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Sullivan v. Portland and Kennebec Railroad Company/Opinion of the Court

The Kennebec and Portland Railroad Company was authorized to build a railroad from Portland to Augusta, both in the State of Maine.

On the 30th of April, 1850, that portion of the road between North Yarmouth and Portland, about twelve miles in length, was mortgaged to Ruel Williams, John Patten, and J. B. Carroll, trustees, to secure the payment of $202,400 advanced to the company by the cestuis que trust. The debt was represented by certificates bearing interest at the rate of ten per cent per annum.

On the 1st of November, 1850, the company mortgaged the whole line of the road to the commissioners of the sinking fund to secure $800,000 lent to the company by other parties.

On the 17th of October, 1851, the road and franchises were mortgaged to John Patten, Joseph McKeen, and M. S. Hagar, in trust to secure bonds issued by the company to the amount of $230,000, known as first mortgage bonds.

On the 15th of October, 1852, the road and franchises were mortgaged to the same trustees to secure the payment of a further issue of bonds to the amount of $250,000, known as the second mortgage bonds.

In the progress of the work on the road, the company issued certificates of preferred stock, known as old preferred stock, to the amount of $240,000. On this stock dividends of ten per cent per annum were to be paid. Two hundred thousand dollars of it in amount is averred to be still outstanding.

On the 7th of October, 1852, a proposition was made by the company to the following effect:--

The company was to waive its existing right to redeem at pleasure its road from North Yam outh to Portland, and to make it irredeemable until Nov. 1, 1870, provided the holders of the certificates of indebtedness would, by indorsement thereon, authorize the trustees, after paying the holders three per cent semiannually upon the amounts severally represented by such certificates, 'to pay over semiannually to the treasurer of the company, for the use and benefit of the company, the balance of the income (for interest) which the stockholders are now entitled to receive (viz., two per cent), to be held by him and appropriated, as far as may be required, or as the same may go, to the payment of interest to such preferred stockholders as shall surrender their old certificates of stock and receive new certificates of preferred stock bearing three per cent interest or income semiannually, in lieu of five per cent, as now stipulated; said payment of three per cent to the holders of said certificates and of the balance aforesaid to the treasurer by said trustees semiannually, to be in full of the annual income of ten per cent to which said certificate holders are now entitled.'

It was ordered by the company, that if the proposed arrangement should be made with the North Yarmouth certificate holders, the fund thereby saved should be applied in payment of the dividends accruing on the new certificates of preferred stock, as also proposed.

Authority was given to the president of the company to issue such new certificates of preferred stock, and to waive the right to redeem the North Yarmouth road until Nov. 1, 1870, the time named in the proposition.

None of the holders of the preferred stock accepted this proposition until Sept. 1, 1853. The first new certificate bears date on that day. The other certificates were issued subsequently.

On the 16th of December, 1853, the company ordered three per cent to be paid on the 1st of January then next to all the holders of the new certificates for the preferred stock.

The company became hopelessly insolvent. The trustees of the second mortgage foreclosed that mortgage. The foreclosure was perfected and became absolute in May, 1862. In November, 1862, the bondholders under that mortgage formed a new corporation, by the name of the Portland and Kennebec Company. The trustees conveyed to this company. The company went into possession, and has since been in possession and operated the road, and claimed to own it.

This bill is filed by the complainants as holders of the new certificates of preferred stock, for themselves and in behalf of the other holders not before the court.

The claim is to recover the four per cent per annum relinquished by the North Yarmouth holders of certificates of indebtedness, pursuant to the proposition of the original company, and which proposition was also to give to the holders of the new certificates of preferred stock what is claimed by this bill.

The Circuit Court, properly, as we think, decreed against the complainants, and dismissed the bill. They have brought the case before this court for review.

In the argument here they have insisted that the process whereby the foreclosure of the second mortgage was effected was irregular, without warrant of law, and void; and that if this were not so, the complainants upon the other facts of the case are entitled to the relief sought.

The first proposition is conclusively negatived by the judgment of the Supreme Judicial Court of the State. The Kennebec & Portland Railroad Co. v. The Portland & Kennebec Railroad Co. and Others, 59 Me. 20.

Nothing more need be said upon that subject.

There is no privity between the complainants and the new corporation. The agreement or arrangement relied upon was made with the Kennebec and Portland Railroad Company. The Portland and Kennebec Railroad Company was not in existence when it was entered into.

There is no ground for insisting that the latter succeeded to this liability of the former. The new company did not take the property with any such onus. The liability rested wholly n the contract of the parties by whom it was made. It did not run with the property into the hands of those who acquired it by the foreclosure. They did not assume the liability expressly or by implication. Hence neither they, nor those claiming under them, are in any wise bound. The foundation of the claim as to both is res inter alios acta.

Nor was there any privity whatever between the North Yarmouth creditors and the preferred stockholders. Whether the stockholders did or did not receive what was surrendered by the creditors, did not affect or concern the latter. The moneys surrendered were to be paid over 'semiannually to the treasurer of this company for the use and benefit of this company.' With such payment the duties of the trustees terminated. Thereafter the company was to apply the fund for the benefit of such of the stockholders as should comply with the condition prescribed. There were two distinct propositions. One to the debt-holders, the other to the stockholders. The latter could get nothing unless the former accepted. But the acceptance of the former had no relation to the acceptance of the latter. After the former accepted, the latter still had the option to accept or refuse. The indorsement required to be made by the debt-holders upon their certificates did not refer or relate to the stockholders. When the arrangement between the old company and the debt-holders was complete, it was equally effectual and conclusive upon those parties, whether the preferred stockholders did or did not thereafter take any action. There was no assignment or transfer of any interest in the mortgage. There was simply a release and extinguishment of so much of the liability secured, and, by consequence, of the lien and existence of the mortgage to that extent. Thereafter the liability and the mortgage were as if they had never been for any thing more. The new company acquired the ownership of the road, and its entire income, subject only to the pre-existing mortgages. The source whence the fund in question was to flow was destroyed by the foreclosure. When the latter was complete the former ceased to exist, and thenceforward was as if it had never been.

The defence of the Statute of Limitations is not set up by plea nor in the answers. We cannot, therefore, consider the case in that aspect. Wilson v. Anthony, 19 Ark. 16.

The objection that there is a remedy at law is only available where such remedy is as plain, adequate, and effectual as the remedy in equity. Boyce's Executors v. Grundy, 3 Pet. 215. Here, if the complainants could recover the moneys claimed, they would be entitled, also, to discovery, and an account.

Where this objection lies, it is the duty of the court, sua sponte, to take notice of it and give it effect. There is, in such cases, a constitutional right to a trial by jury. Parker v. The Woollen Company, 2 Black, 545.

The charges of fraud and conspiracy in the bill are wholly unsupported by the proofs.

To let in the defence that the claim is stale, and that the bill cannot, therefore, be supported, it is not necessary that a foundation shall be laid by any averment in the answer of the defendants. If the case, as it appears at the hearing, is liable to the objection by reason of the laches of the complainants, the court will, upon that ground, be passive, and refuse relief. Every case is governed chiefly by its own circumstances; sometimes the analogy of the Statute of Limitations is applied; sometimes a longer period than that prescribed by the statute is required; in some cases a shorter time is sufficient; and sometimes the rule is applied where there is no statutable bar. It is competent for the court to apply the inherent principles of its own system of jurisprudence, and to decide accordingly. Wilson v. Anthony, 19 Barber (Ark.), 16; Taylor v. Adams, 14 id. 62; Johnson v. Johnson, 5 Ala. 90; Ferson v. Sanger, 2 Ware, 256; Fisher v. Boody, 1 Curtis, 219; Cholmondly v. Clinton, 2 Jac. & Wak. 141; 2 Story's Eq., sect. 1520 a.

'A court of equity, which is never active in giving relief against conscience or public convenience, has always refused its aid to stale demands where a party has slept upon his rights, and acquiesced for a great length of time. Nothing can call forth this court into activity but conscience, good faith, and reasonable diligence. Where these are wanting, the court is passive, and does nothing. Laches and neglect are always discountenanced; and, therefore, from the beginning of this jurisdiction there was always a limitation to suits in this court.' Smith v. Clay, Ambler, 645.

If the complainants had severally sought to enforce their claim in an action at law, ex delicto or ex contractu, the bar of the Statute of Limitations would have been complete after the lapse of six years. Rev. Stat. of 1857, p. 510.

This bill was filed on the 21st of February, 1871.

The complainants were supine and silent for more than seventeen years. In the mean time, the Kennebec and Portland company became hopelessly and finally insolvent, and its affairs a wreck. Proceedings were instituted to foreclose the second mortgage, and brought to a close. The company lost all its property, and has since existed only in name. A new corporation has come into existence, and acquired and owns all the property and effects lost by the old one. This transfer occurred more than seven years before the first step was taken in the present case. This long delay thus characterized is unaccounted for. The facts are amply sufficient to warrant the application of the rule of laches, and to give it the fullest effect.

Decree affirmed.


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Castle, Newstead Abbey, Glossop Hall, &c. A devoted Roman catholic, Hadfield enjoyed the patronage of the leading catholic families, and served four dukes of Norfolk in succession. He was a prominent citizen of Sheffield, acted as a town councillor, and was connected with many charitable institutions. He took a great interest in the school of art, and was president from 1878 to 1880. He married Sarah, daughter of William Frith of Angel Street, Sheffield. He died 9 March 1885, leaving one son and three daughters. Some illustrations of his architectural work will be found in the 'Builder' for 11 April 1885.

[Tablet, 14 March 1885; Builder, 14 March and 11 April 1885; Athenæum, 14 March 1885.]  HADFIELD, WILLIAM (1806–1887), writer on Brazil, born in 1806, entered commercial life in South America at a very early age, and spent some of the most important years of his life there. He was the first secretary of the Buenos Ayres Great Southern railway, secretary to the South American General Steam Navigation Company, and both by literary and commercial effort did much to open up South America to British enterprise and capital. This was without pecuniary benefit to himself, as in 1847, in consequence of an execution levied on his goods, he was driven to bankruptcy (Some Remarks on a Pamphlet called Mr. Rowson's Statement of Facts respecting Recent Occurrences at New Brighton, Liverpool, 1847). In 1863 Hadfield founded in London 'The South American Journal and Brazil and River Plate Mail' (the first number was published 7 Nov.), of which he was chief editor till his death, 14 Aug. 1887. He was buried at St. Peter's, Walthamstow, beside his wife, who had predeceased him.

Hadfield wrote: 1. 'Brazil, the River Plate, and the Falkland Islands, with the Cape Horn Route to Australia,' 1854. 2. 'Brazil and the River Plate in 1868, their Progress since 1853,' 1869. He also edited Brazil. Stray Notes from Bahia,' by Vice-consul James Wetherell, 1860.

[South American Journal, 20 Aug. 1887, p. 480; Athenæum, 27 Aug. 1887, p. 280; Brit. Mus. Cat.]  HADLEY, GEORGE (1685–1768), scientific writer, born in London on 12 Feb. 1685, was a younger brother of John Hadley (1682–1744) [q. v.], who invented the reflecting quadrant. George entered Pembroke College, Oxford, 30 May 1700, and on 13 Aug. 1701 became a member of Lincoln's Inn. He was called to the bar 1 July 1709, but appears to have been more occupied with mechanical and physical studies than in professional work. An anonymous pamphlet in the British Museum which describes the quadrant was written by him, according to a manuscript note on the margin, and he is most probably the author of a Latin version of the same tract which has been bound up with it.

His main claim to notice is that he first clearly formulated the present theory of trade winds. Galileo, Halley, and Hooke had discussed air-currents, and the two latter had attributed them to the rarefying power of the sun's heat, but Hadley was the first who adequately studied the direction of these currents. Being elected a fellow of the Royal Society 20 Feb. 1735, it was on 22 May of the same year that he presented his paper 'Concerning the Cause of the General Trade Winds' (Phil. Trans. xxxix. 58). After showing how the earth's diurnal rotation must be considered in explaining the trade winds, Hadley clearly sets forth first, the motion of the lower atmosphere from north and south towards the equator, with the causes of this motion; secondly, how the air 'as it moves from the tropicks towards the æquator, having a less velocity' of diurnal rotation 'than the parts of the earth it arrives at, will have a relative motion contrary to that of the earth in those parts, which being combined with the motion towards the aequator, a N.E. wind will be produced on this side of the æquator, and a S.E. on the other.'

This simple statement exactly represents the theory of the trade winds as still held by physicists, yet in Hadley's time and for sixty years after the date of his paper the truth and value of his explanation were unacknowledged. In 1793 Dalton, referring to one of his essays, says: 'The theory of the trade winds was, as I conceived when it was printed off, original; but I find since that they are explained on the very same principles and in the same manner by George Hadley, F.R.S.' (Meteorolog. Observations, &c. preface).

Hadley was for at least seven years in charge of the meteorological observations presented to the Royal Society, and drew up an 'Account and Abstract of the Meteorological Diaries communicated for the years 1729 and 1730.' On 9 Dec. 1742 he communicated a similar paper on the meteorology of 1731-5. After leaving London, he for some time lived with a nephew at East Barnet, but most of his later years were spent at Flitton in Bedfordshire, where his nephew, Hadley Cox, was vicar. Hadley died at Flitton on 28 June 1768. The vicar, who died in 1782, speaks affectionately of him in his will, and bequeaths to his son 'my reflecting telescope


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upon the condition that he never part with it, being the first of the sort that ever was made, invented by my late uncle, John Hadley, Esq., and made under the direction and with the assistance of his two brothers, George and Henry.'

[A Biographical Account of John Hadley, Esq., V.P.R.S. … and his brothers George and Henry (anonymous, a copy is in Trinity College Library, Cambridge); Phil. Trans. ut supra and xl. 154, xlii. 243; Dalton's Meteorolog. Observations, ut supra; Cass's Hist. East Barnet, pp. 74, 80.]  HADLEY, GEORGE (d. 1798), orientalist, was appointed a cadet in the East India Company's service in 1763, and gained his first commission on the Bengal establishment on 19 June of that year. He became lieutenant on 5 Feb. 1764, and captain on 26 July 1760, and retired from the service on 4 Dec. 1771 ( and, Indian Army List, 1760-1834, pp. 124-5). Finding it impossible to properly discharge his duty as a commander of a company of sepoys without a knowledge of their language, Hadley reduced their dialect to a grammatical system in 1765. A copy of his manuscript grammar fell into the hands of a London publisher; it was printed very incorrectly in 1770, and was circulated in Bengal. Hadley thereupon published a correct edition, entitled 'Grammatical Remarks on the practical and vulgar Dialect of the Indostan Language commonly called Moors. With a Vocabulary, English and Moors,' 8vo, London, 1772; 4th edit., enlarged, 1796. He published also 'Introductory Grammatical Remarks on the Persian Language. With a Vocabulary, English and Persian,' 4to, Bath, 1776. Hadley died on 10 Sept. 1798 in Gloucester Street, Queen Square, London (Gent. Mag. 1798, pt. ii. p. 816). In 1788 Thomas Briggs, a printer, of Kingston-upon-Hull, persuaded Hadley to put his name to a wretched compilation called 'A New and Complete History of the Town and County of the Town of Kingston-upon-Hull,' 4to.

[Hadley's Prefaces; Brit. Mus. Cat.]  HADLEY, JOHN (1682–1744), mathematician and scientific mechanist, born on 16 April 1682, was the son of George Hadley, deputy-lieutenant and afterwards, in 1691, high sheriff of Hertfordshire; his mother was Katherine FitzJames. He must be distinguished from an older John Hadley who was also skilled in practical mechanics. Desaguliers, when describing the waterworks put up at London Bridge, near the beginning of the eighteenth century, says that 'the contrivance for raising and falling the waterwheel was the invention of Mr. Hadley, who put up the first of that kind at Worcester, and for which a patent was granted him' in 1693 (, Lectures, ii. 528). On 21 March 1717 the younger Hadley became a fellow of the Royal Society. On 1 May in the following year he drew up a report on an abstruse mathematical question, which had been proposed apparently by Maclaurin, with the conclusion 'that the writer had shown the formation of several trajectories in which bodies might move about a gravitating centre, the gravitating power being as any dignity of the distance, either integer or fracted.' This is evidence of Hadley's knowledge of advanced mathematics, which is confirmed by an analysis which he drew up of Bianchini's work on the planet Venus (Phil. Trans. xxxvi. 158).

In 1719-20 Hadley obtained his first great success by the improvement he effected in the reflecting telescope, which had been left imperfect by both Newton and Gregory, and thus produced the first instrument of that kind which had sufficient size and accuracy to be of service to astronomers. His first large reflector was shown on 12 Jan. 1721 to the Royal Society, who 'ordered their hearty thanks to be recorded,' and state in their journals that 'the force [of the telescope] was such as to enlarge an object near two hundred times, though the length thereof scarcely exceeds six feet.' The reflecting metallic mirror was about six inches in diameter, with a focal length of over five feet two inches. Dr. Bradley reported that with it he had seen 'the transits of Jupiter's satellites and their shadows over the disc, the black list in Saturn's ring, and the edge of the shadow of Saturn cast on the ring … also several times the five satellites of Saturn.' Hadley's new telescope was praised in equally high terms by Dr. Halley, the astronomer royal, who tested it 'on the bodies and satellites of the superior planets,' and on 6 April in the same year Hadley communicated a series of observations which he himself had made on the transit of Jupiter's satellites, &c. (ib. xxxii. 384).

Hadley's success with his first reflector and a second equally large led him to effect great improvements in the Gregorian telescope. His friend Dr. Bradley also acquired a taste for constructing these instruments, and the result of their efforts was that reflecting telescopes speedily came into general use, and have since been supplied regularly by opticians (, Life of Newton, i. 55).

From 1726 till his death Hadley was annually elected member of the council of the Royal Society, and on 12 Feb. 1728 he was sworn into the office of vice-president.


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In the summer of 1730 he made his second great success by the invention of the reflecting quadrant, a simple but invaluable improvement of Hooke's instrument. Hooke's octant lacked precisely the quality which makes Hadley's instrument so indispensable at sea, and though Sir Isaac Newton undoubtedly wrote a description to Halley of what was wanting, it is scarcely possible to doubt that Hadley's discovery was reached independently. On 13 May 1731 he read a paper to the Royal Society entitled 'Description of a new Instrument for taking Angles, by John Hadley, Vice-Pres. R.S.' (Phil. Trans. xxxvii. 147-57). This gives a full and exact account of the improved quadrant, the mathematical principles on which it is based, and its special fitness for angle-measurement on board ship. By means of two small mirrors on a portable instrument it was now for the first time possible to easily note the angle subtended by two distant objects independently of small changes of place in the centre of observation. Dr. Whewell, referring to Hadley's 'sextant,' says:' That invaluable instrument in which the distance of two objects is observed by bringing one to coincide apparently with the other' (Ind. Science, ii. 278). The circular arc of the instrument being originally one-eighth of a circumference, it was called 'octant,' and as the double reflection makes one degree on the arc represent two degrees between the objects observed, the octant was therefore a measure of ninety degrees, and thus obtained the name quadrant. In the same way, when Captain Campbell in 1757 first proposed to extend the circular arc to one-sixth of a circumference in order to be able to measure up to 120 degrees, Hadley's instrument then became a sextant (, Phys. Astr. p. 487).

In November 1730 Thomas Godfrey of Philadelphia, Pennsylvania, proposed an improvement of the quadrant similar to that of Hadley, but there is clear evidence that the latter had the priority in point of time (, Corresp. of Scientific Men, i. 286, 288).

Soon after the announcement of Hadley's invention, the lords of the admiralty ordered a series of observations to be made 'on board the Chatham yacht' to test the instrument (Phil. Trans. xxxvii. 147). In 1734 Hadley effected a further improvement by fixing a spirit level to his quadrant so as to take a meridian altitude at sea when the horizon is not visible (ib. xxxviii. 167-72). In the following year he wrote his 'proposition relating to the combination of transparent lenses with reflecting planes,' the object being to measure angular distances by the motion of a reflecting plane which transmitted the rays of light without any second reflection in the telescope. We also read (Royal Society Journals, 1734) of a letter 'from M. Godin since his return to Paris, wherein he says he produced Mr. Hadley's instrument for taking angles or distances before a meeting of the Royal Academy of Sciences.'

In 1734 John Hadley married Elizabeth, daughter of Thomas Hodges, F.R.S., who had been attorney-general for Barbadoes. Besides his home at Enfield Chase, near East Barnet, Hadley had a house in Bloomsbury, London, and was a neighbour and intimate friend of Sir Hans Sloane. On a tombstone in East Barnet churchyard is the record, 'John Hadley of East Barnet, Esq., dyed the 14 of February 1743 [i.e. 1743-4], aged 61 years.' His only son John, born in 1738, showed none of the talent of his family, but after inheriting a large fortune in land and houses, died in poverty and obscurity, February 1816.

[Biographical Account of John Hadley, esq., V.P.R.S. … and of his brothers George and Henry (anonymous, a copy is in Trinity College Library, Cambridge); Phil. Trans. ut supra (vols. xxxii-xl.), and Dr. Hutton's Abridg. vi. 646; Cass's Hist. East Barnet, pp. 74, 79, 80; Gent. Mag. 1744, p. 108; Scots Mag. vi. 98; Musgrave's Obituary Notices, Addit. MSS. 5727-49; Browne's Translation of Gregory's Optics, App. pp. 252, 285.]  HADLEY, JOHN, M.D. (1731–1764), professor of chemistry at Cambridge, eldest son of Henry Hadley (brother of John Hadley, mathematician [q. v.]) and Ann Hoffman (?), was born in London in 1731, and entered Queens' College, Cambridge, in May 1749. He was fifth wrangler, was elected fellow of Queens' in January 1753, and proceeded B.A. in the same year, M.A. in July 1756, and M.D. in 1763. He became professor of chemistry in 1756, and published the 'Plan of a Course of Chemical Lectures,' 1758. He also wrote 'An Introduction to Chemistry, being the Substance of a Course of Lectures read two years successively at the Laboratory in Cambridge,' 1759; the manuscript is in possession of Professor Cumming of Cambridge. In 1758 he became F.R.S., and became, in 1760, assistant physician at St. Thomas's Hospital. In 1763 he was elected physician to the Charterhouse, and also became fellow of the College of Physicians. He died of fever at the Charterhouse 5 Nov. 1764.

The fifty-fourth volume of the 'Philosophical Transactions' contains an account, which Hadley drew up, of 'a mummy inspected in London in 1763,' communicated to Dr. William Heberden. This paper was read 12 Jan. 1764, and on 2 Feb. 'he presented to the society an elegant drawing of


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The New International Encyclopædia/Riff, The

RIFF, (Er-Rif). A name given to the mountain region bordering the north coast of Morocco from Ceuta eastward nearly to the borders of Algeria and included in the Atlas system. The rugged coast, the principal projection of which is Cape Tres Forcas, is almost without harbors. The inhabitants are pure Berbers in blood. In the French conquest of Algeria they were not molested, and they are said to live in a state of chronic revolt against the Sultan of Morocco. They were formerly noted for piracy. The people understand or speak Arabic only to a very slight extent, Shleh or Shluh being their native tongue. They are said to be untrustworthy.


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The New International Encyclopædia/Rifle-bird

RIFLE-BIRD, or. An Australian bird of paradise (Ptiloris paradiseus), with a long curved bill, and in size about equal to a large pigeon. The upper parts are velvety black, tinged with purple; the under parts velvety black, diversified with olive-green. The crown of the head and the throat are covered with innumerable little specks of emerald green, of most brilliant lustre. The tail is black, the two central feathers rich metallic green. The female is much more plainly colored. The name was given by early Australian settlers in allusion to the resemblance between the plumage of the male and the uniform of a familiar rifle brigade.


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Farrington v. Tennessee

ERROR to the Supreme Court of the State of Tennessee.

The Union and Planters' Bank of Memphis is a banking corporation, doing business at Memphis, Shelby County, Tennessee, organized under a charter granted by the General Assembly of that State March 20, 1858, and amended Feb. 12, 1869, the tenth section of which provides that 'said company shall pay to the State an annual tax of one-half of one per cent on each share of the capital stock subscribed, which shall be in lieu of all other taxes.'

Sect. 1 of an act of the General Assembly of 1869-70, c. 81, provides: 'All shares of stock in any bank, institution, or company, now or hereafter incorporated by or in pursuance of any law of this State or any other State,. . . shall be valued and assessed, and subject to taxation.'

The bank paid the said tax of one-half of one per cent for the year 1872.

Farrington was throughout that year the owner of one hundred and fifty shares of the stock of the bank, upon which the State and the county of Shelby, severally claiming the right under that act to do so, assessed against him for that year, taxes at the same rate that they were assessed and levied upon other taxable property. He resisted the payment of them, upon the ground that, by sect. 10 of the charter, the bank, its franchises and capital stock, and also the shares of stock of the individual stockholder, were subject to no taxation other than the specific sum nominated in the charter; and that the act in question impaired the obligation of the contract stipulating to accept that sum in lieu of all other taxes, and was, therefor, in violation of sect. 10, art. 1, of the Constitution of the United States.

A suit was brought to test the validity of the assessment in the Second Chancery Court of Shelby County; and it was agreed, that, in the event of a decision adverse to Farrington, judgment should be rendered against him for $60 and $180, the amount of the taxes assessed by the State and county respectively, with interest from the first day of January, 1873. If the decision should be in his favor, then the judgment should be that said taxes were illegally assessed; that said shares of stock were exempt from all other taxation except the aforesaid one-half of one per cent to the State, as provided in the tenth section of the bank's charter; and, further, that the collection of said taxes be enjoined, and such other appropriate decree rendered as the court might deem proper, in order to protect him and his assigns from taxation on said stock. Each party reserved the right of appeal. The court rendered a decree enjoining the collection of the taxes, which was reversed by the Supreme Court of the State, on the ground that the said shares of stock were not the property or thing exempted, but other and different, ans so were not within the protection of the charter and of the Constitution of the United States; and it was adjudged that Farrington should pay to the State and the county respectively the said sums of money assessed upon his shares of stock.

Farrington thereupon sued out this writ of error.

The case was argued by Mr. H. E. Jackson and Mr. L. D. McKisick for the plaintiff in error, and by Mr. J. B. Heiskell, Attorney-General of Tennessee, and Mr. S. P. Walker, for the defendant in error.

MR. JUSTICE SWAYNE delivered the opinion of the court.

title: Farrington v. Tennessee


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title: Talk:Farrington v. Tennessee


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Farrington v. Tennessee/Opinion of the Court

This case lies within narrow limits. The question to be decided arises under the Constitution of the United States. The ground of the discussion has been well trodden by our predecessors. Little is left for us but to apply the work of other minds. The facts are agreed by the parties, and may be briefly stated.

The Union and Planters' Bank of Memphis was duly organized under a charter granted by the Legislature of Tennessee, by two acts, bearing date respectively on the 20th of March, 1858, and the 12th of February, 1869. Since its organization, it has been doing a regular banking business. Its capital stock subscribed and paid in amounts to $675,000, divided into six thousand seven hundred and fifty shares of $100 each. Farrington, the plaintiff in error, was, throughout the year 1872, the owner of one hundred and fifty shares, of the value of $15,000.

The tenth section of the charter of the bank declares 'that the said company shall pay to the State an annual tax of one-half of one per cent on each share of the capital stock subscribed, which shall be in lieu of all other taxes.'

The State of Tennessee and the county of Shelby claiming the right, under the revenue laws of the State, to tax the stock of the plaintiff in error, assessed and taxed it for the year 1872. It was assessed at its par value. The tax imposed by the State was forty cents on the $100, making the State tax $60. The county tax was $1.20 on the $100, making the county tax $180.

The plaintiff in error denies the right of the State and county to impose these taxes. He claims that the tenth section of the charter was a contract between the State and the bank; that any other tax than that therein specified is expressly forbidden; and that the revenue laws imposing the taxes in question impair the obligation of the contract. The Supreme Court of the State adjudged the taxes to be valid. The case was thereupon removed to this court by the plaintiff in error for review.

A compact lies at the foundation of all national life. Contracts mark the progress of communities in civilization and prosperity. They guard, as far as is possible, against the fluctuations of human affairs. They seek to give stability to the present and certainty to the futur. They gauge the confidence of man in the truthfulness and integrity of his fellowman. They are the springs of business, trade, and commerce. Without them, society could not go on. Spotless faith in their fulfilment honors alike communities and individuals. Where this is wanting in the body politic, the process of descent has begun, and a lower plane will be speedily reached. To the extent to which the defect exists among individuals, there is decay and degeneracy. As are the integral parts, so is the aggregated mass. Under a monarchy or an aristocracy, order may be upheld and rights enforced by the strong arm of power. But a republican government can have no foundation other than the virtue of its citizens. When that is largely impaired, all is in peril. It is needless to lift the veil and contemplate the future of such a people. Trist v. Child, 21 Wall. 441; 1 Montesquieu's Spirit of Laws, 25. History but repeats itself. The trite old aphorism, that 'honesty is the best policy,' is true alike of individuals and communities. It is vital to the highest welfare.

The Constitution of the United States wisely protects this interest, public and private, from invasion by State laws. It declares that 'no State shall. . . pass any. . . law impairing the obligation of contracts.' Art. 1, sect. 10. This limitation no member of the Union can overpass. It is one of the most important functions of this tribunal to apply and enforce it upon all proper occasions.

This controversy has been conducted in a spirit of moderation and fairness eminently creditable to both parties. The State is obviously seeking only what she deems to be right. The judges of her own highest court, whence the case came here, were divided in opinion.

Contracts are executed or executory. A contract is executed where every thing that was to be done is done, and nothing remains to be done. A grant actually made is within this category. Such a contract requires no consideration to support it. A gift consummated is as valid in law as any thing else. Dartmouth College v. Woodward, 4 Wheat. 518. An executory contract is one where it is stipulated by the agreement of minds, upon a sufficient consideration, that something is to be done or not to be done by one or both the parties. Only a slight consideration is necessary. Pillans v. Van Mierop, 3 Burr. 1663; Forth v. Stanton, 1 Saund. 210, note 2, and the cases there cited.

The constitutional prohibition applies alike to both executory and executed contracts, by whomsoever made. The amount of the impairment of the obligation is immaterial. If there be any, it is sufficient to bring into activity the constitutional provision and the judicial power of this court to redress the wrong. Von Hoffman v. City of Quincy, 4 Wall. 535.

The doctrine of the sacredness of vested rights has its root deep in the common law of England, whence so much of our own has been transplanted. Kent, then chief justice, said: It is a principle of that law, 'as old as the law itself, that a statute even of its omnipotent Parliament is not to have a retrospective effect. Nova constitutio futuris formam imponere debet et non preteritis. Bracton, lib. 228; 2 Inst. 292.' Dash v. Van Kleeck, 7 Johns. (N. Y.) 477. See also Society, &c. v. Wheeler et al., 2 Gall. 105, and Broom's Legal Maxims, 34.

It was settled at an early period that it was the prerogative of the king to create corporations; but he could not grant the same identical powers to a second corporation while the prior one subsisted, and, unless the power was reserved, he could not alter, amend, or annul a charter without the consent of the corporate body to which it belonged. To the extent of such assent amendments were effectual, and no further. Dartmouth College v. Woodward, supra; The King v. Passmore, 3 T. R. 199, and the cases cited.

In the worst times of English history no attempt was made by the crown to do either of these things in invitum.

Near the clos of the reign of Charles the Second, the charters of many cities were wrested from them. The case of the City of London was the most memorable. It was done under the forms of law, by means of a corrupt judiciary. After the Revolution of 1688, and the accession of William and Mary to the throne, the charter of the metropolis was restored, and immunity was given to it, by an act of Parliament, against such assaults in future. 3 Bl. Com. 264; 2 Campbell's Lives of the Chief Justices, 41.

It is the theory of the British Constitution that Parliament is omnipotent. It can pass bills of attainder and acts of confiscation. Gibbon's Autobiography, 14. It can also create and destroy corporations. But these things involve the exercise, not of its ordinary, but of an extraordinary power, not unlike that of the Roman emperors, sometimes applied in moulding and administering the civil law in special cases.

In The King v. Passmore, supra, Justice Buller said he 'considered the grant of incorporation to be a compact between the crown and a certain number of the subjects, the latter of whom undertake, in consideration of the privileges which are bestowed, to exert themselves to' carry out the objects of the grant.

The question whether there is in such cases a contract within the meaning of the contract clause of the Constitution of the United States came for the first time before this court in the Dartmouth College case. A college charter was granted by the king before the American Revolution. The State of New Hampshire, by several acts of her legislature, of the 27th of June and of the 18th and 26th of December, 1816, attempted materially to change the original charter and modify the government of the institution which had grown up under it. The college resisted. The case was brought here for final decision. It was argued at the bar with consummate ability. The judgments of the justices of this court who delivered opinions were characterized by a wealth of learning and force of reasoning rarely equalled. Perhaps the genius of Marshall never shone forth in greater power and lustre.

It was said, among other things, that the ingredients of a contract are parties, consent, consideration, and obligation. The case presented all these. The parties were the king, and the donees of the powers and privileges conferred. Consent was shown by what they did. The consideration was the investment of moneys for the purposes of the foundation, the public benefits expected to accrue, and an implied undertaking of the corporation faithfully to fulfil the duties with which it was charged. The obligation was to do the latter, under the penalty of forfeiture in case of 'non-user, misuser, or abuser.' On the part of the king there was an implied obligation that the life of the compact should be subject to no other contingency. The question decided in that case has since been considered as finally settled in the jurisprudence of the entire country. Murmurs of doubt and dissatisfaction are occasionally heard; but there has been no reargument here, and none has been asked for. The same doctrine has been often reaffirmed in later cases. The last one is New Jersey v. Yard, decided at this term, supra, p. 104. In none of them has there been a dissent upon this point.

In cases involving Federal questions affecting a State, the State cannot be regarded as standing alone. It belongs to a union consisting of itself and all its sister States. The Constitution of that union, and 'the laws made in pursuance thereof, are the supreme law of the land,. . . any thing in the Constitution or laws of any State to the contrary notwithstanding;' and that law is as much a part of the law of every State as its own local laws and Constitution. Farmers' & Mechanics' Bank v. Deering, 91 U.S. 29.

Yet every State has a sphere of action where the authority of the national government may not intrude. Within that domain the State is as if the union were not. Such are the checks and balances in our complicated but wise system of State and national polity.

This case turns upon the construction to be given to the tenth section of the charter of the bank. Our attention has been called to nothing else.

The exercise of the taxing power is vital to the functions of government. Except where specially restrained, the States possess it to the fullest extent. Prima facie it extends to all property, corporeal and incorporeal, and to every business by which livelihood or profit is sought to be made within their jurisdiction. When exemption is claimed, it must be shown indubitably to exist. At the outset, every presumption is against it. A well-founded doubt is fatal to the claim. It is only when the terms of the concession are too explicit to admit fairly of any other construction that the proposition can be supported. West Wisconsin Railway Co. v. Board of Supervisors, 93 U.S. 595; Tucker v. Ferguson, 22 Wall. 527.

Can the exemption here in question, examined by the light of these rules, be held valid?

Upon looking into the section, several things clearly appear: 1. The tax specified is upon each share of the capital stock, and not upon the capital stock itself. 2. It is upon each share subscribed. Nothing is said about what is paid in upon it. That is immaterial. The fact of subscription is the test, and that alone is sufficient. 3. This tax is declared to be 'in lieu of all other taxes.' Such was the contract of the parties.

The capital stock and the shares of the capital stock are distinct things. The capital stock is the money paid or authorized or required to be paid in as the basis of the business of the bank, and the means of conducting its operations. It represents whatever it may be invested in. If a large surplus be accumulated and laid by, that does not become a part of it. The amount authorized cannot be increased without proper legal authority. If there be losses which impair it, there can be no formal reduction without the like sanction. No power to increase or diminish it belongs inherently to the corporation. It is a trust fund, held by the corporation as a trustee. It is subject to taxation like other property. If the bank fail, equity may lay hold of it, administer it, pay the debts, and give the residuum, if there be any, to the stockholders. If the corporation be dissolved by judgment of law, equity may interpose and perform the same functions. Wood v. Dummer, 3 Mas. 308; Curran v. Arkansas, 15 How. 304; Gordon v. The Appeal Tax Court, 3 id. 133; People v. The Commissioners, 4 Wall. 244; Van Allen v. The Assessors, 3 id. 573; Queen v. Arnaud, 9 Ad. & E. N. S. 806; Bank Tax Cases, 2 Wall. 200.

The shares of the capital stock are usually represented by certificates. Every holder is a cestui que trust to the extent of his ownership. The shares are held and may be bought and sold and taxed like other property. Each share represents an aliquot part of the capital stock. But the holder cannot touch a dollar of the principal. He is entitled only to share in the dividends and profits. Upon the dissolution of the institution, each shareholder is entitled to a proportionate share of the residuum after satisfying all liabilities. The liens of all creditors are prior to his. The corporation, though holding and owning the capital stock, cannot vote upon it. It is the right and duty of the shareholders to vote. They in this way give continuity to the life of the corporation, and may thus control and direct its management and operations. The capital stock and the shares may both be taxed, and it is not double taxation. The bank may be required to pay the tax out of its corporate funds, or be authorized to deduct the amount paid for each stockholder out of his dividends. Angell & A. on Corp., sects. 556, 557; Union Bank v. The State, 9 Yerg. (Tenn., 490; Van Allen v. The Assessors, supra; Bradley v. The People, 4 Wall. 459; Queen v. Arnaud, supra; National Bank v. Commonwealth, 9 Wall. 353; The State v. Branin, 3 Zab. (N. J.) 484; M'Culloch v. Maryland, 4 Wheat. 316.

There are other objects in this connection liable to taxation. It may be well to advert to some of them.

1. The franchise to be a corporation and exercise its powers in the prosecution of its business. Burroughs on Taxation, sect. 85; Hamilton v. Massachusetts, 6 Wall. 632; Wilmington Railroad v. Reid, 13 id. 264.

2. Accumulated earnings. The State v. Utter, 34 N. J. L. 493; The St. Louis Mutual Insurance Co. v. Charles, 47 Mo. 462.

3. Profits and dividends. The Attorney-General v. Bank &c., 4 Jones (N. C.) Eq. 287.

4. Real estate belonging to the corporation and necessary for its business. Wilmington Railroad v. Reid, supra; The Bank of Cape Fear v. Edwards, 5 Ired. (N. C.) L. 516.

5. Banks and bankers are taxed by the United States: 1. On their deposits. 2. On the capital employed in their business. 3. On their circulation. 4. On the notes of every person or State bank used and paid out for circulation. Rev. Stat. 673 et seq.

The States are permitted, in addition, to tax the shares of the national banks. Id. 1015.

This enumeration shows the searching and comprehensive taxation to which such institutions are subjected, where there is no protection by previous compact.

Unrestrained power to tax is power to destroy. M'Culloch v. Maryland, supra.

When this charter was granted, the State might have been silent as to taxation. In that case, the power would have been unfettered. The Providence Bank v. Billings, 4 Pet. 514. It might have reserved the power as to some things, and yielded it as to others. It had the power to make its own terms, or to refuse the charter. It chose to stipulate for a specified tax on the shares, and declared and bound itself that this tax should be 'in lieu of all other taxes.'

There is no question before us as to the tax imposed on the shares by the charter. But the State has by her revenue law imposed another and an additional tax on these same shares. This is one of those 'other taxes' which it had stipulated to forego. The identity of the thing doubly taxed is not affected by the fact that in one case the tax is to be paid vicariously by the bank, and in the other by the owner of the share himself. The thing thus taxed is still the same, and the second tax is expressly forbidden by the contract of the parties. After the most careful consideration, we can come to no other conclusion. Such, we think, must have been the understanding and intent of the parties when the charter was granted and the bank organized. Any other view would ignore the covenant that the tax specified should be 'in lieu of all other taxes.' It would blot those terms from the context, and construe it as if they were not a part of it.

There is no reservation or discrimination as to any 'other tax.' All are alike included. Such is the natural effect of the language used. The most subtle casuistry to the contrary is unavailing. Under such a contract between individuals, a doubt could not have existed. It may as well be said the power is reserved to tax any thing else, as further to tax the shares. We cannot so hold, without interpolating into the clause a term which it does not contain. This we may not do. Our duty is to enforce the contract as we find it, and not to make a new one. If it was intended to make the exception claimed from the universality of the exemption as expressed, it would have been easy to say so, and it is fairly to be presumed this would have been done. In the absence of this expression, we can find no evidence of such an intent. Our view is fully sustained by the leading authorities upon the subject. We will refer to a few of them.

In The Binghampton Bridge, 3 Wall. 51, it was declared by the act of the legislature authorizing the bridge to be built that it should not be lawful to build any other bridge within two miles above or below the one so authorized. This court held the inhibition to be a covenant, and upheld and enforced the restriction against the authority conferred by a later act of the legislature authorizing a bridge to be so built.

In Wilmington Railroad v. Reid, supra, the charter declared that 'the property of said company and the shares therein shall be exempt from any public charge or tax whatsoever.' The legislature passed laws taxing the entire franchise and rolling-stock, and certain lots of land necessary to the business of the company. This court held the exemption to be a contract, and adjudged the laws to be void.

The Union Bank v. The State, 9 Yerg. (Tenn.) 490, is a case marked by eminent judicial ability and careful thought. There it was stipulated, 'that, in consideration of the privileges granted by this charter, the bank agrees to pay to the State annually the one-half of one per cent on the amount of the capital stock paid in by stockholders other than the State.'

It was held that a further tax on the capital stock was void, but that the State might tax the shares in the hands of individuals.

In the case before us, the charter tax is upon the shares. The tax complained of is a further tax on those shares. Without the phrase, 'in lieu of all other taxes,' the parallelism is complete. A further tax could no more be imposed upon the shares in one case than upon the capital stock in the other. The same negative considerations apply to both.

In The Bank of Cape Fear v. Edwards, supra, the charter provided 'that a tax of twenty-five cents on each share of stock owned by individuals in said bank shall be annually paid into the treasury of the State by the president or cashier of the said bank on or before the first day of October in each year, and the said bank shall not be liable to any further tax.' It was held that the bank was liable to no other tax, State or county, and that the banking-house and the lot upon which it stood was within the exemption.

Gordon v. The Appeal Tax Court seems to us conclusive of the case in hand. The legislature of Maryland continued the charters of certain banks on condition that they would make a road and pay a school tax; and it was provided that, upon any of the banks complying, the faith of the State was pledged not to impose any further tax or burden upon them during the continuance of their charters under the act.

It was held by this court that this was a contract, and that it exempted the stockholders from a tax levied upon them as individuals, according to the amount of their stock.'

Comment here is unnecessary. The points of analogy are too obvious and cogent to require remark. See also State Bank of Ohio v. Knoop, 16 How. 369; Dodge v.Woolsey, 18 id. 331; and Home of the Friendless v. Rouse, 8 Wall. 430.

The decree of the Supreme Court of Tennessee will be reversed, and the case remanded with directions to enter a decree in favor of the plaintiff in error; and it is

So ordered.

NOTE.-In Dunscomb v. Tennessee, Wicks v. Same, Neely v. Same, error to the Supreme Court of the State of Tennessee, which were argued by the same counsel as was the preceding case, and in Hill v. Tennessee, which was argued by Mr. D. E. Myers for the plaintiff in error, and by Mr. J. B. Heiskell, Attorney-General of Tennessee, and Mr. S. P. Walker, for the defendant in error, MR. JUSTICE SWAYNE, in delivering the opinion of the court, remarked: These cases are all disposed of by the opinion in Farrington v. Tennessee, supra, p. 679. The questions are substantially the same as in that case, and the results must be the same. The decrees of the Supreme Court of Tennessee are reversed, and the cases will be remanded with directions to enter decrees in favor of the respective plaintiffs in error.

MR. JUSTICE STRONG, with whom concurred MR. JUSTICE CLIFFORD and MR. JUSTICE FIELD, dissenting.


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Farrington v. Tennessee/Dissent Strong

MR. JUSTICE STRONG, with whom concurred MR. JUSTICE CLIFFORD and MR. JUSTICE FIELD, dissenting.

I cannot concur in the judgments entered in these cases. If there be any doctrine founded in justic, and necessary to the safety and continued existence of a State, it is that all presumptions are against the legislative intent to relinquish the power of taxation over any species of property. In The Providence Bank v. Billings, 4 Pet. 514, Chief Justice Marshall, speaking for the court, said: 'As the whole community is interested in retaining it undiminished, that community has a right to insist that its abandonment ought into to be presumed in a case in which the deliberate purpose of the State to abandon does not appear.' In The Ohio Life Insurance And Trust Co. v. Debolt, 16 How. 416, Chief Justice Taney, speaking of legislative acts incorporating companies, said: 'The rule of construction in cases of this kind has been well settled by this court. The grant of privileges and exemptions to a corporation are (is) strictly construed against the corporation and in favor of the public. Nothing passes but what is granted in clear and explicit terms. And neither the right of taxation nor any other power of sovereignty which the community have an interest in possessing undiminished will be held by this court to be surrendered, unless the intention to surrender is manifested by words too plain to be mistaken.' This doctrine we have many times reiterated and applied. And I do not understand that it is now denied. But I think a majority of my brethren, in the judgments now given, have failed to apply it to the construction of the acts of the Tennessee legislature under consideration in these cases.

One other thing, it appears to me, should be regarded as settled beyond doubt. It is that a tax upon a corporation proportioned to the capital stock, or to the number of shares of its capital stock, is a different thing from a tax upon the individual shareholders of stock in the corporation. The capital stock, and the shares of that stock in the hands of stockholders, are different properties, and consequently distinct subjects for taxation. An exemption of the one is not of itself an exemption of the other, nor is the taxation of the one a tax upon the other in such a sense as to interfere with any exemption the latter may have from taxation. In The Delaware Railroad Tax, 18 Wall. 206, a clause in a charter providing that a company should, in addition to other taxes, pay to the treasurer of the State, for its use, one-fourth of one per cent upon the actual cash value of every share of its capital stock, was held to be not a tax upon the shares of the individual stockholders, but a tax on the corporation, determined by a rule which, though arbitrary, was yet approximately just. So, in Van Allen v. The Assessors, 3 id. 573, this court said a tax on shares of stock is not a tax on the capital of a bank, and that the shares are a distinct, independent interest or property held by the stockholder, and, like any other property that may belong to him, subject to taxation.

If, now, these two acknowledged doctrines are allowed to have their just effect upon the decision of these cases, I cannot see how the stockholders in the several corporations whose charters we are requested to construe can claim an exemption from taxation upon their individual shares of stock. The exemption clause in the charters of two of the companies is: 'Said institution shall pay to the State an annual tax of one-half of one per cent on each share of capital stock subscribed, which shall be in lieu of all other taxes.' The exemption clause in two other of the charters is in substantially the same words, except that the word 'company' is substituted for the word 'institution.' The clause in the fifth charter reads thus: 'That there shall be levied a State tax of one-half of one per cent upon the amount of capital stock actually paid in, to be collected in the same way and at the same time as other taxes are by law collected, which shall be in lieu of all other taxes and assessments.'

I agree with the majority of the court that there is no substantial difference in the extent of the exemption offered in these sev ral charters, though there is some difference in their phraseology. But I think that the benefit of the exemption is in each case for the corporation. It was not intended for the individual stockholder. The legislature were dealing with the proposed corporations. The corporate power granted and the immunities allowed were to the corporations, and the contract found in the charter was with the artificial being created, rather than with the natural persons who might have an interest in them. The language of the acts is, the 'institution' shall pay, or the 'company' shall pay, an annual tax, which shall be in lieu of all other taxes. It was, therefore, the institutions or corporations the legislature had in view, alike in imposing the tax and granting the immunity, and not the natural persons who might happen to own shares of stock in the corporations. It is true that in several of the charters the corporations are required to pay a tax on each share of capital stock subscribed, and in one upon the amount of capital stock paid in. Hence it has been argued the legislature had shares in view; and from this the further inference is sought to be drawn, that the purpose was to tax alike the corporations and the stockholders, and to exempt both from all other taxation. Such a construction is, however, directly in conflict with the ruling in The Delaware Railroad Tax, supra, and with the expressed declaration that the company or institution shall pay the tax to the State, which was to be in lieu of other taxation. Besides, the reference to each share of capital stock subscribed is easily accounted for, without holding that the shareholder, as well as the companies, were intended to be exempted. The amount of capital stock authorized for each company was fixed by its charter, and divided into shares. It was quite possible that the whole stock authorized might not be subscribed. In view of this, the companies were required to pay a tax, not upon their entire authorized capital, but to the extent of the shares subscribed. If such was the intent of the legislature, reference to the shares was necessary, and it raises no implication that the tax imposed was designed to be for the individual interest of the shareholders in the corporations, and that the exemption from further taxation was granted to them.

After all, the true question in these cases is, whether a contract in express terms between the State and a corporation, to exempt its property and franchises from taxation, shall, by construction, extend to and exempt the property of individual stockholders,-property which, for the purposes of taxation, is entirely different from that of the corporation. I think there is no ground for such a construction; none for any such implication. If, however, I am mistaken, it is certainly true that such a construction is not necessary. The words of the charter granting the exemption are fully satisfied by confining their operation to the corporations themselves; and I do not feel at liberty to give them a broader significance, in view of the settled rule I have noticed, that a State's right of taxation will not be held to have been surrendered unless the intention to surrender is manifested in words too plain to be mistaken. Had the legislature intended to extend the exemption beyond the companies themselves, it would have been easy to place the intent beyond doubt, by simply saying the tax should be in lieu of all other taxation of the company or its stockholders. But nothing like this, or equivalent to it, is found in the charter.

I find nothing in Gordon v. The Appeal Tax Court, 3 How. 133, so much relied upon by the plaintiffs in error, necessarily inconsistent with what I have said. That case has not been well understood. The circumstances were penculiar, and the decision rendered should be considered with reference to the peculiar facts which appeared in it. What was, in fact, decided we had occasion to observe in People v. The Commissioners, 4 Wall. 244, where Mr. Justice Nelson d rected attention to the circumstances that more or less controlled the judgment.

For these reasons, which I have not time to elaborate, I think the judgments of the Supreme Court of Tennessee should be affirmed.

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Thompson v. Butler

MOTION to dismiss a writ of error to the Circuit Court of the United States for the District of Massachusetts.

The facts are stated in the opinion of the court.

Mr. G. A. Somerby and Mr. L. S. Dabney, for the defendant in error, in support of the motion.

Mr. J. Hubley Ashton and Mr. James Thomson, contra.

MR. CHIEF JUSTICE WAITE delivered the opinion of the court.

title: Thompson v. Butler


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Thompson v. Butler/Opinion of the Court

This was an action by Butler against Thompson, to recover damages for not accepting a quantity of iron under an alleged contract of purchase. Upon the trial, the jury rendered a verdict against Thompson of $5,066.17 'in gold;' but, before judgment, Butler remitted $66.17, and judgment was entered Nov. 13, 1876, for $5,000 'in coin.' Thompson having brought the case here by writ of error, Butler moves to dismiss, because the 'matter in dispute' does 'not exceed the sum or value of $5,000.'

As the writ of error was sued out by the defendant below, the amount in controversy was fixed by the judgment. Gordon v. Ogden, 3 Pet. 33; Knapp v. Banks, 2 How. 73; Walker v. United States, 4 Wall. 163; Merrill v. Petty, 16 id. 338. No question is presented growing out of a set-off or counter-claim, as was the case in Ryan v. Bindley, 1 id. 66.

Our jurisdiction cannot be invoked until the final judgment below has been rendered; and we cannot open the record to look for errors until jurisdiction has been established. The court below retains full control of a cause until final judgment has been entered; and it follows that, if for any reason a judgment is given against a defendant in a case involving the plaintiff's cause of action alone, unaffected by counter-claim or set-off, for a sum less than our jurisdictional amount, we have no power, at the instance of the defendant, to correct errors that may have been committed in settling the amount. We can only look at a verdict through the record; and, if the record is closed to us, so necessarily must be the verdict. In this case, therefore, we are precluded from inquiry into the propriety of allowing the verdict to be reduced before judgment was entered upon it. Necessarily, verdicts are, to some extent, subject to the control of the court. It is not unusual for a court to announce that a new trial will be granted unless a part of a verdict shall be remitted, and to enter judgment upon the reduced amount if the suggestion is followed. All such matters may properly be left to the sound judicial discretion of the court in which the trial is had; and errors committed under this power can only be corrected by an appellate court in the same manner that other errors are. Undoubtedly, the trial court may refuse to permit a verdict to be reduced by a plaintiff upon his own motion; and, if the object of the reduction is to deprive an appellate court of jurisdiction in a meritorious case, it is to be presumed the trial court will not allow it to be done. If, however, the reduction is permitted, the errors in the record will be shut out from our re-examination in cases where our jurisdiction depends upon the amount in controversy. In Sampson v. Welch, 24 How. 207, we refused to take jurisdiction upon an appeal in admiralty, where a decree had been rendered against a respondent for more than $2,000, with leave to him, if he chose, to set off an amount due him for freight, and he afterwards, by the set-off, reduced the decree below our jurisdictional amount, notwithstanding, in signifying his election to make the set-off, he expressly stated in a writing, which appeared in the record, that he did not thereby waive his right of appeal.

If the remittitur had not been entered until after the judgment, the case would have been different, and, if the reduction was made without the assent of the defendant, more like Kanouse v. Martin, 15 id. 198, where a declaration was amended in a State court so as to reduce the damages claimed below the jurisdictional amount, after the necessary steps had been taken for the transfer of the cause to the Circuit Court, and in which we held that the jurisdiction of the Circuit Court could not be defeated in that way.

We have no jurisdiction if the sum or value of the matter in dispute does not exceed $5,000. One owing a debt may pay it in good coin or legal-tender notes of the United States, as he chooses, unless there is something to the contrary in the obligation out of which the debt arises. A coin dollar is worth no more for the purposes of tender in payment of an ordinary debt than a note dollar. The law has not made the note a standard of value any more than coin. It is true that in the market, as an article of merchandise, one is of greater value than the other; but as money, that is to say, as a medium of exchange, the law knows no difference beteeen them. We are aware that in Bronson v. Rodes, 7 Wall. 229, it was said that a contract to pay in gold or silver coins 'is, in legal import, nothing else than an agreement to deliver a certain weight of standard gold, to be ascertained by a count of coins,' and that 'it is not distinguishable,. . . in principle, from a contract to deliver an equal weight of bullion of equal fineness;' but, notwithstanding this, it is a contract to pay money, and none the less so because it designates for payment one of the two kinds of money which the law has made a legal tender in discharge of money obligations.

This judgment is for coined money, which at the time it was rendered and now is worth more in the market as merchandise than paper money; but our jurisdiction is to be determined by the amount of money to be paid and not the kind. If, instead of paper dollars and gold dollars legalized as money, the law had provided for silver dollars and gold dollars, and this judgment had been for payment in gold, we think it would hardly be contended that this court could take jurisdiction, because when the judgment was rendered gold happened to be worth more in the market as merchandise than silver; but, in principle, that case would not be different from this. Notwithstanding, therefore, the judgment is for coined money, we are satisfied that we have no jurisdiction.

Writ of error dismissed.

title: Thompson v. Butler/Opinion of the Court


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Chicago, Rock Island, and Pacific Railroad Company v. Houston

ERROR to the Circuit Court of the United States for the Western District of Missouri.

This was an action against the Chicago, Rock Island, and Pacific Railroad Company, brought under a statute of Missouri, which subjects a corporation to a penalty of $5,000 where death is caused by an injury resulting from 'the negligence, unskilfulness, or criminal intent' of any of its officers, agents, servants, or employes, whilst running, conducting, or managing a locomotive, car, or train of cars. In this case, the deceased was the wife of the plaintiff; her death was caused by injuries inflicted by the defendant's locomotive whilst the train was passing through the village of Cameron in that State. The defendant had two tracks, one main and the other a side track, which extended through a considerable portion of the village, and passed south of Second Street. The tracks were separated from each other by only a few feet. The house at which the deceased resided was north of Second Street and east of Harris Street, which the tracks crossed. South of the two tracks, and about ninety feet east from Harris Street, was situated a building belonging to the company, called the section-house, near which was a well of water. The building and well were on the company's right of way. The train was due, on the evening when the accident occurred, at half-past six, and it entered the village from the west. At that time a gravel-train ad been switched on the side track east of Harris Street, between the section-house and the depot. Freight-cars were also standing on the side track west of, but near, Harris Street. There was a plank-crossing over the railway at Harris Street. When cars were not standing on the tracks there was nothing to prevent one passing in a direct or nearly direct line from the house of the deceased to the section-house. Persons, in going to the well from that house, sometimes passed the road at the public crossing, and sometimes on the right of way of the company east of Harris Street. The evidence disclosed by the record relating to the accident only shows that at about half-past six in the evening of the 13th of March, 1872, the deceased took a pail upon her arm and left her house, and, it is supposed, started for the well near the section-house. She was seen by her daughter as she left, and by the engineer only a few seconds before she was struck by the locomotive. It does not appear that she was seen by any other person after leaving the house before she was injured. When discovered by the engineer, the locomotive was within four feet of her. She was then on the main track of the railway, about ninety feet east of Harris Street, and was apparently passing from the track south. She was struck by the extreme end of the beam of timber running across the engine, known as the bumper, and was thrown into a ditch about ten feet from the section-house. The engineer testified, that when he discovered her it was impossible to stop the train so as to avoid striking her. She died within an hour after receiving the injury.

It appears from the evidence, also, that the railway was in plain view from the house of the deceased, and that a train approaching from the west could be seen from it, and from any point between the Harris Street crossing and the section-house for a distance of three-quarters of a mile. At the time of the accident there was a bright moonlight; and the headlight of the engine was burning, and the movement of the train created a loud noise. There was some conflict of evidence as to the rate of speed at which the train was running at the time, and whether its bell was rung and its whistle sounded. As to the other facts stated, the evidence was all one way.

There was a verdict and judgment for the plaintiff, whereupon the company brought the case here. The substance of the charge of the court below to the jury is stated in the opinion of the court.

Mr. Thomas F. Withrow for the plaintiff in error.

The court below erred in charging the jury upon assumed facts of which no evidence was offered. Michigan Bank v. Eldred, 9 Wall. 544; United States v. Breiting, 20 How. 252; Goodman v. Simonds, id. 343; Chandler v. Von Roeder et al., 24 id. 224; Improvement Company v. Munson, 14 Wall. 442, Milwaukee & St. Paul Railway Co. v. Arms et al., 91 U.S. 489; Artz v. Chicago, Rock Island, & Pacific Railroad Co., 34 Iowa, 154.

Under the evidence, the court should have instructed the jury to find for the defendant. The deceased was a trespasser, and the company only liable for wilful negligence. Harlan v. St. Louis, Kansas City, & Northern Railroad Co., 64 Mo. 480; Philadelphia & Reading Railroad Co. v. Hummell, 44 Pa. St. 375; Finlayson v. Railroad Company, 1 Dill. 579; Illinois Central Railroad Co. v. Godfrey, 71 Ill. 501.

Where it is manifest that, upon the evidence, the court should set aside a verdict against a party, it is its duty to charge the jury not to return such a verdict. Pleasants v. Fant, 22 Wall. 116; Improvement Company v. Munson, supra; Wilds v. Hudson River Railroad Co., 24 N. Y. 430; Lake Shore & Michigan Southern Railroad Co. v. Miller, 25 Mich. 274.

The deceased did not exercise that degree of care and diligence required of her. Wild v. Hudson River Railroad Co., 29 N. Y. 315; Pennsylvania Railroad Co. v. Beale, 73 Pa. St. 504; North Pennsylvania Railroad Co. v. Heileman, 49 id. 60; Butterfield v. Western Railway Corporation, 10 Allen (Mass.), 532; Wheelock v. Boston & Albany Railroad Co., 105 Mass. 203; Gaynor v. Old Colony & Newport Railroad Co., 100 id. 208; Burns v. Boston & Lowell Railroad Co., 101 id. 50; Lucas, Adm'r, v. Taunton & New Bedford Railroad Co., 6 Gray (Mass.), 64; Wild v. Hudson River Railroad Co., supra; Ernst v. Hudson River Railroad Co., 39 N. Y. 61; Wilcox v. Rome & Watertown Railroad Co., id. 358; Davis v. New York Central & Hudson River Railroad Co., 47 id. 400; Wilds v. Hudson River Railroad Co., supra; Gorton v. Erie Railway Co., 45 N. Y. 660; Steves v. Oswego & Syracuse Railroad Co., 18 id. 422; Sheffield v. Rochester & Syracuse Railroad Co., 21 Barb. (N. Y.) 339; Gonzales v. New York & Harlem Railroad Co., 38 N. Y. 440; Morris & Essex Railroad Co. v. Haslan et al., 33 N. J. L. 149; Telfer v. Northern Railroad Co., 30 id. 188; Pennoyer v. Central Railroad Co., 25 id. 558; Toledo & Wabash Railroad Co. v. Shuckman, Adm'r, 50 Ind. 42; Pittsburgh, Fort Wayne, & Chicago Railroad Co. v. Vining, 27 id. 513; Lafayette & Indianapolis Railroad Co. v. Huffman, 28 id. 287; Toledo & Wabash Railroad Co. v. Goddard, 25 id. 185; Chicago & Rock Island Railroad Co. v. Still, 19 Ill. 500; Galena & Chicago Union Railroad Co. v. Dill, 22 id. 265; Chicago & Alton Railroad Co. v. Gretzner, 46 id. 74; Chicago & Northwestern Railway Co. v. Sweeney, 52 id. 325.

Mr. Jefferson Chandler, contra.

The charge given the jury covers every aspect of the case as presented by the evidence.

As to the negligence of the defendant. Railroad Company v. Whitton, 13 Wall. 270; Maginnis v. Railroad Company, 52 N. Y. 215; Philadelphia Railroad Co. v. Hagan et al., 47 Pa. St. 244; Chicago, Burlington, & Quincy Railroad Co. v. Payne, 59 Ill. 534; Artz v. Chicago & Rock Island Railroad Co., 34 Iowa, 154; Railroad Company v. Stout, 17 Wall. 657; Baltimore & Ohio Railroad Co. v. Trainor, 33 Md. 542; Same v. Boteler, 38 id. 568; O'Mara v. Railroad Company, 38 N. Y. 445; Renwick v. New York Central Railroad Co., 36 id. 132; Beisiegel v. Same, 34 id. 622; Richardson v. Same, 45 id. 846; White v. Phillips, 15 C. B. N. S. 245; State v. Manchester & Lawrence Railroad, 52 N. H. 528; Brown v. The Hannibal & St. Joseph Railroad Co., 50 Mo. 461.

As to contributory negligence. Railroad Company v. Whitton, supra; Railroad Company v. Stout, supra; Smith v. Union Railway Co., 61 Mo. 588; Kennayde v. Pacific Railroad Co., 45 id. 255; Burham v. St. Louis & P. M. Railroad Co., 56 id. 338; Tabor v. Missouri Valley Railroad Co., 46 id. 353; Brown v. The Hannibal & St. Joseph Railroad Co., 50 id. 461; Walsh v. Mississippi Valley Transportation Co., 52 id. 434; Artz v. Chicago, Rock Island, & Pacific Railroad Co., supra; Baltimore & Ohio Railroad Co. v. Trainor, supra; Same v. Fitzpatrick, 35 Md. 32; Railroad Company v. State, 36 id. 366; Brown v. Lynn, 31 Pa. St. 510; Railroad Company v. Chendworth, 52 id. 382; Gray v. Scott, 66 id. 345; Butler v. Milwaukee & St. Paul Railroad Co., 28 Wis. 487; The Lafayette & Indianapolis Railroad Co. v. Adams, 26 Ind. 76; The Bellefontaine Railroad Co. v. Hunter, 33 id. 365; Kerwhacker v. The Cleveland, Columbus, & Cincinnati Railroad Co., 3 Ohio St. 172; Same v. Terry, 8 id. 570; Macon & Western Railroad Co. v. Davis, 18 Ga. 679; Central Railroad and Banking Co. v. Davis, 19 id. 437; Daley v. Norwich & Worcester Railroad Co., 26 Conn. 591; Trow v. The Vermont Central Railroad Co., 24 Vt. 487; Bridge v. The Grand Junction Railway Co., 3 M. & W. 244; Lane v. Atlantic Works, 107 Mass. 104; Britton v. Inhabitants, &c., id. 347.

Mr. JUSTICE FIELD, after stating the case, delivered the opinion of the court.


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Chicago, Rock Island, and Pacific Railroad Company v. Houston/Opinion of the Court

If the positions most advantageous for the plaintiff be assumed as correct, that the train was moving at an unusual rate of speed, its bell not rung, and its whistle not sounded, it is still difficult to see on what ground the accident can be attributed solely to the 'negligence, unskilfulness, or criminal intent' of the defendant's engineer. Had the train been moving at an ordinary rate of speed, it would have been impossible for him to stop the engine when within four feet of the deceased. And she was at the time on the private right-of-way of the company, where she had no right to be. But, aside from this fact, the failure of the engineer to sound the whistle or ring the bell, if such were the fact, did not relieve the deceased from the necessity of taking ordinary precautions for her safety. Negligence of the company's employes in these particulars was no excuse for negligence on her part. She was bound to listen and to look, before attempting to cross the railroad track, in order to avoid an approaching train, and not to walk carelessly into the place of possible danger. Had she used her senses, she could not have failed both to hear and to see the train which was coming. If she omitted to use them, and walked thoughtlessly upon the track, she was guilty of culpable negligence, and so far contributed to her injuries as to deprive her of any right to complain of others. If, using them, she saw the train coming, and yet undertook to cross the track, instead of waiting for the train to pass, and was injured, the consequences of her mistake and temerity cannot be cast upon the defendant. No railroad company can be held for a failure of experiments of that kind. If one chooses, in such a position, to take risks, he must bear the possible consequences of failure. Upon the facts disclosed by the undisputed evidence in the case we cannot see any ground for a recovery by the plaintiff. Not even a plausible pretext for the verdict can be suggested, unless we wander from the evidence into the region of conjecture and speculation. Under these circumstances, the court would not have erred had it instructed the jury, as requested, to render a verdict for the defendant.

But the plaintiff in error specially complains that the court below gave instructions which assumed as established matters not in proof, and thus directed the attention of the jury to subjects which might mislead their judgment. Thus, while the train coming from the west could be seen, as already stated, at any point between Harris Street crossing and the section-house for a distance of three-quarters of a mile, the court in its charge assumed that the light from the train might have been obstructed by cars on the side track in the vicinity of the place where the injury was inflicted, and told them that whether the view was thus obstructed was for them to determine. Again, there was no evidence of any attempt on the part of the deceased to cross the railway at the Harris Street crossing. She was not seen, as already stated, except when leaving her house, until immediately previous to her injury, and then she was ninety feet east of the crossing. Yet the court, at the request of the plaintiff, instructed the jury, as to the right of the deceased in passing the railway upon a public crossing, to rely upon a substantial compliance by the servants of the company with the duties required by law in giving signals and warnings of approach; and as to its liability if the deceased was killed by the cars while they were running to and over a public street-crossing, without giving the required and usual signals of approach: and further instructed them, upon its own motion, that there was a controversy upon the evidence whether she crossed or attempted to cross the railway at the Harris Street crossing, or at a place not a crossing; and that this was a question of fact for their determination.

To instruct a jury upon assumed facts to which no evidence applied was error. Such instructions tended to mislead them, by withdrawing their attention from the proper points involved in the issue. Juries are sufficiently prone to indulge in conjectures, without having possible facts not in evidence suggested for their consideration. In no respect could the instructions mentioned have aided them in reaching a just conclusion.

The judgment must be reversed and the cause remanded for a new trial; and it is

So ordered.

Mr. JUSTICE HARLAN did not sit in this case.


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Neal v. Clark

ERROR to the Supreme Court of Appeals of the State of Virginia.

The facts out of which this case arises, so far as it is material to state them, are substantially these:--

William Fitzgerald, Jr., of the State of Virginia, by his will, which was admitted to probate in 1857, directed his executor to sell his entire landed estate, and distribute the proceeds among those entitled to them, according to the provisions of the will. The lands were sold as directed, in the same year, the purchasers giving bonds, with security, payable to the executor as such. Two of these bonds, each dated Dec. 1, 1857,-one for $1,000, due Nov. 18, 1859, with interest from Nov. 18, 1858, and the other for $2,293, due, with like interest, Nov. 18, 1860,-were sold and assigned by the executor, in June, 1859, to Griffith D. Neal, the plaintiff in error, for the sum of $2,780, who sold them to Richard Jones for $3,056. The latter collected them. When this transaction occurred, the executor, who was a brother of the testator, was a man of large property and undoubted solvency. Neal made no inquiry as to the condition of the estate, but the executor gave, as a reason for selling the bonds, that the estate was in debt to him for moneys advanced.

In 1860, a suit was instituted against the executor in the Circuit Court for Pittsylvania County, Virginia, to obtain a settlement of his accounts and a distribution of the estate. In 1861, in obedience to an order of court, he gave a new bond, with Clark and Holland as sureties; and in 1868 they were made defendants, and a decree was asked against them for whatever sum should be ascertained to be due from the executor. In 1869,-ten years after Neal had purchased the bonds, about seven years after the executor had become insolvent and removed from the State, and without any question having been previously raised as to Neal's liability, Clark and Holland exhibited their bill in the same court against the executor, the distributees, Neal, Jones, and others. They allege that the executor, in disposing of the bonds, committed a devastavit of the estate, and that, in view of the circumstances under which he received them, Neal became a participant in that devastavit, and is liable to the distributees for the amount of the bonds. They ask that, as sureties of the executor, they be substituted to the rights which the distributees have against Neal by reason of his alleged unlawful appropriation of the testator's assets. In the event of any judgment against them, they pray that it be rendered to be first satisfied by the purchaser of the notes.

In the District Court of the United States for the District of Virginia Neal was duly adjudged a bankrupt, and received his certificate, dated Feb. 11, 1869, showing his discharge from all debts and claims which, by the bankrupt law, were provable against his estate, and which existed on the 25th of January, 1868, 'except such debts as were exempted from the operation of a discharge in bankruptcy.'

Neal pleaded his discharge in bar of the action against him, but the Circuit Court for Pittsylvania County gave judgment against him and Jones for the amount of the two notes purchased from the executor. That judgment, so far as it held Neal liable, was affirmed in the Supreme Court of Appeals of Virginia, but, so far as it related to Jones, was reversed. Thereupon Neal brought the case here.

Mr. William A. Maury for the plaintiff in error.

The 'fraud or embezzlement' described by the bankrupt law of 1867 refers only to transactions involving criminal intent and wilful wrong-doing.

The object of statutes in relation to embezzlement is to embrace certain cases where, although the moral guilt was quite as great as in larceny, the technical objection, arising from the fact of possession lawfully acquired by the offending party, screened him from punishment. They were, therefore, declared crimes punishable by law. Commonwealth v. Simpson, 9 Met. (Mass.) 192.

The association of 'fraud' with 'embezzlement' fully justifies the conclusion that the legislature used the former word to indicate a transaction involving moral turpitude.

To deprive a party guilty of no intentional wrong of the benefit of his discharge in bankruptcy, upon the ground that he has committed a technical devastavit, defeats to that extent an act for the relief of the unfortunate debtors who in good faith surrender their property to their creditors.

No counsel appeared for the defendant in error.

Mr. JUSTICE HARLAN delivered the opinion of the court.

title: Neal v. Clark


text: Talk:Neal v. Clark

title: Talk:Neal v. Clark


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Neal v. Clark/Opinion of the Court

This case involves the meaning of the word 'fraud,' as used in the thirty-third section of the bankrupt law of 1867. That section provides that 'no debt created by the fraud or embezzlement of the bankrupt, or by defalcation as a public officer, or while acting in a fiduciary capacity, shall be discharged under this act.'

In the very able opinion of the Court of Appeals, it is said that 'all the cases agree in the principle that a purchaser from an executor of personal property of the testator for valuable consideration need not inquire, and has no means of inquiry, whether the condition of the testator's estate requires a sale of the property, and is not bound to see to the application of the purchase-money, but may fairly presume that the sale is rightly made, and that the purchase-money will be properly applied; and that such a purchaser can only be made liable on the ground of a fraudulent participation with the executor in the commission of a devastavit of his testator's estate. In other words, that the purchaser must be guilty of a fraud in that respect.'

'The only diversity in the cases,' continues that court, 'seems to have arisen from the different views of the judges as to the nature of the fraud within the meaning of the principle; that is, whether there must be actual fraud, or whether it is enough that there is implied or constructive fraud, or gross negligence, which may be equivalent to fraud.'

Upon an elaborate review of the authorities, mainly its own previous decisions, and upon consideration of all the evidence, that court reached these conclusions:--

1st, That the executor had committed a devastavit by selling the bonds at a discount, since the needs of the estate did not require it, and since they had not become his property by reason of any advances made by him, or otherwise.

2d, That Neal was not chargeable with actual fraud, but, in view of the circumstances attending his purchase, he had committed constructive fraud, which implicated him in the devastavit.

3d, That 'fraud,' in the thirty-third section of the bankrupt law of 1867, included both constructive and actual fraud, and consequently that Neal, although guilty of constructive fraud only, was equally liable with the executor who had wasted the estate and failed to account for the amount of the bonds assigned to Neal.

Whether Neal, according to the previous decisions of the Virginia courts, was guilty of constructive fraud, and, upon that ground, became liable to the distributees as a participant in the devastavit of the estate, it is not within our province, upon this appeal, to inquire. Our jurisdiction extends to the re-examination of the final decree, only o far as it involves the construction of the bankrupt law and the denial, by the State court, of rights claimed by the bankrupt under that law.

We concur in the view expressed by the State court, that Neal was not guilty of actual fraud. The evidence does not show that he entertained any purpose himself to commit a fraud, or to aid the executor in committing one. The fair inference from all the testimony is that he purchased the bonds in good faith, not doubting the power or the right of the executor to sell, and having no reason to believe that he meditated any wrong to those interested in the estate which he was administering. Indeed, it appears from the opinion of the State court, that, a few months prior to the purchase, a commissioner had reported a settlement of the executor's accounts, showing a balance due the latter of $765.41. That settlement was of record.

But we do not concur in the construction which the State court gave to the thirty-third section of the bankrupt law of 1867. In reaching this conclusion, we have not been assisted by any express decisions upon the question before us.

The Bankrupt Act of 1841 exempted from discharge debts 'created in consequence of a defalcation as a public officer, or as executor, administrator, guardian, or trustee, or while acting in any fiduciary capacity.' The question arose under that act whether a factor who had sold the property of his principal, and had failed to pay over the proceeds, was a fiduciary debtor within the meaning of that clause. This court, in Chapman v. Forsyth et al., 2 How. 202, said: 'If the act embrace such a debt, it will be difficult to limit its application. It must include all debts arising from agencies, and, indeed, all cases where the law implies an obligation from the trust reposed in the debtor. Such a construction would have left but few debts on which the law could operate. In almost all the commercial transactions of the country, confidence is reposed in the punctuality and integrity of the debtor; and a violation of these is, in a commercial sense, a disregard of a trust. But this is not the relation spoken of in the first section of the act.

'The cases enumerated, 'the defalcation of a public officer,' 'executor,' 'administrator,' 'guardian,' or 'trustee,' are not cases of implied, but special, trusts; and 'the other fiduciary capacity' mentioned must mean the same class of trusts. The act speaks of technical trusts, and not those which the law implies from the contract. A factor is not, therefore, within the act.'

A like process of reasoning may be properly employed in construing the corresponding section of the act of 1867. It is a familiar rule in the interpretation of written instruments and statutes that 'a passage will be best interpreted by reference to that which precedes and follows it.' So, also, 'the meaning of a word may be ascertained by reference to the meaning of words associated with it.' In Broom's Legal Maxims, p. 450, it is said: 'It is a rule laid down by Lord Bacon, that copulatio verborum indicat acceptationem in eodem sensu,-the coupling of words together shows that they are to be understood in the same sense. And where the meaning of any particular word is doubtful or obscure,. . . the intention of the party who has made use of it may frequently be ascertained and carried unto effect by looking at the adjoining words.' The same author says (p. 455): 'In the construction of statutes, likewise, the rule noscitur a sociis is very frequently applied; the meaning of a word, and, consequently, the intention of the legislature, being ascertained by referance to the context, and by considering whether the word in question and the surrounding words are, in fact, ejusdem generis, and referable to the same subject-matter.'

Applying these rules to this case, we remark, that, in the section of the law of 1867 which sets forth the classes of debts which are exempted from the operation of a discharge in bankruptcy, debts created by 'fraud' are associated d rectly with debts created by 'embezzlement.' Such association justifies, if it does not imperatively require, the conclusion that the 'fraud' referred to in that section means positive fraud, or fraud in fact, involving moral turpitude or intentional wrong, as does embezzlement; and not implied fraud, or fraud in law, which may exist without the imputation of bad faith or immorality. Such a construction of the statute is consonant with equity, and consistent with the object and intention of Congress in enacting a general law by which the honest citizen may be relieved from the burden of hopeless insolvency. A different construction would be inconsistent with the liberal spirit which pervades the entire bankrupt system.

It results from what has been said that the debt or claim asserted against Neal was not 'created by the fraud. . . of the bankrupt,' within the meaning of the thirty-third section of the law of 1867. His discharge in bankruptcy affords him complete protection. The court erred in adjudging otherwise.

The judgment of the Supreme Court of Appeals of Virginia will, therefore, be reversed, with directions to reverse the decree rendered against Neal in the Circuit Court for Pittsylvania County, and to remand the case to the last-named court, with an order requiring it to dismiss the original and cross-bill of Clark and Holland against Neal, with costs, and for other proper action in conformity to this opinion; and it is

So ordered.

title: Neal v. Clark/Opinion of the Court


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title: Talk:Neal v. Clark/Opinion of the Court


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Kelly v. Calhoun

APPEAL from the Circuit Court of the United States for the Western District of Tennessee.

The facts are stated in the opinion of the court

Mr. S. P. Walker for the appellants.

Mr. Josiah Patterson, contra.

MR. JUSTICE SWAYNE delivered the opinion of the court.

title: Kelly v. Calhoun


text: Talk:Kelly v. Calhoun

title: Talk:Kelly v. Calhoun