text:
Marsh v. McPherson/Opinion of the Court

This action was brought Jan. 15, 1878, by John McPherson, against James S. Marsh and Elisha C. Marsh, to recover damages for the breach of a contract under seal for the sale of certain real and personal property. On Oct. 16, 1877, a written agreement was entered into, by which he, in consideration of their covenants, agreed to sell and convey to them certain described real estate in Nebraska, and, in addition thereto, one-half the stock of goods in a store belonging to him, on a parcel of the real estate. They covenanted on their part to pay for the real estate as follows: For one parcel, $18,190.37, in combined reapers and mowers and self-rakers, known as the Valley Chief, to be taken, those designated as No. 1 at $175 each, and No. 2 at $170 each, to be delivered, eighty-six machines of No. 1, and twenty of No. 2, at certain named points in different parts of the State and in Kansas, 'all the said machines to be delivered in good condition, and free of all incumbrances, of taxes, and of charges for freight, each machine to have two smooth sickles and one sickle-edge sickle.' In the agreement, the freight on each machine from the manufactory at Lewisburg, Penn., was estimated at $25, and in all cases when it fell below that sum the difference was to be accounted for and paid. The store property was to be paid for in cash and notes, and the remainder of the real estate of $3,600, in machines of another description at $175 each, 'to be delivered in good condition, free of incumbrances,' as before in respect to the others, at certain other named places, being eleven machines at Beatrice, Neb., and the remainder of this lot on board of cars at the factory at Lewisburg, consigned to him or to his order.

At the time of the execution of this agreement, the machines, it is alleged by the plaintiff in his petition, were in the possession of the agents of the defendants at the various points; that they were in bad condition, and subject to incumbrances and charges; that the defendants failed and refused to deliver them, although he had fully performed his covenants, by conveying the real estate and delivering the goods; and that the machines, in the condition required by the contract, were worth the agreed value of $21,775. To recover this amount, with an additional sum for ana scertained difference of freight, the suit was brought in the State court. By reason of the citizenship of the parties, it was, on the petition of the defendants, removed for trial into the Circuit Court.

The defendants, in their answer, admit the execution of the agreement set out in the petition, but allege that it was fully executed, fulfilled, and superseded by a subsequent agreement in writing between the parties, indorsed on it, and dated Nov. 5, 1877, in the words following, to wit:-- 'BROWNVILLE, NEBRASKA, November 5th, 1877.

'The above contract is this day executed by the said parties     thereto as follows: The within-named real estate is conveyed      by said first party (McPherson) to said second parties (Marsh      and Marsh); also one-half of said stock of goods at an      invoice in the sum of four thousand and two hundred and      forty-three and 10-100 dollars, making price of the half,      four thousand two hundred and forty-three and 10-100      ($4,243.10) dollars, is delivered by McPherson to said      parties, Marsh and Marsh.

'The said second parties, Marsh and Marsh, hereby acknowledge     payment of all said machines named in the list within named,      aggregating eighty-six number ones, twenty number twos, and      hereby deliver all thereof to said first party at the places      named in said within list (except there is two instead of one      at Donnbrag, and three instead of four at Wahoo, which change      is consented to by the parties) free and clear of all liens,      charges, or taxes, up to and including taxes for the year      1878, as per within contract. Said second parties also hereby     deliver to said first party eleven of said machines within      named, called Marsh number four, as provided for within and      on the within-named terms therefor, at Beatrice. On this,     eleven machines, number four, there is two hundred and      seventy-five dollars freight in favor of said second parties,      to whom said first party shall account therefor as      hereinafter stated.

The balance of $259.63 on the said list of number ones and     number twos, and the said eleven number fours, amounting to      $1,925, is applied on the purchase price of said lands in      Sonora Island, leaving balance of $1,415.37, for which said      second parties shall delive, as provided for within, eight of      said machines number four deliver, as provided for within, at      place within named, leaving still a balance on said purchase      price of island real estate of $15.37 in favor of said first      party, to whom the second parties shall account. As soon as     the amount due said first party on freights of said number      ones and twos are ascertained, the same, with the said $275      due second parties, and said $15.37 due said first party,      shall be settled and adjusted by the parties. Said eight     number fours to be delivered within thirty days after notice      to second parties. Said second parties hereby warrant that     said eighty-six number ones and twenty number twos and eleven      number fours are now at the places above named in condition      for delivery as above and within provided for, and that said      eight number fours shall be delivered as above stated, and shall stand good to said first party for      any breaches or failures of such warranty and promise.

'On said store goods one thousand dollars is paid to said     first party, the receipt of which is hereby acknowledged, and      the balance shall be paid according to the within contract.

'JOHN MCPHERSON.

'JAMES S. MARSH.

'E. C. MARSH.'

On the contract is the following indorsement by the plaintiff:--

'Received of said second parties, Marsh and Marsh, in full     payment and settlement of said balance due for said store      goods, after said payment of one thousand dollars, the      following described notes of this date, made by James S.      Marsh, to my order, to wit, one for $1,056.44, one for      $915.72, one for $685.47, and one for $585.47, in all four      several promissory notes for said amounts, all due December      1, 1877, with interest at ten per cent per annum after      maturity.

'November 7, 1877.

(Signed) 'JOHN MCPHERSON.

'Witness: WM. H. HOOVER.'

The defendants also allege e rformance of the contract, and aver that the said transactions between the plaintiff and them were neither sales of his lands and goods nor of their machines, 'but were barters of the property of one in exchange for the property of the others, in which the prices fixed were largely in excess of cash prices, so much so that neither would have bought the property of the other for cash at such prices, and that the naming of the prices in the transaction was nothing more than a matter of convenience in executing the exchange.' They further aver as to the eight Marsh No. 4 reapers to be delivered on board cars at Lewisburg, Penn., three had been delivered, and that as to the remainder, they have been ready and willing to do so, on the order of the plaintiff, but that he has neglected to do so, but that they hold the same for him.

The answer also contains the following:--

'Defendants admit that after the making of said agreement in November, 1877, defendants told plaintiff that they (the defendants) would visit each of the points named in said writing where said machines then were, and at which places they were delivered as stated in said writing, and if any agents were not settled with, or any liens or charges were claimed against any of said machines, would make settlement with their said agents then and theretofore having charge of said agricultural machines, and would pay off and discharge all unpaid claims and liens of any each and all of said machines, and ealch and all of said machines, and put in good repair each and all of the said machines, so as to have the same conform to the conditions of said agreement and warranty in writing, but deny that they ever so stated until after said writing of November, 1877, or that they told plaintiff that they would do so at once, but aver that they stated that they would do so in a reasonable time to have them so repaired and in good condition for the first season and time for selling reapers and mowers; which season, defendants aver, was the latter part of the spring of 1878, continuing from thence through the summer of 1878, and aver that said promise was to so repair and fit up said reapers and mowers ready for the harvest of small grains in the year 1878, and for the sales for such harvest, which time commenced about May, 1878, and continued during such harvest; all of which was agreed to between the parties hereto as satisfactory, as making good the warranty of defendants in said agreement dated Nov. 5, 1877, all of which said promises these defendants have fully performed and complied with, and have previous to said time and previous to the commencement of the reaper and mower trade for 1878, and previous to April, 1878, visited each of the points named in said writing, dated Oct. 6, 1877, where said machines then were, and made settlements with their agents then and there having charge of said agricultural machines, where settlements had not already and heretofore been made with such agents, and paid off and discharged all claims and liens of every kind and sort upon each and all of said machines, and put in good condition and repair each and all of said machines, wherever any such claim or liens were unpaid, and wherever any of said machines were not in good condition or were out of repair, and had all said machines as aforesaid discharged of all claims and liens of any and every sort, and in good repair and condition for the 1878 market, in due time for such market and pursuant to such promise.'

The cause was tried by jury, and there was a verdict for the plaintiff. Judgment was rendered thereon, to reverse which this writ of error is prosecuted.

There are thirty-three assignments of error, based on exceptions to the rulings of the court upon questions of evidence, and upon instructions to the jury, either given, or asked and refused; but it will not be necessary to refer to them in detail.

The chief issues between the parties, raised by the pleadings and maintained in evidence, were, whether there had been a delivery of possessiono f the machines by Marsh and Marsh to McPherson, and whether there had been a breach of the warranty, that they were in a good condition at the places named, and free from all liens and charges.

Upon the point whether there had in fact been a delivery of actual possession by the defendants to the plaintiff, of all or of any of the machines, there seems to be some confusion. The bill of exceptions, of course, and properly, does not set out all the evidence, but the court, in its general charge, stated to the jury, 'that the plaintiff admits that all the machines had been delivered to him.' From the context, it would appear that the contract of Nov. 5, 1877, is treated as an admission to that effect, as to all machines that were in fact at the places named, without respect to their condition; based, no doubt, upon the expression contained in the instrument, by which it is declared that said second parties, Marsh and Marsh, hereby acknowledge payment of all said machines, &c., and hereby deliver all thereof to said first party at the places named in said within list, &c., free and clear of all liens, charges, or taxes, &c. The contract undoubtedly had the effect to pass the title to the machines from Marsh and Marsh to McPherson, and the right of possession; but whether the purchaser obtained actual possession could not be conclusively inferred from the contract merely. If the declaration in that instrument of the fact of delivery could have that effect, it would be equally conclusive that they were free of incumbrances, for that is also stated in the same connection. It might have been that the machines were in the places mentioned in the contract and in the condition required; yet the defendants might have refused to deliver actual possession; if so, they would, of course, be liable in damages.

The bill of exceptions recites that 'during the trial, evidence having been admitted tending to prove that many of the machines named in the contracts copied in the pleadings were not in as good condition as called for in the said contracts, and were not supplied with all the pieces specified in the contracts, and that in some instances the whole machine was missing, and what the values of such deficient or impaired machines in the condition in which they then were and the difference in their values, in such condition, and the condition called for by the contract, and also on the part of the defendants that defendants had made repairs on some machines and supplied deficiencies and missing machines since the commencement of this action, and the value thereof,' the court, at the request of the plaintiff, gave to the jury the following instruction:--

'The jury is instructed that they are not permitted to take into account or make any allowance or reductions from the damages of the plaintiff for repairs of any kind made upon the machines or supplies furnished for them after Nov. 5, 1877, all such acts on their part being without authority; and the plaintiff is entitled to recover the full measure of his damages as if no such repairs had ever been made.'

This charge is clearly erroneous. In the first place, it assumes the fact that the acts referred to, of making repairs and furnishing supplies, were without authority. It cannot be denied that, if authorized, they would have to be considered; and whether authorized or not was, at least, one of the questions of fact involved in the issues to be tried, on which it was the duty of the jury to pass. For the defendants had set up in their answer what they claimed to be an agreement with the plaintiff, by which they were to have until the spring of 1878 in which to make good their warranty as to the condition of the machines. Whether this agreement for an extension of time, not acted on, could be pleaded as a bar to the action for a breach of the contract, is not the question. It was, if proved, and if repairs were actually made in pursuance of it, certainly good as proof that they were made with the consent and authority of the plaintiff. And as the billo f exceptions recites that evidence was offered to maintain the issues, by both parties, it is not to be assumed that there was none in support of this claim.

But independently of this alleged agreement, it was certainly competent for the defence to show that, after the date of the second contract, the machines were put in the good condition required by it, and were then delivered to and accepted by the plaintiff; for if he accepted the machines after the time when they should have been delivered, or if, after receiving them, he permitted repairs to be made or supplies to be furnished, and accepted the benefit of them, he certainly cannot claim that he has been damaged by a breach of the contract to the same extent as if nothing had been done to make good his loss.

It is a rule of law, without exception so far as we are aware, that any circumstance, otherwise competent in evidence to reduce the damages, may be proven on the trial for that purpose, although it may not have come into existence until after the commencement of the action.

The court, also, at the request of the plaintiff, gave to the jury the following charges:--

10. 'The jury is instructed that the plaintiff is entitled to recover for any machines which were not at the places named at the time of the making of the contract of Nov. 5, 1877, the price of said machines as fixed in the contract; and if you find that the defendants failed to deliver any of the machines to be delivered at Lewisburg, Penn., after demand made by plaintiff, the plaintiff is entitled to recover the contract price of such machines.' And, also, 11. 'On such machines as were delivered to the plaintiff, he is entitled to recover for any defects in quality or condition, and the measure of his damages is the difference between the value of such machines in the condition in which they then were and the contract price.'

And refused to give, on the request of the defendants, the following:--

'The jury are instructed that if they find there was any breach of the warranty named in the contract of Nov. 5, 1877, that the measure of damages for such breach is the difference in the value of such machines as they actually were and as they were warranted to be, less the benefit to the property by what the defendants have done to make good such warranty.'

During the trial the defendants offered to prove the market value of such machines in good condition for cash, and the difference between that and the value of the machines in the condition in which they were delivered; but this offer was rejected.

In its general charge, the court stated the rule of damages very clearly and correctly, in the following language: 'The extent of the damages in this case will be the difference that it would cost to put the machines in good condition, so as to comply with the contract, and also the value of those that were not then at the time and place stated in the contract.' Standing alone, this instruction would have been unexceptionable. But in the rulings noted above, in giving the tenth and eleventh instructions, asked by the plaintiffs, and refusing to give that asked by the defendants, and in rejecting the evidence offered on the point, there was substantial error.

The price fixed in the contract, at which the plaintiff agreed to take the machines, whether the transaction is viewed as an exchange of property, at assumed valuations, or as a purchase and sale for money, is not conclusive, between the parties, upon the question of damages, recoverable for a breach. If there had been a total failure on the part of the defendants to comply with the contract, and they had refused to deliver any of the machines specified, the damages to the plaintiff would have been the amount of money with which, at the time of the breach, he could have supplied himself by purchase from others, with the same number of similar articles of equal value. If the market price had in the mean time advanced, the recovery would be for more, or, if it had fallen, it would be for less, than the contract prie ; the rule to measure the loss, in such cases, being the difference between the contract and the market price. The same rule applies where the breach is partial and not total; and to make good the warranty as to condition, the cost of repairs; and, as to freedom from liens, the cost of removing them, if that be the difference in actual value, between the article as warranted and the article as delivered, is all that can be properly recovered as damages, unless in exceptional cases of special damage. Whatever that difference, in the actual circumstances of the case, is shown to be, is the true rule and measure of damages. Where the articles delivered are not what the contract calls for, as in the case of defective machines, the measure of the vendee's damages is what it would cost to supply the deficiency, without regard to the contract price. Benjamin v. Hillard, 23 How. 149, 167.

For these errors, the judgment of the Circuit Court will be reversed, and the cause remanded with instructions to grant a new trial; and it is

So ordered.

title: Marsh v. McPherson/Opinion of the Court


text: Talk:Marsh v. McPherson/Opinion of the Court

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


text:
Flanders v. Seelye

ERROR to the Circuit Court of the United States for the District of Louisiana.

The facts are stated in the opinion of the court.

The Solicitor-General for the plaintiff in error.

Mr. H. N. Ogden for the defendant in error.

MR. JUSTICE BLATCHFORD delivered the opinion of the court.

title: Flanders v. Seelye


text: Talk:Flanders v. Seelye

title: Talk:Flanders v. Seelye


text:
Flanders v. Seelye/Opinion of the Court

This suit was brought in the Sixth District Court for the Parish of Orleans, in the State of Louisiana, by Seelye, the defendant in error, against Flanders, the plaintiff in error, in November, 1871, and was removed by certiorari, before issue joined, into the Circuit Court of the United States for the District of Louisiana. In his petition filed in the State court, Seelye claimed to recover from Flanders the sum of $6,233.61, with legal interest from judicial demand. The grounds of the claim, as set forth in the petition, were, that, in March, 1866, 178 bales of cotton were delivered at the pickery of the firm of Seelye & Atwood, in New Orleans, of which firm Seelye was a member, under the instructions of Flanders, who was at that time acting supervisor and special agent of the Treasury Department of the United States; that the firm received from Flanders, at the same time, a written order to pay the charges on the cotton, amounting to $5,907.45; that the firm, in obedience to those instructions, received the cotton and paid the charges; that, in April, 1866, the firm received an order from one Burbridge, supervisor and special agent of the Treasury Department of the United States, directing them to deliver said cotton to one Harrison, but to retain the charges and expenses on said cotton; that, in obedience to said order, the firm delivered the cotton to Harrison, and received from him the amount of charges originally paid by them, and their own charges for storage of the cotton, being in all $6,063.81; that the amount was paid by Harrison under protest, and he subsequently sued Seelye and another person, as composing the firm, and recovered a judgment against them in the Circuit Court of the United States, for $4,661.45, with interest from June, 1866, to July, 1871, and costs, making in all $5,891.44; that that sum was paid by Seelye to Harrison in satisfaction of that judgment; that he also paid, as costs of court in that suit, $92, and for counsel fees in defending the suit $250; and that these sums, with the amount of the judgment, make the $6,233.61. The petition alleges that all that Seelye so did in the premises, and all that he was so finally compelled to pay, was the direct result of the written orders received by the firm from Flanders, and claims that Flanders is bound to reimburse to him the entire amount so paid, either in direct obedience to his orders or as the necessary result of that obedience. In January, 1872, Flanders filed exceptions in the Circuit Court to the petition, which were overruled by the court in April, 1872. These exceptions raised the questions that Seelye had no right of action alone, and that the court had no jurisdiction. After the overruling of these exceptions, Flanders filed a pleading combining exceptions with an answer. The exceptions related to the defences of prescription and want of jurisdiction. The answer set up that when Seelye received the cotton from Flanders and paid the charges, he knew that Flanders had taken the cotton in his said official capacity acting under the act of Congress of March 12, 1863, c. 20 (12 Stat. 820); that the charges directed by Flanders to be paid were a legal charge on the cotton under the provisions of said act; that they were refunded by Harrison to the firm as an admitted claim; that Harrison then brought the said suit to recover back the amount he had so allowed and paid; that the defendants in said suit set up in their answer therein that they received the cotton from Flanders, acting as such special agent, and paid by his orders the charges thereon, and the same were lawful charges thereon, and were acquiesced in by Harrison and reimbursed to them; that after judgment in the suit the defendants in it sued out a writ of error to this court, which writ they failed to prosecute, and it was, therefore, dismissed by this court in December, 1870; that in July, 1871, they voluntarily paid the judgment; that the defence set up in the suit was, if founded in fact, a good and valid one, and their neglect to prosecute it cannot be allowed to operate to the prejudice of Flanders; that the Circuit Court had no jurisdiction in the suit; that Seelye lost all recourse against Flanders, if any he ever had, by reason of his failure to plead to the jurisdiction of the Circuit Court in the suit, and because of his failure to prosecute said writ of error; and that Flanders is not responsible for the costs incurred by Seelye in the suit, or for his counsel fees therein. The answer concluded with these words: 'And for all such matters and things in plaintiff's petition contained as are not herein replied to, respondent for answer pleads the general issue, and prays to be hence dismissed with costs.' The suit was tried by a jury in the Circuit Court in April, 1873. On the 19th of March, 1874, the court set aside the verdict and granted a new trial. On the 27th of March, 1874, an exception was filed, alleging, as a peremptory exception to the petition and the action, that the allegations in the petition, if true, as pleaded, are insufficient in law to entitle the plaintiff to any recovery against the defendant, 'for the same do not disclose any cause of action in behalf of said plaintiff against said defendant.' The suit remained in this condition for nearly five years, when, in January, 1879, the defendant pleaded all applicable prescriptions as a peremptory exception. Then the parties filed a written stipulation agreeing to waive the intervention of a jury, and submitting the cause to the court 'upon the issues of fact as well as of law. The findings and the judgment of the Circuit Court are embraced in one paper. It states that the court, 'having heard the evidence and the arguments of counsel, overrules all the exceptions taken by defendant to the plaintiff's petition.' It then specially finds the facts, and awards judgment to the plaintiff for $6,233.61, with interest and costs. It also grants a certificate of probable cause for the seizure of the cotton, and for all the doings of Flanders in the premises, as deputy general agent of the Treasury Department of the United States, and directs that no execution shall issue on the judgment. There is no bill of exceptions in the record. As the findings are special, the review by this court may extend to the determination of the sufficiency of the facts found to support the judgment.

The following facts were found by the Circuit Court, only those being stated here which are material in the view we take of the case, although some others were found: The 178 bales of cotton while in the possession of Harrison were, under color of the abovec ited act, seized by an assistant special agent of the Treasury Department of the United States. They were shipped from Shreveport, consigned to one Burbridge, supervising special agent of the Treasury Department at New Orleans, subject to charges and freight amounting to $5,907.45. Seelye's firm received the cotton from a steamboat and gave a receipt for it, which stated that they held it subject to the order of the collector of the port of New Orleans. The firm paid the amount of freight and charges to the steamboat, on an order signed by Flanders, as deputy general agent, reading thus: 'Seelye & Atwood's press will pay the within charges and hold the amount against the cotton.' This was in March, 1866. On the 18th of April, 1866, Flanders, as such deputy general agent of the Treasury Department, issued an order to Burbridge, as such supervising special agent, directing him to release the cotton to Harrison, on his giving a bond in $25,000, to save harmless the government of the United States for seizure, detention, or damage. On the same day Harrison executed his bond in that amount, in which he bound himself to save harmless the seizing agent, and all other agents and officers of the Treasury Department, and also the government of the United States, on account of the seizure and detention of the cotton and on account of any damages they might sustain by reason of said seizure. On the next day Burbridge issued an order, directing Seelye & Atwood to deliver the cotton to Harrison, on his paying all proper and legitimate charges, including the charges for transportation to Shreveport. The firm delivered the cotton to Harrison on the 23d of April, and he then paid them the $5,907.45, claimed as charges on the cotton, and they gave him a receipt for it, which stated that he reserved 'all rights or claims not relinquished under order of the treasury agent who released said cotton to him.' Shortly afterwards Harrison sued the firm in a court of the State to recover back the amount so paid by him. The firm removed the suit into the Circuit Court of the United States, and filed their answer, averring that they received the cotton by order of Flanders, special agent of the Treasury Department, and by the order paid the charges on the same, which were reimbursed to them by Harrison on the delivery of the cotton, and that the same were lawful charges on the cotton, acquiesced in and paid by Harrison on the delivery of the cotton, and further pleading a general denial. In February, 1868, a final judgment was rendered in favor of Harrison against the firm for $4,661.45, from which the firm sued out a writ of error to this court, which was, in December, 1870, dismissed, with costs, for want of prosecution. In July, 1871, Seelye paid, out of his individual means, to Harrison, $5,891.44, in full satisfaction of said judgment and costs. In defending the suit Seelye paid, from his individual means, $92 costs and $250 counsel fees.

As grounds for reversing the judgment below, the counsel for the plaintiff in error contends, in his brief, that there is nothing to show that Harrison could have regained the cotton except upon the very conditions which he accepted, namely, that he would receive it at New Orleans and defray all charges connected with its having been carried thither; that except the redelivery of the cotton, the record shows nothing to defeat the presumption, arising from the time and place of the seizure, that the cotton was properly captured and might have been held; that the judgment obtained by Harrison was res inter alios, as against Flanders; that Seely cannot recover in this suit without showing that he could not have successfully resisted the suit by Harrison; that the agreement of Harrison to hold the United States harmless on account of the seizure required him to repay to the United States any money which they had already paid upon that account, as well as any which they might thereafter pay because of obligations then existing; that the question in its present form is not affected y the fact that Harrison paid Seelye without waiting for the United States to pay Seelye and then demand repayment from Harrison; that, in point of right, Harrison, by paying Seelye, paid his own debt; that his accepting from Burbridge an order for the cotton, on paying all proper and legitimate charges, including the charges for transportation to Shreveport, is a contemporaneous interpretation of what was meant by saving the United States and their agents harmless; that, originally, Seelye & Atwood might have recovered from the United States, or, perhaps, from Flanders, for the freight and charges paid on the order of Flanders, but the acceptance of payment from Harrison, who acted in the matter substantially as an agent of the United States, ended the original obligation; and that no subsequent transaction between Harrison and Seelye, whether voluntary or involuntary on the part of Seelye, could revive such obligation, or impose any new duty in the premises on either the United States or Flanders.

It is manifest that the judgment rendered against Flanders in the present suit is founded on the fact that Harrison recovered his judgment against the firm, and that Seelye paid to Harrison the amount of that judgment, and also paid the expenses of defending the suit in which the judgment was recovered. The petition shows this, and so do the findings and judgment. The amount claimed by Seelye in the petition and the amount recovered by him is the exact amount of the Harrison judgment recovered July 13, 1871, and of the costs and counsel fees paid by Seelye. Prior to the bringing of the suit by Harrison, the firm had been fully reimbursed by Harrison, for the charges which they had paid and incurred on the order of Flanders. Although that judgment, and the payment by Seelye of its amount and of the expenses attendant on the defence of the suit, are the sole ground of the claim made in the present suit and the sole foundation of the judgment recovered in it, yet Flanders was neither a party nor a privy to the suit brought by Harrison, and it is not alleged in the petition nor found as a fact by the Circuit Court, that Flanders, or the government of the United States, or any officer or agent of the government, had any notice of the bringing or pendency of the suit brought by Harrison, or any opportunity to assume or control or take part in its defence. The recovery in the present suit is, by the operation of the certificate of probable cause granted by the Circuit Court, under sect. 989 of the Revised Statutes, made substantially a recovery against the government, to be paid out of the treasury. All relationship between Seelye and his firm on one side and the government and its agents and officers on the other side, ceased entirely when the firm was reimbursed by Harrison and the cotton was delivered to Harrison. The firm held the cotton, by authority of Flanders, as security for the charges which they paid by his order, and they held it as security also for their storage charges. They parted with the cotton because all their claims against it were reimbursed, and with the closing of that transaction their agency and that of Seelye as representing the government, or Flanders, in any capacity, in connection with the transaction, entirely ceased. Neither the firm nor Seelye had any such representative capacity in defending the suit brought by Harrison. There is not in the petition any allegation of any fact which tends to show that the government or Flanders is bound by the judgment in the suit brought by Harrison, nor is any such fact stated in the findings made by the Circuit Court. The petition merely alleges that all that Seelye did, and all that he was compelled to pay, was the direct result of the orders of Flanders, and that Flanders is bound to reimburse to him the amount so paid, either in direct obedience to his orders or as the necessary result of that obedience. The payment of the Harrison judgment was, however, in no proper sense the result of any obedience to any order of Flanders. Not ony is there not in the special findings any finding of any facts which tend to make the Harrison judgment of any binding or probative force as against Flanders, as a party or a privy to it, but the finding in regard to the Harrison bond is conclusive to show that no judgment in favor of Harrison against Seelye & Atwood can be used to aid in establishing the present claim against Flanders and the government, unless it appears affirmatively that they had notice of the Harrison suit and an opportunity to defend it. The answer of Flanders in the present suit alleges that the charges which he directed Seelye & Atwood to pay were legal charges on the cotton under the act of Congress referred to, and that they were refunded to them by Harrison, 'as an admitted claim.' It also alleges that Seelye & Atwood, in their answer in the Harrison suit, averred that the charges which they paid were lawful charges on the cotton, and were acquiesced in by Harrison and reimbursed to them. Proof of such admission of, and acquiescence in, the claim, by Harrison, was, therefore, admissible, and was made by proving that Harrison gave at the time the bond referred to. In view of the provisions of that bond it is difficult to see why, as against Flanders, Harrison is not propriety of the charges which he paid to Seelye & Atwood. His bond was given to save harmless the government and the agents of the Treasury Department, 'on account of the seizure and detention of said cotton, and on account of any damages they might sustain by reason of said seizure.' The charges reimbursed to Seelye & Atwood by Harrison grew directly out of the seizure and detention of the cotton, and any amount which might be paid on the recovery in the present suit would be covered by the terms of the bond. The bond covers not merely damages for taking and keeping the cotton, but the agreement is to hold the government and Flanders harmless on account of the seizure and detention. This covers the expenses attending the removal and keeping of the cotton. The act of 1863 expressly makes the expenses of transporting and disposing of captured property a charge upon its proceeds even where a claimant establishes a right to such proceeds. In any event, therefore, before the recovery by Harrison against Seelye & Atwood can be made the foundation of a cause of action or a recovery by Seelye against Flanders, it must appear that he had a fair opportunity to set up as against such recovery by Harrison the said matters of defence to his claim. Proving in the present suit the giving of the bond by Harrison was proving that Flanders had a good defence to the suit brought by Harrison against Seelye. Such proof, having been given, must be regarded as having been properly given, under the answer. It was proof of the admission by Harrison of the claim of Seelye & Atwood, as is alleged in the answer. It does not appear that Flanders had any notice of the Harrison suit, or any opportunity to make therein the defence referred to. It was necessary that it should so appear, the existence of such defence being established. It is not for Flanders to show that he had no notice, by proving a negative.

Our attention has been called to the provisions of articles 378, 379, 382, and 388 of the Code of Practice of Louisiana, as having a bearing on this case. They are as follows: 'Art. 378. The obligation which one contracts to defend another in some action which may be instituted against him is termed warranty. The one who has contracted this obligation is called the warrantor.' 'Art. 379. . . . Personal warranty is that which takes place in personal actions; it arises from the obligation which one has contracted to pay the whole or a part of a debt, due by another to a third person.' 'Art. 382. The defendant wishing to call one in warranty, may, in his answer, pray the court to decree against his warrantor the same judgment which may be rendered against him on the principal action; such prayer will be considered as a demand in warranty.' 'Art. 388. The defendant, though he has not called his warrantor to defend the suit brought against him, does not lose on that account his action in warranty, unless the warrantor prove that he had means for defending the action, which were not used owing to the defendant having failed to call him in warranty, or having neglected to apprise him of the suit having been brought.' In Sterling v. Fusilier (7 Mart. (La.)442), the Supreme Court of Louisiana, in reference to provisions of the Civil Code like those just cited, says that the neglect of a person sued in failing to call in his warrantor to defend the suit, has no other effect, in a suit afterwards brought by such person against his warrantor, than to cause the warranty to cease, on proof, in the latter suit, that the warrantor had sufficient grounds or means of defence to have obtained a judgment in his favor, of which he could not avail himself for want of having been called on; and that that species of defence must be pleaded and proved. Assuming that Flanders was still a warrantor to Seelye & Atwood when the suit by Harrison against that firm was brought, we are of opinion, for the reasons before stated, that it appears in this case that Flanders had a sufficient defence to have obtained a judgment in his favor if he had been called in warranty in the Harrison suit, or been notified of the bringing of that suit, and that he could not avail himself of that defence in the Harrison suit, for the reason that he was not called in warranty or notified of the bringing of that suit. That defence is not only proved in this suit, but is sufficiently pleaded, as is before shown. There is nothing in article 388 of the code which requires Flanders to prove anything more than he has proved in this suit. The existence of the defence being proved, the presumption is that it would have been proved and availed of, in the Harrison suit, by Flanders, if he had been called in warranty or been notified of the bringing of the suit, and it is then for the plaintiff in this suit to rebut such presumption, which has not been done.

Judgment reversed, and cause remanded with directions to award a new trial.

MR. JUSTICE FIELD, MR. JUSTICE BRADLEY, and MR. JUSTICE WOODS dissented.

title: Flanders v. Seelye/Opinion of the Court


text: Observations on Man (6th edition)/Part I/Chapter I/Section III


text: Talk:Flanders v. Seelye/Opinion of the Court


text:
County of Ralls v. Douglass

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

This suit was brought by Joseph M. Douglass against the County of Ralls, to recover the amount due upon certain interest coupons detached from bonds issued by the defendant in payment of its subscription to the capital stock of the St. Louis and Keokuk Railroad Company, which was incorporated by an act of the General Assembly of Missouri approved Feb. 16, 1857.

The section of the act under which the county claimed the right to subscribe is set forth in the opinion of this court in the following case, p. 733.

The bonds are sealed with the seal of the county court, tested by the clerk, and countersigned by the agent of the county. Those bearing date Feb. 10, 1870, recite that they are issued under the authority of said act, and in pursuance of an order of the county court of Feb. 8, 1870, to subscribe $200,000 to the capital stock of that company. Those bearing date June 13, 1871, differ in their recitals from the others, in stating that they are issued in pursuance of that order and of an order amendatory thereof dated June 13, 1871.

A demurrer was sustained to several of the defences set up in the answer. Upon the issues of fact the jury rendered a verdict for the plaintiff, and, judgment having been rendered thereon, the county brought this writ of error. The questions arising upon the demurrer and during the trial are stated in the opinion of the court.

Mr. Henry A. Cunningham for the plaintiff in error.

Mr. John H. Overall for the defendant in error.

MR. CHIEF JUSTICE WAITE delivered the opinion of the court.

title: County of Ralls v. Douglass


text: Talk:County of Ralls v. Douglass

title: Talk:County of Ralls v. Douglass


text:
County of Ralls v. Douglass/Opinion of the Court

If we understand correctly the questions presented in this case, they are—

1. Whether, if county bonds are issued in Missouri by a de facto county court, and are sealed with the seal of the court and signed by the de facto president, they can be impeached in the hands of an innocent holder by showing that the acting president was not de jure one of the justices of the court.

2. Whether it can be shown as a defence to bonds issued by counties in Missouri in payment of subscriptions to the capital stock of a company, and in the hands of innocent holders, that the company to whose stock the subscription was made was not organized within the time limited by its charter.

3. Whether bonds issued by counties in Missouri during the years 1870 and 1871, in payment of subscriptions to the stock of railroad companies, without a vote of the people, are invalid if the subscription was made under authority of charters granted in 1857, which did not require such a vote to be taken.

4. Whether county bonds and coupons issued in the years 1870 and 1871, in payment of subscriptions to railroad companies, were admissible in evidence on the trial of an action against the county for the recovery of the amount due thereon, if not stamped as obligations for the payment of money under the provisions of the internal revenue laws of the United States in force at the time of their issue.

5. Whether in this suit it was necessary to prove the order of the county court authorizing the president of the court to sign and the agent to countersign the bonds, there being no plea or answer sworn to denying the execution of the bonds or coupons sued on.

6. Whether testimony was admissible to prove that the plaintiff was a bona fide holder and owner of the coupons sued on, there being no averment in the petition to that effect.

There are other questions presented by the assignments of error, but they are not alluded to in the argument, and we do not deem them of sufficient importance to require attention.

1. As to the competency of the court.

In no State is it more authoritatively settled than in Missouri that 'the acts of an officer de facto (although his title may be bad) are valid, so far as they concern the public or the rights of third persons who have an interest in the things done.' In State v. Douglass (50 Mo. 593, 596), the Supreme Court of that State said: 'Without this rule the business of a community could not be transacted. The public are necessarily compelled to do business with an officer who is exercising the duties and privileges of an office under color of right, strangers should be void would stranges should be void would be productive of irreparable mischief. It would cause a suspension of business till every officer's right de jure was established.' To the same effect is Harbaugh v. Winsor, 38 id. 327. This is conclusive. The question here is not whether Dimmick was de jure probate judge of Ralls County, but whether he was acting under color of right as a justice and president of the county court. That is averred in the petition and not denied in the answer. His right to the office is one thing; his action while exercising the duties of the office, another.

2. As to the organization of the company.

Both this court and the Supreme Court of Missouri have held over and over again that such a defence as was here set up cannot be maintained. Hale Bank v. Merchants' Bank of Baltimore, 10 id. 123; Kayser v. Trustees of Bremen, 16 id. 88; Smith v. County of Clark, 54 id. 58; City of St. Louis v. Shields, 62 id. 247; County of Macon v. Shores, 97 U.S. 272.

3. As to the vote of the people.

The Supreme Court of Missouri has many times decided, and this court, following such decisions, has always held, that the provision in the State Constitution of 1865, art. 11, sect. 14, prohibiting a county from becoming a stockholder in or loaning its credit to a corporation without a vote of the people, was intended as a limitation on future legislation only, and did not operate to repeal enabling acts in existence when h e Constitution took effect. State v.Macon County Court, 41 Mo. 453; ''Kansas City, &c. Railroad Co. v. Alderman'', 47 id. 349; State v. County Court of Sullivan County, 51 id. 522, dicided in 1873, in which it was said, 'it has always been held that the provision of the Constitution, art. 11, sect. 14, was a limitation upon the future power of the legislature, and was not intended to retroact so as to have any controlling application to laws in existence when the Constitution was adopted;' State v. Greene County, 54 id. 540; County of Callaway v. Foster, 93 U.S. 567; County of Scotland v. Thomas, 94 id. 682; County of Henry v. Nicolay, 95 id. 619; County of Cass v. Gillett, 100 id. 585. When all these cases were decided the act of March 23, 1861, was in force, which provided that it should not be lawful for counties to subscribe to the stock of railroad companies until an election had been held under the provisions of that act, yet it seems never to have been specially referred to, either by counsel or the court, except once in Smith v. Clarke County (54 Mo. 58, 70), when Napton, J., said: 'So that the provisions of the revised code of 1855, and the amendatory acts of 1860 and 1861, and the constitutional prohibition, and the legislative adoption of that prohibition immediately after its passage, have been held by repeated adjudications, and without any conflicting opinions of the court, or any individual judge thereof, so far as their reports show, not to effect the repeal of the privileges contained in special charters.'

Such being the condition of the law on this subject down to April, 1878, we do not feel inclined to reconsider our former rulings, and follow the later decisions of the Supreme Court of the State in State v. Garroute (67 Mo. 445) and State v. Dallas County (72 id. 329), where this whole line of cases was substantially overruled. The bonds involved in this suit were all in the hands of innocent holders when the law of the State was so materially altered by its courts. In our opinion, the rights of the parties to this suit are to be determined by the 'law as it was judicially construed to be when the bonds in question were put on the market as commercial paper.' Douglass v. Pike County, 101 U.S. 687.

4. As to the stamps.

The act of July 13, 1866, c. 184 (14 Stat. 141), amending sect. 154 of June 30, 1864, c. 173 (13 id. 293), provided that all offcial instruments, documents, and papers issued by the officers of the United States government, or by the officers of any State, county, town, or other municipal corporation, should be exempt from taxation. This exempted the class of public securities to which these bonds and coupons belong. It is, indeed, said in a proviso that the intention was only to exempt State, county, town, or municipal corporations from taxation while in the exercise of the functions strictly belonging to them in their ordinary governmental and municipal capacity; but that does not, as we think, affect this case. These bonds were issued by this county in its municipal capacity, and for purposes which were declared by law to be municipal.

5. As to the proof of authority from the county court.

It is conceded that, under the practice in Missouri, unless the execution of the bonds was denied under oath, their execution was admitted. There was no such denial here. Hence it was only necessary to prove such facts connected with the execution as were directly put in issue by the pleadings. The only defence relied on under this branch of the case was the authority of the court to make the order it did. All else was, therefore, admitted. As the presiding judge was necessarily the president of the court, the bonds are not invalid because signed by the president as presiding judge.

6. As to proof of bona fide ownership.

Ownership was alleged in the petition. This ownership at the maturity of the coupons and for value was denied in the answer. This clearly made the evidence not only proper but necessary.

Since all the defence relied on involved questions of law only, except that as to bona fide ownership, and the court correctly decided the legal propositions in favor of the plaintiff, it was not error to instruct the jury to bring in a verdict for the plaintiff if they believed he was a bona fide holder and owner of the coupons sued for.

Judgment affirmed.

MR JUSTICE BLATCHFORD did not sit in this case, nor take any part in deciding it.


text: Talk:County of Ralls v. Douglass/Opinion of the Court


text:
Ralls County Court v. United States

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

The facts are stated in the opinion of the court.

Mr. Henry A. Cunningham for the plaintiff in error.

Mr. john H. Overall, contra.

MR. CHIEF JUSTICE WAITE delivered the opinion of the court.

title: Ralls County Court v. United States


text: Talk:Ralls County Court v. United States


text:
Ralls County Court v. United States/Opinion of the Court

Section 29 of the act to incorporate the St. Louis and Keokuk Railroad Company, approved Feb. 16, 1857, is as follows:-- 'It shall be lawful for the county court of any county in     which any part of the route of said railroad may be to      subscribe to the stock of said company; and it may invest its      funds in the stock of said company, and issue the bonds of      said county to raise funds to pay the stock thus subscribed,      and to take proper steps to protect the interest and credit      of the county. Such county court may appoint an agent to     represent the county, vote for it, and receive its      dividends.'

Under this authority the County Court of Ralls County subscribed $200,000 to the stock of the company, and, during the years 1870 and 1871, issued bonds of the county to pay the subscription. Default having been made in the payment of coupons for interest attached to some of these bonds, Douglass brought suit against the county, in the Circuit Court of the United States for the Eastern District of Missouri, for their recovery, and, on the 16th of October, 1878, obtained judgment for $17,158.43. That judgment was affirmed in County of Ralls v. Douglass, supra, p. 728.

After the judgment was rendered in the Circuit Court, the present suit was begun by the United States, on his relation. to require the county court, by mandamus, to pay the amount due out of moneys in the treasury of the county; or, if that could not be done, to raise the necessary means by the levy of a special tax. In the return to the alternative writ many defences were set up which related to the validity of the coupons on which the judgment had been obtained, as obligations of the county. As to all these defences, it is sufficient to say it was conclusively settled by the judgment which lies at the foundation of the present suit, that the coupons were binding obligations of the county, duly created under the authority of the charter of the railroad company, and, as such, entitled to payment out of any fund that could lawfully be raised for that purpose. It has been in effect so decided by the Supreme Court of Missouri in State v. Rainey (74 Mo. 229), and the principle on which the decision rests is elementary.

The present suit is in the nature of an execution, and its object is to enforce the payment, in some way provided by law, of the judgment which has been recovered. The only defences that can be considered are those which may be presented in the proper course of judicial procedure against the collection of valid coupons, executed under the authority of law and reduced to judgment. While the coupons are merged in the judgment, they carried with them into the judgment all the remedies which in law formed a part of their contract obligations, and these remedies may still be enforced in all appropriate ways, notwithstanding the change in the form of the debt.

This brings us to consider what may be done to enforce the judgment. The county court insists that its power of taxation is limited to the levy of an annual tax of one-half of one per cent on the taxable property in the county, and that as this tx has always been levied at the times provided by law, the duty of the court in the premises has been fully performed. The relator, on the contrary, claims that the limit of one-half of one per cent only applies to taxes to defray the general expenses of the county, and that if the fund produced in this way is not sufficient to enable the county to pay his judgment, an additional tax must be levied and collected specifically for that purpose. This presents the real controversy we have to settle.

When the charter of the St. Louis and Keokuk Railroad Company was granted, when the subscription was made to its stock by the county court, and when the bonds to pay the subscription were put out, there were were limitations on the powers of the county court for the levy of taxes to defray the expenses of the county which confined the tax for a year to one-half of one per cent or less. The question we have to consider is not whether this power has been reduced below that limit, but whether the limit is applicable to the obligation of the county created under the authority of the particular charter now in question.

It must be considered as settled in this court, that when authority is granted by the legislative branch of the government to a municipality, or a subdivision of a State, to contract an extraordinary debt by the issue of negotiable securities, the power to levy taxes sufficient to meet, at maturity, the obligation to be incurred, is conclusively implied, unless the law which confers the authority, or some general law in force at the time, clearly manifests a contrary legislative intention. The power to tax is necessarily an ingredient of such a power to contract, as, ordinarily, political bodies can only meet their pecuniary obligations through the instrumentality of taxation. This general doctrine has been so many times announced, that it cannot be necessary now to do more than refer to Loan Association v. Topeka (20 Wall. 655), where the opinion was given by Mr. Justice Miller, and United States v. New Orleans (98 U.S. 381), in which Mr. Justice Field, speaking for the entire court, went elaborately over the whole subject. In United States v. County of Macon (99 id. 582), there was a special limitation on the power to tax coupled with the authority to contract, and because the legislature saw fit to say how much of a tax in addition to that otherwise provided might be levied to meet the new and extraordinary obligation which was contemplated, it was held that a prohibition against anything more was necessarily to be inferred.

In the present case there is no such special limitation. The defence rests entirely on the power to tax to 'defray the expenses of the county,' which it has always been the policy of the State to restrict. The county court was, however, not only authorized to issue bonds, but to 'take proper steps to protect the interest and credit of the county.' It would seem as though nothing more was needed. As the commercial credit of the county, in respect to its negotiable bonds, could only be protected, under ordinary circumstances, by the prompt payment of both principal and interest, at maturity, and there is nothing to show that payment was to be made in any other way than through taxation, it necessarily follows that power to tax to meet the payment was one of the essential elements of the power to protect the credit. If what the law requires to be done can only be done through taxation, then taxation is authorized to the extent that may be needed, unless it is otherwise expressly declared. The power to tax in such cases is not an implied power, but a duty growing out of the power to contract. The one power is as much express as the other. Here it seems to have been understood by the legislature that the ordinary taxes might not be enough to enable the county to meet the extraordinary obligation that was to be incurred, and so, without placing any restriction on the amount to be raised, the county court was expressly empowered to do all that was necessary to protect the credit of the county. We cannot agree to the position taken by the counsel for the plaintiff in error, that this power was exhausted when the bonds were issued to pay the subscription. The faith of the county pledged by the subscription was kept when the bonds were put out, but only by transferring the credit to be protected from the subscription to the bonds. The subscription was paid by the bonds; but the obligation to pay the bonds, principal and interest, when they matured was legally substituted.

We have been referred to many instances in which statutes were passed authorizing special taxes to pay bonds which had long before been issued under original authority like that contained in the present charter; but this does not, in our opinion, change the case. Such legislation seems to have been procured out of abundant caution; but in none of the numerous cases in the Missouri reports, to which our attention has been directed, is it anywhere said that the requisite tax could not have been levied but for such legislation. In State v. Dallas County Court (72 Mo. 329), and some other cases before, it was held that such a provision as that contained in the charter of the St. Louis and Keokuk Railroad Company, now under consideration, was repealable; but none of the judges whose decisions have been published intimate even that if there had been no repeal there could not be a tax. It has been many times decided that county courts in Missouri, while acting as the governing bodies of their counties, which are nothing more than political subdivisions of the State, have no implied powers. Authority must be conferred on them by law to act, or they cannot act at all. This is not peculiar to the county officials of Missouri. The same principle applies to all municipal organizations in all the States, and in this respect it matters but little whether the organization exists as a full corporation or a quasi corporation. The point is that all such organizations for local government, by whatever name they may be called, have only such powers as the legislatures of their respective States see fit to delegate to them. But all powers that are delegated may be exercised in any proper way and at all proper times.

This makes it unnecessary to consider whether the power of taxation given by the general railroad laws in force when these bonds were made can be invoked in aid of the relator. It is enough that we find sufficient power in the charter of the company itself, without looking elsewhere. We ought, perhaps, to say, however, that the remark in the opinion in United States v. County of Macon (99 U.S. 582, 591), to the effect that the power to taxation granted by the general railroad laws was confined to subscriptions authorized by them, should be construed as made in a case where a special limitation on the power to tax was contained in the charter which authorized the issue of the bonds then in question, and that it was only necessary to decide that the railroad laws did not enlarge that power. The language there used may be broader than on further consideration we shall be willing to agree to. That case is authority on this point only to the extent it was necessary then to decide.

It follows from this that all laws of the State which have been passed since the bonds in question were issued, purporting to take away from the county courts the power to levy taxes necessary to meet the payments, are invalid, and that, under the well-settled rule of decision in this court, the Circuit Court had authority by mandamus to require the county court to do all the law, when the bonds were issued, required it to do to raise the means to pay the judgment, or something substantially equivalent. The fact that money has once been raised by taxation to meet the payment, which has been lost, is no defence to this suit. The claim of the bondholders continues until payment is actually made to them. If the funds are lost after collection, and before they are paid over, the loss falls on the county and not the creditors. The writ as issued was properly in the alternative to pay from the money already raised, or levy a tax to raise more. It will be time enough to consider whether the command of the writ that the court cause the tax to be collected is in excess of the requirements of the law, when the justices of the court are called on to show why they have not obeyed the order. The same may be said of the order to draw the warrant on the treasurer. As at present informed, we see no irregularity in anything that has been done.

The judgment of the Circuit Court will be affirmed, and the cause remanded, with leave to the court to make such changes in the order originally entered as may have become necessary by reason of the time that has elapsed since the writ of error was brought; and it is

So ordered.

MR. JUSTICE BLATCHFORD did not sit in this and the case mentioned in the following note.

NOTE.-Lincoln County Court v. United States, error to the same court, was argued at the same time any by the same counsel as the preceding case.

MR. CHIEF JUSTICE WAITE, on behalf of the court, remarked that the cases differed only in one particular. Here the bonds were not actually delivered until after the statute requiring registration went into effect, though they were in the hands of the agent for delivery before. It is contended that on this account no special tax can be levied for their payment, notwithstanding the judgment that has been recovered upon them. In our opinion this is a defence that cannot ba taken advantage of after judgment. As has been said in the Ralls County case, it was conclusively settled by the judgment, which this proceeding is to carry into execution, that the coupons sued on were binding obligations of the county, duly created under the authority of law, and as such are entitled to payment out of any fund that can lawfully be created for that purpose.

Judgment affirmed and the cause remanded, with the same order as in that case.


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


text:
Lewis v. Commissioners

ERROR to the Circuit Court of the United States for the District of Kansas.

This case depends upon the construction of an act of the legislature of Kansas, approved March 2, 1872. Laws of Kansas, 1872, p. 110.

The first section provides that the board of county commissioners of any county, the mayor and common council of any incorporated city, and the trustee, clerk, and treasurer of any municipal township in the State, may issue the bonds of such county, city, or township, in any sum necessary, not greater than ten per cent, inclusive of all other bonded indebtedness, of the taxable property of such county, city, or township, for the purpose of building bridges, free or otherwise, or to aid in the construction of railroads or water-power, by donation thereto, or the taking of stock therein, or for other works of internal improvement. It also declares that all counties may, in addition to the amount therein authorized, issue bonds not exceeding $100,000.

The second section provides that the bonds so issued shall be payable at such place in the city of New York as the officers issuing the same may direct, in not less than five nor more than thirty years from the date thereof, with interest not to exceed ten per cent per annum, 'all in the discretion of the officers issuing the same,' the interest to be payable semi-annually, and evidenced by coupons attached,-such bonds, if issued by a county, to be signed by the chairman of the board of county commissioners, and attested by the county clerk.

The third section declares that, before any bonds are issued, the same shall be ordered by a vote of the qualified electors of the municipality.

The eighth section provides, among other things, that if the proposition voted for be to aid in the construction of a railroad (either by donation thereto or the taking of stock therein), or other work of internal improvement, that the proper officers of the municipality shall ato nce subscribe upon the books of the railroad company, 'specifically setting forth the conditions upon which such subscription is made, the amount of such donation thereto, stock taken therein, or bonds voted therefor.'

The eleventh section, upon the construction of which the case turned in the court below, is in these words:-- 'That if the proposition for which bonds were voted be to aid in the construction of a railroad, or any bridge, or other work of internal improvement, either by donation thereto or the taking of stock therein, then, upon the subscription being made, as hereinbefore provided, the officers of such county, city, or township [shall thereupon issue the bonds of such county, city, or township] for the amount of such subscription, and shall forthwith deliver the same, together with the original or a copy of the subscription, setting forth its terms in full, to the treasurer of state, which said bonds shall be held by the said treasurer of state, in escrow, until the conditions in the terms of the said subscription to such railroad or other work of internal improvement shall be in all things fully complied with; that upon the conditions of said subscription being in all things fully complied with, then the treasurer of state shall deliver such bonds to the parties entitled thereto, who shall have the same registered as hereinafter provided: Provided, that such bonds shall not bear interest or be negotiable until after the delivery and registration thereof: And provided further, that in case of a failure to comply with the conditions in the terms of such subscription, then such bonds shall be by the treasurer of state cancelled, and redelivered to the county, city, or township issuing the bonds: And provided further, that this section shall not apply where the people may have named some party as trustee in their vote on the proposition, and the contractor may thereafter agree to the same.'

The twelfth section makes it the duty of the municipality issuing the bonds to register the same in a book kept for that purpose, showing the date, amount, maturity, and rate of interest, and, if to aid in the construction of a railroad or other work of internal improvement, of what railroad or other work of internal improvement, and whether the same be a donation or for stock therein; and at the same time transmit to the auditor of state a certified statement, attested by the clerk, under the corporate seal of the municipality, of the number, amount, character of the bonds, to whom, and for what purpose, issued.

The thirteenth section declares it to be the duty of the clerk of each county, city, or township in the State, within sixty days after the act took effect, and thereafter on the first day of January and July of each year, and at such other times as the auditor may request, to transmit to that officer a certified, full, and complete statement of the bonded indebtedness of every description of said municipality, particularly setting forth the nature of such bonds, and for what they were issued. From such statement the auditor is required to make a faithful record of the bonded indebtedness of the several counties, cities, and townships of the State, noting therein all bonds subsequently issued, paid, or cancelled, as the same may be reported to him.

The fourteenth section has an important bearing upon the case, and is in these words:--

'Within thirty days after the delivery of such bonds, the holder thereof shall present the same to the auditor of state for registration, and the auditor shall, upon being satisfied that such bonds have been issued according to the provisions of this act, and that the signatures thereto of the officers signing the same are genuine, register the same in his office, in a book to be kept for that purpose, in the same manner that such bonds are registered by the officers issuing the same, and shall, under his seal of office, certify upon such bonds the fact that they have been regularly and legally issued, that the signatures thereto are genuine, and thats uch bonds have been registered in his office according to law, for which registration and certificate the auditor shall be entitled to a fee of one dollar for each bond so registered, to be paid by the holder thereof.'

The remaining sections, among some things of an unimportant character, provide that the auditor shall annually ascertain the amount accrued and to accrue before the tax of the succeeding year shall be levied and collected (for the final redemption of the same), upon all bonds registered in his office, and certify the amount thereof to the clerk of the county in which the bonds are issued; that the clerk of the county shall thereupon proceed to ascertain the amount of tax necessary to pay the interest and create a sinking fund, in compliance with the auditor's certificate; that the county treasurer shall, at the time of his annual settlements with the State treasurer, pay over to the latter moneys collected under the act, take duplicate receipts therefor, one copy of which shall be filed with the aduitor of state; that the State treasurer, our of the moneys so received, shall pay off the interest accrued upon such registered bonds, taking up the interest coupons, which shall be cancelled and filed with the auditor of state; that the moneys thus collected and remaining in the hands of the State treasurer, after the payment of the interest accrued, except that accruing for the current year, shall be retained as a sinking fund for the final redemption of the bonds; that when any registered bonds mature, the same shall be paid by the State treasurer out of any money in his hands for that purpose, and, when paid, cancelled and filed with the auditor, who shall enter satisfaction in the record of registration; that the treasurer and auditor of state shall annually publish a detailed statement of the business transacted by them under the act during the preceding year; and that the State shall be deemed the custodian only of the taxes so collected, and credited to such municipality, in no manner liable on account of such bond; but the tax and funds so collected to be deemed pledged and appropriated to the payment of the interest and principal of the registered bonds until fully satisfied, the State treasurer to be liable on his official bond for the faithful disbursement of all moneys so collected or received by him.

The case was, by stipulation of the parties, submitted for trial to the court. There was a finding for the defendants. Judgment having been entered thereon, Lewis brought this writ of error.

Submitted on printed arguments by Mr. James Grant for the plaintiff in error, and by Mr. Edward Stillings, Mr. Thomas P. Fenlon, and Mr. A. M. F. Randolph for the defendants in error.

MR. JUSTICE HARLAN, after stating the facts, delivered the opinion of the court.

title: Lewis v. Commissioners


text: Talk:Lewis v. Commissioners

title: Talk:Lewis v. Commissioners


text:
Lewis v. Commissioners/Opinion of the Court

At an election held on the 27th of August, 1873, in the county of Barbour, State of Kansas, the qualified voters gave their sanction to a donation of $100,000 in bonds of the county, to aid in the construction of the Nebraska, Kansas, and Southwestern Railroad. By the terms of the proposition voted on, the bonds were to be placed in the hands of the State treasurer, who was to deliver to the railroad company one-half of them when the proposed road should be constructed to Medicine Lodge, and the remainder of them when it should be completed through the county. A few days after the election, they were signed, sealed, and attested by the proper officers of the county, in conformity with the order of the board of commissioners. They are dated Sept. 1, 1873, and payable to the railroad company, or bearer, with interest, semi-annually, at the rate of ten per cent per annum, payable at the National Park Bank in the city of New York. Each is signed by the chairman of the board of county commissioners, is attested by the county clerk, and purports, upon its face, to be 'one of a series of one hundred bonds of one thousand dollars each, all of like tenor and date,. . . issued for the purpose of aiding in the construction f the Nebraska, Kansas, and Southwestern Railroad, through said Barbour County, in the State of Kansas, under and in pursuance of an act of the legislature of the State of Kansas, entitled 'An Act to authorize counties, incorporated cities, and municipal townships to issue bonds for the purpose of building bridges, aiding in the construction of railroads, water-power, or other works of internal improvements, and providing for the registration of such bonds, the registration of other bonds, and the repealing of all laws in conflict therewith,' approved March 2, 1872.'

There is nothing upon the face of the bonds indicating that the donation was otherwise than absolute and unconditional.

They were left by the county officers with one Hutchinson, to be deposited with the treasurer of state, as required by the terms of the proposition upon which the people had voted. But they were never so deposited, and by Hutchinson were procured to be registered by the auditor of state, and then fraudulently put in circulation.

An indorsement was made upon each bond as follows:--

'STATE OF KANSAS, ss:

'I, D. W. Wilder, auditor of the State of Kansas, do hereby     certify that this bond has been regularly and legally issued;      that the signatures thereto are genuine, and that the same      has been duly registered in my office according to law.

'In witness whereof I have hereunto set my hand and affixed     my seal of office, at Topeka, this nineteenth day of      November, 1873.

'D. W. WILDER, Auditor.' Lewis purchased the bonds and coupons before the maturity of any of the coupons, and (according to our interpretation of the facts specifically found) without notice of any fraud in their execution or issue, unless, as claimed by the county commissioners, such notice was furnished by the terms of the act above mentioned. He brought the present action against the board of commissioners of the county, to recover the coupons due Sept. 1, 1875, March 1, 1876, and Sept. 1, 1876. The defence, which was sustained in the court below, is placed upon the ground that the bonds were issued in plain violation of that act, and that all persons, whether purchasers in good faith or not, were required to take notice of the fact that they were not binding obligations of the county.

We have carefully considered the reasons upon which the judge of the Circuit Court based the conclusion that the county was not liable upon the bonds even in the hands of a bona fide purchaser for value. His opinion seems to proceed upon these grounds: That under the act of 1872 it was a condition precedent that the bonds should not bear interest nor be negotiable until they should pass through the hands of the State treasurer, he alone being invested with authority to determine when they were to be delivered to the parties entitled thereto, for the purposes of registration; that the requirement of that condition was manifest from the statute, of the terms of which all were bound to take notice; that although the bonds, on their face, disclosed no conditions whatever for their delivery, the purchaser should have ascertained whether, prior to their registration, they had, in the first instance, been deposited with that officer as escrows, and that he could not take the certificate of the auditor as conclusive evidence that the statute had been pursued; that as the bonds were not placed in the hands of the treasurer, they never had the quality of negotiability, and could not, therefore, have been rightfully registered, nor their regularity and legality certified by the auditor under his seal of office; and since the conditions affixed by the popular vote had never been performed by the construction of the proposed road, the bonds were not the valid obligations of the county.

We are unable to concur in some of the views expressed by the learned judge, especially in his conclusion that the bonds are not enforceable against the county. The fundamental proposition upon which that conclusion seems to rest is, that bonds executed under the act of 1872 o uld not, consistently with its purpose and language, be registered and issued, even when the subscription was payable immediately and without conditions, unless, in the first instance, they be delivered to the treasurer of state, and be by him delivered to the party entitled thereto. This interpretation is not, we think, justified by any fair construction of the act. Under some circumstances, distinctly disclosed upon its face, it is not at all necessary that they be delivered to the treasurer in order that they may be registered and become the valid obligations of the municipality, in whose name they are issued. The last proviso of the eleventh section expressly declares that that section-the only one which refers to the custody of the bonds by the State treasurer-'shall not apply when the people have named some party as trustee in their vote upon the proposition, and the contractor [that is, as we suppose, the railroad company proposing to do the work of construction] may thereafter agree to the same.' If the people on one side, and the company on the other, agree upon a trustee to hold the bonds until certain contingencies happen, or certain terms or conditions are performed, the statute explicitly declares the eleventh section shall not apply. Again, suppose the people had voted-as, it would seem, that under sects. 1, 2, and 3, they might have done-for a donation, or a subscription of stock, to be paid in bonds deliverable at once, without any conditions or terms whatever. Could it be claimed that the bonds must, of necessity, have been delivered to the treasurer of state? If so, for what purpose could he have received them? What ends could have been subserved by his custody of them, when to their delivery no conditions were attached? When should he, in such case, have delivered them to the parties entitled thereto? If, in the case supposed, the company, under the agreement with the county, and under the vote of the people, became entitled, at once, to the bonds for the purpose of having them registered, and the required certificate of the auditor indorsed thereon, it cannot be that the legislature intended the parties to perform the idle ceremony of passing them through the hands of the treasurer, to be by him immediately surrendered to the proper parties. That officer, in the case put, has no duty to perform, such as the act imposes when conditions are attached to a subscription. For these reasons we are of opinion that the eleventh section, in so far as it requires a delivery of bonds to him, has no application except in cases where, to the subscription of stock, or to the donation, are annexed conditions to be complied with before that officer may rightfully surrender the bonds intrusted to him. The object of that section is to prescribe a mode in which the people of a county may, if they pursue the statute, be protected, in some degree, against a premature delivery of county bonds by local officers in advance of the performance of conditions imposed by the popular vote.

If we are correct in this view, it follows that the purchaser of those bonds was not informed, by the statute, that they belonged to that class which were imperatively required to be deposited, in the first instance, with the State treasurer, and by him held until the conditions upon which they were to be delivered were fully performed.

But it remains for us to consider the important practical question as to the rights of the parties, in view of the admitted fact, that the proposition approved by popular vote did, in terms, provide for the ultimate delivery of the bonds only upon certain conditions,-bonds, therefore, which ought to have been, but were not, delivered by the county officers to the State treasurer, to be held until the prescribed conditions were performed. The determination of this question, so far as it involves the good faith and diligence of the parties, is somewhat complicated by the absence of any finding as to whether the subscription was, in fact, made on the books of the company, 'specifically setting fot h the conditions' upon which it was made (sect. 9); or whether the original or a copy of the subscription was, in fact, delivered or even transmitted to the treasurer of state (sect. 11); or whether the officers of the county themselves made a record of the bonds in a book kept for that purpose (sect. 12); or whether they transmitted to the State auditor a certified statement, attested by the county clerk, 'of the number, amount, and character of the bonds so issued, to whom issued, and for what purpose' (sect. 12). We cannot, therefore, certainly know what facts would have been ascertained by the purchaser had he resorted to all those sources of information,-an investigation upon which, for reasons hereafter to be stated, he was not required to enter. We have in the special finding only the fact that the county, under the order of the board of commissioners, executed bonds payable to the railroad company or bearer, and purporting to have been issued under and in pusuance of the act of 1872; and that the bonds were left by the county officers with Hutchinson for delivery to the State treasurer, when the statute required the county authorities themselves to deliver the bonds to that officer.

Now, it is to be observed that the bonds do not, upon their face, indicate that they were deliverable upon the performance of certain conditions. They are made payable, unconditionally, to bearer, at a designated place and at a specified time. By the act of the county officers, intrusting the bonds to one upon whom no official responsibility rested, he was enabled to represent himself to the auditor as presumptively the owner, because the bearer, of the bonds. But these facts, it is insisted, are of no consequence in view of the statutory provision, declaring, in effect, that bonds, of the kind here in suit, 'shall not bear interest or be negotiable' until after their delivery by the State treasurer to the parties entitled thereto. Whatever force might be conceded to this argument, looking alone to the requirements of the eleventh section of the act, we are of opinion that more consequence is to be attached to the action of the auditor of state, under the fourteenth section, than seems to have been done by the court below. The presumption is that the legislature, while aiming to guard local communities against the fraudulent conduct of their officers, did not intend to withdraw all protection to the bona fide purchasers of municipal securities which those officers were authorized to execute, and which they might put into circulation, or negligently permit to get into circulation. Hence, as we think, the requirement as to the registration of bonds issued under the act, and the duty of the State auditor, upon registration, to attest their regularity and legality by a certificate, under his seal of office.

The State treasurer may improperly surrender bonds deposited with him for delivery only upon the performance of specified conditions. But such delivery would not render them binding upon the municipality, in whose name they are executed. The holder is under a necessity, by the statute, to do something more. He is required to present them for registration to another officer, the auditor of the State, in whose office (if the county authorities obey the statute) is kept a record of the number, amount, and character of the bonds, to whom issued, and for what purpose. And that officer is not under a duty to admit the bonds to registration, simply because asked to do so, and without making inquiry as to their regularity and legality. Unless satisfied that they are issued in accordance with the provisions of the act, he is bound to deny the application for registration. But, if satisfied that the provisions of the State have been pursued, he is required to register the bonds, and certify, upon each one, under his seal of office, that it has been regularly and legally issued. To him, therefore, is committed, by the State, the important function of finally determining whether the law has been, in all respects, obeyed, ad, consequently, whether the bonds have been regularly and legally issued. His determination, necessarily, involves an investigation as to every fact essential to their validity. Purchasers in good faith, although required to know what the statute contains, are not bound, under such circumstances as are here disclosed, to go behind the auditor's certificate, and find out whether he has ascertained all the facts, or whether he has correctly and honestly passed upon the questions arising upon an application for registration. The investigation which the statute authorized him to make involved the inquiry whether the bonds were of the class which should have passed through the hands of the treasurer, and, also, whether the conditions, upon which they were deliverable, had been performed. Purchasers have the right to assume-having no notice to the contrary-that he has, in these respects, discharged his duty. The registration acts, is some of the States, while imposing like duties upon State auditors, and requiring them (when the facts justified them in so doing) to certify, upon municipal bonds, that they have been issued in compliance with law, expressly declare such certificates to be prima facie evidence only of the facts stated, and shall not prevent proof to the contrary in any suit involving the validity of the bonds, or the power and authority of the municipality, in whose name they are executed, to issue them. Anthony v. County of Jasper, 101 U.S. 693. But the statute in question contains no such provision. The legislature of Kansas confers upon the auditor of state full authority to ascertain and determine whether bonds presented for registration have been issued in accordance with the statute, and, if satisfied such is the fact, it is made his duty to certify upon the bonds that they have been regularly and legally issued. Had it appeared upon the face of bonds that they were deliverable upon certain terms, and, therefore, belonged to the class which should pass through the hands of the State treasurer, and if the purchaser, in such a case, be held to have taken the bonds subject to the statutory requirement that they were not negotiable unless they had been, in the first instance, actually delivered by or in behalf of the county officers to the State treasurer, and by the latter surrendered to the proper parties, it is clear no such condition can be attached to the purchase by appellant. For the bonds here in suit do not disclose the conditional nature of the subscription, nor that they belonged to the class which, as a condition precedent to their negotiability, must have been delivered to the State treasurer. That these facts are not disclosed upon the face of the bonds is the fault of the county, and it is estopped, as against a bona fide purchaser, to deny that they are of the class which might have been delivered, at once, and without going through the hands of the State treasurer, to the auditor of state, and been registered and certified as regularly and legally issued. In such a case, at least, the action and certificate of the auditor of state must be deemed conclusive evidence, as between the county and a bona fide purchaser, that the bonds were regularly and legally issued, and, therefore, negotiable, in the fullest sense of that word. If such be not the construction of the registration act, it is difficult to perceive of what practical value is the auditor's certificate, or what the legislature intended by the requirement that he should, after examination into the facts, attest the regularity and legality of the bonds. If the determination of that officer, in this case, operates hardly upon the people of the county, the result must be attributed to the legislation in question as well as to the negligence of the State and county officers. What we have said is in harmony with the settled doctrines of this court upon the subject of negotiable securities issued by municipal corporations, as announced in numerous cases with which the profession is familiar, and h ich need not be here cited.

There are other questions in the case. But they are of minor importance, and it seems to be unnecessary to consider them.

Judgment reversed, and cause remanded with directions to enter a judgment in favor of the plaintiff below.


text: Talk:Lewis v. Commissioners/Opinion of the Court


text:
Carite v. Trotot

APPEAL from the Circuit Court of the United States for the District of Louisiana.

The facts are stated in the opinion of the court.

Mr. Thomas J. Semmes for the appellants.

Mr. Joseph P. Hornor and Mr. William S. Benedict for the appellee.

MR. JUSTICE MATTHEWS delivered the opinion of the court.

title: Carite v. Trotot


text: Talk:Carite v. Trotot

title: Talk:Carite v. Trotot