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The Favorita/Opinion of the Court

It is not necessary for the proper disposition of this case to reconcile conflicting testimony, as is frequently required in causes of collision. It is true the witnesses differ in opinion on the question whether the Manhassett pursued the proper course when threatened with danger, and also in the matter of distances, but these differences do not affect the main points on which we rest our decision.

It is manifest, on account of the extent of the shipping constantly passing through the East River at this point of it, that the greatest vigilance is required in the navigation of the stream by vessels passing up or down it. More especially is this so by reason of the constant passage of ferry-boats across the river. The extent of this business can hardly be overstated. Millions of passengers are transported between Brooklyn and New York annually, and, of necessity, the boats must make their trips with regularity by night as well as by day, and in all kinds of weather. All persons who seek the waters of this river must observe the rules which tend to the safety of navigation. This observance involves no hardship, and does not assert any exclusive or prior right in behalf of ferry-boats. It is necessary for the protection of all the different interests centring in this great harbor, and these interests are all to be recognized and considered in determining what is or is not good navigation under the circumstances. Manifestly the rules of navigation must vary according to the exigencies of business and the wants of the public. The rule which would be applicable in a harbor where the business was light and the passage of vessels not liable to be impeded, would be inapplicable in a great thoroughfare like the East River. In the former it might be that vessels could with safety run across the mouths of ferry slips in going to or from their wharves, while in the latter such navigation would necessarily be hazardous. It is hazardous, because ferry-boats are constantly emerging from their slips, and their masters generally unable, on account of the shipping moored about the piers, to discover approaching vessels until they have got their boats out into the open river. Common prudence, therefore, requires that vessels in the situation of the Favorita should occupy as near as possible the middle of the river. This is necessary for the mutual safety of all concerned in its navigation, and is required for the protection of life as well as property. If the middle of the river be previously occupied, and the ship is obliged to go nearer to shore in order to avoid other vessels pursuing the same track, she must run at such a slow rate of speed as to be easily stopped, so as not to endanger boats pursuing their regular and accustomed occupation. Any other rule than this would tend to the confusion rather than the safety of navigation, and put in jeopardy the lives of hundreds of people. The grest and varied business interests conducted in this harbor require the rigid enforcement of this rule. Indeed, the necessity for it was so apparent that the legislature of New York, doubtless in order to render it more effective, embodied it in a statute. The Favorita, without excuse, violated this rule. It is plain from all the evidence that her object in going where she did was to seek and keep the eddy. This may have made her navigation easier, but she cannot escape in this way, for there was no difficulty in running the boat out in the river, and the excuse that she went close in shore to avoid other vessels is not sustained by the evidence. There were no more vessels than usual in the river at the time, and no reason given why a departure from the usual path was necessary under the circumstances. Besides, suppose there was, the Favorita is condemned by her rate of speed. If she was placed in the predicament which compelled her to take the shore track, obviously her speed should have been lowered, so that the boat could have been readily stopped, and on a moment's warning changed to the right or left, as the necessities of the case may have required. It may be that in the middle of the river she could have been safely run at eight or ten miles an hour (a point on which we express no opinion), but clearly, running along across the pier ends and ferry slips of the East River at such a rate of speed is at all times dangerous, and the result proves that it was particularly so at this time.

There is a good deal of testimony bearing on the point of the distance of the Favorita from the shore at the time of the collision, but it is unnecessary to consider it, for the estimate of witnesses in times of sudden peril on such a subject is mere conjecture, and necessarily inconclusive. That the ship was out of the path she should have occupied, and improperly close to the Brooklyn shore, is evident enough, because both vessels were in perilous proximity the moment the Manhassett emerged from her slip. Had she been at a suitable distance from the shore, or going with a materially lessened speed, the collision would not have happened, and the inquiry arises whether she must alone suffer for the loss that occurred. On a consideration of the whole evidence we are unable to see in what respect blame can be cast on the Manhassett.

It is clear that the officers of the Manhassett did not see the Favorita, on account of intervening vessels, until the former had emerged from her slip, and equally clear that they had no right to expect the Favorita to be in the wrong place in the river. The peril was imminent as soon as the Manhassett had cleared her slip, and both vessels were in full view of each other. Both at once applied the means and took the course deemed proper by their officers to prevent the catastrophe. It is said if the Manhassett had advanced instead of stopping she would have cleared the steamship. This may or may not be true, but if true, she is not in fault for this error of judgment. It was a question whether to advance or to stop and back, and the emergency was so great that there was no time to deliberate upon the choice of modes of escape. In such a moment of sudden danger, caused by the misconduct of the Favorita, the law will not hold the pilot of the Manhassett, acting in good faith, guilty of a fault, if it should turn out after the event that he chose the wrong means to avoid the collision, unless his seamanship was clearly unskilful. And this we do not find to be the case. On the contrary, if there were error at all, it was such a mistake of judgment as would likely be committed by any one in similar peril. If the Favorita had been where good navigation required her to be, or had she slackened her speed so as to be able to stop as soon as she discovered the Manhassett, the danger would not have existed, nor the accident happened. She is, therefore, in our opinion, chargeable with all the consequences that flow from this collision.

The appellants object to the allowance of demurrage by the commissioner on the ground that the ferry company suffered nothing by the loss of the use of the Manhassett while undergoing repairs, because her place was supplied by a spare boat kept for emergencies, and which would otherwise have been idle. This subject was fully discussed in the case of The Cayuga by the learned circuit judge of the second circuit, who sustained a similar allowance, and as that case was affirmed on argument in this court, and his views adopted, we must consider the question as no longer open to discussion.

DECREE AFFIRMED.

title: The Favorita/Opinion of the Court


text: Talk:The Favorita/Opinion of the Court

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title: Talk:The Favorita/Opinion of the Court


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Page:Copyright, Its History And Its Law (1912).djvu/205

 first written a play called "Gold" and had then transformed that into the novel; in this the defendant was enjoined because the version which he produced infringed the earlier play. In Beereu. Ellis in 1889, Baron Pollock enjoined a rival dramatic version of "As in a looking glass" on the ground that while bits of dialogue, presumably copied into the defendant's version, were scarcely substantial, yet a special situation founded on a new incident not in the novel and certain stage business connected with the death of the heroine constituted an infringement. In 1890, in Schlesinger v. Turner, the executors of Wilkie Collins obtained an injunction against a rival dramatic version of "The new Magdalen," the judge holding that although the defendant's version had not been copied from the author's own play, it was substantially similar and therefore an infringement. That an independent and different dramatic version can, however, be made, was specifically held in the case of Schlesinger v. Bedford in the same year, when Collins's executors failed to obtain an injunction against the defendant's rival dramatic version of "The woman in white," although the novelist himself had previously dramatized his work, the judge holding that the two plays were "essentially different."

But the use in a play of considerable portions of a copyrighted novel would be an infringement. That a dramatization using substantial parts of a novel infringes the novel, was definitely established in 1863 in Tinsley v. Lacy, where the proprietor of Miss Braddon's "Lady Audley's secret" and "Aurora Floyd" obtained an injunction against a bookseller who sold dramatizations under the same titles of which a quarter or more of the text was taken bodily from the novels. So in 1888 an injunction was obtained from Judge Stirling, in Warne v. Seebohm, in the Court of


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Espy v. Bank of Cincinnati

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

Stall & Meyer were grocers of Cincinnati, and kept a deposit account in the First National Bank there. Espy, Heidelbach & Co., were brokers in the same city, dealing in government bonds and gold. On the 26th of April, 1870, a well-looking stranger entered the office of these last, and proposed to purchase of them certain bonds and a specified quantity of gold. They agreed to sell both to him at a price named, $3920. He then told them that he would go to Stall & Meyer, with whom he represented that he had dealings, get their check for the amount, and return in about two hours. He went away and returned in about two hours with a check of Stall & Meyer, drawn apparently to the order of Espy, Heidelbach & Co., and for the sum of $3920, which he offered to them for the bonds and gold that he had bought. The firm sent one of their clerks, named Snarenberger, to the bank with directions to ascertain if the check was good, and to say that it was presented by a stranger. Snarenberger presented the check to the teller of the bank, a person named Sanford, who examined it, looked at the account of Stall & Meyer on the bank books, and said to Snarenberger, 'It is good,' or 'It is all right' (the witnesses did not agree which), 'send it through the clearing-house.'

According to Snarenberger's account, he told Sanford that the check was offered by a stranger. Sanford denied that he was told this; but he asserted notwithstanding that he told Snarenberger that if the check was offered to Espy, Heidelbach & Co. by a stranger, he would advise them to have nothing to do with him, no matter how well-looking he was.

After this interview, examination, and answers, Snarenberger went back to the office of Espy, Heidelbach & Co., and informed them that the teller had said, 'It is all right, send it through the clearing-house.' They thereupon delivered to the stranger the bonds and the gold that he had contracted for, and he went his way and was no more heard of.

The check was put through the clearing-house and paid. But on the next day it was discovered that it was an altered or 'raised' check; that the stranger had gone to Stall & Meyer professing to purchase some groceries for a Mrs. E. Hart; that having purchased $23.50 worth, he handed them a $50 bill in payment, asking them to pay him the difference, $26.50, by a check of their own, so that Mrs. Hart might see that he had taken no commission, which they accordingly did, the check being drawn to the order of Mrs. E. Hart; and that the stranger had very ingeniously altered the instrument by substituting as the sum to be paid $3920 instead of $26.50, and by substituting the name of Espy, Heidelbach & Co., for that of Mrs. E. Hart as payee.

Espy, Heidelbach & Co. not being willing to pay back the money got upon the check, the bank sued them in assumpsit to recover the amount improperly paid.

On the trial the plaintiff called one Goodman, who, having testified that he had been a banker in Cincinnati all his life, and was familiar with the customs and usages of banks and bankers there, was asked,

'When a check is sent by a bank, to which it is offered, to the bank upon which it is drawn, to know whether it is good or not, and the answer is, 'That is good,' or 'All right,' has that answer. . . acquired any peculiar or limited meaning? If so, state what that meaning is, and to what it is limited.'

The court allowed the question under objection and exception, and the witness having testified that this language had acquired a peculiar or limited signification, and was understood to refer to the genuineness of the signature, and whether the money was in bank to meet the check; and on cross-examination, that he had never heard the meaning of the terms discussed, or any question made as to the same, or known of any transaction requiring a decision as to their meaning before April 26th, 1870,-and having further testified that the terms 'It is good,' or 'It is all right; send it through the clearing-house,' had not acquired any peculiar or limited meaning-the defendants moved to exclude the answer given to the question last aforesaid, as incompetent and irrelevant, which motion the court overruled, and the defendants excepted.

Similar evidence from other witnesses was received, under objection and exception.

The plaintiff made ten requests for charges, including as a fifth and sixth, these two:

'Fifth. If the defendants, before receiving this check, sent their messenger to the plaintiffs' bank to examine the check carefully, and if it appears from the evidence that among bankers at that time such a request was understood to refer to the genuineness of the signature and state of the account, this inquiry must be presumed to be intended to refer to those parts of the check to which they had the means of giving accurate information, and nothing else; and if as to these matters true answers were given, and the plaintiffs' teller gave his honest judgment as to the general character of the check, and had no knowledge of and could not readily discover this alteration by an inspection of the check, then the plaintiffs are not estopped from recovering this money.

'Sixth. If at the time of this transaction the words 'good' or 'all right' amount bankers was simply understood to refer to the genuineness of the signature and the state of the account, and the said words were so used and intended to be used by Mr. Sanford at that time when he said the check was 'good' or 'all right,' and if the said check had a fraudulent alteration, so skilfully done as not to be readily discovered by an inspection, and which was not known to either party at the time the said check was presented to Mr. Sanford, and if the signature of the check was genuine, and the account good, then the plaintiffs are not estopped from recovering the said money in this action by reason of the said answer given by Mr. Sanford.'

The two, thus above given, were refused.

The defendants made eight requests for charges, including this one as a fourth, which the court gave.

'Fourth. A verbal certification of a check is equally valid with a written certification, and constitutes a contract, obligatory on the party giving the certification, the consideration of which is the property parted with by the party receiving the certification on the faith of the certification.'

The whole ten instructions requested by the plaintiff were given, with the exception of the fifth and sixth ones, quoted supra, p. 607, which two, as already said, were refused.

On the other hand, the eight instructions requested by the defendants were refused (or granted only in modified forms), with the exception of the fourth one, as above quoted.

To the grant of the eight requests of the plaintiff granted, and to the refusal (or grant only in modified forms) of the seven not granted or only so granted, and requested absolutely by the defendants, the defendants excepted.

However, neither the instructions which, at the plaintiff's request, were granted, nor those which in face of the defendants' request were denied, or granted only in modified forms, need here to set out; since the court, of its own motion, summed up (as this court considered) the substance of every instruction given at the request of the plaintiff, and of all its denials of requests by the defendants, in certain propositions made thus in a charge of its own:

'1. If the object of the defendants in sending the check to the plaintiff was to have them examine the same and pass upon the genuineness of the signature of the drawers, and the state of their account with them, and the plaintiff so understood their object, and returned to them the answer, that 'It is good,' or 'All right; send it through the clearing-house,' such answer would be a parol certification of the check, as to the genuineness of the signature, and that the drawers had funds in their hands to meet it, and the plaintiff by such parol certification would be estopped from denying either that the signature was genuine or that the drawers had funds to meet the check.

'2. If the defendants, in order to test the genuineness of the signature of the drawers, that they had funds in their hands to meet it, and to test its genuineness in all other respects, sent it to the plaintiff for inspection and examination, and the plaintiff, knowing the full extent of the object for which it was sent, sent back the reply, 'It is good,' or 'It is all right,' and if the defendants relied upon that answer, and were induced to act upon it, and parted with their bonds and gold upon the assurance of the answer, the plaintiff will be estopped from setting up the fact that the check was a raised check.

'3. If the defendants had no suspicion of the check being a raised check, and sent the check to the plaintiff for the purpose of examination, without specifying the particulars to which they wished the examination directed, the plaintiff had a right to presume that such examination was desired in relation to such points of which the law presumed them to have knowledge, to wit, the genuineness of the drawers' signature, and the state of their account, and if in good faith they made examinations in regard to these points, and they had no knowledge of the raising of the check, or had no particular means not common to the defendants of knowing that it had been raised, their answer to the inquiry must be confined to the genuineness of the signature of the drawers and the state of their account, and cannot be extended as an assurance or guarantee that the check is not a raised check, and plaintiffs are not estopped from setting up such fact.

'4. If the defendants and the plaintiffs were mutually ignorant of the fact of the raising of the check, and neither party had any suspicion that it had been so raised, and the parties having within their power equal means of ascertaining that fact, the law did not impose upon the plaintiff more than upon the defendant the duty of calling upon the drawers to ascertain whether such check had been so raised, and if the plaintiff under such circumstances paid the amount of said check to the defendants, such payment is not an adoption of the check as genuine, and the plaintiffs are not bound by said payment, and are not estopped from showing that the check was so raised.'

To the part three of these instructions the defendants excepted.

Messrs. G. Hoadly and E. M. Johnson, for the plaintiff in error:

I. As to the admission of incompetent testimony.

This consists of several particulars, among them may be mentioned the allowing Goodman to testify to a peculiar meaning attributed, by usage of Cincinnati bankers, to the words, 'that is good,' or 'all right;' no one having pretended that those were the words used; and he testifying that the words, which were in fact used,-'It is good,' or 'It is all right; send it through the clearing-house,'-had not acquired a peculiar meaning, and further, that before the day of the transaction in controversy, April 26, 1870, he had never known of a transaction requiring a decision as to the meaning of the words, 'It is good,' or 'All right,' and had never heard their meaning discussed, or any question made as to the same.

II. As to the legal effect of the words used by plaintiff's teller to the defendants' messenger.

Both parties agreed that the check was shown to Sanford; that he was the proper officer to certify checks, or furnish information of their value; that he knew it was offered to Espy, Heidelbach & Co., and that the offer was pending and undetermined, awaiting his reply; that he examined the check, and said, with the design of having the statement repeated to the defendants, and that they should act upon it, 'It is good,' or 'All right,' 'send,' or 'put it through the clearing-house.'

1. These words constituted a verbal certification, equivalent in law to a written certification of the check.

In the leading case of Merchants' Bank v. State Bank, the form of certification adopted was,

'Good. C. H. SMITH, Cashier.'

In Meads, Receiver, &c., v. The Merchants' Bank of Albany, the form adopted was,

'Good. KIRTLAND, Teller.'

Not only is the form of words thus used for written certification almost identical with those in the present case, but in essential meaning it is quite the same. Both the written and spoken phrase assures the holder that the check, in the form in which it then appears, is good, and will be paid to the holder on presentation. It is an engagement by the bank, upon which will rest the duty of paying the check, that it will comply therewith.

Wherein does, or can the written 'certificate of the bank that a check is good,' differ, in legal effect, from the same certificate by parol? The form of words is the same; the consideration the same; the intent and meaning the same.

The authorities concur in holding a verbal certification equivalent to a written, or to acceptance.

2. Being equivalent to a written certification, the examination and statement of the teller constitute an original obligation, in the nature of an acceptance, which the certifying bank must comply with by payment, and cannot recover back after payment.

In Merchants' Bank v. State Bank, this court says:

'The certification of a check, is an undertaking that the check is good then, and shall continue good, and this agreement is as binding on the bank as its notes of circulation, a certificate of deposit payable to the order of the depositor, or any other obligation it can assume. The object of certifying a check as regards both parties, is to enable the holder to use it as money. The transferee takes it with the same readiness and sense of security that he would take the notes of the bank. It is available also to him for all the purposes of money. Thus it continues to perform its important functions until in the course of business it goes back to the bank for redemption, and is extinguished by payment.'

This authority is of course conclusive, and it is in full accord with the other decisions.

3. The certifying bank cannot escape its duty of payment, or, having paid, recover back the money, under pretence of a fraudulent alteration of the check before certification.

Alteration after execution will discharge the maker or other party to a promissory note, bill of exchange, or check. But alteration before execution is quite different.

In Sanderson v. Collman, Tindal, C. J., says:

title: Espy v. Bank of Cincinnati


text: Talk:Espy v. Bank of Cincinnati

title: Talk:Espy v. Bank of Cincinnati


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Espy v. Bank of Cincinnati/Opinion of the Court

'The first point in this case is whether the drawee, after accepting the thereby giving an apparent validity to a bill, has a right in an action against him as acceptor to set up as a defence that the name of the drawer was forged, or other matter invalidating the bill. And it appears to me that he has no such right.'

In 'assumpsit by the indorsee against the acceptor of a bill of exchange, the plea was that before the bill became due, and whilst it was 'in full force and effect,' the date of it was altered by the drawer, whereby it became void: Held, that the plea was bad, because it did not allege the alteration to have been made after acceptance.'

'It is no defence to an action by a bona fide holder of a bill of exchange against the acceptor, that the bill was fraudulently altered before acceptance.'

It seems clear from these considerations and authorities, that the theory of law applied to the case by the court below was founded in error.

III. As to the plaintiff's supposed right to recover for money paid by mistake.

It is obvious that this right does not extend to every case of mistake. At law, the right to recover money paid by mistake is limited to the cases where no consideration passed. In the case at bar, there was a consideration; the consideration consisting of the detriment to the defendant in receiving the check, and delivering the gold and bonds, upon the faith of the plaintiff's representation that the check was good, and its promise to pay at the clearing-house.

In equity, a complainant seeking to set aside and cancel a transaction, and recover moneys paid or other property transferred or conveyed, can succeed only on condition that he replace the defendant in statu quo, by returning him the consideration he parted with. If part of this consideration consists of money paid at the complainant's instance to a third person, that money must be restored, as a condition of decree.

This rule is recognized even at law, in Pennsylvania. Chief Justice Gibson in Boas v. Updegrove, states it thus:

'Money voluntarily paid by mistake cannot be recovered back where the parties cannot be placed in statu quo; for where the blunder necessarily imposes a loss on some one, it must be borne by the author of it.'

Who was the author? Certainly no one but the plaintiff, whose teller, after careful inspection of the check, replied, 'The check is good, or all right; send it through the clearing-house.' Upon the faith of this representation and promise the defendants parted with their gold and bonds. Return the value of this gold and bonds, or cease to press for a rescission of the dealings between the parties.

Concede that the whole matter was a blunder, that both parties were equally ignorant, and that neither of them suspected, or could have discovered it was a raised check, the first blunderer was the plaintiff, and therefore it was in law the author of the blunder. This principle was recognized and enforced in the Irving Bank v. Wetherald.

IV. The plaintiff is estopped in pais to dispute its liability upon the acceptance.

A case quite similar to that under discussion was disposed of in Alabama by the principle of estoppel. The court say:

'If the maker of a promissory note tells one seeking to trade for it, and desirous to know if he has any defence against it that it is 'all right,' he will not be permitted afterwards to dispute this admission when sued on the note by the party to whom the admission was made.'

The principle of estoppel in pais was thus stated by Lord Denman in Pickard v. Sears.

'Where one by his words or conduct wilfully causes another to believe the existence of a certain state of things, and induces him to act on that belief so as to alter his own provious position, the former is concluded from averring against the latter a different state of things as existing at the same time.'

The word 'wilfully' as here used has since been construed to mean 'voluntarily:'

Had Sanford refused to answer, or said, 'Inquire of Stall & Meyer,' or, 'The amount stands to their credit, and the signature is genuine,' there would have been no dispute. He chose not thus to limit his assurance, but preferred rather the enlarged statement, 'the check is good;' not 'the signature and amount,' but 'the check is good, or all right; send it through the clearing-house.' Thus he created the possibility of injury, giving to the stranger the opportunity of fraud, and his principal should bear the loss.

Mr. T. D. Lincoln, contra.

Mr. Justice MILLER delivered the opinion of the court.

Stall & Meyer, customers and depositors with the First National Bank of Cincinnati, made their check on that bank for the sum of $26.50, payable to the order of Mrs. E. Hart, and delivered it to a stranger to all the parties to the transaction, out of which this controversy arose. This man erased the name of the payee and the amount for which it was given and inserted the name of Espy, Heidelbach & Co., bankers and brokers, and also the sum of $3920, and passed it to Espy, Heidelbach & Co., in payment of bonds and gold which he purchased from them. The check was paid by the bank through the clearing-house, and the next day the fraud was discovered, and the bank made a demand on Espy, Heidelbach & Co., for the amount as paid through a mistake.

If this were all the case there could be no doubt of their right to recover. The principle that money so paid under a mistake of the facts of the case can be recovered back is well settled, and in the case of raised or altered checks so paid by banks on which they were drawn there are numerous well-considered cases where the right to recover has been established, when neither the party receiving nor the party paying has been in any fault or blame in the matter. Of course if there is fault on the part of the party receiving pay for such a check it strengthens the right of recovery.

But in the case before us the rights of the parties are to be determined by what took place between themselves before the check was paid. It appears by the bill of exceptions that the man who perpetrated the fraud, having ascertained from Espy, Heidelbach & Co. the price of the bonds and gold which he proposed to buy of them, told them that he had dealings with Stall & Meyer and would get their check for the amount, and after an absence of two or three hours returned with the check in question. Not wishing to take it from this stranger without further information, they sent Mr. Snarenberger, one of their clerks, to the bank with instructions to ascertain if the check was good, and to say that it was presented by a stranger. Snarenberger presented it to Mr. Sanford, the proper officer of the bank, who, after examining the check and the state of Stall & Meyer's account, said, 'It is good,' or 'It is all right; send it through the clearing-house.'

There is a slight disagreement between Snarenberger and Sanford as to the precise words used, but we do not deem the difference of any importance. But there is difference in another point between these two, which with the jury might have had some weight. Snarenberger testifies that he told Sanford that the check was offered to his house by a stranger, which Sanford denies; and Sanford says that he told Snarenberger that if the check was offered by a stranger he would advise them to have nothing to do with him; that he would be careful and not pay so large a check to a stranger, no matter how good-looking he was.

On the return of Snarenberger, Espy, Heidelbach & Co. delivered the bonds and gold to the stranger and received the check in payment, and in the language of the record the stranger went his way and was heard of no more. Espy, Heidelbach & Co. indorsed the check, and it was paid, as stated already, through the clearing-house.

In a suit brought by the bank to recover the money it had a judgment, to reverse which this suit is brought.

The defendants excepted to the admission of certain testimony given by the plaintiffs on the trial for the purpose of proving that the words 'all right,' 'it is good,' when used in reference to a check presented at the bank on which it is drawn, had, by the custom and usages of the bankers of Cincinnati, acquired a limited and well-understood meaning, namely, that it had reference exclusively to the genuineness of the drawer's signature and to the state of his account at the bank. The objections made to this evidence were that in its nature it was inadmissible; that the person testifying showed his want to knowledge on the subject, and that the expressions 'all right' and 'it is good' were not the precise expressions used. But we need not inquire whether the court was right in admitting this testimony, because in the subsequent progress of the trial it became immaterial. The court refused to charge the jury, as requested by the plaintiffs in their fifth and sixth prayers, that if there was such an understanding among bankers as to the use of the terms mentioned, it limited the responsibility of the bank to these two matters; and in the charge of the court of its own motion it placed the case beyond the influence of such testimony, by instructing the jury that as matter of law such was the effect of the words supposed, when used under the circumstances suggested by the interrogations of plaintiff's counsel in regard to the understanding of them among bankers.

We are relieved also, by an attentive consideration of the instructions given by the court, from another very grave question much discussed by counsel in this court, this is, whether a verbal statement by the proper officer to certify checks that the one presented is good, is, or is not, the equivalent of a written certification of the check in the usual manner. For the fourth instruction asked by the defendants and granted by the court is precisely what is claimed by counsel here as to the effect of such verbal statement, as will be seen at once by its inspection. It is as follows: 'A verbal certification of a check is equally valid with a written certification, and constitutes a contract obligatory on the party giving the certification, the consideration of which is the property parted with by the party receiving the certification on the faith of the certification.' The plaintiff in error, against whom the jury rendered their verdict, notwithstanding the instruction thus given, must be held to have had the benefit of the principle thus asserted with the jury, whether the court was right in giving it or not.

The plaintiffs on the trial below prayed ten distinct instructions to the jury, all of which were granted except the fifth and sixth, which we have considered. The defendants prayed eight instructions, all of which were refused or modified except the fourth, to which attention has just been called. Upon all these rulings of the court as well as upon the charge of the court of its own motion, errors are assigned.

But we are of opinion that the whole case turns upon the latter charge of the court. This consisted of four distinct propositions:

1. That if defendants below sent the check to the bank for the purpose of having the latter pass upon the genuineness of the signature and the state of the account of the drawer, the statement that it was good, or all right, would estop them from denying that the signature was genuine, and there were funds to meet it.

2. If defendants sent the check for the purpose of testing the genuineness of the signature of the drawers, the state of their account, and to test its genuineness in all other respects, and plaintiff knowing the full extent of the object for which it was sent, replied 'It is good,' or 'It is all right,' plaintiff is estopped to set up that the check was raised.

3. That if the defendants had no suspicion that the check was raised, and sent it to plaintiffs for examination without specifying the particulars to which they wished the examination directed, the plaintiffs had a right to presume that it was desired in relation to such points as the law presumed them to have knowledge, namely, the genuineness of the drawer's signature and the state of his account, and if they answered in good faith and had no means other than those of defendants of knowing that the check was raised, they were not estopped from setting up that fact.

4. That if the parties were mutually ignorant and unsuspicious concerning the check being raised, the law did not impose upon plaintiffs more than the defendants, the duty of calling on the drawers for information on that subject.

The plaintiffs in error, defendants below, can have no cause to complain of the first and second proposition laid down by the court below.

If the bank officers had their attention turned to the matter of the raising of the check, or even had notice that in applying to them for information the parties presenting it did so for the purpose of getting information which would include that subject, they could have limited their general statement that it was good so as to exclude its application to that point, or might have declined answering altogether. If, with this notice, says the court, they gave a general statement that the check was good, or all right, these words must be held to have reference to all the matters on which they knew that the other party asked or desired their opinion. Unless we are prepared to hold to the fullest extent the principle asserted by the plaintiffs in error, that the general statement that the check is good binds the party making it as to everything connected with its validity, this charge of the court is as favorable to them as them as it should have been, and is only doubtful as it militates against the bank.

We think it is equally clear on principle that there was no error in the fourth proposition of the court. Undoubtedly, where there exists a suspicion that the check has been altered in the amount, or in the name of the payee, the proper party to be inquired of is the maker of the check. He and he alone has the means of settling that question conclusively. The bank, as a general rule, can know this no better than the party to whom it is presented for negotiation. It is the latter who first parts with his money or property on the faith of the check, and he is as much bound to diligent inquiry on that question as the bank. The latter is held by the law to know the drawer's signature and the state of his account. He is no more bound to know or to answer beyond these two matters than the party who presents it for information. So if there be no suspicion of the fraud in raising the check, the parties are equally innocent, and no question of the relative degree of diligence in making inquiry on that subject arises between them. This is certainly true unless the bank, if it consents to give any information at all about the validity of the check, is bound to answer as to everything which may affect its validity. As this contention is the turning-point of the case and is the one which is responded to in the third of the propositions laid down by the court, we turn now to consider that.

This assumes that neither party had nay suspicion that the check was raised and that no special reference was made to that point in the inquiry of the defendants below. It is also to be considered that the bank was not asked to certify it in the usual way by indorsing it as good, and that the party who asked information was the one whose name was in the check as payee. We do not propose to decide here what would have been the legal effect in the present case if the bank officer had, under precisely these circumstances, been requested to indorse the check as good, and had done so, affixing his name or his initials in the ordinary way.

The strong argument of the plaintiff in error is that such an indorsement would bind the bank for the entire validity of the check, and that what was said verbally by Sanford was the legal equivalent of such an indorsement. If this latter point were conceded no case precisely in point has been produced where this would be held to bind the bank under the circumstances of the present case. The authorities relied on are mainly acceptances of drafts or bills of exchange; and it is the same class of cases that are relied on to show that a verbal acceptance, or promise to accept, is equivalent to a written acceptance. The highest courts in this country and England have regretted the decisions which gave original sanction to this latter proposition.

Bank checks are not bills of exchange, and though the rules applicable to each are in many respects the same, they differ in important particulars. Among these particulars is that a check is drawn against funds on deposit with the banker, and the indorsement that it is good implies that when the indorsement is made there was funds there to pay it. A bill of exchange is not drawn on such deposits necessarily, and its acceptance raises no implication that the drawer has such funds to meet it. It is a new promise by the acceptor to pay, funds or no funds. In both cases the bank is supposed to know the signature of its correspondent, and cannot, after indorsing it as good or accepted, dispute the signature. But as one of the main elements of utility in a bill of exchange is that it shall circulate freely, and it may thus pass through many hands on the faith of the acceptor's signature, it may possibly be that he should be responsible for the promise contained in it, as it came from his hands, for it was drawn on no special fund, and the possession of such fund by him does not affect his liability. By such acceptance he becomes primarily liable, as if he were the maker of a promissory note. How far these reasons should be applied to a certification that a check was good seems extremely doubtful, both on principle and authority. Where the object is to use the indorsement to put the check in circulation, or raise money on it, or use it as money, and this object is known to the certifying bank, it may be argued with some force that the bank should, as in the case of an acceptance of a bill of exchange, be held responsible for the validity of the check as it came from the hands of the certifying bank. Such a rule would seem to be just when checks are certified, as we know they often are, without reference to the presence of funds by the drawer, and when the well-known purpose is to give the drawer a credit by enabling him to use the check as money by putting it in circulation.

But such a verbal statement as was made in the present case cannot come within that principle. There was no design or intent on the part of the bank to assume a responsibility beyond the funds of the drawer in their hands, nor to enable the payee of the check to put it into circulation. Nothing was said or done by the bank officer which could be transferred with the check as part of it to an innocent taker of it from the payee. Such subsequent taker would have no right to rely on what was said by the bank officers, any further than the payee would.

We are of opinion that the court was entirely right in treating the case as one in which information was sought and obtained by Espy, Heidelbach & Co. for their own use, and to govern their own action. For such information as the bank was willing to give, and did give, it was, no doubt, responsible, because it had reason to believe that the other party would act upon it. But only to this extent and only on this principle is it liable. It is not liable as for accepting or indorsing a draft or check with intent that it might go upon the market for general use and negotiation with the credit of its name attached to the paper, just as it was placed on the market.

Under these circumstances we are of opinion that the Circuit Court was right in holding that in the absence of anything tending to direct his attention to other matters, the bank officer had a right to suppose that information was desired of him only in regard to the signature of the drawers and the state of their account. These were material facts to be known, which both common sense and commercial law presumed to be within his knowledge. The answer he gave that the check was good or was all right must be supposed to be responsive only to these two points. The genuineness of the payee's name and of the sum filled in the body of the check were as well known and as easily ascertainable by the payees themselves as by the bank officer, and unless the inquiry was so framed as to call his attention to these points, he had no reason to suppose, in the nature of the transaction, that he was expected to give information in regard to them. So the response of 'good' should not on sound principle be held to extend to them. He was under no moral or legal obligation to give an opinion on these points. He had no reason to suppose that he was asked for such an opinion, and because he did give an opinion that the check was good in the only points of which he knew anything, it would be illogical to hold the bank liable on the ground that the response meant good absolutely and for all purposes.

The court told the jury very clearly that if the bank officer had any reason to believe that the defendants were seeking information in regard to the general validity of the check, or if they had been asked any question which related to the genuineness of the check as to amount or the names of the payees, his statement that it was all right would bind the bank. This was as far as the court ought to have gone in that direction, for they were not bound to answer such a question, nor, as we have already said, does the law or the nature of the business imply that they had any superior information on these points to that which the defendants had.

The case was certainly very fairly put before the jury, so far as the rights of the plaintiffs in error are concerned, if the views here advanced are sound, and the judgment must be

AFFIRMED.


text: Talk:Espy v. Bank of Cincinnati/Opinion of the Court


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Grant v. Strong

APPEAL from the Supreme Court of the District of Columbia.

Strong filed a bill in equity in the court below against Grant to establish a mechanic's lien for the sum of $1547. There was no denial that work was done, nor that it was of the value alleged, nor that it was of that character for which liens are allowed by the laws of the District.

The question was whether, under all the circumstances of the case, such a lien ever attached.

The material facts were these:

On the 14th day of October, 1869, the parties made an agreement that Strong should do the brickwork on sixteen houses which Grant was building. The price of the work per thousand bricks was agreed upon, and that Strong should take one of the houses in payment for his work, the price of which was also fixed; and this contract was reduced to writing. A conveyance was made by Grant of the lot which Strong was to have, and the deed duly acknowledged and recorded and placed in the hands on Enoch Totten, as an escrow, to be delivered to Strong when the work was completed. During the progress of the work dissatisfaction arose between the parties after the larger part of it had been done, and on the 27th of November, a new written contract was made. This, after reciting the former agreement, says that it is agreed that Strong shall finish all the brickwork up to the first floor joists without delay. The price was changed, but the old agreement was referred to for the mode of measurement. It is then said that the same is to be paid for in Grant's negotiable note, payable within three months from the date of the completion of the work, and then the agreement of October 14th shall be cancelled and declared null and void, and of no effect, and the escrow in the hands of Totten be delivered up to Grant, otherwise said agreement to remain in full force and effect.

Another paper, signed by both parties, dated January 1st, 1870, recites the former agreements, and that the work had been finished and measured, and that Grant had given his promissory note for the amount, according to the contract of November 27th; and that, therefore, the escrow in Totten's hands is declared null and void, and is to be delivered to Grant by Totten.

A good deal of evidence was found in the record as to what was said and done by the parties in the matter, and the court below decreed that a lien existed. From that decree this appeal was taken.

Messrs. W. A. Meloy and F. Miller, for the appellant, referred to Barrows v. Baughman, Haley v. Prosser, and numerous other cases, to show that a builder's lien cannot exist where the agreement provides for another sort of security.

Mr. W. A. Cook, contra, cited The Kimball, and many cases, arguing from them, and on principle, that a lien is never extinguished by a mere note, except on the plainest evidence of an intention to extinguish it; but on the contrary, when a lien clearly exists, that a note is always regarded as but cumulative.

Mr. Justice MILLER delivered the opinion of the court.

title: Grant v. Strong


text: Talk:Grant v. Strong

title: Talk:Grant v. Strong


text:
Grant v. Strong/Opinion of the Court

We have much argument in the case as to the effect of the note as a negotiable security operating as a release of the mechanic's lien. We think this has but little pertinency to the case. We admit that when a lien has once attached, the taking of such a note does not of itself operate as a release. The question whether a lien is obtained, or is displaced when it once attaches, is largely a matter of intention to be inferred from the acts of the parties and all the surrounding circumstances. In the case before us, much conflicting testimony as to what was said and done by the parties, is found in the record. We need not consider this, for in our view the decision of the case must rest on the written agreements we have mentioned, and from them we are forced to the conclusion that the appellee always relied wholly upon other security than a mechanic's lien for his pay, which he deemed sufficient, and which he voluntarily agreed to surrender.

It is very clear that under the first contract, the one under which the larger part of the work was done, he was to take his pay, not in money, but in the lot on which one of the houses was built; and that to secure the completion by Grant of the sale when the work was done, the deed was made and placed in the hands of Totten. Under these circumstances no lien could accrue for the work on that, or on the other buildings. When the second contract of November 27th was made, Strong did not give up this security, but still retained and relied on it, and it was made a part of the new contract, that the escrow should remain in the hands of Totten, and should be in full force until the work was completed, measured, and the sum due on it paid by the promissory note of Grant. Now with this security in Totten's hands during all the time the work was going on, looked to and relied upon by Strong, how can it be said that Strong relied upon a mechanic's lien, or that Grant intended in addition to that deed for one lot to allow Strong to obtain a lien upon all the others? And so much reliance was placed on this escrow by Strong, that only after all was settled, the work measured and paid for, as the parties had stipulated by Grant's note, did Strong sign the order for the delivery to Grant of the deed. During this time all the facts repel the idea of a lien.

We do not think that the giving up of the escrow, and the taking of the note in its place, according to the terms of an agreement previously made, and which obviously did not look to a mechanic's lien as part of the transaction, would look a lien where none existed before.

In short, we are of opinion that these agreements show an acceptance and reliance by Strong on another and very different security for the payment for his work, inconsistent with the idea of a mechanic's lien, and that no such lien ever attached in the case.

DISMISS THE BILL.

Mr. Justice SWAYNE dissenting.

title: Grant v. Strong/Opinion of the Court


text: Talk:Grant v. Strong/Opinion of the Court


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Davenport v. Dows

APPEAL from the Circuit Court for the District of Iowa.

Dows, a citizen of New York, in behalf of himself and all other non-resident citizens of Iowa, who were stockholders in the Chicago, Rock Island, and Pacific Railroad Company, filed a bill in the court below against the city of Davenport, and its marshal, to arrest the collection of a tax, alleged to be illegal, levied by the said city for general revenue purposes, on the property of the company within its limits. The bill assigned as a reason for its being filed by Dows, a stockholder in the company, instead of by the company itself, that the company neglected and refused to take action on the subject. A demurrer was interposed to the bill, which was overruled, and on the defendants refusing to answer over, the Circuit Court ordered that the collection of the tax be perpetually enjoined. From this, its action, the defendants appealed, insisting that the Circuit Court erred in overruling the demurrer, for three reasons:

First. Because the railroad company was not made a party to the bill.

Second. Because the complainant had a complete remedy at law; and,

Third. Because the tax in question was a proper charge against the property of the corporation.

Mr. J. N. Rogers, for the appellants; Mr. T. F. Witherow, contra.

Mr. Justice DAVIS delivered the opinion of the court.

title: Davenport v. Dows


text: Talk:Davenport v. Dows

title: Talk:Davenport v. Dows


text:
Davenport v. Dows/Opinion of the Court

It is unnecessary to notice the last two reason assigned, why the demurrer should not have been overruled, as the first is well taken. Indeed, it would be improper to pass on the merits of the controversy until the proper parties to be affected by the decision are before the court.

That a stockholder may bring a suit when a corporation refuses is settled in Dodge v. Woolsey, but such a suit can only be maintained on the ground that the rights of the corporation are involved. These rights the individual shareholder is allowed to assert in behalf of himself and associates, because the directors of the corporation decline to take the proper steps to assert them. Manifestly the proceedings for this purpose should be so conducted that any decree which shall be made on the merits shall conclude the corporation. This can only be done by making the corporation a party defendant. The relief asked is on behalf of the corporation, not the individual shareholder, and if it be granted the complainant derives only an incidental benefit from it. It would be wrong, in case the shareholder were unsuccessful, to allow the corporation to renew the litigation in another suit, involving precisely the same subject-matter. To avoid such a result, a court of equity will not take cognizance of a bill brought to settle a question in which the corporation is the essential party in interest, unless it is made a party to the litigation.

In this case the tax sought to be avoided was assessed against the Chicago, Rock Island, and Pacific Railroad Company, and the decree rendered discharges the company from the payment of this tax. The corporation, therefore, should have been made a party to the suit, and as it was not, the demurrer should have been sustained.

DECREE REVERSED, and the cause remanded for further proceedings,

IN CONFORMITY WITH THIS OPINION.

title: Davenport v. Dows/Opinion of the Court


text: Talk:Davenport v. Dows/Opinion of the Court


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St. Clair County v. Lovingston

ERROR to the Supreme Court of Illinois.

The county of St. Clair, in Illinois, sued Lovingston in the Circuit Court of the county, and got judgment against him. The Supreme Court of Illinois reversed this judgment, and remanded the cause 'for such other and further proceedings as to law and justice shall appertain.' To that judgment the county took this writ of error.

Mr. G. Koerner, for the plaintiff in error; Mr. W. H. Underwood, contra.

Mr. Justice STRONG delivered the opinion of the court.

title: St. Clair County v. Lovingston


text: Talk:St. Clair County v. Lovingston

title: Talk:St. Clair County v. Lovingston


text:
St. Clair County v. Lovingston/Opinion of the Court

The writ of error in this case must be dismissed on the authority of Moore v. Robbins, decided at this term. The judgment of the Supreme Court of the State cannot be regarded as a final judgment in the sense in which the term was used in the Judiciary Acts. No judgment is final which does not terminate the litigation between the parties to the suit. The issue between the parties may be again tried in the Circuit Court, and another judgment may be recovered which may be removed to the Supreme Court for revision. Consequently, then, there has been no final determination of the case.

WRIT DISMISSED.


text: Talk:St. Clair County v. Lovingston/Opinion of the Court


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Gray v. Rollo

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

The Bankrupt Act enacts:

'That in all cases of mutual debts or mutual credits between the parties, the account between them shall be stated, and one debt set off against the other, and the balance only shall be allowed or paid.'

And a statute of Illinois enacts that—

'All joint obligations shall be taken and held to be joint and several obligations.'

These statutes being in force, Moses Gray filed a bill in the court below against William Rollo, assignee in bankruptcy of the estate of the Merchants' Insurance Company of Chicago, to compel a set-off of alleged mutual debts. The insurance company had become bankrupt by the great fire at Chicago, and at that time held two promissory notes for $5555 each, made by the complainant, Gray, jointly with one Gaylord, which the company had received from the payee in the regular course of business. By the fire referred to, Moses Gray, the complainant, and his brother, Franklin Gray, doing business under the firm of Gray Brothers, suffered in the destruction of buildings, and these being insured by the said insurance company for $30,000 on three several policies, the company became indebted to them in the sum named. The complainant alleged in his bill that his just share of liability on the two notes was one-half of the amount, and he desired to have that half extinguished by a set-off of the like amount due on the policies. The money due on the policies was confessedly not due to him alone, but to Gray Brothers. But he alleged that his brother assented to and authorized such appropriation.

The insurance company demurred, and the demurrer being sustained the court dismissed the bill. From its action herein Gray took this appeal.

Mr. J. S. Norton, for the appellant, argued that under the statute of Illinois the whole debt, under both notes, which Moses Gray owed to the assignee in bankruptcy, was a several debt; that while it would be inequitable that Gaylord's debt should be paid by the application of a policy of insurance in which he had no interest, the reverse was true in regard to the share of the notes which Moses Gray owed. The counsel cited Tucker v. Oxley, in this court, as much in point and binding; a case which he observed was supported by Wrenshall v. Cook, in the Supreme Court of Pennsylvania, ever more in point, and by other cases in that tribunal.

Mr. A. M. Pence, contra.

Mr. Justice BRADLEY delivered the opinion of the court.

title: Gray v. Rollo


text: Talk:Gray v. Rollo

title: Talk:Gray v. Rollo


text:
Gray v. Rollo/Opinion of the Court

The bill being demurred to, the assent of Franklin Gray to the appropriation asked by the complainant must be taken as true; and the question is, whether set-off can be allowed in such a case as the one presented?

The language of the Bankrupt Act, on the subject of set-off, is: 'That in all cases of mutual debts, or mutual credits between the parties, the account between them shall be stated, and one debt set off against the other, and the balance only shall be allowed or paid.' It is clear that these claims are not mutual debts. They are not between the same parties. The notes exhibit a liability of the complainant and Gaylord; the policies, a claim of the complainant and his brother. But it is said that by the law of Illinois, all joint obligations are made joint and several; and, therefore, that the complainant is separately liable on the notes, and could be sued separately upon them. Granting this to be so, the debts would still not be mutual. If sued alone on the notes, the claim on the policies, which he might seek to set off, pro tanto, against the notes, is a claim due not to him alone, but to him and his brother. His brother's consent that he might use the claim for that purpose would not alter the case. Had his brother's interest been assigned to him before the bankruptcy of the company, and without any view to the advantage to be gained by the set-off, the case would be different.

Nor does the case present one of mutual credit. There was no connection between the claims whatever, except the accidental one of the complainant's being concerned in both. The insurance company, so far as appears, took the notes without any reference to the policies of insurance; and Gray Brothers insured with the company without any reference to the notes. Neither transaction was entered into in consequence of, or in reliance on, the other; and no agreement was ever made between the parties that the one claim should stand against the other. There being neither mutual debts nor mutual credits, the case does not come within the terms of the Bankrupt law. If it can be maintained at all, it must be upon some general principle of equity, recognized by courts of equity in cases of set-off; which, if it exist, may be considered as applicable under an equitable construction of the act. But we can find no such principle recognized by the courts of equity in England or this country, unless in some exceptional cases which cannot be considered as establishing a general rule. In Pennsylvania, it is true, set-off is allowed in cases where the claims are not mutual, and, in that State, under the decisions there, it is probable that set-off would be allowed in such a case as this. But we do not regard the rule adopted in Pennsylvania as in accord with the general rules of equity which govern cases of set-off. We think the general rule is stated by Justice Story, in his treatise on Equity Jurisprudence, where he says: 'Courts of equity, following the law, will not allow a set-off of a joint debt against a separate debt, or conversely, of a separate debt against a joint debt; or, to state the proposition more generally, they will not allow a set-off of debts accruing in different rights. But special circumstances may occur creating an equity, which will justify even such an interposition. Thus, for example, if a joint creditor fraudulently conducts himself in relation to the separate property of one of the debtors, and misapplies it, so that the latter is drawn in to act differently from what he would if he knew the facts, that will constitute, in a case of bankruptcy, a sufficient equity for a set-off of the separate debt created by such misapplication against the joint debt. So, if one of the joint debtors is only a surety for the other, he may, in equity, set off the separate debt due to his principal from the creditor; for in such a case the joint debt is nothing more than a security for the separate debt of the principal; and, upon equitable considerations, a creditor who has a joint security for a separate debt, cannot resort to that security without allowing what he has received on the separate account for which the other was a security. Indeed, it may be generally stated, that a joint debt may, in equity, be set off against a separate debt, where there is a clear series of transactions, establishing that there was a joint credit given on account of the separate debt.' Other instances are given by way of illustration of the principle on which a court of equity will deviate from the strict rule of mutuality, allowing a set-off; all of them based on the idea that the justice of the particular case requires it, and that injustice would result from refusing it; but none of them approaching in likeness to the case before the court. There is no rule of justice or equity which requires that Gray Brothers should be paid in preference to other creditors of the insurance company, out of the specific assets represented by the notes of Gray and Gaylord. If the complainant instead of the insurance company were bankrupt, and the notes were valueless, his brother and the creditors of Gray Brothers would think it very hard if the company were allowed to pay the insurance pro tanto with that worthless paper.

The case of Tucker v. Oxley, which arose out of the Bankrupt Act of 1800, has been pressed upon our attention by the counsel of the appellant, on the supposition that it is decisive in his favor. The clause relating to set-off contained in that act does not materially differ from the corresponding clause in the act of 1867. Mutual credits given, and mutual debts existing, before the bankruptcy, are made the ground of set-off in both acts. But the case of Tucker v. Oxley will be found to differ from the present. There two persons by the name of Moore, being partners, became indebted to Tucker. They afterwards dissolved partnership, and Tucker became indebted to one of them, who continued the business, and who afterwards became bankrupt. Oxley, the assignee, sued Tucker for this debt, but the latter was allowed to set off his claim against the two. The court put the decision upon the ground that the debt due from the two Moores to Tucker could have been collected from the property of either of them, and was provable under the bankruptcy proceedings against the estate of him who became bankrupt, and bence it might be set off against any claim which the bankrupt had against Tucker. The case, therefore, was the same as the case before us would have been if the complainant had been solely entitled to the insurance-money, and if he and not the company had become bankrupt. In such case the company, according to the case of Tucker v. Oxley, could have set off the notes of the complainant and Gaylord against the claim for insurance. The reciprocal form of this rule would have enabled the complainant to succeed in this case had he been the sole claimant of the money due for insurance. In other words, the case of Tucker v. Oxley decides that a joint indebtedness may be proved and set off against the estate of either of the joint debtors who may become bankrupt, and the fact that it may be subject to be marshalled makes no difference. The joint debtors are severally liable in solido for the whole debt. But the case does not decide that a joint claim, that is to say, a debt due to several joint creditors, can be set off against a debt due by one of them. If a debt is due to A. and B., how can any court compel the appropriation of it to pay the indebtedness of A. to the common debtor without committing injustice toward B.? The debtor who owes a debt to several creditors jointly cannot discharge it by setting up a claim which he has against one of those creditors, for the others have no concern with his claim and cannot be affected by it; and no more can one of several joint creditors, who is sued by the common debtor for a separate claim, set off the joint demand in discharge of his own debt, for he has no right thus to appropriate it. Equity will not allow him to pay his separate debt out of the joint fund. And if he had the assent of his co-obligees to do this, it would be unjust to the suing debtor, because he has no reciprocal right to do the same thing.

The case before us, therefore, is clearly distinguishable from that of Tucker v. Oxley, and the ground on which that case was put is not applicable to this.

DECREE AFFIRMED.

title: Gray v. Rollo/Opinion of the Court


text: Talk:Gray v. Rollo/Opinion of the Court

title: Talk:Gray v. Rollo/Opinion of the Court


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Bartholow v. Bean

ERROR to the Circuit Court for the District of Missouri; the case, as found by the District Court, and on which the judgment to which the writ of error was taken had been entered below, being in substance thus:

Kintzing & Co. (a firm composed of one Kintzing and a certain Lindsley) were grocers in St. Louis, and kept a bank account with Bartholow & Co., bankers in the same city. On the 15th of January, 1869, these last discounted a note for $2500 of their customers, the said Kintzing & Co., indorsed by J. B. Wilcox, and maturing on the 15-18th of March, 1869.

On the 15th of February, 1869, Kintzing & Co. called a meeting of their creditors. These assembled and 'most of them' signed a deed of composition, by which they agreed to take seventy cents on the dollar, in notes of Kintzing, payable in six, twelve, and eighteen months. But there was a provision in the deed that it should not be binding on any creditors unless agreed to and signed by all. Some did not sign. Some who signed, took the composition notes [the amount so taken having been (apparently) $75,000].

Among the few who did not sign were Bartholow & Co. They well knew, however, that an agreement such as above described had been entered into by the other creditors.

On the 27th of February, Kintzing & Co. dissolved their partnership, Lindsley retiring, and Kintzing taking all the assets and assuming all the debts of the firm.

Before the day when the note of Kintzing & Co. matured, Wilcox, he, as already said, being confessedly solvent, waived protest and notice; and the note remained unpaid till August 9th, on which day Kintzing, being then 'hopelessly insolvent even under the terms of the agreement,' paid it.

On the 18th of August, 1869, 'the paper given by said Kintzing, pursuant to the terms of said compromise, to the amount of about $25,000, became due,' and on the 17th of September a petition in bankruptcy was filed against him, on which he was decreed a bankrupt, and one Bean appointed his assignee in bankruptcy.

Bean brought this suit against Bartholow & Co., to recover the money which Kintzing had paid to the said bankers, in discharge of the note, alleging that he made the payment 'with a view to give a preference to them,' and in fraud of the provisions of the Bankrupt law.

The thirty-fifth and thirty-ninth sections of the Bankrupt law, which were relied on by the assignee as giving him the right in law to recover, are thus:

'SECTION 35. If any person being insolvent, or in contemplation of insolvency, within four months before the filing of the petition. . . against him, with a view to give a preference to any creditor or person having a claim against him, or who is under any liability for 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. . ..

'And if any person being insolvent, or in contemplation of insolvency or bankruptcy, within six months before the filing of the petition. . . against him makes any payment, sale, assignment, transfer, conveyance, or other disposition of his property, to any person ''who then has reasonable cause to believe him insolvent, or to be acting in contemplation of insolvency, and that such payment, sale, assignment, transfer, conveyance, or other disposition, & c., is made with a view to prevent his property from coming to his assignee in bankruptcy, or to prevent the same being distributed under this act, or to defeat the object of,. . . or to evade any of the provisions of this act'', the sale, assignment, transfer, or conveyance shall be void, and the assignee may recover the property, or the value thereof, as assets of the bankrupt.

'SECTION 39. Any person. . . who being bankrupt or insolvent, or in contemplation of bankruptcy or insolvency, shall make any payment, grant, sale, conveyance, or transfer of money, or other property or estate,. . . with intent to give a preference to one or more of his creditors, or to any person. . . who. . . is or may be liable for him as indorser. . . shall be adjudged a bankrupt on the petition of one or more of his creditors. . . . And. . . the assignee may recover back the money. . . so paid. . . provided the person receiving such payment, or conveyance, had reasonable cause to believe that a fraud on this act was intended, or that the debtor was insolvent.'

The court below, on the case found, gave judgment for the assignee. Bartholow & Co. brought the case here.

Mr. K. H. Spencer, for the plaintiffs in error:

1. Bartholow & Co. were compelled to receive payment when tendered, since if they had refused to receive payment the indorser, Wilcox, whose liability was contingent only on non-payment by Kintzing & Co., would have been discharged.

2. Bartholow & Co. had no notice of Kintzing's insolvency. The case, as found, is perhaps defective, in not showing more particularly than it does the condition of Kintzing & Co.'s affairs-the relative state of their debts and assets-when they called their creditors together. But it is clear that it was considered that a release of 30 per cent. would set Kintzing up; and that creditors to the amount of more than $100,000 did not only sign off at the rate of 70 cents on the dollar, but did actually take composition notes; the notes that came due in August six months from the date of the deed of composition-having as found been $25,000. To this extent, therefore,-a very large extent, it would seem, from the magnitude of the figures,-we may assume as matter of law, that Kintzing was released, notwithstanding the clause in the deed that the composition should not bind any creditor unless all agreed to it. The creditors who not only signed but took and kept the notes, in law waived that clause. The case then is this: A trader having solid assets, finds himself embarrassed; he calls his creditors together and gets from 'the most of them' a release of 30 per cent. of their claims, contingent on all signing. He expects to get the signatures of all. A large proportion not only sign but actually take notes, and so in law release him to the extent of 30 per cent. After this, he pays a person who had not released; one who being perfectly secured otherwise had no interest to look into or even to watch his affairs, and doubtless had not looked into or even watched them. Continuing insolvency after such a release is not so violently presumable as that every one dealing with the party afterwards must be taken, as of course, to deal with him, with legal notice of it; that is to say, with 'reasonable cause to believe' it; and if he has no such legal notice,-no 'reasponable cause to believe' it,-he cannot have received the payment in fraud of the Bankrupt law. Indeed, in such a case, it is hard to believe that even the debtor can have made the payment with a view to give a preference. The only object which a debtor can have in compromising with creditors is to secure a safe position. Not only Bartholow & Co., but Kintzing himself, may have well believed that such a position had been obtained by Kintzing here; and the fact that the note had lain dishonored for several months is nothing against this view. Kintzing had, indeed, been embarrassed (perhaps insolvent), and unable to go on; but now, when he pays, he had by the release of even a portion of his creditors got on his feet. Why had he let the note lie so long? Because during that time he was embarrased or insolvent. Why does he now pay it? Because his creditors to the amount of more than $100,000 had, in fact and in law, released 30 per cent. of their debts, and extended for six, twelve, and eighteen months the payment of the remaining 70 per cent., and he thinks he is not insolvent. The very fact of the previous delay shows on his own part his now supposed solvency; while as to Bartholow & Co., if they had not supposed him now solvent, why would they, as it of necessity is alleged that they did, in fraud of the Bankrupt Act, receive payment, and so incur the danger of a suit just such as the present, when all the while they had Wilcox liable to them, from whom they could have got payment without any danger whatever?

Messrs. N. Myers and E. T. Allen, contra.

Mr. Justice MILLER delivered the opinion of the court.

title: Bartholow v. Bean


text: Talk:Bartholow v. Bean

title: Talk:Bartholow v. Bean


text:
Bartholow v. Bean/Opinion of the Court

The plaintiffs in error were bankers in the city of St. Louis, with whom Kintzing & Co. kept a bank account, and they had discounted the note of Kintzing & Co. for $2500, dated July 15th, 1869, payable in sixty days, indorsed by J. B. Wilcox. Before its maturity Wilcox, who was solvent, waived protest and notice, and the note remained unpaid until August 9th, when Kintzing paid the amount to plaintiffs in error. In the meantime Kintzing & Co. failed in business, and in February attempted a composition with their creditors at seventy cents on the dollar, in notes payable in six, twelve, and eighteen months. The plaintiffs in error did not sign this agreement, though they knew of it, and that effort seems to have failed. It must be conceded that Kintzing was utterly insolvent when he paid the note, and this must have been known to plaintiffs in error. A petition in bankruptcy was filed against Kintzing within less than four months after the payment of the note, and Bean, the defendant in error, having been appointed assignee, brought the present suit to recover the money so paid, as being a preference of a creditor forbidden by the Bankrupt law.

If it were a transaction solely between Kintzing and the bankers there seems to be no reason to doubt that the payment was such a preference as would enable the assignee to recover it back. But the case is not a little embarrassed by the fact that the indorser, Wilcox, was solvent, and was liable on the note to the bankers, and the question arises whether, under such circumstances, they were at liberty to refuse to receive payment of the principal without losing their claim upon the indorser, who was probably a mere accommodation surety. It is a question not without difficulty.

It is very true that an ingenious argument is made to show that by an arrangement between Kintzing and his partner the former assumed all the debts under the attempted compromise, and took all the property of the former, and that, by reason of the partial success of the compromise, Kintzing was no longer insolvent. But the facts in the finding of the court leave no room to doubt that Kintzing was, after the failure, always insolvent, in the sense of being unable to pay his current overdue debts, and of this plaintiffs could not be unaware, since they held the note, on which they received the money now sued for, about five months after its maturity, without payment, and without their signing the compromise paper. They must, therefore, have known that, in the sense of the Bankrupt law, Kintzing had been insolvent for months before they received payment.

Does the fact that Wilbox, the indorser, was solvent, and was liable, change the rule as to payment as a preference?

The statute in express terms forbids such preference, not only to an ordinary creditor of the bankrupt, but to any person who is under any liability for him; and it not only forbids payment, but it forbids any transfer or pledge of property as security to indemnify such persons. It is, therefore, very evident that the statute did not intend to place an indorser or other surety in any better position in this regard than the principal creditor, and that if the payment in the case before us had been made to the indorser, it would have been recoverable by the assignee. If the indorser had paid the note, as he was legally bound to do, when it fell due, or at any time afterwards, and then received the amount of the bankrupt, it could certainly have been recovered of him. Or if the money had been paid to him directly instead of the holder of the note it could have been recovered, or if the money or other property had been placed in his hand to meet the note or to secure him instead of paying it to the bankers, he would have been liable. He would not, therefore, have been placed in any worse position than he already occupied if the holders of the note had refused to receive the money of the bankrupt. It is very obvious that the statute intended, in pursuit of its policy of equal distribution, to exclude both the holder of the note and the surety or indorser from the right to receive payment from the insolvent bankrupt. It is forbidden. It is called a fraud upon the statute in one place and an evasion of it in another. It was made by the statute equally the duty of the holder of the note and of the indorser to refuse to receive such a payment.

Under these circumstances, whatever might have been the right of the indorser, in the absence of the Bankrupt law, to set up a tender by the debtor and a refusal of the note-holder to receive payment, as a defence to a suit against him as indorser, no court of law or equity could sustain such a defence, while that law furnishes the paramount rule of conduct for all the parties to the transaction; and when in obeying the mandates of that law the indorser is placed in no worse position than he was before, while by receiving the money the holder of the note makes himself liable to a judgment for the amount in favor of the bankrupt's assignee, and loses his right to recover, either of the indorser or of the bankrupt's estate.

We are of opinion, therefore, notwithstanding the hardship of the case, which is more apparent than real, that the payment must be held to be a preference within the Bankrupt law, and that the judgment of the court below, that the assignee should recover it, must be

AFFIRMED.

title: Bartholow v. Bean/Opinion of the Court


text: Talk:Bartholow v. Bean/Opinion of the Court


text:
Dandelet v. Smith

ERROR to the Circuit Court for the District of Maryland; the case being thus:By different Internal Revenue Acts a tax was laid on brewers, by which they were made liable thus:

From September, 1862, to March 1st, 1863, $1 00 per bbl.

From March 1st, 1863, to March 31st, 1864, 60 per bbl.

From April 1st, 1864, 1 00 per bbl.

And after the 30th of June, 1864, a penalty of 50 cents was added where the return was erroneous because of refusal or neglect.

By the Internal Revenue Act of June 30th, 1864 (section 20), the assessors were to make out lists containing the names of persons residing in their respective districts, and having property liable to tax, together with the sums payable by each, which lists the assessors were to send to the collectors.

The Internal Revenue Act of July 13th, 1866, enacted further (by its ninth section):

'The assessor may, from time to time, or at any time within fifteen months from the time of the passage of this act, or from the time of the delivery of the to the collector as aforesaid, enter on any monthly or special list,. . . the names of the persons or parties, in respect to whose returns as aforesaid there has been or shall be any omission, undervaluation, understatement, or false or fraudulent statement, together with the amounts for which such persons or parties may be liable, over and above the amount for which they may have been, or shall be, assessed upon any return, or returns made as aforesaid, and shall certify or return said list to the collector as required by law.'

This same act of 1866 changed the mode of assessing and collecting the tax on malt liquors, and made the tax on them after the 1st of September, 1866, payable by stamps. And an act of March, 1867, by its fifth section enacted:

'That if the manufacturer of any article upon which a tax is required to be paid by means of a stamp, shall have sold or removed for sale any such articles, without the use of the proper stamp, in addition to the penalties now imposed. . . it shall be the duty of the assessor. . . upon such information as he can obtain, to estimate the amount of the tax which has been omitted to be paid, and to make an assessment therefor, and certify the same to the collector; and the subsequent proceedings for collection shall be in all respects like those for the collection of taxes upon manufactures and productions.'

In this state of the law Dandelet, a brewer, in Baltimore, from the year 1862 had made monthly statements or returns to the assessor of what beer he admitted that he made, and these were delivered to the collector. In August, 1867, the assessor made an assessment for alleged deficiencies, the same being in the following form:

F. Dandelet's Assessment.

Deficiency from Sept. 1, '62, to Feb. 28, '63, 522 bbls. @ $1,   $522 00

Deficiency from March 1, '63, to March 31, '64, 922 bbls. @ 60 c., 555 00

Deficiency from April 1, '64, to June 30, '64, 216 bbls. @ $1,   216 00

Deficiency from July 1, '64, to April 20, '67, 1425 bbls. @ $1,   1425 00

Fifty cents penalty on $1425,     712 50

$3430 50

This assessment was entered on the monthly list for August, 1867, delivered to one Smith as collector, and after the remission of the penalty of $712.50, the balance was paid under protest. An appeal was duly made by Dandelet to the Commissioner of Internal Revenue, and was dismissed, after which this suit was brought to recover back the tax paid; and being tried by the court, judgment was given for the defendant. That judgment it was which was now brought here for review.

Messrs. G. C. Maunde and J. C. King, for the plaintiff in error:

First. The assessment is void upon its face. Even if the assessor had authority to reassess for the whole term intervening between September, 1862, and April 20th, 1867, he had no right to divide the term arbitrarily, as he has done. He should have reassessed month by month, indicating the deficiency for each month, so as to make his reassessment coincide in time with the monthly returns of the brewer. The ninth section of the act of July 13th, 1866, was obviously designed to give to the brewer the privilege of knowing which one of his monthly returns was asserted by the assessor to be deficient, and the amount of the deficiency. The accusation of the assessor would then be so specific as to admit of a defence; but how can the brewer defend himself against a reassessment so arbitrary and sweeping in point of time as the one made in this case?

Second. If the section referred to embraces brewers then the reassessment is void, because it disregarded the fifteen months limitation clause contained therein. Instead of confinding himself, as he was bound by the law to do, to fifteen months, the assessor in this case covered by his reassessment a term of nearly five years.

Third. But the section does not refer at all to the tax assessed upon brewers. This section only contemplates those persons whose duty it was, under the law, to make returns of what they made. But after September 1st, 1866, brewers were to pay by stamps, and as during that term Dandelet made no returns, and was not required by law to make them, but paid his tax by stamps, this reassessment was unauthorized.

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

title: Dandelet v. Smith


text: Talk:Dandelet v. Smith

title: Talk:Dandelet v. Smith


text:
Dandelet v. Smith/Opinion of the Court

Mr. Justice BRADLEY delivered the opinion of the court.

The question in this case is whether the assessment for alleged deficiencies was or was not illegal.

1. It is contended by the plaintiff in error that the assessment is void upon its face, because not made month by month so as to indicate the deficiency for each month, and to make the reassessment coincide in time with the monthly returns of the plaintiff. It is sufficient to say that the law does not require this to be done. All that the statute requires is a list of the names of parties whose returns have been deficient, with the amounts for which they are liable over and above the amount for which they may have been assessed upon any return or returns. This language does not, by its terms, require a separate specification of deficiency for each defective return. 'The amount for which a person has been assessed upon any return or returns,' may be an aggregate of many sums; and it is the deficiency of this amount which is to be reassessed. It may frequently happen that the assessor could not possibly tell in what particular month the deficiencies occurred, and yet he may have demonstrative evidence of the deficiency of the aggregate amount returned.

2. It is contended that, by the act, the assessor could only go back fifteen months. We do not so understand it. The language is: 'The said assessor may, from time to time, or at any time within fifteen months from the time of the passage of this act, or from the time of the delivery of the list to the collector as aforesaid, enter in any monthly or special list the names,' &c. The first limitation, 'within fifteen months from the time of the passage of this act,' evidently relates to past deficiencies; the others to future. The reassessment in this case was made within fifteen months after the passage of the act, and the assessor was justified in reviewing the past returns as he did.

3. It is lastly objected, that the law in question, namely, the twentieth section of the Internal Revenue Act of June 30th, 1864, as amended by the ninth section of the act of July 13th, 1866, does not refer at all to the tax assessed upon brewers, inasmuch as they were required, by the same act of 1866, to use stamps, instead of making monthly returns, from and after the 1st of September, 1866; whereas, the amended twentieth section authorizing a reassessment, only applied, by its terms, to defective 'returns.' The language refers to past as well as future returns; and, therefore, expressly covers all returns made prior to September 1st, 1866. The reassessment in this case is for deficiency from September 1st, 1862, to April 20th, 1867, namely: prior to March 1st, 1863, 522 barrels; thence to April 1st, 1864, 922 barrels; thence to July 1st, 1864, 216 barrels; thence to April 20th, 1867, 1425 barrels. It is only the last period which embraces a portion of time in which stamps were used. But it embraced twenty-six months during which assessments were made upon monthly returns, and non constat, but that the deficiency of 1425 barrels arose in that time. The reassessment does not show that any portion of that deficiency arose after September 1st, 1866.

But suppose that a portion of it did arise after that time, when stamps were required to be used. The brewer may have made more beer than he stamped, and by the fifth section of the act of March 2d, 1867, it is enacted that 'if the manufacturer of any article upon which a tax is required to be paid by means of a stamp, shall have sold or removed for sale any such articles, without the use of the proper stamp, in addition to the penalties. . . imposed,. . . it shall be the duty of the assessor,. . . upon such information as he can obtain, to estimate the amount of the tax which has been omitted to be paid, and to make an assessment therefor, and certify the same to the collector; and the subsequent proceedings for collection shall be in all respects like those for the collection of taxes upon manufactures and productions.'

Now, in what more proper form could the assessor make a certificate of 'the amount of the tax which has been omitted to be paid,' than he did in this case? If a more proper form could be devised, still is not the form used by the assessor in this case admissible?

The exact truth always lies in the knowledge of the manufacturer. His books show, or ought to show, everything that he has produced, and in an investigation of this kind, if he shows that his returns or stamps fully equal the amount of his production and sale, the burden will then be on the government to show a deficiency. The form of the assessment adopted in this case can neither mislead nor embarrass an honest manufacturer who has kept true and exact books of account.

JUDGMENT AFFIRMED.

title: Dandelet v. Smith/Opinion of the Court


text: Talk:Dandelet v. Smith/Opinion of the Court