text: Talk:King v. Worthington/Opinion of the Court


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Driesbach v. National Bank Stark

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

The first of these actions was brought by the Second National Bank of Wilkes Barre, Pennsylvania, against Driesbach, upon two promissory notes, of which the following are copies:--

'$8,000.] WILKES BARRE, PA., Aug. 11, 1877.

'Ninety days after date I promise to pay to the order of J. B. Stark eight thousand dollars, at the Second National Bank of Wilkes Barre, without defalcation. Value received.

'D. G. DRIESBACH.

(On the back of which is indorsed:) 'J. B. STARK, D. G. DRIESBACH.'

'$5,000.] WILKES BARRE, PA., Sept. 6, 1877.

'Ninety days after date I promise to pay to the order of J. B. Stark five thousand dollars, at the Second National Bank of Wilkes Barre, without defalcation. Value received.

'D. G. DRIESBACH.

(On the back of which is indorsed:) 'J. B. STARK, D. G. DRIESBACH.'

The second action is by the bank against Stark, the indorser.

On the 20th of April, 1871, a note for $5,000 was, by the bank, discounted for Driesbach, and it was renewed every ninety days thereafter until the 24th of October, 1872, when $1,000 having been paid, it was renewed for $4,000. Jan. 25, 1873, $1,000 was paid, and the note renewed for $3,000. Subsequently it was renewed every ninety days for $3,000 until May 12, 1877, when it was again renewed.

The bank discounted, Sept. 12, 1872, for Driesbach another note, indorsed by Stark, for $5,000, at ninety days. This note was in like manner renewed from time to time until July 11, 1877, when it was paid by the check of one Nesbit, who discounted a note of Driesbach for $5,000, at thirty days. This note matured at the same time as the $3,000 note of May 12, and on the 11th of August the two notes were consolidated into the one at ninety days, for $8,000, discounted by the bank, and now in suit.

There was also another note of Driesbach, of Aug. 16, 1871, for $5,000, at ninety days, indorsed by Stark, which the bank discounted, and which was also renewed every ninety days for the same amount, ending in the note of Sept. 6, 1877, for $5,000, at ninety days, the second note in suit.

The original loans were made under an agreement for a line of discount upon renewable notes. Driesbach was to pay and did pay a portion of the time interest at the rate of ten per cent per annum, a portion of the time at nine, and a portion of the time at eight.

The amount charged on the first discount of the three several notes was deducted from their face, and the net proceeds were passed to the credit of the maker, but the interest on the subsequent notes was paid when they were renewed.

The defendants pleaded the general issue, and a special plea, that the interest charged by and paid to the bank was usurious, and received in violation of sects. 5197 and 5198 of the Revised Statutes. They therefore claimed the right to set off against the face of the notes sued on the whole amount of interest so paid.

There was a judgment in each case for the plaintiff, whereupon the defendants used out writs of error.

Mr. James O. Parker for the plaintiffs in error.

Mr. W. H. Armstrong, contra.

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

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title: Driesbach v. National Bank Stark


text: Talk:Driesbach v. National Bank Stark

title: Talk:Driesbach v. National Bank Stark


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Driesbach v. National Bank Stark/Opinion of the Court

The object of the plaintiffs in error in these suits is to have usurious interest paid a national bank on renewing a series of notes, of which those now in suit are the last, applied in satisfaction of the principal of the debt. The claim is not for interest stipulated for and included in the notes sued on, but for the application of what has actually been paid as interest to the discharge of principal. This we held in Barnet v. National Bank (98 U.S. 555) could not be done; and in First National Bank of Clarion v. Gruber (8 Weekly Notes of Cases, 119), and National Bank of Fayette County v. Dushane (9 id. 472), the Supreme Court of Pennsylvania followed that case, overruling its former decisions on the same question in Lucas v. Government National Bank (78 Pa. St. 228) and Oberholt v. National Bank of Mt. Pleasant, 82 id. 490. If, therefore, we reverse the judgment for the specific errors now complained of, it would serve no useful purpose, for on the facts admitted the same general result must follow another trial. Without, therefore, considering at all the question on which the cases seem to have turned below, the judgments are

Affirmed.


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


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National Bank v. Insurance Company (104 U.S. 54)

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

The Connecticut Mutual Life Insurance Company of Hartford, in the year 1864, appointed A. H. Dillon, Jr., its general agent for the territory consisting of the States of Maryland, Delaware, West Virginia, and the District of Columbia. He opened an office at No. 8 South Street, Baltimore, conspicuously designated by signs as his place of business as general agent of the Connecticut Mutual Life Insurance Company. It was his duty, among others, to collect and receive premiums on policies issued by the company, from persons residing within his territory, and remit the same to the company at Hartford. This he usually did twice a month, finally accounting for the business of each month at its close. The made of remittimed was by checks upon a Baltimore bank to the order of the secretary of the company. To this end he at first opened an account with John S. Gittings & Co., transferred afterwards to the Chesapeake Bank, and on April 1, 1871, to the appellant, a national bank, then recently organized, whose banking-house was across the street from his office. The account was designated on its books as follows: 'Dr. Central National Bank in account with A. H. Dillon, Jr., gen'l ag't. Cr.' To the credit of this account he deposited from time to time premiums collected for the insurance company, and remitted twice a month his checks, signed by him as general agent, and payable to the order of Jacob L. Greene, secretary of the appellee. When the premiums were paid by the checks of others, they were indorsed by him as general agent, and deposited to the credit of this account. In such instances an indorsement in this form was required by the bank. Dillon also deposited to the credit of this account, from time to time, various amounts of money received by him from other sources than from premiums belonging to the appellee, and drew upon this account checks for money applied and paid to his own use. The aggregate of the deposits made, as shown in this account, from the beginning till it was closed, amount to $470,753.05. There were drawn against it, in all, four hundred and eleven checks, of which sixty-eight were on their face payable to the order of Greene as secretary of the appellee, representing, however, much the larger part of the gross sum of the deposits.

On June 12, 1874, this account was finally closed, with a balance, as between deposits and checks, of $11,000.86. At that date Dillon owed an amount larger than this to the insurance company, and the proof is clear that the whole balance then shown by the account, as above stated, was the proceeds of collections of premiums made by him as its agent.

His current deposits of premiums in this account included his own commissions as agent.

Before opening this account with the Central National Bank, on March 9, 1871, Dillon had opened another account with it, in the name of his wife, Mrs. A. P. Dillon. This account was kept open until May 1, 1873, which is the date of the last entries, when it was balanced and closed. The deposits to the credit of this account were made by Dillon, and the checks were drawn by him in his wife's name. All the transactions represented in it were for his individual account. On both these accounts Dillon was, by agreement with the bank, allowed interest, which he collected for his individual use.

On March 14, 1872, Dillon was in distress for money to make good his margins on some speculations in stock, and applied to O'Connor, the president of the bank, for a loan. He explained the nature, extent, and cause of his necessity to O'Connor, who, indeed, was already aware that he was in the practice of stock speculation, having been interested with him in some ventures of that character. O'Connor testifies that he declined making the loan without security, when Dillon proposed his wife as security for the amount required, not to exceed $12,000, to be drawn upon checks in her name, which, if not made good in a few days, were to be taken up by a note signed by her, assuring O'Connor that certain real estate owned by her where they resided in Baltimore, with its furniture, was worth at least $15,000 or $20,000. He also urged, says O'Connor, that he kept a valuable account with the bank, and as he had never asked before for any loan, he thought he was entitled to it. The reference, doubtless, was to his agency account.

The loan was made, the money being paid by the bank on checks drawn in the name of Alice P. Dillon, to the amount of $13,000, on March 14, 15, and 16, 1872. These checks were debited to the bank account in her name, and constituted an overdraft of $12,067.14. On April 2, 1872, the bank discounted Mrs. Dillon's note for $12,000, and carried the proceeds to the credit of this account, in order to change the form of the debt. This note was renewed from time to time, the interest being paid in some instances by Dillon's check as general agent, charged to the account kept by him in that name. It was reduced at one time by a payment of $2,000, paid in money. It was then carried in the same way until Dec. 11, 1873, when the note of Mrs. Dillon for $10,000 was given, dated Nov. 29, 1873, at six months, falling due June 1, 1874. This note was signed by Dillon and his wife, in their own handwriting, both as makers and indorsers. The discount upon it, and the interest accrued on the prior note, overdue for some time, of which it was the renewal, making in all $333.34, was paid to the bank by Dillon's check as general agent. The account in the name of Mrs. Dillon was balanced on May 1, 1873, by two entries of $12,000 each, representing the debt as it then stood; and that account was closed. The note thereafter appeared only in the discount ledger, until it was charged up, as hereafter stated. It was expressed to be payable at the Central National Bank of Baltimore. The same day this note was given, Nov. 29, 1873, an agreement was made in writing between the bank, by resolution of the directors, and Dillon and his wife, 'that in consideration of Alice P. Dillon being a stockholder in this bank, and of A. H. Dillon, Jr., being a customer of the bank, their note for $10,000, dated November 29th, 1873, at six months, be discounted at 6 per c. per annum, provided only that it be agreed in writing between the makers and indorsers of said note and the bank, that at the maturity of the note $5,000 must be paid, and a new note at 6 months, to be discounted at 6 per c., which at its maturity must be paid in full, being in full payment of the loan.'

In addition to these two accounts there was a third, entitled on the books of the bank, 'A. H. Dillon, Jr.,' spoken of in the testimony as his individual account. The first entry is dated Oct. 15, 1873, the last, Dec. 11, 1873. There are eight items on each side, amounting to $28,337.50. In the first three items it is testified that Dillon had no interest at all. They represent transactions made by him for the bank itself. The last item in the account is $10,000, being proceeds of his note discounted, which were used to take up a prior one, then matured.

On June 1, 1874, the note given by Dillon and his wife for $10,000, dated Nov. 29, 1873, at six months, became due and was not paid. By order of the bank it was that day charged to Dillon in his account as general agent. In ignorance of that fact, he continued to make deposits in that account and draw checks upon it till June 12, 1874, when it was closed, showing a credit balance at that date, if the note of $10,000 was not properly chargeable, of $11,000.86.

On June 10, 1874, Dillon drew his check as general agent on the bank for $8,000 to the order of Greene, the secretary of the insurance company, and remitted it to him at Hartford. On June 13 it was presented to the bank for payment, and payment refused, on the ground that there were not funds to the credit of the drawee sufficient to pay it.

In the settlement of his agency accounts with the company for May and June, 1874, he was allowed a credit for the amount of this balance in the Central Bank, $11,000.86, and paid in addition, in full of his account to June 30, $4,550.66.

On June 11 the directors of the bank, by resolution, recite the agreement made in respect to the $10,000 note, on Nov. 29, 1873, when it was discounted; that it had not been complied with; that the note was made payable at the bank; and declare that 'this board approve of the act of the acting cashier in charging said note in full to the account and funds of A. H. Dillon, Jr., general agent,' &c.

On July 18, 1874, the insurance company filed a bill in equity in the Circuit Court of Baltimore City against the bank to recover the balance, which it alleged remained in the account of A. H. Dillon, Jr., general agent, $11,000.86, claiming it to be a fund, received by him in his fiduciary character, as its agent, which they had a right to follow and reclaim as against the bank.

To this bill the bank appeared and answered, denying its equity.

The insurance company filed an amended bill on March 4, 1875, in which it repeated the allegations of the original bill, and further averred that the defendant bank had taken proceedings under the National Bank Act to wind up its business and cease to act as a national bank in the city of Baltimore, and that if it be permitted to do so, distributing its assets among its stockholders, the complainant will have no remedy except by a multiplicity of suits against individual stockholders, many of whom are not within the jurisdiction. It therefore prays, in addition to an account and a declaration that the fund in question is a trust fund, of which the complainant is beneficial owner, that an injunction may be granted restraining the bank from paying to its stockholders its assets without retaining a sufficient amount to satisfy the complainant's demand.

To the amended bill the defendant filed what are designated as pleas, as follows:--

1. That the plaintiff is not in any sense a creditor of the defendant.

2. That there never was nor is any privity between the plaintiff and defendant as to the various matters alleged in the bill.

3. That the court had no jurisdiction as to the matters alleged, the remedy, if any, being complete and adequate at law.

And afterwards an additional plea:--

4. That under the provisions of the acts of Congress, in reference to national banks, it is exempted from the process of injunction as prayed for.

By the amended bill A. H. Dillon, Jr., was made a party defendant. He appeared and filed his answer to the original and amended bill; but, having been lost or mislaid, it is not contained in the transcript of the record.

Subsequently, on April 10, 1877, the cause was removed from the State court to the Circuit Court of the United States, on the petition of the defendant, the Central National Bank.

The bank, on May 23, 1878, filed a motion to dismiss the bill, on the grounds:--

1. That the bank, by a vote of its shareholders, owning two thirds of its stock, taken July 15, 1874, had gone into liquidation, in pursuance of sects. 5220, 5221, and 5222 of the Revised Statutes, and had thereby become dissolved.

2. And that the complainant, on June 8, 1878, had filed in the Circuit Court of the United States its bill of complaint, by virtue of sect. 2, c. 156, of an act of Congress approved June 30, 1876, entitled 'An Act authorizing the appointment of receivers of national banks, and for other purposes,' praying process against said bank and against the persons who were shareholders thereof at the time the same went into voluntary liquidation, and seeking the enforcement of the same demand sought to be enforced in this case, which is still pending.

This motion was overruled. The cause having been set down for hearing, the complainant moved for leave to file a general replication to the original answer, nunc pro tunc, and also to file a replication to defendant's first plea, which motions were granted; and to deny the legal sufficiency of the defendant's 2d and 3d pleas, setting the said two pleas for argument, which was overruled.

The motion to dismiss the bill, on the ground that the bank had gone into liquidation and was thereby dissolved, was renewed on June 10, 1878, with the additional averment, that in the mean time all its property and assets had been distributed among its shareholders, and that the bank was wholly and finally closed, and had ceased to have a corporate existence. This motion was overruled as having been filed after the cause had been argued and submitted, and after the court had orally pronounced its opinion.

And on the same day a decree was passed reciting that the cause standing ready for hearing, and having been argued, and submitted upon the bill, answer, pleadings, and other proceedings and evidence in the cause, and decreeing payment by the bank to the complainant of the amount of the fund claimed, with interest.

From this decree the bank prosecutes this appeal.

Mr. Arthur W. Machen for the appellant.

Mr. John Carson, contra.

MR. JUSTICE MATTHEWS, after making the foregoing statement of facts, delivered the opinion of the court.


text: Talk:National Bank v. Insurance Company (104 U.S. 54)


text:
National Bank v. Insurance Company (104 U.S. 54)/Opinion of the Court

The contention of the appellant, in opposition to the decree below, upon the merits, is that the account of A. H. Dillon, Jr., general agent, with the bank was an individual account with him as a depositor, which created the relation of debtor and creditor between them, and to which no other party was or could be privy; that the style in which it was kept, of general agent, was merely a description personoe, and furnished no indication that the money deposited belonged to the depositor in any fiduciary capacity; that it described merely the business in which he was engaged, as that of a general agency, for whomsoever might employ him; that in point of fact the account embraced deposits from various sources, and was used as a medium for payments of every description, according to the will of the depositor; that the bank had no notice of any equitable claim of the complainant, nor of the facts on which its claim rests; that, consequently, it had the right to treat the account as a dealing with Dillon individually, in which, so far as the bank was concerned, no one else had any interest, legally or equitably, and subject to its lien as a banker, for any overdue obligation of the depositor.

It is claimed further, in support of the bank's position, that the discount of the note afterwards charged to this account was made originally upon the faith and credit that the latter was Dillon's individual property. But this we find to be distinctly and fully negatived by the circumstances in proof. There was a considerable balance to the credit of this account when the original debt was contracted, and at each time when it was renewed; but at no time does it appear that the suggestion was made that it should be applied, in whole or in part, to pay or reduce the indebtedness. The debt was first charged in the account kept in the name of Mrs. Dillon, and never appeared in the other, till it was finally charged up for payment. In the original conversation that resulted in the agreement for the loan, O'Connor, the president of the bank, demanded security, and was satisfied with the responsibility of Mrs. Dillon, as the supposed owner of their residence in Baltimore, and it was not until after O'Connor learned that this had been conveyed to another that he conceived the idea of charging the note, when it should become due, if it remained unpaid, to the account of Dillon, as general agent. The existence of this account as a profitable one to the bank was alleged as a reason by Dillon why he should have the accommodation; but it was not pledged for the payment of the loan, either in express terms, or by any acts or conduct from which such an intention can be inferred. And no such claim is made by the directors of the bank, either in their resolution of Nov. 29, 1873, authorizing the discount of the last six-months note, or that of June 11, 1874, justifying the act of the cashier in finally charging it up to the account of Dillon, as general agent.

We find it also to be fully proven that the bank knew that Dillon was the agent for the insurance company; that it was his business and duty to collect and remit to it the premiums on policies of life insurance as they accrued; that the bank account in his name as general agent was opened in that way to be used for that purpose; that in point of fact such premiums were collected and deposited for accumulation to be remitted, and were remitted by checks on that account, and that they constituted much the larger part of the fund which entered into it.

It will be observed that the question arising here is not what the rights of the parties would be if the note had been taken up by Dillon's check upon that account, the bank having no knowledge of its character, except what might be inferred from the use of the words 'general agent' at its head. Here the attempt is made, with the actual knowledge which we find imputable to the bank, and without Dillon's assent, to pay itself his overdue note out of a fund for which, as agent of the insurance company, he was bound to account to it. In the case of Duncan v. Jaudon (15 Wall. 165), this court decided that a banker lending money to a person, for his private use, on the security of stocks, the certificates of which showed that he held them as trustee for another, was chargeable, as a party to the breach of trust, for the value of the trust property converted, and cited with approbation the similar decision in Shaw v. Spencer (100 Mass. 382), where the certificates were in the name of 'A. B., trustee,' without naming a cestui que trust. In that case it was held that the pledgee is, by the terms of the certificate, put on inquiry as to the character and limitations of the trust, and if he accepts the pledge without inquiry, does so at his peril.

A bank account, it is true, even when it is a trust fund, and designated as such by being kept in the name of the depositor as trustee, differs from other trust funds which are permanently invested in the name of trustees for the sake of being held as such; for a bank account is made to be checked against, and represents a series of current transactions. The contract between the bank and the depositor is that the former will pay according to the checks of the latter, and when drawn in proper form the bank is bound to presume that the trustee is in the course of lawfully performing his duty, and to honor them accordingly. But when against a bank account, designated as one kept by the depositor in a fiduciary character, the bank seeks to assert its lien as a banker for a personal obligation of the depositor, known to have been contracted for his private benefit, it must be held as having notice that the fund represented by the account is not the individual property of the depositor, if it is shown to consist, in whole or in part, of funds held by him in a trust relation.

In such circumstances it is merely an application of the principle of set-off, and is illustrated by the case of Bailey v. Finch, Law Rep. 7 Q. B. 34. There the plaintiff, as trustee of a bankrupt banking firm, sought to recover a balance of a banking account which had been overdrawn. The defendant sought to set off a balance due to him as executor of A., in which name he had another account, and proved that as residuary legatee he was beneficially entitled to this balance, the legatees being otherwise satisfied. It was held that the effect of the account being in the name of the executor was to affect the bank with notice, if there were any equities attaching to the fund, but that under the circumstances there were no such equities as to prevent the defendant from treating the balance as a fund to which he was beneficially as well as legally entitled, and that consequently he was entitled to set it against the plaintiff's claim. Cockburn, C. J., said: 'There can be no doubt that in point of law the estate and effects of the deceased testatrix passed to the defendant as executor. And although it may be for his convenience to open an account in his own name as executor instead of in his own name as private customer, the whole effect of that is, I apprehend, to affect the bank with the knowledge of the character in which he holds the money. Therefore, if there were persons beneficially interested in that fund, the bank might be liable to be restrained by proceedings in equity from dealing with the fund as if it were one in which their customer, the defendant, were beneficially interested, absolutely without reference to any trust or beneficial interest to which it was subject.' In the same case, Blackburn, J., said, that opening the account as executor operated 'as a notice to them, as a statement to the bank-'This account which I am opening is not my own unlimited property, but it is money which belongs to the estate which I am administering as executor; consequently there may be persons who have equitable claims upon it.' The bank would have been bound by any equity which did exist, of which they had notice at the time the bank became bankrupt.'

In the case of Pannell v. Hurley (2 Col. C. C. 241), the depositor, having two accounts, one in trust, the other in his own name, drew his check as trustee to pay his private debt to the banker. The Vice-Chancellor, Knight Bruce, put the case thus:--

'Money is due from A. to B., in trust for C. B. is indebted to A. on his own account. A., with knowledge of the trust, concurs with B. in setting one debt against the other, which is done without C.'s consent. Can it be a question in equity whether such a transaction stand?'

In Bodenham v. Hoskyns (2 De G., M. & G. 903), the principle was stated to be one, acted upon daily by courts of equity, 'according to which a person who knows another to have in his hands or under his control moneys belonging to a third person, cannot deal with those moneys for his own private benefit when the effect of that transaction is the commission of a fraud upon the owner.'

In the case of Ex parte Kingston, In re Gross (Law Rep. 6 Ch. App. 632), a county treasurer had two bank accounts, one headed 'Police Account.' Some of the items to his credit in this account could be traced as having come from county funds, but most of them could not. The checks which he drew upon it were all headed 'Police Account,' and appeared to have been drawn only for county purposes. For the purposes of interest the bank treated the accounts as one account, and the interest on the balance in his favor was carried to the credit of his private account. The manager of the bank knew he was county treasurer, and understood that he had been in the habit of paying county moneys into the bank. He absconded, his private account being overdrawn, and the police account being in credit. It was held that the bank was not entitled to set off the one account against the other, but that the county magistrates could recover the balance standing to the credit of the police account. Sir W. M. James, L. J., said: 'In my mind this case is infinitely stronger than those referred to during the argument, in which a similar claim on the part of bankers was disallowed; for in those cases the bankers relied on cheques drawn by the customers; and if a banker receives from a customer holding a trust account a cheque drawn on that account, he is not in general bound to inquire whether that cheque was properly drawn. Here the customer has drawn no cheque, and the bankers are seeking to set off the balance on his private account against the balance in his favor on what they knew to be a trust account.'

It is objected that the remedy of the complainant below, if any existed, is at law, and not in equity. But the contract created by the dealings in a bank account is between the depositor and bank alone, without reference to the beneficial ownership of the moneys deposited. No one can sue at law for a breach of that contract, except the parties to it. There was no privity created by it, even upon the facts of the present case, as we have found them, between the bank and the insurance company. The latter would not have been liable to the bank for an overdraft by Dillon, as was decided by this court in National Bank v. Insurance Company, 103 U.S. 783; and, conversely, for the balance due from the bank, no action at law upon the account could be maintained by the insurance company.

But although the relation between the bank and its depositor is that merely of debtor and creditor, and the balance due on the account is only a debt, yet the question is always open, To whom in equity does it beneficially belong? If the money deposited belonged to a third person, and was held by the depositor in a fiduciary capacity, its character is not changed by being placed to his credit in his bank account.

In the case of Pennell v. Deffell (4 De G., M. & G. 372, 388), Lord Justice Turner said: 'It is, I apprehend, an undoubted principle of this court, that as between cestui que trust and trustee and all parties claiming under the trustee, otherwise than by purchase for valuable consideration without notice, all property belonging to a trust, however much it may be changed or altered in its nature or character, and all the fruit of such property, whether in its original or in its altered state, continues to be subject to or affected by the trust.' In the same case, Lord Justice Knight Bruce said (p. 383): 'When a trustee pays trust money into a bank to his credit, the account being a simple account with himself, not marked or distinguished in any other manner, the debt thus constituted from the bank to him is one which, as long as it remains due, belongs specifically to the trust as much and as effectually as the money so paid would have done, had it specifically been placed by the trustee in a particular repository and so remained; that is to say, if the specific debt shall be claimed on behalf of the cestuis que trustent, it must be deemed specifically theirs, as between the trustee and his executors, and the general creditors after his death on one hand, and the trust on the other.' He added (p. 384): 'This state of things would not, I apprehend, be varied by the circumstance of the bank holding also for the trustee, or owing also to him, money in every sense his own.'

Vice-Chancellor Sir W. Page Wood, in Frith v. Cartland (2 Hem. & M. 417, 420), said that Pennell v. Deffell rested upon and illustrated two established doctrines. One was that 'so long as the trust property can be traced and followed into other property into which it has been converted, that remains subject to the trust;' the second is, 'that if a man mixes trust funds with his own, the whole will be treated as the trust property, except so far as he may be able to distinguish what is his own.'

The case of Pennell v. Deffell (supra) was the subject of comment byh Fry, J., in In re West of England & South Wales District Bank, Ex parte Dale & Co., 11 Ch. D. 772. Strongly approving the decision in principle, he felt bound nevertheless, by what he considered the weight of authority, not to apply it, in the circumstances of the case before him, where there had been mingling of trust money with individual money. He said, however: 'Does it make any difference that, instead of trustee and cestui que trust, it is a case of fiduciary relationship? What is a fiduciary relationship? It is one in which, if a wrong arise, the same remedy exists against the wrong-doer on behalf of the principal as would exist against a trustee on behalf of the cestui que trust. If that be a just description of the relationship, it would follow that wherever fiduciary relationship exists, and money coming from the trust lies in the hands of persons standing in that relationship, it can be followed and separated from any money of their own.'

The whole subject of this discussion was very elaborately and with much learning reviewed by the Court of Appeal in England, in the very recent case of Knatchbull v. Hallett, In re Hallett's Estate, 13 Ch. D. 696. It was there decided that if money held by a person in a fiduciary character, though not as trustee, has been paid by him to his account at his banker's, the person for whom he held the money can follow it, and has a charge on the balance in the banker's hands, although it was mixed with his own moneys; and in that particular the court overruled the opinion in Ex parte Dale & Co., supra. It was also held that the rule in Clayton's Case (1 Mer. 572), attributing the first drawings out to the first payments in, does not apply; and that the drawer must be taken to have drawn out his own money in preference to the trust money; and in that particular Pennell v. Deffell was not followed. The Master of the Rolls, Sir George Jessel, showed that the modern doctrine of equity, as regards property disposed of by persons in a fiduciary position, is that, whether the disposition of it be rightful or wrongful, the beneficial owner is entitled to the proceeds, whatever be their form, provided only he can identify them. If they cannot be identified by reason of the trust money being mingled with that of the trustee, then the cestui que trust is entitled to a charge upon the new investment to the extent of the trust money traceable into it; that there is no distinction between an express trustee and an agent, or bailee, or collector of rents, or anybody else in a fiduciary position; and that there is no difference between investments in the purchase of lands, or chattels, or bonds, or loans, or moneys deposited in a bank account. He addopts the principle of Lord Ellenborough's statement in Taylor v. Plumer (3 M. & S. 562), that 'it makes no difference in reason or law into what other form different from the original the change may have been made, whether it be into that of promissory notes for the security of money which was produced by the sale of the goods of the principal, as in Scott v. Surman (Willes, 400), or into other merchandise, as in Whitecomb v. Jacob (1 Salk. 161); for the product or substitute for the original thing still follows the nature of the thing itself, as long as it can be ascertained to be such, and the right only ceases when the means of ascertainment fail.' But he dissents from the application of the rule made by Lord Ellenborough, when the latter added, 'which is the case when the subject is turned into money and confounded in a general mass of the same description;' for equity will follow the money, even if put into a bag or an undistinguishable mass, by taking out the same quantity. And the doctrine that money has no ear-mark must be taken as subject to the application of this rule. The Court of Appeals had previously applied the very rule as here stated in the case of Birt v. Burt, reported in a note to Ex parte Dale & Co., 11 Ch. D. 773.

The principle is illustrated by many cases in this country. In Farmers' & Mechanics' National Bank v. King (57 Pa. St. 202), a collector of rents deposited moneys of his principal in a bank in his own name; it was attached by a creditor of the depositor, and immediately afterwards notice of ownership was given by the principal. It was held that the attaching creditor stood in the position of the depositor, and could recover only what the depositor could. The law of the case was stated by Judge Strong in the following language: 'It is undeniable that equity will follow a fund through any number of transmutations, and preserve it for the owner so long as it can be identified. And it does not matter in whose name the legal right stands. If money has been converted by a trustee or agent into a chose in action, the legal right to it may have been changed, but equity regards the beneficial ownership. It is conceded, for the cases abundantly show it, that when the bank received the deposits it thereby become a debtor to the depostor. The debt might have been paid in answer to his checks, and thus the liability extinguished, in the absence of interference by his principals, to whom the money belonged. But serely it cannot be maintained that when the principals asserted their right to the money before its repayment, and gave notice to the bank of their ownership, and of their unwillingness that the money should be paid to the agent, his right to reclaim it had not ceased. A bank can be in no better situation than any other debtor.'

The same doctrine was strongly maintained byh the New York Court of Appeals in the case of Van Alen v. American National Bank, 52 N. Y. 1. In that case it was decided that when an agent deposits in a bank to his own account the proceeds of property sold by him for his principal, under instructions thus to keep it, a trust is impressed upon the deposit in favor of the principal, and his right thereto is not affected by the fact that the agent at the same time deposits other moneys belonging to himself; nor is it affected by the fact that the agent, instead of depositing the identical moneys received by him on account of his principal, substitutes other moneys therefor. In the course of the opinion, Church C. J., said: 'It was suggested on the argument that notice to the bank by the depositor was necessary to protect the rights of the plaintiff; but this is not so. The title of the plaintiff does not depend upon whether the bank knew he had a title or not. That rested upon other facts. A notice to the bank might have prevented any transfer or the creation of a lien by the depositor, or prevented the bank from taking or acquiring such lien in good faith, bot could not otherwise be necessary or important.'

This doctrine of equity is modern only in the sense of its being a consistent and logical extension of a principle originating in the very idea of trusts, for they can only be preserved by a strict enforcement of the rule that forbids one holding a trust relation from making private use of trust property. It has been repeatedly recognized and enforced in this court. Oliver v. Piatt, 3 How. 333; May v. LeClaire, 11 Wall. 217; Duncan v. Jaudon, 15 id. 165; Bayne v. United States 93 U.S. 642; United States v. State Bank, 96 id. 30.

The relation of Dillon to the insurance company was one of confidence and trust. He was its agent for the collection of premiums, which belonged to it no less when in his hands than before their receipt by him. He was to account for them, under its directions, and in his entire dealing with them was bound to obey its orders. He was not merely its debtor for the amount in his hands. He held the fund for the use and as the property of the company. Foley v. Hill, 2 H. of L. Cas. 28. In a direct suit between them, Dillow v. Connecticut Mutual Life Insurance Co. (44 Md. 386), it was so expressly ruled, the Maryland Court of Appeals saying: 'Dillon not only held the fiduciary relation to the company of its agent, but was acting in respect to this and all the money he collected while such agent, under specific directions as to what he should do with it, directions which the company had the right, for its own protection and that of its policy-holders, to have specifically performed. . . . He must, we think, be regarded and treated as a trustee, and the fund thus in his hands must be considered as so far impressed with a trust as to give a court of equity jurisdiction of the case on that ground, if on no other.'

Evidently the bank has no better right than Dillon, unless it can obtain it through its banker's lien. Ordinarily that attaches in favor of the bank upon the securities and moneys of the customer deposited in the usual course of business, for advances which are supposed to be made upon their credit. It attaches to such securities and funds, not only against the depositor, but against the unknown equities of all others in interest, unless modified or waived by some agreement, express or implied, or by conduct inconsistent with its assertion. But it cannot be permitted to prevail against the equity of the beneficial owner, of which the bank has notice, either actual or constructive.

In the present case, in addition to the circumstance that the account was opened and kept by Dillon in his name as general agent, and all the presumptions properly arising upon it, we have found that other facts proven on the hearing justify and require the conclusion that the bank had full knowledge of the sources of the deposits made by Dillon in this account, and of his duty to remit and account for them as agent of the insurance company. It is, consequently, chargeable with notice of the equities of the appellee.

In our opinion the equity of the case, upon the merits, was manifestly with the appellee. But the appellant has assigned other errors upon the decree which remain to be considered.

It is claimed that the suit while in the Circuit Court abated by reason of the dissolution of the defendant below as a corporate body.

The Central National Bank was organized Jan. 16, 1871, under the act of June 3, 1864, c. 106 (13 Stat. 99), and the amendments thereto. Its articles of association provided that 'this association shall continue for the period of twenty years from the date of the organization certificate, unless sooner dissolved by the act of its stockholders owning at least two-thirds of its stock, who may dissolve and close up the association in such manner as they may deem to be for the interest of the stockholders and creditors of the association, but subject to the restrictions, requirements, and provisions of the act.'

On July 15, 1874, three days before the complainant's bill was filed, at a meeting of the stockholders of the bank held pursuant to law, 'it was voted by the stockholders of said association owning more than two-thirds of its stock, that said association go into liquidation and be closed.'

It is certified by the Comptroller of the Currency 'that the Central National Bank of Baltimore went into voluntary liquidation on July 15, 1874, under sections 5220 and 5221 of the Revised Statutes of the United States, and on Jan. 8, 1875, deposited legal-tender notes with the treasurer of the United States for the full amount of its outstanding circulation, as provided in section 5222 of the Revised Statutes, whereupon the bonds deposited by the association for the purpose of securing its circulating notes were delivered to the bank, thus finally closing its connection with this department.'

It further appears that the bank ceased to do any new banking business after resolving to go into liquidation; paid its depositors and other creditors, so far as their claims were admitted; reduced its assets to cash, and distributed the money among the shareholders, paying them back their capital in full with an accumulation of two per cent premium. The bank's lease of its banking-house expired March 1, 1875, when its doors were closed, its clerks discharged, and afterwards its furniture removed and disposed of and its signs taken down. On Feb. 1, 1875, a special authority was issued by the board of directors, authorizing the president and acting cashier to act for and do all legal acts that might become necessary in the liquidation of the business of the bank.

It is claimed that these facts show a dissolution of the corporation.

It is provided by sect. 5136 of the Revised Statutes that every national bank, duly incorporated, shall 'have succession for the period of twenty years from its organization, unless it is sooner dissolved according to the provisions of its articles of association, or by the act of its shareholders owning two-thirds of its stock, or unless its franchise becomes forfeited by some violation of law.'

By sect. 5220 it is also provided that 'any association may go into liquidation and be closed by the vote of its shareholders owning two-thirds of its stock.'

Sect. 5221 requires that whenever a vote is taken to go into liquidation, notice of the fact shall be given to the Comptroller of the Currency, and publication made in newspapers, that the association is closing up its affairs, and notifying its creditors to present their claims for payment.

Six months thereafter is given by sect. 5222, in which the association is required to deposit with the treasurer of the United States lawful money of the United States sufficient to redeem all its outstanding circulation.

Sect. 5224 further provides that when that deposit has been made, the bonds deposited to secure payment of its notes shall be reassigned to it. 'And thereafter the association and its shareholders shall stand discharged from all liabilities upon its circulating notes, and their notes shall be redeemed at the treasury of the United States.'

In connection with the provision of the articles of association of the Central National Bank, already noticed, these are all the provisions of law that are supposed to affect the question.

It is to be observed that the sections under which the proceedings took place which, it is claimed, put an end to the corporate existence of the bank, do not refer, in terms, to a dissolution of the corporation, and there is nothing in the language which suggests it, in the technical sense in which it is used here as a defence. The association goes into liquidation and is closed. It is required to give notice that it is closing up its affairs, and in order to do so completely and effectually, to notify its creditors to present their claims for payment. And the redemption of its bonds given to secure the payment of its circulating notes, by the required deposit of money in the treasury, is limited in its effect to a discharge of the association and its shareholders from all liability upon its circulating notes. The very purpose of the liquidation provided for is to pay the debts of the corporation, that the remainder of the assets, being reduced to money, may be distributed among the stockholders. That distribution cannot take place, with any show of justice, and according to the intent of the law, until all liabilities to creditors have been honestly met and paid. If there are claims made which the directors of the association are not willing to acknowledge as just debts, there is nothing in the statute which is inconsistent with the right of the claimant to obtain a judicial determination of the controversy by process against the association, nor with that of the association to collect by suit debts due to it. It is clearly, we think, the intention of the law that it should continue to exist, as a person in law, capable of suing and being sued, until its affairs and business are completely settled. The proceeding prescribed by the law seems to resemble, not the technical dissolution of a corporation, without any saving as to the common-law consequences, but rather that of the dissolution of a copartnership, which, nevertheless, continues to subsist for the purpose of liquidation and winding up its business.

In the case of Bank of Bethel v. Pahquioque Bank (14 Wall. 383), the same question was made in reference to a national bank which, having become insolvent, by a refusal to pay its circulating notes, was put into liquidation by the Comptroller of the Currency, by the appointment of a receiver under other provisions of the bank act. It was there claimed, for the purpose of defeating a suit brought against the bank by name, that the appointment of the receiver, who had refused to admit and pay the plaintiff's claim, was a dissolution of the corporation. Mr. Justice Clifford, delivering the opinion of the court, recited the provisions of the law upon the subject, and said: 'None of these proceedings, however, support the theory that the association ceased to exist when the receiver was appointed, nor at any time before the assets of the association are fully administered, and the balance, if any, is paid to the owners of the stock or their legal representatives.' p. 398.

'Much aid cannot be derived from authorities in the examination of this proposition, as the question turns chiefly, if not entirely, upon the construction of the act of Congress; and suffice it to say that we are all of the opinion that the act contains nothing in its subsequent provisions inconsistent with the theory of the plaintiffs, that the association may sue and be sued, complain and defend, in all cases where it may be necessary that the corporate name of the association shall be used for that purpose in closing its business and winding up its affairs, under the provisions of the act which authorized its formation.' p. 400.

In that case it was argued, as in this, that as the only constitutional warrant for the existence of a national bank was its connection with the government as a fiscal agent, the severance of that connection ipso facto deprived it of vitality. The same argument would render it incapable of returning to its stockholders their capital and accumulated profits. If it was a reasonable incident to its living that it should contract debts, it is equally a reasonable incident to its dissolution that it should pay them. We see no constitutional impediment that prevents it.

The same conclusion was reached by the Court of Appeals of Maryland in the case of Ordway v. Central National Bank, 47 Md. 217.

The second section of the act of June 30, 1876, c. 156, authorizing the appointment of receivers of national banks, and for other purposes (19 Stat. 63), provides that when any national banking association shall have gone into liquidation under the provisions of sect. 5220 of the Revised Statutes, the individual liability of the stockholders, provided for by sect. 5151 of said statutes, may be enforced by any creditor of such association by bill in equity, in the nature of a creditor's bill, brought by such creditor on behalf of himself and of all other creditors of the association against the shareholders thereof, in any court of the United States having original jurisdiction in equity for the district in which such association may have been located or established.

It appears that the appellee filed, Jan. 8, 1878, in the Circuit Court of the United States for the District of Maryland, its bill of complaint against the appellant and the persons who were shareholders in the bank at the time it resolved to go into liquidation, under the provisions of that section.

It is urged that the act of 1876 is itself evidence that the bank was dissolved as a corporation by the proceedings in liquidation, and that the pendency of the bill authorized by it was a bar to any further proceeding in the present suit.

We see nothing in the act inconsistent with the continued existence of the bank as a corporation for the purposes of liquidation. Indeed, it seems to confirm the idea that for the purpose of being sued, in order judicially to determine the question of disputed liability, it continues to exist, and the remedy against the shareholders is added as a means of execution, in case the corporate assets have in the mean time been otherwise applied or shown to have been insufficient. It is a cumulative remedy and against other persons, and cannot be considered as an objection to the rendition of the present decree.

It is also assigned for error that the appellee failed to set down for argument or traverse the pleas of the defendant, as required by the thirty-eighth equity rule; but the pleas in this case were irregularly filed and defective, under the thirty-first rule, for lack of the affidavit of the defendant that they were not interposed for delay, and of the certificate of counsel that they were, in his opinion, well founded in point of law, and may well have been disregarded on that account. Besides, the second and third pleas were such only in form, as they merely alleged matters of law and not of fact.

'The office of a plea,' said Lord Eldon, in Rowe v. Teed (15 Ves. Jr. 372), 'generally, is not to deny the equity, but to bring forward a fact which, if true, displaces it.' The first plea is open to the same objection; for, although it appears to negative the averment of a matter of fact essential to the complainant's case,-that he was a creditor of the defendant,-yet really it merely denies the conclusion of law, to be drawn from the whole of the case as stated in the bill. Every matter, therefore, covered by the pleas was necessarily embraced in the hearing upon the bill, answer, and proofs. There was no issue tendered on matter of fact that was left undecided, and no matter of law affecting the merits that was not adjudged.

It is also assigned for eror that the complainant failed to file a replication to the answer. Leave to do so was granted by the court, on the complainant's motion; and although the transcript does not show that it was done, the parties went to the hearing as if it had been done, submitting the case upon the proofs which had been taken, as though a formal issue had been perfected.

The same objection was made in the cases of Clements v. Moore (6 Wall. 299) and Laber v. Cooper (7 id. 565), under circumstances not distinguishable from the present, and for the reasons there stated it is overruled.

The absence of an answer by Dillon, and the want of an issue upon it, is also assigned for error. The transcript shows that an answer had been filed by Dillon, but had been lost or mislaid. This fact having been called to the attention of the court below, before the hearing, the circuit judge announced that he would not proceed with the hearing without the answer, if the respondent's solicitor, then present, objected to the hearing for that reason. No objection was made, and the hearing properly proceeded. For aught that appears, Dillon's answer may have been a confession of the truth of the allegations of the bill.

We find no error in the record.

Decree affirmed.


text: Talk:National Bank v. Insurance Company (104 U.S. 54)/Opinion of the Court


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Kelly v. Pittsburgh

ERROR to the Supreme Court of the State of Pennsylvania.

The facts are stated in the opinion of the court.

Mr. Daniel Agenw and Mr. Albert N. Sutton for the plaintiff in error.

Mr. George Shiras, Jr., contra.

MR. JUSTICE MILLER delivered the opinion of the court.

title: Kelly v. Pittsburgh


text: Talk:Kelly v. Pittsburgh

title: Talk:Kelly v. Pittsburgh


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Kelly v. Pittsburgh/Opinion of the Court

The plaintiff in error, James Kelly, is the owner of eighty acres of land, which, prior to the year 1867, was a part of the township of Collins, in the county of Alleghany and State of Pennsylvania. In that year the legislature passed an act by virtue of which, and the subsequent proceedings under it, this township became a part of the city of Pittsburgh. The authorities of the city assessed the land for the taxes of the year 1874 at a sum which he asserts is enormously beyond its value, and almost destructive of his interest in the property. They are divisible into two classes; namely, those assessed for State and county purposes by the county of Alleghany, within which Pittsburgh is situated, and those assessed by the city for city purposes.

Kelly took an appeal, allowed by the laws of Pennsylvania, from the original assessment of taxes to a board of revision, but with what success does not distinctly appear. The result, however, was unsatisfactory to him, and he brought suit in the Court of Common Pleas to restrain the city from collecting the tax. That court dismissed the bill, and the decree having been affirmed on appeal by the Supreme Court, he sued out this writ of error.

The transcript of the record is accompanied by seven assignments of error. All of them except two have reference to matters of which this court has no jurisdiction. Those two, however, assail the decree on the ground that it violates rights guaranteed by the Constitution of the United States. As the same points were relied on in the Supreme Court of the State, it becomes our duty to inquire whether they are well founded. They are as follows:--

First, The Supreme Court of Pennsylvania erred in sustaining the authority of the city of Pittsburgh to assess and collect taxes from complainant's farm lands for municipal or city purposes, such exercise of the taxing power being a violation of rights guaranteed to him by article 5 of amendments to the Constitution of the United States.

Second, The Supreme Court of Pennsylvania erred in sustaining the authority of the city of Pittsburgh to assess and collect taxes from complainant's farm lands for municipal or city purposes, such exercise of the taxing power being a violation of rights guaranteed to him by art. 14, sect. 1, of the amendments to the Constitution of the United States.

As regards the effect of the fifth amendment of the Constitution, it has always been held to be a restriction upon the powers of the Federal government, and to have no reference to the exercise of such powers by the State governments. See Withers v. Buckley, 20 How. 84; Davidson v. New Orleans, 96 U.S. 97. We need, therefore, give the first assignment no further consideration. But this is not material, as the provision of sect. 1, art. 14, of the amendments relied on in the second assignment contains a prohibition on the power of the States in language almost identical with that of the fifth amendment. That language is that 'no State shall. . . deprive any person of life, liberty, or property without due process of law.'

The main argument of the plaintiff in error-the only one to which we can listen-is that the proceeding in regard to the taxes assessed on his land deprives him of his property without due process of law.

It is not asserted that in the methods by which the value of his land was ascertained for the purpose of this taxation there was any departure from the usual modes of assessment, nor that the manner of apportioning and collecting the tax was unusual or materially different from that in force in all communities where land is subject to taxation. In these respects there is no charge that the method pursued is not due process of law. Taxes have not, as a general rule, in this country since its independence, nor in England before that time, been collected by regular judicial proceedings. The necessities of government, the nature of the duty to be performed, and the customary usages of the people, have established a different procedure, which, in regard to that matter, is, and always has been, due process of law.

The tax in question was assessed, and the proper officers were proceeding to collect it in this way.

The distinct ground on which this provision of the Constitution of the United States is invoked is, that as the land in question is, and always has been, used as farm land, for agricultural use only, subjecting it to taxation for ordinary city purposes deprives the plaintiff in error of his property without due process of law. It is alleged, and probably with truth, that the estimate of the value of the land for taxation is very greatly in excess of its true value. Whether this be true or not we cannot here inquire. We have so often decided that we cannot review and correct the errors and mistakes of the State tribunals on that subject, that it is only necessary to refer to those decisions without a restatement of the argument on which they rest. State Railroad Tax Cases, 92 U.S. 575; Kennard v. Louisiana, id. 480; Davidson v. New Orleans, 96 id. 97; Kirtland v. Hotchkiss, 100 id. 491; Missouri v. Lewis, 101 id. 22; National Bank v. Kimball, 103 id. 732.

But, passing from the question of the administration of the law of Pennsylvania by her authorities, the argument is, that in the matter already mentioned the law itself is in conflict with the Constitution.

It is not denied that the legislature could rightfully enlarge the boundary of the city of Pittsburgh so as to include the land. If this power were denied, we are unable to seel how such denial could be sustained. What portion of a State shall be within the limits of a city and be governed by its authorities and its laws has always been considered to be a proper subject of legislation. How thickly or how sparsely the territory within a city must be settled is one of the matters within legislative discretion. Whether territory shall be governed for local purposes by a county, a city, or a township organization, is one of the most usual and ordinary subjects of State legislation.

It is urged, however, with much force, that land of this character, which its owner has not laid off into town lots, but insists on using for agricultural purposes, and through which no streets are run or used, cannot be, even by the legislature, subjected to the taxes of a city,-the water tax, the gas tax, the street tax, and others of similar character. The reason for this is said to be that such taxes are for the benefit of those in a city who own property within the limits of such improvements, and who use or might use them of they choose, while he reaps no such benefit. Cases are cited from the higher courts of Kentucky and Iowa where this principle is asserted, and where those courts have held that farm lands in a city are not subject to the ordinary city taxes.

It is no part of our duty to inquire into the grounds on which those courts have so decided. They are questions which arise between the citizens of those States and their own city authorities, and afford no rule for construing the Constitution of the United States.

We are also referred to the case of Loan Association v. Topeka (20 Wall. 655), which asserts the doctrine that taxation, though sanctioned by State statutes, if it be for a public use, is an unauthorized taking of private property.

We are unable to see that the taxes levied on this property were not for a public use. Taxes for schools, for the support of the poor, for protection against fire, and for water-works, are the specific taxes found in the list complained of. We think it will not be denied by any one that these are public purposes in which the whole community have an interest, and for which, by common consent, property owners everywhere in this country are taxed.

There are items styled city tax and city buildings, which, in the absence of any explanation, we must suppose to be for the good government of the city, and for the construction of such buildings as are necessary for municipal purposes. Surely these are all public purposes; and the money so to be raised is for public use. No item of the tax assessed against the plaintiff in error is pointed out as intended for any other than a public use.

It may be true that he does not receive the same amount of benefit from some or any of these taxes as do citizens living in the heart of the city. It probably is true, from the evidence found in this record, that his tax bears a very unjust relation to the benefits received as compared with its amount. But who can adjust with precise accuracy the amount which each individual in an organized civil community shall contribute to sustain it, or can insure in this respect absolute equality of burdens, and fairness in their distribution among those who must bear them?

We cannot say judicially that Kelly received no benefit from the city organization. These streets, if they do not penetrate his farm, lead to it. The water-works will probably reach him some day, and may be near enough to him now to serve him on some occasion. The schools may receive his children, and in this regard he can be in no worse condition than those living in the city who have no children, and yet who pay for the support of the schools. Every man in a county, a town, a city, or a State is deeply interested in the education of the children of the community, because his peace and quiet, his happiness and prosperity, are largely dependent upon the intelligence and moral training which it is the object of public schools to supply to the children of his neighbors and associates, if he has none himself.

The officers whose duty it is to punish and prevent crime are paid out of the taxes. Has he no interest in maintaining them, because he lives further from the court-house and policestation than some others?

Clearly, however, these are matters of detail within the discretion, and therefore the power, of the law-making body within whose jurisdiction the parties live. This court cannot say in such cases, however great the hardship or unequal the burden, that the tax collected for such purposes is taking the property of the taxpayer without due process of law.

These views have heretofore been announced by this court in the cases which we have cited, and in McMillen v. Anderson, 95 U.S. 37.

In Davidson v. New Orleans (supra) the whole of this subject was very fully considered, and we think it is decisive of the one before us.

Judgment affirmed.


text: Talk:Kelly v. Pittsburgh/Opinion of the Court


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Davis v. Speiden

APPEAL from the Supreme Court of the District of Columbia.

The facts are stated in the opinion of the court.

Mr. Job Barnard and Mr. James S. Edwards for the appellant.

Mr. William F. Mattingly, contra.

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

title: Davis v. Speiden


text: Talk:Davis v. Speiden

title: Talk:Davis v. Speiden


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Davis v. Speiden/Opinion of the Court

This is a bill of review for error apparent on the face of the record, and we think with the court below that on the merits it presents a case for reversal, because the averments in the original bill were not sufficiently precise and definite to warrant a decree such as was rendered, without proof. The only question, therefore, is whether the court was right in dismissing the bill because the decree had not been performed.

One of Lord Bacon's ordinances 'for the better and more regular administration of justice in chancery, to be daily observed, saving the prerogative of the court,' was that 'no bill of review shall be admitted, or other new bill to change matter decreed, except that the decree be first obeyed and performed,' save only where the act decreed to be done would extinguish a party's right at common law. Bacon's Law Tracts, 280. This ordinance is the foundation of the practice not to entertain bills of review until the decree to be reviewed has been performed, or its performance excused; the object being, as was said by Chancellor Kent, in Wiser v. Blachly (2 Johns. (N. Y.) Ch. 290), 'to prevent abuse in the administration of justice, by the filing of bills of review for delay and vexation, or otherwise protracting the litigation to the discouragement and distress of the adverse party.' That this ordinance was intended for the regulation of procedure rather than to limit the jurisdiction of the court, seems to us apparent, because not only on its face the 'prerogative of the court is saved,' but as early as 1632, in Cock v. Hobb (5 Russ. 235), a bill of review having been filed without performance of the decree, the cause was permitted to proceed on giving security for the debt which was decreed to be paid. Afterwards, in 1674, in Savill v. Darrey (1 Ch. Cas. 42), where to a bill for the review of a decree for a large sum of money the rule was pleaded 'that the defendant ought first to pay the money, before the bill should be brought into court,' the Lord Chancellor said, 'Let him give good security for the money, and we will dispense with the rule.' Again, in 1682, in Williams v. Mellish (1 Vern. 117), where a motion was made that proceedings on a decree be stayed until a bill of review could be heard, it was ordered that the decree should be performed before any bill of review would be allowed, 'unless the plaintiff. . . will swear himself not able to perform the decree, and will surrender himself to the Fleet, to lie in prison until the matter be determined on the bill of review.' Afterwards, during the year 1684, in Fitton v. Macclesfield (1 id. 264), on a motion that a bill of review might be admitted without the payment of costs in a former suit, amounting to 150, the plaintiff having made oath that he was not worth  40 besides the matter in dispute, leave was granted him to bring in the bill without the payment; and although, when the bill of review came on for hearing, it was insisted that the order dispensing with the payment of the costs ought to have been set forth in the bill, and it had not been done, the court passed by the objection without notice, and dismissed the case on its merits. So in 1685, in Palmes v. Danby (5 Russ. 239), Danby, the defendant to a bill for the review of a decree for the payment of money, put in a plea and demurrer, and among other causes of demurrer assigned that 'the decree had not been performed by the complainants in review, as ought to have been done by the rules and practice of this honorable court before they can be permitted to bring a bill of review;' but, notwithstanding this, the court finally heard the cause and made a decree on the whole matter. These cases clearly show that from the beginning the ordinance was treated as a rule of practice, and questions touching obedience to its requirements were not considered as matters of strict right, but as governed by a sound discretion. Taylor v. Person, 2 Hawks (N. C.), 298.

Another of the ordinances of Lord Bacon, promulgated at the same time, provided 'that no bill of review shall be put in, except the party that prefers it enters into a recognizance with sureties for satisfying of costs and damages for the delay, if it be found against him.' Bacon's Law Tracts, supra. This is of the same general character with the other. That provides that a bill of review shall not be admitted, that is to say, received, until the decree has been performed; and this, that such a bill shall not be put in until the prescribed security is given. Both are administrative rather than jurisdictional. The order for security was as imperative as that for performance, but we think it would not be seriously claimed that a bill which could be filed as a matter of right, was, while that rule was in force, subject to demurrer if it failed to set forth that a recognizance had been entered into. Undoubtedly a court would strike a bill from the files if it got there, without a performance of the decree, or the security required, unless good cause was shown why it had not been done. That would be a far different thing from dismissing a bill on demurrer for like cause.

We are aware that under another ordinance of Lord Bacon in respect to bills of review for newly discovered matter, and which provides that such a bill 'may be grounded by special license of the court, and not otherwise' (Bacon's Law Tracts, supra), it was held by the Master of the Rolls, in Bainbridge v. Baddeley (9 Beav. 538), that a demurrer must be allowed unless such special license is averred, and that this case was followed hesitatingly by the Vice-Chancellor in Henderson v. Cook (4 Drew. 306), because Lord Redesdale had said (Mit. Pl. by Jer. 89) it seemed necessary to state in the bill the leave obtained to file it. Whatever may be said in such cases, which are really only bills in the nature of bills of review, and which can only be filed on special license, we think it clear that as to bills which relate to errors on the face of the decree alone, and which may be filed without leave, no such rule prevails. The filing without performance is in the nature of privilege, not jurisdiction. The courts of some of the States have so treated it (Forman v. Stickney, 77 Ill. 575), and we are clearly of the opinion that such is the better practice and fully recognized by all the early English cases. Performance does not establish the error, but only makes it the duty of the courts, when called on in a proper way, to inquire as to any errors that may have been committed. Whether the courts will enter on such an inquiry without performance depends upon the exercise of a sound judicial discretion applied to the facts of the particular case.

This beings us to the facts as presented by this record. The bill of review does not aver a performance of the decree or give any excuse for non-performance. It was demurred to, among other things, on this ground. The court below at special term, notwithstanding the demurrer, reversed and vacated the decree in the original cause, and gave the complainant in the bill of review leave to answer instanter, and for that purpose to withdraw the answer filed as an exhibit to the present bill, leaving a copy with the papers. Speiden was also enjoined from prosecuting his suit at law until the final hearing of the original cause. On appeal to the general term it was ordered that Davis be permitted, by a day named, to pay into court the amount due on the decree against him, and if he did, that the decree of the special term be affirmed; but if he did not, that such decree be reversed and the bill of review dismissed. At the appointed time Davis appeared, and by affidavit showed to the court that he was utterly unable to comply with the decree at the general term; that he had no means and no possible way by or from which he could raise the money to bring into court, and this because of the great financial embarrassment under which he was then laboring. He consequently asked that the order as entered be modified so as to allow him to amend his bill, or, if that could not be done, that his bill be dismissed without prejudice. This was refused, and, consequently, the decree of the special term was reversed and the bill of review dismissed. In this we think there was error. The injustice of the decree as it stood was manifest on the face of the record, and the showing by the affidavit, which was uncontradicted, clearly brought the complainant in review within the operation of the exception to the rule dispensing with performance in case of 'poverty, want of assets, or other inability to do it.' Wiser v. Blachly, supra.

The decree of the Supreme Court of the District in general term will be reversed and the cause remanded, with instructions to affirm the decree at special term and proceed accordingly; and it is

So ordered.

title: Davis v. Speiden/Opinion of the Court


text: Talk:Davis v. Speiden/Opinion of the Court


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Klein v. Insurance Company

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

The facts are stated in the opinion of the court.

Mr. Hiram Barber, Jr., for the appellant.

Mr. Francis H. Kales, contra.

MR. JUSTICE WOODS delivered the opinion of the court.

title: Klein v. Insurance Company


text: Talk:Klein v. Insurance Company

title: Talk:Klein v. Insurance Company


text:
Klein v. Insurance Company/Opinion of the Court

On Sept. 1, 1866, a policy of insurance was issued by the New York Life Insurance Company upon the life of Frederick W. Klein, in the sum of $5,000, payable to his wife, Caroline Klein, within sixty days after his death and due notice and proof thereof.

The policy is in the usual form. The consideration for its issue was the payment to the company by Caroline Klein of an annual premium of $173, in semi-annual instalments of $86.50 each, on the first day of September and the first day of March of every year during the life of Frederick W. Klein.

The policy contains the following provision: 'And it is also understood and agreed by the within assured to be the true intent and meaning hereof that. . . in case the said Caroline Klein shall not pay the said premiums on or before the several days herein mentioned for the payment thereof, with any interest that may be due thereon, then and in every such case the said company shall not be liable for the payment of the sum assured or any part thereof, and this policy shall cease and determine.'

The premiums were punctually paid until March, 1871, when default was made in the payment of the semi-annual instalment which matured on the first day of that month, and it remained unpaid until the death of Frederick W. Klein, which occurred March 18, 1871.

The agent of the company, after proof of the death of Klein, offered to pay Caroline Klein the surrender value of the policy. She declined to accept any sum less than the amount of the insurance, and on the company then insisting upon the absolute forfeiture of the policy, according to its terms, she filed this bill.

She therein alleges as the ground of relief that the policy was taken out by Frederick W. Klein without her knowledge; that she had received no information of its terms or conditions until after his death; that about February 1 he was taken down by the illness of which he died; that for about twenty days prior to March 1, and thence up to the time of his death, he was, in consequence of his sickness, deranged in mind and incapable of attending to any matter of business whatever, and for that reason, and that alone, failed to pay the premium when it was due, and that she failed to pay it because she was ignorant of the existence of the policy and of its terms.

The prayer of the bill is as follows: 'That the said New York Life Insurance Company may be prevented from insisting upon and taking advantage of the alleged forfeiture of said policy of insurance, and that your oratrix may be relieved from said alleged default upon her part, and the accidental default of the said Frederick W. Klein in the non-payment of said semiannual premium maturing March 1, 1871, and that the said New York Life Insurance Company may be decreed to pay to your oratrix the said sum of $5,000,' &c.

The answer of the company denies its liability upon the policy of insurance, and insists that the contract ceased and determined by reason of the non-payment of the premium due March 1, 1871, and denies the equity of the bill.

The bill was dismissed upon final hearing. The cause was then brought to this court for review, by the appeal of the complainant.

Conceding, for the sake of argument, that the case made by the bill is sustained by the evidence, the question is presented whether, upon the facts, the appellant was entitled to the relief prayed for.

In New York Life Insurance Co. v. Statham (93 U.S. 24) it was held by this court, Mr. Justice Bradley delivering its opinion, that a life insurance policy 'is not a contract of insurance for a single year, with the privilege of renewal from year to year by paying the annual premium, but that it is an entire contract for assurance for life, subject to discontinuance and forfeiture for non-payment of any of the stipulated premiums.'

But, in the same case, the court further said: 'In policies of life insurance time is material and of the essence of the contract, and non-payment at the day involves absolute forfeiture, if such be the terms of the contract.'

While conceding this to be the rule which would apply if an action at law were brought upon the policy, the appellant insists that she is entitled to be relieved in equity against a forfeiture, by reason of the excuses for non-payment of the premium set out in the bill, and this contention raises the sole question in this case.

We cannot accede to the view of the appellant. Where a penalty or a forfeiture is inserted in a contract merely to secure the performance or enjoyment of a collateral object, the latter is considered as the principal intent of the instrument, and the penalty is deemed only as accessory. Sloman v. Walter, 1 Bro. Ch. 418; Sanders v. Pope, 12 Ves. Jr. 282; Davis v. West, id. 475; Skinner v. Dayton, 2 Johns. (N. Y.) Ch. 526.

But in every such case the test by which to ascertain whether relief can or cannot be had in equity, is to consider whether compensation can or cannot be made.

In Rose v. Rose (Amb. 331, 332), Lord Hardwicke laid down the rule thus: 'Equity will relieve against all penalties whatsoever; against non-payment of money at a day certain; against forfeitures of copyholds: but they are all cases where the court can do it with safety to the other party; for if the court cannot put him in as good condition as if the agreement had been performed, the court will not relieve.'

A life insurance policy usually stipulates, first, for the payment of premiums; second, for their payment on a day certain; and, third, for the forfeiture of the policy in default of punctual payment. Such are the provisions of the policy which is the basis of this suit.

Each of these provisions stands on precisely the same footing. If the payment of the premiums, and their payment on the day they fall due, are of the essence of the contract, so is the stipulation for the release of the company from liability in default of punctual payment. No compensation can be made a life insurance company for the general want of punctuality on the part of its patrons.

It was said in New York Life Insurance Co. v. Statham (supra), that 'promptness of payment is essential in the business of life insurance. All the calculations of the insurance company are based on the hypothesis of prompt payments. They not only calculate on the receipt of premiums when due, but upon compounding interest upon them. It is on this basis that they are enabled to offer insurance at the favorable rates they do. Forfeiture for non-payment is a necessary means of protecting themselves from embarrassment. Delinquency cannot be tolerated or redeemed except at the option of the company.'

If the assured can neglect payment at maturity and yet suffer no loss or forfeiture, premiums will not be punctually paid. The companies must have some efficient means of enforcing punctuality. Hence their contracts usually provide for the forfeiture of the policy upon default of prompt payment of the premiums. If they are not allowed to enforce this forfeiture they are deprived of the means which they have reserved by their contract of compelling the parties insured to meet their engagements. The provision, therefore, for the release of the company from liability on a failure of the insured to pay the premiums when due is of the very essence and substance of the contract of life insurance. To hold the company to its promise to pay the insurance, notwithstanding the default of the assured in making punctual payment of the premiums, is to destroy the very substance of the contract. This a court of equity cannot do. Wheeler v. Connecticut Mutual Life Insurance Co., 82 N. Y. 543. See also the opinion of Judge Gholson in Robert v. New England Life Insurance Co., 1 Disney (Ohio), 355.

It might as well undertake to release the assured from the payment of premiums altogether as to relieve him from forfeiture of his policy in default of punctual payment. The company is as much entitled to the benefit of one stipulation as the other, because both are necessary to enable it to keep its own obligations.

In a contract of life insurance the insurer and assured both take risks. The insurance company is bound to pay the entire insurance money, even though the party whose life is insured dies the day after the execution of the policy, and after the payment of but a single premium.

The assured assumes the risk of paying premiums during the life on which the insurance is taken, even though their aggregate amount should exceed the insurance money. He also takes the risk of the forfeiture of his policy if the premiums are not paid on the day they fall due.

The insurance company has the same claim to be relieved in equity from loss resulting from risks assumed by it as the assured has from loss consequent on the risks assumed by him.

Neither has any such right.

The bill is, therefore, based on a misconception of the powers of a court of equity in such cases.

There is another answer to the case made by the bill. The engagement of the insurance company was with Caroline Klein, and not with Frederick W. Klein. It entered into no contract with the latter. It agreed to pay Caroline Klein the insurance, provided she paid with punctuality the premiums. She was never incapacitated from making payment. The alleged fact that she had no knowledge of the existence and terms of the policy does not relieve her default. If the fact be true, her ignorance resulted from the neglect of her husband, who, in respect to this contract of insurance, was her agent, in not informing her about the insurance upon his life and the terms of the policy. The bill is, therefore, an effort by her to obtain relief in equity against the appellee from the consequences of the carelessness or neglect of her own agent.

We are of opinion that the decree of the Circuit Court is right, and should be

Affirmed.


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Page:The Records of the Federal Convention of 1787 Volume 3.djvu/610

 [III]

The Senate and H. D. shall by joint Ballot annually (septennially) ''chuse the Presidt. U. S. from among themselves or the People at large. — In the Presidt. “the executive Authority of the U. S. shall be vested.”''

“It shall be his Duty to inform the Legislature [at every session] of the condition of the United States, so far as may respect his Department—to recommend Matters to their Consideration [such as shall appear to him to concern their good government, welfare and prosperity] *—to correspond with the Executives of the several States—to attend to the Execution of the Laws of the U S” (by the several States)—“to transact Affairs with the Officers of Government, civil and military—to expedite all such Measures as may be resolved on by the Legislature”—(to acquire from time to time, as perfect a knowledge of the situation of the Union, as he possibly can, and to be charged with all the business of the home department. He will be empowered, whenever he conceives it necessary) “to inspect the Departments of foreign Affairs—War—Treasury—” (and when instituted of the) “Admiralty—to reside where the Legislature shall sit—to commission all Officers, and keep the Great Seal of the United States.”

“He shall, by Virtue of his Office, be Commander in chief of the Land Forces of U. S. and Admiral of their Navy.”

“He shall have Power to convene the Legislature on extraordinary occasions—to prorogue them,” (when they cannot agree as to the time of their adjournment,) “provided such Prorogation shall not exceed Days in the space of any —He may suspend Officers, civil and military.”

(He shall be removable by impeachment. The Legislature shall fix his salary on permanent principles.)

He shall have a Right to advise with the Heads of the different Departments as his Council.

''Council of Revision, consisting of the Presdt. S. for for. Affairs, S. of War, Heads of the Departments of Treasury and Admiralty or any two of them togr wt the Presidt.''

(IV)

(The 4th article . . . is formed exactly upon the principles of the 4th article of the present confederation, except with this difference, that the demand of the Executive of a State for any fugitive


text: Talk:Klein v. Insurance Company/Opinion of the Court


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Metcalf v. Williams

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

The facts are stated in the opinion of the court.

Mr. C. S. Bundy and Mr. W. Willoughby for the appellants.

Mr. James G. Field, contra.

MR. JUSTICE BRADLEY delivered the opinion of the court.

title: Metcalf v. Williams


text: Talk:Metcalf v. Williams

title: Talk:Metcalf v. Williams