text:
Shillaber v. Robinson

APPEAL from the Circuit Court of the United States for the Eastern District of New York.

The original transaction, which gave rise to the present suit, was a sale by John Shillaber of about three thousand acres of land, in the State of Illinois, to John Robinson, the appellee. The contract was evidenced by a written agreement, by which it appears that Robinson, in part payment of the Illinois land, was to convey to Shillaber three different parcels of land, lying in the State of New York,-one in Kings, one in Sullivan, and one in Essex, County.

On this contract, a suit, in the nature of a bill for specific performance, was brought, in the Circuit Court of Ogle County, Illinois, by Robinson against Shillaber. The latter having subsequently died, his sole heir, Theodore Shillaber, was substituted as defendant. The suit resulted in a decree which, among other things, established an indebtedness of Shillaber to Robinson, on final accounting, of $4,249.58; and ordered that, on the payment of this sum, Robinson should convey to Shillaber the lands in New York, already mentioned. In order that the whole matter should be finally disposed of, the decree then ordered that Robinson and wife should make and deposit with the clerk of the court a good and sufficient conveyance for said lands, as an escrow, to be delivered to Shillaber on his payment of the sum aforesaid within ninety days. It further provided that, if the money was not paid by Shillaber within that time, Robinson should convey the lands, in trust, to Silas Noble, who 'should proceed to sell the same, in such manner, and after giving such reasonable notice of the time and place of such sale, as might be usual or provided by law in the State of New York;' and out of the proceeds pay the expenses of the trust and the money due Robinson, with interest, and hold the remainder, if any, subject to the order of the court.

Shillaber did not pay the money as ordered by the decree. Robinson then made the deed of trust to Noble, in strict accordance with the terms of the decree; and Noble, after giving notice of sale, by publication once a week for six weeks successively in the 'Brooklyn Standard,' sold, at public auction, on the sixteenth day of March, 1861, the lands to John A. Robinson, for the sum of $1,950, and made to him a conveyance of the same. Said John A. Robinson purchased the lands for the benefit of John Robinson. Neither the deed from John Robinson to Noble, nor that from the latter to John A. Robinson, was placed upon record.

Since that time, and before the commencement of the present suit, John Robinson sold all these lands to divers and sundry individuals, for sums amounting in the aggregate to $9,628.

The present suit was commenced in November, 1870, in the Circuit Court for the Eastern District of New York, by Theodore Shillaber against John Robinson, requiring him to account for the value of the New York lands, on the ground that he had never acquired any other title to them than that which he held when the decree of the Illinois court was made, and that, since the purchasers from him were innocent purchasers, without notice of Shillaber's rights, their title was perfect, and Robinson was liable to him on a final settlement for the value of the lands, less the sum which Shillaber owed him, as ascertained by the decree in the Illinois court.

The court, on hearing, dismissed the bill; whereupon Shillaber appealed here.

The provisions of the New York Revised Statutes, regarding notice, are as follows:--

'SECT. 3. Notice that such mortgage will be foreclosed by a sale of the mortgaged premises, or some part of them, shall be given as follows:--

'(1.) By publishing the same for twelve weeks successively, at least once in each week, in a newspaper printed in the county where the premises intended to be sold shall be situated, or, if such premises shall be situated in two or more counties, in a newspaper printed in either of them.

'(2.) By affixing a copy of such notice, at least twelve weeks prior to the time therein specified for the sale, on the outward door of the building where the county courts are directed to be held, in the county where the premises are situated; or, if there be two or more such buildings, then on the outward door of that which shall be nearest the premises. And by delivering a copy of such notice, at least twelve weeks prior to the time therein specified for the sale, to the clerk of the county in which the mortgaged premises are situated, who shall immediately affix the same in a book prepared and kept by him for that purpose; and who shall also enter in said book, at the bottom of such notice, the time of receiving and affixing the same, duly subscribed by said clerk, and shall index such notice to the name of the mortgagor; for which service the clerk shall be entitled to a fee of twenty-five cents.

'(3.) By serving a copy of such notice at least fourteen days prior to the time therein specified for the sale, upon the mortgagor or his personal representatives, and upon the subsequent grantees and mortgagees of the premises, whose conveyance and mortgage shall be upon record at the time of the first publication of the notice, and upon all persons having a lien by or under a judgment or decree upon the mortgaged premises, subsequent to such mortgage, personally, or by leaving the same at their dwelling-house in charge of some person of suitable age, or by serving a copy of such notice upon said persons at least twenty-eight days prior to the time therein specified for the sale, by depositing the same in the post-office, properly folded, and directed to the said persons at their respective places of residence.'

Mr. Michael H. Cardozo for the appellant.

Robinson must account, as trustee, for all the money which he received on the sales of the New York land, together with interest thereon, from the respective times at which they were made.

The decree of the Illinois court stated an account between the parties then before it, and charged Shillaber with the full contract price of the New York lands. This constituted a payment, and passed the equitable title to him, leaving the bare legal title in Robinson, he holding the lands in trust for the complainant. Hill, Trustees, p. 171; Bispham, Principles of Equity, sects. 95, 364.

That decree changed the status of each of the several parties, and from it all their rights and liabilities arise. By it, specific performance was enforced; the Illinois lands were transferred directly to Robinson, and the New York lands to Shillaber; and this, though the court had no jurisdiction over the subject-matter, provided it had jurisdiction of the person. Massey v. Watts, 6 Cranch, 148; Northern Indiana Railroad Co. v. Michigan Central Railroad Co., 15 How. 233; Brown v. Desmond, 100 Mass. 267; Penn v. Lord Baltimore, 1 Ves. 444; Fry, Specific Performance, sect. 63; Pennoyer v. Neff, 95 U.S. 353.

A court of equity of competent jurisdiction can adjust the equities of the parties before it, and, in accordance with a familiar principle, it regards that which is agreed to be done as already performed. Story, Eq. Jur., sect. 64; Hill, Trustees, supra; Francis's Maxims, 13; 1 Fonb. Eq., bk. 1, c. 6, sect. 9.

The court, in so adjusting the equities, adjudged that Robinson should not be required to convey the New York lands to Shillaber, without some security or lien thereon for the payment to him of the balance found due by the decree.

The general intention was to constitute Robinson a mortgagee, and Shillaber a mortgagor, of the lands in question; and it is a leading maxim of construction, that the intention of the parties is the controlling element. Mitchell v. Tilghman, 19 Wall. 387, 395; Shays v. Norton, 48 Ill. 100.

The terms 'trust-deed' and 'mortgage' are used in Illinois and other Western States, if not synonymously, at least interchangeably. Hoffman v. Mackall, 5 Ohio St. 124; Ingle v. Culbertson, 43 Iowa, 265; McQuie v. Peay, 58 Mo. 56; Adams & Durham's Real Estate Statutes and Decisions of Illinois, 202, 1702; Pardee v. Lindley, 31 Ill. 174; Wilson v. McDowall, 78 id. 514.

The distinction is, at most, a technicality. Wilkins v. Wright, 6 McLean, 340. It is laid down by more than one authority of weight that a 'deed of trust in the nature of a mortgage' is, in legal effect, the same as a 'mortgage.' Jones, Mortgages, sects. 60, 62, 1769; Southern Law Review, N. S. vol. iii. p. 712; Hoffman v. Mackall, supra; Woodruff v. Robb, 19 Ohio, 212; Coe v. Johnson, 18 Ind. 218; Coe v. McBrown, 22 id. 252; Newman v. Samuels, 17 Iowa, 528; Ingle v. Cuthbertson, 43 id. 265; Sargent v. Howe, 21 Ill. 148; Eaton v. Whiting, 3 Pick. (Mass.) 484; Lenox v. Reed, 12 Kans. 223; Turner v. Watkins, 31 Ark. 429; In re Bondholders of York & Cumberland Railway, 50 Me. 552; Palmer v. Gurnsey, 7 Wend. (N. Y.) 248; Lawrence v. Farmers' Loan & Trust Co., 13 N. Y. 200; Corpman v. Baccastow, Sup. Ct. of Penn. 1877, 5 N. Y. Weekly Digest, 204; Dillon, J., in 2 Am. Law Reg. N. S. 648.

title: Shillaber v. Robinson


text: Talk:Shillaber v. Robinson

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

title: Talk:Shillaber v. Robinson


text:
Shillaber v. Robinson/Opinion of the Court

In equity, any deed, although an absolute conveyance in terms, if it be devised for the purpose of securing the payment of money, is a mortgage. Hughes v. Edwards, 9 Wheat. 489; Conway's Ex'rs v. Alexander, 7 Cranch, 218; Villa v. Rodriguez, 12 Wall. 323; Flagg v. Mann, 2 Sumn. 486; Coote, Law of Mortgages, p. 11; Story, Eq. Jur., sect. 1018. Doubtful instruments are so construed. Bright v. Wagle, 3 Dana (Ky.), 252; Edrington v. Harper, 3 J. J. Marsh. (Ky.) 354; Conway's Ex'rs v. Alexander, supra; Holmes v. Grant, 8 Paige (N. Y.), Ch. 243; Horn v. Keteltas, 46 N. Y. 605.

There are, under the laws of New York, three methods of foreclosing a mortgage. Since the judicial proceedings in Illinois demand that the 'trust-deed' be construed as such an instrument, either one of these methods must be adopted for that purpose, or the equity of redemption remains. They are: by the decree of a competent court; or by the proceedings prescribed in pt. iii. c. 8, tit. 15, of the New York Revised Statutes, commonly called foreclosure by advertisement; or by lapse of time, as by the failure of the mortgagor to enforce his remedy against a mortgagee in possession for more than twenty years, by analogy to the Statute of Limitations. Hughes v. Edwards, 9 Wheat. 489; Demarest v. Wynkoop, 3 Johns. (N. Y.) Ch. 129; Lawrence v. Farmers' Loan & Trust Co., 13 N. Y. 200.

It is not pretended by Robinson that proceedings in conformity with any of these requirements were taken to foreclose Shillaber's equity of redemption.

Noble was, by the provisions of the decree and deed, directed to give such reasonable notice as is usual or provided by law in New York. 'Usual' must be regarded as identical with 'provided by law.'

'Or' has the same meaning as 'and,' when such a construction is necessary to effectuate the intention of the parties. Maxwell on the Interpretation of Statutes, 216; Potter's Dwarris on Statutes and Constructions, 286, 292; Fowler v. Padget, 7 T. R. 509; Roome v. Phillips, 24 N. Y. 463, Arnold v. Buffum, 2 Mas. 208.

Trustees are bound to comply strictly with the requirements of the instrument originating and defining their power and authority. 1 Hilliard, Mortgages, 143; Hill, Trustees, 474, Thornton v. Boynton, 31 Ill. 200; Hull v. Towne, 45 id. 493, Griffin v. Marine Co., 52 id. 130; Strother v. Law, 54 id. 413, Jencks v. Alexander, 11 Paige (N. Y.), Ch. 619; Tarascon v. Ormsby, 3 Litt. (Ky.) 404; Wallis v. Thornton, 2 Brock. 422; Gray v. Shaw, 14 Mo. 341; Smith v. Proven, 4 Allen (Mass.), 516; Roche v. Farnsworth, 106 Mass. 509.

Courts of equity are adverse to, and have ever been suspicious of, sales under a power in mortgages or trust-deeds, without notice to the mortgagor; and special requirements of notice in the deed itself, or the instrument originating the trust, have been enforced with the utmost rigor. Anonymous, 6 Madd. Ch. 10; Gill v. Newton, 12 Jur. N. S. 220; Major v. Ward, 5 Hare, 598; Longwith v. Butler, 3 Gilm. (Ill.) 32; Tarascon v. Ormsby, 3 Litt. (Ky.) 404; Flower v. Elwood, 66 Ill. 438; Bigler v. Waller, 14 Wall. 297; Jones, Mortgages, sect. 1822.

It is not necessary to make out a case of fraudulent connivance between Noble and the defendant, in order to entitle the appellant to the account which he desires. The appellee is a mortgagee in possession of the lands, and, as a trustee for the complainant, is bound to take the greatest care of the interests of the latter. When called on for an accounting, he must show that he has faithfully performed the duties of a trustee, in relation to the property. Story, Eq. Jur., sect. 1016; Bigler v. Waller, 14 Wall. 297; Russell v. Southard, 12 How. 139.

Had Robinson not sold and conveyed the property to innocent purchasers, Shillaber, on paying Robinson the amount due under the decree of the Illinois court, would have an unquestionable right to the lands.

Even if the deed made by Robinson to Noble be regarded as creating an express trust, under the New York Statutes, for the sale of land, Robinson, in the absence of an express permission by the instrument originating the alleged trust, could not, under the circumstances of this case, acquire title by such a sale, directly or indirectly. Fulton v. Whitney, 66 N. Y. 548; Blake v. Buffalo Creek Railroad Co., 56 N. Y. 485; Case v. Carroll, 35 N. Y. 385; Gardner v. Ogden, 22 id. 327; Colburn v. Morton, 3 Keyes, 296; Conger v. Ring, 11 Barb. (N. Y.) 356; Van Epps v. Van Epps, 9 Paige (N. Y.), Ch. 237; Davoue v. Fanning, 2 Johns. (N. Y.) Ch. 252; Bergen v. Bennett, 1 Cai. (N. Y.) Cas. 11, 13, 20; Michoud v. Girod, 4 How. 503; Ringo v. Binns, 10 Pet. 269; Lockett v. Hill, 1 Wood, 552; Dexter v. Shepard, 117 Mass. 480; Dyer v. Shurtleff, 112 id. 165; Montague v. Dawes, 12 Allen (Mass.), 397; s. c. 14 id. 369; Benham v. Rowe, 2 Cal. 386; Parmenter v. Walker, 9 R. I. 225, Ex parte Bennett, 10 Ves. 381; Coles v. Trecothick, 9 id. 234; Ex parte Hughes, 6 id. 617; 2 Washburn, Real Prop. 79; Sugden, Vendors and Purchasers, c. 20, sect. 2, par. 1.

This rule embraces trustees, mortgagees, and all other persons sustaining a fiduciary relation, their agents or assignees. Hill, Trustees, 159, 160; Mapps v. Sharp, 32 Ill. 13; Waite v. Dennison, 51 id. 319.

Although the courts have, in a few cases (Coles v. Trecothick, 9 Ves. 234; Howard v. Davis, 6 Tex. 174), held that sales so made were valid, it was only when a marked spirit of fairness pervaded the entire transaction, and due care was taken to preserve the rights of all interested; and so careful are they to guard safely the interest of beneficiaries, that wherever any attempt to act unfairly, to stifle competition, or in any manner to take undue advantage of the fiduciary has been made, such sales have been set aside, provided innocent third parties would not suffer thereby. Longwith v. Butler, 3 Gilm. (Va.) 32; Griffin v. Marine Company, 52 Ill. 130; Flower v. Elwood, 66 id. 436; Sugden, Vendors and Purchasers, c. 20, sect. 2, par. 1.

Mr. Philip S.C.rooke and Mr. John H. Bergen, contra.

The trust-deed to Noble of the property created a valid trust, under the statutes of New York (Corse v. Leggett, 25 Barb. 389; Sedgwick v. Stanton, 20 id. 473; 2 Rev. Stat. N. Y. 355, sub. 1 & 2, vol. i., Edmund's ed. p. 677), which allow an express trust, 1, to sell lands for the benefit of creditors; and, 2, to sell, mortgage, or lease lands, for the benefit of legatees, or for the purpose of satisfying any charge thereon.

Robinson was a creditor of Shillaber under the decree of the Illinois court; and the amount due was made a charge and lien on the property, which was sold by Noble to John A. Robinson for the appellee, and not to the appellee; although the latter, not occupying any fiduciary relation either to Noble or Shillaber, had a perfect right to purchase. The authorities cited by the appellant in support of his position, that the appellee could not acquire a title at Noble's sale, are all instances where a trustee was the purchaser of the trust property, and have, therefore, no bearing upon this case.

Reference to the statutes of Illinois is not necessary, although this was a valid trust in that State (Stats. of Illinois, Cross, 3d ed., 1869, vol. i. p. 84, sect. 3); for it is a well-settled principle that the law of the State where the land lies determines the construction of instruments affecting it. As the trust-deed covered lands in New York, and was by its terms to be there performed, the law of that State must govern it. Smith v. Smith, 2 Johns. (N. Y.) 235; Thompson v. Ketcham, 4 id. 285; Hyde v. Goodnow, 3 N. Y. 266; Bowen v. Newell, 13 id. 290; 10 id. 436; 33 id. 615. It vested the fee of the land in the trustee, subject to the trust (Noyes v. Blackeman, 6 N. Y. 578); and where the trust was executed by his sale of the land, either with or without notice, a valid and unincumbered title passed to the purchaser. Belmont v. O'Brien, 12 N. Y. 405.

MR. JUSTICE MILLER, after stating the case, delivered the opinion of the court.

The principal, in fact the only, defence which merits any consideration in this case, is that by the trust-deed which Robinson made to Noble under the decree of the court, and by the sale which Noble made in conformity to the terms of the decree, and of that deed, Shillaber's rights were completely divested in the land; and since it did not bring, at that sale, as much money as was due to Robinson, which, by the terms of both the decree and the deed of trust, was to be paid to him out of the proceeds of that sale, nothing was left for Shillaber in the matter.

The decree in the Illinois suit, in which Theodore Shillaber had appeared after his father's death, is binding and conclusive on both parties. The deed of trust made by Robinson to Noble is in accordance with the decree, and conferred an authority on him to sell the land. The purpose of this sale, as expressed in the deed of trust and the decree, was to pay to Robinson the $4,249.58, which was a first lien on the land, and the balance into the court, for the use of Shillaber.

Much discussion has been had in the case as to the nature of the conveyance to Noble, one party insisting that it is a simple mortgage with power of sale, and the other that it is, under the statutes of New York, the creation of a valid trust in lands. The point of this discussion is found in the question, whether the sale by Noble, under that instrument, was valid or was void. The counsel of defendant insists that Noble became vested with a perfect title to the land by the deed of Robinson, and that his sale and conveyance are valid whether he pursued the direction of the deed in regard to advertising or not; and that, if any such advertising were necessary, there was no usual notice, nor any provided by law, for such sales in the State of New York.

It is shown by the evidence that Noble did publish a notice that the three pieces of land in the three different counties would be sold on a day mentioned, at Montague Hall, in the city of Brooklyn. This notice was published, for six weeks preceding the day appointed for the sale, in the 'Brooklyn Standard,' a weekly paper printed in Kings County. But the statutes of New York, then in force, prescribed publication of such notice for twelve weeks successively before the sale.

If the instrument under which Noble acted is a mortgage with power of sale, it is beyond dispute that the sale is void, because it was not made in conformity with the terms on which alone he was authorized to sell. That the sale, under such circumstances, is void, is too well established to admit of controversy. We refer specially to the recent case in this court of Bigler v. Waller, 14 Wall. 302. The list of authorities cited by the appellant are to the same effect.

Without entering into the argument of the question whether the instrument under which Noble acted is in all respects a mortgage, the case of Lawrence v. The Farmers' Loan & Trust Co. (13 N. Y. 200), shows that it is an instrument which, for the purposes of the sale under the power which it contains, comes under the provisions of the statute we have cited as regards publication of notice. It also decides that a sale made without such notice is void. It is the well-settled doctrine of courts of equity, that a conveyance of land, for the purpose of securing payment of a sum of money, is a mortgage, if it leaves a right to redeem upon payment of the debt. If there is no power of sale, the equity of redemption remains until it is foreclosed by a suit in chancery, or by some other mode recognized by law. If there is a power of sale, whether in the creditor or in some third person to whom the conveyance is made for that purpose, it is still in effect a mortgage, though in form a deed of trust, and may be foreclosed by sale in pursuance of the terms in which the power is conferred, or by suit in chancery. These instruments generally give specific directions regarding the notice to be given, and of the time, place, and terms of the sale. In some States, the statute prescribes the manner of giving this notice, and in such case it must be complied with. In either case, the validity of the sale being wholly dependent on the power conferred by the instrument, a strict compliance with its terms is essential.

If this is not a mortgage to which the notice of the New York statute is applicable, we do not see that the defendant's position is improved by that circumstance; for there is, then, no provision for a sale or foreclosure of the equity of Shillaber, but by a decree of an equity court. This has never been had, and it still remains that there has been no valid execution of the trust reposed in Noble by the deed. If the matter had remained in this condition, Shillaber would, on payment to Robinson of the $4,249.58, with interest, have had a right, enforceable in this suit, to have a conveyance of the New York land by Noble to him. But neither the conveyance by Robinson, which remained an escrow, nor that to Noble, was ever placed on record; and Robinson, in whom, according to the records of the proper counties in New York, the title still remained, sold all these lands to persons who, as innocent purchasers for a valuable consideration, now hold them by a good title. This title is equally beyond the reach of Robinson, of Shillaber, and of the court. Indeed, although Robinson alleges in his answer that the purchase of John A. Robinson was made for his benefit, he seems to have attached no importance to it; for he does not aver that John A. Robinson ever conveyed to him, nor does he, while giving copies of all the deeds on which he relies, including the deed to John A. Robinson, show any evidence of a conveyance from John A. Robinson to him.

The defendant, therefore, when he sold and conveyed this land to the parties who now hold it under him, did it in violation of the rights of Shillaber, as settled by the Illionis decree. By that decree, Robinson had no right to sell. By the conveyance made to Noble under that decree, he had nothing left in the New York lands but a lien for his $4,249.58. The sale by Noble was void, and conferred no rights on Robinson whatever. His belief in its validity did not change the matter. By availing himself of the title which was in him originally, and which appeared by the records to be there yet, he sold the lands for twice as much as his lien, and received the money. That he must account to Shillaber in some way is too plain for argument. If Shillaber could, by paying his debt to Robinson, redeem the lands from their present holders, it is the relief which he would prefer, and to which as against Robinson he would be entitled. But Robinson has put this out of his power, by a wrongful sale and conveyance to innocent purchasers.

There is no evidence to show that the lands are now worth any more than Robinson sold them for; no evidence that they were worth more when he sold them. His answer gives the precise sum received by him for each parcel of land, and the date when he received it. He probably believed the land was his own when he sold it; but, as we have seen, he must be considered as holding such title as he had in trust, first for his own debt due from Shillaber, and the remainder for the use of Shillaber. Treating him, then, as trustee, he must account for the money received for the lands, according to the trusts on which he held them. The decree of the Circuit Court dismissing Shillaber's bill must be reversed, and the case remanded to that court, with instructions to render a decree on the basis of charging Robinson with the sums received by him for the lands, and interest thereon until the day of the decree, deducting therefrom the sum found due him from Shillaber by the Illinois decree, with interest to the same time, and rendering a decree for the difference in favor of Shillaber against Robinson, with costs; and it is

So ordered.


text: Talk:Shillaber v. Robinson/Opinion of the Court


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Grant v. National Bank

Appeal from the Circuit Court of the United States for the Northern District of Illinois.

This case arises upon a bill in equity, filed by Charles E. Grant, assignee in bankruptcy of John S. Miller, to set aside a mortgage, or deed of trust, executed by him about two months prior to his bankruptcy. Miller was indebted to the First National Bank of Monmouth, Illinois, in about $6,200, of which $4,000 consisted of a note which had been twice renewed, and the balance was the amount which he had overdrawn his account in the bank. Wanting some cash for immediate purposes, the bank advanced him $300 more, on his giving them the deed of trust in question, which was made for $6,500, and was given to secure the indebtedness referred to. The question below was, whether, at the time of taking this security, the officers of the bank had reasonable cause to believe that Miller was insolvent. The Circuit Court came to the conclusion that they had not, and dismissed the bill. From that decree the assignee appealed.

Mr. Thomas G. Frost and Mr. H. G. Miller for the appellant.

Where a creditor, who accepts a conveyance to secure a precedent debt, has reason to believe that his debtor is at the time unable to pay his debts as they become due, the conveyance is void as a fraudulent preference within the meaning of the Bankrupt Act. Toof et al. v. Martin, Assignee, &c., 13 Wall. 40; Buchanan v. Smith, 16 id. 308; Wilson v. City Bank, 17 id. 487; Dutcher v. Wright, 94 U.S. 553; Forbes v. Howe, 102 Mass. 437.

Mr. C. B. Lawrence, contra.

If Miller was in fact insolvent when he executed the deed of trust, the officers of the bank had no knowledge of the fact, nor any reasonable cause for believing it.

The deed of trust was given to secure $6,500, of which only the sum of $4,000 was a precedent debt, the remaining $2,500 being for money advanced under the provision of the deed. Even if it could be held that the deed was constructively fraudulent as to the $4,000, it must be sustained as to the $2,500.

MR. JUSTICE BRADLEY, after stating the case, delivered the opinion of the court.

title: Grant v. National Bank


text: Talk:Grant v. National Bank

title: Talk:Grant v. National Bank


text:
Grant v. National Bank/Opinion of the Court

Some confusion exists in the cases as to the meaning of the phrase, 'having reasonable cause to believe such a person is insolvent.' Dicta are not wanting which assume that it has the same meaning as if it had read, 'having reasonable cause to suspect such a person is insolvent.' But the two phrases are distinct in meaning and effect. It is not enough that a creditor has some cause to suspect the insolvency of his debtor; but he must have such a knowledge of facts as to induce a reasonable belief of his debtor's insolvency, in order to invalidate a security taken for his debt. To make mere suspicion a ground of nullity in such a case would render the business transactions of the community altogether too insecure. It was never the intention of the framers of the act to establish any such rule. A man may have many grounds of suspicion that his debtor is in failing circumstances, and yet have no cause for a well-grounded belief of the fact. He may be unwilling to trust him further; he may feel anxious about his claim, and have a strong desire to secure it, and yet such belief as the act requires may be wanting. Obtaining additional security, or receiving payment of a debt, under such circumstances is not prohibited by the law. Receiving payment is put in the same category, in the section referred to, as receiving security. Hundreds of men constantly continue to make payments up to the very eve of their failure, which it would be very unjust and disastrous to set aside. And yet this could be done in a large proportion of cases if mere grounds of suspicion of their solvency were sufficient for the purpose.

The debtor is often buoyed up by the hope of being able to get through with his diffculties long after his case is in fact desperate; and his creditors, if they know any thing of his embarrassments, either participate in the same feeling, or at least are willing to think that there is a possibility of his succeeding. To overhaul and set aside all his transactions with his creditors, made under such circumstances, because there may exist some grounds of suspicion of his inability to carry himself through, would make the bankrupt law an engine of oppression and injustice. It would, in fact, have the effect of producing bankruptcy in many cases where it might otherwise be avoided.

Hence the act, very wisely, as we think, instead of making a payment or a security void for a mere suspicion of the debtor's insolvency, requires, for that purpose, that his creditor should have some reasonable cause to believe him insolvent. He must have a knowledge of some fact or facts calculated to produce such a belief in the mind of an ordinarily intelligent man.

It is on this distinction that the present case turns. It cannot be denied that the officers of the bank had become distrustful of Miller's ability to bring his affairs to a successful termination; and yet it is equally apparent, independent of their sworn statements on the subject, that they supposed there was a possibility of his doing so. After obtaining the security in question, they still allowed him to check upon them for considerable amounts in advance of his deposits. They were alarmed; but they were not without hope. They felt it necessary to exact security for what he owed them; but they still granted him temporary accommodations. Had they actually supposed him to be insolvent, would they have done this?

The circumstances calculated to excite their suspicions are very ably and ingeniously summed up in the brief of the appellant's counsel; but we see nothing adduced therein which is sufficient to establish any thing more than cause for suspicion. That Miller borrowed money; that he had to renew his note; that he overdrew his account; that he was addicted to some incorrect habits; that he was somewhat reckless in his manner of doing business; that he seemed to be pressed for money,-were all facts well enough calculated to make the officers of the bank cautious and distrustful; but it is not shown that any facts had come to their knowledge which were sufficient to lay any other ground than that of mere suspicion. Miller had for years been largely engaged in purchasing, fattening, and selling cattle. He had always borrowed money largely to enable him to make his purchases; for this purpose he had long been in the habit of temporarily overdrawing his account: the note which he renewed was not a regular business note, given in ordinary course, but was made to effect a loan from the bank apparently of a more permanent character than an ordinary discount; and his manner of doing business was the same as it had always been. That he was actually insolvent when the trustdeed was executed, there is little doubt; but he was largely indebted in Galesburg, in a different county from that in which Monmouth is situated; and there is no evidence that the officers of the bank has any knowledge of this indebtedness.

Without going into the evidence in detail, it seems to us that it only establishes the fact that the officers of the bank had reason to be suspicious of the bankrupt's insolvency, when their security was obtained; but that it falls short of establishing that they had reasonable cause to believe that he was insolvent.

Decree affirmed.


text: Talk:Grant v. National Bank/Opinion of the Court


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County of Bates v. Winters

ERROR to the Circuit Court of the United States for the Western District of Missouri.

The county of Bates, in the State of Missouri, brought this writ of error to reverse a judgment rendered against it in favor of Jonathan Winters and Valentine Winters, for the sum of $6,251.14, the amount of certain bonds and coupons issued by said county in behalf of Mount Pleasant township. The bonds were a part of a series amounting to $90,000, purporting to be issued upon an election authorizing a subscription to the capital stock of the Lexington, Chillicothe, and Gulf Railroad Company. They, and the coupons attached to them, are in the following form:--

'No. 56. UNITED STATES OF AMERICA. $1,000. 'State of Missouri, County of Bates.

'Issued pursuant to articles of consolidation in payment of stock due the Lexington, Lake, and Gulf Railroad Company, consolidated Oct. 4, A.D. 1870.

'Know all men by these presents, that the county of Bates, in the State of Missouri, acknowledges itself indebted and firmly bound to the Lexington, Lake, and Gulf Railroad Company, in the sum of $1,000, which sum the said county of Bates, for and in behalf of Mount Pleasant township therein, promises to pay the said Lexington, Lake, and Gulf Railroad Company, or bearer, at the Bank of America, in the city and State of New York, on the eighteenth day of January, A.D. 1886, together with interest thereon, from the eighteenth day of January, A.D. 1871, at the rate of ten per cent per annum, which interest shall be payable annually on the presentation and delivery at said Bank of America of the coupons hereto attached.

'This bond being issued under and pursuant to an order of the county court of Bates County, by virtue of an act of the General Assembly of the State of Missouri, approved March 23, 1868, entitled 'An Act to facilitate the construction of railroads in the State of Missouri,' and authorized by a vote of the people, taken May 3, 1870, as required by law, upon the proposition to subscribe $90,000 to the capital stock of the Lexington, Chillicothe, and Gulf Railroad Company, and which said railroad company last aforesaid and the former, Pleasant Hill Division of the Lexington, Chillicothe, and Gulf Railroad Company, were, on the fourth day of October, 1870, consolidated, as required by law, into one company, under the name of the Lexington, Lake, and Gulf Railroad Company; and which said last-named railroad company, as provided by law and under the terms of said consolidation thereof, possesses all the powers, rights, and privileges, and owns and controls all the assets, subscription bonds, moneys, and properties whatever, of the two said several companies forming said consolidation, or either one of them.

'In testimony whereof, the said county of Bates has executed this bond by the presiding justice of the county court of said county under the order thereof, signing his name hereto, and by the clerk of said court under the order thereof, attesting the same and affixing the seal of said court.

'This done at the city of Butler, county of Bates, this eighteenth day of January, A.D. 1871.

COUNTY COURT, BATES COUNTY, MO., SEAL.

'B. H. THORNTON,

'Presiding Justice of the County Court of Bates County, Mo.

'Attest:

'W. J. Smith,

Clerk of the County Court of Bates County, Mo.

'$100. BUTLER, BATES COUNTY, MO. [$100.

'Jan. 18, A.D. 1871.

'The county of Bates acknowledges to owe the sum of $100, payable to bearer, on the eighteenth day of January, 1872, at the Bank of America, in the city and State of New York, for one year's interest on bond No. 56.

'W. J. SMITH,

Clerk of the County Court, Bates County, Mo.The Constitution of Missouri, sect. 14, art. 11, prescribes,

'The General Assembly shall not authorize any county, city, or town to become a stockholder in, or to loan its credit to, any company, association, or corporation, unless two-thirds of the qualified voters of such county, city, or town, at a regular or special election to be held therein, shall assent thereto.'

The statute of that State of March 23, 1868, enacted, that whenever twenty-five persons, tax-payers and residents of a municipal township, should set forth their desire to subscribe to the capital stock of a railroad company proposing to build a road into or near said town, it should be the duty of the county court to order an election, to determine if such subscription should be made; and, if it should appear that two-thirds of the qualified voters voting at such election were in favor of such subscription, it should be the duty of the county court to make such subscription in behalf of the township according to the terms and conditions thereof, and. . . to issue bonds in the name of the county. Wagner, Stat. p. 313, sect. 551; Laws Mo., 1868, p. 92.

The authority on the part of Bates County to issue its bonds to the Lexington, Lake, and Gulf Railroad Company is based upon the following proceedings:--

On the fifth day of April, 1870, the county court of Bates County, having received such a petition, ordered an election, at which the electors of Mount Pleasant township should determine whether they would subscribe $90,000 to the Lexington, Chillicothe, and Gulf Railroad Company, to be paid in bonds, upon the terms and with the numerous conditions and qualifications in the said order particularly set forth.

The election resulted in favor of making the subscription; and on the 14th of June, 1870, the county court made an order 'that the sum of $90,000 be, and is hereby, subscribed to the capital stock of the Lexington, Chillicothe, and Gulf Railroad Company, in the name and behalf of Mount Pleasant township, subject to and in pursuance of all the terms, restrictions, and limitations. . . of the order of the court' so made as aforesaid; and that the agent be authorized to make such subscription on the books of the company; and in making it he be directed to have copied in full the order of the court, as the conditions on which the subscription is made; and that he report his acts to the court.

One of these conditions was, that from the proceeds of the sale of said bonds there should be paid to said company, monthly, ninety per cent of the monthly estimate of the work done on said road in Mount Pleasant township; and it authorized said bonds to be issued when all of the said road south of Lexington to the north line of Mount Pleasant township should have been located and put under contract.

The agent went to Lexington for the purpose of making the subscription, and carried with him a copy of the records of the county court, as he says, 'for the purpose of showing his authority to act in the premises;' but the company had no books, by reason whereof he did not make the subscription; he sought to withdraw or reclaim his papers, but the company refused to allow him to do so. He went again for the same purpose, but, being dissatisfied with the condition of the company, did not make the subscription; and on the nineteenth day of December, 1870, reported his doings to the county court, ending in the words, 'the bonds of said township are, therefore, not subscribed.' This report was formally approved by the county court.

Seven months after making the order above set forth, and on the 18th of January, 1871, the county court made another order, which recited that the subscription had been made to said Chillicothe Company, that a consolidation had been made between that and another company, resulting in the Lexington, Lake, and Gulf Railroad Company; and it directed that $90,000 of bonds be issued to the latter company, in payment and satisfaction of the original subscription as aforesaid; and concluded: 'Said James M. Boreing (their agent to receive and dispose of the bonds) is hereby authorized to subscribe said stock to said railroad company,' the Lexington, Lake, and Gulf Railroad Company.

Boreing did make the subscription on the books of the new company, which was accepted by that company; and then, for the first time, a certificate of stock was issued to the county.

The court below found that the defendants in error were bona fide holders, for value, of the bonds and coupons in suit, before maturity, without notice of any defect in the issue of the bonds, except such as they were bound in law to take notice of, and such as the face of the bonds imparted to them.

Mr. Thomas C. Reynolds and Messrs. Glover & Shipley for the plaintiff in error.

The subscription of $90,000 to the capital stock of the Lexington, Chillicothe, and Gulf Railroad Company, authorized by the election held May 3, 1870, was never made.

The pretended subscription to the stock of another company, which was not in existence at the time of holding the election, and the bonds issued in payment of such subscription, are void, inasmuch as the county court, as the mere agent of the township, had no power in the premises beyond that conferred by said vote. Harshman v. Bates County, 92 U.S. 569; County of Scotland v. Thomas, 94 id. 682.

The recitals in the bonds are sufficient notice of every material fact which affects their validity.

Mr. T. K. Skinker, contra.

The transfer of the original subscription, and the issue of the bonds to the Lexington, Lake, and Gulf Railroad Company, were lawful. The order of the county court, of June 14, 1870, subscribing, in pursuance of the popular vote cast on the third day of the preceding month, $90,000 to the Lexington, Chillicothe, and Gulf Company, is itself obligatory, without a formal acceptance by the company, or an actual subscription on its books. Justices of Clarke County v. ''Paris, &c. Turnpike Co.'', 11 B. Mon. (Ky.) 143. The county court properly regarded that order as equivalent to a subscription, and as legally binding. Its subsequent orders direct the bonds to be issued 'in payment of said original subscription.' That the subscription was accepted by the company is manifest from their refusal to permit the agent of the county to withdraw the copies of the orders of the county court, which he had brought with him to transcribe on the stock-book of the company. The subscription could be lawfully transferred to the consolidated company, and the issue of bonds to the latter was lawful. Nugent v. The Supervisors, 19 Wall. 241.

MR. JUSTICE HUNT delivered the opinion of the court.

title: County of Bates v. Winters


text: Talk:County of Bates v. Winters

title: Talk:County of Bates v. Winters


text:
County of Bates v. Winters/Opinion of the Court

If we hold that there was no valid subscription until that made on the 18th of January, 1871, which was to the Lexington, Lake, and Gulf Road Company, it is open to the objection that the township voted an authority to subscribe to the stock of one company, and the county court subscribed to the stock of a different company. This was condemned in Harshman v. Bates County (92 U.S. 569), which arose upon the same issue of bonds and in relation to the same roads as the case before us. That case has since been modified as to the first point decided in it, in relation to the number of votes required to authorize the subscription, but remains unimpaired as to the point we are considering.

It is said that the subscription was, in law, made on the 14th of June, 1870, to the Lexington, Chillicothe, and Gulf Railroad Company; and that, having been made by the authority of the popular vote, it could be transferred to the consolidated organization. Nugent v. The Supervisors (19 Wall. 241) is cited to sustain this proposition.

It is decided, in that case, that an actual, manual subscription on the books of a company is not indispensable; that where an order was made by a county court, which said that it subscribed for a specified number of shares of railroad stock, which was accepted by the company, and notice of such acceptance given to the county court, when the minds of the parties met, and both understood that a contract had been made, and where the county court had accepted the position of a stockholder, received certificates for the stock subscribed, and voted as a stockholder, that these facts constituted a valid subscription.

In County of Moultrie v. Savings Bank (92 U.S. 631) a like decision was had, and upon like facts. In declaring the resolution of the corporation to have been an executed subscription, the court use this language: 'The authorized body of a municipal corporation may bind it by an ordinance, which, in favor of private persons interested therein, may, if so intended, operate as a contract; or they may bind it by a resolution, or by vote clothe its officers with power to act for it. The former was the clear intention in this case. The board clothed no officer with power to act for it. The resolution to subscribe was its own act, its immediate subscription.'

A similar case is that of Justices of Clarke County v. Paris, &c. (11 B. Mon. (Ky.) 143), where the order was entered in these words (in part): 'With the concurrence of all the magistrates of the county, ordered, that the county court of Clarke County subscribe, as they hereby do, for fifty shares of stock in the Paris' Company, &c. The court say (at p. 146): 'It is manifest on the face of the order that it was made as a subscription. The suspending order of October calls it a subscription, and the evidence shows that it was so intended and understood when made, both by the court which made it and by the company which solicited and accepted it.'

The present case is quite a different one. The order of the county court was not intended, as in the cases referred to, to be final and self-executing. While it recited that the sum named should be, and was thereby, subscribed, it 'authorized and directed' the agent 'to make said subscription on the stockbooks of the said company,' upon the conditions specified, and to report to the court thereon.

Having failed, for the reasons given by him, to make the subscription, the agent reported to the county court his doings, and 'that the bonds of the township are not, therefore, subscribed;' and the county court approved his report.

A subscription to the amount of $90,000 was made in January, 1871, by color of said authority, on the books of the Lexington, Lake, and Gulf Railroad Company. This subscription was accepted by that company, and a certificate of stock to the amount of such subscription was then, for the first time, issued to the county.

The company whose stock was thus received has graded in part the road, but never completed it. The county of Bates or the town of Mount Pleasant has never, in fact, received any benefit from this issue of its bonds.

The county court did not intend their action in June, 1870, to be final, and did not understand that a subscription was thereby completed. Their vote was a declaration that the power to subscribe should be exercised, and was an authority to their agent to perfect a contract with the railroad company, on the conditions set forth. No acceptance was made by the railroad company, no notice of acceptance was given, nor was there any act or fact which afforded a pretext for saying that the railroad company was bound by the contract of subscription. While it refused to allow the agent to withdraw his evidence of authority, it said nothing and did nothing to indicate that the minds of the parties had met upon the terms of a subscription. The county court was precise and particular in requiring those conditions to be copied in full on the books of the company, as the conditions on which the subscription was made; and there could be no mutual contract until the railroad company assented, on its part, to those conditions.

At a subsequent time, Jan. 18, 1871, when it had determined to issue bonds to a different company, and apparently as its justification for so doing, the county court recited that a subscription had been made to the Chillicothe road. It at once, and in the same order, contradicted and repudiated this recital, by directing a subscription for $90,000 of bonds in the Lexington and Lake Railroad Company. If the subscription had been made before to one company, there was no occasion or authority for a subscription to another. This historical statement furnishes no satisfactory evidence of an actual or legal subscription in June, 1870.

We are of the opinion that the action of the county court on the 14th of June, 1870, did not constitute a subscription to the stock of the Lexington, Chillicothe, and Lake Railroad Company, and that the case of the defendants in error is fatally defective, under the ruling of Harshman v. Bates County, in this: that the popular vote gave authority to subscribe to the Lexington, Chillicothe, and Gulf Railroad Company, while the subscription was made and the bonds issued to a different company, to wit, to the Lexington, Lake, and Gulf Railroad Company.

The same decision holds that the recitals in the bonds are such that there can be no bona fide holders of them; and to the like effect in principle is McClure v. Township of Oxford, 94 U.S. 429.

The judgment must be reversed, and the case remanded to the Circuit Court, with directions to proceed to a new trial, according to the views above expressed; and it is

So ordered.

MR. JUSTICE CLIFFORD, with whom concurred MR. JUSTICE SWAYNE and MR. JUSTICE STRONG, dissenting.


text: Talk:County of Bates v. Winters/Opinion of the Court


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County of Bates v. Winters/Dissent Clifford

MR. JUSTICE CLIFFORD, with whom concurred MR. JUSTICE SWAYNE and MR. JUSTICE STRONG, dissenting.

I dissent from the opinion in this case, upon the ground that it is in conflict with prior decisions of this court upon the same subject.


text: Talk:County of Bates v. Winters/Dissent Clifford


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Eldridge v. Hill

ERROR to the Circuit Court of the United States for the Western District of Michigan.

The facts are stated in the opinion of the court.

''Mr. Matt. H. Carpenter'' for the plaintiffs in error.

Mr. E. W. Keightley, contra.

MR. JUSTICE MILLER delivered the opinion of the court.

title: Eldridge v. Hill


text: Talk:Eldridge v. Hill

title: Talk:Eldridge v. Hill


text:
Eldridge v. Hill/Opinion of the Court

The bill of exceptions in this case shows that forty-four record-books, and some deeds, mortgages, and other papers, were, on the night of the 28th of June, 1872, stolen from the office of the register of deeds of the county of St. Joseph, Mich.

After an unavailing effort for over two months to recover them, the officers of the county seem to have come to an understanding with some detectives, by which they were to deposit in Chicago, with the law firm of Eldridge & Tourtelotte, now plaintiffs in error, the sum of $3,500, to be paid to the person causing said books and papers to be delivered to the county, if it was done before the twelfth day of September.

The money was so deposited on the fifth day of September, with Eldridge & Tourtelotte, and a written instrument signed by them and by the proper officers of the county, which, after reciting the circumstances that led to it, ends with the following agreement:--

'It is hereby agreed that the said supervisors and the treasurer shall deposit in the hands of Messrs. Eldridge & Tourtelotte the said sum of money (which sum is hereby deposited with said Eldridge & Tourtelotte), and which said sum shall be held by them until the said books and papers shall be returned to said county; and when so delivered to said county, the said sum of money so deposited in said Eldridge & Tourtelotte's hands shall be paid and delivered to said parties so causing said books and papers to be so returned to said county; and in case the said books and papers, and all of them, are not delivered to said county on or before the twelfth day of September, A.D. 1872, then the said sum of money so received by said Eldridge & Tourtelotte shall be returned to and given back to said treasurer of said county.

'CHICAGO, Sept. 5, A.D. 1872.

(Signed) 'WM. M. WATKINS,

'''Comm. of Board of Supervisors for the County of St. Joseph''.

'JAMES HILL, County Treasurer.

'E. F. PEIRCE, County Sheriff.

'ELDRIDGE & TOURTELOTTE.

'It is understood that any failure to deliver some small paper or papers shall not invalidate the above agreement.

'WM. M. WATKINS.'

It is further shown that, on the appearance of Tourtelotte at his office at the usual hour on the morning of September 7, a man named Wilson, known to him as a detective, was there awaiting him, and presented him the following paper:--

'I have received from somebody forty-four books for St. Joseph County, also papers and small index-books.

W. W. HATCH.'

Hatch was the deputy-sheriff of the county, and on the production of this paper Tourtelotte paid the money to Wilson.

Hill, on behalf of the county, brought this action against Eldridge & Tourtelotte, for the money so paid, and recovered judgment.

One of the errors assigned is, that the court admitted the instrument signed by the parties, dated September 5, to be read in evidence, when the copy set out in the declaration is dated September 6. It is unnecessary to consider this question, as we are of opinion that the judgment must be reversed, and a new trial awarded on another and more important ground.

We are of opinion that there was no evidence of the liability of the defendants on which a verdict could have been rendered against them; and, though no instruction to that effect was prayed, the court did charge the jury that the evidence raised the question which it was proper for them, and not for the court, to decide, whether, on the delivery of the books and papers to the county officers, they were in such a condition as justified the defendants in paying the money to the party claiming it. To this defendants excepted.

On this point we think that the court did not give sufficient weight to the fact that defendants were simple bailees and agents acting for the county without compensation. Although in the course of this charge the court calls them bailees and agents, it lays down a rule which would govern the case if the defendants had made a contract for a valuable consideration to restore the books and papers in good order to the county inside of seven days, or to return the money.

The bill of exceptions states as facts proved that 'all of the property except one deed and two powers of attorney, and the whole of the books which had been stolen from the office of the register of deeds, viz. forty-four books of records, were returned to the custody of the register.' That a leaf was missing from one book, and three from another. That some of the writing had been rendered illegible, and parts of the pages gone. This is the substance of the testimony, on which the judge put it to the jury as a question for them to decide, whether Eldridge & Tourtelotte should refund to the county the money which, as its gratuitous agents, they had paid to recover the books.

We think there was no such question; that in the absence of any pretence of bad faith there was no right of recovery. It is clear that the defendants were not required by the circumstances of the case to see and examine the books, or to await their delivery to the register, and his examination and report on their condition. Any such idea is inconsistent with the whole arrangement; and the county officers who consented to such an arrangement should be the last to insist on a condition which would enable them to get the books, catch the thief, and retain the reward.

If Eldridge & Tourtelotte acted in good faith, as it is clear they did, and without reward did what they had every reason to believe was in accord with the wishes of those who deposited the money, they are discharged. The thing to be done was the recovery of forty-four large record-books of one of the oldest counties of the State. It was an important thing to the owners of property in the county that it should be done. When this had been done and the books recovered, with all the loose papers but two or three, it is idle to say that the absence of two or three pages, and the fading of the ink of as many more, justified the county in holding the books and suing its own agent for the money which, under its instruction, he had paid to get them back. It seems to us that if those books had been presented to Tourtelotte just as they were to the deputy-sheriff, and he had refused to pay the $3,500, and the books had thereby been for ever lost, the county would have had a much stronger cause of action than it has proved in this case.

Because there was no evidence on which plaintiff had a right to recover, and because the court, against the exception of defendants, told the jury there was evidence on that point for them to consider, the judgment must be reversed and the cause remanded, with instructions to set aside the verdict and grant a new trial; and it is

So ordered.

title: Eldridge v. Hill/Opinion of the Court


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


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County of Warren v. Marcy

ERROR to the Circuit Court of the United States for the Northern District of Illinois.

This was an action brought in the court below by George O. Marcy, the defendant in error, against the County of Warren, to recover the amount of certain coupons, originally attached to certain bonds of the said county, bearing date Jan. 25, 1871. These bonds were in the following form:--

'UNITED STATES OF AMERICA.-STATE OF ILLINOIS.

'No. ___. County of Warren. $1,000.

'On the first day of July, in the year of our Lord one thousand eight hundred and ninety, the county of Warren, and State of Illinois, promises to pay to the Rockford, Rock Island, and Saint Louis Railroad Company, or bearer, the sum of $1,000, and interest thereon, at the rate of eight per cent per annum, payable annually, on the first day of July in each year, on presentation to the treasurer of said Warren County of the respective interest-coupons which are hereto severally adjoined.

'This bond is issued in conformity with the vote of the electors of said county, cast at an election held on the twenty-third day of September, A.D. 1869.

'In testimony whereof, and pursuant to the authority granted by law, and upon the order of the board of supervisors of said Warren County, passed at an adjourned session thereof, begun on the twenty-fifth day of January, A.D. 1871, I, clerk of the county court of said county, have hereunto signed my name as such clerk, and affixed the seal of said county court, this twenty-fifth day of January, A.D. 1871.

WARREN COUNTY COURT, ILLINOIS, SEAL.

'W. G. BONE,

'Clerk of the County Court of Warren County.'

A jury being waived, the court made a special finding of the facts, and thereupon found generally for the plaintiff, and rendered judgment in his favor. The county then brought the case here.

The principal facts of the case, as found by the court, are as follows:--

The Rockford, Rock Island, and St. Louis Railroad Company, having been chartered by an act of the legislature of Illinois, approved Feb. 16, 1865, a supplement to said charter was passed and approved on the 4th of March, 1869, whereby, amongst other things, it was enacted (by sect. 6) that any incorporated city, town, village, or county, through which said railroad might pass, or which might be situated on or near the line thereof, might subscribe to the capital stock of the company any sum not exceeding $100,000, and might issue coupon bonds, not to run more than thirty years. To this enactment was appended the following proviso:--

'Provided, that before said stock shall be subscribed, an election shall be held, in conformity to the laws in regard to ordinary State, city, county, or town elections, thirty days' notice first having been given, by publication in at least one newspaper in the county, and six public notices, printed or written, having been posted in six of the most public places therein during the time above named, and returns to be made in the usual way; at which election a majority of the legal voters, voting on the question, shall have voted in favor of said subscription; and to this end, the. . . board of supervisors. . . may from time to time order elections, specifying the amount proposed to be subscribed.'On the 25th of March, 1869, another act was passed and approved, entitled 'An Act to authorize certain counties and towns therein named to subscribe stock in railroad companies.'

The first section of this act authorized the counties of Rock Island, Mercer, Warren, McDonough, Schuyler, Cass, Scott, and Greene to purchase or subscribe for shares of the capital stock in any railroad company already organized, or thereafter to be organized, which should pass in whole or in part through the said counties, or any or either of them, to such an amount as any of said counties, or either of them, should determine and deem proper. The second section provided that such subscriptions might be made by an agent appointed by the board of supervisors, in counties that might adopt township organization (which it was conceded Warren County had done), upon such terms and conditions as the corporate authorities of any such county might prescribe; and for the payment of such stock the board were authorized to borrow money at interest not exceeding ten per cent, or to pay for the same in the bonds, orders, or warrants of the county, in sums not less than $100, to run not exceeding twenty years, at interest not exceeding ten per cent per annum. The fourth section directed that all such bonds, &c., should be issued by the clerk of the county court, under the seal of his office, upon the order of the county authorities, and the county clerk to make registration thereof, and certify the same on the bonds. The tenth section declared that no such subscription to stock should be made, unless the same was submitted to a vote of the people of such county, and should receive a majority of the votes cast; and that the question should be submitted in such manner as the county authorities might determine.

It is claimed by the defendant in error that the county of Warren derived authority to issue the bonds in question under the last-mentioned act. The road of the Rockford, Rock Island, and St. Louis Railroad Company was partially built north and south of Warren County before the election hereafter mentioned was held, and it was declared by the company that it would go through that county; and it is not disputed that it was, in fact, afterwards laid through the same as proposed.

The proceedings of the board of supervisors and county officers which resulted in the issue of the bonds were as follows: -

On the 23d of August, 1869, the board called an election of the people of the county to be held on Sept. 23, 1869, for the purpose of determining the question of a county subscription of $200,000 to the stock of said railroad company, including the $100,000 previously voted to the St. Louis, Alton, and Rock Island Railroad Company, claimed to have been transferred to the former company by virtue of an act of assembly passed in 1869. Notices of the election were not published until Aug. 27, 1869 (less than thirty days prior thereto), and some of those posted were not posted for the full period of thirty days, and in one township none were posted at all; but in all the others notices were published for periods varying from twenty to thirty days. The election was held pursuant to notice on the 23d of September, 1869; and one thousand seven hundred and seventy-five votes were cast for the subscription, and nine hundred and seventy-five against it, the total vote of the county at the last previous general election being four thousand seven hundred and thirty-one. The vote was duly canvassed, and filed in the clerk's office; and on the 16th of March, 1870, the board declared that the election had resulted in favor of the subscription, and ordered its chairman to make the same accordingly.

On the 18th of July, 1870, one Harding, a tax-payer and citizen of the county, filed a bill in chancery, on behalf of himself and all other tax-payers, against the county officers and the railroad company, in the Circuit Court of Warren County, asking for an injunction to prevent the subscription of stock and the issue of bonds therefor, and that the proceedings of the board be set aside and declared void. The bill set forth the foregoing facts; and a temporary injunction was granted, but was subsequently dissolved on the 23d of January, 1871. The complainant prayed an appeal from the order dissolving the injunction, which was not granted; and the cause went to final hearing on the 2d of February, 1871, when the bill was dismissed. Thereupon the complainant appealed to the Supreme Court of the State. The cause having been heard at the first term thereafter, the decree of the Circuit Court was reversed in 1873, and the cause remanded with directions to enter a decree for the complainant, according to the prayer of the bill. In accordance with these directions, a decree was duly entered in the Circuit Court.

Meantime, pending these proceedings, after the dissolution of the temporary injunction by the Circuit Court, and on the 25th of January, 1871, the bonds in question, to the amount of $200,000, in the form above set forth, were executed under the hand of the clerk of the board of supervisors of Warren County, by order of a majority of the board, at a meeting held on that day. They were then delivered by the clerk, as directed by the board, to the Rockford, Rock Island, and St. Louis Railroad Company, in payment of a subscription to the stock of said company, which purported to be made in March, 1870, in the name of the county, by the chairman of said board, in pursuance of the order of the board, before stated. They were registered in the office of the clerk of Warren County, and so certified by him Jan. 25, 1871, and were registered Jan. 27, 1871, in the office of the State auditor of public accounts, and so certified by him on the bonds.

The defendant in error subsequently became a purchaser of the coupons in question for value, before maturity, and without any actual notice of their alleged invalidity, or of any suit in relation thereto.

Mr. George F. Harding for the plaintiff in error.

The Constitution of Illinois of 1870 prohibits a county from becoming a subscriber to the capital stock of a railroad company, unless authorized by a vote of the people.

The notice for the election not having been given in compliance with the provisions of the act of March 4, 1869, the bonds are void.

The Supreme Court of Illinois, in Harding v. Rockford, Rock Island, & St. Louis Railroad Co. (65 Ill. 90), decided that those provisions were not repealed by the tenth section of the act of March 25, 1869.

The coupons here sued on were issued pending that suit, and it was a notice to purchasers of all matters in litigation, so as to affect and bind them. Murray v. Ballou, 1 Johns. (N. Y.) Ch. 566; Murray v. Lylburn, 2 id. 441; 2 White & Tudor's Leading Cases, 64; Park v. Johnson, 11 Wend. (N. Y.) 453.

That rule applies to personal as well as to real property, and to personal property of every description. McCutcheon v. Miller, 31 Miss. 83; Bishop of Winchester v. Paine, 11 Ves. Jr. 200; Same v. Beaver, 3 id. 314; Kellogg et al. v. Fancher et al., 23 Wis. 1; Scudder v. Van Amburgh, Edw. (N. Y.) Ch. 30; Haddens v. Spaders, 20 Johns. (N. Y.) 573; McRary v. Fries, 4 Jones (N. C.), Eq. 234; Fletcher v. Ferrell, 9 Dana (Ky.), 377; Leitch v. Wells, 48 Barb. (N. Y.) 650; Murray v. Lylburn, supra.

The only exception to the rule is unmatured negotiable paper, in existence when the suit was brought; but that exception cannot extend to paper executed pendente lite.

Mr. Charles M. Osborn and Mr. Sanford B. Perry, contra.

The statutes of 4th and 25th March, 1869, are ample authority to the county of Warren to subscribe for stock in the Rockford, Rock Island, and St. Louis Railroad Company, and to issue bonds, like those in question, in payment therefor, an affirmative vote of the county having been first given in favor thereof.

The board of supervisors was invested with full power to submit to the voters of the county the question of subscribing to the stock of the railroad company, and to decide whether the election was properly held, and the majority vote cast in favor of the subscription. The board having ordered the bonds in question to be issued, with a recital therein that they were issued in conformity with the vote of the electors of said county, they are, in the hands of a bona fide holder for value, conclusive proof that such an election was legally called and held, and are binding on the county. Commissioners of Knox County v. Aspinwall et al., 21 How. 539; Bissell v. City of Jeffersonville, 24 id. 287; Moran v. Commissioners of Miami County, 2 Black, 722; Van Hostrup v. Madison City, 1 Wall. 291; Grand Chute v. Winegar, 15 id. 355; Lynde v. The County, 16 id. 6; Kenicott v. The Supervisors, id. 452; St. Joseph Township v. Rogers, id. 644; Town of Coloma v. Eaves, 92 U.S. 484; Marcy v. Town of Oswego, id. 637; Humboldt Township v. Long et al., id. 642; County of Calloway v. Foster, 93 id. 567; Commissioners, &c. v. Thayer, 94 id. 631; Commissioners, &c. v. January, id. 202, Commissioners, &c. v. Clark, id. 278; Town of East Lincoln v. Davenport, id. 801.

Such a holder is required only to ascertain whether the county was authorized by law to subscribe for stock in the railroad company named in the bonds, and to issue them in payment therefor. Commissioners of Knox County v. Aspinwall, supra; Moran v. Commissioners of Miami County, supra; Mercer County v. Hacket, 1 Wall. 83; Meyer v. City of Muscatine, id. 384; Supervisors v. Schenck, 5 id. 772; Pendleton County v. Amy, 13 id. 297; Nugent v. The Supervisors, 19 id. 241; Lynde v. The County, supra; Kenicott v. The Supervisors, supra; Town of Coloma v. Eaves, 92 U.S. 484; County of Moultrie v. Savings Bank, id. 631.

Such bonds, with the interest coupons attached, are in the hands of such a holder negotiable securities, having all the properties of commercial paper: White v. Vermont & Massachusetts Railroad Co., 21 How. 575; Moran v. Commissioners, &c., supra; Mercer County v. Hacket, supra; Gelpcke v. Dubuque, 1 Wall. 175; City of Lexington v. Butler, 14 id. 282; St. Joseph Township v. Rogers, supra; Humboldt Township v. Long et al., supra; Commissioners, &c. v. Clark, supra; Cromwell v. County of Sac, 96 U.S. 51; and the doctrine of lis pendens is not applicable to them. Leitch v. Wells, 48 N. Y. 586; Stone v. Elliott, 11 Ohio St. 252; Kieffer v. Ehler, 18 Pa. St. 388; Durant v. Iowa County, 1 Woolw. 69; Winston v. Westfeldt, 22 Ala. 760; National Bank of Washington v. Texas, 20 Wall. 72; Olcott v. Supervisors, 16 id. 678; 2 Lead. Cas. in Eq. (ed. of 1877) 196; 2 Powell, Mortgages, 618.

MR. JUSTICE BRADLEY, after stating the case, delivered the opinion of the court.

title: County of Warren v. Marcy


text: Talk:County of Warren v. Marcy

title: Talk:County of Warren v. Marcy


text:
County of Warren v. Marcy/Opinion of the Court

It is insisted by the plaintiff in error that the bonds and coupons were void, for want of authority in the board of supervisors to issue them, in consequence of insufficient notice of the election. It must be conceded, however, that if the case is to be governed by the act of March 25, 1869, there was no defect in the proceedings. But it is insisted that the act of March 4, 1869, which prescribed a notice of thirty days, by publication in a newspaper, was still binding, and was not abrogated by the act of March 25, the tenth section of which provided that the question should be submitted in such manner as the county authorities might determine.

This was the very question raised before the State court in Harding v. Rockford, Rock Island, & St. Louis Railroad Co. (65 Ill. 90); and the Supreme Court of Illinois decided that the provisions of the act of March 4 were binding, and that the election was void for want of such published notice of thirty days.

The court considered that the object of the act of March 25 was to remove the limitation as to the amount of the subscription, and to change the time for the maturity of the bonds, as imposed by the act of March 4, but not to change the time or manner of giving notice of the election; and they conclude their opinion in the following words:--

'We are of opinion that the proviso to section six (6) of the act of 4th of March is not abrogated by section ten (10) of the subsequent act. Their reconciliation, in the manner we have attempted, will best subserve the public good; and the validity of both, thus reconciled, will make the legislation more in accordance with reason, shield the legislature from an absurdity, and prevent serious consequences.

'As the election was invalid for want of sufficient notice, there was no power to make the subscription, and none was conferred by the vote to issue the bonds.'

If we accept this as the true construction of these statutes, the question then arises, whether, the bonds having been issued and acquired under the circumstances shown by the special findings of the Circuit Court, the defendant in error is entitled to recover. Is the county bound to pay the coupons in question to one who purchased them for value before maturity, and without any actual knowledge of the facts relied on to invalidate them, or of the pendency of the suit brought to have the proceedings declared void?

This involves two question: 1. Are the bonds so absolutely void, as against the county, as to be invalid under all circumstances, even in the hands of a bona fide holder for value? 2. If not, was the commencement and pendency of the suit for having the proceedings of the supervisors declared void, and preventing the issue of the bonds, such notice to all persons of their invalidity, as to defeat the title of a purchaser for value before maturity, having no actual notice of the suit, or of the objection to the bonds?

The first question is to be viewed in the light of the former decisions of this court. We have substantially held, that if a municipal body has lawful power to issue bonds or other negotiable securities, dependent only upon the adoption of certain preliminary proceedings, such as a popular election of the constituent body, the holder in good faith has a right to assume that such preliminary proceedings have taken place, if the fact be certified on the face of the bonds themselves, by the authorities whose primary duty it is to ascertain it. Commissioners of Johnson County v. January, 94 U.S. 202; Commissioners of Douglass County v. Bolles, id. 104, 108; Town of Coloma v. Eaves, 92 id. 484, 488; Lynde v. The County, 16 Wall. 6. Now, that is the case here. The bonds are executed by the board of supervisors, or, which is the same thing, by their clerk, under their order and direction. They certify on their face that they are issued in conformity with the vote of the electors of said county, cast at an election held on the twenty-third day of September, 1869. This, according to the cases, is a sufficient authentication of the fact that an election was duly held, to protect a bona fide holder for value.

A similar defence, that the bonds were absolutely void for want of authority (and so declared by the State tribunals), in consequence of irregularity in the preliminary proceedings, was set up in the case of Lee County v. Rogers, 7 Wall. 181. That case arose in Iowa. A county election had been held to determine on the subscription of stock to a railroad, and the issue of bonds in payment thereof. A bill in equity was filed to prevent such subscription and issue, and was successful. The legislature then passed a healing act, and the bonds were issued. A year after this, another bill was filed to have both the act and the bonds declared void, but was dismissed. Two years after this dismissal, a bill of review was filed to reverse the last decree; and it was reversed, and the bonds and the healing act itself were declared void. This court held that, notwithstanding all this, the bona fide holder of the bonds was entitled to recover upon them. It being contended that he was bound to take notice of the lis pendens for avoiding the bonds, the court held otherwise, on the ground that there was no continuous litigation. The first suit was determined before the issue of the bonds, and the second was not commenced until after they had been issued. No suit was pending when they were issued.

This case is an authority for the position that bonds of this sort may be valid in the hands of a bona fide holder, notwithstanding the fact that the preliminary proceedings requisite to their issue may have been so defective as to sustain a direct proceeding against the county officers to annul them or prevent their issue.

This brings us to the second question; namely, whether the pendency of the chancery suit for vacating the proceedings of the supervisors and preventing the issue of the bonds, in this case, was in itself constructive notice to all persons of their invalidity, or of the objections raised against them. This question has an important bearing upon the case; for, whilst the bonds may be valid in the hands of a bona fide purchaser before maturity, and without notice of any defect or vice in their origin, this cannot be said in reference to one who has such notice, or who is chargeable therewith.

It is a general rule that all persons dealing with property are bound to take notice of a suit pending with regard to the title thereto, and will, on their peril, purchase the same from any of the parties to the suit. But this rule is not of universal application. It does not apply to negotiable securities purchased before maturity, nor to articles of ordinary commerce sold in the usual way. This exception was suggested by Chancellor Kent, in one of the leading cases on the subject in this country, and has been confirmed by many subsequent decisions.

The learned Chancellor gave the history and grounds of the general doctrine of lis pendens, in 1815, in the case of Murray v. Ballou (1 Johns. (N. Y.) Ch. 566), which is the leading American case on the subject, and deserves the careful study of every student of law. The fundamental proposition was stated in these words: 'The established rule is, that a lis pendens, duly prosecuted, and not collusive, is notice to a purchaser so as to affect and bind his interest by the decree; and the lis pendens begins from the service of the subpoena after the bill is filed.' p. 576. That case related to land, with regard to which the doctrine is uniformly applied.

In the subsequent case of Murray v. Lylburn (2 id. 441), decided in 1817, the same doctrine was held to apply to choses in action (in that case, a bond and mortgage) assigned by one of the parties pendente lite. But the Chancellor, with wise prevision, indicated the qualification to which the rule should be subject in such cases. Speaking of the trustee, whose acts were in question, he said: 'If Winter had held a number of mortgages, and other securities, in trust, when the suit was commenced, it cannot be pretended that he might safely defeat the object of the suit, and elude the justice of the court, by selling these securities. If he possessed cash, as the proceeds of the trust estate, or negotiable paper not due, or perhaps movable personal property, such as horses, cattle, grain, &c., I am not prepared to say the rule is to be carried so far as to affect such sales. The safety of commercial dealing would require a limitation of the rule; but bonds and mortgages are not the subject of ordinary commerce; and they formed one of the specific subjects of the suit against Winter, and the injunction prohibited the sale and assignment of them, as well as of the lands held in trust.'

Here we have the whole law on the subject. Subsequent cases have only carried it out and applied it. We shall cite only a few of the most important.

In Kieffer v. Ehler (18 Pa. St. 388), decided in 1852, it was held that, although a promissory note not due is liable to attachment under the Pennsylvania statute of 1836, relative to executions; yet such attachment is unavailable against a bona fide holder for value of a negotiable note, where it was obtained after the attachment was served on the maker of the note as garnishee, and after its return, but before the maturity of the note, and without actual notice of the attachment. Mr. Justice Lowrie, in that case, speaking of such instruments, says: 'They have a legal quality that renders the hold of an attachment upon them very uncertain. Unlike all other property, they carry their whole evidence of title on their face; and the law assures the right of him who obtains them for valuable consideration, by regular indorsement, and without actual notice of any adverse claim, or of such suspicious circumstances as should lead to inquiry. To hold that an attachment prevents a subsequent bona fide indorser for value from acquiring a good title, would be almost a destruction of one of the essential characteristics of negotiable paper.' He admits that the negotiation of such paper by a defendant after he had notice of the attachment would be a fraud upon the law; but he suggests the remedy, namely, that the court should exert its power to prevent it, by requiring the instrument to be placed in such custody as to prevent it from being misapplied,-a remedy analogous to that of injunction and sequestration by a court of chancery.

In a subsequent case in Pennsylvania, that of Diamond v. Lawrence County (37 id. 353), it is true, the same court held the purchaser of county bonds pendente lite to be affected with constructive notice; but placed its decision specially on the ground that, in Pennsylvania, such bonds are not deemed negotiable securities.

The case of Winston v. Westfeldt, which came before the Supreme Court of Alabama in 1853 (22 Ala. 760), is directly in point, and was decided upon great consideration and after exhaustive arguments by counsel. The note sued on, at the time of its purchase by the plaintiff, was the subject of controversy in the chancery court; and the question was, whether the proceedings operated as notice to him, 'or, in other words,' says the court, 'does the doctrine of lis pendens apply to negotiable paper?' And the decision was, that it does not. The arguments of the counsel, as well as the judgment of the court, in this case, are very instructive; but we forbear to accumulate further quotations.

Suffice it to say, that the same doctrine is held and adjudged in Stone v. Elliott, 11 Ohio St. 252; Mims v. West, 38 Ga. 18; Durant v. Iowa County, 1 Woolw. 69; and Leitch v. Wells, 48 N. Y. 585, overruling same case in 48 Barb. 637. The case of Durant v. Iowa County was decided by Mr. Justice Miller, and related to coupons attached to county bonds, being parallel to the case now under consideration, except that the coupons had been issued before the lis pendens was instituted. Justice Miller, in this case, meets the objection that the rule may operated to defeat the action of the court by withdrawing from its jurisdiction the subject-matter of the controversy. He says: 'It is insisted that, in this view, proceedings to enjoin the transfer of such securities are futile. Not so. An injunction will prevent the transfer of the securities during the pendency of the suit, and a decree that they be delivered up to be cancelled, if enforced at once, will protect the parties. A neglect to take out the injunction, or to enforce the decree, is the fault of the plaintiff, not of the law.'

In the present case, an injunction was issued, and, so long as it was in force, was obeyed by the board of supervisors. The Circuit Court saw cause to dissolve the injunction, it is true, and eventually dismissed the bill; and it was not till two years afterward that the Supreme Court reversed this decree. Whether the Circuit Court did right in dissolving the injunction without dismissing the bill (which was emphatically an injunction bill); or whether the complainant ought not, at once, to have submitted to a dismissal, taken an appeal, and adopted the necessary proceedings for a continuance of the injunction,-it is unnecessary now to inquire. It cannot be said that the court was destitute of power to maintain its own jurisdiction and protect its suitors. If it did not choose to exert this power, and any failure of justice ensued, it is to be attributed to that inherent imperfection to which the administration of all human laws is liable. At all events, the evil is no greater than that which would befall the innocent purchasers of the bonds, if the loss should be made to fall upon them. From this dilemma there is no escape, unless we abrogate the privileges of commercial paper, and make it the duty of those who take it to inquire into all its previous history and the circumstances of its origin. This would be to revolutionize the principles on which the business of the commercial world is transacted, and would require a new departure in the modes and usages of trade.

The only thing calculated to raise any doubt, in the present case, is the fact that the bonds in question were not in existence when the suit to prevent their issue was brought. But we see no good reason for limiting the exception to paper or securities previously in existence. The court, as we have seen, has ample power, by injunction, to prevent their execution; and the reason of the exception is as applicable to the one class as to the other. Its object is to protect the commercial community by removing all obstacles to the free circulation of negotiable paper. If, when regular on its face, it is to be subject to the possibility of a suit being pending between the original parties, its negotiability would be seriously affected, and a check would be put to innumerable commercial transactions. These considerations apply equally to securities created during, as to those created before the commencement of, the suit; and as well to controversies respecting their origin, as those respecting their transfer. Both are within the same mischief, and the same reason.

This very question was involved in City of Lexington v. Butler, 14 Wall. 283. In that case, irregularities had occurred in the preliminary proceedings, and the city authorities refused to issue the bonds. A mandamus was applied for by the railroad company, for whose use the bonds were intended; and a judgment of mandamus was rendered, to compel the city to issue them, and it issued them accordingly. Subsequently, this judgment was reversed by the Court of Appeals of Kentucky, and an injunction was obtained to prevent the railroad company from parting with the bonds. The injunction was not obeyed; the bonds were negotiated whilst proceedings were still pending, and were purchased by the plaintiff for value before maturity, without any knowledge of these circumstances. This court held that the bonds were valid in his hands. The point in question received no discussion in the opinion of the court, it is true; but it appeared on the pleadings, was made in the argument, and must have been passed upon in arriving at the judgment.

Whilst the doctrine of constructive notice arising from lis pendens, though often severe in its application, is, on the whole, a wholesome and necessary one, and founded on principles affecting the authoritative administration of justice; the exception to its application is demanded by other considerations equally important, as affecting the free operations of commerce, and that confidence in the instruments by which it is carried on, which is so necessary in a business community. The considerations that give rise to the exception apply with full force to the present case.

We think that the result reached by the Circuit Court was correct.

Judgment affirmed.

MR. JUSTICE MILLER, MR. JUSTICE FIELD, and MR. JUSTICE HARLAN dissented.

NOTE.-In County of Warren v. Post and County of Warren v. Portsmouth Savings Bank, error to the Circuit Court of the United States for the Northern District of Illinois, which were argued at the same time and by the same counsel as was the preceding case, MR. JUSTICE BRADLEY, in delivering the opinion of the court, remarked: These cases are in all respects similar to that of County of Warren v. Marcy, and must have the same result.

Affirmed.

MR. JUSTICE MILLER, MR. JUSTICE FIELD, and MR. JUSTICE HARLAN dissented.


text: Talk:County of Warren v. Marcy/Opinion of the Court