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Snow v. United States (85 U.S. 317)/Opinion of the Court

The government of the Territories of the United States belongs, primarily, to Congress; and secondarily, to such agencies as Congress may establish for that purpose. During the term of their pupilage as Territories, they are mere dependencies of the United States. Their people do not constitute a sovereign power. All political authority exercised therein is derived from the General Government.

It is, indeed, the practice of the government to invest these dependencies with a limited power of self-government as soon as they have sufficient population for the purpose. The extent of the power thus granted depends entirely upon the organic act of Congress in each case, and is at all times subject to such alterations as Congress may see fit to adopt.

The organic act establishing the Territorial government of Utah constituted a governor, a legislative assembly, and certain courts, and judicial and executive officers. Amongst the latter are an attorney for the Territory and a marshal.

By the sixth section of the act, it is enacted that the legislative power shall extend to all rightful subjects of legislation consistent with the Constitution of the United States and the provisions of that act. By the ninth section, it is enacted that the judicial power shall be vested in a supreme court, district courts, probate courts, and justices of the peace, whose jurisdiction shall be limited by law; provided, that justices shall not try land titles, nor cases exceeding one hundred dollars in amount; and that the supreme and district courts shall possess chancery as well as common-law jurisdiction; and each of the district courts is invested with the same jurisdiction in cases arising under the Constitution and laws of the United States as is vested in the circuit and district courts of the United States; and the first six days in each term are appropriated to such cases.

The duties of the attorney are not specified in the act. The marshal is required to execute all processes issuing from said courts when exercising their jurisdiction as circuit and district courts of the United States.

This recital shows that the business of these courts, when acting as circuit and district courts of the United States, is to be kept distinct from their business as ordinary courts of the Territory; and gives countenance to the idea upon which the Territorial legislature seems to have acted in appointing separate executive officers for attending the courts when sitting as Territorial courts. By an act of that legislature, passed March 3d, 1852, it is, amongst other things, provided that an attorney-general shall be elected by the legislative assembly to attend to all legal business on the part of the Territory before the courts where the Territory is a party, and to prosecute individuals accused of crime in the judicial district in which he shall keep his office, in cases arising under the laws of the Territory; and that for the other districts, district attorneys shall be elected in like manner with like duties. This law, it is understood, has always been acted upon until the recent decision of the Supreme Court of Utah, denying its validity. Similar laws have been passed and acted upon in other Territories, organized under similar organic acts. The attorney appointed by the President for the Territory has been accustomed to attend to the business of the General Government, the same as is done by United States district attorneys in the several States; and the attorney-general and district attorneys of the Territory have attended to the business of the latter, and prosecuted crimes committed against the Territorial laws.

It must be confessed that this practice exhibits somewhat of an anomaly. Strictly speaking, there is no sovereignty in a Territory of the United States but that of the United States itself. Crimes committed therein are committed against the government and dignity of the United States. It would seem that indictments and writs should regularly be in the name of the United States, and that the attorney of the United States was the proper officer to prosecute all offences. But the practice has been otherwise, not only in Utah, but in other Territories organized upon the same type. The question is whether this practice is legal; or, in other words, whether the act of the Territorial legislature was authorized by the organic act. If it was, the plaintiff in error in this case was erroneously ousted from performing the duties of his office of attorney-general of the Territory.

The power given to the legislature is extremely broad. It extends to all rightful subjects of legislation consistent with the Constitution and the organic act itself. And there seems to be nothing in either of these instruments which directly conflicts with the Territorial law. If there is any inconsistency at all, it is in that part of the organic act which provides for the appointment by the President of an attorney for the Territory. But is that necessarily an inconsistency? The proper business of that attorney may be regarded as relating to cases in which the government of the United States is concerned. The analogous case of the marshal, and the separation of the business of the courts as to Government and Territorial cases, seem to give some countenance to this idea. At all events, it has sufficient basis for its support to establish the conclusion that there is no necessary conflict between the organic and the Territorial laws. The organic act is susceptible of a construction that will avoid such conflict. And that construction is supported by long usage in this and other Territories. Under these circumstances it is the duty of the court to adopt it, and to declare the Territorial act valid. In any event, no great inconvenience can arise, because the entire matter is subject to the control and regulation of Congress.

JUDGMENT REVERSED.


text: Talk:Snow v. United States (85 U.S. 317)/Opinion of the Court

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


text:
Westray v. United States

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

'An act to increase duties on imports,' &c., passed June 30th, 1864, enacts:

'SECTION 14. That on the entry of any merchandise, the decision of the collector of the customs at the port of importation and entry, as to the rate and amount of duties to be paid on such merchandise, shall be final and conclusive against all persons interested therein, unless the owner, importer, consignee, or agent of the merchandise shall, within ten days after the ascertainment and liquidation of the duties by the proper officer of the customs, as well in cases of merchandise entered in bond as for consumption, give notice in writing to the collector on each entry, if dissatisfied with his decision, setting forth therein, distinctly and specifically, the grounds of his objection thereto, and shall, within thirty days after the date of such ascertainment and liquidation, appeal therefrom to the Secretary of the Treasury, whose decision on such appeal shall be final and conclusive. And such merchandise shall be liable to duty accordingly, unless suit shall be brought within ninety days after the decision of the Secretary of the Treasury on such appeal, for any duties which shall have been paid before the date of such decision on such merchandise, or within ninety days after the payment of duties paid after the decision of the secretary.'

This act being in force, Westray & Co. imported into New York a cargo of rice; the duty on which article, when in the form commercially known and designated as 'uncleaned,' is two cents per pound, and when in the form commercially known and designated as 'cleaned' is two and a half cents per pound. The rice was entered for warehouse in October, 1864, and the usual warehouse bond given on that day by the importer. The bond was in $25,049.90, and was conditioned that the importer should,

'On or before the expiration of one year, to be computed from the date of importation,. . . pay. . . into the collector of the customs, &c., the sum of $12,524.95, OR the amount of duties to be ascertained under the laws now existing, or hereafter to be enacted, to be due and owing, &c., OR shall in the mode prescribed by law, on or before the expiration of three years from date of said importation, withdraw said goods from the bonded store or public warehouse where they may be deposited,. . . and actually export the same beyond the limits of the United States, OR shall within three years. . . transport said merchandise in bond to any port of the Pacific or western coast of the United States.'

Westray & Co. within a year after giving the bond withdrew the rice for consumption, and paid thereon two cents per pound as upon 'uncleaned rice;'

Thus paying, as it turned out, the sum of $12,352 15

Or less by 172 80

Than the sum conditioned named in the bond, $12,524 95

The rice was afterwards appraised as 'cleaned rice,' and on entry the collector liquidated the same as such, and the dutiable rate thereof at two and a half cents per pound. The additional half cent, thus charged, made a difference of $2111.17 between the sum which had been paid and that with which the rice as cleaned rice was now chargeable.

It did not appear that the collector had at any time given notice to Westray & Co., the importers, of the liquidation, nor did the importers within ten days after the ascertainment and liquidation give any notice of their dissatisfaction, nor make any appeal to the Secretary of the Treasury.

In this state of things the United States brought suit on the bond, alleging as breach that though the time of one year mentioned in it had expired, Westray & Co. had not within the said year paid the $12,524.95 OR the amount, when ascertained, of the duties imposed by laws then existing, &c. Plea, nil debet.

On the trial the defendants offered in evidence samples of the rice, and offered to prove that it was in fact and as commercially designated 'uncleaned rice,' and, therefore, liable to pay no more duty than two cents per pound, which the government admitted had been paid within one year from date of importation, and that by the said payment of two cents per pound the bond became void.

The government objected to this evidence on the ground that by the act of Congress, above quoted, the decision of the collector was final and conclusive as to the rate and amount of duties, no notice of dissatisfaction with such decision having been given to him within ten days after the liquidation, and no appeal therefrom having been made to the Secretary of the Treasury.

The court sustained the objection, and held that the defendants could give no evidence respecting the character of the rice or its commercial designation in trade, or the rate of duty chargeable thereon. The defendants excepted.

The defendants then requested the court to rule that, there being no evidence that notice of the aforesaid liquidation by the collector was at any time given to them, or that they ever had knowledge of such liquidation, the time within which to serve notice of dissatisfaction upon the collector, and to appeal from his decision to the Secretary of the Treasury, if required by law, as ruled by the court, did not run till notice of liquidation was given to defendants, or till they had knowledge of the same.

The court refused thus to rule, on the ground that the collector was not bound to give any notice of his liquidation to the defendants, nor to bring his decision to the defendants knowledge, and that the time within which to give notice of dissatisfaction as aforesaid, and appeal, must run from the date of such liquidation, whenever made. To which decision the defendants excepted.

The defendants then requested the court to admit the evidence offered by them as to the commercial designation of the rice, on the grounds that the collector had given no notice of liquidation as aforesaid, and that, therefore, they were not debarred by the limitations of the statute from giving such notice of dissatisfaction and appeal, as required by the ruling of the court.

The court refused to admit the evidence, on the ground that, having ruled that no notice of liquidation from the collector to the defendants was required, the defendants were barred, and the evidence inadmissible. To which decision the defendants excepted.

The defendants then requested the court to instruct the jury that it was a condition of the bond that the same should be cancelled upon the payment of $12,524.95, within one year from date of importation, and as it was admitted that $12,352.15 had been paid within one year, that the jury could lawfully find no greater amount of damage than the difference between these two amounts, and interest on this difference.

The court refused to so instruct the jury. To which decision the defendants excepted.

The court then directed the jury to bring in a verdict for the plaintiffs for $2111.77, gold, with interest, to which direction of the court the defendants excepted.

Verdict and judgment having gone for the United States, the defendants brought the case here.

Mr. Ethan Allen, for the plaintiffs in error:

The liquidation of the duties, and the decision of the collector is a secret proceeding, so far as the merchant is concerned. No date is fixed when the act shall be done. The appraiser notes his classification of the merchandise on the invoice when his convenience permits, and his clerk extends in figures on the entry the amount of the duty according to this classification; and this constitutes the decision of the collector, of which, according to the ruling of the court below, no notice whatever need be given to the importer, although from the moment this decision is made, the ten days limitations begin to run within which the importer must protest and appeal. As this statute takes away the common-law right of the citizen to defend himself, as in this case, against an alleged illegal exaction, it is a severe statute, and should be interpreted liberally. Indeed the treasury department, by regulations adopted in 1869, directs notice to be given to the merchant of the time when the decision of the collector is made, by ordering collectors to 'keep a daily record of the entries liquidated,' &c., and to 'give notice of the liquidation of such entries by posting a transcript of such record in some conspicuous place in the custom-house, &c., for ten days.' As these regulations, however, were issued in 1869, and as the bond upon which this suit is brought was made in 1864, these regulations do not cover this case. They show, however, that the treasury recognizes it as a duty to give notice to the merchant of the decision of the collector. Before this regulation was made, it was the custom for the collector to send a special notice to the importer, informing him of any decision made. This notice, however, was not given to the importers in this case, as was admitted on the trial.

2. In an action on a bond, of many separate conditions-like the one in suit-the performance of either one of which cancels the bond, the maker of the bond is entitled to choose which condition he will fulfil in satisfaction of it.

In part fulfilment of the first condition, it was admitted on the trial that $12,352.15 had been paid within one year. The only breach, then, on the part of the importers, was in not paying the balance of $172.80 within the year. Had this balance been paid within the year, clearly the importers could have demanded cancellation of the bond.

The condition of an obligation is considered as the language of the obligee, and so is construed in favor of the obligor, and shall always be taken most favorably for the obligor. The law never overcomes by implication the express provisions of parties. Nor will equity enforce the penalty, the party being ready and desirous fully to perform any one of several alternate conditions.

Mr. G. H. Williams, Attorney-General, and Mr. S. F. Phillips, Solicitor-General, contra.

Mr. Justice STRONG delivered the opinion of the court.

title: Westray v. United States


text: Talk:Westray v. United States

title: Talk:Westray v. United States


text:
Westray v. United States/Opinion of the Court

The acts of Congress which regulate the collection of duties upon imported articles are imperative that, on the entry of any goods, wares, or merchandise, the decision of the collector of customs, at the port of importation and entry, as to the rate and amount of duties to be paid on such goods, wares, and merchandise, and the dutiable costs and charges thereon, shall be final and conclusive against all persons interested therein, unless the owner, importer, consignee, or agent of the merchandise shall, within ten days after the ascertainment and liquidation of the duties by the proper officers of the customs, as well in cases of merchandise entered in bond as for consumption, give notice in writing to the collector on each entry, if dissatisfied with his decision, setting forth therein distinctly and specifically the grounds of his objection thereto, and shall, within thirty days after the date of such ascertainment and liquidation, appeal therefrom to the Secretary of the Treasury.

This act expressly applies to liquidations made when imported articles are entered for warehousing, and to those made when they are entered for consumption. In neither case is there any provision for notice of the decisions or liquidations, and for the obvious reason that such a provision would be superfluous. The importer is instructed by the law at what time the collector or officers of the customs must liquidate the duties. The statute, and the treasury regulations established under it, require that the duties must be ascertained whenever an entry is made, whether it be for warehousing or for withdrawal. In practice, it is true, the liquidation at the time of entry for warehousing is little more than an approximate estimate, and it is mainly for the purpose of determining the amount of the bond to be given. It is made, and the bond is given, before the goods are sent to the warehouse, or even to the appraisers' stores, and before they are weighed, gauged, or measured. But the importer enters them and gives the bond, the amount of which is regulated by the estimated amount of duties. It is due to his inattention, therefore, if he does not know what that estimate is at the time when it is made. Equally true is it that he has ample means of knowledge of the second or corrected liquidation-that made at the time of the withdrawal entry. One of the conditions of his bond is that he pay the amount of duties to be ascertained under the laws then existing or thereafter enacted. He is thus informed that there is to be another liquidation, and that the law requires it to be made at the time when he shall make his withdrawal entry and when the duties are required to be paid. There is, then, no reason for requiring a notice to be given to him of the collector's decision. But, if this were not so, it is certain that the statute requires none; and it is not for us to rule that what Congress has declared to be conclusive shall not be so, unless something has been done more than the lawmakers required. It follows that the Circuit Court was not in error when it refused to receive evidence to show that the rice which the officers of the customs had decided was 'cleaned rice,' and subject to duty as such, was 'uncleaned,' and therefore subject to less duty. No notice of dissatisfaction with the duty assessed, or with the liquidation made, was given to the collector within the period defined by the statute; no appeal was made to the Secretary of the Treasury, and the decision of the collector was, therefore, by the express declaration of the act of Congress, final and conclusive upon the plaintiffs and upon all persons interested.

The same considerations lead to the conclusion that the Circuit Court correctly refused to rule that the ten days prescribed by the statute, within which notice of dissatisfaction is required to be given, did not begin to run until notice of the collector's liquidation was given to the plaintiffs in error, or until they had knowledge thereof. The limitation of the right to complain or to appeal commences with the date of the liquidation, whenever that is made. No notice is required, but the importer who makes the entries is under obligation to take notice of the collector's settlement of the amount of duties. The claim of the government upon the goods is in the nature of a proceeding in rem, of every step in which the claimant, owner, or importer is presumed to have notice, and since, as we have remarked, the liquidation of the duties is required by the law to be made when the entries are made, the presumption is not unreasonable. This disposes of the first four assignments of error.

The bond upon which the suit was brought was for the penal sum of $25,049.90, and its conditions were that it should be void if the obligors, or either of them, should, within one year, pay unto the collector of the customs the sum of $12,524.95 (half the penalty), or the amount of duties to be ascertained under the laws then existing, or thereafter to be enacted, due and owing on the imported goods described, or should, in the mode prescribed by law, on or before the expiration of three years from the date of importation, withdraw the goods from the bonded warehouse where they might be deposited, and actually export them, or within three years should, under the regulations of the Secretary of the Treasury, transport them to the Pacific coast. It was an ordinary warehouse bond, in the from prescribed by the regulations of the Treasury Department. Its purpose was to secure the payment of the duties which might be owing upon the goods, when they should be withdrawn from the warehouse for consumption, should they be so withdrawn. It was impossible to ascertain at the time when it was given what the amount of duties would be when the goods might be withdrawn. The defeasance was, therefore, in the alternative that the penalty might be avoided by payment of a sum mentioned within one year, or by the payment of whatever duties might be ascertained to be due and owing, that is, ascertained to be due and owing whenever the goods should become subject to duty by withdrawal for consumption. It was not, therefore, an ordinary pecuniary bond. Hence, when the defendants requested the Circuit Court to instruct the jury that it having been admitted $12,352.15 had been paid within one year, no verdict could be returned for any greater sum than the difference between the amount paid and $12,524.95 (the sum mentioned in the defeasance), with interest thereon, we think it was not error to refuse the instruction. At law the penalty was forfeited by the non-performance of any one of the conditions. The defendants' claim to relief was in equity alone, and though in the case of an ordinary pecuniary bond, with a simple pecuniary penalty, compliance with the condition to pay at a specified day is allowed even in a court of law to be compensated for by the payment of the sum mentioned in the condition, with interest thereon, the rule may well be otherwise in the case of such a bond as this. If it be admitted that the obligors might have selected the condition with which they would comply before a legal forfeiture had been commended, it must still be held that, considering the nature of the bond and the purpose for which it was given, such an option was not theirs after they had come into default. They can be relieved from the forfeiture only upon their doing complete equity, and that is nothing less than the payment of all the duties, to secure which they gave the bond.

It follows that the jury were properly directed to return a verdict for the plaintiffs for the amount of duties unpaid, as ascertained and liquidated by the collector, with interest thereon.

JUDGMENT AFFIRMED.


text: Talk:Westray v. United States/Opinion of the Court


text:
Cook v. Tullis

APPEAL from the Circuit Court for the Southern District of Ohio.

Cook and others, trustees in bankruptcy of the estate of Homans, filed a bill in equity in the court below to set aside the transfer of a certain note for $7000, secured by mortgage, alleged to have been made by the said Homans to the defendant, Tullis, in violation of the provisions of the Bankrupt Act, and to compel an assignment of the note and mortgage to them.

It appeared from the record that in August, 1869, and for two years before, Homans, the bankrupt, was engaged in business as a banker, in Cincinnati, in the State of Ohio; that on several occasions during this period he had purchased bonds of the United States for the defendant, Tullis; that these bonds were left with him on special deposit for safe keeping; that the bonds were inclosed in envelopes and kept in a package by themselves, marked with the name of Tullis, and placed in a separate box; that on one occasion, about eighteen months before his failure, Homans had been permitted by the defendant to use $20,000 of the bonds thus purchased, upon condition of substituting for them in the package an equivalent in amount in bills receivable, and agreeing to replace the bonds when called for; that the bonds thus used were subsequently replaced; that on another occasion, about a year afterwards, in March, 1869, he took, without any such permission, from the package and used $6000 of the bonds, substituting in their place an equivalent amount in bills receivable; that in April following he removed these bills receivable and substituted in their place, for the bonds taken, a note and mortgage belonging to him, of one Hardestly, for $7000, the note bearing date April 17th, 1869, and payable in ninety days, and the mortgage being on real property; that this note was not paid at maturity, and in August following was placed by Homans, with the mortgage, in the hands of attorneys, with instructions to give notice to the maker of the note that if it were not paid by the beginning of the next term of the court, proceedings by suit would be taken for its collection; that Homans failed on the 26th of August, 1869; that soon afterwards Tullis was informed of the substitution of the note and mortgage for his bonds; and that thereupon he siguified his acceptance of the same and his satisfaction with the transaction, and directed proceedings to be commenced by the attorneys, in whose hands the papers had been placed, for the foreclosure of the mortgage.

It further appeared from the record that, on the 20th of September following, Homans was adjudged a bankrupt upon a petition in involuntary bankruptcy, filed on the 13th of the month, and that in December afterwards the complainants were appointed trustees of his estate.

The deposition of Homans was taken in the case, and he stated in explanation of his conduct in appropriating the bonds in question, that as on a former occasion Tullis had consented to his using a much larger amount, he inferred that there would be no objection to his using a smaller amount if it could be done without risk to Tullis; that at this time he was carrying on his business as usual, and did not apprehend insolvency or bankruptcy; that he did not think it necessary when he placed the note and mortgage with his attorneys to give them notice that they belonged in Tullis's package, and did not do so until the day of his failure, when, remembering the omission, he gave them notice to that effect, and directed them to account to Tullis for $6000 of the note, stating that this proportion of it belonged to him. It did not appear that Tullis had any knowledge leading him to suppose that Homans, until the day of his failure, was insolvent, or contemplated insolvency.

The trustees of Homans by this suit sought, as already said, to set aside the transfer to the defendant of the note and mortgage, and to obtain possession of the same, on the alleged ground that the transfer was made for the purpose of giving the defendant a preference over the other creditors of the bankrupt, and preventing a distribution of the proceeds of the note equally among his creditors, in violation of the provisions of the Bankrupt Act.

The provisions relied on by the trustees are in the thirtieth section of the act (by the forty-third made applicable to trustees), and in these words:

'If any person, being insolvent, or in contemplation of insolvency, within four months before the filing of the petition by or against him, with a view to give a preference to any creditor or person having a claim against him,. . . makes any payment, pledge, assignment, transfer or conveyance of any part of his property, either directly or indirectly,. . . the person receiving such payment, pledge, assignment, transfer or conveyance, or to be benefited thereby,. . . having reasonable cause to believe such person is insolvent, and that such. . . payment, pledge, assignment or conveyance is made in fraud of the provisions of this act, the same shall be void, and the assignee may recover the property, or the value of it, from the person so receiving it or so to be benefited.'

The court below adjudged that the defendant was entitled to $6000 of the proceeds of the note of Hardesty; and that he held the balance of the proceeds as trustee for the complainants, and entered a decree to that effect. From that decree the complainants appealed to this court.

Messrs. George Hoadly and E. M. Johnson, for the appellants:

1. The Hardesty note and mortgage were part of Homans's assets, procured by him, as we may reasonably presume, by means obtained from his general creditors. There is no evidence by which to apply the rule that the proceeds of a trust estate may be followed by the cestui que trust as far as they can be traced. We admit that property held in trust does not pass to the assignee by the proceedings in bankruptcy, but we assert that the trust must be such that the property can be followed or distinguished. 'When the trust property does not remain in specie, but has been made way with by the trustee, the cestui que trust has no longer a specific remedy against the estate, and must come in pari passu with the other creditors.'

Homans took and used the bonds, but he does not suggest that he applied their proceeds, or anything bought with such proceeds, in obtaining this note and mortgage. For aught that appears he lost the proceeds of these bonds in his business.

2. The ratification could not retroact, for several reasons:

First. The doctrine of relation is a fiction applicable only when demanded by considerations of justice, and therefore not required when it will defeat the intervening rights of third persons, as here of Homans's trustees, representing his creditors, whose rights, for the same reason, and by the express provision of the act, relate back four months, for the purpose of avoiding preferences.

Secondly. This fiction cannot apply to this case, because its effect would be the evasion of a statute enacted in the interests of morality. 'Directly or indirectly' shall no preference be permitted, says the Bankrupt Act. Now, with the ratification, a preference is achieved; without it, none. The ratification is the consummation of an incomplete preference; and, as such, is itself forbidden by the act, and therefore to be treated as not having taken place at all, in fact or in law.

Thirdly. A ratification is not allowed by law when the act ratified is itself forbidden at the time of ratification. As Homans after he broke could not prefer Tullis directly, neither could he prefer him by the indirect way of ratification. If an agent, without authority, assumes to do that which is afterwards prohibited by law, it is too late to give validity to the act by a ratification subsequent in date to the prohibition. To permit this is to defeat the law.

In Bird v. Brown, Baron Rolfe discussing the effect of ratification, says:

'But this doctrine must be taken with the qualification, that the act of ratification must take place at a time, and under circumstances, when the ratifying party might himself have lawfully done the act which he ratifies.'He cites Lord Audley's Case, reported alike by Croke, Moore, and Popham, which seems in point, and is cited with approval by Lord Coke in Margaret Podger's Case.

Fourthly. The alleged ratification amounts to nothing. What was there to ratify? Nothing but the conversion of the bonds, which made Tullis the creditor of Homans. By ratifying this Tullis could deprive the transaction of its tortious aspect, and make the liability one by contract also, instead of sounding both in trover and assumpsit. But he could do no more.

Mr. H. A. Morrill, contra.

Mr. Justice FIELD, after stating the facts of the case, delivered the opinion of the court, as follows:

title: Cook v. Tullis


text: Talk:Cook v. Tullis

title: Talk:Cook v. Tullis


text:
Cook v. Tullis/Opinion of the Court

It is evident from the statement of the transaction, that the transfer by Homans to the defendant of the note and mortgage of Hardesty does not present a case of preference made by a bankrupt to one creditor over another, within the meaning of the Bankrupt Act. It was not a transfer to prefer a creditor. There was no debt at the time to the defendant to be preferred. The transaction was not one of borrowing. There was no loan made nor credit given. It was the case of an exchange of one species of property for another, made by one party without authority from the other, and subsequently ratified by the latter, or it was the case of the conversion to his use by the depositary of property in his hands, and his substituting property equivalent in value as the investment of the property converted.

This suit must proceed, therefore, if at all, not on the ground of an alleged preference to a creditor in violation of the Bankrupt Act, but upon the ground that the title to the note and mortgage never passed from the bankrupt, because the ratification of his unauthorized transaction was not made until after the period when the rights of the trustees attached; or on the ground that the note and mortgage never became subject in the hands of the bankrupt to the claim of the defendant as the investment of the latter's property, because the bonds appropriated were not first sold and their proceeds used in the purchase of the note and mortgage.

Both of these grounds were urged by counsel of the appellants, and it is on their disposition that the case must be determined.

The substitution of the note and mortgage in place of the bonds was approved by the defendant immediately upon being made acquainted with the facts. This approval constituted a ratification of the transaction. The general rule as to the effect of a ratification by one of the unauthorized act of another respecting the property of the former, is well settled. The ratification operates upon the act ratified precisely as though authority to do the act had been previously given, except where the rights of third parties have intervened between the act and the ratification. The retroactive efficacy of the ratification is subject to this qualification. The intervening rights of third persons cannot be defeated by the ratification. In other words, it is essential that the party ratifying should be able not merely to do the act ratified at the time the act was done, but also at the time the ratification was made. As said in one of the cases cited by counsel, 'the ratification is the first proceeding by which he (the principal ratifying) becomes a party to the transaction, and he cannot acquire or confer the rights resulting from that transaction unless in a position to enter directly upon a similar transaction himself. Thus, if an individual pretending to be the agent of another should enter into a contract for the sale of land of his assumed principal, it would be impossible for the latter to ratify the contract if, between its date and the attempted ratification, he had himself disposed of the property. He could not defeat the intermediate sale made by himself, and impart validity to the sale made by the pretended agent, for his power over the property or to contract for its sale would be gone.' On the same principle liens by attachment or judgment upon the property of a debtor are not affected by his subsequent ratification of a previous unauthorized transfer of the property.

The question, therefore, in this case is whether any rights of third parties did thus intervene between the act of substitution made by Homans and its adoption and ratification by Tullis, which defeated the retroactive efficacy of the ratification. And the test is, as already indicated, could the parties have made the transaction at the time of the ratification without contravening the provisions of the Bankrupt Act? It is asserted by the appellants that the rights of the trustees extend not only to all property of the bankrupt in his possession when proceedings in bankruptcy were instituted against him, but also to all property transferred by the bankrupt within four months previously to a creditor in order to give him a preference over other creditors, or transferred by the bankrupt within six months previously to any one to defeat or evade the operation of the Bankrupt Act, the grantee in both cases knowing or having reasonable cause to believe that the grantor was at the time insolvent or that he then contemplated insolvency. Admitting this to be so, it does not follow that the trustees acquired any right to the note and mortgage in question. They were not transferred to the defendant, as already stated, to give a preference to one creditor of the bankrupt over another, for the defendant was not a creditor of Homans at the time, nor were they transferred to him to evade or defeat any of the provisions of the Bankrupt Act; the transaction was neither designed nor calculated to have any such effect. Homans was not insolvent at the time, nor did he contemplate insolvency. But even if he had been then insolvent, the transaction would not have been the subject of just complaint on the part of his creditors, if made with the approval of the defendant whose bonds were taken. There is no pretence that the property substituted was not equally valuable with that taken, or that the estate of the bankrupt was any the less available to his creditors. A fair exchange of values may be made at any time, even if one of the parties to the transaction be insolvent. There is nothing in the Bankrupt Act, either in its language or object, which prevents an insolvent from dealing with his property, selling or exchanging it for other property at any time before proceedings in bankruptcy are taken by or against him, provided such dealing be conducted without any purpose to defraud or delay his creditors or give preference to any one, and does not impair the value of his estate. An insolvent is not bound, in the misfortune of his insolvency, to abandon all dealing with his property; his creditors can only complain if he waste his estate or give preference in its disposition to one over another. His dealing will stand if it leave his estate in as good plight and condition as previously.

We do not think, therefore, that the rights of the trustees, though relating back four months so as to avoid preferences to creditors, and six months to avoid transfers to others, in fraud of the act, and thus going back of the ratification, touched the transaction in question or prevented the ratification from having complete retroactive efficacy.

The position of counsel, that the ratification, if sustained, only extended to the conversion of the bonds, and merely operated to deprive the transaction of its tortious aspect, all else consisting of dealings by Homans with his own property, is not tenable. The answer to its is, that the ratification was of the whole transaction taken together; that of the appropriation of the bonds upon substituting an equivalent in value for them, not of a part without the rest, not of the appropriation without the substitution.

Nor do we perceive the force of the objection to the validity of the transaction, because Homans intended to limit the transfer to the value of the bonds, to wit, six thousand dollars. The transfer was in form of the whole note, with a reservation to himself of the surplus over the amount of the bonds received from its proceeds. The note being indivisible, the legal title to a part could only be made by a transfer of the instrument itself. The reservation of the surplus was not forbidden by any rule of law, and a court of equity would, and, in this case has, given effect to it.

But if we lay aside the doctrine of ratification as inapplicable, and assume that the transaction could not have been made by the parties after the failure of Homans, and, therefore, that the previous substitution could not then have been ratified, and treat the case as one of simple misappropriation of property of the defendant, still the trustees must fail in their suit. They took the property of the bankrupt subject to all legal and equitable claims of others. They were affected by all the equities which could be urged against him. Now, it is a rule of equity jurisprudence, perfectly well settled and of universal application, that where property held upon any trust to keep, or use, or invest it in a particular way, is misapplied by the trustee and converted into different property, or is sold and the proceeds are thus invested, the property may be followed wherever it can be traced through its transformations, and will be subject, when found in its new form, to the rights of the original owner or cestui que trust.

In the case of Taylor, assignee of a bankrupt, against Plumer, this doctrine is well illustrated. There a draft for money was intrusted to a broker to buy exchequer bills for his principal, and the broker received the money and misapplied it by purchasing American stock and bullion, intending to abscond with them, and did abscond, but was taken before he quitted England. Thereupon he surrendered the stock and bullion to his principal, who sold the whole and received the proceeds. The broker became bankrupt on the day he received and misapplied the money, and his assignees sued for the proceeds of the stock and bullion. But the court decided that the principal was entitled to the proceeds as against the assignees, holding that if property in its original state and form is covered with a trust in favor of the principal, no change of that state and form can divest it of such trust and give to the trustee, or those who represent him in right, any more valid claim in respect to it than he previously had; and that it makes no difference in reason or law into what other form, different from the original, the change may have been made, for the product of, or substitution for, the original thing still follows the nature of the thing itself, as long as it can be ascertained to be such, and that the right only ceases when the means of ascertainment fail.

It is contended that the doctrine of this case does not apply, because the note and mortgage were not purchased with the proceeds of the bonds taken, but were substituted for them. We do not think this fact takes the present case from the principle upon which the other proceeds, that property acquired by a wrongful appropriation of other property covered by a trust, is itself subject to the same trust. It cannot alter the case that the newly acquired property, instead of being purchased with the proceeds of the original property, is obtained by a direct exchange for it. The real question in both cases is, what has taken the place of the property in its original form? Whenever that can be ascertained, the property in the changed form may be claimed by the original owner or the cestui que trust, and assignees and trustees in bankruptcy can acquire no interest in the property in its changed form which will defeat his rights in a court of equity.

DECREE AFFIRMED.

Mr. Justice MILLER dissented.

title: Cook v. Tullis/Opinion of the Court


text: Talk:Cook v. Tullis/Opinion of the Court


text: Mulhall v. Keenan

title: Mulhall v. Keenan


text: Talk:Mulhall v. Keenan

title: Talk:Mulhall v. Keenan


text:
Mulhall v. Keenan/Opinion of the Court

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

Keenan & Co. were residents of Chicago, and commission dealers in live stock there. On the 7th of July they gave W. L. Tamblyn, then about to go to St. Louis to buy cattle for them, a letter of introduction to Joseph Mulhall, a similar dealer of that place, and who previously to this had had dealing in cattle on his own account with Keenan & Co. The letter was in these words:

MR. JOSEPH MULHALL.

CHICAGO, July 7th, 1870.

DEAR SIR: The bearer, W. L. Tamblyn, goes to your city to buy cattle, and any favors conferred will be reciprocated. You will make advances on any stock consigned to me, and draw sight or time drafts when there is sufficient margin, and oblige,

Yours, respectfully,

KEENAN & Co.

Cattle were accordingly forwarded from St. Louis to Keenan & Co. at Chicago; and at the conclusion of one transaction Keenan & Co. claimed a balance of $2336.26, from Mulhall, on account of a draft for $9070.73, drawn by Mulhall hall on the 20th of July, 1870, and paid by them, which draft had not been discharged by the price for which the cattle against which it was drawn had been sold.

That Keenan & Co. by the transaction in this particular lot of cattle had got out of pocket to the extent asserted by them was apparently not denied. The question was whether Mulhall was liable to repay to them the deficit.

He asserted that he was not, that he had drawn on Keenan & Co. pursuant to the above-quoted letter, for cattle bought by Tamblyn, and that regard being had to the value of the cattle sent he had kept his drafts within such limits that he had left a 'sufficient margin;' the inference being, of course, that if Keenan & Co. were out of pocket, they had made injudicious sales or had acted negligently. Keenan & Co. asserted, on the other hand, that Mulhall had not sent the cattle under the above-quoted letter, but had sent them on his own account, and independently of the letter. It was admitted that Mulhall when forwarding his draft had not advised Keenan & Co. that it was drawn in pursuance of the letter of credit, and that the cattle were Tamblyn's. And further, that after the cattle in connection with which the draft had been drawn reached Chicago, Keenan & Co. thus telegraphed to Mulhall:

July 25th, 1870.

TO JOSEPH MULHALL,

St. Louis, Mo.

Sold forty-four tails ($4.40), car natives, 7 cents; balance unsold; four half best offer. Can ship New York $50 car. Answer.

W. T. KEENAN & Co.

And that the bookkeeper of Mulhall (Mulhall himself at the time being ill, and, as the bookkeeper testified, 'not having been consulted,' and he the bookkeeper 'acting on his own judgment and responsibility from his general position in Mulhall's office, and never thinking of the cattle being Tamblyn's, nor looking at the books,') returned a telegram thus:TO W. T. KEENAN & CO.,

Chicago.

Ship one-half cattle to William Thompson; 100th Street, New York; other half to your consignees.

JOSEPH MULHALL.

The questions thus were whether Mulhall had sent the cattle about which the deficit arose, under the letter.

If he had not, there was, of course, an end of his defence from that source. If he had, then arose a further question, to wit:

Whether he did keep his drafts within such limits as that, regard being had to the value of the cattle, he had left a 'sufficient margin.'

The parties being unable to agree, Keenan & Co. sued Mulhall in assumpsit, and filed with their narr a bill of particulars thus:

CHICAGO, August 6th, 1870.

Joseph Mulhall in account with Keenan & Co.

1870.     DR.

"   6.  " exchange on money dep.,  3

"   "   "    "      " draft drawn,  4

July 26. By account sales, 59 cattle, $3112

Aug. 6.  "   "      "     126 "   Thompson & Co.,    1610

"   "   "   "      "     114 " Ranken,  1892

On the trial, the plaintiffs, in order to show that the draft was drawn on Mulhall's own account, offered in evidence a letter of Mulhall's thus:

ST. LOUIS, July 12th, 1870.

W. T. KEENAN.

DEAR SIR: I ship you 12 cars of catle Mr. Tamlyn has one half Entrust he allso has th cst of th catle I will put fore thousand Dollars charges or moore on th catl and draw for th ballens I may by som moore Befor Mr. Tamblyn gets back Dow th best you can

yurs truly

JOSEPH MULHALL.

To the admission of this evidence the defendant objected, but the court received it.

The defendant then, in order to show that the cattle were sent on account of Tamblyn, offered in evidence his own books, in which an account of the cattle was entered, with a heading thus:

'PURCHASE CATTLE. (Tamblyn.)'

The plaintiff objected to the evidence, and the court excluded it.

Mulhall himself swore that it was always the rule in their business where a party advanced for another, as he said 'in this case I did for Tamblyn on Keenan's credit,' to ship the cattle in the name of the person who advances, and he added, 'These cattle were shipped in my name.'

The plaintiff, then, near the close of the trial, offered evidence to show that assuming that the cattle were sent on account of Tamblyn, and under the letter of July 7th, 1870, Mulhall in his drafts had not allowed for shrinkage of the cattle on their way to Chicago, and for bad markets; in other words, had not left, as in the letter of July 7th he had been directed to leave, a 'sufficient margin.'

To this evidence the defendant objected, but the court received it.

The court, to which by a stipulation of the parties the case had been submitted, found for the plaintiffs $2336.26, the amount claimed, with interest.

The defendant and his counsel thereupon filed affidavits, very full to the point, that they had been completely taken by surprise by the admission of the testimony to prove that the margin was not sufficient; that they had supposed that the only issue was whether Mulhall was liable for the draft as his individual transaction. The counsel swore that he had so informed Mulhall near the close of his trial; and that no question as to margin could arise. Mulhall swore that in point of fact there was sufficient margin, and that he had informed his counsel when evidence was given to the contrary, that he could prove this, and that the deficit sued for had arisen from the negligence of Keenan & Co., but that the counsel informed him that the case was closing, and that the witnesses (who were at stock-yards between one and two miles from the place of trial) could not be got in time. He swore further that he could still prove all that he thus alleged, if opportunity was given to him. The affidavits of other persons were filed to show that there was a sufficient margin. A new trial was accordingly moved for; but the court refused it.

The case was now here on exceptions by the defendant:

1st. To the admission of his letter of July 12th.

2d. To the exclusion of the entries in his own books.

3d. To the admission of testimony about margins.

Objections were also made here that the court below had improperly disregarded the affidavits of Mulhall and his counsel about surprise, which it was argued it ought not to have done, since the bill of particulars filed with the declaration showed that the claim was on Mulhall as for an individual transaction, and naturally led to the belief that no question about margins would be raised.

Messrs. M. Blair and F. A. Dick, for the appellants, insisting chiefly on the first and third exceptions; Mr. J. M. Krum, contra.

Mr. Justice SWAYNE delivered the opinion of the court.

The defendants in error, under the name of Keenan & Co., sued Mulhall to recover a balance alleged to be due to them upon a draft drawn by him and accepted and paid by them. The parties waived the intervention of a jury, and submitted the cause to the court. The court found for the plaintiffs, and assessed their damages at $2336.26. Judgment was entered accordingly. There was no special finding of facts. A bill of exceptions in the record shows, that during the progress of the trial, the defendant excepted to the admission of evidence offered by the plaintiffs, and to the rejection of evidence offered by himself. Three specific errors have been assigned in this court.

(1.) The admission in evidence of the letter of Mulhall-of the 12th of July, 1870-to the plaintiffs.

(2.) The exclusion of certain entries on the defendant's books.

(3.) The admission of the testimony relating to margins.

The second assignment has been virtually abandoned, and need not, therefore, be considered. It is too clear to admit of doubt that the ruling to which it relates was correct.

The letter of the 12th of July, 1870, stated, among other things, that Mulhall might buy more cattle before Tamblyn got back. It said nothing of Tamblyn having any interest in such purchase, or in any further purchase the defendant might make. Mulhall testified that the cattle were shipped to Keenan & Co., in his name. When consulted by them about the disposition of the cattle unsold, his authorized agent directed them to be shipped to New York. The draft was drawn after the cattle were shipped to Chicago. No explanation whatever accompanied it to Keenan & Co. Mulhall insisted that the cattle belonged to Tamblyn, subject to his advances upon them, and that the advances were made and the draft drawn upon the faith of the letter of credit addressed to Mulhall in favor of Tamblyn, which Keenan & Co. had given to the latter. Keenan & Co. claimed that they believed, and, under the circumstances were warranted in believing, that the cattle belonged to Mulhall, and that the draft was drawn solely on his own account. The letter in question was an important link in the plaintiffs' chain of evidence touching this issue. As such, it was clearly competent and proper to be received in evidence. Its weight and effect, in connection with the other testimony upon the subject, were questions for the jury. There was no error in this ruling.

Whether it was incumbent upon Mulhall, when the draft was forwarded, to notify Keenan & Co. that it was drawn in pursuance of the letter of credit, and that the cattle were Tamblyn's, is a point not raised and upon which we need, therefore, say nothing. #fn-s-s

The third assignment remains to be considered. It relates to the admission of testimony as to the margins.

The letter of credit authorized Mulhall 'to make advances on any stock consigned' by Tamblyn to Keenan & Co., and to 'draw sight or time drafts when there was sufficient margin.' The limits within which the authority to draw was given, were thus distinctly marked. Beyond them it did not subsist, and Keenan & Co. were in no wise liable to the drawer. The case presented four questions:

Whether the draft was drawn by Mulhall for his own account.

If not, whether he was estopped from denying that it was so drawn.

Whether it was drawn in pursuance of the letter of credit.

If so drawn, whether there was such margin in respect to the value of the cattle, as conformed to the requirement of the letter of credit, and made it obligatory on Keenan & Co. to pay the draft.

In the view presented by the last inquiry, the testimony was clearly admissible.

This is not denied by the counsel for the plaintiff in error; but it is insisted that this phase of the case took the defendant and his counsel by surprise, and that they did not come to the trial prepared to meet it.

It is insisted further, that this proposition is not consistent with the bill of particulars filed with the declaration. The bill of particulars is made up of the debit of the draft in question, sundry credits, and the balance claimed by Keenan & Co. It is alike consistent with either phase of the case. If the plaintiffs were entitled to recover in any view of the facts to be developed upon the trial, the amount to be recovered was thus shown. The ground or grounds upon which the recovery was to be insisted upon were in nowise indicated. That was not the purpose the paper. If there were surprise, the only remedy for it was a motion for a new trial. Such a motion was made, supported by the affidavits of Mulhall, his counsel, and others, and was overruled by the court. With that motion and its result we have nothing to do. They cannot be made the subject of review by this court. Our duty is to ascertain whether there is any error in the record of which we can take cognizance. We have found none, and the judgment is

AFFIRMED.

title: Mulhall v. Keenan/Opinion of the Court


text: Talk:Mulhall v. Keenan/Opinion of the Court


text: Galpin v. Page

title: Galpin v. Page


text: Talk:Galpin v. Page

title: Talk:Galpin v. Page