text:
Angle v. North-Western Mutual Life Insurance Company/Opinion of the Court

Persons dealing with an agent are entitled to the same protection as if dealing with the principal, to the extent that the agent acts within the scope of his authority.

Pursuant to that rule, it is settled law, that where a party to a negotiable instrument intrusts it to another for use as such, with blanks not filled up, such instrument so delivered carries on its face an implied authority to complete the same by filling up the blanks; but the authority implied from the existence of the blanks would not authorize the person intrusted with the instrument to vary or alter the material terms of the instrument by erasing what is written or printed as part of the same, nor to pervert the scope and meaning of the same by filling the blanks with stipulations repugnant to what was plainly and clearly expressed in the instrument before it was so delivered.

By virtue of the implied authority, such a depositary may perfect, in his discretion, what is incomplete, by filling the blanks; but he may not make a new instrument by erasing what is written or printed, nor by filling the blanks with stipulations repugnant to the plainly expressed intention of the same as shown by its written or printed terms. Goodman v. Simonds, 20 How. 361; Bank v. Neal, 22 id. 108.

Much reference to the pleadings will be unnecessary, as the questions presented for decision arise chiefly out of the facts deducible from the proofs exhibited in the record. Suffice it to say, in that regard, that the suit was instituted by the complainant to procure a decree that the bond and mortgage and the two fire-insurance policies described in the bill of complaint were delivered and assigned to the respondents without consideration, and to obtain a decree setting aside said bond and mortgage, and for a return of said policies, the same having been delivered to the respondents as additional security for a loan of ten thousand dollars, the proceeds of which never came to the hands of the complainant; and he charges that the proceeds of the loan were never forwarded to him by his authority; that if the insurance company ever paid the same in current funds to the person through whom the loan was negotiated upon any order signed by him, as pretended by the respondents, the order was forged by the party who presented it, or by some person interested, to cheat and defraud the complainant out of the money.

Service was made, and the corporation respondents appeared and filed an answer, in which they allege that the bond, mortgage, and fire policies were duly delivered to the company by the agent of the complainant; and they deny that the order for the payment of the proceeds of the loan was forged, and aver that they made the payment to the person who presented it, in good faith. Proofs were taken; and the court, having heard the parties, entered a decree dismissing the bill of complaint, and the complainant appealed to this court.

Sufficient appears to show that the respondents are a corporation created by the laws of Wisconsin, and that they were doing a life-insurance business throughout the North-western States; and it also appeared that they were accustomed to loan money on real-estate securities. Agents were appointed by the respondents, in the different States, whose duty it was to solicit applications for policies, and to transact other matters connected with their insurance business.

State agents were appointed by the company; but it is conceded that they in turn appointed sub-agents to perform the same duties, and it appears that the commissions for all such services were paid by the company to the State agents.

Applications for loans of money were frequently made to the company through the State agents; and it appears that such agents of the company were furnished with blank forms for such applications, and for the appraisement of real estate intended as security for such loans. When an application for a loan was made, the blank forms were filled up by the agent. It was the business of the borrower to furnish abstracts of the title of the real estate offered as security, all of which were transmitted by the agent to the home office for examination; and, if they were approved, the course of business was that the bond and mortgage were prepared and forwarded to the agent, to be delivered to the applicant for execution and return.

Of course, the applicant might still refuse to execute the bond and mortgage; but if he was satisfied with the terms of the instruments, and completed the same, they were given back to the agent, and were by him returned to the company. It seems that the money loaned was usually transmitted to the applicant by means of a draft payable to the order of the borrower; or, in certain cases, the money was paid by the company at the home office, pursuant to the written order of the borrower, evidenced by a receipt on the back of the order by the person in whose favor it was drawn. Such papers from the home office to the borrower and from the borrower to the company, it is conceded, are usually mailed to the State agent, and that they pass through his office; but it is insisted by the respondents that he has no interest in the business, and that he receives no compensation from the company for his services.

Sub-agents, it is conceded, were employed by the agents appointed by the company; and it appears that I. T. Martin, during the winter and spring of 1871, was a regular agent of the company, appointed for the State of Iowa; that he employed one C. W. Copeland, as sub-agent, to solicit applications for life insurance; that Copeland claimed to be the agent of the company to effect loans in their behalf on security of real estate; and that he represented to the complainant that he, the sub-agent, could procure for the complainant a loan from the company of $10,000 on such security.

Both the complainant and Copeland then resided at Cedar Rapids, and it was at that place and about that time that the former was introduced to the latter; and it appears that Copeland was at that time canvassing for the company, to procure customers to take policies in the company, and to induce persons to take loans from the company on security of real estate. About the same time, Copeland published a card in one or more of the local newspapers, representing that he was the agent of the company; and it appears that he exhibited to the complainant pamphlets, circulars, and other documents, of the kind prepared and distributed by the State agents, as the means of extending the business of the company, and that notice was published by the same party in one or more of the local journals, in which he is described as the agent of the insurance company.

Evidence entirely satisfactory was introduced, showing that it was during that period that the complainant commenced negotiations with Copeland to obtain for him a loan from the company for the sum of $10,000, to be secured by bond, and mortgage of real estate. Conversation ensued between them; and the evidence shows that Copeland told the complainant that he was going to quit preaching, and that he had made arrangements to act as attorney for the said insurance company; that he had already secured a loan for one person; and that, being an intimate friend of the general agent, he could get the money whenever he recommended a loan.

Blank forms were requisite; and it appears that Copeland furnished the complainant with a printed blank form of an application for a loan, and that he requested the complainant merely to insert the description of the property to be offered as security and his valuation of the same, stating that he, the agent, would fill the other blanks, and send the application forward. Accordingly, the complainant inserted the description of the property, giving his valuation of the same in figures, and also gave the name of his wife and the date of the instrument, and his own name, and place of residence. Incomplete though the instrument was, yet the witness states that he delivered it to Copeland, and that he, the witness, never saw it afterwards until he gave his deposition in the case, and that the indorsements on the back of the instrument were not there when it left his possession.

Due notice was received by the complainant, from the president of the company, that his application for the loan was accepted; and he was also informed, in the same communication, that abstracts of the title of the property and certain certificates were required to show that the property was free of incumbrances and liens, and that when the same were received, if found to be correct, their attorney would prepare the bond and mortgage, and forward the same to him for execution.

Such abstracts and certificates were procured by the complainant, at the instance of Copeland, and they were delivered by the complainant to him at his request; and it appears that Copeland presented to the complainant the bond and mortgage, ready for his signature, he having procured the signature of the complainant's wife to the mortgage before the instruments were exhibited to the complainant for execution. They were signed by the complainant at his house, no one being present except his wife and Copeland; and the complainant testifies that he then and there delivered the same to Copeland, together with two fire policies of insurance, in order that the fire policies might be indorsed by the agent of the companies issuing the same, in a way to make the loss, if any, payable to the corporation respondents. Decisive proof that Copeland received the bond and mortgage for record and transmission is also exhibited by the receipt which he gave in behalf of the company, and which he signed as agent.

Throughout the whole transaction, the negotiations with the complainant were conducted by Copeland; and the evidence shows beyond doubt that all the instruments and documents which were delivered by the complainant to Copeland were by him delivered or transmitted to the State agent of the company, and that they were all forwarded by the latter to the company at their home office, where the officers of the company transact all their business.

Such applications for loans are usually made direct to the executive committee, and are required to be signed by the party desiring the loan; and, when the loan papers have been perfected, the company pay to the owner directly, either in checks or drafts to his order, unless the borrower, by written request or order, may have otherwise directed: but the president, in his testimony, admits that the State agent sometimes forwards applications to the executive committee for parties residing in the State, and that the home office does advise such parties, through him, of the action of the company in respect to such applications. Cases of the kind, therefore, it may be assumed, had occurred before, where the business was transacted through the State agent; but, if not, still it is proved beyond all doubt that all the negotiations with the complainant were conducted by the sub-agent, and that all the propositions to and from the company, in respect to the loan in question, were transmitted to the company through the same State agent.

Satisfactory abstracts and certificates having been forwarded, and the due execution and delivery of the bond and mortgage having been procured, nothing remained to be done to enable Copeland to carry his fraudulent scheme into effect, except to get an order for the money in such a form that he could convert the fund to his own use, without danger of immediate exposure and detection. Antecedent conversations between the parties made it known to him that the complainant expected to receive the proceeds in drafts payable to his own order; it appearing that the complainant had told him that he wanted the amount in two drafts, one for $6,000 and the other for $4,000, each payable to his own order. Apprised of what the complainant desired, he doubtless thought it prudent to seem to conform to his expressed wish. Circumstances occasioned some delay: but Copeland finally informed the complainant that the papers had gone forward, and stated that notice that the papers were satisfactory might come any day, and suggested that the complainant might as well sign the blank order for the money, adding that he 'would fill it out;' and the witness testifies that he looked at the blank, and, seeing that it contained the words 'in drafts to the order of,' put his signature to it, placed it in the drawer of Copeland, and went home.

Taken as a whole, the evidence satisfies the court, beyond all doubt, that the blank form which the complainant signed was without date, except the year, which was in printed figures; that it contained no direction except the printed word 'to,' followed by a blank; that it did not contain the name of any payee, nor any thing upon the subject, except the printed words 'pay to,' followed by a blank; that it did not specify any amount, nor contain any thing upon the subject, except the printed word 'dollars,' preceded by a blank; that it did not specify for what the payment was to be made, nor did it contain any thing upon the subject, except the printed words 'on account of,' followed by a blank; and that it contained nothing in respect to the medium of payment, except the printed words 'in drafts to the order of,' the word 'of' immediately preceding the name of the plaintiff, H. G. Angle, and so close to the first initial of the signature as to leave no blank between the erased sentence and the name of the complainant.

Subsequent to the time when the blank form was signed by the complainant, and was left in the drawer of Copeland, the printed words 'drafts to the order of,' just preceding the signature of the complainant, were erased, evidently with pen and ink, and the words 'current funds' were inserted in writing between the printed word 'in' and the word 'drafts,' which is the first word of the sentence 'drafts to the order of,' the effect of which was to authorize the company to pay the proceeds of the loan 'in current funds,' instead of 'drafts to the order of' the signer of the blank form.

Armed with that instrument, the blanks having been filled, and the words 'current funds' having been inserted, in lieu of the words 'drafts to the order of,' which were erased, Copeland went to the home office and obtained the whole proceeds of the loan, and absconded with the whole amount.

Full power to receive the proceeds of the loan would have been conferred upon the person who presented it, even if the holder of the blank form had done nothing more than to fill the blanks contained in the incomplete instrument; but it is quite obvious, that, if he had merely filled the blanks of the instrument, the company would have been obliged to make the payment 'in drafts to the order of' the complainant, which, it is easy to see, would have defeated the fraudulent intent of the party who presented it for payment, as the drafts, if payable to the order of the complainant, could not be by that party converted into current funds. Had he merely filled the blanks, the body of the completed instrument would have read as follows; to wit: 'Pay to [the person named] ten thousand dollars, on account of bond and mortgage, in drafts to the order of H. G. Angle.' Evidently such an instrument would not have answered the purpose of the holder of the blank form, if he intended to betray his trust, and to convert the proceeds of the loan to his own use, without the consent of the lawful owner of the fund.

Blanks necessary to complete the instrument and render it operative, it may be admitted, might be filled by the holder of the instrument; but it is clear that it was not possible, within the meaning of that rule, to give the instrument such a form as would make it answer the supposed fraudulent intent, without doing violence to the scope and design of the blank form, as evidenced by the printed terms it contained, which, as outlines, plainly indicate that the signer required that the payment of the proceeds of the loan should be made in drafts to his own order. Manifest as that indication was, and as it would be, even to the casual reader, it became necessary, in order to make the completed instrument answer the fraudulent intent of the holder, to change the scope and design of the same, which he effectually accomplished by erasing the printed words 'drafts to the order of,' which immediately preceded the name of the signer, as before explained, and by inserting the words 'current funds' between the erased word 'drafts' and the word 'in,' between which and the erased word 'drafts' there was a short blank, scarcely sufficient to admit the written words 'current funds,' as will be seen by reference to the instrument actually presented to the company, which was sent up with the transcript as an original paper.

Compare the altered instrument with what it would have been if nothing had been done to it except to fill the blanks, and the criminal character of the act is manifest. By the erasure and insertion of the words 'current funds,' it was made to read as follows: 'Pay to [the person named] ten thousand dollars, on account of bond and mortgage, in current funds.'

Such an alteration, it is insisted by the complainant, is not and cannot be justified by any implication which arises from the existence of blanks in the instrument, inasmuch as the alteration consists both of the erasure of material words and the insertion of other material words in lieu of those erased, which change the scope and legal effect of the instrument from what it would have been if the blanks had been filled without any such erasure and insertion.

Complainant concedes that blanks in such an instrument may be filled by the person to whom it is intrusted for use; but he contends that the said alterations made in the instrument in this case were a forgery, which renders the completed instrument void; and the court here concurs in that proposition.

Negotiable instruments are frequently delivered for use, with blanks not filled; and, in respect to such instruments, it is held that where a party to such an instrument intrusts it to the custody of another for use, with blanks not filled up, whether it be to accommodate the person to whom it was intrusted or to be used for the benefit of the signer of the same, such negotiable instrument carries on its face an implied authority to fill up the blanks necessary to perfect the same; and the rule is, that, as between such party and innocent third parties, the person to whom the instrument was so intrusted must be deemed the agent of the party who committed the instrument to his custody, in filling the blanks necessary to perfect the instrument. Violet v. Patton, 5 Cranch, 142; Russell v. Langstaffe, 2 Doug. 514; Collis v. Emmet, 1 H. Black. 313; Montague v. Perkins, 22 Eng. L. & Eq. 516.

Questions of the kind most frequently arise in respect to negotiable instruments; but the court here is of the opinion that the same rule is properly applicable to the case before the court. Authority to act for another may be express, or it may, in certain cases, be implied; but an implied authority has its limitations as well as that which is express. Examples to prove that proposition exist everywhere; but it would be difficult to give one more apposite and striking than the one presented by the case in decision, where the authority to fill blanks is implied from their existence in an instrument intrusted to another for use. 1 Greenl. Ev. (12th ed.), sect. 567.

Beyond all doubt, such a party may fill every blank which it is necessary should be filled to perfect the instrument and render it operative, within its scope and design, if the terms or words of the instrument sufficiently indicate what that scope and design are. Cases arise, it must be conceded, where a party signs his name to a blank paper, and intrusts the paper containing his signature to another for use; but it is sufficient to say upon the subject, that the case before the court is not of that character. Instead of that, the blank form signed by the complainant contained terms clearly indicating that the money was to be paid on account of 'the bond and mortgage,' and that the signer of the blank form required the payment to be made 'in drafts to the order of' the signer of the same; and it was no more competent for the person to whom it was intrusted, in that state of the case, to erase the words 'drafts to the order of,' and to insert in the short blank preceding that sentence the words 'current funds,' than it would have been for that person to have prepared and executed a new instrument in the name of the signer, requesting the company to pay the proceeds to the order of the holder of the blank form.

Argument is scarcely necessary to support that proposition, as it is self-evident that the erasure of the words 'drafts to the order of' changed the manifest scope and design of the incomplete instrument; and it is equally clear that the words 'current funds,' which were inserted, are utterly repugnant to the printed terms 'drafts to the order of,' which were erased by black lines. Bank v. Douglas, 31 Conn. 180.

Properly applied, that case is decisive of the present case. It appears that the defendant in that case put his name upon an inchoate bill of exchange, drawn and signed by the maker, on a certain firm, blanks being left for the date, amount, time of payment, and the name of the payee; and that the defendant deivered the paper, thus indorsed, to the maker of the same, who struck out the name of the place where it was made, and the name of the firm on which it was drawn, and filled out the instrument, so as to make it a promissory note for $3,500, payable to the order of another party. Upon these facts the court held that an inference arose,-which, in favor of a bona fide holder of the paper, was irresistible,-that the person to whom the paper was intrusted was authorized, by filling the existing blanks, to complete the instrument and to fill the blanks so as to bind the defendant as indorser of a bill of exchange, drawn by him on the firm therein named, for any sum, payable at any time and place. But, say the court, no inference, or presumption of authority, can arise that he might turn the bill drawn on one firm into a bill drawn on another, or to turn it into a promissory note. Neither dictum nor decision, say the court, has been cited to warrant such a claim; and they add, that they suppose that none such can be found. Suit in that case was brought by the bank, claiming to be an innocent holder; but the court held, that, notwithstanding the erasures, unmistakable evidence of the original character of the instrument remained, and that the evidence was amply sufficient to excite distrust, and make it the duty of any one to whom the paper was offered to inquire when and by what authority such erasures and alterations had been made. Gardner v. Walsh, 32 Eng. L. & Eq. 162.

Where blanks exist in negotiable securities, delivered to another for use, the custody of the paper, under such circumstances, gives the custodian the right to fill the blanks; but it does not confer authority to make any addition to the terms of the note; and if any such of a material character are made by such a party, without the consent of the party from whom the paper was received, it will avoid the note, even in the hands of an innocent holder. Ivory v. Michael, 33 Mo. 400.

Proof was given in that case that the parties had for many years been in the habit of indorsing for each other; that the defendant indorsed the note, which was in blank, as to the time of payment, and was payable without defalcation or discount. Before using it, the other party filled the blank with thirty days, and added, after the word 'discount,' 'bearing ten per cent after maturity.' Attempt was made in argument to sustain the right to make the addition to the note, because it was delivered before the blank was filled; but the court held that the insertion of the words, 'bearing ten per cent after maturity,' was not the filling of a blank, and that it rendered the note invalid. Wood v. Steele, 6 Wall. 80.

Persons intrusted with negotiable securities for use by the parties to it may, if it contains blanks, fill the same: but Mr. Parsons, though he admits that rule to its fullest extent, adds, that, if one materially changes words which are printed or written, the note by such change would be rendered invalid; and certainly it must be so if the change substantially varies the scope of the instrument, to the prejudice of the party from whom it was obtained. 2 Pars. on Bills & Notes, 566.

Suppose that is so: still it is insisted by the respondents that the rule is not applicable in this case, because they had not notice of the defect in the blank order. But the court here is entirely of a different opinion. Even the holders of negotiable securities, taken in the usual course of business, before the securities fall due, are held chargeable with notice, where the marks on the instrument are of a character to apprise one to whom the same is offered of the alleged defect. Goodman v. Simonds, 20 How. 365.

When it is proposed to impeach the title of a holder, for value, by proof of any facts and circumstances outside of the written instrument itself, it is a very different matter. He is then to be affected, if at all, by what has occurred between other parties; and he may well claim an exemption from any consequences flowing from their acts, unless it be first shown that he had knowledge of such facts and circumstances at the time the transfer was made. These principles are of universal application; but where a person takes a negotiable security, which, upon the face of it, is dishonored, he cannot, says Taney, C. J., be allowed to claim the privileges which belong to a bona fide holder. Andrews v. Pond, 13 Pet. 65.

If he chooses to receive it under such circumstances, he takes it with all the infirmities belonging to it, and is in no better condition than the person from whom he received it. The same doctrine was enforced and applied in a subsequent case, where, in speaking of a promissory note, so marked as to show for whose benefit it was to be discounted, the court held that all those dealing in paper 'with such marks on its face must be presumed to have knowledge of what it imported.' Fowler v. Brently, 14 Pet. 318; Brown v. Davis, 3 Term, 80.

Actual notice in such a case is not required, even in suits founded upon negotiable securities, where the evidence of its infirmity consists of matters apparent on its face; nor is any different or stricter rule applicable in cases like the present, it appearing that the printed words, though erased so as to be inoperative, were still entirely legible, even to the casual reader; and that the words 'current funds,' inserted before the erased word 'drafts,' were plainly repugnant to the erased words, 'drafts to the order of,' which followed them in the same connection.

Constructive notice in such cases is held sufficient, upon the ground, that, when a party is about to perform an act which he has reason to believe may affect the rights of third persons, an inquiry as to the facts is a moral duty, and diligence an act of justice. Whatever fairly puts a party upon inquiry in such a case is sufficient notice in equity, where the means of knowledge are at hand; and if the party, under such circumstances, omits to inquire, and proceeds to do the act, he does so at his peril, as he is then chargeable with all the facts which by a proper inquiry he might have ascertained. Hawley v. Cramer, 4 Cow. 712; Hill v. Simpson, 7 Ves. Jr. 170; Kennedy v. Green, 3 Myl. & K. 722; Booth v. Barnum, 9 Conn. 286; Pitney v. Leonard, 1 Paige, 461; Pringle v. Phillips, 5 Sand. 157.

Authorities to show that the material alteration of a written instrument renders it void is unnecessary, as it is a principle of universal application.

Decree reversed, and the cause remanded, with direction to enter a decree in favor of the complainant.


text: Talk:Angle v. North-Western Mutual Life Insurance Company/Opinion of the Court

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


text:
Oaksmith's Lessee v. Johnson

ERROR to the Supreme Court of the District of Columbia.

Mr. Edward Lander and Mr. William A. Meloy for plaintiff in error.

Mr. A. G. Riddle, contra.

MR. JUSTICE FIELD delivered the opinion of the court.

title: Oaksmith's Lessee v. Johnson


text: Talk:Oaksmith's Lessee v. Johnson

title: Talk:Oaksmith's Lessee v. Johnson


text:
Oaksmith's Lessee v. Johnson/Opinion of the Court

This was an action of ejectment to recover a parcel of land situated in the city of Washington, consisting of the south half of lot fourteen in reservation B, and a portion of the adjoining lot thirteen. For this latter portion the plaintiff obtained judgment; and no question with respect to it is here raised. The only contention in this court relates to the other portion of the demanded premises,-the south half of lot fourteen. To recover this portion, the plaintiff relied principally upon evidence of title arising from the possession of the premises by the lessor of the plaintiff, and parties through whom he claims, for a period of nearly forty years. It was shown, that, as early as 1828, one Thomas Hughes occupied and used the premises, and that he continued from that time to occupy and use them exclusively, either in person or by tenants, until his death in 1837; that by his will he devised his interest and estate in them to his daughter Anna, who, upon his death, continued in like manner in their occupation and use until the entry of the defendant in 1867, having erected in the mean time a brick building thereon. The lessor of the plaintiff, Oaksmith, is the trustee of Anna's estate.

The defendant traced title to the premises from the United States through a conveyance of the mayor of Washington, executed in October, 1866, in completion of a sale made by commissioners under the act of Congress of May 7, 1822, 3 Stat. 691, and an ordinance of the city of the same year passed to carry that act into effect. It is conceded, that, previous to the sale, the title was in the United States.

It appeared in evidence that the sale was made in September, 1822, to one Henry Weightman, to whom a bond was given for a conveyance upon payment of the purchase-money; that in June, 1830, the purchase-money was paid, and that, in 1832 or 1833, the purchaser permitted Hughes to occupy the premises as his tenant; that in 1853 the purchaser died, leaving Roger Weightman his only surviving heir; and that to him the mayor of the city, in October, 1866, executed the conveyance, and that during the same year he conveyed to the defendant.

It also appeared in evidence that the purchase of the premises by Henry Weightman in 1822 was made in trust for Roger Weightman, who, as early as 1830, became the assignee of the bond, and paid the purchase-money; and that the conveyance of the mayor to him, in October, 1866, was obtained upon a representation that the bond had been lost; that Roger Weightman had also purchased the adjoining lot thirteen, and in June, 1830, had received a conveyance of the same from the mayor of Washington, and in March, 1837, had conveyed to Hughes that portion of the lot which the plaintiff recovered in this action.

Upon this evidence, assuming it to have established all that it tended to prove, the plaintiff asked of the court several instructions to the jury, amounting, when divested of some repetitions, substantially to these:--

1st, That the jury might presume that Roger Weightman assigned the bond for a conveyance to Thomas Hughes during his life; and that the mayor of the city executed a conveyance of the premises either to Hughes, or, after his death, to his devisee and daughter; and,

2d, That the exclusive and uninterrupted possession of the premises by the devisee of Hughes for more than twenty years prior to the entry of the defendant created a title upon which the plaintiff could recover.

The court refused the instructions; and, for their refusal, error is alleged.

The objection to the first of these instructions arises from that part which relates to the presumption of a conveyance from the mayor of the city. The title of the property, as already stated, was originally in the United States, and the mayor acted only as their agent in transferring it to the purchaser. It was, therefore, a grant from the government which the court was requested to instruct the jury to presume.

It is undoubtedly true, as stated by counsel, that, under some circumstances, grants may be presumed from the government, as well as from individuals, in support of a long-continued possession. The presumption in such cases arises not merely from the possibilities of the loss of documents by the common accidents of time, but from the general experience of men that property is not usually suffered to remain for long periods in the quiet possession of any one but the true owner, and that no other person will deliberately add to the value of the property by permanent improvements.

But in this country, at the present day, there can seldom be occasion to invoke the presumption of a grant from the government, except in cases of very ancient possessions running back to colonial days, as, since the commencement of the present century, a record has been preserved of all grants of the government, and of the various preliminary steps up to their issue; and provision is made by law for the introduction of copies of the record when the originals are lost.

The act of Congress of May 7, 1822, which authorized the sale of the public reservations, embracing the property in controversy, required the deeds executed to the purchasers by the mayor of the city to be recorded among the land-records of the county of Washington within the time prescribed for the recording of conveyances of real estate; and the ordinance of the city creating a board of commissioners to carry the act of Congress into effect, and direct the sales of the property, provided that the board should keep regular minutes of its act and proceedings, and lay the same before the board of aldermen and common council at the commencement of every session of the council. If any deed was made by the mayor of the city to Hughes or to his devisee, as the court was requested to instruct the jury to presume, the records of the county and the minutes of the commissioners would no doubt have shown the fact. But these records and minutes were not produced; and no evidence was offered that they made mention of any deed of the premises, either to Hughes or to his devisee. The absence of any evidence on this point was of itself a circumstance sufficient to justify the conclusion that the records and minutes disclosed nothing impaining, or tending to impair, the validity of the conveyance through which the defendant claims. In the absence of such evidence, no presumption could legitimately arise that any other deed was executed by the mayor than the one produced. The court, therefore, properly refused the instruction asked.

The long uninterrupted possession of the premises by the devisee, and the valuable improvements made by her, might have justified the presumption of a transfer of the bond from Roger Weightman. But such transfer, if established, would not have availed the plaintiff: it would only have disclosed the possession of an equitable right to a conveyance, which a court of chancery might enforce by compelling a transfer of the legal title from the defendant, if he purchased with notice of the plaintiff's equity, or by decreeing compensation from Roger Weightman, if he conveyed the title to a bona fide purchaser without notice. But in the action of ejectment, in the Federal courts, the legal title must control, and to another forum the plaintiff must look for the enforcement of any equitable rights he may possess.

The legal title being in the United States, the Statute of Limitations raises no bar to the action. Mere possession of the land, though open, exclusive, and uninterrupted for twenty years, creates no impediment to a recovery by the government, and of course none to a recovery by one who within that period receives its conveyance. In Burgess v. Gray, 16 How. 48, the plaintiff and those through whom he claimed had been in possession of the land, for which the action was brought, for more than half a century; and, among other grounds, he relied upon this long-continued possession to recover against defendants, who had entered under title derived from the United States. But the court said, 'The mere possession of public land without title will not enable the party to maintain a suit against any one who enters on it; and, more especially, he cannot maintain it against persons holding possession under title derived from the proper officers of the government. He must first show a right in himself before he can call into question the validity of theirs.' The second instruction was, therefore, properly refused.

Judgment affirmed.


text: Talk:Oaksmith's Lessee v. Johnson/Opinion of the Court


text:
Reckendorfer v. Faber

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

Mr. Charles F. Blake and Mr. Edmund Wetmore for the appellant.

Mr. John S. Washburn and Mr. George Gifford for the appellee.

MR. JUSTICE HUNT delivered the opinion of the court.

title: Reckendorfer v. Faber


text: Talk:Reckendorfer v. Faber

title: Talk:Reckendorfer v. Faber


text:
Reckendorfer v. Faber/Opinion of the Court

This is an appeal from a decree of the United States Circuit Court for the Southern District of New York, dismissing the bill of complaint, which was filed to restrain the infringement by the respondent of certain letters-patent, and for an accounting and damages.

These patents relate to the manufacture of combined pencils and erasers.

1. The first was granted to Hymen L. Lipman, March 30, 1858; and was extended for a farther term of seven years from the 30th of March, 1872.

The material parts of the specification are as follows:--

'I make a lead-pencil in the usual manner, reserving about one-fourth of the length, in which I make a groove of suitable size, A, and insert in this groove a piece of prepared india-rubber (or other erasive substance), secured to said pencil by being glued at one edge. The pencil is then finished in the usual manner; so that, on cutting one end thereof, you have the lead, B, and on cutting at the other end you expose a small piece of india-rubber, C, ready for use, and particularly valuable for removing or erasing lines, figures, &c., and not subject to be soiled, or mislaid on the table or desk.

'In making mathemathical, architectural, and many other kinds of drawings, in which the lines are very near each other, the eraser is particularly useful, as it may be sharpened to a point to erase any marks between the lines; and, should the point of the rubber become soiled or inoperative from any cause, such cause is easily removed by a renewed sharpening, as in the ordinary lead-pencil.'

The claim is as follows:--

'I do not claim the use of a lead-pencil with a piece of indiarubber, or other erasing material, attached at one end for the purpose of erasing marks; but what I do claim as my invention, and desire to secure by letters-patent, is the combination of the lead and india-rubber, or other erasing substance, in the holder of a drawing-pencil, the whole being constructed and arranged substantially in the manner and for the purposes set forth.'

The drawings forming part of the specification exhibit a continuous sheath of uniform size, with interior grooves of different sizes, the eraser groove being larger than the lead groove.

2. The second patent is for an improvement upon the invention of Lipman, and was granted to Joseph Reckendorfer, the complainant, the 4th of November, 1862, and reissued on the 1st of March, 1872.

The material parts of the specification are as follows:--

'My invention is intended to provide a means whereby articles of greater size or diameter than the lead may be securely held in the head of a pencil of otherwise ordinary or suitable construction, without making the body of the pencil cumbrous or inconvenient. To this end, my invention consists,--

'First, Of a pencil composed of a wooden sheath and lead core, having one end of the sheath enlarged and recessed to constitute a receptacle for an eraser or other similar article, as hereinafter stated.

'Second, Of a pencil, the wooden case of which gradually tapers from the enlarged and recessed head towards its opposite end for the whole or a portion of the length, as hereinafter set forth.

'The receptacle for the eraser or other article is formed in the head, without too much weakening the wood, owing to the form of the sheath; while, for the same reason, the end of the pencil which contains the ordinary lead is not cumbrous nor clumsy, but can be readily held between the fingers, just as an ordinary pencil is.'

Having thus described his invention, Reckendorfer claims,--

'1st, A pencil composed of a wooden sheath and lead core, having one end of the sheath enlarged and recessed to constitute a receptacle for an eraser, or other similar article, as shown and set forth.

'2d, A pencil, the wooden case of which gradually tapers from its enlarged and recessed head towards its opposite end for the whole or a portion of its length, substantially as shown and described.'

The points we propose here to discuss are two:--

First, Is the article patented by the plaintiff and his assignor, and for the infringement of which patents this action is brought, a patentable invention within the laws of the United States?

Second, Is it within the power of the courts to examine and determine this question? or is the decision of the Commissioner of Patents, when, by issuing a patent, he decides that the invention is patentable, final and conclusive on the point? The plaintiff contends that the decision of the commissioner is conclusive upon the point of invention; and that the question, as distinct from that of want of novelty, is one not open to the judgment of the court. In the natural order of things, this question is the first one to be examined; for, if it shall appear that the contention of the plaintiff is correct in this respect, the question in regard to the patentability of the instrument now before us will not arise. The point will have been decided for us, and by a controlling authority.

The 'act to revise, consolidate, and amend the statutes relating to patents and copyrights,' passed July 4, 1836 (5 U.S. Stat. 118), is the act regulating this case.

By the sixth section thereof it is enacted, 'that any person having invented or devised any new and useful art, machine, manufacture, or composition of matter, not known or used by others before his invention or discovery thereof, and not at the time of his application for a patent in public use, or on sale with his consent or allowance as the inventor or discoverer, and shall desire to obtain an exclusive property therein, may make application in writing to the commissioner, expressing such desire; and the commissioner, on due proceedings had, may grant a patent therefor. . . . He shall make oath that he believes himself to be the first inventor or discoverer thereof, and that he does not know or believe that the same has ever before been used.'

Looking at this section alone, it may be safely said no one is entitled to a patent unless (1) he has discovered or invented an art, machine, or manufacture; (2) which art, machine, or manufacture, is new; (3) which is also useful; (4) which is not known or patented as therein mentioned. It is not sufficient that it is alleged or supposed, or even adjudged, by some officer, to possess these requisites. It must, in fact, possess them; and that it does possess them the claimant must be prepared to establish in the mode in which all other claims are established; to wit, before the judicial tribunals of the country.

The seventh section of the act (p. 120) provides, that on the filing of any such application, &c., and the payment of the duty required by law, the commissioner shall make, or cause to be made, an examination of the alleged new invention or discovery; and if, on such examination, it shall not appear to the commissioner that the same has been invented or discovered by any other person in this country prior to the alleged discovery, or patented or described in any foreign publication, or been in public use or on sale with the consent of the applicant, and if he shall be of the opinion that the same is sufficiently useful and important, the commissioner shall issue a patent therefor.

Before the commissioner is authorized to issue a patent, it must appear to him that the claimant is justly entitled to a patent; i.e., that his art, machine, or manufacture, possesses all the qualities before mentioned. The commissioner must also be satisfied, that, if it possesses these qualities, it is sufficiently useful and sufficiently important to justify him in investing it with the prima facie respect arising from the governmental approval. These restrictions are wise and prudent; are intended to secure at least a probable advantage to those who deal with the favorites of the government; for they may justly be so termed who receive the exclusive right of making or using or vending particular arts or improvements.

It is nowhere declared in the statute that the decision of the commissioner, as to the extent of the utility or importance of the improvement, shall be conclusive upon that point; but, in the section just quoted, it is placed in the same category with the want of novelty and the other requisites of the statute; and it is expressly conceded by the appellant that the judgment of the commissioner on the question of novelty is not conclusive, but that that point is open to examination. On that subject the practice of the courts is uniform in holding it to be subject to inquirty.

The plaintiff's counsel, in his brief, put his argument in this form: 'The commissioner, then, passes on these questions: (1.) Did the applicant himself make the invention? This question is settled by his oath.' This is true to the extent and for the purpose of issuing a patent, and to this extent only. When the patentee seeks to enforce his patent, he is liable to be defeated by proof that he did not make the invention. The judgment of the commissioner does not protect him against the effect of such evidence. (2.) The counsel says, 'Was the invention new? This question is solved by the examination required by the act.' To the same extent only. The defence of want of novelty is set up every day in the courts, and is determined by the court or the jury as a question of fact upon the evidence adduced, and not upon the certificate of the commissioner. (3.) The counsel says again, 'Is the invention sufficiently useful and important? This the commissioner settles for himself by the use of his own judgment. It is a question of official judgment.' These questions are all questions of official judgment, and are all settled by the judgment of the commissioner. His judgment goes to the same extent upon each question. He determines and decides for the purpose of issuing or refusing a patent. When the patent is sought to be enforced, the questions, and each of them, are open to judicial examination. We see many reasons why all the questions of invention, novelty, and prior use, should be open to examination in each case; and such we believe to be the course of the authorities, and practice of the courts.

A reference to some of the most recent cases, and to those decided by this court, will be sufficient. A review of all the cases in this court, and the various circuit courts where this question has been alluded to, will not be profitable.

In Hotchkiss v. Greenwood, 11 How. 248, a patent had been granted for a 'new and useful improvement in making door and other knobs, of all kinds of clay used in pottery and of porcelain,' by having the cavity in which the screw, or shank, is inserted, by which they are fastened, largest at the bottom of its depth, in form of a dovetail, and a screw formed therein by pouring in metal in a fused state. The precise question argued in this court and decided was of the patentability of this invention, and it was held not to be patentable. The only thing claimed as new was the substitution of a knob made of clay or porcelain for one made of wood. This, it was said, might be cleaper or better; but it was not the subject of a patent. The counsel for the defendants, in their points, there say, 'The court now is called upon to decide whether this patent can be sustained for applying a well-known material to a use to which it had not before been applied, without any new mode of using the material, or any new mode of manufacturing the article sought to be covered by the patent.' Mr. Justice Nelson delivered the opinion of the court to the effect already stated. Mr. Justice Woodbury dissented, not upon the question of the power of the court to pass upon the validity of the patent, but rather in regard to the manner in which the facts were submitted to the jury.

In Stimpson v. Hardman, 10 Wall. 117, it was decided that the engraving or stamping of the figure upon the surface of a roller for pebbling leather by pressure, where the use previously had been of a smooth roller, required no invention; that it was a change involving mechanical skill merely, and not patentable. Mr. Justice Clifford dissented from the majority of the court, but expressly says that the question of patentability is for the decision of the jury, and not for the court, upon a bill of exceptions. The majority of the court held that the question could be considered upon a bill of exceptions; and no one claimed that the decision of the commissioner concluded the question.

In Hailes v. Van Wormer, 20 Wall. 353, the question of the patentability of certain improvements in stoves was largely discussed in this court upon appeal from the Circuit Court for the Northern District of New York. It was held, that, if a new combination produces new and useful results, it is patentable, though all the constituents of the combination were known and in use previous to the combination; but the results must be the product of the combination, not a mere aggregate of several results, each the complete product of one of the combined elements. It was held that the facts there present did not create a compliance with this principle; and the judgment, that the plaintiff's bill be dismissed, was affirmed.

In Rubber Tip Pencil Co. v. Howard, 20 Wall. 498, the same principle was affirmed. In delivering the opinion, the Chief Justice says, 'The question which naturally presents itself for consideration at the outset of this inquiry is, whether the new article of manufacture claimed as an invention was patentable as such: if not, there is an end of the case, and we need not go farther.' He makes a careful examination of the claim, and concludes that there is nothing patentable in the character of the invention. The decree of the court below dismissing the bill was unanimously affirmed upon that ground.

In Smith v. Nichols, 21 Wall. 115, an elaborate opinion to this same effect was delivered by Mr. Justice Swayne, and concurred in unanimously by the court. The only question discussed is the patentability of the invention.

Hicks v. Kelsey, 18 Wall. 670, is a similar case. To this rule, the case of Lyman v. Osborne, 11 Wall. 516, cited by the defendant, is no exception. The remarks there made are chiefly upon the subject of reissues, and are in accordance with the principles above set forth. Even as to reissues, their conclusiveness is limited to questions of fact, and is accompanied by the statement that they are re-examinable in court, when it is apparent upon the face of the patent that the commissioner has exceeded his authority, or there is such a repugnance between the old and the new patent that it must be held as a matter of legal construction that the new patent is not for the same invention as that embraced and secured in the original patent. Pp. 543, 544.

We do not attach much significance to the fact that the fifteenth section of the act of 1836 allows the defendant to plead the general issue, and to give in evidence, upon thirty days' notice, special matter tending to prove the various matters therein referred to. The statute in that respect was intended to create an easy system of pleading, and to relieve from any doubt the admissibility in that form of the defences specified. The argument, that because permission is given to prove under the general issue, that the specification does not contain the whole truth, or that it intentionally and deceitfully contains too much, or that the patentee was not the first discoverer, or that it had been in prior use, it follows that proof that there is no invention or discovery at all, or that the invention has no importance, cannot be made, is quite unsound. Proof that there is no invention or discovery strikes at the root of the whole claim. The patent is based on an affirmative fact, of which this is the direct negative. It needed no statute to aid or justify this defence. It is provable when it exists under any general denial, like the fact of not guilty or non-assumpsit in cases where guilt or a promise is first to be established.

Upon the proposition that the decision of the commissioner on the question of invention, its utility and importance, is conclusive, and that the same is not open to examination in the courts, we are unanimously of the opinion that the proposition is unsound. His decision in the allowance and issue of a patent creates a prima facie right only; and, upon all the questions involved therein, the validity of the patent is subject to an examination by the courts.

We come, then, to the questions, Does the article patented by Lipman, and improved by Reckendorfer, involve an invention? or is it a product of mechanical skill or a construction of convenience only?

The article presented is for the performance of machanical operations, to produce mechanical results, and is a mechanical instrument as much as a brush, a pen, a stamp, a knife, a file, or a screw. Whether it is styled a manufacture, a tool, or a machine, it is an instrument intended to produce a useful mechanical result; and the question presents itself, Does it embody any new device, or any combination of devices producing a new result?

In the first place, what is not claimed by the specification of Lipman is to be observed. 'I do not claim,' he says, 'the use of a lead-pencil with a piece of rubber attached at one end.' Of course he does not claim a lead-pencil as his invention, nor the use of a strip of india-rubber for erasure. Each of these articles had been in long and general use. But he claims as his invention 'the combination of the lead and india-rubber in the holder of a drawing-pencil,' in the manner set forth. There is nothing peculiar in the manner set forth. The claim is simply of the combination of the lead and india-rubber in the holder of a drawing-pencil; in other words, the use of an ordinary lead-pencil, in one end of which, and for about one-fourth of its length, is inserted a strip of india-rubber, glued to one side of the pencil. The pencil is to be made in the 'usual manner:' i.e., he takes an ordinary lead-pencil, and in this he makes 'a groove of suitable size,' giving no idea of what he deems a suitable size; and in this groove he inserts a piece of prepared india-rubber, which is glued to one edge of the pencil. 'The pencil is then finished in the usual manner; so that, in cutting one end thereof, you have the lead, B, and on cutting the other end you expose a small piece of india-rubber, C, ready for use.' It is evident that this manner of making or applying the instrument gives no aid to the patent. It must rest where the patentee claims to place it; that is, on the combination.

This combination consists only of the application of a piece of rubber to one end of the same piece of wood which makes a lead-pencil. It is as if a patent should be granted for an article, or a manufacture as the patentee prefers to term it, consisting of a stick twelve inches long, on one end of which is an ordinary hammer, and on the other end is a screw-driver or a tack-drawer, or, what you will see in use in every retail shop, a lead-pencil, on one end of which is a steel pen. It is the case of a garden rake, on the handle end of which should be placed a hoe, or on the other side of the same end of which should be placed a hoe. In all these cases there might be the advantage of carrying about one instrument instead of two, or of avoiding the liability to loss or misplacing of separate tools. The instruments placed upon the same rod might be more convenient for use than when used separately. Each, however, continues to perform its own duty, and nothing else. No effect is produced, no result follows, from the joint use of the two.

A handle in common, a joint handle, does not create a new or combined operation. The handle for the pencil does not create or aid the handle for the eraser. The handle for the eraser does not create or aid the handle for the pencil. Each has and each requires a handle the same as it had and required, without reference to what is at the other end of the instrument; and the operation of the handle of and for each is precisely the same, whether the new article is or is not at the other end of it. In this and the cases supposed you have but a rake, a hoe, a hammer, a pencil, or an eraser, when you are done. The law requires more than a change of form, or juxtaposition of parts, or of the external arrangement of things, or of the order in which they are used, to give patentability. Curtis on Pat., sect. 50; Hailes v. Van Wormer, 20 Wall. 353. A double use is not patentable, nor does its cheapness make it so. Curtis, sects. 56, 73. An instrument or manufacture which is the result of mechanical skill merely is not patentable. Mechanical skill is one thing: invention is a different thing. Perfection of workmanship, however much it may increase the convenience, extend the use, or diminish expense, is not patentable. The distinction between mechanical skill, with its conveniences and advantages and inventive genius, is recognized in all the cases. Rubber Tip Pencil Co. v. Howard, and other cases, supra; Curtis, sect. 72 b.

The combination, to be patentable, must produce a different force or effect, or result in the combined forces or processes, from that given by their separate parts. There must be a new result produced by their union: if not so, it is only an aggregation of separate elements. An instance and an illustration are found in the discovery, that, by the use of sulphur mixed with indiarubber, the rubber could be vulcanized, and that without this agent the rubber could not be vulcanized. The combination of the two produced a result or an article entirely different from that before in use. Another illustration may be found in the frame in a saw-mill which advances the log regularly to meet the saw, and the saw which saws the log; the two co-operate and are simultaneous in their joint action of sawing through the whole log: or in the sewing-machine, where one part advances the cloth, and another part forms the stitches, the action being simultaneous in carrying on a continuous sewing. A stemwinding watch-key is another instance. The office of the stem is to hold the watch, or hang the chain to the watch: the office of the key is to wind it. When the stem is made the key, the joint duty of holding the chain and winding the watch is performed by the same instrument. A double effect is produced or a double duty performed by the combined result. In these and numerous like cases the parts co-operate in producing the final effect, sometimes simultaneously, sometimes successively. The result comes from the combined effect of the several parts, not simply from the separate action of each, and is, therefore, patentable.

In the case we are considering, the parts claimed to make a combination are distinct and disconnected. Not only is there no new result, but no joint operation. When the lead is used, it performs the same operation and in the same manner as it would do if there were no rubber at the other end of the pencil: when the rubber is used, it is in the same manner and performs the same duty as if the lead were not in the same pencil. A pencil is laid down and a rubber is taken up, the one to write, the other to erase: a pencil is turned over to erase with, or an eraser is turned over to write with. The principle is the same in both instances. It may be more convenient to have the two instruments on one rod than on two. There may be a security against the absence of the tools of an artist or mechanic from the fact, that, the greater the number, the greater the danger of loss. It may be more convenient to turn over the different ends of the same stick than to lay down one stick and take up another. This, however, is not invention within the patent law, as the authorities cited fully show. There is no relation between the instruments in the performance of their several functions, and no reciprocal action, no parts used in common.

We are of the opinion, that, for the reasons given, neither the patent of Lipman nor the improvement of Reckendorfer can be sustained, and that the judgment of the Circuit Court dismissing the bill must be affirmed.

MR. JUSTICE STRONG dissenting.

I dissent from so much of the opinion of the majority of the court as holds that the instrument or manufacture described in the patents exhibits no sufficient invention to warrant the grant of a patent for it.

MR. JUSTICE DAVIS and Mr. JUSTICE BRADLEY also dissented.


text: Talk:Reckendorfer v. Faber/Opinion of the Court


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Potts v. Chumasero

Sect. 1 of an act of the legislature of the Territory of Montana, approved Feb. 11, 1874 (Laws of Montana, 8th sess., 1874, p. 43), provides,--'That the seat of government of the Territory of Montana be, and the same is hereby, changed from the city of Virginia, in the county of Madison, to the town of Helena, in the county of Lewis and Clark, upon the approval hereof as hereinafter provided.'

Sect. 2 provides that the question of removal shall be submitted to the qualified electors of the Territory at the general election to be held in 1874.

Sect. 3 prescribes the method of voting on the question, and provides, that, if a greater number of votes are cast for the removal than against it, 'it shall be taken, deemed, and held that this law has been duly approved, and that the seat of government of the Territory of Montana has been in due form of law removed to the said town of Helena, and the governor shall make public proclamation thereof.'

Sect. 5 provides that the votes cast for the approval of this law shall be counted, returned, and canvassed in the same manner and by the same persons and officers as votes for delegate in Congress.

Sect. 20 of the codified statutes of Montana (c. 23, p. 466) makes it 'the duty of the secretary of the Territory, with a marshal of the Territory or his deputy, in presence of the governor, to proceed within thirty days after the election, and sooner if the returns be received, to canvass the votes given for delegate for Congress; and the governor shall grant a certificate of election to the person having the highest number of votes, and shall issue a proclamation declaring the election of such person.'

At the general election held in the Territory on the 3d of August, 1874, the electors voted on the approval or disapproval of the law above referred to.

On the 2d September, 1874, thirty days after the election, the secretary and marshal of the Territory, in the presence of the governor, opened and canvassed the votes returned from the several counties of the Territory, recorded and signed the certificate of the court, and adjourned sine die. The canvass thus made showed a majority of the votes against removal.

On the 11th December, 1874, the defendants in error filed a petition in the Supreme Court of the Territory, setting forth that they are resident citizens of Helena, in Montana Territory, and are attorneys and counsellors-at-law; that in the course of their practice, in order to attend the sessions of the Supreme Court, 'they are required and compelled to make frequent journeys to the seat of government of said Territory; that heretofore they have been required and compelled to make frequent journeys to the city of Virginia,' where the seat of government was located, and where it has hitherto remained, and where the records of said court, and clerk thereof, continue to remain; that, in order to attend to their professional duties, they are obliged to expend large sums of money in and about defraying their expenses for fare in stage-coaches thereto and therefrom, and for board and lodging at hotels along the route and at said city; and that they are therefore beneficially interested in having the seat of government and the Supreme Court of said Territory removed to Helena, which is about one hundred miles distant from said city.

The petition then sets forth in substance that the votes of two counties, although duly returned, had been improperly excluded, and that, had they been counted, the result would have been different; and it concludes by praying that a writ of mandate be issued to the plaintiffs in error,-viz., the governor, secretary, and marshal of the Territory,-commanding them again to canvass the votes in accordance with the findings and judgment of the court.

A demurrer to the petition having been overruled, the plaintiffs in error answered, denying its allegations, and setting up that the removal of the seat of government would involve an expense to the United States of $3,000.

The court found the facts for the petitioners, and issued the writ of mandate as prayed for: whereupon the case was brought here.

Mr. Richard T. Merrick, for the defendants in error, in support of a motion to dismiss for want of jurisdiction.

Mr. James A. Garfield, contra.

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

title: Potts v. Chumasero


text: Talk:Potts v. Chumasero

title: Talk:Potts v. Chumasero


text:
Potts v. Chumasero/Opinion of the Court

We have no jurisdiction in this case. Writs of error and appeals lie to this court from the Supreme Court of the Territory of Montana only in cases where the value of the property or the amount in controversy exceeds the sum of $1,000, and from decision upon writs of habeas corpus involving the question of personal freedom. Rev. Stat., sect. 1909.

In Barry v. Mercien, 5 How. 120, it was held, Chief Justice Taney speaking for the court, that, in order to give us jurisdiction in a case dependent upon the amount in controversy, 'the matter in dispute must be money, or some right, the value of which in money can be calculated and ascertained.' This rule has been followed in many cases. Pratt v. Fitzhugh, 1 Black, 273; De Krafft v. Barry, 2 id. 714.

In the present case, the contest is not for money, or any right the value of which can be measured by money. The petitioners, to show that they have such a special interest in the question presented for adjudication as entitles them to commence and maintain the action, allege that they are attorneys and counsellors-at-law, and that, by the removal of the seat of government from Helena to Virginia City, their expenses will be increased while in attendance upon the courts pursuant to their professional engagements. But this is not the matter in controversy. The contest is as to the validity of certain proceedings for the removal of the seat of government for the Territory. The interest which the petitioners have in that contest is not in any sense property. Besides, they do not complain.

The defendants, who are the plaintiffs in the error here, do not claim to be personally interested pecuniarily in the litigation. They only state in their answer, that, if a removal is had, the United States will be put to an expense of $3,000. But in this proceeding they do not represent the United States. They are government officials; but they do not appear here in their official capacity. By a law of the Territory, it has been made their duty to canvass the votes cast at a Territorial election. In this they act for the people of the Territory, and not for the United States. They derive all their authority for this purpose from a law of the Territory, and not from a law of Congress. If a judgment is given against them, they will not lose any money; neither will the petitioners gain any from them.

Writ dismissed for want of jurisdiction.

title: Potts v. Chumasero/Opinion of the Court


text: Talk:Potts v. Chumasero/Opinion of the Court


text:
Scammon v. Kimball

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

The complainant, a private banker in Chicago, held several policies of insurance issued to him by the Mutual Security Insurance Company, of which he was a director.

The company was duly adjudicated a bankrupt. At the time of such adjudication, it had money deposited with him on call, drawing interest, and held his notes for unpaid subscriptions to its capital stock.

The question arising in the case and determined by the court below was, whether the amount due from the company on said policies of insurance on account of losses he had sustained by fire could be set off against said notes, and the money deposited.

In view of the decision in Sawyer v. Hoag, Assignee, 17 Wall. 610, by this court, the complainant's right to set off his claim against the company, so far as the notes in question are concerned, was abandoned in the argument.

''Mr. Matt. H. Carpenter'' for the appellant.

1. The complainant is clearly entitled to the set-off. The Bankrupt Act, sect. 20; Tucker v. Oxley, 5 Cranch, 34; Holbrook v. ''Receivers of the American Fire Ins. Co., 6 Paige, 220; Ex parte Globe Fire Ins. Co.'', 2 Edw. Ch. 625; Gray v. Rollo, 18 Wall. 629; Drake v. Rollo, 3 Biss. 274; Olive v. Smith, 5 Taunt. 56; Young. v. Bank of Bengal, 1 Deac. 622; Jones v. Robinson, 26 Barb. 310; Berry v. Brett, 6 Bosw. 627; Bize v. Dickason, 1 T. R. 285; Ginn v. Dubois, id. 112; Osgood v. De Groot, 36 N. Y. 348.

2. The deposit of the money with him as banker constituted a loan, and no trust attached to it in his hands. Hill on Trustees, 173; Patt v. Clegg, 16 M. & W. 321; Sims v. Bond, 5 B. & Ad. 389; Carr v. Carr, 1 Meriv. 541; Devoyneo v. Noble, id. 568.

Mr. John L. Thompson, contra.

The debts are not of the same character, and cannot be set off. Lawrence v. Nelson, 21 N. Y. 158; Duncan v. Lyon, 3 Johns. Ch. 358; Waterman on Set-off, 209.

MR. JUSTICE CLIFFORD delivered the opinion of the court.

title: Scammon v. Kimball


text: Talk:Scammon v. Kimball

title: Talk:Scammon v. Kimball


text:
Scammon v. Kimball/Opinion of the Court

Jurisdiction is vested in the circuit courts, under the Bankrupt Act, concurrent with the District Court fof the same district, of all suits, at law or in equity, which may or shall be brought by any person against the assignee of the bankrupt's estate, touching any property, or rights of property, of the bankrupt transferable to, or vested in, such assignee.

Pursuant to that authority, the appellant, on the 3d of May, 1872, filed the present bill of complaint in the Circuit Court against the appellee as assignee of the bankrupt company described in the title of the case. Prior to that,-to wit, on the 27th of January in the same year,-the insurance company was duly adjudged bankrupt; and the record shows that the present appellee was appointed the assignee of the estate of the bankrupt company.

Satisfactory evidence is exhibited in the record to show that the company was duly organized with a nominal capital of $300,000, of which ten per cent had been paid, and that the residue was secured by the notes of the subscribers. Provision is made by the charter that the stock and affairs of the corporation shall be managed and conducted by any number of directors, not more than twenty-five nor less than nine, to be chosen by ballot from among and by the stockholders. Directors, it is also provided, shall choose out of their number a president and vice-president; and the directors have the power to appoint, for the time being, 'such officers, secretaries, agents, and servants as they shall judge necessary.'

Shares in the stock of the company, to a large amount, were owned by the complainant; and he admits that the company held notes against him to the amount of $10,147.50, given to secure unpaid balances of subscriptions, for which he was liable either as principal guarantor or surety. Throughout the lifetime of the company, the complainant insured many and valuable properties in the company, and paid to the proper officers of the same large sums of money as premiums for such policies of insurance. Antecedent to the event which caused the failure of the company, the proper officers of the same transacted a large, and, for the greater portion of the time, a prosperous insurance business.

Much reference to those details will not be made, as they are no longer material in this investigation. Suffice it to say, in that connection, that the complainant was, as he alleges, during the whole of that period, a large owner of real and other property, and was possessed of sufficient means to render secure any moneyed obligation into which he might enter, and to enable him to perform any promise or contract for the payment of money he might make; and he also alleges that it was necessary that the means of the company should be kept where the same could be promptly commanded, if required to pay losses; and in order that the company might accomplish that object, and still realize interest on the same, he came to an agreement with the proper authorities of the company that the funds thereof, or such portion of the same as they might choose, should thereafter, from time to time, be deposited with him, he being then a private banker, and that the moneys so deposited should be paid out or drawn at the pleasure of the company, without notice or limitation; and he avers that the agreed with the company to account with the proper officers for such moneys when and as often as thereto required, and to pay to the company interest thereon, at the rate of ten per centum annually during the continuance of such deposit, until a further or other agreement should be made.

Funds of the kind contemplated were, in accordance with the agreement, deposited with the complainant at the pleasure of the company; and the complainant avers that he paid interest on the average amount of the same, at the agreed rate, for the period and to the amount specified in the exhibit annexed to the bill of complaint.

Ten per centum per annum was paid during the period specified in the annexed exhibit; but it appears that the rate at the close of that period was reduced to eight per cent per annum, and the complainant admits that no part of the interest since the rate was reduced has been paid.

Both parties, it seems, were solvent until the 9th of October, 1871, when a large part of the property of the complainant and others, which was insured by the company, was destroyed by fire, the immediate effect of which was to cause the failure of the insurance company. Losses of the complainant by the fire, for which the company is responsible, as claimed by the complainant, amount to the sum of $55,800, as appears by the second exhibit annexed to the bill of complaint; and he admits that he held on deposit at the time the company failed the sum of $39,188.03, received under the agreement already fully described, which is due to the company, with eight per cent interest from July 1, 1871, to the 18th of December in the same year.

Process was accordingly issued. The complainant prays that the respondent may be decreed to deliver to him the notes referred to; that he, the respondent, shall acquit and discharge the complainant from the admitted indebtedness to the company; that he, the complainant, be allowed to prove the balance of his demand against the estate of the bankrupt company; and that the respondent be enjoined and restrained from selling or assigning the said notes, and from instituting any suit against the complainant to recover the notes or his indebtedness to the company.

Service was made, and the respondent appeared and filed an answer. He admits that the complainant was one of the original corporators of the company, and subscribers to its capital stock; that only ten per cent of the subscriptions for the capital stock was paid in cash, and that ninety per cent of the same was secured in the promissory notes of the subscribers; that the company at the time of the great fire became insolvent, and that the company on the day named in the bill was adjudged bankrupt; that the company, as alleged, issued several policies of insurance to the complainant, and that he sustained large losses by the great fire; that he is indebted to the company as set forth in the third schedule exhibited in the record, and that he was and is the holder of the funds of the company to the amount specified in the bill of complaint: but the respondent avers that the company never came to any such agreement, in respect to such funds, as that alleged, and that the complainant held the same solely in his official character as treasurer of the company.

Most of the allegations of the answer were also embodied in a cross-bill filed by the respondent at the same time, in which he denied all the equity of the original bill, and prayed for a decree in his own favor, and that the complainant in the original bill be decreed to pay over to him as assignee the whole amount he owed to the company, including the notes given for subscriptions for stock and the amount he held on deposit.

Proofs were taken; and, the parties having been fully heard, the court dismissed the original bill of complaint and entered a decree for the respondent in the sum of $9,532, being the amount of the promissory notes given for capital stock, and $39,188.03, being the amount of the funds of the company held by the respondent in the cross-bill, with ten per cent interest on both amount. Immediate appeal was taken by the complainant in the original bill and respondent in the cross-bill, and he now seeks to reverse that decree.

Complainant's losses by the great fire, it is admitted, amount to $45,015.33, and that the company is liable to him in that amount for such losses under the policies of insurance issued to the complainant prior to the fire.

Since the bill of complaint was filed in this case, this court has decided that the debt due to a stockholder in such a case, for losses sustained by the stockholder, of properties insured by the company, cannot be set off against his indebtedness to the company for unpaid shares in the capital stock of the company, for the reason that moneys arising from that source constitute a trust-fund for the payment of the debts of the company, which, in the due administration of the Bankrupt Law, must be equally divided among all the creditors of the bankrupt. Sawyer v. Hoag, 17 Wall. 610.

Such an indebtedness constitutes an exception to the rule, that, where there are mutual debts, 'one debt may be set against the other,' as originally provided by act of Parliament; or perhaps it would be more accurate to say that the rule does not apply where it appears that the debts are not in the same right as well as mutual. United States v. Eckford, 6 Wall. 488.

Whether the suit be one at law or in equity, set-off must be understood as that right which exists between two parties, each of whom, under an independent contract, owes an ascertained amount to the other to set off their respective debts by way of mutual deduction, so that, in any action brought for the larger debt, the residue only, after such deduction, shall be recovered. Adams's Eq., 6th Am. ed., 447.

Courts of equity, following the law, will not allow a set-off of a joint debt against a separate debt, or of a separate debt against a joint debt; nor will such courts allow a set-off of debts accruing in different rights, except under very special circumstances, and where the proofs are clear and the equity is very strong. 2 Story's Eq., 6th ed., sect. 1437.

Equity regards the capital stock and property of a corporation as held in trust for the payment of the debts of the corporation, and recognizes the right of creditors to pursue such properties into whosesoever possession the same may be transferred, unless the stock or property has passed into the hands of a bona fide purchaser; and the rule is well settled, that stockholders are not entitled to any share of the capital stock nor to any dividend of the profits until all the debts of the corporation are paid. Railroad Co v. Howard, 7 Wall. 416.

Moneys derived from the sale and transfer of the franchises and capital stock of an incorporated company are the assets of the corporation, and, as such, constitute a fund for the payment of its debts; and if held by the corporation itself, and so invested as to be subject to legal process, the fund may be seized by a creditor on such process, and subjected to the payment of the indebtedness of the company. Where the fund has been improperly distributed among the stockholders, or passed into the hands of third persons not bona fide creditors or purchasers, the established rule in equity is, if the debts of the company remain unpaid, that such holders take the fund charged with the trust in favor of the creditors, which a court of equity will enforce, and compel the application of the same to the satisfaction of the debts of the corporation. 2 Story's Eq., 9th ed., sect. 1252; Mumma v. Potomac, 8 Pet. 286; Wood v. Dummer, 3 Mas. 308; Vose v. Grant, 15 Mass. 522; Spear v. Grant, 16 id. 14; Curran v. Arkansas, 15 How. 307.

Tested by these considerations, it is clear that the prayer of the bill of complaint, that the respondent may be directed to deliver to the complainant the notes referred to, must be denied.

Claim for losses due from the company cannot be set off against the notes given for capital stock. Suppose that is so: still the complainant insists that such claims for losses may be set off against the amount due from him to the company for the moneys of the company deposited with him under the agreement set forth in the bill of complaint.

Matters alleged in the bill of complaint, and denied in the answer, must be proved before such matters can be assumed as true by the court. Concede that, and it follows that the important question remains to be considered, whether there was such an agreement between the complainant and the company, in respect to the moneys deposited with the complainant, as thta set forth in the bill of complaint.

Moneys to a large amount were deposited with the complainant; and it is not denied that he paid interest on the same to the amount of $11,799.96, as shown by the first schedule annexed to the original bill: but the respondent in the original bill, and complainant in the cross-bill, alleges that the complainant in the original bill received and held all such sums as treasurer of the company, and that the balance in his hands is a trust-fund belonging to all creditors, and consequently that his claim for losses under the policies issued to him by the company cannot be set off against his indebtedness to the company for the balance of that fund in his hands. He admits that he was elected to the office of treasurer by the directors in the month of July, 1870, and that he was reappointed thereto during the following year; but he denies that he ever accepted the office, or that he ever qualified as such, or that he held in his custody any money whatever as treasurer of the company. Subsequently he was examined as a witness in the case, and testified that he never qualified as treasurer or gave bond, and never had any other or different relations with the company in respect to its funds than such as existed before he was elected.

What he states in respect to the alleged agreement is substantially as follows: That he agreed, at the first meeting of the directors, to receive all moneys paid to the company, and to allow the company ten per cent interest upon it, payable annually, until he should notify the company to the contrary, or a different arrangement should be made between the parties; the purpose of the directors being to have the money at all times available, as far as possible, and at the same time to get interest on it; and he says that he made the offer, not because it was of advantage to him, but to encourage the company.

Sufficient appears to show that the complainant was at that time a private banker in good standing, and of great reputed wealth; and he testifies that the arrangement was continued as long as the company transacted business, except that the rate of interest which he was to allow was reduced from ten to eight per cent per annum. Blank checks to draw the money in his hands were prepared by the officers of the company, and were drawn on him, not as treasurer, but as a private banker; and he testifies that it was never understood at any meeting of the company that there were any funds of the company in his hands as treasurer, and that the funds on hand were always reproted as funds in bank, and were so described in the published reports of the company.

Decided confirmation of the material parts of these statements comes from several witnesses; and it appears to the entire satisfaction of the court that the arrangement set forth in the bill of complaint was known to and approved by the stockholders as well as the directors, and by the executive committee and the committee of finance and investment. Deposits undoubtedly may be made with a banker under circumstances where the legal conclusion would be, that the title to the fund deposited remained in the depositor; and in that case the banker would become the bailee of the depositor, and the latter might rightfully demand the identical money deposited as his property: but where the deposit is general, and there is no special agreement proved inconsistent with such a theory, the title to the money deposited, whatever it may be, passes to the banker, and he becomes liable for the amount as a debt which can only be discharged by a legal payment of the amount. Thompson v. Riggs, 5 Wall. 678; Bank v. Wister, 2 Pet. 325.

All deposits made with bankers, said Mr. Justice Miller, may be divided into two classes: namely, those in which the bank becomes bailee of the depositor, the title to the thing deposited remaining with the latter; and that other kind of deposit of money, peculiar to banking business, in which the depositor for his own convenience parts with the title of his money, and loans it to the banker; and the latter, in consideration of the loan of the money and the right to use it for his own profit, agrees to refund the same amount, or any part thereof, on demand. Marine Bank v. Fulton Bank, 2 Wall. 256.

Such an agreement to refund may be express or implied; and, if it is express, it may be to refund with or without interest, according to the terms of the agreement. Where the agreement is to pay interest, the agreement is obligatory; but the fact that the depositary agreed to pay interest affords very strong evidence that the title to the money deposited passed out of the depositor by the act of making the deposit.

Money deposited with a banker, says Hill, creates a legal debt between the parties, which, under proper circumstances, may be recovered in an action at law. Hill on Trustees, 4th Am. ed., 173.

Authorities to the same effect are numerous and decisive; as, for example, it was expressly decided by the Master of the Rolls that money paid to a banker becomes immediately a part of his general assets, and he is merely a debtor for the amount. Devaynes v. Noble, 1 Meriv. 561.

Sums which are paid, said Lord Denman, to the credit of a customer with a banker, though usually called deposits, are, in truth, loans by the customer to the banker; and the party who seeks to recover the balance of such an account must prove that the loan was in reality intended to be his, and that it was received as such. Sims v. Bond, 2 Barn. & Ad. 392.

Exactly the same rule was laid down in the Court of Exchequer, where it was held that money deposited with a banker by his customer, in the ordinary way, is money lent to the banker, with a superadded obligation that it is to be paid when demanded by a check. Pott v. Clegg, 16 Mee. & Wels. 327.

Viewed in the light of these suggestions, it is clear that the amount deposited by the company with the complainant, and which he still owes to the company, or to the respondent as assignee, was and is held by him as a private banker, and not as treasurer of the company; and that any losses sustained by the complainant, at the time and in the manner alleged, for which the bankrupt corporation were and are liable as insurers, may be set off against that claim of the bankrupt corporation, as described in the pleadings in the original suit and cross-bill filed by the respondent.

Nothing remains to be done in this investigation except to recapitulate the elements for a decree, and to direct in general terms what the new decree in the case shall be in the court below. Enough is already remarked to show that the complainant is entitled to the relief prayed, so far as respects the claim of the respondent for the balance due to the bankrupt corporation for the moneys deposited with him as a private banker, amounting to the sum of $39,188.03, as appears in the record; and that he should be allowed to prove the balance due to him for the said losses, to the extent that the company is liable therefor, against the estate of the bankrupt corporation; that the complainant is not entitled to the relief prayed, so far as respects the notes referred to in the bill of complaint, for the reason that the notes were given for shares in the capital stock, and constitute a trust-fund which belongs to all the creditors of the company, for which the complainant in the cross-bill is entitled to a decree.

Should further investigation become necessary in order to ascertain the exact amount of the respective claims, that investigation will be made by the Circuit Court.

Decree reversed, and cause remanded for such further proceedings as may be necessary, and for decree in conformity to the opinion of this court.

MR. JUSTICE STRONG did not sit during the argument, nor take any part in the decision, of this case.

title: Scammon v. Kimball/Opinion of the Court


text: Talk:Scammon v. Kimball/Opinion of the Court


text:
Pace v. Burgess

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

The question raised in this case was, whether the charge for the stamps required to be placed on packages of manufactured tobacco intended for exportation was a tax or duty on exports within the meaning of the constitutional prohibition.

Mr. William P. Burwell and Mr. C. S. Stringfellow for the plaintiff in error.

The constitutional provision that 'no tax or duty shall be laid on articles exported from any State 'absolutely prohibits Congress from imposing a pecumiary charge on them, whether it consists of a tax or duty, or is laid in the form of excises or imposts; and it is immaterial whether or not the professed object be to identify and separate the articles which are intended for export or to prevent fraud.

It has been insisted, however, that these charges are only for the regulation of trade, and are not a tax or duty for the purpose of revenue. This is entirely immaterial. In the constitutional convention, an amendment proposing to insert, after 'duty' in the existing provision, the words 'for the purpose of revenue,' was rejected by a vote of eight States to three. Madison Debates, p. 456.

The asserted fact, that it was not the intention of Congress to give the character of an export tax to the money exacted by the law in question, is entitled to no weight. Their constitutionality cannot be determined by such intention. In Brown v. Maryland, 12 Wheat. 49, the articles imported were not taxed, but the importer was required to pay for a license to sell them. No one intimated that the legislature of Maryland designed to regulate the foreign commerce in which her citizens were engaged. It was contended, however, that the State had an undoubted right to tax the occupation of all persons within her limits; but this court held that this 'was but varying the form without varying the substance of the thing prohibited.' So, in this case, the purchase of the required revenue-stamps by the plaintiff in error at the time the officer made the entry is but the purchase of the privilege of exporting, and is equivalent to taking out a license and paying the United States therefor. The practical result is the same as if a tax or duty was specifically laid upon each exported package of manufactured tobacco.

Almy v. State of California, 24 How. 169, is another case bearing fully on the case at bar. This court held that the California statute was clearly within the terms of the prohibition on the States in regard to the subject of exports. If, therefore, it was an unconstitutional exercise of power in a State to levy a tax on a bill of lading, which the court regarded as an inseparable incident to a shipment abroad, how much more would it have regarded a stamp-tax laid directly on the article about to be exported! Chief Justice Taney stated, that, if the stamp had been required to be placed on the packages of gold dust, every one would see at a glance that such a tax would be repugnant to the prohibition. Yet that is exactly what the acts of Congress in question have required in regard to the exportation of this tobacco, although a much more stringent prohibition is imposed on that body than on the States.

The amount required to be paid for the stamp is wholly unimportant in determining the question submitted. It is one of constitutional power.

Mr. Assistant Attorney-General Edwin B. Smith, contra.

MR. JUSTICE BRADLEY delivered the opinion of the court.

title: Pace v. Burgess


text: Talk:Pace v. Burgess

title: Talk:Pace v. Burgess