text:
Heryford v. Davis/Opinion of the Court

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

This is an action under the statutes of Missouri, by Henry H. Davis, sheriff of Chariton County, for the use of the Jackson and Sharp Company, a corporation under the laws of Delaware, upon a bond executed and delivered to him by William Heryford and James W. Lewis, to indemnify him against all damages which he might sustain in consequence of the seizure and sale of certain cars levied upon as the property of the Keokuk and Kansas City Railway Company, under an execution sued out on a judgment rendered in favor of said William against the latter company and the Western Construction Company in the Circuit Court of Chariton County, Missouri.

A trial by jury having been waived by the written stipulation of the parties, the court below found the facts as follows:--

1. That on and prior to Dec. 23, 1873, the Jackson and Sharp Company was incorporated by Delaware, having its office and doing business at Wilmington, in that State, and engaged in manufacturing railroad cars; that the Keokuk and Kansas City Railway Company was incorporated by Missouri, and engaged in the construction of a railroad through the county of Chariton and other counties in the latter State.

2. That, Jan. 5, 1874, the car company delivered to the railway company at Salisbury, Missouri, to be used on its road, one passenger car, No. 1, and one mail, baggage, and express car, also No. 1, lettered with the name of the railroad company, under and pursuant to the terms and conditions of the following articles of agreement entered into Dec. 23, A.D. 1873, by and between said car company of the first part, and the said railway company of the second part. It recites,--

'That the party of the first part has constructed one passenger car, No. 1, and one mail, baggage, and express car, also No. 1, and lettered with the name of the aforesaid railway company, to be used on the railroad of the party of the second part for hire,' and then proceeds: 'It is therefore agreed as follows: The said party of the first part hereby agrees to loan to the said party of the second part, for hire, the said passenger, and mail, baggage, and express cars for the space of four months from the date of this agreement, to be used on said railway, and to deliver the same to the party of the second part at Wilmington, Delaware, to be transported to the said railway company at Salisbury, Missouri, at the expense and risk of the party of the second part, to be used on the said railway for hire as aforesaid, and not elsewhere, without the written consent of the party of the first part.

'The party of the first part has received from the party of the second part three promissory notes of the party of the second part, to the order of the Western Construction Co., and indorsed by A. C. Vandewater, president, F. A. Jones, John Foggett, A. C. Vandewater, G. P. Lawrence, John C. Noyes, and J. W. Morse, together with thirteen of the first-mortgage bonds of said railway company, of $1,000 each, as collaterals for said notes; two of said notes are dated Nov. 14, 1873, one payable at sixty days, and the other at four months, each for $1,919.20, payable, with interest at the rate of ten per cent per annum, after date, at the Mercantile Bank of St. Louis, Missouri; the other of said notes is dated Dec. 15, 1873, payable at four months, for $2,583, without interest, at the National Bank of Commerce, New York, which said three notes the said party of the first part is to hold as collateral security, and to collect the same at maturity, and to hold the proceeds, when collected, for the safe custody, and return to the party of the first part, when demanded, of the said passenger, and mail, baggage, and express cars, delivered to the party of the second part for the term of four months, for hire, as aforesaid, the said party of the second part to have the right and privilege to purchase at any time the said passenger, and mail, baggage, and express cars within the period of four months from aforesaid date, upon the payment to the party of the first part in cash the sum of $6,338.40, with interest at the rate of ten per cent per annum from the date of the agreement until day of payment; but until such payment is made in full the said party of the second part shall have no right, title, claim, or interest in and to the said passenger, and mail, baggage, and express cars, except as to their use or hire, nor any right or authority in any way to dispose of, hire, sell, mortgage, or pledge the same, but the said cars are, and shall remain, the property of the party of the first part, to be accounted for by the party of the second part to the party of the first part, and to be redelivered to the party of the first part, when demanded, in default of the payment of the aforesaid sum of $6,338.40, with interest as aforesaid, hereinbefore described, anything to the contrary herein contained notwithstanding.

'It is also agreed that should there be any default in the payment of any one of the above-described three promissory notes at the time and on the day that they, or either of them, respectively become due and payable, and the party of the first part shall elect to take into their own possession the above-described passenger and mail, baggage, and express cars, delivered as aforesaid, the several sums which may have been collected on account of the above-described promissory notes are to be retained by the party of the first part for their own use, and the passenger and the mail, baggage, and express cars are to be sold by the party of the first part at public or private sale, and of the net amount realized from said sale so much as should be needed to make the amount remaining due and unpaid on the above-described promissory notes, with the interest that may have accrued on the same, shall be retained by the said party of the first part, and the surplus, if any, shall be paid over to the said party of the second part.

'And the said party of the first part hereby agrees with the said party of the second part, that if all the said three promissory notes are paid on the day and at the time that they severally became due and payable according to their terms, tenor, and effect, that upon payment of all the said notes having been made without any hinderance or delay whatever, the party of the first part will then relinquish their ownership to the said passenger car and the mail, baggage, and express car, and will give to the party of the second part a good and sufficient bill of sale or conveyance for the said cars, and will apply to the payment of the same the proceeds of the above-described promissory notes, interest on notes overdue in any event to belong to the party of the first part.

'And it is also agreed and understood that, if the said notes are paid according to their tenor and effect, the said party of the first part may retain the money paid upon said notes, and then the said cars shall belong to and be the property of the said party of the second part, and the said party of the first part shall, on request, relinquish their ownership thereof, and make a bill of sale or conveyance of all their right, title, and interest therein, to the said party of the second part.

'In witness whereof, the parties have hereto set their name and caused the seal of their respective corporations to be affixed.

[SEAL.]

'JACKSON AND SHARP COMPANY,

'JOB H. JACKSON,

'THE KEOKUK AND KANSAS CITY RAILWAY CO.,

By S. H. MELVIN, President.

[SEAL.]

'ALBERT BLAIR, Secretary.' 3. That said cars were brought to Missouri and were placed upon and used by said railroad company on its railroad in Chariton County, Missouri.

4. That the notes mentioned in said contract were not paid at maturity, and still remain unpaid; that, Dec. 4, 1873, the Jackson and Sharp Company received $13,000 in the first-mortgage bonds of said railroad company as collateral security for said notes, for which it executed and delivered its receipt, as follows:--

'WILMINGTON, DEL., Dec. 14, 1873.

'Received of Keokuk and Kansas City R. R. Co., thirteen one thousand dollar bonds, No. 281 to 293, both numbers inclusive, as collateral for said Co. notes given in payment for one passenger car, and for notes yet to be given for one mail, bagg., and ex. car.

'JOB H. JACKSON, Pres't.'

5. That said bonds are yet in the hands of that company.

6. That the defendant, Heryford, under and by virtue of the provisions of an act of the General Assembly of Missouri, entitled 'An Act to protect contractors, sub-contractors, and laborers in their claims against railroad companies or corporatious, contractors, or sub-contractors,' approved March 21, 1873, obtained, Nov. 20, 1874, a judgment in the Circuit Court of Chariton County, Missouri, against the said railroad company and the Western Construction Company, for materials furnished and labor performed by him in the construction of the road, which said judgment it was declared should be a lien upon the 'road-bed, station-houses, depots, bridges, rolling-stock, real estate, and improvements pertaining to said railroad within the counties of Clark, Knox, Macon, Randolph, and Chariton, in the State of Missouri.'

7. That on Nov. 25, 1874, an execution was issued on the judgment.

8. That Davis, sheriff of Chariton County, Missouri, indorsed and returned the execution as levied 'upon the following-described property as the property of the Keokuk and Kansas City Railway Company and the Western Construction Company, to wit, the road-bed, iron, and cross-ties thereon on the Keokuk and Kansas City Railway Company, station-houses, depots, bridges, rolling-stock, and improvements appertaining to said road, situated in Chariton County; also a lot of crossties piled up along the line of said road, supposed to be about seven thousand; also locomotive engine No. 1, named James W. Lewis, and tender of the same; one passenger-coach No. 1, branded K. & K. C. R. W. Co.; and one mail and express car, branded K. & K. C. R. W. Co.; four box of freight cars; two coal-cars; one flat-car; three hand-cars; two iron-cars; one set blacksmith tools; one lot shovels, spades, and picks; and all the tools and implements pertaining to said railroad which are in Chariton County, and all the furniture in the railroad and construction cars; office in the town of Salisbury.'

It was also returned May 3, 1875, by Berry Owens, sheriff of Chariton County as levied 'on one box-car, three rubber-cars, and three break-jacks, as the property of the Keokuk and Kansas City Railway Company and the Western Construction Company.'

That Heryford, prior to Dec. 12, 1874, caused Davis to levy upon and seize, under an execution issued from the Circuit Court of Chariton County, Missouri, in his favor and against the Keokuk and Kansas City Railway Company and the Western Construction Company, the cars in said contract described.

That on Dec. 13, 1874, the Jackson and Sharp Company served notice upon the sheriff claiming the passenger car and mail, baggage, and express car under and by virtue of chap. 55, sect. 28, p. 608, vol. i. Wagn. Mo. Stat., title 'Executions.'

That the sheriff thereupon gave Heryford notice of the claim of the company, who, Dec. 15, 1874, executed and tendered his bond to the sheriff, with Lewis as security, conditioned 'that the said bounden William Heryford and his securities will indemnify the said H. H. Davis, as sheriff aforesaid, against all damage and costs which he may sustain in consequence of the seizure and sale of the above-described passenger-coach No. 1, and mail, baggage, and express car No. 1, branded with the name of the K. & K. C. R. W. Co., and to satisfy and pay to any person or persons claiming the same all damages which said person or persons may sustain in consequence of such seizure and sale.'

That by virtue of the execution aforesaid, and in pursuance of chap. 55, sect. 58, p. 608, vol. i., Wagn. Mo. Stat., title 'Executions,' Berry Owens, sheriff of Chariton County, Missouri, on May 1, 1875, advertised and sold the said passenger-car, and mail, baggage, and express car, so levied upon.

That prior to the sale and after the levy the defendants had knowledge of the contract of Dec. 23, 1873.

That the parties, in negotiating their contract of Dec. 23, 1873, and in the subsequent correspondence and dealings after the execution of the same, treated and undertook said contract as a conditional sale.

That the contract has never been acknowledged or recorded.

That the cars were, at the time they were delivered, marked and branded as described in the contract.

That the value of the cars, at the time of the seizure by the sheriff, was $3,800.

As a conclusion of law, the court found that the plaintiff was entitled to recover of the defendants $3,800, with interest, by way of damages, in the sum of $540, together amounting to $4,340, and rendered judgment accordingly.

Heryford and Lewis thereupon sued out this writ of error.

Upon the facts and in the rendition of the judgment the judges were divided in opinion upon the following points, which are certified here:--

1. Whether on the facts the plaintiff or the defendants were entitled to judgment.

2. Whether the instrument under which the plaintiff claims was required by the laws of Missouri to be registered in order to be valid against the creditors of the said railroad company, the property in question having been delivered to and being in possession and use of the said company at the time of the levy.

3. Whether the said instrument is a 'mortgage or deed of trust of personal property,' within the meaning of the statutes of Missouri; viz., 1 Wagn. Stat. p. 281, sect. 8.

Mr. Thomas T. Crittenden for the defendant in error, in support of the judgment below.

The contract of Dec. 23, 1873, was a conditional sale of the cars, at a fixed price, to be paid on a certain day, the title to remain in the seller until payment. Such payment was a condition precedent to the vesting of title in the buyer, and, not having been made, the cars were not subject to levy under the execution. Porter v. Pettingill, 12 N. H. 298; Bigelow v. Huntley, 8 Vt. 151; Ayre v. Bartlett, 9 Pick. (Mass.) 156; Reed v. Upton, 10 id. 522; Fairbanks v. Phelps, 22 id. 535; Strong v. Taylor, 2 Hill (N. Y.), 326; Hunt v. Bay State Iron Co., 97 Mass. 279; Fenwick v. Smith, 63 Pa. St. 18; Clarke v. Farnum, 7 R. I. 174; Coggill v. Hartford & New Haven Railroad Co., 3 Gray (Mass.), 545.

The plaintiffs in error had notice of the title of the Jackson and Sharp Company, before the execution of the bond sued on.

This case is clearly distinguished from Hervey v. Rhode Island Locomotive Works [93 U.S. 664), where the transaction occurred in Illinois. The contracts and the laws of the respective States which apply to them essentially differ.

In Illinois, it is held that where the vendor of personal property delivers possession to the purchaser under an agreement that the property is to be considered as belonging to the vendor until the payment of the purchase-money, notwithstanding such delivery of possession, such agreement as to the creditors of the purchaser is fraudulent and void. McCormick et al. v. Hadden, 30 Ill. 370; Ketcham v. Watson, 24 id. 591; Thompson v. Yeck, 21 id. 73; Murch v. Wright, 46 id. 487.

In Missouri, the law of which State must govern this case, such a conditional sale is valid not only as between the parties but as against subsequent bona fide purchasers or creditors of the vendee. Parmlee v. Catherwood, 36 Mo. 480; Little v. Page, 44 id. 412; Ridgway v. Kennedy, 52 id. 24; Robbins v. Phillips, 68 id. 100; Rogers Locomotive Works v. Lewis, 4 Dill. 158.

There was no waiver of the vendor's rights, nor such laches in asserting them as forfeited its title to the cars. In Rogers Locomotive Works v. Lewis (supra), the notes for the purchasemoney were all overdue eighteen months, and the property was still in the possession of the vendee. This was not laches. In the present case the notes were overdue only eight months.

The statute of Missouri on the subject of bailment by way of loan (1 Wagn. Stat., p. 280) has been construed in McDermott v. Barnum et al., 16 Mo. 114, and Criddles's Adm'r v. Criddles, 21 id. 522. Sect. 5 is peculiar, and may have had some effect upon the mind of the draftsman of the contract between the companies.

Mr. Henry S. Green, contra.

MR. JUSTICE STRONG delivered the opinion of the court.

The correct determination of this case depends altogether upon the construction that must be given to the contract between the Jackson & Sharp Company and the railroad company, against which the defendants below recovered their judgment and obtained their execution. If that contract was a mere lease of the cars to the railroad company, or if it was only a conditional sale, which did not pass the ownership until the condition should be performed, the property was not subject to levy and sale under execution at the suit of the defendant against the company. But if, on the other hand, the title passed by the contract, and what was reserved by the Jackson & Sharp Company was a lien or security for the payment of the price, or what is called sometimes a mortgage back to the vendors, the cars were subject to levy and sale as the property of the railroad company. The statute of the State of Missouri enacts that 'no mortgage or deed of trust of personal property shall be valid against any other person than the parties thereto, unless possession of the mortgaged or trust property be delivered to and retained by the mortgagee or cestui que trust, or unless the mortgage or deed of trust be acknowledged or proved and recorded in the county in which the mortgagor or grantor resides, in such manner as conveyances of land are, by law, directed to be acknowledged or proved and recorded.' 1 Wagn. Stat., c. 35, art. 2, sect. 8. The plain purpose of this statute was to render secret liens upon personal property ineffectual as against purchasers or creditors. The property in this case was in the possession of the railroad company when the levy upon it was made, and the contract under which the company held it was not recorded.

What, then, is the true construction of the contract? The answer to this question is not to be found in any name which the parties may have given to the instrument, and not alone in any particular provisions it contains, disconnected from all others, but in the ruling intention of the parties, gathered from all the language they have used. It is the legal effect of the whole which is to be sought for. The form of the instrument is of little account.

Though the contract industriously and repeatedly spoke of loaning the cars to the railroad company for hire, for four months, and delivering them for use for hire, it is manifest that no mere bailment for hire was intended. No price for the hire was mentioned or alluded to, and in every bailment or letting for hire a price or compensation for the hire is essential. The amount may not be stipulated. It may be a reasonable compensation or a quantum valebat, but the contract must contemplate payment for the use of the thing let or bailed. Not only was no such payment provided for or required, but all intention to demand it is negatived by the strongest implications. The manufacturing company exacted and took promissory notes for the entire selling price of the property, $6,138.40, and, in addition thereto, collaterals to a large amount to secure payment of the notes. The aggregate of the notes was equal to that price; two of them for $1,919.20 each, one payable at sixty days and the other at four months, bearing interest from their date at the rate of ten per cent; and the third note, at four months, being for $2,583, interest at that rate having been added to the principal sum. One of these notes fell due only nine days after the cars were delivered to the railroad company, and both the others before the expiration of four months from the date of the agreement. The notes were to be collected at maturity, and thus it was contemplated that before the end of four months the manufacturing company should have in hand in cash the full value or price of the cars. It is needless to say that all this is totally inconsistent with the idea that the parties intended a mere letting or bailment for hire.

It appears equally clear to us that the contract was not one for a conditional sale. It is true it said the manufacturing company were to hold the three notes as collateral security, and collect the same at their maturity, and 'hold the proceeds when collected for the safe custody and return to the party of the first part, when demanded, of said passenger, mail, baggage, and express cars, delivered to the party of the second part for the term of four months for hire,' 'the said party of the second part to have the right and privilege to purchase' (the cars) 'at any time within the said period of four months, upon payment to the party of the first part, in cash, the sum of $6,338.40, with interest at the rate of ten per cent from the date of the agreement until day of payment, but, until such payment is made in full, the said party of the second part shall have no right, title, claim, or interest in and to said passenger and mail, baggage, and express cars, except as to their use or hire, nor any right or authority in any way to dispose of, hire, sell, mortgage, or pledge the same, but that the said cars are and shall remain the property of the party of the first part, to be accounted for by the party of the second part to the party of the first part, and to be redelivered to the party of the first part, when demanded in default of the payment of the aforesaid sum of $6,338.40, with interest as aforesaid, hereinbefore described, anything to the contrary herein contained notwithstanding.'

If this were all, it would necessarily be held that a conditional sale was intended. But it is not all. It is quite unmeaning for parties to a contract to say it shall not amount to a sale, when it contains every element of a sale, and transmission of ownership. This part of the contract is to be construed in connection with the other provisions, so that if possible, or so far as is possible, they all may harmonize. Thus construed, it is quite plain these stipulations were inserted to enable the manufacturing company to enforce payment, not of any rent or hire, but of the selling price of the cars for which the company took the notes of the railroad company. They were intended as additional security for the payment of the debt the latter company assumed. This is shown most clearly by the other provisions of the contract. The notes became the absolute property of the vendors. As has been stated, they all fell due within four months, and it was expected they would be paid. The vendors were expressly allowed to collect them at their maturity, and it was agreed that whatever sums should be collected on account of them should be retained by the vendors for their own use.

No part of the money was to be returned to the railroad company in any event, not even if the cars should be returned. On the contrary, it was stipulated expressly that if the manufacturing company should elect to take the cars into their own possession, which they reserved the right to do in case of default of payment of the notes, the property should be sold, and of the net amount realized from the sale, so much as should be needed to make the amount remaining due and unpaid on the promissory notes, with the interest that might have accrued thereon, should be retained by the manufacturing company, and the surplus, if any, should be paid over to the railroad company.

What was this but treating the notes given for the sum agreed to be the price of the cars as a debt absolutely due to the vendors? What was it but treating the cars as a security for the debt? And why stipulate that the surplus which might be obtained from the sale of the cars, after taking them back, beyond what was needed to pay the unpaid part of the debt, should be paid over to the railroad company, if that company was not the owner of the cars, even while they were in the possession of the other company, and had not even then what may be called an equity of redemption?

In view of these provisions, we can come to not other conclusion than that it was the intention of the parties, manifested by the agreement, the ownership of the cars should pass at once to the railroad company in consideration of their becoming debtors for the price. Notwithstanding the efforts to cover up the real nature of the contract, its substance was an hypothecation of the cars to secure a debt due to the vendors for the price of a sale. The railroad company was not accorded an option to buy or not. They were bound to pay the price, either by paying their notes or surrendering the property to be sold in order to make payment. This was in no sense a conditional sale. This giving the property as a security for the payment of a debt is the very essence of a mortgage which has no existence in a case of conditional sale.

It may be added that the notes were given to the vendors before the cars were delivered.

So, also, the collaterals for the notes were taken before the delivery; and when they were taken, the president of the maunfacturing company acknowledged he received them, not as additional security for the restoration of the cars at any time thereafter when demanded, but as security for the notes 'given in payment' for the cars. This is confirmatory of the construction we have given to the contract. It tends to show that the transaction was a sale by which the ownership passed to the railroad company, the vendors retaining only a lien for the consideration.

It follows, from what we have said, that to protect the cars from seizure and sale by virtue of executions against the railroad company, recording the contract was made necessary by the statutes of Missouri, to which we have referred.

The judgment of the Circuit Court will, therefore, be reversed, and the record remitted with instructions to enter judgment, on the special finding of facts, in favor of the defendants below; and it is

So ordered.

MR. JUSTICE BRADLEY dissenting.

title: Heryford v. Davis/Opinion of the Court


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

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


text:
Heryford v. Davis/Dissent Bradley

MR. JUSTICE BRADLEY dissenting.

I dissent from the judgment in this case. I think that, in the absence of express law to the contrary, no only has a man the right to make a conditional sale of his property, but that this right is not opposed to sound public policy, and should be fairly and liberally dealt with. The present case was, in my opinion, clearly a conditional sale, and nothing else; and the owners of the property had a right to reclaim it on the terms contained in the agreement. These terms were fair and just; not involving and forfeiture, but providing for a due allowance for every dollar paid, by requiring a sale of the property if the purchase should not go into effect.

title: Heryford v. Davis/Dissent Bradley


text: Talk:Heryford v. Davis/Dissent Bradley

title: Talk:Heryford v. Davis/Dissent Bradley


text:
Rogers v. Palmer

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

The facts as stated in the opinion of the court.

Mr. Edward G. Rogers for the appellant.

Mr. Enoch Totten and Mr. Cushman K. Davis, contra.

MR. JUSTICE MILLER delivered the opinion of the court.

title: Rogers v. Palmer


text: Talk:Rogers v. Palmer

title: Talk:Rogers v. Palmer


text:
Rogers v. Palmer/Opinion of the Court

The complainant is assignee in bankruptcy of Andrew Palmer, Jr., son of the appellee.

The father having procured a judgment against his son in the District Court of Freeborn County, Minnesota, for the sum of $8,433, caused execution to be issued thereon and levied upon the stock of goods of the defendant, who was a merchant in business in the town of Albert Lea, in that county.

Within a few days thereafter, proceedings in bankruptcy were instituted against the son, and he was duly declared a bankrupt. His assignee brought this suit in chancery for the purpose of having the levy declared void as a fraud upon the Bankrupt Act, and the goods, or their proceeds, subjected to administration in the bankruptcy proceeding. After answer, considerable testimony was taken. The Circuit Court dismissed the bill, and he appealed.

The bankrupt was indebted to his father on three promissory notes of several years' standing, and long overdue, on which interest had been paid with tolerable regularity until a year before the bankruptcy. About that time, the father, a resident of Wisconsin, visited the son, who lived in Minnesota, and received a mortgage on some land, but not sufficient in value to secure the debt. In July, 1875, he again visited his son in Albert Lea, and not long afterwards sent the notes for collection to Lovely & Parker, attorneys of that place, who commenced suit by the issue of a summons Oct. 23, 1875, which was served the same day. An affidavit was made, November 5, in the case by Parker, one of the attorneys, on which an attachment was issued and levied on the entire stock of the defendant's goods. In this affidavit Parker stated, without qualification, that the defendant was about to dispose of his property with intent to delay and defraud his creditors.

By the course of procedure in the courts of Minnesota, the plaintiff in that suit was entitled to judgment on the 13th of the month, if no plea or answer was interposed; and none was filed by the defendant.

Two days before this time, however, other creditors of Palmer, hearing of the condition of affairs, came to look after their interests and to prevent this judgment. Before they could initiate proceedings in bankruptcy they filed a bill in equity in the State court, and procurred an order enjoining the plaintiff and his attorneys from taking their default and judgment, on the ground that the proceeding was fraudulent and collusive between father and son. This injunction was issued on the 12th; but on the 13th, the first day on which a judgment by default could have been entered in the action at law, it was dissolved on the affidavit of Andrew Palmer, Jr., drawn up by one of the attorneys for his father, denying all the allegations of the bill, and stating that his father's debt was a just and true one, and was due and wholly unpaid to the amount stated in the complaint. Judgment was rendered immediately, and on the same day an execution was levied on the defendant's stock of goods.

In a very few days thereafter the debtor Palmer was duly declared a bankrupt. By agreement the goods were sold, and the money derived therefrom deposited in the bankrupt court, subject to the final decree in this suit, as they would have been if they had not been sold.

There is no question that at the commencement of the action by the father the son was insolvent.

There are many circumstances besides the affidavit made by the son to show that he and his father had a perfect understanding in regard to that suit. Among these are the visit of the father only a few months before it was commenced; the absence of any special reason for suing at that time after eight years' delay, and the giving shortly after of security by mortgage for the debt, though insufficient; the sending of the notes for suit to the attorneys who had been usually employed by the son; the son's moving, as soon as the goods were attached, his books and papers into the office of these attorneys, and his seeming full consultation with them throughout the whole proceeding.

When we come to add to these the voluntary affidavit of the defendant, on which alone the injunction was dissolved, and the father enabled to recover judgment, under which an execution was issued and a lien secured on all the defendant's goods, we are satisfied that the son actively aided in securing this seizure of them, with a design to prevent the equal distribution of them among his creditors under the proceedings in bankruptcy, which he knew would be commenced in a few days.

Several of these creditors were present when the injunction was dissolved and the judgment rendered. The injunction, as the attorneys and the debtor Palmer knew, was obtained to restrain the prosecution of the action until they could apply to the court in bankruptcy. To delay the rendition of the judgment until the application could be made would be fatal to the preference of the father's debt; for by the bankrupt law the attachment was dissolved when the son was adjudged a bankrupt, and unless execution could be levied before that time the goods would pass to the assignee, relieved of any claim under the judgment.

Whether, therefore, the father should be paid in full to the exclusion of other creditors or not depended on the dissolution of that injunction, and that was obtained solely on the voluntary affidavit of the insolvent son.

We are satisfied that he procured this preference and this taking of his goods on execution with a purpose of defeating the operation of the bankrupt law, within the meaning of the act on that subject. Sect. 35 of Bankrupt Act.

But, in order that the assignee shall recover the value of the goods seized on execution, it is not alone sufficient that the bankrupt should have aided in procuring the seizure. It is also necessary that the creditor should have had reasonable cause to believe that the debtor was insolvent and should have known that a fraud on the Bankrupt Act was intended.

We think this is the result of sects. 35 and 39 of the original bankrupt law, as amended by the act of June 22, 1874, which changed the original act in important particulars, and which, so far as it may conflict with that act, or the revision, must be held to control them both. 18 Stat. part 3, pp. 180, 181.

This latter statute carefully introduces the word know instead of reasonable ground to believe, in regard to the purpose to commit a frand on the act.

We have little difficulty in coming to the conclusion that the elder Palmer had reason to believe that his son was insolvent at the time judgment against him was taken and the execution levied. We have already given the reasons for this, to which may be added that his son swears that he wrote to his father, pending negotiation with his other creditors and before the judgment was taken, asking him to consent, with the other creditors, to accept a compromise of fifty per cent for his debts.

It is a little more difficult to say that the father knew that the goods were seized with intent to defraud the bankrupt law. Possibly at the moment of the seizure he did not know personally all that his attorneys and his son had done, nor all that they knew. It may be that he supposed his suit would proceed in regular order, without the aid of his son or any act on the part of his attorneys intended to evade the bankrupt law. He may not have known personally that other creditors were on the ground contesting his right to a judgment, and still others on the way to institute bankruptcy proceedings, which, if done before the goods were seized under his execution, would defeat his purpose of securing a prior lien.

But this cannot be said of the attorneys who represented him. One of them had, only a few days before, made oath that the son was about to dispose of his property to delay and defraud his creditors. This, if true, was certainly a fraud on the bankrupt law. Instead of instituting a proceeding in bankruptcy, this attorney swore out an attachment in favor of his client, which would be a fraud on the bankrupt law, by preventing the equal distribution of this debtor's property among his creditors.

These attorneys also procured the debtor to make the affidavit in the injunction suit, with the perfect knowledge that, if they thereby succeeded in dissolving it, their client would seize the goods, and make his debt in preference to all other creditors, though they knew that other creditors were on their way to St. Paul to initiate bankruptcy proceedings. They, therefore, knew and intended that their action in behalf of their client would work a fraud upon the bankrupt law.

Is this knowledge imputable to the appellee in this case? In Hoover v. West (91 U.S. 308), a creditor had procured a confession of judgment and a levy on property of his debtor, who was declared a bankrupt within four months thereafter.

The creditor had sent his note to a collection agency in Philadelphia, which forwarded it to their corresponding attorney in Nebraska, where the judgment was taken. The creditor knew nothing of what was done until the money was made by sale of the goods, and had given no direction as to the mode of proceeding, and held no communication with his attorney. This court held that the attorney was the agent in the transaction of the collecting agency and not of the creditor, and that he could not be held to know what the attorney knew in regard to the insolvency of the debtor, and other matters in the case. There of the judges dissented from this view. But an examination of the opinion will show that all were agreed that if the creditor had sent the note directly to the attorney, the latter would then have been the agent of the creditor, whose acts and whose knowledge, obtained in the course of the employment, would have been the acts and the knowledge of his principal. And such, we think, is the true rule of law.

That the attorneys of the elder Palmer and the son were aware of the insolvent condition of the latter, and were cooperating to have his property seized on execution before the bankrupt law could be enforced, and with intent to defeat its operation on the son's property, we think is quite clear. And this we understand to be a fraud upon the bankrupt law, where the debtor contributes actively to that end. Wilson v. City Bank, 17 Wall. 473; Little v. Alexander, 21 id. 500.

The result of these considerations is that the decree of the Circuit Court must be reversed, and a decree rendered for the complainant, in conformity to this opinion; and it is

So Ordered.

Mr. JUSTICE FIELD dissented.

title: Rogers v. Palmer/Opinion of the Court


text: Talk:Rogers v. Palmer/Opinion of the Court


text: The New Student's Reference Work/Gwalior


text:
Finch v. United States

APPEAL from the Court of Claims.

The facts are stated in the opinion of the court.

Mr. Nathaniel Wilson and Mr. Lewis Abraham for the appellants.

The Solicitor-General for the United States.

Mr. JUSTICE SWAYNE delivered the opinion of the court.

title: Finch v. United States


text: Talk:Finch v. United States

title: Talk:Finch v. United States


text:
Finch v. United States/Opinion of the Court

This is an appeal from the Court of Claims. The case is spread over a large surface in the record, but a very condensed statement to the facts will be sufficient for the purposes of this opinion.

In the years 1868 and 1869 appellants were distillers, and had two distilleries in Pittsburgh, Pa. The distilleries were designated as 1 and 4. In October, 1868, the appellants made application, in due form, to the Commissioner of Internal Revenue for Tice meters for distillery No. 1, and at the same time deposited with the collector of the district in which the distilleries were situated the sum of $2,050, the price of the meters, to be paid over to the manufacturer when the meters were delivered to them. The meters were delivered, and the money was paid accordingly.

These meters were never used, the distillery having ceased to run long before any one went to make the attachment necessary to utilize them.

In March, 1869, the appellants made a like application for such meters for distillery No. 4, and deposited with the collector $2,100 to pay for them. They were delivered to the distillers in July, 1869, and the $2,100 was thereupon paid to the manufacturer. These meters never worked properly. There is no proof that they were tested before they were shipped from the manufactory, nor that any officer of the Internal Revenue Bureau was detailed to attach them, or to test them after their attachment, or that their indications were ever in any wise regarded by the storekeeper in making his daily reports, or by the assessor in making his monthly computation of the products of the distilleries.

By the act of July 20, 1868, c. 186 (15 Stat. 125), the commissioner, for the prevention and detection of fraud by distillers of spirits, was 'authorized to adopt and prescribe for use such hydrometers, saccharometers, weighing and gauging instruments, or other means for ascertaining the quantity, gravity, and producing capacity of any mash, wort, or beer used, or to be used, in the production of spirits, and the strength and quantity of spirits subject to tax,' as he might deem proper.

Under these provisions, orders, regulations, and instructions, covering the subject of the meters in every aspect, were issued by the commissioner. They compelled the distillers to buy and pay for Tice meters, as was done in the case in hand, and left them no choice to do otherwise. One of those regulations was as follows: 'Under the provisions of the law the distiller is required to furnish and attach meters at his own expense, and also to furnish all pipes, materials, labor, and facilities necessary to complete such attachment. The first duty of a distiller is, of course, to procure a meter. The manufacturer is not required to furnish the meters on credit, and ought not to be expected to do so. When he ships a meter to a distiller in accordance with the application, the manufacturer is entitled to the pay for it. The law does not require the manufacturer to attach it, but, on the contrary, requires the distiller to attach at his own expense.'

Another specified that 'the expenses and transportation and attachment of meters, and of changes required to be made in the distillery, are to be paid by the distiller,' and 'distillers must furnish all lumber and other materials necessary for the attachment of the meter, and such workmen and assistants as may be required.' By a circular of June 8, 1871, the commissioner announced substantially that the meters were a failure, and from that time they ceased to be used.

By the act of June 6, 1872, sect. 12, c. 315 (17 Stat. 239), all the provisions of the act of 1868 touching meters were repealed, and the use of meters was thereupon abandoned by law. Upon the passage of this act the commissioner issued a circular advising distillers that 'all meters attached to distilleries may be detached,' and 'that the meters being the property of the distillers, they will be permitted to dispose of them as they may desire.'

By this suit the appellants seek to recover from the United States the aggregate of the $2,050 and $2,100 paid by them for the Tice meters as before mentioned.

The appellants insist that there was an implied warranty by the United States that the meters they thus bought would be effectual for the purposes they were designed to accomplish, and that there being a clear breach of this warranty, the United States are liable accordingly.

To this there are two answers:--

1. The meters were soley for the benefit of the United States. The appellants had no interest in their working well. If they had any interest in the result, it was in the other direction.

The sole object of the meters was to prevent or expose frauds by the distillers. If the meters were effectual for these purposes, so much the better for the government. If they were a failure, so much the worse. If the distillers were honest, the success of the meters was to them wholly immaterial. If dishonest, the failure would have helped to make their frauds lucrative, while efficiency might have cut off their fraudulent profits and subjected them to exposure and punishment. The distillers did not pay out a dollar more because the meters were a failure, nor would they have paid a dollar less if the tests thus provided had fully answered the expectations of the government.

In either event the pecuniary result to the distillers, if honest in their business, must have been exactly the same.

The essence of their complaint is that the government found the means lawfully provided to detect their frauds, if they committed any, unavailing, and therefore used none. Their argument implies that, if those means had been effectual and had been used, they would have been satisfied, and their claim could not have arisen.

Both the proposition and the argument seem to us to involve a palpable solecism. There is nothing in the facts of which any contract relation, express or implied, between them and the government, can be predicated.

2. Regulations established pursuant to law made it obligatory upon the distillers to procure the meters, if they continued to carry on the business. They were required to buy and pay, and did so. The government neither paid nor agreed to pay anything. The purchase of the meters was an incident and burden of the business. The right to engage in the business was not unqualified. It could only be done when authorized by the government, in the mode prescribed. No one was compelled to procure that authorization, but whoever elected to do so took it necessarily cum onere, and hence has no right to complain of any condition imposed and assented to, or of anything resulting from it. Certainly no consequence such as that here in question can constitute a cause of action against the United States, any more than would any other expenditure or any other loss arising from the business.

Nor can there be any valid demand against the United States upon the ground of money paid and expended for their benefit. The meters were bought and paid for by the appellants. They chose to give the order and pay the money rather than give up the business. The meters were delivered to them by the manufacturer. They owned them, and still own them. The United States never asserted any claim to them. After their use was finally dispensed with by the government, the distillers had the right, as they still have, to dispose of them according to their discretion. Upon the passage of the act of 1872 a circular from the commissioner notified them accordingly.

Nor is there any foundation for a claim against the United States for money had and received. It is true, their officer received the price of the meters from the appellants; but it was for the manufacturer, and not for the government, and it was paid over, accordingly, upon the delivery of the meters. The officer was a mere conduit for passing the money from one party to the other. The regulation which prescribed the arrangement was intended to secure certainty and promptitude of payment to the manufacturer, and corresponding promptitude on his part in the delivery of the meters when ordered.

Not a dollar of the funds in question is, or ever was, in the national treasury.

We concur in the views expressed by the Court of Claims.

Judgment affirmed.


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


text:
Railroad Company v. County of Hamblen

ERROR to the Supreme Court of the State of Tennessee.

This was an action brought by the East Tennessee, Virginia, and Georgia Railroad Company, against the County of Hamblen, Tennessee. The question at issue was as to the liability of the company to pay taxes on the assessed value of that portion of its road which lies in that county.

The Cincinnati, Cumberland Gap, and Charleston Railroad Company was chartered by an act of the General Assembly of Tennessee, approved Nov. 18, 1853, the eight section of which provides, 'That said company shall be, and they are hereby, vested with all the rights, powers, and privileges, and subject to all the restrictions and liabilities, of the Nashville and Louisville Railroad Company, except where otherwise provided for in this charter.'

A charter was granted to the latter company Feb. 9, 1840. the fortieth section of which provides,--

'That the capital stock in said company, the dividends thereon, and the roads and fixtures, depots, workshops, warehouses, and vehicles of transportation belonging to the company, shall be for ever exempt from the taxation in each and every of the said States of Tennessee and Kentucky, and it shall not be lawful for either of the said States, or any corporation or municipal police, or other authority thereof, or of any town, city, county, or district thereof, to impose any tax on such stock or dividends, property or estate: Provided, the stock or dividends, when the said dividends shall exceed the legal interest of the State, may be subject to taxation by the State in common with and at the same rate as money at interest or interest thereon, and when the State shall impose a tax on the dividends declared. in favor of the stockholders of the company, the tax shall extend only to such proportion of the said dividends and capital stock as the part of the road in that State shall bear to the whole road, from the profits of which the said dividends have arisen, which tax, when imposed, shall be retained by the company out of the dividends and paid to the State; but no tax shall be imposed so as to reduce the part of the dividends to be received by the stockholders below the legal interest of the State.'

The company first named borrowed from the State her coupon bonds. To secure their payment, the General Improvement Act of 1852, and the acts amendatory thereof, which authorized the loan, retained a lien therefor upon the property, real and personal, stock, and franchises of the company. The latter failing to pay the interest, a law was passed conferring upon the Chancery Court of Nashville jurisdiction of all questions arising upon loans made under those acts to the various railroad companies. The State filed her bill July 21, 1871, in that court to enforce her lien, and secure the payment of the bonds so advanced to the company. A decree was passed for the sale of the property, which is set out in the opinion of this court. McGhee, the purchaser under the decree, conveyed the property to the East Tennessee, Virginia, and Georgia Railroad Company.

The Circuit Court for the county of Hamblen held that the company was subject to the tax, and entered judgment accordingly, upon the affirmance of which by the Supreme Court the case was removed here.

Mr. George Brown for the plaintiff in error.

Mr. William Y. C. Humes, contra.

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

title: Railroad Company v. County of Hamblen


text: Talk:Railroad Company v. County of Hamblen


text:
Railroad Company v. County of Hamblen/Opinion of the Court

This case is, we think, governed by the of Morgan v. Louisiana, 93 U.S. 217. We there held that immunity from taxation was not such a franchise of a railroad corporation as would pass by a sale under a mortgage 'on the property and franchises of the company,' and that the term 'franchises' was not synonymous with 'rights, privileges, and franchises,' 'rights, powers, and privileges,' and the like. The Cincinnati, Cumberland Gap, and Charleston Railroad Company was by its charter invested 'with all the rights, powers, and privileges' of the Nashville and Louisville Railroad Company; but the statutory lien retained by the State as security for its advances covered only 'the property, real and personal, stock, and franchises' of the Cincinnati, Cumberland Gap, and Charleston Company. The decree of the Chancery Court of Nashville provided that if the railroad company itself, or some one or more of its stockholders, should not purchase 'the said railroad and all the property, real, personal, and mixed, and the franchises and privileges of said railroad company, for $700,000, payable in the bonds of the State of Tennessee, with the coupons attached of and after Jan. 1, 1871,' or sell 'the same to other parties. . . under the conditions, liabilities, and restrictions as aforesaid, which are fully set forth in said. . . decree,' then the commissioners of the State might sell 'all the property and franchises of the. . . company to the best advantage, either at public or private sale.' Neither the company nor its stockholders bought under this decree; but C. M. McGhee, for himself and his associates, proposed to the commissioners to pay for the road $300,000 in bonds of the State, with January, 1871, coupons attached; and in his proposal he said, 'I expect a full and perfect title to the road, including the State's interest, franchises, and privileges.' This proposition was accepted by the commissioners, and the sale, reported to the court, was confirmed by decree in the following words: '. . . which report being seen, heard, and fully understood by the court, and not excepted to, is in all things confirmed; and it appearing to the satisfaction of the court that the sales of the Knoxville and Kentucky and the Cincinnati, Cumberland Gap, and Charleston Railroad, with their property and franchises, have been made by the commissioners in conformity with the previous decrees, it is therefore ordered, adjudged, and decreed that these said sales be confirmed, and that the commissioners retain the bonds and collect the residue of the purchase-money as the same falls due, and, when the same is fully paid, make title to the purchasers according to the terms of the contract and former decrees of this court. It is further ordered and decreed by the court that the purchasers be at once put in possession of these roads, severally bought by them, with all the property, franchises, and effects so bought by them as aforesaid, and for this purpose, if necessary, the clerk and master is hereby ordered and directed, upon the application of either of said purchasers, to issue a writ of possession, or writs of possession, directed to the sheriff of the several counties in this State through which the roads may run, or in which any part thereof, or of the property sold, may be, directing said sheriff to put the purchasers in possession of such property at once, and make return of his action to this court. It is further ordered, adjudged, and decreed that all the acts of the commissioners in reference to said sales be, and the same are hereby, approved, sanctioned, and ratified by the court.'

From this it will be seen that although McGhee in his proposal said, 'he expected a full and perfect title to the road,. . . franchises, and privileges,' the court, in passing upon the confirmation, treated the sale as of the 'property and franchises,' 'in conformity with the previous decrees,' and directed that, when the agreed price was paid in full, the commissioners 'make title to the purchasers according to the terms of the contract and former decrees of this court.'

In this way, as it seems to us, the title of these purchasers was confined to the property and franchises of the company, notwithstanding the use of the additional word 'privileges' in the proposal. The authority to sell embraced only 'property and franchises,' and the sale recognized by the court as having been made is confined within the same limit. An opportunity was afforded the company itself or its stockholders to discharge the State lien or buy the State's interest, on the payment of $700,000 in State bonds. In that event, the original franchises and privileges of the company were to remain unimpaired or pass to the company's vendee; but if a sale was made by the State authorities to a third party under the statutory lien, then only the franchises which the lien covered were to be transferred; and those, as we said in Morgan v. Louisiana (supra), were only 'the positive rights or privileges, without the possession of which the road of the company could not be successfully worked.' The act of Dec. 21, 1870, does not purport to enlarge the State's interest. It simply provided a way in which the statutory lien, as originally retained, could be enforced; and gave authority, upon a sale of 'any of the franchises,' to transfer and vest in the purchaser 'all the rights, privileges, and immunities appertaining to the franchises sold.' As in this case only franchises 'essential to the operations of the corporation, and without which its road and works would be of little value' (Morgan v. Louisiana), were sold, the immunity from taxation did not pass as an incident.

Our attention has been called to the case of the Knoxville & Ohio Railroad Co. v. Hicks, decided by the Supreme Court of Tennessee at its September Term, 1877, but not yet reported in the regular series of reports, as holding that this immunity did pass under a similar sale. We do not so understand that case. There it appears that the Chancery Court of Nashville, acting under the jurisdiction conferred by the act of Dec. 21, 1870, 'distinctly adjudged that not only the property of the old company, but all its rights, franchises, privileges, and immunities, as defined by the charter and laws and the decree in the cause, passed to and vested in the new company.' Here, on the contrary, the same court adjudged, under the authority of the same act, that only the 'property and franchises' passed. The same difference, therefore, exists between these cases that there is between Humphrey v. Pegues (16 Wall. 244) and Morgan v. Louisiana, supra. In Humphrey v. Pegues, we held that immunity from taxation did pass under a transfer of 'all the powers, rights, and privileges' of a railroad corporation, but, in Morgan v. Louisiana, that it did not by a transfer of 'property and franchises' only.

This disposes of the case, and makes it unnecessary to consider whether the immunity from taxation which the Nashville and Louisville Company had by its charter was granted to the Cincinnati, Cumberland Gap, and Charleston Company, or whether, if it was, this immunity could be transferred to a purchaser at a sale to enforce the statutory lien retained by the State, even with the aid of the jurisdiction conferred on the Chancery Court of Nashville by the act of Dec. 21, 1870.

Judgment affirmed.


text: Talk:Railroad Company v. County of Hamblen/Opinion of the Court


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Page:A book of the Cevennes (-1907-).djvu/265

Rh down. Thus, in one day, the wife was deprived of husband, children, home, and substance.

Throughout the Cevennes spirits were stirred with expectation of a great deliverance. A prophetess announced that the millennium was at hand. A prophet declared that a ladder was about to be let down from heaven.

In February, 1702, Durand Fage was at an assembly, carrying arms. The prophetess Marguerite Bolle, aged twenty-three, fell into an ecstasy, and announced that the sword of Durand would smite the enemies of the truth hip and thigh. Later on the great prophets of the mountains, Abraham Mazel, Solomon Couderc, and Pierre Séguier, received similar revelations.

The Abbé du Chayla, archpriest and inspector of missions in the Cevennes, had a house in which he sometimes dwelt at Pont-de-Montvert. He had been a missionary in China, and had there suffered martyrdom, was left for dead, and brought back to life by the charity of a poor Chinese. One Massys, a muleteer, was guiding a party of fugitives who were escaping to Geneva, and on him, with his convoy, consisting mostly of women dressed as men, Du Chayla laid his hands. He was a cruel man; he plucked out the beards and eyebrows with pincers, he put live coals into the hands of his victims and then forced them to clench their fists. Sometimes he surrounded their fingers with cotton steeped in oil and set fire to it.

On the Sunday following the capture of the convoy there was a gathering of the Protestants in the woods of Altefage, on Mount Bougès, when Séguier fell into ecstasy and prophesied. He was a wool-carder, tall, black-faced, and toothless, but a man full of energy


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Buchanan v. Litchfield

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

This was an action of assumpsit, brought Nov. 25, 1876, by Alexander Buchanan against the City of Litchfield, Illinois, to recover the amount of certain coupons of which it was admitted that he was the bona fide holder for value. The declaration, besides a count upon the coupons themselves, contains the usual counts for money lent and advanced, and for money had and received. The city defended the action upon the ground that the bonds were issued in violation of the Constitution of the State, and that they were consequently void. The court which, by the stipulation of the parties, tried the issue found for the defendant, and the plaintiff sued out this writ.

The legislature of Illinois passed, April 15, 1873, an act entitled 'An Act authorizing cities, incorporated towns, and villages to construct and maintain water-works,' by the first section of which act it is provided that all cities, incorporated towns, and villages in the State be, and are hereby, authorized and shall have power to provide for a supply of water for the purpose of fire protection and for the use of the inhabitants of such cities, incorporated towns, and villages, by the erection, construction, and maintaining of a system of waterworks.

The second section provides that such cities, incorporated towns, and villages may borrow money, and levy and collect a general tax in the same manner as other municipal taxes may be levied and collected, for the erection, construction, and maintaining of such water-works, and appropriate money for the same.

The city council, the legislative authority of the city, adopted, Dec. 4, 1873, an ordinance in the words following:--

'An Ordinance to provide for the issuing of Bonds for the Construction of the Litchfield Water-works.

'Be it ordained by the city council of the city of Litchfield:

'SECT. 1. That in accordance with the power conferred by section second of an act of the General Assembly of the State of Illinois, entitled 'An Act authorizing cities, incorporated towns and villages to construct and maintain water-works,' approved April 15, 1873, the mayor and city clerk are hereby authorized and instructed to issue not exceeding fifty thousand dollars in Litchfield water bonds, which bonds shall be used for borrowing money for the erection, constructing, and maintaining of water-works for the use of the people of said city of Litchfield.

'SECT. 2. That the said Litchfield water bonds shall be of the denomination of five hundred dollars each, shall be dated Jan. 1, 1874, and shall become due twenty years after said date, but may be redeemed at par at any time after the year 1878, notice being given at the Nassau Bank, in the city of New York, six months in advance of the intention so to redeem, and said bonds shall bear interest at the rate of ten per centum per annum, payable semi-annually at the said Nassau Bank in the city of New York.'

As required by the charter, the mayor of the city approved this ordinance, and after its adoption he and the city clerk made one hundred bonds of the denomination of $500 each, as follows, differing in the numbering from 1 to 100, inclusive.

'No. ___.] LITCHFIELD WATER BOND. [$500.00.

'CITY OF LITCHFIELD, STATE OF ILLS.

'The City of Litchfield, in the State of Illinois, for value received, promises to pay to Geo. Wm. Ballou or bearer five hundred dollars, in current money of the United States, at the Nassau Bank in the city of New York, twenty years after date, with interest thereon from the date hereof at the rate of ten per centum per annum, which interest shall be payable semi-annually in current money of the United States on presentation at said bank of the coupons hereto annexed: Provided, that the said city of Litchfield shall have the right to pay off and redeem this bond at its par value at any time after the year A. D. 1878, first giving said bank six months' notice in writing of the intention to so redeem.

'This bond is issued under authority of an act of the General Assembly of the State of Illinois, entitled 'An Act authorizing cities, incorporated towns, and villages to construct and maintain waterworks,' approved April 15, 1873, and in pursuance of an ordinance of the said city of Litchfield numbered 184, and entitled 'An Ordinance to provide for the issuing of bonds for the construction of the Litchfield water-works,' approved Dec. 4, 1873.

'In testimony whereof, the mayor of said city has hereunto set his hand and caused the corporate seal to be affixed, and the clerk of said city to countersign the same this first day of January A.D. 1874.

'W. S. PALMER, Mayor.

'B. S. HOOD, City Clerk.'

Coupons for the semi-annual interest were attached to the bonds, and the whole number, amounting to $50,000, were sold by the city for the purposes for which they were authorized. The plaintiff's coupons were due July 1, 1876.

The defendant then proved against the objection of the plaintiff, who insisted that such evidence was not admissible against him as the bona fide holder of the coupons, that the city of Litchfield is incorporated under a special law which defines its boundaries; that there was no assessment made of the taxable property within said city for the year 1873, separately, but that the city is within the limits of two municipal townships organized under the township organization laws of the State, one called North Litchfield and the other South Litchfield, each six miles square, and that the taxable property in the city was assessed for State and county taxes in the township in which it was situated and to which it belonged; that the property of the city as assessed for State and county taxes for the year 1873 was $1,400,000, which valuation was ascertained by the following method:--

The assessors of North and South Litchfield returned to the clerk of the county court the lists and value of the property assessed for taxation for the year 1873 in said townships respectively, which lists contained a description of all the lands, lots, and other real estate in said township, with the proper valuation opposite each tract or lot. With these lists and the plat of the city before him, the clerk was able to ascertain the description and value of all the real estate in the city, and by footing the value of the several lands and lots found within the city limits the aggregate value of all the real estate of the city was ascertained for the year 1873.

By another special law the city of Litchfield is made one school district, called the Litchfield school district. And it is a part of the legal duty of the township to note opposite the name of each owner of personal property assessed for taxation the school district in which he resides. That the assessors of North and South Litchfield for the year 1873 noted opposite the names of the owners of personal property in their township residing within the city limits that they resided in Litchfield school district, and the assessed value of the personal property of the city of Litchfield was ascertained by computing the value of all the personal property assessed for taxation in the school district.

That railroad property and the property of corporations were assessed by the State Board of Equalization, and the whole value of these species of property lying in Montgomery County (in which the city of Litchfield is situated) was certified by the auditor to the county clerk, and the proportion taxable in Litchfield was ascertained by the clerk.

That the assessment thus made by the town assessors of the towns of North and South Litchfield was the only assessment made, or authorized by law to be made, of the property situated in the city of Litchfield for State and county taxes for the year 1873, and which assessment for the purposes aforesaid was the last assessment for State and county taxes previous to the issuing and making of said bonds. That by compiling the assessments thus made the exact amount of the value of taxable property in said city of Litchfield for the year 1873, as assessed for State and county taxes, should be and is ascertained to be the said sum of $1,400,000.

It was proved that the debt of the city of Litchfield on and before the first day of January, 1874, exclusive of the water bonds, was $70,000.

Sect. 12 of art. 9, in force in 1870, of the Constitution of the State, is in these words: 'No county, city, township, school district, or other municipal corporation shall be allowed to become indebted in any manner or for any purpose to an amount including existing indebtedness in the aggregate exceeding five per centum on the value of the taxable property therein to be ascertained by the last assessment for State and county taxes previous to the incurring of such indebtedness.'

Upon the trial the following questions arose:--

First, Whether said twelfth section of the ninth article of the Constitution of the State of Illinois, by its own force and terms, without appropriate legislation, limited or affected the otherwise lawful power of the city of Litchfield to issue the bonds and coupons, and sell the same to raise money for the construction of water-works according to the provisions of the act of April 15, 1873, and the ordinance of the city of Litchfield No. 184, in relation thereto, so as to render said bonds and coupons void as being in excess of five per cent including existing indebtedness on the value of taxable property in said city as ascertained by the last assessment for State and county taxes preceding the issue of such bonds.

Second, Whether the facts offered in evidence for the purpose of showing the value of taxable property in the city of Litchfield for the year 1873 are competent and sufficient to establish the value of taxable property therein, to be ascertained by the last assessment thereof, for State and county taxes previous to the issue of such bonds.

Third, Whether the said facts tending to prove that the said bonds, including the indebtedness of said city, exceed five per cent on the value of the taxable property of said city at the time they were issued, as ascertained in manner before stated, are admissible or competent as evidence in this case to impair the rights of the plaintiff as the bona fide holder of the coupons sued on.

And the opinion of the said judges being opposed upon the questions, the latter were duly certified to this court.

Mr. John M. Palmer and Mr. Frank Morison for the plaintiff in error.

The defence relied upon by the city is the nullity of the bonds by reason of her asserted absolute want of power to issue them. It rests upon the constitutional clause, that 'no county, city, &c., shall be allowed.' &c. The question arises, whether the clause operates proprio vigore upon municipal corporations, and imposes an actual limitation upon them, or whether it enjoins a duty upon the legislature, when either creating them or providing for the government and control of such as are already in existence. The sounder view, we submit, is that it requires for its enforcement legislation prescribing, under adequate penalties, the duties of the officers of a municipal corporation and declaring the mode by which those dealing with them may ascertain its indebtedness. None has been enacted.

But, conceding the clause to be self-operating, it does not unconditionally prohibit the city from contracting debts for the purposes enumerated in its charter, or in the act of April 15, 1873. That power is expressly granted, and the limitation upon it taking effect only under certain circumstances, the question as to when it may be lawfully exercised must be necessarily dependent upon the decision of the city council whether they do in fact exist. That body alone has access to the means by which they can be investigated and determined. The passage of the ordinance, so far as innocent third parties are concerned, was a final and authoritative declaration by those who were clothed with authority to make it, that no circumstances existed which precluded the exercise of that power. The bonds issued, whereon the money was raised to carry that ordinance into effect, are, therefore, valid securities in the hands of a bona fide holder for value. The city is as effectually estopped by their recitals as if the ordinance had declared in express terms, as it now does virtually and by necessary implication, that, at the time of its passage, her debt, including that thereby incurred, would not be in excess of the prescribed amount.

Under the well-settled rule of this court, that nothing but a total want of power renders this class of securities void in the hands of such a holder, bonds issued without proper formalities, bonds issued contrary to the provisions of the laws authorizing them, bonds fraudulently issued, stolen bonds, the proceeds of which never reached the municipalities issuing them, and bonds declared to be invalid by the courts of the States in which they were issued, have all been pronounced good here. The municipalities have been held to the payment of them, without regard to any equities which would constitute a good defence against a party who had notice of them. Commissioners of Knox County v. Aspinwall, 21 How. 539; Moran v. Miami County, 2 Black, 732; Mercer County v. Hacket, 1 Wall. 83; Mayor v. Muscatine, id. 384;, Kennicott v. Supervisors, 16 id. 452; Supervisors v. Schenk, 5 id. 784; County of Daviess v. Huidekoper, 98 U.S. 98; County of Schuyler v. Thomas, id. 169; County of Callaway v. Foster, 93 id. 567; County of Scotland v. Thomas, 94 id. 682; County of Warren v. Marcy, 97 id. 96; Cromwell v. County of Sac, 96 id. 51; Commissioners v. Bolles, 94 id. 104; Commissioners v. January, id. 202.

Marcy v. Township of Oswego (92 id. 637) was a suit on bonds issued under the authority of a statute of Kansas, which provided that they should not exceed such a sum as would require a levy of more than one per cent per annum to pay the yearly interest. Each recited that it was issued by virtue of and in accordance with that statute, and in pursuance of and in accordance with the vote of three-fifths of the legal voters of the township. A recovery was resisted, upon the ground that the authorized amount was exceeded; but this court held the bonds to be valid in the hands of a bona fide holder, and remarked: 'It is to be observed that every prerequisite fact to the execution and issue of the bonds was of a nature that required examination and decision. The existence of sufficient taxable property to warrant the amount of the subscription and issue was no more essential to the exercise of the authority conferred upon the board of county commissioners than was the petition for the election, or the fact that fifty freeholders had signed, &c. These are all extrinsic facts, bearing not so much upon the authority vested in the board to issue the bonds, as upon the question whether that authority should be exercised.'

The bonds now in question recite that they are issued under the authority of an act of the General Assembly and pursuant to an ordinance of the city. The cases are not distinguishable in principle. The only difference in point of fact is that the prohibition in one is declared by statute, and in the other by a constitutional provision. It is hardly necessary to say that a law passed pursuant to the Constitution has, while it remains in force, the same binding efficacy as the Constitution itself.

In Humboldt Township v. Long (id. 642), which was governed by the same statute, the required notice of the popular election was not given. This court, however, reaffirming the doctrines of Marcy v. Township of Oswego, ruled, in view of the recitals in the bonds,-and they are not substantially different in effect from those in the present case,-that the township was liable. Unless the vote cast at such an election was in favor of the issue of the bonds, the commissioners were not authorized to order it. Their decision that the election had been duly held, although only inferrible from their order for the issue, was regarded as conclusive. So here, under the statute of Illinois and her Constitution, giving to the latter the broadest effect, it was a condition precedent to the power of the city council that certain facts, peculiarly if not exclusively within its knowledge, should exist, but which a third party had no means of ascertaining. The exercise of the power was a decision by the appointed tribunal that such facts existed. We may therefore insist, in the language of Mr. Justice Strong, that 'the bonds are not invalid by reason of their having been voted and issued in excess of the statutory (constitutional) limit.' Wilson v. Salamanca (99 id. 499) is to the same effect, and the decisions here contain nothing in conflict therewith.

If the city had contracted with a party to erect the water-works, she, after accepting them and enjoying the benefit and protection which they afford, could not set up that the contract entailed upon her a debt in excess of the amount she was allowed to incur. Union Water Co. v. Murphy's Flat Fluming Co., 22 Cal. 650; Whitney Arms Co. v. Barlow et al., 63 N. Y. 62. The bondholders' case is as meritorious as his, because their money was, in this instance, faithfully applied to the construction and maintenance of those works.

Again, if the city, with a knowledge of her then indebtedness, passed the ordinance, sold the bonds, and received into her treasury the money therefor, can she set up her own fraud to exempt her from liability to pay it? The doctrine of ultra vires has no application to such a case, and she, to the same extent as an individual, is liable for the acts of her servants, who, in their appropriate sphere of duty, are engaged in the transaction of her business.

No assessment of the taxable property of the city of Litchfield was made or authorized to be made in the year 1873, and the value of that property was, therefore, not 'ascertained,' as provided for in the constitutional provision.

This being so, the remaining evidence shows that the valuation of the towns of North and South Litchfield was ascertained by their assessors; that other officers ascertained the value of the railroad property, and still others that of the school property in a part of the county in which Litchfield is situated; and that, by compiling these different returns, the assessable valuation of the property in the city of Litchfield may be determined.

It is not in evidence that it was the duty of any city officer to so compile these various returns, or that any authorized person ever did so; but the court is now asked to do it, and so far constitute itself a city functionary as to make from these returns an estimate of the taxable value of the then property in the city.

The fact indispensable to make out the defendant's case on this point is the ascertained taxable value of this property in 1873. The evidence shows that it never was ascertained.

Mr. A. L. Knapp, contra.

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

title: Buchanan v. Litchfield


text: Talk:Buchanan v. Litchfield

title: Talk:Buchanan v. Litchfield


text:
Buchanan v. Litchfield/Opinion of the Court

The first and most important of the certified questions involves the construction of the twelfth section of the ninth article of the Constitution of Illinois.

The words employed are too explicit to leave any doubt as to the object of the constitutional restriction upon municipal indebtedness. The purpose of its framers, beyond all question, was to withhold from the Legislative Department the power to confer upon municipal corporations authority to incur indebtedness in excess of a prescribed amount. The authority, therefore, conferred by the act of April 15, 1873, to incur indebtedness in the construction and maintenance of a system of water-works, could have been lawfully exercised by a city, incorporated town, or village, only when its liabilities, increased by any proposed new indebtedness, would be within the constitutional limit. No legislation could confer upon a municipal corporation authority to contract indebtedness which the Constitution expressly declared it should not be allowed in incur. Law et al. v. The People ex rel., 87 Ill. 385; Fuller v. City of Chicago, 89 id. 282.

It was proved that the debt of the city of Litchfield on and before the 1st of January, 1874, exclusive of the water bonds, was $70,000.

If, therefore, it appears, by evidence, of which the city may rightfully avail itself, as against a bona fide holder for value of the coupons in suit, that the bonds, issued Jan. 1, 1974, created an indebtedness in excess of the amount to which municipal indebtedness is restricted by the Constitution, there would seem to be no escape from the conclusion that the bonds are void for the want of legal authority to issue them at the time they were issued.

To the evidence upon which the city relied as showing such want of authority, objections were interposed by the plaintiff, who insisted that it was not admissible against him, as a bona fide holder of the coupons in suit.

That evidence was made the basis of important findings of fact. Introduced for the purpose of showing the value of taxable property within the limits of the city, and the extent of her indebtedness, when these water bonds were issued, it is not, in our opinion, liable to any serious objection. It seemed to be the best proof upon those subjects that the law furnished.

In determining whether the constitutional limit of indebtedness has been exceeded by a municipal corporation, an inquiry would always be necessary as to the amount of taxable property within its boundaries. Such inquiry would be solved, not by information derived from individual officers of the municipality, but only in the mode prescribed in the Constitution; that is, by reference to the last assessment for State and county taxes for the year preceding the issuing of the bonds. That test was applied in this case. Had there been, under or by competent legal authority, an assessment for that year of taxable property within the city, separately from all other property in the county or township to which the city belonged, such assessment would undoubtedly have been controlling. But there was no such official assessment, in fact, or required by law. There were, however, official assessments for State and county taxes for 1873, embracing all taxable property within the county and townships of which the city formed a part, and from which, in connection with the map of the city, could be readily ascertained the location and taxable value of all property within the corporate limits of the city for that year. The purchaser of the bonds was certainly bound to take notice not only of the constitutional limitation upon municipal indebtedness, but of such facts as the authorized official assessments disclosed concerning the valuation of taxable property within the city for the year 1973.

But in what way was the purchaser to ascertain the extent of the city's indebtedness existing at the time the bonds in question were issued? The extent of that indebtedness was a fact peculiarly within the knowledge of the constituted authorities of the city. It was necessarily left, both by the Constitution and the statute of 1873, to their examination and determination, under the constitutional injunction, however, that no municipal corportion should exceed the prescribed amount of indebtedness. It was, nevertheless, a fact which, so far as we are advised by the record, could not at all times and absolutely, or with reasonable certainty, be ascertained from any official documents to which the public had access. A like difficulty, perhaps, would arise in the case of any municipal corporation, possessing the general power of raising money, by taxation and otherwise, to carry on local government. Its liabilities might frequently vary in their aggregate amount, and at particular periods might be of different kinds, some fixed and absolute, while others would be contingent upon events thereafter to happen. These considerations were, doubtless, present in the minds as wll of those who framed the Constitution as of those who passed the statute of 1873.

As, therefore, neither the Constitution nor the statute prescribed any rule or test by which persons contracting with municipal corporations should ascertain the extent of their 'existing indebtedness,' it would seem that if the bonds in question had contained recitals which, upon any fair construction, amounted to a representation upon the part of the constituted authorities of the city that the requirements of the Constitution were met,-that is, that the city's indebtedness, increased by the amount of the bonds in question, was within the constitutional limit,-then the city, under the decisions of this court, might have been estopped from disputing the truth of such representations as against a bona fide holder of its bonds. The case might then, perhaps, have been brought within the rule announced by this ourt in Town of Coloma v. Eaves (92 U.S. 484), in which case we said, and now repeat, that 'where legislative authority has been given to a municipality, or to its officers, to subscribe for the stock of a railroad company, and to issue municipal bonds in payment, but only on some precedent condition, such as a popular vote favoring the subscription, and where it may be gathered from the legislative enactment that the officers of the municipality were invested with power to decide whether the condition precedent has been complied with, their recital that it has been, made on the bonds issued by them and held by a bona fide purchaser, is conclusive of the fact, and binding upon the municipality; for the recital is itself a decision of the fact by the appointed tribunal.' So, in the more recent case of Orleans v. Pratt (99 id. 676), it was said that 'where the bonds on their face recite the circumstances which bring them within the power, the corporation is estopped to deny the truth of the recital.'

The cases cited by counsel for the plaintiff do not assert any different doctrines, as will be seen from an examination of those chiefly relied upon. In Commissioners of Knox County v. Aspinwall (21 How. 539), which was a case of municipal subscription of stock in a railroad company, the statute upon which the subscription there purported to rest made the existence of certain facts essential to the exercise of authority to make the subscription and issue bonds therefor. The bonds, upon their face, however, recited that they were issued in pursuance of the statute, which prescribed the conditions precedent to any subscription, and, therefore, the court said, they imported a compliance with the law under which they were issued. It was, consequently, ruled that the purchaser was not bound to look further for evidence of a compliance with the condition annexed to the grant of the power.

In Kenicott v. Supervisors (16 Wall. 452), the rule was thus stated: 'If an election or other fact is required to authorize the issue of the bonds of a municipal corporation, and if the result of that election, or the existence of that fact, is by law to be ascertained and declared by any judge, officer, or tribunal, and that judge, officer, or tribunal, on behalf of the corporation, executes or issues the bonds, with a recital that the election has been held or that the fact exists or has taken place, this will be sufficient evidence of the fact of all bona fide holders of the bonds.'

In County of Moultrie v. Savings Bank (92 U.S. 631), the validity of the bonds there in suit was questioned, upon the ground that certain precedent conditions imposed by statute had not been complied with. The bonds, however, recited their issue to be in conformity to the provisions of the statute which gave the authority to issue them. So, in Marcy v. Township of Oswego (id. 637), where the statute authorizing a municipal subscription, with the sanction of three-fifths of the voters interested, and the issue of bonds in payment thereof, required particular facts to exist and certain acts to be performed before the right to make the subscription and to issue bonds in discharge thereof could be exercised. The statute contained, amongst other things, a proviso to the effect that the amount of bonds sold by the township should not exceed such a sum as would require a levy of more than one per cent per annum on the taxable property of the township to pay the yearly interest. It appeared that the statute had not, in some of these respects, been complied with; that is, that the conditions had not been performed which the statute required before any subscription should be made or bonds issued. But, adhering to the rule announced in Town of Coloma v. Eaves, the defence was overruled in favor of a bona fide holder for value, because of the recital in the bonds that their issue was by virtue of, and in accordance with,' the statute, and in pursuance of, and in accordance with, the vote of three-fifths of the legal voters of the township.'

Returning to the case in hand, it will be observed that the bonds issued by the city of Litchfield contain no recital whatever of the circumstances which, under the Constitution of the State, must have existed before the city could legally incur the indebtedness for which the bonds were issued. They purport, it is true, to be issued under the authority of the act of April 15, 1873, and in pursuance of the ordinance of the city based upon that statute. But that statute does not expressly restrict the exercise of the power to erect and maintain a system of water-works to cases in which the aggregate indebtedness of the city was within the limit which the Constitution declared no municipal corporation should exceed. Nor does the city ordinance recite or state, even in general terms, that the proposed indebtedness was incurred in pursuance of or in accordance with the Constitution of the State, or under the circumstances which permitted the issue of the bonds. Consequently, a recital that the bonds were issued under the authority of the statute, and in pursuance of the city ordinance, did not necessarily import a compliance with the Constituion. Had the bonds made the additional recital that they were issued in accordance with the Constitution, or had the ordinance stated, in any form, that the proposed indebtedness was within the constitutional limit, or had the statute restricted the exercise of the authority therein conferred to those municipal corporations whose indebtedness did not, at the time, exceed the constitutional limit, there would have been ground for holding that the city could not, as against the plaintiff, dispute the fair inference to be drawn, from such recital or statement, as to the extent of its existing indebtedness.

Any different conclusion from that indicated would extend the doctrines of this court upon the subject of municipal bonds farther than would be consistent with reason and sound policy, and farther than we are now willing to go. The present action cannot be maintained, unless we should hold that the mere fact that the bonds were issued, without any recitals of the circumstances bringing them within the limit fixed by the Constitution, was, in itself, conclusive proof, in favor of a bona fide holder, that the circumstances existed which authorized them to be issued. We cannot so hold.

Our attention is called by counsel to the exceeding hardship of this case upon those whose money, it is alleged, has supplied the city of Litchfield with a system of water-works, the benefits of which are daily enjoyed by its inhabitants. The defence is characterized as fraudulent and dishonest. Waiving all considerations of the case, in its moral aspects, it is only necessary to say that the settled principles of law cannot, with safety to the public, be disregarded in order to remedy the hardships of special cases.

Whether the city is under a legal obligation to make restitution of the money, obtained without authority of law, that is, to refund to the proper party or parties such sums as were actually received by its authorized agents or officers upon the sale of the bonds, is not a question arising in the present action, which is only for the recovery of the stipulated interest upon such bonds. Upon this point it is not proper at this time, or in this form of action, to express an opinion.

What we have said constitutes a sufficient answer to all of the questions certified to us, and requires an affirmance of the judgment.

Judgment affirmed.


text: Talk:Buchanan v. Litchfield/Opinion of the Court