He then writes a short letter, and refers the defendant to Hazard* and two years after files his bill.
    Under these circumstances it operates as a fraud for the plaintiff to set up a claim to the ownership of.this machinery; he has estopped himself, by his acts and declarations, from so doing. Packard v. Sears, 6 Adol. & Ellis, 475, (33 E. C. L. 117); Gregg v. Wells, 10 Adol. & Ellis, 90 (37 E. C. L.); Bushnell v. Church, 15 Conn. 54, 406, 419, 420; Roe v. Jerome, 18 Conn. 153.
    VI. The contract between Lippitt and R. G. Hazard & Co., which, it is claimed, created a lien on the machinery, never having been recorded, does not, according to the laws of Connecticut, give title to the machinery against a bond fide purchaser, mortgagee, or attaching creditor, the machinery having remained in the possession of Lippitt, and’ treated as his own during the time. Swift v. Thompson, 9 Conn. 72; Mills v. Camp, 14 Conn. 225; Kirtland v. Snow, 20 Conn. 23; Patten v. Smith, 4 Conn. 450; Tobey v. Reed, 9 Conn. 216; Talcott v. Wilcox et al. 9 Conn. 134; Pettibone v. Stevens et al. 15 Conn. 19.
    1. The mortgage was made to secure several distinct, independent debts of a number of creditors residing in • different places, having no connection with each other; and there is no claim in the bill, or proof, tending to show that any, except Peleg Wilbur and C.H. Lippitt, had any knowledge of the existence of any contract between Hazard & Co., and Lippitt, concerning the machinery, or are in any manner chargeable with: notice.
    . 2. The defendant, Wilbur, had not any notice of there being any lien on the property when it was mortgaged to himself and other creditors. He positively denies in his answer any' notice of the existence of any lien. He was aware of the existence of a contract for manufacturing, and that Hazard & Co., made advances to Lippitt.
    3. Even if the defendant, Wilbur, having notice of the existence of a contract between Hazard & Co., and Lippitt, were chargeable with notice of the terms of the agreement, and of the lien of Hazard & Co. on the machinery, by the law of Connecticut, under the circumstances of the case, his rights as mortgagee are not affected thereby. Swift v. Thompson, 9 Conn. 63, and other cases above cited.
    VII. In the month of March, 1836, Christopher Lippitt made' an assignment, under the insolvent laws of Connecticut, of his interest in the'machinery to commissioners; and on.the 15th October, 1836, they sold the equity of redemption in this.machinery to John W. Fanning, the purchaser of the equity of redemption in the real estate. This conveyance was a valid one, and conveyed the property, subject only to the mortgages which were recorded, and was not subject any secret lien of Almy on the machinery. Swift v. Thompson, 9 Conn. 63.
    VIII. This machinery, subsequently to the mortgage to Wilbur hnd others, was attached by other creditors of Lippitt, and the suits prosecuted to judgment. This attachment constituted a- lien on this property, which would not be affected by any prior lien unrecorded. . Neither did those creditors have any-notice of any lien by Hazard or Almy.
    IX. R. G. Hazard & Co., failed to perform their contract with Lippitt. They assigned the contract, and their assignee refused to furnish cotton and continue it.
    This contract was an .advantageous • one to Lippitt to a far greater amount than the balance claimed to be due to R. G. Hazard & C., or Almy, under it.
    X. The demand by Bailey, on behalf of Almy, of the 25th November, .1836, is not evidence of a conversion by Wilbur, evei} if he were not entitled to hold the property as security for his own debt,
    1. Because he was bound to hold the property until the bond fide creditors, secured by mortgage without notice, had received the amount of their debts as above stated.
    2. Because the commissioners, under the insolvent laws of Connecticut, had received a valid conveyance of the machinery, not subject to any lien by Almy.

      3. Because the property was at the time under attachment on behalf of bona fide creditors, who subsequently obtained judgments on their claims; and the property so attached was receipted to the officer by Wilbur himself.
    4. At the time when the demand was made, the machinery was not in the possession of Wilbur, While Lippitt was in possession for Wilbur and other mortgagees, (27th October, 1836,) he executed an agreement with John W. Fanning, by which he surrendered the mill and machinery to Fanning, and toqk a lease from-him. . The possession of. Lippitt was thus the possession of Fanning.
    There is no allegation in the bill that Wilbur was ever in the possession of the machinery. The 6th interrogatory in the bill is, “whether said Peleg Wilbur does not claim to be the owner of the said property, or did not, on the 25th day of November, 1836; and if said Wilbur had-sold or conveyed the same, when, to whom, and for how much.”
    XL .The statute.of limitation furnishes a complete bar to this action.
    “ The statute of limitation Is applied by courts of equity in all cases when at law it might be pleaded.” Coulson v. Walton et al. 9 Pet. 62, 82.
    The mortgage of Wilbur and others was dated December -8, 1835; the bill was filed October 17,1842. ■
    . 1. The cause of action arose when Wilbur took possession of the property on the 8th December,- 1835, and the statute then begins to run. 'He then took possession for himself and his co-mortgagees, and claimed to hold it adversely, denying the right of all others, to the possession. Murray v. Burling, 10 Johns. 172; Bristol v. Burt, 7 Johns. 254; Reynolds v. Shuler, 5 Cow. 323; Hyde v. Noble, 13 N. H. Rep. 494.
    2. If it did not commence at that time, it certainly did on the 15th October, 1836, when Hazard, at the time of the sale of the commissioners,-publicly, and in the presence of Wilbur, as the agent of Almy, declared that Almy was entitled to the property under a prior lien.
    3. If these did not constitute a conversion, there is no evidence of conversion furnished by the demand and refusal of the 25th November, 1836, for the reasons before stated.
    The demand and refusal furnish no evidence of a conversion, if at the time Wilbur had not possession, or if he had not the right to relinquish it; nor if the person for whom the demand was made had no right to the possession at the time. If, therefore, a démand and refusal were necessary as the only evidence of a conversion, the action cannot be sustained.
    XII; There was complete and adequate remedy at law.

      The 16th section of the Judiciary Act (1 Stat. at Large, 82,) provides, “that suits in equity shall not be sustained in either of the courts of the United States in any case where plain, adequate, and complete remedy may be had at law.”
    If the plaintiff has any claims at all, he could have enforced them, as the assignee of the mortgage and machinery, by an action of trover. Montgomery v. Kerr, 1 Hill, S. C. Rep. 291; Langdon v. Buel, 9 Wend. 80; Oliver’s executors v. Palmer & Hamilton, 11 Gill & Johns. 426.
    XIII. If Wilbur is hable at all, he cannot be subject beyond the amount received by him, of $407, or, at the most, for the proportional amount which that sum bore to the entire amount received- by the creditors under the mortgage, and if Low and Fenner owned one half the machinery, to only one half the amount.
    The points raised by the counsel for the appellee
    were as follows:
    I. The facts in this case give jurisdiction in equity.
    1. The remedy at law was not plain, adequate and complete.
    2. An account was necessary.
    The ascertainment of damages involved necessarily the transactions between Lippitt and Hazard & Co.; and Lippitt and complainant; and Lippitt and defendant with Hazard and Co., and with complainant, respectively.
    3. If the complainant is to be considered in equity as a mortgagee or assignee of a mortgagee, equity alone had jurisdiction to enable the mortgagor or his assignee to redeem or to foreclose the mortgage.
    4. If Almy had a lien on the property, a court of equity was the proper forum to give him relief.
    II. What is the true construction of the contract between Lippitt and Hazard & Co. ?
    1. Is it a mortgage in the true meaning of that term'?
    The essential characteristics of a mortgage are a debt or duty, and an obligation to repay the debt or perform the duty secured by a conveyance or assignment of some valuable thing. The form is immaterial, but the obligation must • clearly appear. Here there is vno obligation. A right or privilege is given, but there is no corresponding duty to take the property and pay.
    The Hazards were the purchasers, took the bills in their own names, and were necessarily the general owners. He who pays the money is the general owner, no matter in whose name, the conveyance is made. 2 Story Eq. § 1201, and notes.
    Even if the bills had been in the name of Lippitt, it would have made no difference. . 1 Hill. Ab. 307, § 12 - 28, 382, § 42. It was not a joint purchase.

      2.'How did the parties themselves understand it? This is admissible evidence. 1 Hill. Ab. 273, 274. Neither of the parties treated Lippitt individually as debtor.
    See R. G. Hazard, dep. 56. “ His understanding at the time of the contract was that R. G. Hazard & Co. were to be absolute owners of the machinery, but C. Lippitt had a right to become the owner and to require a title from R. G. H. & Co. on performirig certain conditions.” Again, in 1830, when he was proposing to sell to Lippitt, he says: “ I reminded him of his obligation under the contract to buy at a certain price. He argued that machinery was then low, and he would give me as much for it as it was then worth.” Again, “ I afterwards told Lippitt he must regard S. Almy as the owner.
    So as to Lippitt, &c., in 1828 he insured $6,000 on the machinery belonging to R. G. Hazard & Co., and in 1829, to Hazard’s assignees. In his application for insurance he says “ the buildings and fixtures belong to me, and the machinery to R. G. Hazard & Co.” In his own deposition he says “ the assignees of R. G. Hazard & Co. proposed to sell me the interest they had in the machiriery.” In his letters to Almy he proposes to Almy to buy it from the assignees, by which he would save some $3,000, or to assist him in purchasing.
    He had the privilege of becoming the owner, but was not bound to exercise it..
    The case of Conway’s Executor v. Alexander, 7 Cranch, 218, 237, and 8, 9, is in point both as to the general principle and the admissibility of extrinsic circumstances to determine whether it was a mortgage or not. It was not a mortgage in the ordinary meaning of that term.
    III. It was a contract for a special and limited partnership, by which the ownership of the machinery remained in the Hazards until it should be paid for out of half the earnings of the factory, or in some other mode appointed in the contract.
    1. It is an executory contract.
    2. A contract for the employment of capital put in by either party, for the service of both parties, and for a division between the parties of the profits to be made out of such capital and services.
    Lippitt gives the use of his mill, water privilege, &c.
    Hazard, the. use of the machinery.
    Both, their services.
    3. To tfye wórld they were partners, and the property used in the business was liable; with each other it was separate property.
    4. Neither party could convey or burden the partnership property for his private debt; nor could legal process for a separate debt affect it.

      5. The possession of one partner could not alter these principles.
    6. The assignment by Hazard & Co. to the complainant of their contract, which was communicated, to Lippitt by R. G. Hazard, and the continuance by Lippitt of the business after such assignment and notice, made Almy a partner, with the' same rights, duties, and liabilities.
    7. These rights ‘ continued till the' partnership business was settled.
    To third point we cite Rogers et al. v. Batchelor et al. 12 Pet. 221, 229, 230, 231, &c.; Ex parte Hamper, 17 Ves. Jr. 403, and Amer. notes by Sumner; Story’s Part. § 27, pp. 37-42.
    In this view the assignment by Lippitt to defendant was void, with or without notice.
    The statutes of fraud and enrolment do not apply. It is not a conveyance by a man who has the title and retains a possession inconsistent with the deed, but a possession by a man consistent with the rights of the true owner, a lawful possession.
    IV. But if it is a mortgage or a lien, as collateral security, to be treated in equity as a mortgage, the defendant is not a bond fide purchaser without notice, and having notice, he must redeem or account for the property.
    The evidence of this knowledge will be found in his answer. He knew that half the profits of that mill could not have amounted to $10,000 up to December, 1835.
    He knew the facts. He was bound to know.the law. Either there was a partnership, and he could not buy from one partner; or he knew the machinery was held as collateral security, and he was bound to inquire how that account stood.
    Again; on the 2d December, 1835, R. G. Hazard went to see Lippitt, at the request of Almy, to get a settlement, Lippitt declined; ■ same day he left. He returned in the spring, told Wilbur of the cause of his abrupt departure, and that “ he knew he had no more right to take that machinery from C. Lippitt in payment of his debt than he would have had to take Samson Almy’sspockct-book, if he had left it in the keeping of Lippitt.” He did not deny the charge.
    • Notice may be expressed or implied. “ Whatever is sufficient to put a party upon inquiry, (that is, whatever has a reasonable certainty as to time, place, circumstances, and person,) is in equity held to be good notice to bind him.” 1 Story’s Eq. § 400; and see § 39&, and notes to both sections; Buck v. Holloway, 2 J. J. Marsh. 176; Hardy v. Summers, 10 Gill & Johns. 317; Hoxie v. Carr, 1 Sumn. 172.
    Where a party has knowledge of the facts, he has notice of the legal consequences resulting from those facts. The Ploughboy, 1 Gall. 41.

      It affects the conscience of the party. Smith v. Shane & Morgan, 1 McLean, 27. Notice of such facts as with ordinary diligence will lead to a knowledge of an outstanding equity, is sufficient. Hinde et al. v. Vattier et al. 1 McLean, 118; 2 Powell on Mort. ch. 14, p. 562; 2 Eden, R. 224 ; 2 Sch. & Lef. 315, 328; 2 Sim. & Stu. 372, 380.
    Independent of the evidence, 'Wilbur, in his answer, admits, first, He knew of the contract; second, that Hazard purchased the machinery; third, they were to be paid for it out of one half the profits.
    He knew it had not been paid for at the time of their failure. Almy claims under them; Wilbur claims under Lippitt; he is' bound by the knowledge of the facts, and purchased with notice.
    V. The statute of limitation is not a bar.
    1. The right of action accrued 25th November, 1836; action brought 17th October, 1842 — less than six years.
    2. Wilbur went into actual possession, he says, 8th December, 1825, in his own right, and as agent and attorney of some of his co-mortgagees, yet the use and custody was not changed, nor did he set up a claim till demand and refusal.
    3. 'His custody and that of Lippitt was consistent with the complainant’s right till the demand and refusal.
    4. The notice given by Hazard, 15th October, 1836, was notice to purchasers at that sale of an unrecorded lien, known
    • to Wilbur. Wilbur did not purchase. Wilbur did not set up any claim to the possession of, or right to, the machinery. The sale was subject to prior existing equities.
    YI. The exceptions to the master’s report were propérly overruled.
    1. The first and second exceptions depend on the admissibility of the record found at p. 196,197, and 198, in a case to which neither Almy nor Wilbur was a party. See 16 Pet. 331, 332.
    2. The third exception assumes, that Almy is entitled to recover only what he paid the Hazards. We refer to the contract itself, and the letter of Lippitt.
    • 3. The fourth exception sets up a pro rata scale of diminished yalue. We rely first on the master's report.
    The value is to be proved,
    First. By an estimate of persons who never saw it.
    Second. By those who have seen it, examined, or used it.
    Third. By the rents or products.
    ■ 1st. Except Lippitt, no one of the witnesses of Wilbur ever saw it; and Lippitt says it was worth about $2000. Yet he himself said, in 1830, it was worth abqut $8000; insured it in 1836 for $65C0; and when it was insured in 1844, the insurance company paid $3500.

      2d. Complainant’s evidence is mainly from persons who had seen it, examined it, or used it. Phillips, worth two thirds ; A. Fenner, had seen it, worth one half; J. Fenner, had rented it, worth two thirds; Isaac Thompson, made an inventory of, and examined'it, about two thirds ; Alfred.Ladd, hired it, value 'two thirds; E. Manton’s estimated value, two thirds, insurance company.
    3d. The rents or product. A. Fenner, J. Fenner, E. S. Williams, Mantón, Ladd. The result is,_that .this mill rented at a rate which put the value of the machinery at about $7000.
    4. The fifth exception is, that the master would not permit the defendant to contradict his answer.
    1st. He could not have so amended it; a fortiori he could not disprove it. Rule 60, Sup. Ct.; 7 Gill & Johns. 389; Greenwood v. Atkinson, 4 Sim. 61. This would essentially have changed ,the ground of defence, and the whole issue. West. Res. Bank v. Ryker, 1 Clarke, 380; 2 Bland, 261, note.
    No amendment can be allowed, unless the plaintiff, will be left in the same situation as before. Jackson v. Parish, 1 Sim. 505; Daniel, 916, 917. Nor after the cause is set down ior hearing. 4 Russ. 486.
    5. The sixth exception is wholly unsupported by proof.
    VII. It was not objected, in the court bf tow, that the assignment of machinery xo Almy was void.
    In the bill, complainant states that he purchased from the assignees of said Hazard & Co. all the interest which said R. G. Hazard & Co. and the said assignees had in the said contract with said Lippitt, together with all their interest in said machinery &c. (p. 6). It is not denied, or in any manner put in issue by the .pleading, or answer. It is in proof, that Low assented. to the whole machinery being put into the hands of Almy; and that R. G. Hazard was the agent of the assignees..
    The assent of Low would bind him as trustee. 2 Story’s Eq. § 1281 to 1284; 4 Kent’s Com. 307; Monell v. Monell, 5 Johns. Ch. 296; Willis on Trus. 194-196; Hewitt v. Foster, 6 Beav. 259.
   Mr. Justice CURTIS

deliveied the opinion of the court.

Samson Almy filed his bill in the Circuit Court of the United States for the District of Rhode Island, stating that one Christopher Lippitt, on the _ 7th day of March, 1828, entered into a contract in writing with Hazard & Co., the effect of which was to create an equitable mortgage on certain machinery for the price thereof advanced by Hazard & Co., who were to supply Lippixt with cotton, receive and sell the cloth, allow him three and a half cents 'per yard for manufacturing, aiid credit half the profits towards paying for the machinery, retaining the other' half for their own services and the interest oh the cost of-the machinery. The bill further states, that in May, 1829, Hazard & Co. faded in business and transferred all their property to. Thomas R. Hazard and Charles Low, in trust for the benefit of their creditors; and that on the 9th of March, 1830, the complainant purchased of the assignees their interest under the contract with Lippitt, by á written instrument of salé, of that date, a copy of which, annexed to the bill, is as follows:

The assignees of R. G. Hazard & Co. hereby sell and convey to Samson Almy the right, title and interest which ihey have to a certain contract with Christopher Lippitt, bearing date March (3d mo.) 7th, 1828, (a copy of which is hereto annexed) together with the balance due from said Lippitt on account of payment for machinery, as expressed in said contract; also their right, title and interest, to the machinery.held as collateral security for the said balance due from said C. Lippitt agreeable to the aforesaid contract, a schedule of which is hereto annexed, for which Samson Almy agrees to pay them (the said assignees)' or account with them for the sum of five thousand dollars; and it is further agreed, that if Low and Fenner should redeem their one half of the aforesaid contract by the payment of the drafts drawn upon them by R. G. Hazard & Co. on account thereof, and to return one half of the aforesaid five thousand dollars to said Samson Almy, he relinquishing to said Low and Fenner all claims .upon the aforesaid one half part of the said contract.

Providence, 3d month 9th, 1830.

For assignees of R. G. Hazard & Co.

R. G. Hazard,

R. G. Ha.zard & Co.,

Witness: A. E. Forbush. Sámson Almy.

Whereas, R. G. Hazard, for the assignees of R. G. Hazard & Co., has made an. agreement with Samson Almy, bearing date 3d month 9th, 1830, relative to contract existing between Christopher Lippitt and R. G. Hazard & Co., dated March 7th, 1828, and of the machinery held by them as collateral security, by debts due from Christopher Lippitt and drafts drawn on Low and Fenner, I hereby ratify and confirm the above agreements the same as if made by myself as assignee of R. G. Hazard & Co.

South Kingston, 3d month 10th, 1839.

Thomas R. Hazard, Assignee.

. Witness: Robert Rathbone.

The bill further states, that from the time of the failure of Hazard & Co. till his purchase from the assignees, the complainant supplied Lippitt with cotton, pursuant to the original contract between Hazard and Co. and Lippitt, having agreed with the assignees so to do; that after his purchase from the assignees, he continued to supply cotton to Lippitt, till September, 1832, when Lippitt refused to receive more; that in August, 1831, he also furnished to Lippitt a speeder, which cost five hundred and fifty dollars ; that in September, 1832, when Lippitt ceased to receive cotton from him,' there was due upon the mortgage the sum of five thousand four hundred and five dollars 87/100 for which sum he then' had a lien on the machinery; that Lippitt transferred the machinery to Wilbur, the defendant, with notice of the complainant’s rights, and after the complainant had demanded the machinery of Wilbur, the latter sold it and refuses to account. The.bill prays for an account of the value of the machinery, and that Wilbur may be decreed to pay to the complainant, out of the sum found to be its value, the money due upon the mortgage, including the amount of the advance made by' the complainant to purchase the speeder.

The cause .was heard in the Circuit Court, on the bill, answer, and evidence, and a final decree made in favor of the complainant; and thereupon the respondent appealed to this court.

The' title of the complainant-, as a purchaser from the assignees .of Hazard & Co., not being admitted in the answer, it is obvious that proof of the assignment to him is indispensable. The bill alleges it to have been made by the written instrument, a copy of which has been given. By reference thereto, it appears to have been executed by R. G. Hazard, for the assignees. E. G. Hazard is examined as a witness by the complainant, but does . not state that he had any authority from the assignees to act for them in this behalf, nor is there any evidence of such authority in the record.

His act is ratified in writing by Thomas E. Hazard, one of the assignees. . This is not sufficient. Trustees must unite to pass any title tp property jointly held by them. Ex parte Rigby, 19 Ves. 463; Sinclair v. Jackson, 8 Cowen, 543, 583; Kirby v. Turner, 1 Hopkins, 309; 2 Story’s Eq. § 1280 ; Willis on Trustees, 136. The previous authority or subsequent assent of Low must be shown.

It is .urged that, though Low, the other assignee, did riot sign the paper, nor ratify Hazard’s act, by any writing, he did, by acts in pais.

There áre reasons why very clear proof of such ratification should be required in this case. The first is, that the bill itself states no such ratification. It relies on the written paper alone, and does not suggest that after the execution of the p.aper, one of the assignees ratified the transfer, by acts in pais. But another, and more important reason, is, that this transaction between Afiny and R. G. Hazard, who undertook to act for the assignees, was not in accordance with the trusts, on which the assignees held the property. The nominal consideration of the transfer to Almy was five thousand dollars; the real consideration was a debt due to Almy from Hazard & Co. at the time they became insolvent, and the purpose of the transfer to Almy was to prefer that debt. This, neither Hazard & Co. nor the assignees, had a right to do. And the proof should be very clear, to induce the court to declare that a trustee has ratified, or acquiesced in, a breach of his trust, amounting to a fraud on the other creditors of Hazard & Co., whose rights he was bound to protect We do not find such proof in the record. There is no evidence tending to show that Low was ever informed of the true nature of the transaction between R. G. Hazard and Almy, or had knowledge that the purpose of those parties was to give a preference to Almy’s claim. And, consequently, if he had acquiesced in or even expressly ratified the transfer, while ignorant of its real character, it would have been open to him after-wards to have disaffirmed it. But it is not shown that Low did acquiesce in, or ratify the act of R. G. Hazard. The complainant put in evidence certain letters from Low to Lippitt, which have an important bearing on this part of the case. They are as follows:

Providence, 6th February, 1832.

Dear Sir: Yours, dated four days since, is just at hand. Contents noted. With regard to the contract, I am as desirous to have it adjusted as you, and am ready to attend to it at any time you may name. It will be necessary for you. to take an account of what cotton, yarn, cloth, &c., you have on hand. You stated that Mr. Hazard informed you that he had purchased the contrapt of the assignees. That is not the case. I have made no disposition of it.

Charles Low, Assignee.

Providence, October 26,1832.

Mr. Christopher Lippitt, Sir:' Having been notified by you that you wish to close up the contract under which you have been manufacturing, and to take the machinery, you paying the deficiency of your half of the profits, you are hereby authorized and requested not to receive any more cotton from Samson Almy to manufacture under said contract, and to manufacture what cotton you have on hand as soon as practicable. You are requested also to render your accounts as soon as practicable, and we will have the accounts of the profits prepared as soon as practicable, with a view to a prompt and final settlement of the whole business.

“ Mr. Almy was never authorized to supply you with cotton under the contract for his own account.

Respectfully, your obedient servant,

Charles Low, for self and T. R. Hazard, assignee for R. G. Hazard & Co.”

Providence, Nov. 13,1832.

“ Dear Sir : I should like to know if you are furnishing yourself with cotton and not receiving it .from Mr. Almy, as you have been heretofore. As for. Rowland Hazard being my agent fo: settling the business, he cannot produce any thing to show that I ever empowered him to act for me in any one instance. I shall call upon Mr. Almy within a few days and ask him for a settlement. Yours, &c.,

Charles Low, Assignee for R. G. Hazard & Co”

In these letters, Low not only denies R. G. Hazard’s agency, but Almy’s right to supply cotton on his own account, and declares, in so many words, that he has made no disposition of the contract which created the mortgage, and Mr. Lippitt testifies that Low always told him R. G. Hazard never was appointed the agent of the assignees, and had nothing to do with their business. It does not appear that up to the time when he wrote the last of these letters, he was aware that Almy was supplying cotton to Lippitt by reason of an assignment of the contract to .him. It does appear that he knew Lippitt received cotton from Almy under the contract; but this he had done for nearly a year before Almy took the assignment of the. contract, by virtue of an arrangement between Almy, Lippitt, and the assignees of Hazard & Co. as the bill itself states; and- notice of the discontinuance of that arrangement is not brought home to Low, until after Almy had ceased to supply cotton to Lippitt. The acquiescence by Low in Almy’s acts of furnishing cotton, under the contract, is not therefore referable to an assignment of the contract to Almy, and still less does it amount to a ratification of such an assignment as the assignees were not able to • make without a breach of trust.

If it were necessary therefore to decide the case upon this point, we must hold that Almy has failed to show a valid title from the assignees. But we are of opinion that independent of this defect in his title, the bill cannot be maintained.

It has already been stated that Almy did mot purchase this mortgage, but took.' an assignment of, it for the purpose of obtaining payment of a debt, which Hazard & Co. owed him at the time of their failure. .This is proved; and at the same time it is shown that when he ceased to furnish cotton to Lippitt, in September, 1832, his debt was paid;. Chistopher H. Lippitt testifies:

“ I did converse with Samson Almy, at different times, while he was stocking the mill, in relation to the interest he had in doing so. He said the only interest he had in furnishing stock for the mill was to get a debt to him from R. G. Hazard & Co.; that he did not care to continue the business after said debt was paid, and that after that it made no difference to him who stocked the mill, whether my father or anybody else. I told Mr. Almy that if it would be any damage to him for my father to stop receiving stock from ‘him, that he might still continue to furnish the mill. Mr. Almyreplied that it would be no damage to him, and that my father had better stock the mill himself, as he, Mr. Almy, had got his debt, and more too. Subsequent to my father’s furnishing the mill, Mr. Almy gave him, a letter of recommendation to a house in New York, for the purpose of aiding him in purchasing cotton. He did state that hé had no further interest in having the mill run for him, as he had secured his debt as I stated in my answer to the previous cross interrogatory. ríe said it was a matter of indifference to him whether the mill and machinery was run any longer for him, or not, but that he would run it for my father’s benefit, if so desired.” Christopher Lippitt also testifies : “At the time I stopped manufacturing for Mr. Almy, we had some conversation about furnishing .cotton. Mr. Almy says, that, if I were in your place, I wouldn’t manufacture for them any longer, they are all bankrupt, you don’t know who you are manufacturing for. I observed to Mr. Almy that, if I stopped receiving cotton from you, won’t it be an injury to you ? He said, no, not in the least, for I think I’ve got my pay, and more too. I then observed to him, that probably I might stand in need of some assistance from him, if I commenced on my own account; he promised to render me ah the assistance that he well could, give me some recommendations and introductions, where I might buy cotton. Afterwards, some time in the year 1834, he gave me introductions to go to New York to buy cotton. I stopped by the advice and' consent of Mr. Almy. The letter he gave was addressed to Messrs. Jenkins, Merrick & Co., New York; I was also advised by Mr. Almy to send my goods to them for sale, and I- did send most of my goods to them in future, accordingly. I never heard him say that he had any lien or claim on the machinery what-' ever. He said the contract between me and R. G. Hazard & Co. was placed iñ his hands by them for the purpose of getting a debt that R. G. Hazard & Co. owed him, or that he had become obliged or bound to pay for them.”

There is nothing to control this evidence except the testimony of R. G. Hazard. He says, “ S. Almy, the only probable purchaser, to whom it seemed safe to sell, objected on account of apprehension of difficulty with Low and Fenner, but by promising my personal services in the subsequent management of the business, and obligating myself by some other conditions, I prevailed upon him to make the purchase.”

This is far toó vague an account of the consideration and terms of the sale to be relied on to control the explicit declarations of Almy, and the inferences to which, his conduct gives rise..

. This conduct tends to show he had only a conditional interest in the property and that his interest had terminated. He not only ceased to supply cotton in 1832, declaring, at the same time, that his debt was paid, and he had no longer any interest in the matter, but he suffered Lippitt to run the machinery, and treat it as his own, until his failure in December, 1835, when Lippitt conveyed it to Wilbur and others. It rested in their hands until November, 1836, when Almy demanded it of Wilbur. Nothing more appears to have been done or said by him in reference to the property, till October, 1840, when he'wrote the following letter:

“ Providence, 10th month 23d, 1840.
“ Peleg Wilbur,
“ Respected Friend: I have consulted counsel respecting the claim I have against thee, and have made up my mind to commence a suit immediately, unless there is a settlement. If thee would like to see Mr. Hazard, he will be in town on the 26th instant.
“ Thy friend,
“ Samson Almy.”

Two years more elapsed, making ten years, from the time when he ceased to have any thing to do with the machinery. This bill was then filed, and R. G. Hazard is very active in the management of the suit, as he says, by reason of an understanding between Almy and himself, when the assignment was made. This understanding must have been included by him in that part of his' testimony, where he speaks of promising his “ personal services in the subsequent management of the business, and obligating himself by other conditions; ” and, if one of those conditions was that Almy took the transfer, by way of security, and his debt had been paid, it is quite consistent with Almy’s real relation- to this property that he should lie by ten years, and when he moved that R. G. Hazard should'be active also.

But we find another piece of evidence in the record, to which it is proper to advert. It is the examination of Almy before the' master upon the subject of his title, in which he has undertaker} to give what he calls “ the history of the whole matter.” It is as follows:

“ In reply, I must give you the history of the whole matter. In 1829, I think, I made arrangement with Rowland G. Hazard, Low & Fenner, and Christopher Lippitt, to furnish stock to Christopher Lippitt under the contract made by R. G. Hazard & Co., and Christopher Lippitt, they agreeing to give me one half of the profits for doing the business. We went on in that way, until I made the purchase of the machinery, after which I became sole owner and went on under the contract. At the time of R. G. Hazard & Co.’é failure, they owed me five or six thousand dollars, due by note, and the consideration of the contract or bill of sale was those notes, so far as they were required; that is, the agreement was that that bill'of sale, so far as it went, should go to cancel these notes. The notes thus cancelled, it is my impression, were surrendered to R. G. Hazard, as agent for the assignees. I can’t say that Mr. Hazard acted as agent of the assignees when I surrendered the notes to him: he did when the contract was made. I can’t remember when I surrendered the notes to Mr. H., nor how many of them there were. I could ascertain, if time were allowed.”

This is perfectly explicit, except on tine point, and that, is, whether the transfer to him was an absolute-sale, extinguishing the notes, or by way of collateral security for the notes. Adose examination of his statement will tend to show it to. have been the latter. -

He says, “ the consideration of the' contract, or bill of sale, was those notes, so far as they were required.; that is, the agreement was, that that bill of sale, so far as it went, should go tó cancel those notes.”

But, if the consideration of the sale was the extinguishment of the notes, what is meant by its extinguishing them, so far as it went ? This language is intelligible, if the agreement was that he should work out his debt through this contract with. Lippitt. In such case, the bill of sale might be said to extinguish the notes so far as it went; that is, so far as it should prove to be effectual for that pmpose. And this construction is much strengthened by the fact that he does not profess to have surrendered any of the notes at or about the time when the transfer was made to him, and theré is no reason to believe he did so before his debt was paid. Taking-this statement of Almy, in connection with his repeated declarations to the Lippitts. and his conduct in reference to this property, we cannot doubt that the transfer was made solely to enable Mm to obtain payment of these, notes by means of the contract with Lippitt, and that payment' was thus obtained. '

Other questions have been made in the case, wMch we have not found it necessary to decide. Our opinion is that the decree of the Circuit Court should be reversed and the bill dismissed with costs.

Order.

This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the District of Rhode Island, and was argued by counsel. On consideration whereof, it is now here ordered, adjudged, and decreed by this court, that the decree of the said Circuit Court in this cause be, and the same is hereby, reversed, with costs; and that this cause be, and the same is hereby, remanded to the said Circuit Court with directions to dismiss the bill of complaint with costs.