text:
Gibson v. Warden/Opinion of the Court

This is an appeal from the decree of the Circuit Court for the Southern District of Ohio.

The appellees are the assignees in bankruptcy of Robert Moore & Sons, and filed this bill to compel such of the defendants as claimed to have liens upon certain effects of the bankrupt firm to have their respective rights touching the property in question ascertained and adjusted by the decree of the court. The decree rendered, disposed of the several cases litigated under the bill. All the defendants acquiesced in the decisions made, except David Gibson and Gaylord, Son & Co. They have brought the decree of the Circuit Court, so far as it affects them, here for review by this appeal. Our examination of the case will be confined to their respective claims.

On the 8th of March, 1868, Moore & Sons executed to Gibson a chattel mortgage. It was conditioned that if the mortgagors should pay to Gibson their promissory note to him of the same date with the mortgage, for $6000, payable sixty days from date at the Central National Bank of Cincinnati, the instrument should be void. The testatum clause set forth that Robert Moore & Sons, by Robert Moore, one of the firm, had thereto set their hands and seals. Robert Moore alone affixed his name and seal to the document. The amount claimed by Gibson under the mortgage was indorsed and sworn to by him, and the instrument was filed with the proper officer on the 18th of the same month. On the 21st of that month Moore & Co. failed in business, and made a general assignment of all their effects for the benefit of their creditors. On the 15th of September, 1868, a petition in bankruptcy was filed against them, under which they were subsequently adjudged bankrupts, and the appellees were appointed their assignees in that proceeding.

The note mentioned in the mortgage was indorsed by Gibson for the accommodation of the makers. They procured it to be discounted, and the proceeds went to their benefit. Gibson was compelled to pay it. The amount thus paid, with interest, constitutes his claim under the mortgage.

No statute of Ohio directs how a chattel mortgage shall be executed. The statutes regulating such instruments are silent upon the subject. Our attention has been called to no local adjudication touching the point. In an elementary work prepared by an eminent jurist of that State the form given purports a sealed instrument, and has a seal affixed to it.

Such instruments in Ohio are usually under seal. But the term mortgage used in the statutes does not import or imply that a seal is necessary. In regard to chattels, it is a mortgage, and not a deed of mortgage, that is required. The distinction between real and personal property and between the means which are necessary to affect them is well settled. Personal property, according to the common law, could always be transferred or incumbered without the use of a deed for that purpose. A seal has never been held necessary to the validity of a bill of sale. A chattel mortgage is only a bill of sale with a defeasance incorporated in it. The presence or absence of that formality is wholly immaterial. In the case before us it may be regarded as surplusage.

There is another view of the subject that must not be overlooked. There is proof in the record that the partners, other than Robert Moore, authorized him in advance to execute the mortgage, and after its execution, with full knowledge, acquiesced in what he had done. If the law had required a seal these circumstances would have made the instrument the deed of the firm as much so as if all the members had been personally present and assented to its execution in that form. This is not inconsistent with the principle, which seems to be too deeprooted in the law to be wholly eradicated by judicial authority, that a sealed instrument executed in the name of a firm by one of its members, without the proper authority, where a seal is necessary, is the deed of such member only, and that he alone is bound by it.

The statute provides that every mortgage of goods and chattels, where there is no change in the possession of the things mortgaged, 'shall be absolutely void,' as against subsequent purchasers and mortgagees in good faith, 'unless the mortgage, or a true copy thereof, shall be forthwith deposited' with the proper officer. The Supreme Court of the State has held that the omission to deposit forthwith, as directed, does not avoid the mortgage in toto, but that, whenever deposited, it becomes effective from that time. That court has also held that actual notice to a subsequent mortgagee, before his mortgage is taken, is conclusive evidence of mala fides on his part.

In cases like this the assignees stand in the place of the bankrupt; his rights are their rights; and theirs, like the liens of judgments at law, are subordinate to all the prior liens, legal and equitable, upon the property in question.

This mortgage was deposited three days less than six months before the filing of the petition in bankruptcy.

This raises a question under the bankrupt statute which it is necessary to consider.

The first clause of the 35th section avoids certain acts of the bankrupt touching his effects, if done within four months before the filing of the petition in bankruptcy. The second clause imposes the like result, if the transaction be within six months of that time.

To bring a case within the first clause the act must have been done by a person insolvent, or in contemplation of insolvency, with a view to give a preference to a creditor or person having a claim against, or who is under a liability for, the bankrupt, and such person must have reason to believe that the transaction is in fraud of the statute.

The category of the second clause contains the same requirement of insolvency, or contemplation of insolvency, on the part of the person doing the act. The recipient may be any one who has reason to believe him insolvent or acting in contemplation of insolvency, and that the act was done by him to prevent the property from coming into the hands of his assignee in bankruptcy, and from being distributed under the bankrupt law.

Upon comparing the two clauses carefully together we are satisfied that the first clause was intended to refer to the past and the second to the present. The language employed in the first clause imports clearly that the consideration must be one growing out of a former transaction, and that the recipient must stand in the relation thus created to the other party. It is equally clear that the second clause, enlightened by this construction of the first one, must be limited to cases where the transaction in question was original and complete in itself at the time it occurred, and had no reference for its consideration to anything between the parties which had gone before it. It is only by this construction that the two clauses can be made to harmonize and full and distinct effect be given to each. Any other construction would make them cover the same ground and obliterate everything by which one is differenced from the other, except the limitation of time which they respectively prescribe. It is not to be supposed that such was the intention of the law-making power. This view of the subject was taken by the Circuit Court for the District of Missouri, and subsequently there by one of the justices of this court. We can see no answer to the conclusion at which they arrived. According to this construction the mortgage to Gibson falls within the second category, as to the time within which its validity could be challenged. Is it therefore void? To this there is a conclusive answer in the negative.

The statute of Ohio deprived the mortgage of effect until 'deposited'-as to creditors, subsequent purchasers, and mortgagees in good faith. These assignees are neither. As between the mortgagor and the mortgagee and subsequent mortgagees and purchasers with notice, the mortgage was valid and took effect from the time of its delivery to Gibson, which was the 8th of March, more than six months before the filing of the petition in bankruptcy.

The mortgaged premises have been converted into money. But this does not affect the rights of the parties. The lien of the mortgage followed the fund into the hands of the assignees, and binds it there in all respects as it bound, before conversion, the property which the fund represents.

Gaylord, Son & Co. indorsed for Moore & Sons to the extent of $10,000, as early as May, 1867, which was repeated from time to time. In May, 1868, Moore & Sons applied to them for a definite arrangement for indorsements to the extent of $20,000, to be secured by a chattel mortgage. After inquiry, they agreed to indorse for $15,000, and possibly $20,000, their liability to be secured as proposed. In pursuance of this arrangement, on the 23d of January, 1868, they indorsed for $5000, and afterwards made other indorsements, amounting in all to $17,000. The first mortgage was made on the 27th of January, 1868. It was held by Gaylord, Son & Co., and not filed. Later-probably in March-Moore & Sons pressed for further indorsements, which were refused. Shortly afterwards Moore & Sons advised Gaylord that judgments were about to be taken against them, but insisted they were solvent. The mortgage was shown to counsel, who objected to it, but upon what ground does not appear. He advised that another should be taken. This was done on the 18th of March, and the mortgage was deposited on the same day with the proper officer, but some hours later than the deposit of the mortgage to Gibson. It appears by the face of the instrument that the signature and seal of the firm were affixed by one of the firm in the absence of the others. There was the same prior authority and subsequent acquiescence as in the case of the Gibson mortgage. It recited that Gaylord, Son & Co. were liable as indorsers and otherwise for certain debts of Moore & Sous; that Moore & Sons were indebted to Gaylord, Son & Co.; and that Moore & Sons were desirous to renew their paper with the indorsement of Gaylord, Son & Co., and was conditioned that if Moore & Sons should save Gaylord, Son & Co. from loss by reason of said indorsements and debt-Gaylord, Son & Co. agreeing to renew for eighteen months-then the mortgage was to be void.

After the failure of Moore & Sons, Gaylord, Son & Co. took up notes which they had indorsed for the mortgagors, amounting to $17,000. The mortgagees also held a note of the mortgagors for iron sold by the former to the latter, amounting to $400, making the aggregate of the indebtedness of Moore & Sons to Gaylord, Son & Co., exclusive of interest, $17,400.

We hold this mortgage also to be valid under the laws of Ohio. The views we have expressed as to the Gibson mortgage, considered with reference to the statutes of Ohio, apply equally to the one here under consideration, and render it needless to say anything further upon the subject.

Being founded upon a past consideration, it falls within the first clause of the 35th section of the bankrupt law, which limits the right of attack upon such instruments to those executed within four months prior to the filing of the petition in bankruptcy. In respect to this statute also it must, therefore, be held valid. It was upon the same property as the mortgage to Gibson. Like that mortgage, its force and effect reach and bind the fund into which the property has been converted.

It was contended with great ability by the counsel of Gaylord, Son & Co. that as regards the limitations of time under the 35th section of the bankrupt law this mortgage must be regarded as if it had been executed at the date of the prior one for which it was substituted, and numerous authorities were cited to sustain the proposition. The view we have taken of the case has rendered it unnecessary to consider this point.

The counsel representing both mortgages, in the argument in this court, advised us that we need not decide the question of priority as between the two instruments, they having made an agreement which fixes their respective rights. We have not, therefore, considered the question. If there be any surplus after satisfying these claims it must be distributed to the general creditors.

So much of the decree of the Circuit Court, as is brought before us by this appeal, is REVERSED, and the cause will be remanded to that court, with directions to enter a decree

IN CONFORMITY TO THIS OPINION.

title: Gibson v. Warden/Opinion of the Court


text: Talk:Gibson v. Warden/Opinion of the Court

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


text:
Hook v. Payne

Ann Payne, a citizen of Virginia, filed a bill in chancery in the Circuit Court of the United States for Missouri, against Zadok Hook and others, citizens of the State of Missouri. Hook had acted as administrator of the estate of one Curtis, and the other defendants were sureties on his official bond, and the object of the bill was to assert the right of the complainant, as one of the heirs of Curtis, to an account and a distribution of the assets in Hook's hands. But she had received of Hook a certain sum of money, in consideration of which she had signed a paper which might be called either a release or assignment to Hook of all her interest in the estate of which he was administrator, and she charged in her bill that this instrument had been procured by fraud, and prayed to have it set aside and held for naught. She also charged that certain settlements made by Hook with the County Court, which had probate jurisdiction of such matters, were fraudulent, and she prayed that they be restated, and she alleged that she was entitled to one-eighth part of the estate of the said Curtis on final distribution, and prayed that on a fair statement of the administrator's account a decree be rendered in her favor for the one-eighth of the sum found in his hands subject to distribution.

Susan Curtis and Mary Gwinn, each of whom held a like interest with Ann Payne in the estate, had signed the same paper, and each of them brought a similar suit to that brought by Ann Payne, in the same court, and though the bills in these cases were not in the record, it was conceded that except in the name of the complainants they were identical with that of Ann Payne. These suits were consolidated before answer, by order of the court, and were treated in the subsequent proceedings as one case.

The defendants answered, and the court made an interlocutory decree setting aside the release given by the complainants and the settlements made by Hook with the County Court, and appointed a master to state an account with Hook as administrator, and he was directed to inquire what other persons were interested in the estate besides the complainants, and to report what payments, if any, had been made to them, and what was due to them, respectively, at the date of the report.

The report of the master seemed, as this court considered, to have been based upon diligent inquiry and accurate information, and if the principles on which it is founded were sound, there seemed to be no reason to question the facts on which it proceeded.

It charged the administrator with interest on all that came to his hands at the rate of 10 per cent. per annum, with annual rests. It reported the names of all who were entitled to distribution, which the master believed he had correctly ascertained. He said that some of these appeared before him, either in person or by attorney, and claimed their rights in the estate, while others did not, and he gave the names of those who did and of those who did not. He reported that, as to some who appeared, they had given releases similar to those given by the complainants, and that, though this was shown, he disregarded them, and allowed their interest as though the releases were void, and ascertained and reported what was due to each distributee, whether appearing or not. The final decree modified the report by substituting 8 per cent. per annum as the rate of interest, and confirmed it in all other respects, and made a final decree distributing the estate according to the report, and ordering Hook to pay to each person the specific sum found due, with interest from the date of the report. On the subject of the annual rests, and as a ground therefor, it appeared that nearly all the bonds and notes belonging to the estate bore 10 per cent. interest, which was collected by Hook, who failed to charge himself with the interest received; that he had used the money of the estate in trade and speculation; buying and selling gold, discounting paper, and lending it at full interest. In answering the bill, too, and in giving testimony, he dealt mostly in generalities, when positive information was called for. He could not tell when he made collections, nor in what amounts; 'paid no particular attention;' lent the money 'from time to time;' but to whom he lent it, in what amounts, when the money was collected, and how long he kept it on hand, or when he re-lent it, he did not state, but said he had kept no accounts by which he could answer these questions. He admitted that he had deposited the trust money with certain bankers named, but he did not produce his deposit books, because, as he said, his private funds were mixed up in the accounts; to what amount he could not remember. His loans and deposits of the estate's money were in his own name, excepting one loan. On the other hand he attempted to prove by sundry witnesses that in their opinion money could not have been lent at certain times during the war at all.

The case coming here many objections were taken to the decree, among them two, much insisted on:

1st. That the court had disposed of the rights of parties who were in no kind of way actually or in contemplation of law before it.

2d. That the rate of interest was too high, and that the case was not one for rests.

Mr. J. B. Henderson, for the appellants; Messrs. Glover and Shepley, contra.

Mr. Justice MILLER delivered the opinion of the court.

title: Hook v. Payne


text: Talk:Hook v. Payne

title: Talk:Hook v. Payne


text:
Hook v. Payne/Opinion of the Court

1. We are of opinion that all that part of the decree which attempts to settle the rights of the parties, who were neither plaintiffs nor defendants in the original suit, must be reversed.

We do not propose, in this case, to lay down any precise rule on the subject of adjusting administrators' accounts in the Federal courts, or how far certain persons, not made parties in the original suit, or incapable of being made parties by reason of their citizenship, may or may not come in before the master, on a general accounting, and protect their rights; nor do we intend to go into that question.

In the case before us persons representing a considerable interest in value have not appeared at all. As to them we hold it to be clear that they cannot be bound by the decree rendered in this case, and they have an undoubted right to bring such a suit or institute such other proceeding as the law authorizes for the assertion of their rights, notwithstanding this decree.

It follows from this also, that as they are not bound by it, so Hook, the administrator, cannot be bound by a decree which does not bind them as to any rights to be controverted between them and him.

It is also equally clear that if Hook had paid money to any other parties who did appear before the master, and had made a purchase of the interest of these parties in the estate, that purchase could not be set aside and held for nought without such adversary proceedings between them and Hook as would give him a fair hearing on that subject. They should have filed such a bill as the present plaintiffs did, and the question of the fraud should have been heard and decided by the court. It by no means follows that because the court, on full hearing, set aside his purchase of Ann Payne, that the master could without pleading or trial assume that all other purchases were equally fraudulent.

Another reason for this may be found in the nature of the original bills. Although there are three of them there is no attempt to make the other distributees parties, nor do they make each other parties to their separate bills. They are each framed on the basis of setting aside the release executed by them, in which no other distributee had any interest, and each claims for herself the one-eighth to which she is entitled, without any prayer for general accounting or general distribution. The consolidation then of these cases does not change this feature of the relief sought, and the ground of that relief, namely, the fraud in obtaining the release.

These bills are obviously not framed on any theory of a final settlement of the estate and distribution among all entitled. They are merely brought to obtain for each plaintiff the special relief from the fraudulent release and the specific sum of money due to each from Hook, and on this theory it is that counsel brought three separate suits instead of one.

For these reasons we are of opinion that the only relief to be administered in this case is that in favor of the three complainants.

2. It is strongly urged upon us that the account stated against the administrator is too hard to be justified, in reference to the interests, both as regards the rates charged and the annual rests.

The laws of Missouri allow a conventional rate of interest not exceeding ten per cent. The master stated the account on that basis, but the court below, on mature consideration, reduced the rate to eight per cent., and we are not disposed to disturb that decision. The annual rest is one which can hardly be sustained in a case of honest administration unless it be shown that the amount so ascertained was actually received. But there are circumstances in this case which seem to justify the decree of the court so far as to disincline us to interfere with it on that point. The administrator is shown to have mixed the funds with his own, and to have used them for puposes of speculation for his own profit. The assets for which he was held accountable were almost exclusively notes due the intestate, bearing ten per cent. interest and collected by the administrator. In his settlement with the County Court he rendered no account of the interest received on these notes, nor any interest account for the use of the money after it came to his hands. Nor of the profits made by him by its use in his own business transactions. He is shown to have made private arrangements to settle separately with the distributees or to buy out their interests, and these have been shown to be accompanied with fraud and without any fair statement of the condition of the estate, and he kept no separate account of the trust funds in his hands. Under such circumstances we are of opinion that he should be held to account for all that he might have made by the use of the money, and as the master and the Circuit judges have held that he might have invested and reinvested annually, at eight per cent., we will not disturb their finding.

The decree in favor of Ann Payne, and Susan Curtis, and Mary Gwinn, is AFFIRMED, and the decrees in favor of the other parties are REVERSED, and the case remanded to the Circuit Court with directions to dismiss the case as to them without prejudice. And that each party pay their own costs of appeal.

title: Hook v. Payne/Opinion of the Court


text: Talk:Hook v. Payne/Opinion of the Court

title: Talk:Hook v. Payne/Opinion of the Court


text:
The Vaughan and Telegraph

ON the 7th of October, 1864, O. & J. Lynch, of St. Timothy, a place (near Montreal) in Canada East, shipped a cargo of barley on board a canal-boat which was about to sail through different canals and waters into the upper part of the Hudson and go thence to New York. The Lynches were correspondents of Gordon, Bruce & McAuliffe, commission merchants of New York, and this barley was in fact consigned to them.

The cargo was worth on that day, at St. Timothy's, $2436 in gold, or at the then rate of depreciation, about $4896.30 in legal tender notes of the United States; at that time so much below the value of gold as that it required $2.01 of them to buy $1 of gold. The Lynches received a bill of lading making the barley deliverable 'on the order of O. & J. Lynch, or to their assigns,' which bills they thus indorsed:

'Deliver to the order of Gordon, Bruce & McAuliffe.

'O. & J. LYNCH.'

Thus indorsed, the bills were forwarded to Gordon, Bruce & McAuliffe, at New York, who on receipt of them advanced the premium for insurance, the consignors being then indebted to G., B. & McA. for some advances previously made.

The canal-boat arrived safely at Troy, on the Hudson, where she was taken in tow with other boats-she on the port side-by the steamer Mary Vaughan. The steamer went down the river with her tow, and on the night of the 26th October, a clear, starlight night, in calm weather, the tide near its change, and therefore feeble-when in that broad, straight, deep reach of the Hudson, where Butter Hill announces the presence of the Highlands-she saw another steamer, the Telegraph, coming up the river, she also with a tow, and the lights of the two steamers being visible to each other for more than a mile. No intervening objects interfering with the safe and easy transit, nothing but the grossest negligence, or, what would seem more probable, a determination by each boat that the other should give way to her, could have brought them together; nevertheless they did come together, and with such force that the canal-boat was wrecked, her cargo sunk mid-river; the crew just escaping with their lives.

Hereupon Gordon, Bruce & McAuliffe, alleging themselves to be the consignees of the barley, libelled in one libel both the steamers in the District Court at New York. The libel alleged that the Mary Vaughan moving down the river Hudson with her tow (describing it), the canal-boat being securely fastened on the port side of the steamer, and propelled, governed, and controlled in all respects by her movements, on the morning of the 26th October, 1864, encountered in the Highlands the Telegraph, moving up with her tow (also described); that a barge on the port side of the Telegraph, in all respects propelled, governed, and controlled by the Telegraph, 'came in collision with and struck the canal-boat near her bow with great great violence, parting the fasts that held her to the Vaughan, staving in her bow, and causing so much damage and injury to her that in about fifteen minutes she went down in water from 100 to 200 feet deep,. . . and that the loss was caused by the negligence, want of skill, and improper conduct of the persons navigating the Mary Vaughan, or by the negligence, want of skill, and improper conduct of the persons navigating the Telegraph, or by their joint negligence, fault, and improper conduct, and not by the fault, negligence, or improper conduct, of the persons on board the canal-boat.'

The case coming on to be heard in the District Court exception was taken there by the Vaughan—

1st. That the statement of facts upon which the libellants relied was not sufficiently full, by reason of the omission of essential particulars, such as the courses of the respective steamers one to that of the other, their speed, the direction of the wind, the flow of the tide; and again, by the omission to state in what manner the Vaughan was in fault or improperly managed; that it did not state any fault or negligence on the part of the steamer, nor the acts of commission or omission, upon which the imputation of fault might be founded; all which were required by the practice in admiralty to be stated in plain allegations, to apprise the claimant of the ground of fact upon which relief was sought, that he might admit or take issue thereon, or allege matters in avoidance thereof.

2d. That the libellants could not join in the same libel both steamers, nor maintain a joint libel against them; this exception being taken by both steamers.

Both these exceptions of form were overruled and a decree entered against both steamers, charging each with the whole loss of the cargo; fixed at $2924, this value in gold, as already stated, on the day and at the place of shipment. But though the value in gold of the cargo was thus plainly made the basis of the decree in the District Court at New York, yet the decree was not by its terms made payable in gold, thus apparently leaving it payable in legal tender notes, if they were constitutional. Appeals were taken to the Circuit Court, nothing being contained in the appeals about the exceptions of form taken in the District Court, nor anything said in the arguments there on those points. The cases were considered on their merits, and on an objection that Gordon, Bruce & McAuliffe showed no sufficient interest in the cargo to sue; and especially on an objection to the entry of the judgment payable in legal tender notes instead of gold or its value in legal tenders.

The Circuit Court, equally with the District Court, held both steamers liable; but reversed the decree because, as it held, the same ought, in order to give full indemnity to the libellants, to have been for the value in legal tender notes ($4896.30), of the $2436 gold, which in gold the cargo was worth. The decree of the Circuit Court was accordingly entered March 26th, 1870, for the $4896.30, with interest added to the date of its entry, in all $6515.51, with costs. One dollar of gold was, at the date of this decree, worth $1.12 in legal tenders.

An appeal was now taken to this court.

The case coming here, Mr. C. Van Santvoord, for the owners of the Vaughan, and Mr. F. J. Fithian, for the Telegraph, pressed, the one or the other, the objections of form which had been urged in the District Court, though not put before the Circuit Court. They contended then, in opposition to each other, on the merits; the former that the fault had been with the Telegraph, the latter that it had been with the Vaughan. The point was raised and argued in the interest of both steamers, that Gordon, Bruce & McAuliffe had no sufficient interest to sue; that in legal effect the advance of the premium of insurance at the time of the delivery of the bill of lading with the direction indorsed, to be forwarded, and not as security for the advance, was an advance on advice of the shipment, as in Sargent v. Morris, for which, as was held in that case, the libellants would have had a lien if the goods had been received by them, but which could have no effect to transfer the property; that the libellants not having the legal title or any property or right of possession at time of loss, and the suit being without the scope of their authority as consignees or agents, for the purpose of sale on arrival in New York, the case did not fall within the rule which allows a consignee or agent for an absent owner to institute a suit for a purpose within the scope of his authority.

But the point most pressed perhaps was the mode in which the Circuit Court had fixed the damages, in regard to which it was said by these counsel, that the Circuit Court should have affirmed the decree of the District Court in its award of damages based upon the value of the barley lost, at the time and place of shipment, St. Timothy, Canada East, in specie or Canadian currency, on a specie basis, in dollars and cents, equivalent to money of that denomination in gold or in the coinage of the United States, with interest from the date of the shipment; or at the most, that the Circuit Court should have decreed the payment in gold, or in the coinage of the United States, of the value at the time and place of shipment, in the currency prevalent there, specie or paper, on a specie basis, with interest. The damages decreed by the District Court, it was said, if short of full indemnity, were so only for the reason that the claimants, under the Legal Tender Act, might pay the decree in legal tender notes. But that a decree for the payment in gold, or coin of the United States equivalent to the specie value at the time of shipment in Canada, with interest from the time of shipment, would be a full indemnity to the Canadian shipper, whose consignees the libellants claim to be. The cases in this court recognizing the existence of two currencies, one specie or gold, and the other paper, and adjudging payment in gold or not, as the justice of the case demands, were, it was said, authorities to the competency of the court to make such assessment and decree; the Legal Tender Acts not having been intended to change the legal standard or measure of value, or rule of damages in judicial proceedings.

Mr. Samuel E. Lyons, contra:

The exceptions to form having been abandoned in the appeal to the Circuit Court cannot be renewed.

The case on the merits is clear.

The libellants were consignees, and as such had a right to maintain the action for the injury to the cargo. In Fitzhugh v. Wiman, Selden, J., says:

title: The Vaughan and Telegraph


text: Talk:The Vaughan and Telegraph

title: Talk:The Vaughan and Telegraph


text:
The Vaughan and Telegraph/Opinion of the Court

'The consignee of property is in law presumed to be the owner, and if lost in transitu or diverted from its destination, suit may be brought, either in his name or that of the real owner.'

The decision of the Circuit Court in giving the libellants indemnity for their loss was correct. The rule under which damages in such a case are to be ascertained is stated with exactness in Smith v. Griffith, as follows:

'The damages to which the plaintiff is entitled, if any, should afford an adequate indemnity for the loss sustained at the time the injury happened. The fair test of its value, assuming there is no defect in the quality of the article, and consequently of the loss to the owner, if it has been destroyed, is the price at that time in the market.'

In this case the property destroyed had a market price, fixed by daily transactions, and it is this price at its exact value on the day of the destruction, in the forum where the judgment is rendered, that is allowed by by decree of the Circuit Court. This gives the libellants indemnity and no more, while the rule contended for by the appellants would give them a fraction less than one-half the sum of the actual cost of the barley.

If the legal tender notes have approximated more in value to gold than they were when the decree in the Circuit Court was entered, that is only because the owners have chosen to appeal.

Mr. Justice SWAYNE delivered the opinion of the court.

On the 25th of October, 1864, the steam propeller Mary Vaughan left the city of Troy for a voyage on the Hudson River to the city of New York. She had in tow two canal-boats laden with cargoes of barley under the deck and hooppoles upon the deck. The boats were lashed, one on each side of the propeller. The canal-boat R. M. Adams was fastened to the starboard side, and the canal-boat Sherman Lewis upon the port side. They were attached to the propeller by towing lines. The propeller was about sixty tons burden, and ninety feet in length by seventeen wide.

The steamboat Telegraph left her dock at the city of New York about five o'clock in the afternoon of the same day on a voyage up the river to Newburg, having in tow three large heavy freight barges, to wit, the Minnesink lashed to her port side, the Dutchess to her starboard side, and the Insurance lashed to the stern of the starboard barge, Dutchess.

On the morning of the next day, between two and four o'clock A.M., just below Butter Hill, the barge Minnesink, on the larboard side of the Telegraph, and the canal-boat Sherman Lewis, on the port side of the Vaughan, came in collision, whereby the Sherman Lewis was torn from her fastenings to the propeller, swung round crosswise of the river, and across the bow of the Telegraph and her barges, and was so much injured that shortly afterwards she filled and sunk in water from one to two hundred feet deep, carrying down her under-deck cargo with her.

The barley belonged to J. & O. Lynch, of Buharnois, Canada, and was shipped by them from St. Timothy, Canada, in the boat in which it was lost. The boat was bound to Albany or New York. The bill of lading was given to the owners, and by them indorsed as follows: 'Deliver to the order of Gordon, Bruce & McAuliffe. O. & J. Lynch.' Gordon, Bruce & McAuliffe were a firm of the city of New York. The bill of lading was then placed in the hands of Gordon & Co., and by them, at the request of the shippers, forwarded to the consignees. Upon receiving it Gordon & Co., as the agents of the consignees, advanced upon it $29.50 for the premium of insurance upon the barley; the entire arrangement with the shippers was made by Gordon & Co. as such agents. They had special authority to advance upon this particular barley by drafts at thirty days upon the consignees, and so advised the shippers before the bill of lading was forwarded.

This libel was filed by the consignees. It alleged that the disaster was caused 'by the negligence, want of proper skill, and improper conduct of the persons navigating the said propeller, or by the negligence, want of proper skill, and improper conduct of the persons navigating said steamboat, or by their joint negligence, fault, and improper conduct.'

In the District Court both the claimants excepted to the libel; the claimant of the Vaughan upon the grounds that the particular facts upon which the imputation of fault was founded were not set forth, and that the allegations were not sufficient to entitle the libellants to a decree; the claimant of the Telegraph upon the same grounds, and the further ground that a libel against both vessels jointly could not be maintained. The exceptions were overruled. The court decreed against both vessels, and the claimants of both appealed to the Circuit Court.

The appeals found in the record are wholly silent as to these exceptions. It does not appear that they were brought to the attention of the Circuit Court, or that it took any action whatever upon the subject. The appeals from the Circuit Court to this court are confined to the merits of the case. Neither of them contains any reference expressly, or by implication, to the exceptions. Under these circumstances they must be held to have been conclusively waived by the respondents. To consider them here would be to exercise the appellate power of this tribunal in reviewing the action, not of the Circuit, but of the District Court. This we have no power to do. The exceptions must, therefore, be laid out of view.

It was insisted in the argument here by the counsel for the Vaughan that the consignees had no title to the barley, and hence cannot maintain this libel for its loss. The converse of this proposition is too clear to require discussion. The transfer of the bill of lading carried the legal title with it. The authority of Gordon & Co. to draw on the consignees for advances upon receiving the bill of lading, and the actual payment by them as such agents of the premium for insurance, show such to have been the intention of the parties.

The presumption of title in the transferee of a bill of lading which the law raises upon the transfer is, in this case, fully sustained by the facts developed in the proofs. But aside from the special circumstances referred to, we have no doubt of the right of the consignees as such to maintain this proceeding. The question is not an open one in this court. In Houseman v. The Schooner North Carolina, Chief Justice Taney, delivering the opinion of the court, said: 'We consider it well settled in admiralty proceedings that the agent of absent owners may libel either in his own name as an agent, or in the name of his principals, as he thinks best. . . . And that the consignees had such an interest in the whole cargo that they may lawfully proceed in this case, not only for what belonged to them, and was shipped on their account, but for that portion also which was shipped by Porter as his own and consigned to them.' In McKinlay v. Morrish, it was said, 'Whatever may be the uncertainty concerning the consignee's right to sue in a court of law, from the conflicting decisions to be found on that right, there is none that he may sue in a court of admiralty in the United States.'

This brings us to the consideration of the merits of the case.

The District Court held that both vessels were in fault. The Circuit Court came to the same conclusion, and affirmed this part of the decree of the District Court. These concurring judgments are prima facie to be deemed correct. Our examination of the evidence apart from this consideration has led our minds to the same results. Where the collision occurred the channel was straight, wide, and deep. The night was calm and clear. It was near the end of the ebb tide. No disturbing element was present. The circumstances were as favorable as possible for each vessel to pass the other with its tows in safety. Without the grossest negligence or mismanagement there could be neither peril nor disaster. Yet there was a disaster; and the colliding vessels came together with such violence that the canal-boat was wrecked and sunk. Neither vessel had a lookout. The pilot and engineer of the Vaughan were inexperienced and incompetent. There was at the time no one on the deck of the Telegraph but the captain. The pilot had gone below. The engine was in charge of a fireman. Other special faults in the conduct of each vessel are imputed, and we think the evidence establishes them. The vessels are antagonists, and one remarkable feature of the case is the zeal and ability with which the counsel of each has attacked the other and labored to defend his own. In the former both have been successful; in the latter neither. The evidence is to a large extent confused and contradictory. It could serve no useful purpose to analyze and discuss it. It is sufficient to remark that we could add nothing to the clear and able opinion of the judge of the District Court, by whom this part of the case was there disposed of. We concur in the views which he expressed.

In the District Court it was held that the proper rule of damages where a cargo is lost in transitu by a collision, or other tort, is the value of the goods at the time and place of shipment. It was conceded that upon the breach of a contract for the delivery of goods at a particular place the measure of damages is the full value of the goods at such place. Both propositions are correct and are well settled in our jurisprudence. The place of shipment was a port in Canada, and the value of the barley there when shipped was found to have been 70 cents per bushel, amounting in the aggregate, with interest, to $2436. The estimate was made in the currency of Canada, which was equivalent in value to the gold coin of the United States. It was admitted that the decree was solvable in legal tender notes, which were then largely depreciated, but it was held that this was an incident of the suit in the forum where it was brought, and that the result was unavoidable. In the Circuit Court the same rule of damages was applied, but the decree gave the value of the Canada currency in legal tender notes. These notes have since largely appreciated, so that while the libellants would, under the decree of the District Court, if it had been paid when rendered, have received much less than the estimated value of the barley, they will now, if the decree of the Circuit Court be affirmed, receive much more.

It is clear that if the decree of the Circuit Court had been paid when it was rendered the result to the respondents would have been the same as if the decree of the District Court had been then affirmed and paid in specie. Upon the rule of damages applied by both courts as respects the kind of currency in which the value of the barley was estimated the libellants were entitled, upon the plainest principles of justice, to be paid in specie or its equivalent. The hardship arising from the decree before us is due entirely to the delay in its payment which has since occurred, and the change which time and circumstances have wrought in the value of the legal tender currency. The decree was right when rendered, and, being so, cannot now be disturbed. It is unnecessary to pursue the subject further. The decree, in the particular under consideration, presents the same question which was decided by this court in the case of Knox v. Lee. There the court instructed the jury that in assessing the plaintiff's damages they might take into account the fact that the judgment could be paid in legal tender notes. This court upon error affirmed the correctness of that instruction. The authority of that case is conclusive of the question here under consideration.

DECREE AFFIRMED.


text: Talk:The Vaughan and Telegraph/Opinion of the Court


text:
The Cayuga

ERROR to the Circuit Court for the District of New York; the case being thus:

Congress, by an act of April 29th, 1864, 'fixing certain rules and regulations for preventing collisions on the water,' made among them the following:

TWO SHIPS UNDER STEAM MEETING.

Article 14. If two ships under steam are crossing so as to in volve risk of collision, the ship which has the other on her own starboard side shall keep out of the way. CONSTRUCTION OF ARTICLES 14, &c.

Article 18. Where by the above rule one of two ships is to keep out of the way, the other shall keep her course subject to the qualifications contained in the following article:

PROVISO TO SAVE SPECIAL CASES.

Article 19. In obeying and construing these rules due regard must be had to all dangers of navigation, and due regard must also be had to any special circumstances which may exist in any particular case, rendering a departure from the above rules necessary in order to avoid immediate danger.

With these rules in force the James Watt, a North River ferry steamboat, and a fast sailer, set out from her slip at Hoboken, New Jersey, opposite the upper part of New York, to make her regular ferry trip to her slip at the foot of Barclay Street, a point about a mile lower down on the opposite side of the river. This made her course across the river southeast. A few minutes previously the steam-tug Cayuga, a less fast sailer than the ferry-boat, was setting out from her slip at Desbrosses Street, a point on the New York side about half a mile lower down than Hoboken, and of course about half a mile above Barclay Street. Her purpose was to go over to certain wharves on the Jersey shore, not very far from opposite Barclay Street; meaning, however, first to go in to Hubert Street-a street about seven hundred feet below Desbrosses-and there to take a boat in tow. Setting off, she did round in as if to go in to Hubert Street, but perceiving that she could not get the boat out from the place (the dock being then crowded), rounded out again, and pursuing a course about south-southwest went out toward the middle of the river, about one-third into the stream. Pursuing their respective courses the two boats were on intersecting lines; the tug having, of necessity, the steamer on her starboard side until the point of intersection should be passed. The ferry-boat having been the faster sailer, and her point of departure at Hoboken having been farther north than that of the tug on the opposite or New York side of the river, she was continually coming nearer to the tug, but coming up on an intersecting line and not directly astern. The possibility of a collision was, of course, obvious to any intelligence, from the time the two boats left their respective wharves. As they got near the middle of the stream it became more plain; and by degrees, as they approached, the possibility passed into a probability.

Coming quite near to each other, the ferry-boat being still on the tug's starboard side, and just before reaching the point where their courses if adhered to would intersect, the tug stopped her engine for a short time, and then put it ahead. The ferry-boat having supposed, when she saw that the tug's engine was stopped, that it was meant that she, the ferry-boat, should go ahead, now dashed on, but the tug after a short stoppage put her engine into motion again, and a collision followed. The ferry-boat was struck on the port bow, and so much injured that she had to go into dock and remain there seventeen days for repairs; the company which owned her putting on the line a spare boat which they owned and kept to supply emergencies. Hereupon the owners of the ferry-boat libelled the tug in the District Court at New York. That court condemned the tug, and awarded to the owners of the ferry-boat $75 a day for the time she was necessarily laid up for repairs; the superintendents of three leading ferries in New York harbor having expressed the opinion, and the reasons of it with an exhibition of estimates, that the boat was worth that much per day; though it was admitted by her owners that there was no fixed charter rate for ferry-boats.

The Circuit Court affirmed the decree, and from this the present appeal came.

Assuming the case as above given to be the case made out by the evidence (which was what the court did assume), the points, of course, were:

1st. Which boat had violated the rules of navigation?

2d. Whether the decree for demurrage was rightly made on the testimony, and with the admitted want of evidence of a charter rate per day for ferry-boats; and when the company supplied the place of the injured boat with another boat of their own, kept for emergencies of a sort such as that which had happened.

Mr. C. Van Santvoord, for the appellants; Mr. W. J. A. Fuller, contra.

Mr. Justice CLIFFORD delivered the opinion of the court.

title: The Cayuga


text: Talk:The Cayuga

title: Talk:The Cayuga


text:
The Cayuga/Opinion of the Court

Collision cases usually present difficult questions of fact, arising from conflicting testimony, and the case before the court is one of that class, but both of the subordinate courts decided in favor of the libellants, and our decision, with brief explanations, must be in the same way.

The libellants are the owners of the steam ferry-boat James Watt, employed in transporting passengers and freight between the port of New York and the city of Hoboken, in the State of New Jersey, and they filed the libel in the District Court against the steamtug Cayuga, usually employed in towing vessels and other water-craft, charging that the steamtug was so improperly and unskilfully managed and navigated that she ran into and upon the James Watt, causing to the latter steamboat great injury and damage, as more fully set forth in the libel. By the pleadings and evidence it appears that the collision occurred at four o'clock in the afternoon of the thirteenth of June, 1866, in clear weather and under circumstances which show beyond all doubt that one or both vessels were in fault. Daily trips were made by the James Watt, and at the time she was making her regular trip down the river to her place of destination at the foot of Barclay Street, on the New York side of the river. She started from her regular slip at Hoboken, and as she proceeded on her route she was heading obliquely across the river towards the wharf to which she was bound. Shortly after the James Watt left her wharf at Hoboken the Cayuga came out from the slip at the foot of Desbrosses Street, and having rounded to, nearly opposite Hubert Street, she then took a course down the river, heading for the Jersey side of the river, though less obliquely than the ferry-boat of the libellants, and they collided when the former had advanced about one-third of the way across the river towards the Jersey shore. Enough appears to show that the James Watt was heading in a south by east course, and that she was running in the track she usually followed in making her daily trips, and that the Cayuga was heading nearly in a south-southwest course for the place of her ultimate destination on the opposite side of the river. Both steamers were well manned, and each was seasonably seen from the other and at about the same time, and as it was daylight and good weather, and as it was obvious that their courses intersected, it must have been known to those intrusted with their navigation that a collision might ensue unless some proper precaution was seasonably adopted to prevent such a disaster. They had plenty of sea-room, and if either had changed her helm the collision would have been prevented, but as the Cayuga had the James Watt on her own starboard side throughout, from the time she took her course down the river to the time of the disaster, the sailing rules made it her duty to keep out of the way. Article fourteen prescribes that 'if two ships under steam are crossing so as to involve risk of collision, the ship which has the other on her own starboard side shall keep out of the way of the other,' and the court is of the opinion that the Circuit judge was correct in deciding that that rule is applicable in this case.

Suggestion is made, and perhaps it is correct, that the Cayuga was slightly ahead when she first took her course and started down the river, but the speed of the James Watt being somewhat the greater it appears that she soon made such an advance that it became evident that unless one or the other gave way the danger of collision would become imminent. Apply that rule and it is clear that it was the duty of the Cayuga to keep out of the way, inasmuch as she had the James Watt on her own starboard side. Every vessel overtaking another vessel, it is said, shall keep out of the way of the vessel ahead, but that rule cannot properly be applied in this case, as the two steamers were crossing or running on intersecting lines, in which case the question is not in general affected by the comparative speed of the two vessels, nor by the fact that the one or the other was slightly ahead when the necessity for precaution commenced.

Undoubtedly where two ships are running in the same direction, the ship astern, if she is sailing faster than the ship ahead, is in general bound to adopt the necessary precautions to avoid a collision, but it is clear that the rule does not in general apply in a case where the ships are crossing or are distant from each other on a right line and are running on intersecting lines, as it is expressly enacted where two steamships are crossing that the ship which has the other on her own starboard side shall keep out of the way of the other. Such is the express regulation enacted by Congress, and the correlative duty of the other vessel is described in the eighteenth article, which is, that where one of two ships is required to keep out of the way the other shall keep her course, subject to the qualifications contained in the succeeding article, which is entitled a 'proviso to save special cases.' By that proviso it is prescribed that in obeying and construing those rules due regard must be had to all dangers of navigation, and to any special circumstances which may exist in any particular case, rendering a departure from those rules necessary in order to avoid immediate danger. Persons engaged in navigating vessels upon the seas are bound to observe the nautical rules enacted by Congress, whenever they apply, and in other cases to be governed by the rules recognized and approved by the courts. Nautical rules, however, were framed and are administered to prevent such disasters and to afford security to life and property, but it is a mistake to suppose that either the act of Congress, or the decisions of the courts, require the observance of any given rule in a case where it clearly appears that the rule cannot be followed without defeating the end for which it was prescribed or without producing the mischief which it was intended to avert. Qualifications of that character were sanctioned by this court years before the existing rules were enacted by Congress, and no doubt is entertained that the proviso to save special cases contained in those rules was intended to affirm in substance and effect the views upon that subject which this court had previously expressed. Responsive to the charge that the Cayuga did not observe the fourteenth article of the sailing rules, the respondents attempt to show that the James Watt did not keep her course, as required by the eighteenth article-that she was running faster than the steamtug, and that having passed her on the starboard side she suddenly sheered across her bows, and that the two steamboats in a few seconds came together, the stern of the Cayuga striking against the port stern-quarter of the James Watt and caused the injuries alleged in the libel. Instead of that the District Court found, as matter of fact, that the Cayuga, just before she reached the point of intersection, stopped her engine, giving those in charge of the ferry-boat to understand that the latter steamer could pass in safety, which had the effect to mislead those in charge of the James Watt, as the Cayuga in a brief period put her engine in motion and started ahead, and that the collision immediately ensued.

Additional testimony was taken, subsequent to the appeal from the decree of the District Court, but the Circuit Court, in view of the whole case, was still inclined to the opinion that the finding of the District judge was correct. Considerable conflict exists in the testimony on that point, but it is not necessary to decide it, as the same conclusion must be adopted even if it be admitted that the steamtug did not stop her engine and mislead the ferry-boat, as is supposed by the libellants, as it is clear that the charge made against the James Watt that she changed her course is not sustained.

Even if the Cayuga did not do anything to mislead the James Watt it is clear that she did not keep out of the way, as required by the fourteenth sailing rule, nor did she adopt any proper precaution to prevent a collision. Bound as she was to keep out of the way, the fact that she did not comply with that requirement is as complete an answer to the defence set up by the claimants as the proof would be that she misled the other vessel, as charged by the libellants. Having done nothing to prevent the collision she must abide the consequences, unless she can show some good reason for her failure to perform her duty in that regard. All the excuse, or the principal one, offered is the one before mentioned, that she was ahead and that it was the duty of the James Watt to have adopted the necessary precautions.

Where a steamer astern, in an open sea and in good weather, is pursuing the same general course as the one ahead, and at greater speed, the steamer astern, as a general rule, is required to give way or to adopt the necessary precautions to prevent a collision, as the steamer ahead is entitled to the road, but the court here concurs with the Circuit Court that that rule did not apply in this case, even if it be conceded that the Cayuga, after she rounded to, and when she first took her course down the river, was slightly ahead, as the relative situation of the two steamers even at that time, was that described in the fourteenth article of the sailing rules, and not that described in the seventeenth article, as is supposed by the respondents. Precautions at that time were not necessary, as the distance between the two steamers, measuring east and west, was very considerable, but they were running on converging lines, and as they advanced that distance was fast reduced, which soon created the necessity for precautions to prevent a collision, and the testimony entirely satisfies the court that at the time the necessity for precaution commenced, the two steamers were nearly abreast, and that the Circuit Court was right in holding that the fourteenth sailing rule is applicable to the case, and that it was the duty of the Cayuga to keep out of the way.

Reference was made to a commissioner in the District Court to ascertain the amount of the damages, and he reported the whole amount to be two thousand six hundred and seventy-two dollars and thirty cents, as more fully shown in the record. Exceptions were duly taken by the respondents to various items of the report, but the court overruled the exceptions and confirmed the report. Included in the report of the commissioner was an allowance of seventy-five dollars per day for the seventeen days the steamer was detained while the repairs were being made, and to that allowance the respondents still object. Other exceptions to the commissioner's report were taken at the time, but they have not been much pressed in argument and are overruled as not well founded. Reasonable demurrage is certainly a proper charge, as the leading maxim is restitutio in integram in all suits for damages occasioned to vessels by collision. Subject to the provision that owners of ships and vessels are not now liable for any such loss, damage, or injury, beyond the amount of their interest in the ship and her freight then pending, it is settled law that the damages which the owner of the injured vessel is entitled to recover in cases of collision are to be estimated in the same manner as in other suits of like nature for injuries to personal property, and the owner, as the suffering party, is not limited to compensation for the immediate effects of the injury inflicted, but the claim for compensation may extend to loss of freight, necessary expenses incurred in making repairs, and unavoidable detention. Tested by that rule it is quite clear that the explanations given by the respective judges in the subordinate courts are sufficient to show that the report of the commissioner was correct. Many other authorities might be referred to in support of the rule here laid down, but inasmuch as the subject was fully considered in the case of The Baltimore, the court does not deem it necessary to give it much additional consideration.

DECREE AFFIRMED.

title: The Cayuga/Opinion of the Court


text: Talk:The Cayuga/Opinion of the Court

title: Talk:The Cayuga/Opinion of the Court


text:
Easley v. Kellom

APPEAL from the Circuit Court for the District of Nebraska; the case being thus:

On the 25th of June, 1857, Harrison Johnson having, as he supposed, the west half of a pre-emption right of 160 acres within the limits of the city of Omaha, gave a mortgage or deed of trust on it to secure the payment of his note to Easley and Willingham. Some time afterwards, the city of Omaha filed a caveat against Johnson's claim, and on the 29th of December, 1859, the commissioner of the land office gave notice to the local register and receiver that Johnson's certificate of location had been cancelled. Thereupon the property was advertised for sale as a part of the public lands. Johnson being in debt to several other persons, including one Kellom, it was proposed between him and some of these creditors that the property should be bid off at as low a price as possible, so that the creditors might receive satisfaction for their claims, and that something might be left for him. An agreement was drawn up and signed by Johnson and several of his creditors; but Easley and Willingham and one or two others refused to come into it. They insisted on their priority of lien. The sale took place in August, 1860. In pursuance of the agreement Johnson bid off the southern half of the 160 acres at the minimum government price in the name of his mother, and Kellom, on behalf of the creditors, bid off the northern half; each part containing forty acres of the land mortgaged. Kellom executed conveyances to the other creditors who, with himself, had signed the agreement, so as to divide between them the eighty acres purchased by him, in proportion to their claims against Johnson; and these creditors gave Johnson acquittances in full. Johnson's mother was in possession of her portion ever since the sale, he living on a part of it.

In 1866 Easley and Willingham filed their bill against Kellom, Johnson, his mother, and several creditors, to foreclose their mortgage. They charged, first, that the cancellation of Johnson's pre-emption right was procured by his complicity and acquiescence, for the purpose of defrauding them out of their mortgage debt, and paying the other creditors; and, secondly, that when the public sale took place, it was agreed between Johnson and the other creditors who participated in the purchase, that Johnson was to have an interest in the purchase proportionate to the claims of those creditors who did not sign the agreement, so that he might afterwards make settlements with them. All the answers denied these charges; that of the mother alleged further that she was a bon a fide purchaser of the eighty acres purchased by her; and those of the other defendants alleged that Kellom was a similar purchaser of the eighty acres purchased by him. They further insisted that the complainants' mortgage, or trust deed, being made by Johnson before he obtained a patent for the land, was void by the 12th and 13th sections of the pre-emption act of September 4th, 1841.

Upon these pleadings the parties went into proofs. No evidence, however, was adduced to show that the cancellation of Johnson's pre-emption certificate was improperly obtained, and the case was therefore to be considered upon the hypothesis that he had no valid claim, and that the land belonged to the government, and was properly sold as such in 1860.

But on the question with regard to the agreement made between Johnson and his creditors, the preponderance of the evidence seemed to establish the allegations of the bill. Neither the original agreement between Johnson and the creditors, though it had confessedly been in writing, nor any copy of it, could be found; and the parol evidence, taken after the lapse of seven years (notwithstanding the stout assertions of Kellom and the creditors associated with him to the contrary), went to show that Johnson had reserved an interest in such portion of the land as would have belonged to the creditors that failed to come into the agreement. Johnson himself testified this. The consequence was, that a decree was entered for the complainants, against Kellom and those who received portions of his purchase, for one undivided half of the property in their possession covered by the mortgage. The decree did not touch the mother's half.

After the decree was entered a copy of the agreement was accidentally discovered, and by it, it appeared that no provision had been made for the benefit of any creditors but those who signed it. The position which the defendants had taken in the case, and which, on the hearing, had appeared to be a false one, was thus shown to have been well founded. A bill of review was thereupon filed by the defendants, and the Circuit Court pronounced a decree in their favor, reversing the former decree. From this decree an appeal was taken to this court.

Mr. J. Hughes (a brief of Mr. Woolworth being filed), for the plaintiff in error; Mr. Lyman Trumbull, contra.

Mr. Justice BRADLEY (having stated the case) delivered the opinion of the court.

title: Easley v. Kellom


text: Talk:Easley v. Kellom

title: Talk:Easley v. Kellom


text:
Easley v. Kellom/Opinion of the Court

It seems difficult to find any ground for sustaining this appeal. Conceding that the deed of trust held by the complainants would have been valid as against Johnson and his assigns, had his pre-emption right been sustained; still, this right was not sustained. He had nothing that he could mortgage or convey. The subsequent sale by the government agents conveyed a good title to the purchasers, clear of the mortgage. The other ground on which the appellants relied, namely, that at the public sale Johnson had made some reservations in his own favor, in his agreement with the other creditors, for the purpose of enabling him to settle with the appellants, is taken away by the discovery of a copy of that agreement. It contains no such provision whatever. On the contrary it is a mutual agreement made for the sole benefit of those who executed it.

No question arises here, in reference to the eighty acres purchased by Johnson's mother. The original decree did not embrace any portion of that, and no appeal from that decree was taken by the complainants.

Some observations were made in reference to the provision of the agreement, looking to a combination to prevent competition in bidding at the government sale; but that objection, if valid, could only be taken by the government itself.

To conclude, the copy of the agreement which was discovered, and which laid the foundation for the bill of review, is sufficiently proved; and its absence at the former trial is satisfactorily accounted for.

DECREE AFFIRMED.

title: Easley v. Kellom/Opinion of the Court


text: Talk:Easley v. Kellom/Opinion of the Court


text:
City of Lexington v. Butler

THE 11th section of the Judiciary Act enacts:

'The Circuit Court shall have original cognizance of all suits. . . between a citizen of the State where the suit is brought and a citizen of another State.'

It is enacted by the same section:

'That no Circuit Court shall have cognizance of any suit to recover the contents of any promissory note or other chose in action, in favor of an assignee, unless such suit may have been prosecuted in such court to recover the said contents, if no assignment had been made, except in cases of foreign bills of exchange.'

The 12th section, however, of the same act enacts:

'That if a suit be commenced in any State court against an alien or by a citizen of the State in which the suit is brought against a citizen of another State,. . . and the defendant shall at the time of entering his appearance in such State court file a petition for the removal of the cause for trial into the next Circuit Court,. . . and offer good and sufficient surety for his entering in such court on the first day of its session copies of said process against him, and also for his there appearing. . . it shall then be the duty of the State court to accept the surety and proceed no further in the cause;. . . and the said copies being entered as aforesaid in such court of the United States, the cause shall there proceed in the same manner as if it had been brought there by original process.'

By a statute of March 2d, 1867, this right of removal was extended to controversies in any State court, between a citizen of the State where the suit is brought and a citizen of another State, in cases where either party-plaintiff or defendant-shall, any time before final hearing,

'Make and file in such State court an affidavit stating that he has reason to and does believe, that from prejudice or local influence, he will not be able to obtain justice in such State court.'

With these statutes in force the city of Lexington, Kentucky, acting under the authority of an act of the legislature of Kentucky, issued in 1853 to the Lexington and Big Sandy Railroad Company, one hundred and fifty bonds, each for $1000, having thirty years to run, and bearing an interest of 6 per cent. per annum, payable semi-annually, for which coupons were annexed to the bonds. The coupons were payable 'to bearer.'

The bonds bore the corporate seal of the city and were signed by the mayor, and countersigned by the city clerk. They were payable to the Lexington and Big Sandy Railroad Company or order at the Bank of America, New York, and were indorsed and assigned by the railroad company to bearer. They recited upon their face that—

'This certificate is used in part payment of a subscription of $150,000 by the city of Lexington to the capital stock of said Lexington and Big Sandy Railroad Company, by order of the mayor and council of said city, as authorized by a vote of the people taken in pursuance of an act of the General Assembly of the Commonwealth of Kentucky incorporating said railroad company, approved the 9th of January, 1852.'They were sold in market overt by the railroad company, and being by the indorsement made payable to bearer, circulated by delivery from hand to hand. J. C. Butler, a citizen of Ohio, became the owner of four of them. The coupons for a number of years being unpaid, he brought suit in a court of the State of Kentucky for the recovery of the amount of them. Before the trial came on, he removed the cause into the Circuit Court of the United States for the District of Kentucky, for trial, under the already-quoted act of Congress of March 2d, 1867, and on bringing the transcript of the cause into the Circuit Court, he filed a declaration in debt in that court, in conformity with the rules of proceeding in causes removed from the State court. To this declaration the city of Lexington filed two pleas in bar.

First plea. That the city was authorized to make the subscription of the $150,000, on condition that a majority of the qualified voters of the city should cast their votes in favor of the subscription, and that without such a vote the city had no authority to make the subscription; that the vote was cast in favor of the subscription, but only on the condition that it should not be obligatory until $1,000,000 should be first subscribed by others; that the $1,000,000 not having been subscribed, the city refused to make the subscription or to issue the bonds; that the company thereupon obtained a judgment of mandamus to compel the city to make the subscription and execute the bonds; and that the city was compelled by that judgment, and did so make the subscription and issue the bonds; that the Court of Appeals of Kentucky, however, reversed this judgment; that a rule was then made upon the company to redeliver the bonds in order to be cancelled; but that the company refused to redeliver them; that before the company had negotiated the bonds sued upon, the city obtained an injunction against the issue, and an order that the bonds be deposited with a receiver; that these orders, although process was duly served on the company, were not obeyed; and that both actions were still pending.

The plea then alleged that it was after all these proceedings and with these actions pending, that the company transferred and delivered the bonds to Butler; and that Butler had notice of the proceedings aforesaid before said bonds were transferred to him.

Second plea. As to the coupons the city pleaded a statute of limitations, applicable to debts not under seal; a statute of five years;-fifteen years being the statutory bar in regard to sealed instruments.

To the first plea the plaintiff replied, traversing the notice and denying all knowledge of any facts set out in the plea when he took the bonds.

To the second plea he demurred.

To the plaintiff's replication to the first plea (the replication denying notice of the proceedings about the bonds) the city demurred.

The court below on the whole case gave judgment for the plaintiff; and the city now brought the case here.

The questions, of course, were:

1st. Whether under the restriction of the 11th section of the Judiciary Act and under the act of March 2d, 1867, the court below had jurisdiction.

2d. Whether the fact that Butler had no notice of the proceedings about the bonds, set up to rebut his bona fides and destroy his right to sue (which fact of want of notice was of course admitted by the city's demurrer to his replication), made him, presumably, a bon a fide holder for value, and entitled to sue.

3d. Whether the statutory bar of five years was applicable to coupons to bonds under seal, and where to the bonds themselves nothing less than fifteen would by statute be a bar, or whether the coupons partook of the qualities of the bond in such a way as to be subject to the law which governed them?

Mr. J. F. Fisk, for the plaintiff in error:

1. The court below had no jurisdiction. The bonds sued on were made by a corporation or citizen of Kentucky, and were payable to the order of the railroad company, another citizen or corporation. If no assignment had been made then certainly under the 11th section the Circuit Court would have had no jurisdiction, the suit being between citizens of the same State. It is only in virtue of the assignment which was made by the indorsement that Butler, a citizen of Ohio, has any rights. But the same 11th section says that the Circuit Court shall not have cognizance of any suit to recover any chose in action in favor of an assignee, unless the suit could have been prosecuted in the same court if no assignment had been made.

2. The facts alleged in the plea other than that of notice which is the only part of the plea traversed-are sufficient to bar the action. The allegation of notice was not necessary. Butler was bound to take notice of the proceedings. The rule of lis pendens applies; a rule than which none has been established on higher authority or with more uniform sanction, one also peculiarly applicable to negotiable paper.

3. The court held the bonds negotiable and yet held that the statute of limitations governing promissory notes did not apply. This was plain error. Even if the bonds which were sealed did not come within the statute of five years, the coupons, which were not sealed-mere ordinary promises, did.

Mr. J. W. Stevenson, contra:

1. As to the jurisdiction. The whole argument of the other side on this point has no foundation. Since the case of Bushnell v. Kennedy, in which it was decided that the restriction of the 11th section as to the right to sue on choses in action assigned, not being found in the language of the 12th, and the reasons for its being in the 11th not existing for its being in the 12th, 'it is not to be considered as applying to cases transferred from State courts to the Circuit Courts under this latter section.' The decision applies equally to cases transferred under the act of March 2d, 1867.

2. As to the demurrer of the city to the replication. The plea, to which this replication was filed, went on to set forth a state of facts from which it was to be inferred the bonds were issued without authority of law. In the face of bonds which recite that they were issued by authority of law, such a plea would be bad, unless it also showed that Butler was not an innocent holder for value. The law presumes in favor of the holder: (1) that he took the bonds before they were due; (2) that he paid a valuable consideration for them; and (3) that he took them without notice of any latent defect which would render them invalid. The plea did not dispute the first two points, to wit: That Butler took the bonds before they were due and paid a valuable consideration for them. Hence these two presumptions stood in his favor, notwithstanding the plea. It did, however, aver that at the time he took the bonds he had notice of the facts set forth in the plea and relied on as rendering the bonds invalid. It was this averment of notice alone that rendered the plea good.

The replication traversed the averment of notice, and denied all knowledge or notice of any of the facts set out in the plea at the time the plaintiff took the bonds.

By demurring to the replication the city confessed Butler's denial of notice to be true, and thereby confessed away an allegation in its plea which was absolutely necessary to render it good.

3. As to Butler's demurrer to the second plea. This plea is an attempt to rely upon the statute of limitation of five years, in force in Kentucky, to actions on simple contracts. But the obligation to pay this interest is embodied in the bond itself, which is a specialty, under seal, and of a higher nature than simple contracts. Therefore no lapse of time, short of fifteen years, would bar an action on the bond, that being the period of limitation to actions upon specialties by the statute of Kentucky. That bonds of this character are specialties, and that the coupons attached to them partake of their character and are governed by the same term of limitation as governs the bond itself, was ruled by this court in The City v. Lamson.

Mr. Justice CLIFFORD delivered the opinion of the court.

title: City of Lexington v. Butler


text: Talk:City of Lexington v. Butler

title: Talk:City of Lexington v. Butler


text:
City of Lexington v. Butler/Opinion of the Court

Subscription to the stock of the Lexington and Big Sandy Railroad Company was made by the corporation defendants to the amount of one hundred and fifty thousand dollars, and on the fifteenth of October, 1853, they, as the municipal corporation of Lexington, issued one hundred and fifty bonds, each for one thousand dollars, sealed with the corporate seal and signed by the mayor and clerk of the corporation. By the terms of the bonds they are payable to the railroad company or order, at the Bank of America, in thirty years from date, with interest semi-annually at the rate of six per centum per annum, also payable at the same bank in the city of New York. Interest warrants were annexed to each bond, whereby the municipal corporation undertook and promised to pay to bearer the several instalments of interest provided in the bonds, as the same matured and became payable.

Pursuant to that arrangement the railroad company became the lawful owners and holders of the whole of those bonds, and they, as such holders and owners, indorsed the bonds in blank and transferred the same to divers persons or corporations as the means of borrowing money to construct their railroad, and the plaintiff in that way, as he alleges, became the purchaser and owner of four of those bonds with the unpaid interest warrants annexed. Payment of the interest being refused the plaintiff instituted the present suit in the State court to recover the amount of the interest overdue, as more fully appears in the petition or declaration filed in the State court where the suit was commenced. Service was made and the defendants appeared, and on their motion the cause was continued. Subsequently the plaintiff filed a petition and affidavit for the removal of the cause into the Circuit Court of the United States, for trial, alleging as the ground of the application that he had reason to believe and did believe that from prejudice and local influence he would not be able to obtain justice in the State court, and the applicant having given bond as required by law the cause was removed into the Circuit Court of the United States for that district.

Two special pleas were filed by the defendants in bar of the action:

I. That they were not liable to pay either the bonds or the interest on the same because the conditions precedent to the right of the corporation to subscribe for the stock of the railroad company and to issue the bonds were never fulfilled; that the conditions annexed to the right, as enacted by the legislature, were that the proposition to subscribe should be submitted to the qualified voters of the corporation, and that it should be approved by a majority of the persons voting on the question; that three conditions were embodied in the proposition as submitted to the voters, as specifically set forth in the plea; that the proposition as submitted did not authorize a subscription unless a million of dollars were previously subscribed by other parties; that other parties not having subscribed that amount the authorities of the corporation refused to make the subscription, and that the State court on the application of the railroad company issued a mandamus and compelled the authorities of the corporation to make the subscription and issue the bonds; that the defendants appealed to the Court of Appeals, where the judgment of the subordinate court was reversed, the Court of Appeals holding that the corporation had no authority to subscribe for the stock or to issue the bonds until one million of dollars had been subscribed by other parties; that the action was thereupon redocketed and a rule laid upon the railroad company to redeliver the bonds to the defendants to be cancelled; that the railroad company in the meantime deposited forty-eight of the bonds with an agent with directions to sell the same for their benefit; that before the bonds were negotiated or transferred they, the defendants, obtained an injunction and an order of court that the same should be deposited with a receiver of the court to be sold, and that the proceeds should be applied under the order of the court, and the defendants allege that the action is still pending and that the order of the court was never obeyed; that the bonds described in the declaration are a portion of those bonds, and that the plaintiff, when the bonds in suit were transferred to him, well knew of the pendency of said actions and of the judgments and orders therein, and that the bonds had been issued under and by virtue of said writ of mandamus.

II. That the cause of action did not accrue to the plaintiff within five years next before the action was commenced.

To the first special plea of the defendant the plaintiff filed a replication, in which he denied that he had any knowledge, notice, or information whatever, before or at the time the bonds were transferred to him, of the pendency of said supposed actions, or any or either of them, or of the supposed judgments or orders in those actions, or that said bonds had been issued under or by virtue of the said writ of mandamus, in manner and form as the defendants have alleged and tendered an issue, and the defendants demurred to the replication and the plaintiffs joined in demurrer.

On the other hand the plaintiffs demurred to the second plea of the defendants and the defendants joined in demurrer, so that both pleas terminated in an issue of law for the decision of the court; and the court overruled the demurrer of the defendants to the replication of the plaintiff and sustained the demurrer of the plaintiff to the second plea of the defendants, and gave judgment for the plaintiff in the sum of three thousand six hundred and thirty dollars and six cents, being the amount of the debt demanded in the declaration. Dissatisfied with the judgment of the court the defendants sued out a writ of error and removed the cause into this court.

Three errors are assigned by the original defendants: (1.) That the court erred in rendering judgment for the plaintiff, as the court had no jurisdiction of the case. (2.) That the court erred in overruling the demurrer of the defendants to the replication of the plaintiff filed to their first special plea. (3.) That the court erred in sustaining the demurrer of the plaintiff to the second plea of the defendants.

Jurisdiction of the case is denied by the defendants because, as they insist, the suit is founded on a cause of action which could not properly be removed from the State court into the Circuit Court, where the judgment was rendered, but the objection is not well founded, as will be seen by reference to the twelfth section of the Judiciary Act and the amendatory act under which the removal in this case was made. Where a suit is commenced in any State court, in which there is a controversy between a citizen of the State in which the suit is brought, and a citizen of another State, and the matter in dispute exceeds the sum of five hundred dollars, exclusive of costs, such citizen of another State, whether he be plaintiff or defendant, if he will make and file in such State court an affidavit stating that he has reason to, and does, believe that from prejudice or local influence he will not be able to obtain justice in such State court, may at any time before the final hearing or trial of the suit, file a petition in such State court for the removal of the suit into the next Circuit Court of the United States, to be held in the district where the suit is pending. Authority to remove such a suit is given by that act to the plaintiff as well as to the defendant, but the further provision is that the party desiring to exercise the privilege, must offer good and sufficient surety that he will enter in such court, on the first day of its session, copies of all process, pleadings, depositions, testimony, and other proceedings in said suit, and that he will do such other appropriate acts as are required by law to be done for the removal of a suit from a State court into a Federal court.

Evidence that the plaintiff complied with those conditions, it is conceded, is exhibited in the record, but the precise objection is that the cause of action is not one cognizable in the Circuit Court under any circumstances, and reference is made to the eleventh section of the Judiciary Act to support that proposition. By that section it is provided that no District or Circuit Court shall have cognizance of any suit to recover the contents of any promissory note, or other chose in action in favor of an assignee, unless such suit might have been prosecuted in such court to recover the said contents if no assignment had been made, except in cases of foreign bills of exchange.

All of the bonds were made payable to the order of the railroad company, and each was assigned by a writing on the back of the instrument to bearer by the company, and the payment of principal and interest was guaranteed by the obligees in the bond. Neither bonds of the kind nor the coupons annexed, where they are made payable to bearer or are indorsed to bearer by the original obligees or payees, are regarded as falling within the prohibition of the eleventh section of the Judiciary Act, as they pass from one holder to another by delivery without any formal assignment, as has been held by this court in several cases, to which reference is made for the reasons upon which the rule is founded.

Suppose, however, the rule is otherwise, still the objection must be overruled, as the suit was not originally commenced in the Circuit Court. Suits may properly be removed from a State court into the Circuit Court in cases where the jurisdiction of the Circuit Court, if the suit had been originally commenced there, could not have been sustained, as the twelfth section of the Judiciary Act does not contain any such restriction as that contained in the eleventh section of the act defining the original jurisdiction of the Circuit Courts. Since the decision in the case of Bushnell v. Kennedy, all doubt upon the subject is removed, as it is there expressly determined that the restriction incorporated in the eleventh section of the Judiciary Act, has no application to cases removed into the Circuit Court from a State court, and it is quite clear that the same rule must be applied in the construction of the subsequent acts of Congress extending that privilege to other suitors not embraced in the twelfth section of the Judiciary Act. Such a privilege was extended by the twelfth section of the Judiciary Act only to an alien defendant, and to a defendant, citizen of another State, when sued by a citizen of the State in which the suit is brought, but the privilege was much enlarged by subsequent acts, and the act in question extends it to a plaintiff as well as to a defendant, where the controversy is between a citizen of the State where the suit is brought and a citizen of another State, if the matter in dispute exceeds the sum of five hundred dollars, exclusive of costs, which shows that the jurisdiction of the Circuit Court in this case was beyond controversy.

III. Express authority to subscribe for the stock of the railroad company, and to issue the bonds in payment for the same, was conferred upon the corporation defendants by the twenty-eighth section of the act incorporating the railroad company, subject to the conditions therein prescribed, that the proposition to subscribe for the stock should be submitted to the qualified voters of the corporation, and the same section points out the steps to be pursued by the proper authorities to take the sense of the voters upon the subject. Authority was conferred by the legislative act upon the corporation defendants to issue bonds to the amount of one hundred and fifty thousand dollars, and the plea alleges that, by virtue thereof, they issued one hundred and fifty bonds, each of one thousand dollars, payable in thirty years from date, with coupons or interest warrants annexed providing for the payment of the interest semi-annually at the rate of six per centum per annum. They bear the corporate seal of the city and are signed by the mayor, and are countersigned by the clerk, each bond containing on its face a certificate that it was issued in part payment of the subscription of one hundred and fifty thousand dollars, by the city of Lexington, to the capital stock of the railroad company, by order of the mayor and council of said city, as authorized by a vote of the people taken in pursuance of the beforementioned act of the General Assembly of the State. Issued by authority of law, as the bonds purport to have been, and being, by the regular indorsement thereof, made payable to bearer, they lawfully circulated from holder to holder by delivery, and the plaintiff having purchased four of the number in market overt, became the lawful indorsee and holder of the same, together with the coupons annexed, and the interest secured by the coupons being unpaid he instituted the present suit to recover the amount. Evidently, the prim a facie presumption in such a case is that the holder acquired the bonds before they were due, that he paid a valuable consideration for the same, and that he took them without notice of any defect which would render the instruments invalid. Impliedly the plea admits that the bonds were purchased before they were due, and that the plaintiff paid a valuable consideration for the same, but the defendants allege that he took the same with notice of the irregularities in issuing the same, as set forth in the plea, and they rely on those allegations as a complete defence to the action, but the replication traversed the averment of the notice and tendered an issue to the country, and the defendants, by demurring to the replication, confessed that the allegations of the plea in that behalf were untrue, and that the plaintiff was the bon a fide holder of the bonds without notice of the alleged defects in the inception of the instruments.

Coupons attached as interest warrants to bonds for the payment of money, lawfully issued by municipal corporations, as well as the bonds to which they are attached, when they are payable to order and are indorsed in blank, or are made payable to bearer, are transferable by delivery and are subject to the same rules and regulations, so far as respects the title and rights of the holder, as negotiable bills of exchange and promissory notes. Holders of such instruments, if the same are indorsed in blank or are payable to bearer, are as effectually shielded from the defence of prior equities between the original parties, if unknown to them at the time of the transfer, as the holders of any other class of negotiable instruments.

Admitted, as it is, that the corporation defendants possessed the power to subscribe for the stock and to issue the bonds, it is clear that the plaintiff is entitled to recover upon the merits, as the repeated decisions of this court have established the rule that when a corporation has power under any circumstances to issue negotiable securities the bon a fide holder has a right to presume that they were issued under the circumstances which give the requisite authority, and that they are no more liable to be impeached for any infirmity in the hands of such a holder than any other commercial paper.

IV. Actions on simple contracts are barred by the limitation law of that State unless commenced within five years next after the cause of action accrued, and the second plea was filed as a bar to the action under that section of the statute of limitations, but the bonds described in the declaration are specialties not falling within that section of the statute. On the contrary, suits upon bonds may be maintained if commenced at any time within fifteen years next after the cause of action accrued, and it is well settled law that a suit upon a coupon is not barred by the statute of limitations unless the lapse of time is sufficient to bar also a suit upon the bond, as the coupon, if in the usual form, is but a repetition of the contract in respect to the interest, for the period of time therein mentioned, which the bond makes upon the same subject, being given for interest thereafter to become due upon the bond, which interest is parcel of the bond and partakes of its nature and is not barred by lapse of time except for the same period as would bar a suit on the bond to which it was attached. Coupons are substantially but copies of the stipulation in the body of the bond in respect to the interest, and are so attached to the bond that they may be cut off by the holder as matter of convenience in collecting the interest, or to enable him to realize the interest due or to become due by negotiating the same to bearer in business transactions without the trouble of presenting the bond every time an instalment of interest falls due.

For these reasons we are of the opinion that the ruling of the Circuit Court was correct.

JUDGMENT AFFIRMED.


text: Talk:City of Lexington v. Butler/Opinion of the Court