text:
Dillon v. Barnard

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

The Boston, Hartford, and Erie Railroad Company, a corporation existing under the laws of Massachusetts, Rhode Island, Connecticut, and New York, and having a railway (then partially constructed and subject to certain mortgages and other liens) between certain points in those States, on the 19th of March, 1866, by its indenture of mortgage of that date, conveyed to Berdell and others all its railways, rights, leases, privileges, and franchises, and all its property then owned or thereafter to be acquired, to be held by them and their successors in trust upon the terms and for the purposes set forth in the indenture. The object of its execution was to secure certain bonds of the company, in sums of $1000 each, to the amount of $20,000,000, to be thereafter issued and disposed of to raise the funds required to provide for and retire all the then existing mortgage debts and prior liens upon the line of its road, and to complete and equip the road, and to lay down a third rail thereon. The road in its then existing state was of less value than the amount of the bonds proposed to be issued. The company, however, expected that, upon its completion, the road would be of great value and afford ample security for the bonds.

The indenture provided that the mortgage should be the first and only lien on the property and franchises of the company when the existing mortgage debt was retired, and it contained the following covenants on the part of the company:

'1st. That of the bonds issued there shall be retained in the hands of the trustees such portion as will be equal to the whole amount of the bonds and mortgage notes outstanding from time to time, as a lien upon any of the property or franchises conveyed, to be delivered to the company only on the cancellation of a corresponding amount of such outstanding bonds or mortgage notes; and,

'2. That the expenditure of all sums of money realized from the sale of the bonds shall be made with the approval of at least one of the trustees, whose assent in writing shall be necessary to all contracts made by the company before the same shall be a charge upon any of the sums received from such sales.'

In October, 1867, one Dillon entered into a contract with the corporation for the construction of a portion of its railroad at certain specified rates of compensation, the work to be commenced on the 1st of December, 1867, and completed on the 1st of June, 1869; payments to be made monthly of 90 per cent. of the work done, as estimated by the engineer of the company, the remaining 10 per cent. to be retained until the completion of the work. This contract was approved and assented to in writing by two of the trustees under the mortgage.

After the work was done, but before the time fixed for payment for it came round, the company became bankrupt and had no property from which payment could be got, except such as was then claimed under the mortgage and was now held by the trustees under it; certain persons who had been substituted in the place of the original trustees. Assignees in bankruptcy having been appointed, Dillon accordingly filed a bill in the court below against the trustees and the assignees to get payment of what the company owed him.

The bill, having set forth the facts already mentioned, alleged that the railroad was at the time of the mortgage of small value, because not completed; and alleged further that the better to attain the objects of the mortgage, namely, the acquisition of funds and the construction of the unbuilt portions of the road, and in order to induce other persons to enter into contracts for the construction and completion of the road, the agreement contained in the second or last abovementioned provision was made; and that such agreement was a part of the terms and trust under which the trustees held and were to hold the trust estate; and that according to such agreement they and the corporation bound themselves and their successors to act; and that the contracts of the corporation assented to in writing by one of the trustees should and would be a charge upon the sums realized from the sale of the bonds issued. A copy of the indenture of mortgage and of the contract with the plaintiff was annexed to the bill.

The bill, referring now more specifically to the particular contract of Dillon, further alleged that the purpose, object, intention, and understanding of the parties-the corporation, the trustees, and the complainant-in procuring the approval of the trustees in making the same, and in accepting the contract so approved, was that the sums to become due to the complainant under the contract should be a charge upon the sums to be received from the sales of the bonds, no part of which, or a very inconsiderable part of which, had then been sold or disposed of; that the complainant thereafter undertook and performed work under his contract, and thereunder expended large sums of money, relying for his compensation on the sums of money to be derived from the sales of bonds, and his lien thereon by virtue of the premises as aforesaid; and that his reliance thereon was at all times well known to the corporation and to the trustees under the mortgage; that the work done under the contract was accepted by the engineer of the company in charge, but for only a portion of the amount owing to him was the complainant paid; and that there remained due to him for this work over one million of dollars, with interest from the 1st of January, 1870.

It alleged further that a large amount of money was received by the company from the sales of the bonds issued, more than sufficient to pay the amount due the complainant, but that instead of being thus appropriated, it was expended in acquiring new property, to be held under the mortgage, and in improving and increasing the value of the property then and since in the possession of the trustees.

It alleged in addition that the amounts due to the complainant became and were a charge and lien upon the money derived from the sale of the bonds; that the money thus raised became appropriated to, and ought to have been used and paid to discharge the debt to the complainant and to no other purpose; that it was within the power of the trustees and of the corporation to cause the same to be devoted to that purpose, and to prevent the same from being devoted to any other purpose; that by virtue of the premises the trustees and the corporation became bound to the complainant so to do, and became trustees for his benefit for that purpose, under said indenture and agreement; that the trustees and corporation wrongfully permitted and suffered the money which ought to have been paid to the complainant to be otherwise expended, to an amount exceeding the amount due to the complainant; and that at the present time, and on March 18th, 1871, and on October 21st, 1870, and long prior thereto the plaintiff 'had a valid and subsisting lien on the said property and franchises of said corporation, arising from and created' by the facts and proceedings set forth.

The bill prayed that the defendants might be declared trustees for the benefit of the complainant of the property held by them under the indenture, to the extent of the amount of money and interest thereon which was due to the complainant and wrongfully expended in acquiring and improving and adding value to said property; and trustees for the benefit of the complainant of so much of the property, and of the value in the hands of the trustees, as was acquired by and as is due to such wrongful expenditure, and for general relief.

To the bill the defendants demurred generally for want of equity. The Circuit Court sustained the demurrer and dismissed the bill, and the case is brought to this court on appeal.

Messrs. S. Bartlett and J. J. Storrow, for the appellant.

1. We have in the outset of this case, the distinct admission of the defence, that whatsoever may be the legal construction of the second covenant, it was the 'understanding, purpose, and object of all parties,' that the plaintiff should and did have a lien or charge upon the proceeds of the bonds.

If the construction of the covenant is doubtful, then the confessed contemporaneous construction of all parties, and the grave acts of the plaintiff admitted to have been done under that construction, and to have been known to the defendants to have been so done, will tend to remove the doubt.

2. What is the true legal construction of the covenant?

An inspection of the mortgage shows that it was framed in complete distrust of the fidelity of a faltering corporation, and that all the bonds, and their proceeds, embraced in the mortgage, were designedly placed in trust.

3. Then by a just construction of the words of the trust contained in the second covenant, were parties making written contracts to construct and equip the road intended both by the company and the trustees, on compliance with its terms, to be secured by it? It is admitted by the demurrer that the case is one of a corporation with an unfinished road of small value in itself, and in addition deeply mortgaged, destitute of means to make such completion, and thus clearly with no credit, proposing a new mortgage of $20,000,000, which would have priority to any claims of contractors. How do these circumstances weigh upon the construction of a provision in the mortgage (should the terms of that provision appear doubtful), whether there was an intent to provide, out of the sales of the new bonds, security for any one who would venture to contract to complete the road? Do they not tend to support the allegation of the bill, that the clause was inserted in order 'to induce other persons to enter into contracts for the construction and completion of said railroad,' which allegation the demurrer admits?

4. Next, as to the legal construction of the article itself, or the clause in the mortgage on which the controversy arises.

There is nothing in the surrounding circumstances, in the terms, recital, or scheme of the mortgage, which tends to the conclusion that the language of the second covenant was inadvertently used. If this is so, then the words must receive their natural force and meaning, and the construction must be such that every word used by the parties shall be made effective. It is then clear that the article contemplates a charge in favor of some person 'upon the sums received,' whensoever contracts of the description referred to shall be made and approved in writing by the trustees.

Who then are the person or persons in whose favor that charge was to arise?

The language rightly construed cannot import the creation of a charge in favor of the corporation itself. It already held the funds in its own hands in trust for the same purpose, with the right and duty so to apply them. The character of the charge to be created points conclusively to the parties for whose benefit it is created. That charge is to be of the 'contract made,' not merely of the fixed periodical payments to be made under it. None but a contractor would have any interest in having the contract itself made a charge upon the fund.

The bill avers that the plaintiff acted with full knowledge of the clause authorizing, as we assert, a charge of his contract on the fund, and was known by the defendants to have so acted, and to have expended his labor and means on the faith of it. This the demurrer must be deemed to admit.

Why was the approval of the trustees procured, made, and accepted by these two parties and the complainant? Upon the theory that it gave him no charge upon the fund, it was an idle and a purposeless act. There was already the valid contract of the corporation. Upon the defendants' theory the written approval of the trustees gave him nothing more, and why did the trustees go through the formality of making a written approval which they knew or supposed gave no additional force to the contract or security to the contractor?

The acts of both the complainant and the trustees were obviously in compliance with the second covenant, and it thus follows that it was known to the former; and further, that the trustees, when the contract was presented to them for their written approval, knew and understood that the contractor had a motive for procuring that approval, and that that motive was to give him some advantage or security which he would not possess without it.

Can the trustees or the company be heard to say that they did not understand that this advantage and this security were a charge upon the trust fund under the second covenant?

Finally, the provisions of the indenture coupled with the written approval of the contract in pursuance of them, give to the trust relied on that certainty of subject and of object which is necessary to its enforcement, and which of itself is deemed to be ground for inferring the existence of a trust from words doubtful in themselves.

Messrs. C. S. Bradley and W. G. Russell, contra.

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

title: Dillon v. Barnard


text: Talk:Dillon v. Barnard

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

title: Talk:Dillon v. Barnard


text:
Dillon v. Barnard/Opinion of the Court

The plaintiff has brought the present suit against the new trustees under the mortgage, and the assignees in bankruptcy, to charge the property held by them with the amount of his demand remaining unpaid for work done under his contract with the company. In support of his pretension he insists that under the indenture his contract, when it obtained the assent of two of the trustees, became a charge upon the moneys received by the corporation from the sale of the bonds; that the trustees under the mortgage and the corporation thereupon became trustees for his benefit of the proceeds thus received, and were bound to apply them to pay his debt; that by their failure to have the proceeds thus applied, and by expending them in acquiring new property and improving that already possessed, the charge upon the proceeds became attached to the property in the hands of the trustees thus added to and improved; and that this charge is entitled to preference over the lien of the bondholders.

The positions thus asserted must find their support, if at all, in the provisions of the indenture of mortgage. If not sustained there they are not sustained anywhere. The averments of the bill as to the purport and meaning of the provisions of the indenture, the object of their insertion in the instrument, and the obligations they imposed upon the corporation and the trustees, and the rights they conferred upon the plaintiff when his contract was approved, are not admitted by the demurrer. These are matters of legal inference, conclusions of law upon the construction of the indenture, and are open to contention, a copy of the instrument itself being annexed to the bill, and, therefore, before the court for inspection. A demurrer only admits facts well pleaded; it does not admit matters of inference and argument however clearly stated; it does not admit, for example, the accuracy of an alleged construction of an instrument, when the instrument itself is set forth in the bill, or a copy is annexed, against a construction required by its terms; nor the correctness of the ascription of a purpose to the parties when not justified by the language used. The several averments of the plaintiff in the bill as to his understanding of his rights, and of the liabilities and duties of others under the contract, can, therefore, exert no influence upon the mind of the court in the disposition of the demurrer. This is not the case of a bill to set aside or reform the contract as not expressing the actual intention of the parties. It is a case where the contention arises solely upon the meaning of the indenture in its bearing upon the contract, and that must be ascertained by applying to its language the ordinary rules of interpretation.

Looking, then, at the indenture we find that the only clause upon which the plaintiff relies to sustain his positions is the one providing that the expenditure of all sums of money received from the sale of the bonds shall be made with the approval of at least one of the trustees, and that his assent shall be necessary to all contracts made by the corporation 'before the same shall be a charge upon any of the sums' thus received. It is contended that the term charge, as here used, is synonymous with the term lien, and that the whole clause implies that when a contract has thus received the written assent of one of the trustees, it shall be, to the extent of the obligation created, a specific lien upon the moneys obtained. But this meaning of the term is not in harmony with its immediate context, or the object of the indenture. The instrument was executed to secure the payment of the mortgage bonds; it so declares on its face. It nowhere indicates any design to secure the contractors; its language is, 'that for the better securing and more sure payment of the sums of money mentioned in the said mortgage bonds, and each of them,' the indenture is executed. And the clause in question was intended to increase this security by preventing a wasteful expenditure of the funds of the corporation; it is, in fact, an agreement on its part that the funds received from the bonds shall only be used with the approval of one of the trustees, and without his written assent no contracts shall be payable out of those funds. The term charge is not used in any technical sense, as importing a lien upon the funds, but in the general acceptation of a claim that may be payable out of them. The contractors are not parties to the indenture, and are not entitled to claim as against those parties any benefit under its provisions, except that upon the assent being given to their contracts the use of the moneys for their payment is permissible. They are, so far as the agreement is concerned, strangers to the instrument. The written assent to contracts on the part of one of the trustees, was not required for their protection, but as an additional safeguard to the bondholders against an improvident use of the funds by the corporation. The clause is one of a series of covenants on the part of the corporation with the trustees, intended to secure the application of the funds received to the purposes contemplated at the time the indenture was executed,-the retirement of the existing indebtedness of the corporation, the completion of its road, and the laying of a third rail. And full effect is given to the language of the clause in question by this interpretation.

The present case, notwithstanding the largeness of the plaintiff's demand, is not different in its essential features from those cases of daily occurrence, where the expectation of a contractor, that funds of his employer derived from specific sources will be devoted to the payment of his services or materials, is disappointed. Such expectation, however reasonable, founded even upon the express promise of the employer that the funds shall be thus devoted, of itself avails nothing in favor of the contractor. Before there can arise any lien on the funds of the employer, there must be, in addition to such express promise, upon which the contractor relies, some act of appropriation on the part of the employer depriving himself of the control of the funds, and conferring upon the contractor the right to have them applied to his payment when the services are rendered or the materials are furnished. There must be a relinquishment by the employer of the right of dominion over the funds, so that without his aid or consent the contractor can enforce their application to his payment when his contract is completed. In the case at bar there is no circumstance impairing the dominion of the corporation over the funds received from the bonds; there is only its covenant with the trustees that the expenditure of those funds shall be made with the approval of one of them, and that one of them shall give his written assent to its contracts before they are paid out of such funds. There is no covenant with the contractor of any kind in the instrument, and no right is conferred upon him to interfere in any disposition which the corporation may see fit to make of its moneys. The essential elements are wanting in the transaction between him and the corporation to give him any lien upon its funds. No right, therefore, exists in him to pursue such funds into other property upon which they have been expended. The case, as already intimated, is on his part one of simple disappointed expectation, against which misfortune equity furnishes no relief.

The plaintiff made his contract with knowledge of the existing mortgage and of the declaration which it contains, that it is to be the 'first and only lien on the property and franchises of the company,' and that it covered not only property then held by the company, but would also cover all property which might thereafter be acquired. If he had reason to doubt the future solvency of the corporation, or that it would apply the funds it obtained from its bonds to the payment of his work, he should have provided against such a contingency in advance. He cannot now be heard to complain that his expectation of receiving for his work funds not specifically appropriated for his benefit has failed, and to insist that, therefore, he ought to be allowed to follow those funds into property upon which other parties should have by the terms of a previous contract the first and only lien.

DECREE AFFIRMED.

title: Dillon v. Barnard/Opinion of the Court


text: Talk:Dillon v. Barnard/Opinion of the Court


text:
Trist v. Child

APPEAL from the Supreme Court of the District of Columbia; the case being thus:

N. P. Trist having a claim against the United States for his services, rendered in 1848, touching the treaty of Guadelupe Hidalgo-a claim which the government had not recognized-resolved, in 1866-7 to submit it to Congress and to ask payment of it. And he made an agreement with Linus Child, of Boston, that Child should take charge of the claim and prosecute it before Congress as his agent and attorney. As a compensation for his services it was agreed that Child should receive 25 per cent. of whatever sum Congress might allow in payment of the claim. If nothing was allowed, Child was to receive nothing. His compensation depended wholly upon the contingency of success. Child prepared a petition and presented the claim to Congress. Before final action was taken upon it by that body Child died. His son and personal representative, L. M. Child, who was his partner when the agreement between him and Trist was entered into, and down to the time of his death, continued the prosecution of the claim. By an act of the 20th of April, 1871, Congress appropriated the sum of $14,559 to pay it. The son thereupon applied to Trist for payment of the 25 per cent. stipulated for in the agreement between Trist and his father. Trist declined to pay. Hereupon Child applied to the Treasury Department to suspend the payment of the money to Trist. Payment was suspended accordingly, and the money was still in the treasury.

Child, the son, now filed his bill against Trist, praying that Trist might be enjoined from withdrawing the $14,559 from the treasury until he had complied with his agreement about the compensation, and that a decree might pass commanding him to pay to the complainant $5000, and for general relief.

The defendant answered the bill, asserting, with other defences going to the merits, that all the services as set forth in their bill were 'of such a nature as to give no cause of action in any court either of common law or equity.'

The case was heard upon the pleadings and much evidence. A part of the evidence consisted of correspondence between the parties. It tended to prove that the Childs, father and son, had been to see various members of Congress, soliciting their influence in behalf of a bill introduced for the benefit of Mr. Trist, and in several instances obtaining a promise of it. There was no attempt to prove that any kind of bribe had been offered or ever contemplated; but the following letter, one in the correspondence put in evidence, was referred to as showing the effects of contracts such as the one in this case:

FROM CHILD, JR., TO TRIST.

HOUSE OF REPRESENTATIVES,

WASHINGTON, D. C., Feb. 20th, 1871.

MR. TRIST: Everything looks very favorable. I found that my father has spoken to C_____ and B_____, and other members of the House. Mr. B_____ says he will try hard to get it before the House. He has two more chances, or rather 'morning hours,' before Congress adjourns. A_____ will go in for it. D_____ promises to go for it. I have sent your letter and report to Mr. W_____, of Pennsylvania. It may not be reached till next week. Please write to your friends to write immediately to any member of Congress. Every vote tells; and a simple request to a member may secure his vote, he not caring anything about it. Set every man you know at work, even if he knows a page, for a page often gets a vote. The most I fear is indifference.

Yours, &c.,

L. M. CHILD.

The court below decreed,

1st. That Trist should pay to the complainant $3639, with interest from April 20th, 1871.

2d. That until he did so, he should be enjoined from receiving at the treasury 'any of the moneys appropriated to him' by the above act of Congress, of April 20th, 1871.

From this decree the case was brought here.

The good character of the Messrs. Child, father and son, was not denied.

Messrs. Durant and Horner, for the appellants, upon the main point of the case (the validity of the contract between Child and Trist), relied upon Marshall v. Baltimore Railroad, in this court, and upon the principles there enunciated in behalf of the court by Grier, J.

title: Trist v. Child


text: Talk:Trist v. Child

title: Talk:Trist v. Child


text:
Trist v. Child/Opinion of the Court

Messrs. B. F. Butler and R. D. Mussey, contra:

The case relied on by opposing counsel is widely different from this one.

There, Marshall entered-as the report of the case shows-into a contract with the Baltimore and Ohio Railroad Company, to obtain certain favorable legislation in Virginia for the contingent compensation of fifty thousand dollars by the use of personal, secret, and sinister influences upon the legislators. He expressly stated that his plan required 'absolute secrecy,' and 'that he could allege 'an ostensible reason' for his presence in Richmond and his active interference without disclosing his real character and object.' He spoke of using 'outdoor influence' to affect the legislators through their 'kind and social dispositions,' and pictured them as 'careless and good-natured,' 'engaged in idle pleasures,' capable of being 'moulded like wax' by the most 'pressing influences.' The company authorized him to use these means. The question in that case, therefore, was, whether a contract for contingent compensation for obtaining legislation by the use of secret, sinister and personal influences upon legislators was or was not contrary to the policy of the law. And the decision of that question was the decision of the case.

In Marshall's case, the plaintiff and defendant combined together to perpetrate a fraud upon the servants of the public engaged in legislating for the public good, and it was this fact which made the contract infamous and disgraceful and incapable of enforcement in the courts; not that the action sought was that of a legislature.

The case at bar differs from that of Marshall, toto coelo. Here both father and son were openly and avowedly attorneys for their client, Trist. They never presented themselves to anybody in any different or other respect. Every act of theirs was open, fair, and honorable.

Will it be denied that any man having a claim on the government, may appear in person before a committee of Congress, if they allow him, or speak to members of Congress, if they incline to hear him; point out to them the justice of his claim, and put before them any and all honorable considerations which may make them see that the case ought to be decided in his favor? This, we assume, will not be denied. But suppose that he is an old man, or a man infirm and sick; one, withal, living away from the seat of government; a case, it may be stated, in passing, the exact case of Mr. Trist; for he was old, infirm, sick, and lived at Alexandria. Now, if Mr. Trist being well had the right to call upon committees or members of Congress, and (if they invited him or were willing to listen to him) to show to them that he negotiated, as he asserted that he did, the treaty of Guadalupe Hidalgo, and should be paid for doing so, what principle of either morals or policy, public or private, was there to prevent him (being thus old, infirm, sick, and away from Washington) from employing an honorable member of the Massachusetts bar to do the same thing for him? What principle to prevent him from doing by attorney that which he had himself the right, but from the visitation of God, had not himself, and at that time, the physical ability to do?

We are not here asking the court to open the door to corrupt influences upon Congress, or to give aid to that which is popularly known as 'lobbying,' and is properly denounced as dishonorable. But we are asking that by giving the sanction of the law to an open and honorable advocacy by counsel of private rights before legislative bodies, the court shall aid in doing away with the employment of agencies which work secretly and dishonorably.

The records of Congress show that with honorable motives and dishonorable stimulants both combined and acting upon the two classes of persons-upright and avowed, the Childs; or dishonest and secret, the Marshalls-who urge claims upon Congress, out of fifteen thousand private claims put before it since the government was organized, not more than one-half have been acted upon in any way. Are all private claims-claims in which the public has no interest-to be left absolutely to the action of Congress itself, moving only su a sponte? If so, they will never be acted upon. They can come before the body only through the action of private parties.

There will, therefore, always be solicitation before legislatures so long as legislatures have the power and exercise it of passing private laws. For the gift, or the art, of statement and persuasion is not the common property of mankind.

And if solicitation of some sort there must be, shall it come from the mouths of such men as Linus Child and his son-lawyers both, of unquestioned integrity-and be an open and upright solicitation of the intellect and the reason of the legislator; or shall it be made, by outlawry, a secret, sinister and personal solicitation of his passions, his prejudices, and his vices?

If you shall decide that the pledged word of his client as to compensation avails the Congressional practitioner nothing; that a man who in his poverty makes a contract may repudiate it when the fruit of the contract is attained; then will you remit all work before such bodies to men devoid of honor, irresponsible both in character and property; preying alike upon the misfortunes of claimants and the weaknesses of legislators.

[A good deal was said in the argument on both sides about contingent fees, but in view of the grounds on which the court based its judgment, a report of that part of the argument would be of no pertinence.]

Mr. Justice SWAYNE delivered the opinion of the court.

The court below decreed to the appellee the amount of his claim, and enjoined Trist from receiving from the treasury 'any of the money appropriated to him' by Congress, until he should have paid the demand of the appellee.

This decree, as regards that portion of the fund not claimed by the appellee, is an anomaly. Why the claim should affect that part of the fund to which it had no relation, is not easy to be imagined. This feature of the decree was doubtless the result of oversight and inadvertence. The bill proceeds upon the grounds of the validity of the original contract, and a consequent lien in favor of the complainant upon the fund appropriated. We shall examine the latter ground first. Was there, in any view of the case, a lien?

It is well settled that an order to pay a debt out of a particular fund belonging to the debtor gives to the creditor a specific equitable lien upon the fund, and binds it in the hands of the drawee. A part of the particular fund may be assigned by an order, and the payee may enforce payment of the amount against the drawee. But a mere agreement to pay out of such fund is not sufficient. Something more is necessary. There must be an appropriation of the fund pro tanto, either by giving an order or by transferring it otherwise in such a manner that the holder is authorized to pay the amount directly to the creditor without the further intervention of the debtor.

Viewing the subject in the light of these authorities, we are brought to the conclusion that the appellee had no lien upon the fund here in question. The understanding between the elder Child and Trist was a personal agreement. It could in nowise produce the effect insisted upon. For a breach of the agreement, the remedy was at law, not in equity, and the defendant had a constitutional right to a trial by jury. If there was no lien, there was no jurisdiction in equity.

There is another consideration fatally adverse to the claim of a lien. The first section of the act of Congress of February 26th, 1853, declares that all transfers of any part of any claim against the United States, 'or of any interest therein, whether absolute or conditional, shall be absolutely null and void, unless executed in the presence of at least two attesting witnesses after the allowance of such claim, the ascertainment of the amount due, and the issuing of a warrant therefor.' That the claim set up in the bill to a specific part of the money appropriated is within this statute is too clear to admit of doubt. It would be a waste of time to discuss the subject.

But there is an objection of still greater gravity to the appellee's case.

Was the contract a valid one? It was, on the part of Child, to procure by lobby service, if possible, the passage of a bill providing for the payment of the claim. The aid asked by the younger Child of Trist, which indicated what he considered needful, and doubtless proposed to do and did do himself, is thus vividly pictured in his letter to Trist of the 20th February, 1871. After giving the names of several members of Congress, from whom he had received favorable assurances, he proceeds: 'Please write to your friends to write to any member of Congress. Every vote tells, and a simple request may secure a vote, he not caring anything about it. Set every man you know at work. Even if he knows a page, for a page often gets a vote.'

In the Roman law it was declared that 'a promise made to effect a base purpose, as to commit homicide or sacrilege, is not binding.' In our jurisprudence a contract may be illegal and void because it is contrary to a constitution or statute, or inconsistent with sound policy and good morals. Lord Mansfield said: 'Many contracts which are not against morality, are still void as being against the maxims of sound policy.'

It is a rule of the common law of universal application, that where a contract express or implied is tainted with either of the vices last named, as to the consideration or the thing to be done, no alleged right founded upon it can be enforced in a court of justice.

Before considering the contract here in question, it may be well, by way of illustration, to advert to some of the cases presenting the subject in other phases, in which the principle has been adversely applied.

An agreement-to pay for supporting for election a candidate for sheriff; to pay for resigning a public position to make room for another; to pay for not bidding at a sheriff's sale of real property; to pay for not bidding for articles to be sold by the government at auction; to pay for not bidding for a contract to carry the mail on a specified route; to pay a person for his aid and influence in procuring an office, and for not being a candidate himself; to pay for procuring a contract from the government; to pay for procuring signatures to a petition to the governor for a pardon; to sell land to a particular person when the surrogate's order to sell should have been obtained; to pay for suppressing evidence and compounding a felony; to convey and assign a part of what should come from an ancestor by descent, devise, or distribution; to pay for promoting a marriage; to influence the disposition of property by will in a particular way.

The question now before us has been decided in four American cases. They were all ably considered, and in all of them the contract was held to be against public policy, and void. We entertain no doubt that in such cases, as under all other circumstances, an agreement express or implied for purely professional services is valid. Within this category are included, drafting the petition to set forth the claim, attending to the taking of testimony, collecting facts, preparing arguments, and submitting them orally or in writing, to a committee or other proper authority, and other services of like character. All these things are intended to reach only the reason of those sought to be influenced. They rest on the same principle of ethics as professional services rendered in a court of justice, and are no more exceptionable. But such services are separated by a broad line of demarcation from personal solicitation, and the other means and appliances which the correspondence shows were resorted to in this case. There is no reason to believe that they involved anything corrupt or different from what is usually practiced by all paid lobbyists in the prosecution of their business.

The foundation of a republic is the virtue of its citizens. They are at once sovereigns and subjects. As the foundation is undermined, the structure is weakened. When it is destroyed, the fabric must fall. Such is the voice of universal history. The theory of our government is, that all public stations are trusts, and that those clothed with them are to be animated in the discharge of their duties solely by considerations of right, justice, and the public good. They are never to descend to a lower plane. But there is a correlative duty resting upon the citizen. In his intercourse with those in authority, whether executive or legislative, touching the performance of their functions, he is bound to exhibit truth, frankness, and integrity. Any departure from the line of rectitude in such cases, is not only bad in morals, but involves a public wrong. No people can have any higher public interest, except the preservation of their liberties, than integrity in the administration of their government in all its departments.

The agreement in the present case was for the sale of the influence and exertions of the lobby agent to bring about the passage of a law for the payment of a private claim, without reference to its merits, by means which, if not corrupt, were illegitimate, and considered in connection with the pecuniary interest of the agent at stake, contrary to the plainest principles of public policy. No one has a right, in such circumstances, to put himself in a position of temptation to do what is regarded as so pernicious in its character. The law forbids the inchoate step, and puts the seal of its reprobation upon the undertaking.

If any of the great corporations of the country were to hire adventurers who make market of themselves in this way, to procure the passage of a general law with a view to the promotion of their private interests, the moral sense of every right-minded man would instinctively denounce the employer and employed as steeped in corruption, and the employment as infamous.

If the instances were numerous, open, and tolerated, they would be regarded as measuring the decay of the public morals and the degeneracy of the times. No prophetic spirit would be needed to foretell the consequences near at hand. The same thing in lesser legislation, if not so prolific of alarming evils, is not less vicious in itself, nor less to be condemned. The vital principle of both is the same. The evils of the latter are of sufficient magnitude to invite the most serious consideration. The prohibition of the law rests upon a solid foundation. A private bill is apt to attract little attention. It involves no great public interest, and usually fails to excite much discussion. Not unfrequently the facts are whispered to those whose duty it is to investigate, vouched for by them, and the passage of the measure is thus secured. If the agent is truthful, and conceals nothing, all is well. If he uses nefarious means with success, the spring-head and the stream of legislation are polluted. To legalize the traffic of such service, would open a door at which fraud and falsehood would not fail to enter and make themselves felt at every accessible point. It would invite their presence and offer them a premium. If the tempted agent be corrupt himself, and disposed to corrupt others, the transition requires but a single step. He has the means in his hands, with every facility and a strong incentive to use them. The widespread suspicion which prevails, and charges openly made and hardly denied, lead to the conclusion that such events are not of rare occurrence. Where the avarice of the agent is inflamed by the hope of a reward contingent upon success, and to be graduated by a percentage upon the amount appropriated, the danger of tampering in its worst form is greatly increased.

It is by reason of these things that the law is as it is upon the subject. It will not allow either party to be led into temptation where the thing to be guarded against is so deleterious to private morals and so injurious to the public welfare. In expressing these views, we follow the lead of reason and authority.

We are aware of no case in English or American jurisprudence like the one here under consideration, where the agreement has not been adjudged to be illegal and void.

We have said that for professional services in this connection a just compensation, may be recovered. But where they are blended and confused with those which are forbidden, the whole is a unit and indivisible. That which is bad destroys that which is good, and they perish together. Services of the latter character, gratuitously rendered, are not unlawful. The absence of motive to wrong is the foundation of the sanction. The tendency to mischief, if not wanting, is greatly lessened. The taint lies in the stipulation for pay. Where that exists, it affects fatally, in all its parts, the entire body of the contract. In all such cases, protior conditio defendentis. Where there is turpitude, the law will help neither party.

The elder agent in this case is represented to have been a lawyer of ability and high character. The appellee is said to be equally worthy. This can make no difference as to the legal principles we have considered, nor in their application to the case in hand. The law is no respecter of persons.

DECREE REVERSED, and the case remanded, with directions to

DISMISS THE BILL.

title: Trist v. Child/Opinion of the Court


text: Talk:Trist v. Child/Opinion of the Court


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Hill v. Mendenhall

ERROR to the Circuit Court for the Eastern District of North Carolina.

Hill sued Mendenhall in the court below upon a judgment in one of the courts of record in the State of Minnesota. The plea was nul tiel record alone. Upon the trial of the issue made by this plea, the plaintiff introduced in evidence an exemplification of the record sued upon. This record showed upon its face that the defendant was, at the time that action was commenced, a resident of the State of North Carolina; that the summons issued had been returned not served; that thereupon, by order of the court, service was made by publication, and that after such publication the defendant appeared by attorney, filed an answer verified by an agent, and voluntarily submitted himself to the jurisdiction of the court.

The bill of exceptions showed that, after introducing the record, the plaintiff called a witness who gave evidence tending to prove that the party who verified the answer was at the time an agent of the defendant for the transaction of his business in Minnesota. The defendant then testified in his own behalf and in substance denied the agency.

The Circuit Court found that there was such a record as was sued upon, but because it did not appear in the exemplification or from the evidence that the summons had been served upon the defendant, gave judgment in this action in his favor. This ruling of the Circuit Court was now assigned for error.

''Messrs. P. Phillips and W. A. Graham, for the plaintiff in error. No opposing counsel''.

The CHIEF JUSTICE delivered the opinion of the court.

title: Hill v. Mendenhall


text: Talk:Hill v. Mendenhall

title: Talk:Hill v. Mendenhall


text:
Hill v. Mendenhall/Opinion of the Court

It is true the record sued upon in this case does show that defendant was not served with process, but it also shows his voluntary appearance by an attorney. If this appearance was authorized, it is as effective for the purposes of jurisdiction as an actual service of summons. When an attorney of a court of record appears in an action for one of the parties, his authority, in the absence of any proof to the contrary, will be presumed. A record which shows such an appearance will bind the party until it is proven that the attorney acted without authority.

Since the cases of Thompson v. Whitman, and Knowles v. Gaslight and Coke Company, it may be considered as settled in this court, that when a judgment rendered in one State is sued upon in another, the defendant may contradict the record to the extent of showing that in point of fact the court rendering the judgment did not have jurisdiction of his person. If such showing is made the action must fail, because a judgment obtained under such circumstances has no effect outside of the State in which it was rendered.

But if it appears on the face of the record that the court did have jurisdiction, extrinsic evidence to contradict it is not admissible under a plea of nul tiel record. The office of pleading is to inform the court and the parties of the facts in issue; the court, that it may declare the law, and the parties, that they may know what to meet by their proof. Nul tiel record puts in issue only the fact of the existence of the record, and is met by the production of the record itself valid upon its face, or an exemplification duly authenticated under the act of Congress. A defence requiring evidence to contradict the record must necessarily admit that the record exists as a matter of fact, and seek relief by avoiding its effect. It should, therefore, be formally pleaded, in order that the facts upon which it is predicated may be admitted or put in issue. Under the common-law system of pleading this would be done by a special plea. The equivalent of such a plea is required under any system. The precise form in which the statement should be made will depend upon the practice of the court in which it is to be used, but it must be made in some form. Defects appearing on the face of the record may be taken advantage of upon its production under a plea of nul tiel record, but those which require extrinsic evidence to make them apparent must be formally alleged before they can be proven. This we believe to be in accordance with the practice of all courts in which such defences have been allowed, and it is certainly the logical deduction from the elementary principles of pleading. In Knowles v. Gaslight and Coke Company, the issue was directly made by an averment of jurisdiction in the complaint and a denial in the answer, and in Thompson v. Whitman by plea and replication.

It follows that, upon the pleadings in this case, judgment should have been given for the plaintiff after proof of the record, showing as it did jurisdiction of the defendant by reason of his appearance by attorney. As both parties, however, submitted evidence without objection upon the question of the authority of the attorney so to appear, we should have held them to a waiver of the proper pleadings to present that issue if it appeared affirmatively that this evidence had been considered and passed upon by the court below. Such, however, is not the case. Judgment was given for the defendant upon the sole ground that it did not appear from the record or the evidence that summons had been served. This was error if the defendant had in fact voluntarily appeared. The record upon its face furnished evidence of such an appearance. The court did not find that this evidence was not in accordance with the facts.

The judgment of the Circuit Court is, therefore, REVERSED, and the cause remanded with instructions to award a venire de novo, and permit such amendments to the pleadings as may be necessary to present fairly for trial the real issues between the parties.

REVERSED AND REMANDED.

title: Hill v. Mendenhall/Opinion of the Court


text: Talk:Hill v. Mendenhall/Opinion of the Court


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Baltimore and Ohio Railroad Company v. Maryland (88 U.S. 456)

ERROR to the Court of Appeals of Maryland; the case being thus:

A statute of Maryland granted to the Baltimore and Ohio Railroad Company the right to make a branch or lateral road from Baltimore to Washington City, and of employing machinery and carriages thereon, for the transportation of freight and passengers. And it was further enacted,

'That the company shall be entitled to charge and take for conveying each person, the whole distance between the cities of Baltimore and Washington, not exceeding two dollars and fifty cents, and in proportion for every shorter distance.

'That the said company shall pay to the treasurer of the Western Shore of Maryland, on the first Monday in January and July in each and every year, for the use of the State, one-fifth of the whole amount which may be received for the transportation of passengers on said railroad by said company during the six months last preceding.'There were other statutes on the main subject, but this one presents the substance of the enactments.

This enactment was accepted, and the payment made for many years of one-fifth of $1.50, the fare asked. However, after a certain time the railroad company denied the constitutionality of the stipulation to pay, and refused further payment. Hereupon the State sued the company in one of the State courts of Baltimore.

The action was indebitatus assumpsit. The declaration contained two counts: the first for money due and payable, the second for money had and received. In answer to a demand of the defendant for a bill of particulars, the following was filed by the State.

'The claim is for the particulars following, viz.: For $500,000, being the one-fifth part of the whole amount of moneys received by the defendant for the transportation of passengers upon the Washington branch of the Baltimore and Ohio Railroad, from the 1st day of January, 1860, to the 1st day of January, 1870; which said sum of $500,000 was received by the defendant for the use of the plaintiff, and was due and in arrears to the plaintiff at the time of the institution of this action.'

The defendant pleaded the general issue, and on that issue the case was tried.

The record showed that at the trial of the cause, after all the acts of Assembly constituting the charter referred to, and bearing on the question, had been submitted, the defendant, by his counsel, prayed the court to instruct the jury that these acts, so far as they provided that the defendant should pay to the treasurer of the Western Shore of Maryland, on the first Monday of January and July in each and every year, for the use of the State, one-fifth of the whole amount that may be received for the transportation of passengers on the branch road mentioned in said acts during the six months last preceding, were unconstitutional, because in conflict with the Constitution of the United States; and secondly, that the defendant was not estopped from setting up the defence.

The plaintiff, on the other hand, prayed the court to instruct the jury that even if the said provision was unconstitutional, still the defendant, by accepting the terms of the charter, was bound to pay to the State the one-fifth part of the passage-money in question.

The court granted the prayer of the defendant and refused that of the plaintiff, and a verdict and judgment were rendered for the former.

The Court of Appeals of Maryland reversed the judgment and awarded a venire de novo.

Upon the second trial the same instructions were asked by each party respectively, and the court below, in conformity with the decision of the Court of Appeals, refused the instruction asked for by the defendant and granted that asked for by the plaintiff, and a verdict and judgment were rendered for the latter. This judgment was affirmed by the Court of Appeals, and was now brought here under the assumption that it was within section 709 of the Revised Statutes, the old twenty-fifth section of the Judiciary Act.

Messrs. J. H. B. Latrobe and Reverdy Johnson, for the plaintiff in error.

The question is, were the statutes of Maryland and the contract made under them constitutional?

We submit that this question has been settled by this court in the case of Crandall v. State of Nevada. That case arose upon an act of Assembly of Nevada. The act was thus:

'There shall be levied and collected a capitation tax of $1.00 upon every person leaving the State by any railroad, stagecoach, or other vehicle engaged or employed in the business of transporting passengers for hire.'

This court pronounced the act unconstitutional.

Is there any essential difference between that act of Nevada and the Maryland act?

1. In the Nevada case the effect was to make each passenger leaving the State pay $1.00 to the State. In the case at bar the effect was to make each passenger entering or leaving the State by the Washington branch road pay 30 cents, or one-fifth of $1.50.

The payment to the State is irrespective of the earnings of the company, out of which are defrayed the cost of running the road, &c., and a dividend to the stockholders; these are met by the $1.20, which is the company's share of the $1.50.

That the phrase 'one-fifth of a given sum' is an accurate statement of the quotient resulting from dividing 'the given sum' by five cannot, of course, be denied. The tax of $1.00, therefore, in Nevada, was not more specific than a tax of one-fifth of the gross receipts, when the fare was $1.50, in Maryland.

In the Nevada case the carrier was made the collector for the State; in the case at bar the company is made the collector, and required by the law to pay the tax to the State out of what it receives from the passenger.

In the Nevada case the legislation was general in its operation; in the case at bar it is special, being confined to a single company.

But the principle involved is independent of the number of carriers to whom the legislation is applicable. The wrong done is to each particular passenger; and the fact that the law is not uniform in its operation-that a portion only of the people who travel that portion, namely, who use a particular road, is affected by it-is not an argument in its favor.

If it is unconstitutional to exact payment from a person entering or leaving the State, the unconstitutionality cannot be evaded by the name that is given the exaction; and the fact that in Nevada the law called the collection to be made from the passengers a capitation tax, and that in Maryland it is described as one-fifth of the gross receipts of the passenger traffic between Baltimore and Washington, can make no difference.

In the Freight Tax Cases, to which we refer as much in point, Mr. Justice Strong, delivering the opinion of this court, says:


text: Talk:Baltimore and Ohio Railroad Company v. Maryland (88 U.S. 456)


text:
Baltimore and Ohio Railroad Company v. Maryland (88 U.S. 456)/Opinion of the Court

'It has repeatedly been held that the constitutionality or unconstitutionality of a State tax is to be determined not by the form or agency through which it is to be collected, but by the subject on which the burden is laid.'

2. Is there any distinction due to the fact that in the Nevada case the law imposed a tax, and in the case at bar the company contracted to pay the tax?

If, as we assume, the law is unconstitutional because of its exaction from the passenger, it can make no difference whether the State imposes the tax by a general law or whether it is the result of a special contract with the party receiving it in the first instance. If it is wrong, as the Nevada case has decided, for the State to impose such a tax, the wrong cannot be rectified by a contract in which the carrier agrees to pay it out of a gross fund. If the State cannot, of itself, make the traveller pay a portion of his fare into the State treasury, it cannot delegate to another the power to compel a payment that is, subsequently and circuitously, to find its way into it, unless indeed we are prepared to admit that the law can be simply evaded by the form in which those who collude to evade it may contract for the purpose.

The constantly recurring question is, 'Is the charge one that increases the cost of transportation to the passenger for the use of the State, beyond what it would be were the fare regulated by circumstances irrespective of the State?'

That the company, after fixing the fare irrespectively of the tax, would pay the 30 cents per passenger out of it, cannot be supposed. Fixing the fare, the amount to be paid to the State out of the gross receipts, as a matter of course became a matter of consideration; and equally as a matter of course a sum was fixed, the deduction of 20 per cent. from which would still leave a remunerative compensation to the company, which becomes as much the collector for the State of the latter's 20 per cent. as the stage-owner in Nevada was made the collector of the $1.00 there. Had the stage-owner been willing to pay the tax, he would have added the dollar to the fare of the passenger, exactly as the company here added 30 cents to the fare of passengers between Baltimore and Washington.

In the State Freight Tax Cases, already referred to, it is said, 'In view of these provisions of the statute, it is impossible to escape from the conviction that the burden of tax rests on the freight (passengers) transported,. . . and that the company authorized to collect the tax and pay it into the State treasury is in effect only a tax-gatherer.'

If, as just suggested, the form which the State and its creature, the railroad corporation, agree that the charter shall assume, is to settle the constitutionality of an exaction that the Constitution prohibits, and thereby preclude all inquiry by this court on behalf of the public, then the State of Maryland will have the doubtful merit of furnishing a form for the safe violation of law; taking the public from under the shield of this court and placing them at the mercy of the State and its corporations, who may collude to tax them.

Messrs. P. F. Thomas, I. N. Steele, and S. T. Wallis, contra.

I. No jurisdiction exists in this court, under section 709, ''to review the judgment below. There is no 'Federal question''.'

The right of the State to recover from the company was placed upon grounds independent of the question of the constitutionality of the statutes. The declaration contained two counts of only; one 'for money due and payable by the defendant to the plaintiff,' and the other 'for money had and received by the defendant for the use of the plaintiff.' Neither of the prayers offered by the company impeached, or indeed referred or pointed to the pleadings; so that, according to the established Maryland rule, they conceded the right to recover on those pleadings, if the evidence established a right to recover at all. But they set up and relied on the defence of the unconstitutionality of the statutes. The State in reply, by its prayers, claimed the right to recover, even if the statutes should be held to be unconstitutional, and without regard to the question of constitutionality.

The company thereupon argued that the statutes imposed a tax on passengers and required the company to collect it, which, under the ruling in Crandall v. Nevada, made them quoad hoc unconstitutional and void. The State of Maryland replied, that conceding the statutes to be void for the reason assigned, the company was liable nevertheless, for what it had already collected, and what the passengers, whose rights only were affected, had already paid to it without dispute, and waiving their rights. These propositions of the State were founded, too, on what for thirty years had been established law in its courts; law which has also the sanction of this court; Brooks v. Martin, being a leading case on the subject.

Here then was a ground covering the whole case and broad enough to maintain the judgment of the court below, which was presented to that court as a proper basis for its decision, and upon which its judgment was in fact founded. In such a case, according to the judgments of this court, the court will not review.

Of course, whether a special collector, who has received money for the State, under a law repugnant to the Constitution, but to which he was a willing and interested party, should, on grounds of public policy, be permitted to set up his own wrong, or his participation in the wrong, as an excuse for appropriating the fund, is a question which belongs to the State courts, in cases properly before them.

II. But assuming that the case is properly here and that the constitutionality of the Maryland statutes is to be passed on.

The Nevada act imposed, in terms, a capitation tax of $1.00 upon every individual who left the State by a public conveyance. It was therefore a specific tax upon the traveller, to be paid by and levied on him for the exercise of his right to leave the State by the ordinary public conveyances, and over and above the entire fare for his travel. There is no analogy between such a case and the case at bar.

The Maryland legislation, by its terms, instead of imposing a tax on the traveller, provides only that the company shall semi-annually pay to the State one-fifth of the amount received for 'the transportation of passengers' or 'passage-money.' It does not authorize the company to collect a tax from any person, for any privilege, but requires it to pay to the State every six months a tax of one-fifth of the amount received by it for its services in carrying passengers. The 'passage-money' received, belongs to the company, to be used and expended as it pleases. After the expiration of each period of six months, and only then, the amount of the tax is to be ascertained and the State becomes entitled to demand and receive that amount. This is simply a tax on its gross receipts from passenger fare, and the amounts of the tax is to be ascertained every six months by the amount of its business during that period in passenger transportation.

Again, the Nevada law prohibited the citizen from traveling at the usual and agreed rates of fare, over existing and established routes, and in existing and established conveyances. It impaired and obstructed his existing rights. The Maryland statutes were passed in order to create new and improved modes of conveyance; to give to the traveller a railroad instead of a turnpike.

Further. The right to one-fifth of the amount of the gross receipts from passenger fare was given to the State as a bonus for the franchise and as the price of a valuable privilege and option which it parted with on the company's urgency, and which the State might have refused, on any terms if it had seen fit. A State may exact from a company which it charters, as a bonus, or price for the franchise which it grants, and the privileges which it relinquishes, a sum of money payable in cash, or by instalments, or at some distant day, with interest payable semi-annually. How does the bonus become unconstitutional because its amount is to be ascertained semi-annually, according to the gross receipts from the transportation of passengers? Like the bonus just referred to, it is exacted from the company-to be paid by it out of its receipts and cannot be increased by the State to the point of prohibition, because its amount is proportionally fixed by a contract which the Constitution protects. The mere fact that this amount is measured by the semi-annual receipts from passenger travel cannot convert it into a capitation tax on passengers; and except in that fact it does not differ from the bonus supposed.

The constitutionality of such a tax as was here laid is established by this court in the case of 'State Tax on Railway Gross Receipts.'

I. As to the jurisdiction.

Was there, below, any question of Federal law of such controlling character that a correct decision of it is necessary to any final judgment in the case? If there was, of course there is a right of review. We say that there was such a question.

The action being one of indebitatus assumpsit, and the counts general, the declaration did not indeed, of itself, show such a question. But when a bill of particulars was asked for and given, the bill given made the declaration equivalent to a special declaration in assumpsit on a contract between the company and the State. Hence the State offered in evidence the statutes of the State giving the alleged right to the one-fifth. The State, therefore, made the statute giving one-fifth, and the stipulation under the statute, an integral part of its case. The case could not stand, possibly, independently of the statute, and if the company set up that the statute of the State was void as opposing the Federal Constitution-which by its request to charge it did set up-and a judgment was entered against the company, then jurisdiction here arises within section 709 of the Revised Statutes; the old twenty-fifth section of the Judiciary Act.

The vice of the opinion of the Court of Appeals is that it divides into two parts a contract whose parts are necessarily inseparable. The collection it makes one part, the paying over another part. The charter gave the right to collect within the maximum of $2.50. No constitutional question could arise there. The collection for the purpose of paying over and the actual paying over constituted the illegal act, under a contract not to collect only, but to collect and pay over: necessarily, we repeat, an entirety.

Before the State can establish a right to any part of the revenue from the road it must exhibit the unconstitutional act as the foundation of its claim. Put the case in the form of a dialogue:

'You have moneys which belong to me,' says the State.

'We deny it,' replies the company.

'Have you not received $1.50 a head for so many passengers between Baltimore and Washington?' asks the State.

'We have,' say the company, 'but what right have you to any part of it?'

'A statute of Maryland gives me the right,' says the State.

The company answers: 'That act being unconstitutional can confer no right. ''But for the act the whole fare would belong to us. It falls within the limit that we are authorized to charge per passenger''. You can claim no part of it unless you first produce the act; and when that is produced its unconstitutionality defeats you claim.'

This answer is conclusive. Jurisdiction, then, exists.

II. As to the constitutionality of the tax.

The tax is said to be a bonus, and therefore valid.

As a bonus is ordinarily understood, it is a payment by the stockholders in a corporation for corporate privileges. If paid at once it affects their capital; if paid annually it affects their income. But here neither the capital nor the income is affected. The capital is not affected because the payment is an annual one. The income is not affected because this annual payment does not belong to the company, but is received by it, accounted for by it, and paid into the State treasury. Affecting, then, neither the capital nor the income of the stockholders, it comes within no known definition of a bonus. It is a tax, and nothing but a tax; a capitation tax, in the recognized meaning of the term.

Mr. Justice BRADLEY delivered the opinion of the court.

The first question raised has reference to jurisdiction.

It appears by the record that the question of the constitutionality of the stipulation, under the statute of Maryland, was distinctly raised by the defendant, with a denial of any estoppel precluding such a defence. The counsel for the plaintiff contend, and the Court of Appeals of Maryland held, that whether the stipulation by the State for one-fifth of the passage-money was constitutional or not, it was received by the company for the State, and was the money of the State, the company being merely the agent of the State to collect it; and that the company was, therefore, bound to respond to the State for it, on the ground that an agent or receiver cannot withhold the money of his principal under pretence of illegality in the transaction by virtue of which it was obtained. The general doctrine referred to is a sound one, and if it were applicable to this case it would follow that the constitutional question was not necessarily involved; but as this question was in fact passed upon by the Court of Appeals, and ruled against the defendants, though not the principal ground on which it placed its judgment, it would be our duty, under our recent rulings on the construction of the act of 1867, to assume jurisdiction of the case, and review the judgment of the State court on the constitutional point. But with great respect for the opinion of that learned court, we are compelled to differ with it as to the applicability to the present case of the doctrine referred to. We cannot concur in the position that any part of the passenger-money, when received by the company, became or was the money of the State. It was the money of the railroad company alone. The railroad company was authorized by its charter to charge the passenger for transporting him between Baltimore and Washington what it did charged him. The State cannot be permitted to deny that it had power to confer upon the company such a franchise; nor can it be permitted to say that the passenger could complain of any extortion practiced upon him; for the fare, so far as he was concerned, was perfectly legitimate. It might have been greater than it was, and yet he would have had no right to complain. The State, at least, is estopped from saying that he could justly do so. The company, then, charged a lawful fare. The money all went into its treasury together, and one portion was not distinguished from another. The company was simply under a contract to pay to the State one-fifth of the whole amount received for the transportation of passengers. If there was anything unconstitutional in the arrangement it was this contract. The grant of the right to build the road and operate it was constitutional; the right to charge fare and freight was constitutional; the amount of such fare and freight would have been entirely in the discretion of the company if it had not been limited by the grant. There is, in short, nothing in the whole transaction between the State and the company to which, in a constitutional point of view, the slightest exception can be taken, except this contract to pay to the State a portion of the amount received. In the cases in which it has been held that parties engaged in an illegal undertaking are answer able to one another for moneys received therein, it was the undertaking, and not the agreement to pay over the moneys received, which was obnoxious to the law or its policy. In this case it is not the transaction out of which the money grew, but the agreement to pay over a portion of it, which is vicious, if anything is vicious; and the transaction is only vicious, if at all, because of the reflected effect of the agreement upon it. We think no case can be found where the agreement itself, to divide a common fund or to pay over money received, as contradistinguished from the transaction out of which the money arose, was illegal, in which it has been held that a recovery could be had. If it be said that the vice, if any, lies back of the agreement, namely, in the reservation by the State of one-fifth, it would amount to the same thing. The right to recover would then stand on the reservation, and would be no better than before.

We think, therefore, that the constitutionality of the stipulation came directly in question, and could not properly be avoided in determining the case.

In approaching the merits of the case it is unnecessary to examine in detail the various laws which constitute the charter of the railroad company in reference to the construction of the Washington branch. They were all accepted by the company, and no question of impairing the obligation of contracts is raised. The substance is simply this: That the State granted to the railroad company the franchise of constructing a railroad from Baltimore to Washington, and of employing machinery and vehicles thereon for the transportation of passengers and merchandise, and of charging therefor certain rates of fare for the one, and freight for the other, the passenger fare not to exceed two dollars and fifty cents per passenger for the entire distance, and in that proportion for less distances; and it was stipulated that the company should, at the end of every six months, pay to the State one-fifth of the whole amount which might be received for the transportation of passengers. The question is, whether such a stipulation is, or is not, a violation of the Constitution of the United States, as being a restriction of free intercourse and traffic between the different States.

That the road is one of the principal thoroughfares in the country for interstate travel is conceded, and, indeed, may be judicially assumed. As, however, nearly all the railroads in the country are, or may be, used to a greater or less extent as links in through transportation, this road cannot in principle be regarded as an exceptional one in that respect.

Commerce on land between the different States is so strikingly dissimilar, in many respects, from commerce on water, that it is often difficult to regard them in the same aspect in reference to the respective constitutional powers and duties of the State and Federal governments. No doubt commerce by water was principally in the minds of those who framed and adopted the Constitution, although both its language and spirit embrace commerce by land as well. Maritime transportation requires no artificial roadway. Nature has prepared to hand that portion of the instrumentality employed. The navigable waters of the earth are recognized public highways of trade and intercourse. No franchise is needed to enable the navigator to use them. Again, the vehicles of commerce by water being instruments of intercommunication with other nations, the regulation of them is assumed by the National legislature. So that State interference with transportation by water, and especially by sea, is at once clearly marked and distinctly discernible. But it is different with transportation by land. This, when the Constitution was adopted, was entirely performed on common roads, and in vehicles drawn by animal power. No one at that day imagined that the roads and bridges of the country (except when the latter crossed navigable streams) were not entirely subject, both as to their construction, repair, and management, to State regulation and control. They were all made either by the States or under their authority. The power of the State to impose or authorize such tolls, as it saw fit, was unquestioned. No one then supposed that the wagons of the country, which were the vehicles of this commerce, or the horses by which they were drawn, were subject to National regulation. The movement of persons and merchandise, so long as it was as free to one person as to another, to the citizens of other States as to the citizens of the State in which it was performed, was not regarded as unconstitutionally restricted and trammelled by tolls exacted on bridges or turnpikes, whether belonging to the State or to private persons. And when, in process of time, canals were constructed, no amount of tolls which was exacted thereon by the State or the companies that owned them, was ever regarded as an infringement of the Constitution. When constructed by the State itself, they might be the source of revenues largely exceeding the outlay without exciting even the question of constitutionality. So when, by the improvements and discoveries of mechanical science, railroads came to be built and furnished with all the apparatus of rapid and all-absorbing transportation, no one imagined that the State, if itself owner of the work, might not exact any amount whatever of toll or fare or freight, or authorize its citizens or corporations, if owners, to do the same. Had the State built the road in question it might, to this day, unchallenged and unchallengeable, have charged two dollars and fifty cents for carrying a passenger between Baltimore and Washington. So might the railroad company, under authority from the State, if it saw fit to do so. These are positions which must be conceded. No one has ever doubted them.

This unlimited right of the State to charge, or to authorize others to charge, toll, freight, or fare for transportation on its roads, canals, and railroads, arises from the simple fact that they are its own works, or constructed under its authority. It gives them being. It has a right to exact compensation for their use. It has a discretion as to the amount of that compensation. That discretion is a legislative-a sovereign-discretion, and in its very nature is unrestricted and uncontrolled. The security of the public against any abuse of this discretion resides in the responsibility to the public of those who, for the time being, are officially invested with it. In this respect it is like all other legislative power when not controlled by specific constitutional provisions, and the courts cannot presume that it will be exercised detrimentally.

So long, therefore, as it is conceded (as it seems to us it must be) that the power to charge for transportation, and the amount of the charge, are absolutely within the control of the State, how can it matter what is done with the money, whether it goes to the State or to the stockholders of a private corporation? As before said, the State could have built the road itself and charged any rate it chose, and could thus have filled the coffers of its treasury without being questioned therefor. How does the case differ, in a constitutional point of view, when it authorizes its private citizens to build the road and reserves for its own use a portion of the earnings? We are unable to see any distinction between the two cases. In our judgment there is no solid distinction. If the State, as a consideration of the franchise, had stipulated that it should have all the passenger-money, and that the corporation should have only the freight for the transportation of merchandise, and the corporation had agreed to those terms, it would have been the same thing. It is simply the exercise by the State of absolute control over its own property and prerogatives.

The exercise of power on the part of a State is very dirferent from the imposition of a tax or duty upon the movements or operations of commerce between the States. Such an imposition, whether relating to persons or goods, we have decided the States cannot make, because it would be a regulation of commerce between the States in a matter in which uniformity is essential to the rights of all, and, therefore, requiring the exclusive legislation of Congress. It is a tax because of the transportation, and is, therefore, virtually a tax on the transportation, and not in any sense a compensation therefor, or for the franchises enjoyed by the corporation that performs it.

It is often difficult to draw the line between the power of the State and the prohibitions of the Constitution. Whilst it is commonly said that the State has absolute control over the corporations of its own creation, and may impose upon them such conditions as it pleases; and like control over its own territory, highways, and bridges, and may impose such exactions for their use as it sees fit; on the other hand, it is conceded that it cannot regulate or impede interstate commerce, nor discriminate between its own citizens and those of other States prejudicially to the latter. The problem is to reconcile the two propositions; and as the latter arises from the provisions of the Constitution of the United States, and is, therefore, paramount, the question is practically reduced to this: What amounts to a regulation of commerce between the States, or to a discrimination against the citizens of other States? This is often difficult to determine. In view, however, of the very plenary powers which a State has always been conceded to have over its own territory, its highways, its franchises, and its corporations, we cannot regard the stipulation in question as amounting to either of these unconstitutional acts. It is not within the category of such acts. It may, incidentally, affect transportation, it is true; but so does every burden or tax imposed on corporations or persons engaged in that business. Such burdens, however, are imposed diverso intuit u, and in the exercise of an undoubted power. The State is conceded to possess the power to tax its corporations; and yet every tax imposed on a carrier corporation affects more or less the charges it is compelled to make upon its customers. So, the State has an undoubted power to exact a bonus for the grant of a franchise, payable in advance or in futuro; and yet that bonus will necessarily affect the charge upon the public which the donee of the franchise will be obliged to impose. The stipulated payment in this case, indeed, is nothing more nor less than a bonus; and so long as the rates of transportation are entirely discretionary with the States, such a stipulation is clearly within their reserved powers.

Of course, the question will be asked, and pertinently asked, Has the public no remedy against exorbitant fares and freights exacted by State lines of transportation? We cannot entirely shut our eyes to the argument ab inconvenienti. But it may also be asked, has the public any remedy against exorbitant fares and freights exacted by steamship lines at sea? Maritime transportation is almost as exclusively monopolized by them as land transportation is by the railroads. In their case the only relief found is in the existence or fear of competition. The same kind of relief should avail in reference to land transportation.

Whether, in addition to this, Congress, under the power to establish postroads, to regulate commerce with foreign nations, and among the several States, and to provide for the common defence and general welfare, has authority to establish and facilitate the means of communication between the different parts of the country, and thus to counteract the apprehended impediments referred to, is a question which has exercised the profoundest minds of the country. This power was formerly exercised in the construction of the Cumberland road and other similar works. It has more recently been exercised, though mostly on National territory, in the establishment of railroad communication with the Pacific coast. But it is to be hoped that no occasion will ever arise to call for any general exercise of such a power, if it exists. It can hardly be supposed that individual States, as far as they have reserved, or still possess, the power to interfere, will be so regardless of their own interest as to allow an obstructive policy to prevail. If, however, State institutions should so combine or become so consolidated and powerful as, under cover of irrevocable franchises already granted, to acquire absolute control over the transportation of the country, and should exercise it injuriously to the public interest, every constitutional power of Congress would undoubtedly be invoked for relief. Some of the States are so situated as to put it in their power, or that of their transportation lines, to interpose formidable obstacles to the free movement of the commerce of the country. Should any such system of exactions be established in these States, as materially to impede the passage of produce, merchandise, or travel, from one part of the country to another, it is hardly to be supposed that the case is a casus omissus in the Constitution. Commercially, this is but one country, and intercourse between all its parts should be as free as due compensation to the carrier interest will allow. This is demanded by the 'general welfare,' and is dictated by the spirit of the Constitution at least. Any local interference with it will demand from the National legislature the exercise of all the just powers with which it is clothed.

But whether the power to afford relief from onerous exactions for transportation does, or does not, exist in the General government, we are bound to sustain the constitutional powers and prerogatives of the States, as well as those of the United States, whenever they are brought before us for adjudication, no matter what may be the consequences. And, in the case before us, we are of opinion that these powers have not been transcended.

JUDGMENT AFFIRMED.

I am of opinion that the statute of Maryland requiring the railroad company to pay into the treasury of the State one-fifth of the amount received by it from passengers on the branch of the road between Baltimore and Washington, confined as it is exclusively to passengers on that branch of the road, was intended to raise a revenue for the State from all persons coming to Washington by rail, and had that effect for twenty-five years, and that the statute is, therefore, void within the principle laid down by this court in Crandall v. Nevada.


text: Talk:Baltimore and Ohio Railroad Company v. Maryland (88 U.S. 456)/Opinion of the Court


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Fox v. Gardner

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

Fox & Howard had contracted with a railroad company to make its railroad, and on the 4th of October, 1870, employed one N. Young as a contractor (excavator) under them. By the terms of the contract with Young, Fox & Howard were to pay him, on the 15th of December, 1870, a certain sum per cubic yard of earth excavated; payments to be made as follows:

'To the laborers employed in doing said work the amount ascertained to be due to them for their services and the balance to the said Young.'

Young finished his work November 24th, 1870, and being in debt to one Burrows, as also to three other persons severally, to the extent of $3692, gave to him and them drafts on Fox & Howard for different amounts, in all making that sum, payable December 15th, 1870. Fox & Howard accepted the drafts in this form:

'Accepted and promised to be paid out of any money due N. Young, in our hands, after payment of laborer's lien and orders previously accepted. Done this 1st day of December, at eight o'clock P.M.

'FOX & HOWARD.'

About the same time various laborers under Young, and thus creditors of Young, also gave drafts (in all for $502), on him in favor of Burrows, who cashed or discounted them, and by Young's directions Fox & Howard charged him, Young, with the amount of the drafts as cash paid to him; they agreeing, at the same time, with Burrows, to pay to him the amount of the drafts, but not actually paying them.

When Young gave these different drafts he was insolvent; and on the 7th of January, 1871, a petition in bankruptcy was filed against him, on which he was, upon the same day, decreed a bankrupt.

One Gardner being appointed his assignee brought this suit in the court below, September 12th, 1872, against Fox & Howard, to compel the payment to him of what they had owed Young, and had agreed to pay to Burrows and the others, in the manner already stated. The ground of the suit was of course that the transactions were void under the thirty-fifth section of the Bankrupt Act, quoted supra, 365.

The court charged the jury that before the plaintiff could recover he was bound, under the thirty-fifth section of the act, to show: 1st. That Young was insolvent when the drafts were given. 2d. That Fox & Howard had reasonable cause to believe him insolvent. 3d. That the person or persons, in such case respectively, to whom the drafts were given, had reasonable cause to believe Young insolvent. And further, that Fox & Howard had reasonable cause to believe that the person or persons to whom they were so given had, when they took the same, reasonable cause to believe Young insolvent. But that if he satisfied the jury, by the evidence, of all these things, the acceptances of Fox & Howard were void, and did not amount to payments in the action.

Under these instructions the jury found for the assignee the amounts claimed, and Fox & Howard brought the case here on exceptions to the charge.

Mr. R. T. Merrick (with whom was Mr. B. G. Caulfield), for the plaintiff in error:

The court below was mistaken in its construction of the thirty-fifth section of the Bankrupt Act. That section does not authorize suits by an assignee against debtors of the bankrupt who have discharged their debts to him, or paid money to other persons for his use, within the period of four or six months specified in the act. It only authorizes suits against such creditors of the bankrupt as have fraudulently received such payments. Only the parties benefited by a fraudulent preference under the Bankrupt Act are liable to the assignee.

The doctrine of the District Court leads to the most disastrous consequences. For if a debtor cannot respect the orders of a man in embarrassed circumstances except at his peril, then he will necessarily precipitate the condition of insolvency and bankruptcy which a different course might have prevented. It is believed that this doctrine is contrary to common justice and the established principles of law.

As respects Fox & Howard, the verdict and judgment below were very hard. If affirmed here those persons have to pay the same debt twice; once to Burrows and the other holders of their acceptances, and again to the assignee in bankruptcy.

Mr. W. F. Vilas, contra.

Mr. Justice HUNT delivered the opinion of the court.

title: Fox v. Gardner


text: Talk:Fox v. Gardner

title: Talk:Fox v. Gardner


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Fox v. Gardner/Opinion of the Court

The thirty-fifth section of the Bankrupt Act provides that a transaction like the one under consideration here 'shall be void, and the assignee may recover the property or the value of it from the person so receiving it or so to be benefited.'

The language of the statute authorizing the assignee 'to recover the property, or the value of it, from the person so receiving it or so to be benefited,' does not create a qualification or limitation of power. There is no implication that the party paying is not also liable. The words are those of caution merely, and give the assignee no power that he would not possess if they had been omitted from the statute. In the present case the property or value attempted to be transferred belonged originally to the bankrupt. On the adjudication of bankruptcy the possession and ownership of the same were transferred to the assignee. The attempted transfer by the bankrupt was fraudulent and void. It follows logically that the debtor yet holds it for the assignee, and that the assignee may sue him for its recovery.

Upon principle there would seem to be scarcely room for doubt upon the point before us. The pretended payment or transfer or substitution by the debtor of the bankrupt was in fraud of the act and illegal. It was a transaction expressly forbidden by the statute. The jury found that the insolvency of Young was known to Fox & Howard, and to the creditors by whom the drafts were taken at the time they were taken; that they were given by the bankrupt with intent to create forbidden preferences, and that they were accepted by Fox & Howard in fraud of the act. This is a transaction expressly condemned by the statute.

It amounts simply to this: the debtor of the bankrupt seeks to protect himself against an admitted debt by pleading a payment or substitution which was in fraud of the Bankrupt Act, and, therefore, void. The proposition carries its refutation on its face. Fox & Howard were indebted to the bankrupt and can only discharge themselves by a payment or satisfaction which the law will sanction. A payment or transfer condemned by the express terms of the Bankrupt Act cannot protect them.

It is to be observed, also, that when the bankruptcy proceedings were begun Fox & Howard had never, in fact, paid to Burrows and his associates the amount of the drafts accepted by them. They had simply promised to pay them, if there should prove upon settlement of their accounts with the bankrupt to be so much money due to him. This presents them in a still less favorable condition. They owe money to the bankrupt. They are sued for it by his assignee in bankruptcy. As a defence they allege that they have made an agreement with Burrows and others, with the assent of the bankrupt, to pay the amount of the debt to them. They allege an agreement merely. This agreement has already been shown to be illegal. The assignee, representing the creditors as well as the bankrupt, is authorized to set up such illegality. The bankrupt perhaps could take no action to avoid this agreement, but his assignee has undoubted authority to do so. When the assignee sets up this illegality and sustains it by proof of the facts referred to, the whole foundation of the defence falls.

It is well settled that a debtor may pay a just debt to his creditor at any time before proceedings in bankruptcy are taken. It is also true that a valid agreement to substitute another person as creditor may be made, and may be pleaded as a discharge of the debt in the nature of payment. It is not, however, payment in fact, and is binding only when the contract is fair and honest and binding upon the first creditor.

The right of an insolvent person before proceedings are commenced against him to pay a just debt, honestly to sell property for which a just equivalent is received, to borrow money and give a valid security therefor, are all recognized by the Bankrupt Act, and all depend upon the same principle. In each case the transaction must be honest, free from all intent to defraud or delay creditors, or to give a preference, or to impair the estate.

If there is fraud, trickery, or intent to delay or to prefer one creditor over others, the transaction cannot stand.

It is urged that Fox & Howard are liable upon the drafts to the creditors of Young, in whose favor the acceptances were given. Should this be so it would but add another to that large class of cases in which persons endeavoring to defraud others are caught in their own devices. The law looks with no particular favor on this class of sufferers.

In the present case, however, there seems to be no such difficulty. The acceptances were a part of an illegal contract, and no action will lie upon them in favor of those making claim to them. They are guilty parties to the transaction and can maintain no action to enforce it. The law leaves these parties where it finds them, giving aid to neither. The drafts cannot pass into the hands of bon a fide holders, as by the terms of the acceptances they are to remain in the possession of Fox & Howard until they can be paid by authority of law. When Fox & Howard pay to the assignee the debt due from them to Young they will pay it to the party entitled to receive it and will have discharged their liability.

JUDGMENT AFFIRMED.

title: Fox v. Gardner/Opinion of the Court


text: Talk:Fox v. Gardner/Opinion of the Court