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Baldwin v. Hale/Opinion of the Court

Contract was made in Boston and was to be performed at the place where it was made, and upon that ground it is contended by the defendant that the certificate of discharge is a complete bar to the action. But the case shows that the plaintiff was a citizen of Vermont, and inasmuch as he did not prove his debt against the defendant's estate in insolvency, nor in any manner become a party to those proceedings, he insists that the certificate of discharge is a matter inter alios, and wholly insufficient to support the defence.

Adopting the views of the court in Scribner et al. v. Fisher, 2 Gray, 43, the defendant concedes that the law is so, as between citizens of different States, except in cases where it appears by the terms of the contract that it was made and must be performed in the State enacting such insolvent law. Where the contract was made and is by its terms to be performed in the State in which the certificate of discharge was obtained, the argument is, that the discharge is entirely consistent with the contract, and that the certificate operates as a bar to the right of recovery everywhere, irrespective of the citizenship of the promisee. Plaintiff admits that a majority of the Supreme Court of Massachusetts, in the case referred to, attempted to maintain that distinction, but he insists that it is without any foundation in principle, and that the decisions of this court in analogous cases are directly the other way.

Controversies involving the constitutional effect and operation of State insolvent laws have frequently been under consideration in this court, and unless it be claimed that constitutional questions must always remain open, it must be conceded, we think, that there are some things connected with the general subject that ought to be regarded as settled and forever closed.

State legislatures have authority to pass a bankrupt or insolvent law, provided there be no act of Congress in force establishing a uniform system of bankruptcy, conflicting with such law; and, provided the law itself be so framed that it does not impair the obligation of contracts. Such was the decision of this court in Sturges v. Crowninshield, 4 Wheat., 122, and the authority of that decision has never been successfully questioned. Suit was brought in that case against the defendant as the maker of two promissory notes. They were both dated at New York, on the 22d day of March, 1811, and the defendant pleaded his discharge under an act for the benefit of insolvent debtors and their creditors, passed by the legislature of New York subsequently to the date of the notes in controversy. Contracts in that case, it will be observed, were made prior to the passage of the law, and the court held, for that reasons, that the law, or that feature of it, was unconstitutional and void, as impairing the obligation of contracts within the meaning of the Constitution of the United States. Suggestion is made that the ruling of the court in the case of McMillan v. McNeill, 4 Wheat., 209, decided at the same term, asserts a different doctrine, but we think not, if the facts of the case are properly understood.

Recurring to the statement of the case, it appears that the contract was made in Charleston, in the State of South Carolina, and it is true that both parties resided there at the time the contract was made, but the defendant subsequently removed to New Orleans, in the State of Louisiana, and it was in the latter State where he obtained the certificate of discharge from his debts. He was also one of a firm doing business in Liverpool, and a commission of bankruptcy had been issued there, both against him and his partner, and they respectively obtained certificates of discharge. Suit was brought in the District Court for the District of Louisiana, and the defendant pleaded those certificates of discharge in bar of the action, and the plaintiff demurred to the plea. Under that state of the case and of the pleadings, the court held that the certificate of discharge obtained in the State of Louisiana, was no defence to the suit, and very properly remarked that the circumstance that the State law was passed before the debt was contracted made no difference in the application of the principle. Bearing in mind that the plaintiff was a citizen of South Carolina, and that the contract was made there, it is obvious that the remark of the court is entirely consistent with the decision in the former case.

Secondly, the court also held that a discharge under a foreign bankrupt law was no bar to an action in the courts of the United States, on a contract made in this country. Speaking of that case, Mr. Justice Johnson afterwards remarked that it decided nothing more than that insolvent laws have no extra-territorial operation upon the contracts of other States, and that the anterior or posterior character of the law with reference to the date of the contract makes no difference in the application of that principle. Eight years later the question, in all its phases, was again presented to this court, in the case of Ogden v. Saunders, 12 Wheat., 213, and was very fully examined.

Three principal points were ruled by the court. First, the court held that the power of Congress to establish uniform laws on the subject of bankruptcies throughout the United States did not exclude the right of the State to legislate on the same subject, except when the power had actually been exercised by Congress, and the State laws conflicted with those of Congress. Secondly, that a bankrupt or insolvent law of any State which discharges both the person of the debtor and his future acquisitions of property, was not a law impairing the obligation of contracts so far as respects debts contracted subsequent to the passage of such law. Thirdly, but that a certificate of discharge under such a law cannot be pleaded in bar of an action brought by a citizen of another State in the courts of the United States, or of any other State than that where the discharge was obtained. Much diversity of opinion, it must be admitted, existed among the members of the court on that occasion, but it is clear that the conclusions to which the majority came were in precise accordance with what had been substantially determined in the two earlier cases to which reference has been made. Misapprehension existed, it seems, for a time, whether the second opinion delivered by Mr. Justice Johnson in that case was, in point of fact, the opinion of a majority of the court, but it is difficult to see any ground for any such doubt. Referring to the opinion, it will be seen that he states explicitly that he is instructed to dispose of the cause, and he goes on to explain that the majority on the occasion is not the same as that which determined the general question previously considered. Ample authority exists for regarding that opinion as the opinion of the court, independently of what appears in the published report of the case. When the subsequent case of Boyle v. Zacharie et al., 6 Pet., 348, was first called for argument, inquiry was made of the court whether the opinion in question was adopted by the other judges who concurred in the judgment of the court. To which Marshall, C. J., replied, that the judges who were in the minority of the court upon the general question concurred in that opinion, and that whatever principles were established in that opinion were to be considered no longer open for controversy, but the settled law of the court. Judge Story delivered the unanimous opinion of the court in that case during the same session, and in the course of the opinion he repeated the explanations previously given by the chief justice. Boyle v. Zacharie et al., 6 Pet., 643. Explanations to the same effect were also made by the present chief justice in the case of Cook v. Moffat et al., 5 How., 310, which had been ruled by him at the circuit. He had ruled the case in the court below, in obedience to what he understood to be the settled doctrine of the court, and a majority of the court affirmed the judgment. Acquiescing in that judgment as a correct exposition of the law of the court, he nevertheless thought it proper to restate the individual opinion which he entertained upon the subject, but before doing so, he gave a clear and satisfactory exposition of what had previously been decided by the court. Those remarks confirm what had at a much earlier period been fully explained by the former Chief Justice and his learned associate. Taken together, these several explanations ought to be regarded as final and conclusive. Assuming that to be so, then, it was settled by this court, in that case,-1. That the power given to the United States to pass bankrupt laws is not exclusive. 2. That the fair and ordinary exercise of that power by the States does not necessarily involve a violation of the obligation of contracts, multo fortiori of posterior contracts. 3. But when in the exercise of that power the States pass beyond their own limits and the rights of their own citizens, and act upon the rights of citizens of other States, there arises a conflict of sovereign power and a collision with the judicial powers granted to the United States, which renders the exercise of such a power incompatible with the rights of other States, and with the Constitution of the United States. Saunders, a citizen of Kentucky, brought suit in that case against Ogden, who was a citizen of Louisiana at the time the suit was brought. Plaintiff declared upon certain bills of exchange drawn by one Jordan, at Lexington, in the State of Kentucky, upon Ogden, the defendant, in the city of New York, where he then resided. He was then a citizen of the State of New York, and the case shows that he accepted the bills of exchange at the city of New York, and that they were subsequently protested for non-payment.

Defendant pleaded his discharge under the insolvent law of New York, passed prior to the date of the contract. Evidently, therefore, the question presented was, whether a discharge of a debtor under a State insolvent law was valid as against a creditor or citizen of another State, who had not subjected himself to the State laws otherwise than by the origin of the contract, and the decision in express terms was, that such a proceeding was 'incompetent to discharge a debt due a citizen of another State.' Whenever the question has been presented to this court since that opinion was pronounced, the answer has uniformly been that the question depended upon citizenship. Such were the views of the court in Suydam et al. v. Broadnax et al., 14 Pet., 75, where it was expressly held that a certificate of discharge cannot be pleaded in bar of an action brought by a citizen of another State in the courts of the United States, or of any other State than that where the discharge was obtained. Undoubtedly a State may pass a bankrupt or insolvent law under the conditions before mentioned, and such a law is operative and binding upon the citizens of the State, but we repeat what the court said in Cook v. Moffat et al., 5 How., 308, that such laws 'can have no effect on contracts made before their enactment, or beyond their territory.' Judge Story says, in the case of Springer v. Foster et al., 2 Story, C. C., 387, that the settled doctrine of the Supreme Court is, that no State insolvent laws can discharge the obligation of any contract made in the State, except such contracts as are made between citizens of that State. He refers to the case of Ogden v. Saunders to support the proposition, and remarks, without qualification, that the doctrine of that case was subsequently affirmed in Boyle v. Zacharie, where there was no division of opinion. In the last-mentioned case he gave the opinion of the court, and he there expressed substantially the same views. Confirmation of the fact that such was his opinion may be found both in his Commentaries on the Constitution and in his treatise entitled Conflict of Laws. His view as to the result of the various decisions of this court is, that they establish the following propositions: 1. That State insolvent laws may apply to all contracts within the State between citizens of the State. 2. That they do not apply to contracts made within the State between a citizen of the State and a citizen of another State. 3. That they do not apply to contracts not made within the State: 2 Story on Const., sec. 1390 (3d edition), p. 281; ''Story on Confl. L., sec. 341, p.'' 573.

Chancellor Kent also says that the discharge under a State law is not effectual as against a citizen of another State who did not make himself a party of the proceedings under the law. 2 Kent Com. (9th ed.), p. 503. All of the State courts, or nearly all, except the Supreme Court of Massachusetts, have adopted the same view of the subject, and that court has recently held that a certificate of discharge in insolvency is no bar to an action by a foreign corporation against the payee of a note, who indorsed it to the corporation in blank before its maturity, although the note itself was executed and made payable in that State by a citizen of the State. Repeated decisions have been made in that court, which seem to support the same doctrine. Savoye v. Marsh, 10 Met., 594; Braynard v. Marshall, 8 Pick., 196. But a majority of the court held, in Scribner et al. v. Fisher, 2 Gray, 43, that if the contract was to be performed in the State where the discharge was obtained, it was a good defence to an action on the contract, although the plaintiff was a citizen of another State and had not in any manner become a party to the proceedings. Irrespective of authority it would be difficult if not impossible to sanction that doctrine. Insolvent systems of every kind partake of the character of a judicial investigation. Parties whose rights are to be affected are entitled to be heard; and in order that they may enjoy that right they must first be notified. Common justice requires that no man shall be condemned in his person or property without notice and an opportunity to make his defence. Nations et al. v. Johnson et al., 24 How., 203; Boswell's Lessee v. Otis et al., 9 How., 350; Oakley v. Aspinwall, 4 Comst., 514.

Regarded merely in the light of principle, therefore, the rule is one which could hardly be defended, as it is quite evident that the courts of one State would have no power to require the citizens of other States to become parties to any such proceeding. Suydam et al. v. Broadnax et al., 14 Pet., 75. But it is unnecessary to pursue the inquiry, as the decisions of this court are directly the other way; and so are most of the decisions of the State courts. Donnelly v. Corbett, 3 Seld., 500; Poe v. Duck, 5 Md., 1; Anderson v. Wheeler, 25 Conn., 607; Felch v. Bugbee et al., 48 Me., 9; Demerrit v. Exchange Bank, 10 Law Rep. (N. S.), 606; Woodhull v. Wagner, Bald., C. C., 300.

Insolvent laws of one State cannot discharge the contracts of citizens of other States, because they have no extra-territorial operation, and consequently the tribunal sitting under them, unless in cases where a citizen of such other State voluntarily becomes a party to the proceeding, has no jurisdiction in the case. Legal notice cannot be given, and consequently there can be no obligation to appear, and of course there can be no legal default. The judgment of the Circuit Court is therefore affirmed with costs.

JUDGMENT ACCORDINGLY.

title: Baldwin v. Hale/Opinion of the Court


text: Talk:Baldwin v. Hale/Opinion of the Court

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


text:
Baldwin v. Bank of Newbury

THE Bank of Newbury, a corporation, at the time of the suit and now, established in Vermont, brought an action of assumpsit in the Circuit Court of the United States for the Massachusetts district against Baldwin, upon a promissory note made by him in Massachusetts, where he resided. The following is a copy of the note. It was unindorsed:

$3500.

BOSTON, Dec. 9, 1853.

Five months after date I promise to pay to the order of O. C. Hale, Esq., Cashier, Thirty-five hundred dollars, payable at either bank in Boston, value received.

J. W. BALDWIN.

After making the note, and pursuant to laws of Massachusetts existing prior to making it, Baldwin obtained a certificate of discharge from his debts, embracing by its terms all contracts to be performed within the State of Massachusetts after the passage of said laws. The Bank of Newbury took no part in these proceedings in insolvency in Massachusetts by which Baldwin obtained his discharge. This discharge he pleaded in bar of the action on this note.

He also pleaded the general issue, and under that plea objected that the note declared on was not competent evidence to support the declaration, and did not sustain the cause of action therein set forth. On this point the case, as agreed on by the parties, was as follows, viz.:

'It is agreed that O. C. Hale was in fact the Cashier of the Bank of Newbury at the time of the making of said note, and in case the court would admit such evidence after objection by the defendant, and not otherwise, and not waiving his objection to the same as incompetent, the defendant admits that said Hale mentioned in said note, in taking said note was acting as the cashier of and agent for the plaintiff corporation. If upon the foregoing facts the plaintiff has made out a legal cause of action in his favor, and the defendant's discharge, &c., is ineffectual as a bar of said action, the defendant is to be defaulted; otherwise the plaintiff is to become nonsuit.'

Two points thus arose and were argued:

1. Whether the contract, being by a citizen of Massachusetts, was discharged by the proceedings in Massachusetts, even though to be performed in that State,-Hale being a citizen, and the Bank of Newbury being a corporation of Vermont, a different State.

2. Whether, if this discharge was not a bar, parol evidence was admissible to show that 'O. C. Hale, Esq.,' described in the note as 'Cashier,' simply, was cashier of the Bank of Newbury, the plaintiff in the suit, and that in taking the note, he acted as the cashier and agent of the corporation.

The court below ruled that the discharge pleaded was no bar, and also that the plaintiff had made out a cause of action, and gave judgment accordingly. On error here the same two questions arose.

Mr. F. A. Brooks, for Baldwin, the plaintiff in error.

1. The first point will be determined by whatever decision is given in Baldwin v. Hale, ante, p. 223, and need not be discussed.

2. The second point has been precisely adjudged in the Circuit Court of the United States for Vermont, in Bank of the United States v. Lyman. The note in that case was payable to 'Samuel Jaudon, Esq., cashier, or order.' Jaudon was notoriously cashier of that bank, which was there plaintiff. The debt, no one doubted, was due to the bank and was not due to Jaudon. The case, completely, was our case. The Bank of the United States, having the same view of the law that the present plaintiff has, sued on the note without Jaudon's indorsement. The court decided that suit could not be so maintained. Prentiss, J., examined the subject on principle and on authority, both English and American. He begins with Evans v. Cramlington, so far back as Carthew, affirmed in the Exchequer Chamber, 2 Ventries, 307. He says that the observations of Buller, J., in Fenn v. Harrison, show, very plainly, that in his opinion no person could be considered as a party to a bill unless his name was upon it, and cites an observation of Lord Abinger, who, speaking of a case before him of 'written simple agreements,' says that 'cases of bills of exchange are quite different in principle from those that ought to govern this case.' His honor, after affirming that the doctrine enforced by him, he 'may safely say,' prevails in general in this country, though there may have been now and then an occasional departure from it, and that there can be 'little doubt,' when we refer to Van Ness v. Forrest (8 Cranch, 30), 'how the rule of law on the subject is understood in the national court,' thus sums up the subject:

'Upon the whole, it appears to me, that the true rule of law, as deducible from the adjudged cases, American as well as English, is that no person, although in fact a principal or partner, can sue or be sued upon a bill or negotiable note, unless he appear upon its face to be a party to it. A promissory note, according to the expression of very great judges, partakes in some measure of the nature of a specialty, importing a consideration, and creating a debt or duty by its own proper force. Being assignable, and passing by mere indorsement, it is necessary that the parties to it should appear, and be known, by bare inspection of the writing; for it is on the credit of the names appearing upon it that it obtains circulation. It is for these qualities, and on these considerations, that it is distinguished from written, simple contracts in general, and made subject to a different rule.

'The note in question here is a perfect instrument, without ambiguity in form or purpose, and must have operation and effect according to the terms in which it is expressed. It is made payable to 'Samuel Jaudon, Esquire, cashier, or order.' The promise, therefore, is to pay him, or the person to whom he shall order it to be paid; and it would be repugnant to the terms of the instrument to allow the Bank of the United States, or any one else, without his order, to demand and enforce payment of it by suit. The bank is not named in the note at all, either as principal or otherwise; nor can it be inferred, from anything contained in the note, that it was made even in trust or for the benefit of the bank, or that the bank has any interest whatever in it. To admit parol evidence to show that the bank is the real principal, and hold that it may sue upon the note as such, would be to subject negotiable paper to the very uncertainty the law intended to avoid. It would be putting promissory notes upon the footing of other written simple contracts, and prostrate entirely the distinction, which sound policy, as well as the nature and purpose of negotiable securities, demands should be kept up between the two classes of cases.'

The case in the national court to which Prentiss, J., refers, strongly supports, by implication, our view. There a note was executed to Joseph Forrest, President of the Commercial Company, for merchandise belonging to and sold as the property of the company. On the question, whether an action could be maintained upon the note in the name of Forrest, Marshall, C. J., said:

'The suit is instituted on a promissory note given, not to the company, but to Joseph Forrest, president of the company. Although the original cause of action does not merge in this note, yet a suit is clearly maintainable on the note itself. Such suit can be brought only in the name of Joseph Forrest. It can no more be brought in the name of the company, than if it had been given to a person not a member, for the benefit of the company. The legal title is in Joseph Forrest, who recovers the money in his own name, as a trustee for the company.'

The Commercial Bank v. French (21 Pickering, 486), whether decided rightly or the reverse of rightly, is not at essential variance with the doctrine we maintain; for in that case the note was drawn to no person by name. It was to the Cashier of the Commercial Bank, Boston, or his order. The name of the cashier was not in the note, while that of the bank was so, prominently. It was almost the same thing as if made to the bank by some loose form of name. On the face of the note it belonged to the Commercial Bank. Here no bank at all is specified. An individual is specified by name, and the name is not that of the party suing. 'Cashier' is mere surplusage. Neither was the case in accordance with Massachusetts precedents. In one case in that State, it was decided that a note payable to the treasurer of a parish might be sued in the name of the treasurer. And in another case in the same State, that a note indorsed to S. S. Fairfield, Cashier, might be sustained in the name of Fairfield. It is true that these cases do not directly decide that action might not have been brought also in the name of the corporation which the plaintiffs represented; and it is by this suggestion that the judge who gives the opinion in The Commercial Bank v. French, evades their force. But with what regard to law does he evade it, if Marshall, C. J., be right in his declaration, in Van Ness v. Forrest, that suit on such note can be brought only in the name of the person to whom it was given, and 'can no more be brought in the name of the company than if it had been given to a person not a member?'

Mr. Hutchins, contra.

Mr. Justice CLIFFORD, after stating the case, delivered the opinion of the court:

title: Baldwin v. Bank of Newbury


text: Talk:Baldwin v. Bank of Newbury

title: Talk:Baldwin v. Bank of Newbury


text:
Baldwin v. Bank of Newbury/Opinion of the Court

1. Two questions are presented for decision, but the first is the same as that just decided in the preceding case, and for the reasons there given must be determined in the same way. Contrary to what was held in the case of Scribner et al. v. Fisher, 2 Gray, 43, we hold that the certificate of discharge in the case was no bar to the action, because the debt was due to a citizen of another State. Such was the rule laid down in Ogden v. Saunders, 12 Wheaton, 279; and we also hold that the circumstance that the contract was to be performed in the State where the discharge was obtained does not take the case out of the operation of that rule.

2. Agreed statement also shows that O. C. Hale was in fact the cashier of the Bank of Newbury at the time the defendant executed the note, but the defendant insists, as he insisted in the court below, that parol evidence was not admissible to prove that the person therein named as payee in taking the note acted as cashier and agent of the corporation. He admits that the plaintiff can prove those facts, if admissible, but denies that parol evidence is admissible for that purpose, which is the principal question on this branch of the case. Counsel very properly admit that such evidence would be admissible in suits upon ordinary simple contracts, but the argument is that a different rule prevails where the suit is upon a promissory note or bill of exchange. Suit in such cases, it is said, can only be maintained in the name of the person therein named as payee, and consequently that the plaintiff bank cannot be treated as such without explanatory evidence, and that parol evidence is not admissible to furnish any such explanation. Suppose the rule were so, still it could not benefit the defendant in this case, because it is unconditionally admitted that O. C. Hale was in fact cashier of the plaintiff bank at the time of the making of the said note. Undeniably the note must be considered in connection with that admitted fact, and when so considered it brings the case directly within the rule laid down in the case of Commercial Bank v. French, 21 Pickering, 486, and the several cases there cited upon the same subject. In that case the court say the principle is that the promise should be understood according to the intention of the parties. If in truth it be an undertaking to the corporation whether a right or a wrong name is inserted, or whether the name of the corporation or some of its officers be used, it should be declared on and treated as a promise to the corporation, and as a general rule it may be said that where enough appears to show that the parties intended to execute the instrument in the name of the principal, the form of the words is immaterial, because as between the original parties their intention should govern. But it is not necessary to place the decision upon that ground alone, as we are all of the opinion that even if the facts set forth in the agreed statement are all to be regarded merely as an offer of proof, subject to the objections of the defendant, still the case must be decided in the same way. Regarded in that point of view, the question then is whether the evidence offered was admissible. Promise, as appears by the terms of the note, was to O. C. Hale, cashier, and the question is, whether parol evidence is admissible to show that he was cashier of the plaintiff bank, and that in taking the note he acted as the cashier and agent of the corporation. Contract of the parties shows that he was cashier, and that the promise was to him in that character. Banking corporations necessarily act by some agent, and it is a matter of common knowledge that such institutions usually have an officer known as their cashier. In general he is the officer who superintends the books and transactions of the bank under the orders of the directors.

His acts within the sphere of his duty are in behalf of the bank, and to that extent he is the agent of the corporation. Viewed in the light of these well-known facts, it is clear that evidence may be received to show that a note given to the cashier of a bank was intended as a promise to the corporation, and that such evidence has no tendency whatever to contradict the terms of the instrument. Where a check was drawn by a person who was a cashier of an incorporated bank, and it appeared doubtful upon the face of the instrument whether it was an official or a private act, this court held, in the case of the Mechanics' Bank v. The Bank of Columbia, 5 Wheat., 326, that parol evidence was admissible to show that it was an official act. Signature of the promissor in that case had nothing appended to it to show that he had acted in an official character, and yet it was unhesitatingly held that parol evidence was admissible to show the real character of the transaction. Opinion in that case was given by Mr. Justice Johnson, and in disposing of the case he said, that it is by no means true, as was contended in argument, that the acts of agents derive their validity from professing on the face of them to have been done in the exercise of their agency. Rules of form, in certain cases, have been prescribed by law, and where that is so those rules must in general be followed, but in the diversified duties of a general agent, the liability of the principal depends upon the fact that the act was done in the exercise and within the limits of the powers delegated, and those powers, says the learned judge, are necessarily inquirable into by the court and jury. Maker of the note in that case had signed his name without any addition to indicate his agency, which makes the case a stronger one than the one under consideration. Same rule as applied to ordinary simple contracts has since that time been fully adopted by this court. Examples of the kind are to be found in the case of the New Jersey Steam Navigation Company v. The Merchants' Bank, 6 How., 381, and in the more recent case of Ford v. Williams, 21 How., 289, where the opinion was given by Mr. Justice Grier. In the latter case it is said that the contract of the agent is the contract of the principal, and he may sue or be sued thereon, though not named therein. Parol proof may be admitted to show the real nature of the transaction, and it is there held that the admission of such proof does not contradict the instrument, but only explains the transaction.

Such evidence, says Baron Park, in Higgins v. Senior, 8 Mee. & Wels., 844, does not deny that the contract binds those whom on its face it purports to bind, but shows that it also binds another by reason that the act of the agent is the act of the principal. Argument for the defendant is, that the doctrine of those cases can have no application to the present case, because the suit is founded upon a promissory note, but the distinctions taken we think cannot be sustained under the state of facts disclosed in the agreed statement. Mr. Parsons says, if a bill or note is made payable to A. B., cashier, without any other designation, there is authority for saying that an action may be maintained upon it, either by the person therein named as payee or by the bank of which he is cashier, if the paper was actually made and received on account of the bank; and the authorities cited by the author fully sustain the position. Fairfield v. Adams, 16 Pick., 381; Shaw v. Stone, 1 Cush., 254; Barnaby v. Newcombe, 9 Cush., 46; Wright v. Boyd, 3 Barb., S.C.., 523. Among the cases cited by that author to show that the suit may be maintained by the bank, is that of the Watervliet Bank v. White, 1 Den., 608, which deserves to be specially considered. Note in that case was indorsed to R. Olcott, Esq., cashier, or order, and the suit was brought in the name of the plaintiff bank, of which the indorsee was the cashier. Objection was made that the suit could not be maintained in the name of the bank, but it appearing that the indorsement was really made for the benefit of the corporation, the court overruled the objection, and gave judgment for the plaintiff. Bayley v. ''Onondaga Ins. Co.'', 6 Hill, 476. Suggestion was made at the argument that the rule was different in Massachusetts, but we think not. On the contrary, the same rule is established there by repeated decisions, which have been followed in other States. Eastern R. R. Co. v. Benedict et al., 5 Gray, 561; Folger v. Chase, 18 Pick., 63; Hartford Bank v. Barry, 17 Mass., 94; Long v. Colburn, 11 Mass., 97; Swan v. Park, 1 Fairf., 441; Rutland & R. R. Co. v. Cole, 24 Vt., 33. Doubt cannot arise in this case that the person named in the note was in fact the cashier of the plaintiff bank, because the fact is admitted, and it is also admitted that the plaintiff can prove that in taking the note he acted as the cashier and agent of the corporation, provided the evidence is legally admissible. Our conclusion is, that the evidence is admissible, and that the suit was properly brought in the name of the bank. The judgment of the Circuit Court is therefore affirmed with costs.

JUDGMENT ACCORDINGLY.


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Ex parte Vallandigham

THIS case arose on the petition of Clement L. Vallandigham for a certiorari, to be directed to the Judge Advocate General of the Army of the United States, to send up to this court, for its review, the proceedings of a military commission, by which the said Vallandigham had been tried and sentenced to imprisonment; the facts of the case, as derived from the statement of the learned Justice (WAYNE) who delivered the opinion of the court, having been as follows:

Major-General Burnside, commanding the military department of Ohio, issued a special order, No. 135, on the 21st April, 1863, by which a military commission was appointed to meet at Cincinnati, Ohio, on the 22d of April, or as soon thereafter as practicable, for the trial of such persons as might be brought before it. There was a detail of officers to constitute it, and a judge advocate appointed.

The same general had, previously, on the 13th of April, 1863, issued a general order, No. 38, declaring, for the information of all persons concerned, that thereafter all persons found within his lines who should commit acts for the benefit of the enemies of our country, should be tried as spies or traitors, and if convicted should suffer death; and among other acts prohibited, was the habit of declaring sympathies for the enemy. The order issued by General Burnside declared that persons committing such offences would be at once arrested, with a view to being tried as above stated, or to be sent beyond his lines into the lines of their friends; that it must be distinctly understood that treason, expressed or implied, would not be tolerated in his department.

On the 5th of May, 1863, Vallandigham, a resident of the State of Ohio, and a citizen of the United States, was arrested at his residence and taken to Cincinnati, and there imprisoned. On the following day, he was arraigned before a military commission on a charge of having expressed sympathies for those in arms against the Government of the United States, and for having uttered, in a speech at a public meeting, disloyal sentiments and opinions, with the object and purpose of weakening the power of the Government in its efforts for the suppression of an unlawful rebellion.

The specification under the charge was, that he, the said Vallandigham, a citizen of Ohio, on the 1st of May, 1863, at Mount Vernon, in Knox County, Ohio, did publicly address a large meeting of persons, and did utter sentiments, in words or to the effect, 'that the present war was a wicked, cruel, and unnecessary war, one not waged for the preservation of the Union, but for the purpose of crushing out liberty and to erect a despotism; a war for the freedom of the blacks and the enslavement of the whites; and that if the administration had not wished otherwise, that the war could have been honorably terminated long ago; that peace might have been honorably made by listening to the proposed intermediation of France; that propositions, by which the Southern States could be won back, and the South guaranteed their rights under the Constitution, had been rejected the day before the late battle of Fredericksburg by Lincoln and his minions, meaning the President of the United States, and those under him in authority. Also charging that the Government of the United States was about to appoint military marshals in every district to restrain the people of their liberties, and to deprive them of their rights and privileges, characterizing General Order No. 38, from headquarters of the Department of the Ohio, as a base usurpation of arbitrary authority, inviting his hearers to resist the same, by saying, the sooner the people inform the minions of usurped power that they will not submit to such restrictions upon their liberties, the better; and adding, that he was at all times and upon all occasions resolved to do what he could to defeat the attempts now being made to build up a monarchy upon the ruins of our free government, and asserting that he firmly believed, as he had said six months ago, that the men in power are attempting to establish a despotism in this country, more cruel and oppressive than ever existed before.'

The prisoner, on being arraigned, denied the jurisdiction of the military commission, and refused to plead either to the charge or specification. Thereon, the members of the commission, after private consultation, directed the judge advocate to enter a plea of Not Guilty, and to proceed with the trial, with an allowance to the petitioner to call witnesses to rebut the evidence which might be introduced against him to establish the charge. The next day the commission proceeded with the trial. Seven members of it were present, and tried the charge in due form of military law. The prisoner exercised his right to call witnesses, and to cross-examine those who were sworn for the prosecution. At his request he had the aid of counsel, and the court adjourned to enable him to procure it. Three gentlemen of his own choice attended; but for some cause, only known to themselves and their client, they remained in an adjoining room during the trial, without having been introduced before the commission, though it expressly authorized it to be done, saying that it had adjourned to permit the prisoner to obtain their presence. The prisoner was informed by the judge advocate, when he closed his evidence, that no other witnesses would be introduced. He then offered the Hon. S. S.C.ox as a witness in his behalf. This gentleman was interrogated in chief, without being cross-examined, and it was admitted by the judge advocate, that if three other persons who had been summoned to appear as witnesses for the prisoner had appeared, but who were not in court, that their evidence would have been substantially the same as Mr. Cox had given. Here the accused closed his testimony, and then read to the commission a statement, which, with the other proceedings of the trial, was forwarded to the judge advocate general, and was inserted in the record.

It began with the declaration, that he had been arrested without due process of law, without a warrant from any judicial officer; that he was then in a military prison, and had been served with a charge and specifications, as in a court-martial or military commission; that he was not either in the land or naval forces of the United States, nor in the militia in the actual service of the United States, and, therefore, not triable for any cause by any such court; that he was subject, by the express terms of the Constitution, to arrest only by due process of law or judicial warrant, regularly issued upon affidavit by some officer or court of competent jurisdiction for the trial of citizens; that he was entitled to be tried on an indictment or presentment of a grand jury of such court, to a speedy and public trial, and also by an impartial jury of the State of Ohio, to be confronted with witnesses against him, to have compulsory process for witnesses in his behalf, the assistance of counsel for his defence, by evidence and argument according to the common law and the usages of judicial courts;-all those he demanded as his right as a citizen of the United States, under the Constitution of the United States. He also alleged that the offence of which he is charged is not known to the Constitution of the United States, nor to any law thereof; that they were words spoken to the people of Ohio, in an open and public political meeting, lawfully and peaceably assembled under the Constitution, and upon full notice; that they were words of criticism upon the policy of the public servants of the people, by which policy it was alleged that the welfare of the country was not promoted. That they were used as an appeal to the people to change that policy, not by force, but by free elections and the ballot-box; that it is not pretended that he counselled disobedience to the Constitution or resistance to the law or lawful authority; that he had never done so, and that beyond this protest he had nothing further to submit.

The judge advocate replied, that so far as the statement called in question the jurisdiction of the commission, that had been decided by the authority convening and ordering the trial, nor had the commission, at any time, been willing to entertain the objection; that as far as any implications or inferences designed or contemplated by the statement of the accused, his rights to counsel and to witnesses for his defence, he had enjoyed the allowance of both, and process for his witnesses, which had been issued; and that as to the facts charged in the specification, they were to be determined by the evidence;-that his criminality was a question peculiarly for the commission, and that he had submitted the case to its consideration. The commission was then cleared for consideration.

The finding and sentence were, that Vallandigham was guilty of the charge and specification, except so much of the latter, 'as that propositions by which the Southern States could be won back and guaranteed in their rights under the Constitution had been rejected the day before the battle of Fredericksburg, by Lincoln and his minions, meaning the President of the United States, and those under him in authority;' and the words, 'asserting that he firmly believed, as he had asserted six months ago, that the men in power are attempting to establish a despotism in this country more oppressive than ever existed before.' As to those words the prisoner was not guilty; but of the charge he was guilty, and the commission, therefore, sentenced him to be placed in close confinement in some fortress of the United States, to be designated by the commanding officer of this department, there to be kept during the war.

The finding and sentence were approved and confirmed by General Burnside, in an order bearing date the 16th of May, 1863, and Fort Warren was designated as the place of imprisonment. On the 19th of May, 1863, the President, in commutation of the sentence, directed Major-General Burnside to send the prisoner, without delay, to the headquarters of General Rosecrans, then in Tennessee, to be by him put beyond our military lines; which order was executed.

In support of the motion for the certiorari, and against the jurisdiction of the military commission, it was urged that the latter was prohibited by the act of March 3d, 1863, for enrolling and calling out the national forces (§ 30, 12 Stat. at Large, 736), as the crimes punishable in it by the sentence of a court-martial or military commission, applied only to persons who are in the military service of the United States, and subject to the articles of war. And also, that by the Constitution itself, § 3, art. 3, all crimes, except in cases of impeachment, were to be tried by juries in the State where the crime had been committed, and when not committed within any State, at such place as Congress may by law have directed; and that the military commission could have no jurisdiction to try the petitioner, as neither the charge against him nor its specifications imputed to him any offence known to the law of the land, and that General Burnside had no authority to enlarge the jurisdiction of a military commission by the General Order No. 38, or otherwise.

Mr. Justice WAYNE, after stating the case, much as precedes, delivered the opinion of the court:

title: Ex parte Vallandigham


text: Talk:Ex parte Vallandigham

title: Talk:Ex parte Vallandigham


text:
Ex parte Vallandigham/Opinion of the Court

General Burnside acted in the matter as the general commanding the Ohio Department, in conformity with the instructions for the government of the armies of the United States, approved by the President of the United States, and published by the Assistant Adjutant-General, by order of the Secretary of War, on the 24th of April, 1863.

It is affirmed in these instructions, that military jurisdiction is of two kinds. First, that which is conferred and defined by statute; second, that which is derived from the common law of war. 'Military offences, under the statute, must be tried in the manner therein directed; but military offences, which do not come within the statute, must be tried and punished under the common law of war. The character of the courts which exercise these jurisdictions depends upon the local law of each particular county.'

In the armies of the United States, the first is exercised by courts-martial, while cases which do not come within the 'rules and regulations of war,' or the jurisdiction conferred by statute or court-martial, are tried by military commissions.

These jurisdictions are applicable, not only to war with foreign nations, but to a rebellion, when a part of a country wages war against its legitimate government, seeking to throw off all allegiance to it, to set up a government of its own.

Our first remark upon the motion for a certiorari is, that there is no analogy between the power given by the Constitution and law of the United States to the Supreme Court, and the other inferior courts of the United States, and to the judges of them, to issue such processes, and the prerogative power by which it is done in England. The purposes for which the writ is issued are alike, but there is no similitude in the origin of the power to do it. In England, the Court of King's Bench has a superintendence over all courts of an inferior criminal jurisdiction, and may, by the plenitude of its power, award a certiorari to have any indictment removed and brought before it; and where such certiorari is allowable, it is awarded at the instance of the king, because every indictment is at the suit of the king, and he has a prerogative of suing in whatever court he pleases. The courts of the United States derive authority to issue such a writ from the Constitution and the legislation of Congress. To place the two sources of the right to issue the writ in obvious contrast, and in application to the motion we are considering for its exercise by this court, we will cite so much of the third article of the Constitution as we think will best illustrate the subject.

'The judicial power of the United States shall be vested in one Supreme Court, and in such inferior courts as the Congress may, from time to time, ordain and establish.' 'The judicial power shall extend to all cases in law and equity, arising under the Constitution, the laws of the United States, and treaties made or which shall be made under their authority; to all cases affecting ambassadors, other public ministers and consuls,' &c., &c., and 'in all cases affecting ambassadors, other ministers and consuls, and those in which a State shall be a party, the Supreme Court shall have original jurisdiction. In all the other cases before mentioned, the Supreme Court shall have appellate jurisdiction, both as to law and fact, with such exceptions and under such regulations as the Congress shall make.' Then Congress passed the act to establish the judicial courts of the United States, and in the 13th section of it declared that the Supreme Court shall have exclusively all such jurisdiction of suits or proceedings against ambassadors or other public ministers or their domestics or their domestic servants as a court of law can have or exercise consistently with the laws of nations, and original, but not exclusive jurisdiction, of suits brought by ambassadors, or other public ministers, or in which a consul or vice-consul shall be a party. In the same section, the Supreme Court is declared to have appellate jurisdiction in cases hereinafter expressly provided. In this section, it will be perceived that the jurisdiction given, besides that which is mentioned in the preceding part of the section, is an exclusive jurisdiction of suits or proceedings against ambassadors or other public ministers or their domestics or domestic servants, as a court of law can have or exercise consistently with the laws of nations, and original but not exclusive jurisdiction of all suits brought by ambassadors or other public ministers, or in which a consul or vice-consul shall be a party, thus guarding them from all other judicial interference, and giving to them the right to prosecute for their own benefit in the courts of the United States. Thus substantially reaffirming the constitutional declaration, that the Supreme Court had original jurisdiction in all cases affecting ambassadors and other public ministers and consuls, and those in which a State shall be a party, and that it shall have appellate jurisdiction in all other cases before mentioned, both as to law and fact, with such exceptions and under such regulations as the Congress shall make.

The appellate powers of the Supreme Court, as granted by the Constitution, are limited and regulated by the acts of Congress, and must be exercised subject to the exceptions and regulations made by Congress. In other words, the petition before us we think not to be within the letter or spirit of the grants of appellate jurisdiction to the Supreme Court. It is not in law or equity within the meaning of those terms as used in the 3d article of the Constitution. Nor is a military commission a court within the meaning of the 14th section of the Judiciary Act of 1789. That act is denominated to be one to establish the judicial courts of the United States, and the 14th section declares that all the 'before-mentioned courts' of the United States shall have power to issue writs of scire facias, habeas corpus, and all other writs not specially provided for by statute, which may be necessary for the exercise of their respective jurisdictions, agreeably to the principles and usages of law. The words in the section, 'the before-mentioned' courts, can only have reference to such courts as were established in the preceding part of the act, and excludes the idea that a court of military commission can be one of them.

Whatever may be the force of Vallandigham's protest, that he was not triable by a court of military commission, it is certain that his petition cannot be brought within the 14th section of the act; and further, that the court cannot, without disregarding its frequent decisions and interpretation of the Constitution in respect to its judicial power, originate a writ of certiorari to review or pronounce any opinion upon the proceedings of a military commission. It was natural, before the sections of the 3d article of the Constitution had been fully considered in connection with the legislation of Congress, giving to the courts of the United States power to issue writs of scire facias, habeas corpus, and all other writs not specially provided for by statute, which might be necessary for the exercise of their respective jurisdiction, that by some members of the profession it should have been thought, and some of the early judges of the Supreme Court also, that the 14th section of the act of 24th September, 1789, gave to this court a right to originate processes of habeas corpus ad subjiciendum, writs of certiorari to review the proceedings of the inferior courts as a matter of original jurisdiction, without being in any way restricted by the constitutional limitation, that in all cases affecting ambassadors, other public ministers and consuls, and those in which a State shall be a party, the Supreme Court shall have original jurisdiction. This limitation has always been considered restrictive of any other original jurisdiction. The rule of construction of the Constitution being, that affirmative words in the Constitution, declaring in what cases the Supreme Court shall have original jurisdiction, must be construed negatively as to all other cases. The nature and extent of the court's appellate jurisdiction and its want of it to issue writs of habeas corpus ad subjiciendum have been fully discussed by this court at different times. We do not think it necessary, however, to examine or cite many of them at this time. We will annex a list to this opinion, distinguishing what this court's action has been in cases brought to it by appeal from such applications as have been rejected, when it has been asked that it would act upon the matter as one of original jurisdiction.

In the case Ex parte Milburn, Chief Justice Marshall said, as the jurisdiction of the court is appellate, it must first be shown that it has the power to award a ''habeas corpus. In re Kaine'', the court denied the motion, saying that the court's jurisdiction to award the writ was appellative, and that the case had not been so presented to it, and for the same cause refused to issue a writ of certiorari, which in the course of the argument was prayed for. In Ex parte Metzger, it was determined that a writ of certiorari could not be allowed to examine a commitment by a district judge, under the treaty between the United States and France, for the reason that the judge exercised a special authority, and that no provision had been made for the revision of his judgment. So does a court of military commission exercise a special authority. In the case before us, it was urged that the decision in Metzger's case had been made upon the ground that the proceeding of the district judge was not judicial in its character, but that the proceedings of the military commission were so; and further, it was said that the ruling in that case had been overruled by a majority of the judges in Raines' case. There is a misapprehension of the report of the latter case, and as to the judicial character of the proceedings of the military commission, we cite what was said by this court in the case of The United States v. Ferreira.

'The powers conferred by Congress upon the district judge and the secretary are judicial in their nature, for judgment and discretion must be exercised by both of them, but it is not judicial in either case, in the sense in which judicial power is granted to the courts of the United States.' Nor can it be said that the authority to be exercised by a military commission is judicial in that sense. It involves discretion to examine, to decide and sentence, but there is no original jurisdiction in the Supreme Court to issue a writ of habeas corpus ad subjiciendum to review or reverse its proceedings, or the writ of certiorari to revise the proceedings of a military commission.

And as to the President's action in such matters, and those acting in them under his authority, we refer to the opinions expressed by this court, in the cases of Martin v. Mott, and Dynes v. Hoover.

For the reasons given, our judgment is, that the writ of certiorari prayed for to revise and review the proceedings of the military commission, by which Clement L. Vallandigham was tried, sentenced, and imprisoned, must be denied, and so do we order accordingly.

CERTIORARI REFUSED.

NELSON, J., GRIER, J., and FIELD, J., concurred in the result of this opinion. MILLER, J., was not present at the argument, and took no part.


text: Talk:Ex parte Vallandigham/Opinion of the Court


text:
Dunham v. Cincinnati Peru Railway Company

THIS was an appeal from a decree of the Circuit Court of the United States for the District of Indiana, made in a case in which Dunham was complainant, and the Cincinnati, Peru, and Chicago Railway Company, with one Walker, a builder of the road, and Ludlow, his assignee, under the insolvent laws of the State, were defendants. The facts were these:

The appellant, Dunham, on the 18th of April, 1860, filed his bill in the court below to foreclose a mortgage given to him as trustee by the said railway company, to secure the payment of certain bonds therein described. The respondent corporation was organized under a general law of the State of Indiana, for the incorporation of railroad companies, one section of which provides that 'such company may from time to time borrow such sums of money as they may deem necessary for completing or operating their railroad, and issue and dispose of their bonds, for amount so borrowed, for such sums and such rate of interest as is allowed by the laws of the State where such contract is made, and mortgage their corporate property and franchises to secure the payment of any debt contracted by such company.' They were authorized by their charter to construct a railroad from Laporte, in that State, by the way of Plymouth, &c., to Marion in the same State. The whole length of the railroad, as contemplated, was about ninety-seven miles, and for the purpose of constructing, completing, and equipping the entire route, the directors resolved to raise money by loans to an amount not exceeding $1,000,000, and to issue the bonds of the company, not exceeding one thousand in number, for the sum of $1000 each, payable in twenty years from date, and bearing interest not exceeding seven per cent. per annum. They also decided to construct the road by sections, and, with that view, divided the route into four parts, designated and numbered as sections one, two, three, and four. Section one extended from Laporte to Plymouth, a distance of about twenty-eight and a half miles: this was the only one that was built, and is the one which constitutes the subject-matter of the controversy in this suit. Intending to construct the road in sections, they apportioned the loan and the bonds to be issued upon the several sections. Three hundred thousand dollars were apportioned to the first section, and the residue to the three other sections. Having arranged these preliminaries, they resolved to mortgage the road to secure the payment of the interest accruing on the bonds, and for the ultimate discharge of the principal. The complainant was appointed trustee for the purpose of such a conveyance, and on the 20th of February, 1855, a mortgage was made to him as such trustee, his successors and assigns, of the following property of the company, that is to say, 'their road built, and to be built,' 'including the right of way, and the land occupied thereby, together with the superstructures and tracks thereon, and all bridges, viaducts, culverts, fences, depot grounds and buildings thereon, and all other appurtenances belonging thereto, and all franchises, rights, and privileges of the company to the same.' Pursuant to the previous determination of the company, the proper officers thereof, on the 1st of March following, issued the three hundred bonds apportioned to the first section of the road, and which had been duly set apart for its construction and equipment. They were the only bonds ever issued under the first mortgage. The allegation of the bill of complaint was that the interest warrants had not been paid, and that the railway company had failed to furnish any means whatever for that purpose as stipulated between the parties. The bill also alleged that the company, on the 26th of February, 1855, made to the complainant, as such trustee, another mortgage of their railroad, to secure the payment of bonds proposed by them to be issued for another sum, not exceeding $1,000,000, for the same purpose. An apportionment of that sum also was made upon the different sections of the road in the same manner as was done under the first mortgage, but none of the bonds were issued, except those apportioned to the first section. The railway company did not appear, and as to them the complainant took a decree pro confesso. The defendants, Walker and Ludlow, appeared and filed separate answers. The defence of Walker was, that the company being wholly unable to complete the road, he, the respondent, on the 28th of November, 1855, entered into an agreement with them to complete the first section and furnish all the materials, and that the company agreed to pay him the full value of the materials so furnished, and a reasonable compensation for his services; that, as part of the arrangement, the company engaged to deliver to him, from time to time, ninety-nine of the first mortgage bonds, and two hundred and ninety-nine of the second mortgage bonds, at $400 for each $1000 bond, and that he, the contractor, was to have and keep possession and control of that section of the road and its earnings until the company should make full payment to him of what they should owe him under that agreement. The answer then averred that he expended for materials and labor in completing the contract, $302,000, and that the company, on the 8th of April, 1858, confessed a judgment in his favor for the balance due him under the contract, amounting to $129,491 43/100, which, as he insisted, was entitled to a preference in payment from the earnings and income of the road, and from the proceeds of the sale of the same over the first mortgage bonds.

The stipulations of the contract purported to give to the contractor the absolute control of the first section of the road and its earnings, from its opening until the company should make full payment for its construction, and the contractor was to disburse its earnings,--

1st. To pay the expenses of operating the road.

2d. To reimburse himself for all the money which he might advance.

3d. To pay the interest on the first and second mortgage bonds, and if there was any surplus, to apply the same to the other objects therein specified.

The answer of the other respondent, Ludlow, set up the same defence.

The mortgage of the complainants had been duly registered, March 9, 1855, more than eight months before the contract was made with Walker and Ludlow.

The court below rendered a decree directing that the road should be sold, and that the proceeds, after the payment of costs, should be paid over to Ludlow, as assignee of the contractor, to the exclusion of the trustee, and in preference to the mortgage on which the suit was founded.

The decree also ordered that coupons past due on the bonds should take precedence over the principal of the bonds; the ground of the decree being a clause in the mortgage held by the complainant as trustee, in these words: 'In case of default in the payment of interest or principal of any bonds, and a sale or other proceedings to coerce the same, all bonds which shall then be a lien in common therewith, and the interest accrued thereon, shall be considered, and shall in fact be equally due and payable, and entitled to a pro rata dividend of the proceeds of said sale or other proceedings; but in no case shall the principal of any bond be considered due until twenty years from the date thereof.'

From this decree, Dunham, a creditor under the mortgagee, appealed, and now sought to reverse the decree.

Messrs. Major and Black for Walker and Ludlow:

1. The question is, whether Walker-having made the road by the expenditure of his own means, without which expenditure the road was worthless to the company and the bondholders, and made it under a written agreement with the company that he should retain possession of the road, and apply its earnings to the liquidation of the debt due him, until such debt was paid; and having never surrendered possession to the company-holds a prior lien upon it, and is entitled in equity to a priority in the distribution of the proceeds on sale of it? We think that he is.

I. Railroad mortgages made to secure the payment of bonds which are sold for the purpose of obtaining means with which to construct the road, are different from mortgages on land, to secure money borrowed. In the latter the security is in esse, and belongs to the party making the mortgage; in the former, the road, which is the only security, is not in existence and does not belong to the mortgagor, but on the faith that the company will in future construct it, the bonds are purchased.

There is no evidence that this company owned the soil. No deed is shown. The presumption is against ownership. It is contrary to the policy of the law to allow railroad companies to acquire any greater interest in the land than a right of way. A grant of a right of way confers no right to the soil. It is but an incorporeal hereditament; a right issuing out of the soil, not a right to or in it. It has been decided in Louisiana, that a railway is not an 'immovable,' by nature or destination, if the soil over which it passes belongs to another, and that the rails do not become immovable by being laid down. In an article given to one of our periodicals by Mr. Theron Metcalf, always one of the best lawyers, as now one of the eminent judges of our country, he says, in reference to that case, 'As the company has no right of soil to the land embraced by the railroad, but a mere easement, a mortgage by the company cannot pass the right of soil, and consequently timber and iron, afterwards acquired and laid down upon the road, cannot be considered as passing by the mortgage merely because of their being fixed to the soil.'

It is a general rule that nothing can be mortgaged that is not in esse, and that does not at the time of making the mortgage belong to the mortgagor.

But equity, it is said, will attach the lien of the mortgage to the subsequent superstructure, when by the terms of the mortgage it is stipulated that the mortgage shall cover it. Still, this result will not attach until the company shall have acquired title to such superstructure; and this title the company cannot acquire so long as the person who made the superstructure keeps possession thereof, unless the company pays to that person the amount due for the work. Especially is this true where, by agreement between the company and such person, he is to keep possession of the road and its earnings until the company should pay him all it might owe him. Now, decided cases show that the company could not acquire any right to the road until Walker was first paid all that was owing to him by the company. In a Georgia case, Collins v. The Central Bank, certain contractors had constructed a part of the railroad, and the company made them a mortgage thereon to secure to them payment for the work. A bank, which was the holder of bills issued by the company to contractors who built the road, claimed a priority in the proceeds of the road, under a law which authorized the issue of those bills by the company, and created the same a lien on the road built by the company. It was held that the contractors had a prior lien on that part of the road which they had built. The court says:

'Nor was the company entitled to the part of the road made by the contractors, until payment was made therefor. It was competent for the company to stipulate, by express agreement, that the contractors should have a lien on that part of the road which they contracted to build, to the extent of the work furnished, until payment was made by the company. This lien, until payment for the work and materials furnished, does not at all conflict with the lien created by the statute on that part of the road built by the company; nor would the company have been entitled to that portion of the road built by the contractors above Griffin until payment made to them therefor. Certainly the billholders, who are the creditors of the company, cannot be considered as standing, at least in a court of equity, in a better condition than the company under whom they claim. If the company could not appropriate the road built by the contractors, to their own use and benefit, until payment for the work and materials, on what principle is it, the billholders, claiming under and through the company, can justly claim in a court of equity to have exclusively appropriated to their benefit the proceeds of the sale of such portion of the road and materials?'

Thatcher, Burt & Co. v. Coe, in the Federal court for Ohio, is to the same effect. T., B. & Co. built a bridge for a railroad company upon piers and abutments made by the company, without any agreement whatsoever as to lien or security of any kind. When the bridge was completed, T., B. & Co., fearing that the company would not be able to pay them the balance due, refused to give up possession of the bridge to the company until they were paid the balance due them, or a mortgage made to them on the bridge to secure the payment. The company made the mortgage to T., B. & Co., who thereupon gave up the bridge to the company. Coe, the trustee of the first mortgage bondholders, claimed the proceeds of the road in preference to the claims of T., B. & Co. under that mortgage. McLean, J., held that T., B. & Co. were entitled to a priority. In his opinion in the case, that judge, replying to an objection that the company had no power to give the mortgage, says:

'The company had the power to make the contract for the bridge on such terms as they believed would best advance the interest of all concerned. This discretion was necessarily exercised by the company in the entire construction and equipment of the road. It was a trust vested in them, and could be exercised by no other power. But it is said the company could do no act to the prejudice of the bondholders represented by the complainant. This assumes that the act done impairs the security of the bondholders. This is not true, either in fact or in law.

'The contractors were not bound to perform the work and deliver it to the railroad company, unless the stipulated compensation was paid or secured to be paid. This they have a right to demand, under the circumstances, and a sense of justice and law induced the railroad company to give the security required. This was not under the mechanic's law, but the common law, which authorizes every man to retain possession of his own work, where no contract has otherwise provided, until he is paid for it, or the payment secured.

'The deed of trust secured to the holders the right of way and the road when constructed with all its equipments. But the equipments, the iron, and the structure of the road, had to be procured by the company with the means under their control, as the best interests of the road required. If its funds were exhausted, and the company could not procure labor or materials on credit, must the enterprise be abandoned? And if these things could not be procured but by giving a pledge of the work and materials, so as to put the road in operation and enable it to pay an income, has not the company the power to do it? They take nothing from the bondholders, but on the contrary greatly benefit them by adding to the value and productiveness of the road.'

McLean, J., further held that T., B. & Co., by keeping the bridge in their possession, preserved a lien on it for their compensation.


text: Talk:Dunham v. Cincinnati Peru Railway Company


text:
Dunham v. Cincinnati Peru Railway Company/Opinion of the Court

'The lien of the bondholders, in no legal or equitable sense, can be considered as paramount to that of the contractors. It was the contractor's labor and money which constructed the things mortgaged, and not the means of the company, so far as regards the balance due.'. . .. 'In this view, so long as the bridges remained in the possession of the contractors, the lien of the bondholders did not attach. But this right of possession by the contractors was surrendered for the special mortgage given. . . .. Had the contractors delivered the possession of the bridge to the company without a mortgage, the lien of the bondholders would have attached.'

II. But suppose the company had the legal title to the land. This would not defeat the lien. A chattel attached to land with the consent of the owner of the land, will remain the property of the person placing it there, as in the erection of houses on another's land. So of the erection of a fence, though under an agreement by parol: held valid against a purchaser of the land, though without notice. So of a paper-making machine. So of salt kettles. So of iron rails laid in the track, under an agreement it should not become the property of the company until paid for: held, that the iron was not covered by a subsequent mortgage.

It is said that the assent of the trustee or bondholders to Walker's contract with the company was necessary to make it valid against them. The answer is, that if such assent was necessary, the court will presume it, under the circumstances presented in the case. The construction of the road was the primary object of the organization of the company. It was the purpose for which the bonds were sold, and the agreement was made with Walker. The bondholders and stockholders were the only persons personally interested in making the road. The road being the only security which the bondholders had for the payment of the bonds, they were more deeply interested in the construction than the stockholders. The right of way or right to the land, afforded them no security. The construction of the road was under the control and management of the company, who alone had to provide the means for its construction, and who alone, in its construction, represented the interest of every one concerned. The company was the agent or minister of the trustee, bondholders and stockholders, in the construction; and it was their duty to employ all available resources over which they were competent to exercise control, to prosecute it to completion. This authority may fairly be held to extend to everything which was necessary to the further construction of the road, and which was in no sense prejudicial to the interest of the bondholders.

2. The decree gives priority to overdue coupons. This is right. A clause of the mortgage provides that in 'no case shall the principal of any bond be considered due until twenty years after its date.'

Mr. Otto, who also filed a brief for Mr. Niles, contra:

1. The mortgage is, in substance and effect, a conveyance of the road as an entire thing. Subsequently acquired property annexed thereto became, by such accession, an inseparable part of the original subject of the mortgage.

Repeated adjudications have affirmed, on general principles, the validity of such a mortgage by a railroad company against subsequent creditors and incumbrancers with notice. Pennock v. Coe, in this court, may be said to be in point. The mortgage was executed in pursuance of a power conferred upon the company, and its validity is not drawn in question by the pleadings.

It is not alleged that the complainant consented to the arrangement in regard to the road for which the contract with Walker provided. That contract was later in date than the mortgage. Walker had full notice of the latter. His title to the possession of the mortgaged property or to the proceeds of the sale thereof cannot, therefore, be enforced so as to displace the prior and paramount lien of the mortgage, or to impair or postpone any of the rights or equities created thereby or arising therefrom.

Counsel on the other side insist that the consent of the complainant should be presumed, if such consent be necessary to the maintenance of Walker's contract. But the court will not presume that a party, whose rights were secured by a valid mortgage duly recorded, consented to waive them, nor that a fact existed, where there is no averment thereof in the record. If Walker relied upon such consent, he should have alleged and proved it.

The doctrine that fixtures attached to the soil at the time of the execution of a mortgage or subsequently acquired, will pass by it, is not controverted on the other side, but its applicability to this case is denied upon the assumption that the company had but a right of way and no title to the land. That assumption, if supported by the facts, would not affect the complainant's rights, but the mortgage does convey, in express terms, 'their road built and to be built in the State of Indiana, including the right of way, and the land occupied thereby, together, &c., &c.' The court will presume that the company had the property which it mortgaged, and Walker's answer does not set up the company's non-ownership of the land, in avoidance of the mortgage.

Neither of the two cases cited on the other side are authorities in this court. We think that the case from Georgia went in a large degree on the construction of a local statute. The one decided by McLean, J., is more in point; but it is a circuit case, and of course not binding here. As the case was never published by that judge during his lifetime, being now brought out from his MSS., it would seem that he was not absolutely sure, on reflection, how correctly he had decided it. Pennock v. Coe, as we have already said, is an authority, being in this court.

2. The decree of the court below gives precedence in payment to the past due coupons, over the principal of the bonds. This was in violation of a clear provision of the mortgage, in case a default be made in the payment of the principal or interest.

Mr. Justice CLIFFORD, after stating the case, delivered the opinion of the court:

1. Appellant contends that the proceeds of the sale of the road, after paying the costs of suit, should be ratably applied towards the payment of the first mortgage bonds and the overdue interest warrants under the same, instead of being applied, as directed in the decree, to the payment of the judgment in favor of the contractor, and to the overdue interest warrants, to the exclusion of the principal of the bonds. Appellees insist that inasmuch as the contractor completed the road by the expenditure of his own means, under a written agreement with the company, purporting to secure to him the possession of the road and its earnings, he has a right to retain the same, and that the proceeds of the sale should be applied to the liquidation of the indebtedness of the company to him until the same is fully discharged.

Possession of the road having been delivered by the company to the contractor for the purpose of completing the road, the respondents insist that he, the contractor, having never surrendered the possession, now holds a prior lien upon the road, and in equity is entitled to a priority in the distribution of the proceeds of the sale. Attempt is made to sustain that proposition, chiefly upon two grounds. 1st. It is insisted that the mortgage to the complainant, as trustee for the benefit of the bondholders, does not hold any part of the road except what was built at the time the mortgage was executed and delivered. 2dly. They contend that a contractor, expending money and labor in building a railroad, as in this case, under an agreement with the company that he shall have the possession of the road until he is fully paid, thereby acquires a priority over an elder valid mortgage.

Neither of the propositions is based upon any peculiar circumstances in the case, nor are there any such disclosed in the evidence to take the case out of the general rules of law applicable to similar controversies respecting railroad transactions. Nothing of the kind is pretended, and it is obvious that the pretence, if set up, could not be sustained, as there is nothing in the circumstances to distinguish the case from the ordinary course of events in that department of business. Certain persons procured a charter for a railroad, and wanting means to complete it, decided to issue their bonds as a means of borrowing money, and mortgage their road to secure their payment. Railroads, it is believed, have frequently been built in that way, and if it be true that such a mortgage holds no part of the road except what was completed, it is quite time that the rule should be distinctly announced, that the consequences of further misapprehension upon the subject may be avoided. But we are not prepared to adopt any such rule, or to admit that the proposition has any foundation whatever in the facts of this case. On the contrary, we hold it to be clear law that the complainant, as the trustee for the benefit of the bondholders, took 'the road built and to be built,' together with all the other matters and things specifically enumerated in the mortgage. Express authority was given to the company by the law of the State to borrow such sums of money as they might deem necessary for completing and operating their railroad, and to issue and dispose of their bonds for any amounts so borrowed. What they wanted was money to enable them to make the road, and the authority was expressly given to authorize them to mortgage it for that purpose. Authorized as this mortgage was by express statute, the case is even stronger than that of Pennock et al. v. Coe (23 Howard, 128), where the rights of the parties depended upon the general rules of law.

Terms of the grant in that case were, 'all present and future to be acquired property,' and yet this court held, in a controversy between the grantees of a first mortgage and the grantees of a second mortgage, that the first took the future acquired property, although the property itself was not in existence at the time the first mortgage was executed. While enforcing the rule there laid down, this court said there are many cases in this country confirming the doctrine, and which have led to the practice extensively of giving that sort of security, especially in railroad and other similar great and important enterprises of the day. Several cases were cited by the court on that occasion, which fully support the position, and many more might be added, but it is unnecessary to refer to them, as the one cited is decisive of the point. 2 ''Story Eq. Jur. (8th ed.), §§ 1040-1040 a''.

2. Filing to sustain that position, the respondents, in the second place, rely upon the terms of the subsequent agreement made by the company with the contractor for the completion of the route. Counsel of respondents concede that the mortgage to the complainant was executed in due form of law, and the case also shows that it was duly recorded on the ninth day of March, 1855, more than eight months before the contract set up by the respondents was made. All of the bonds, except those subsequently delivered to the contractor, had long before that time been issued, and were in the hands of innocent holders. Contractor, under the circumstances, could acquire no greater interest in the road than was held by the company. He did not exact any formal conveyance, but if he had, and one had been executed and delivered, the rule would be the same. Registry of the first mortgage was notice to all the world of the lien of the complainant, and in that point of view the case does not even show a hardship upon the contractor, as he must have known when he accepted the agreement that he took the road subject to the rights of the bondholders. Acting as he did with a full knowledge of all the circumstances, he has no right to complain if his agreement is less remunerative than it would have been if the bondholders had joined with the company in making the contract. No effort appears to have been made to induce them to become a party to the agreement, and it is now too late to remedy the oversight. Conceding the general rules of law to be as here laid down, still an attempt is made by the respondents to maintain that railroad mortgages made to secure the payment of bonds issued for the purpose of realizing means with which to construct the road, stand upon a different footing from the ordinary mortgages to which such general rules of law are usually applied.

Authorities are cited which seem to favor the supposed distinction, and the argument in support of it was enforced at the bar with great power of illustration, but suffice it to say, that in the view of this court the argument is not sound, and we think that the weight of judicial determination is greatly the other way. Pierce v. Emery (32 N. H., 484); Pennock v. Coe (23 How., 130); Field v. The Mayor of N. Y. (2 Seld. 179); Seymour v. ''Can. and Niag. Falls Railroad Company (25 Barb., 286); Red. on Railways, 578; Langton v. Horton (1 Hare Ch. R., 549); Matter of Howe (1 Paige, 129); Winslow v. Mitchell (2 Story, C. C., 644); Domat, 649, art. 5; 1 Pow. on Mort. 190; Noel v. Burley'' (3 Simons, 103).

Decree of Circuit Court not only gives precedence to the judgment of the contractor, but also to the past-due coupons or interest warrants over the principal of the bonds. Complainant objects to the decree in both particulars, and we think his objections are well founded. Terms of the mortgage are, that in case of default in payment of interest or principal of any bond, and a sale or other proceedings to coerce the same, all bonds which shall be a lien in common therewith, and the interest accrued thereon, shall be considered, and shall in fact be equally due and payable, and entitled to a pro rata dividend of the proceeds of said sale or other proceedings. Reference is made to another clause of the mortgage, where it is said that in no case shall the principal of any bond be considered due until twenty years after its date; but it is quite obvious, we think, that the latter clause was inserted merely to exclude any possible inference that a bondholder under any circumstances might bring an action for the principal of a bond before it became due by its terms. Such was, doubtless, the intention of the provision, but it does not in any manner conflict with the suggestion already made, that in case of sale on account of default of payment of interest or principal, that all the bonds of the same class, and the interest accrued thereon, shall be entitled to a pro rata dividend of the proceeds.

The decree of the Circuit Court is, therefore, reversed, with costs, and the cause remanded for further proceedings, in conformity with the opinion of this court.

DECREE ACCORDINGLY.

Mr. Justice DAVIS dissented.


text: Talk:Dunham v. Cincinnati Peru Railway Company/Opinion of the Court


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Sturgis v. Clough (68 U.S. 269)

ERROR to the Circuit Court of the United States for the Southern District of New York, the case being thus:

The steamer Mabey had injured the steamer Hector in a collision, and had been libelled for damages. It being referred by the court to a commissioner to assess these damages, the owners of the Hector claimed the whole cost of the repairs, and also damages for fourteen days' demurrage, during which the repairs were getting done. The commissioner awarded,

For repairs, being the full cost of them, $2162 80

For demurrage, fourteen days, as claimed, _1099 50

$3262 30

The Hector was an old vessel,-twenty years old, it was testified,-her guards and deck, which were now repaired, having been in a very decayed condition, and her whole hull, comparatively, worthless. Still she was a navigating vessel, and was engaged, at the time of the collision, in towing vessels to and from sea, about the harbor of New York. Several witnesses were brought, who testified that there was a great demand for labor at that time, and who gave their opinions as to what the vessel might have made per day, if engaged. But the owner did not exhibit, nor offer to exhibit, his books, to show what she actually had made previously; and some of the testimony was of a general, rather than of a special kind. The court below, in deciding the case, said as follows:

'We are not satisfied that the proofs bring the case upon the question of damages within the rule laid down by the Supreme Court, in Williamson v. Barrett. A good deal of the testimony was general, and turned upon mere opinion as to the probability of employment in the towing business, and the amount of the earnings, if employed. This kind of proof is too speculative and contingent to be the foundation of any rule of damages: it is, at best, but conjecture. The true question within the case of Williamson v. Barrett was, what could the tug have been chartered for per day in the business of towing, regard being had to the market price in the city of New York? This would have brought the question down to some degree of certainty, and afforded ground for an intelligible allowance or not, of the loss which the libellant had actually sustained by the delay during the repairs. We shall, therefore, strike out the item for demurrage, $1099 50, and confirm the decree for $2162 80.' Application was afterwards made to the court to reconsider this decision, which it did; and after advisement said as follows:

'In passing upon the question of demurrage, and in refusing the taking of further testimony in respect to it, I was influenced, as to the latter result, from a conviction that the repairs allowed were greater than justified upon the proofs. These have to be watched, as in cases of collision there is an opportunity, and not unfrequently a disposition, by the successful party, to aggravate them. I should have been obliged, therefore, to set aside the whole report; and the withholding of the reference in the demurrage satisfied me the result would be about just between the parties on the whole case.'

The refusal in the decree below to allow anything for the detention of the vessel for the time she was detained, was the error assigned by the libellant.

Mr. Jones, for the libellant, contended that the language of the decree showed specifically that demurrage was rejected. The court here had to do with nothing but the decree. The course of thought passing through the judicial mind was hardly to be considered against a judicial record. There was no doubt as to what the decree was, and the exact sum awarded by the commissioner for damages was the exact sum total of the final decree. Demurrage was exactly and specifically rejected; yet there was no doubt that there ought to have been some demurrage. It is impossible to deny that the libellant did sustain a loss by reason of the detention of the vessel for the period of fourteen days. If the commissioner erred in awarding too large a sum for demurrage, or if any error was committed by him in the rule which he adopted in determining the amount on the evidence, or if there was any error in the manner in which such loss was attempted to be proved, an opportunity have been given to correct the error.

Mr. Justice GRIER delivered the opinion of the court:

title: Sturgis v. Clough (68 U.S. 269)


text: Talk:Sturgis v. Clough (68 U.S. 269)

title: Talk:Sturgis v. Clough (68 U.S. 269)


text:
Sturgis v. Clough (68 U.S. 269)/Opinion of the Court

From the manner in which this decree was drawn, it might be inferred that the court had refused to allow anything for demurrage. But on reference to the record, it appears that this sum was allowed by the judge, because he thought that 'the result would be about just between the parties on the whole case.' The sum reported by the commissioner has not the effect of a verdict. The court may not concur in his conclusions upon the facts reported, and may modify or wholly reject it. The court did not decide that demurrage was not a proper item to be allowed in the computation of damages, but that the amount of his decree was a just allowance for all damages sustained by libellant. On reviewing the evidence, we are satisfied that the sum allowed in the decree was 'just between the parties.' The report of the commissioner, allowing the whole bill for repairs, was not just, because the repairs necessarily made were chargeable not wholly to the collision, but to the age and previous condition of the boat. The charge for demurrage allowed by him was not justified by the evidence, although there was testimony to support it, such as can always be obtained when friendly experts are called to give opinions. Besides, the libellant withheld the best evidence of the profits made by his boat, which would be found in his own books, showing his receipts and expenditures before the collision.

We believe the decree gave the libellant ample reparation for all damages, as well for demurrage as repairs.

DECREE AFFIRMED.


text: Talk:Sturgis v. Clough (68 U.S. 269)/Opinion of the Court


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Seybert v. City of Pittsburg

THE legislature of Pennsylvania incorporated a railway company, by act of Assembly, one section of which enacted that any incorporated CITY should have authority to subscribe to the stock 'as fully as any individual,' but the act did not give such cities any power to issue bonds in payment of their subscriptions. However, the city of Pittsburg, in Pennsylvania, having subscribed for several shares of the stock, did issue its negotiable bonds in payment of the subscription. Some of these bonds having got into the ownership of the plaintiff, Seybert, and not being paid when due, he sued the city in the Circuit Court of the United States for the Western District of Pennsylvania, upon them; a case being stated for judgment. A person named Reinboth, who also owned some of the bonds, had about the same time sued the city in one of the State courts of Pennsylvania, and the question as to the right of the city of issue the bonds was pending in the Supreme Court of that State when the present case, of Seybert, came on for argument in the Circuit Court below. To expedite a decision, which the parties desired to have, in this, the Supreme Court of the United States, the Circuit Court entered a judgment pro form a in favor of the city; so deciding, for the sake of form, that it, the city, could not, under the powers given, issue its bonds for payment of the stock subscribed for. Between the time, however, of this judgment in the court below, and the time when the case was called for argument here, Reinboth's case had been decided in the Supreme Court of the State. That court said as follows: 'The power given to the corporation to subscribe was a power to create a debt, and consequently to give an evidence of the debt. The authority given was to subscribe as fully as an individual; and as an individual (by agreement with the company) could have given his bond, the city corporation had the same power. That grants of powers to corporations are strictly construed in favor of the public, but it would be a perversion of the rule to permit a coporation to use it to defraud its creditors, or protect itself against its own assumed obligations. If they legally owe a debt, it follows that they can give a bond for it.' Mr. Knox, for Seybert, submitted the case by brief.

Mr. Justice GRIER delivered, in a few words, the opinion of the court.

title: Seybert v. City of Pittsburg


text: Talk:Seybert v. City of Pittsburg

title: Talk:Seybert v. City of Pittsburg


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Seybert v. City of Pittsburg/Opinion of the Court

He stated the case, quoted the language of the Pennsylvania decision as just given, and announced that 'as this court fully concur in the construction of the act made by the highest tribunal of the State of Pennsylvania, it was unnecessary to make further remark.' That the judgment of the Circuit Court was therefore to be reversed, and judgment entered for the plaintiff on the special verdict.

JUDGMENT ACCORDINGLY.


text: Talk:Seybert v. City of Pittsburg/Opinion of the Court