text:
Conner v. Long/Opinion of the Court

The facts out of which this case has grown are undisputed. They are as follows:--

On July 20, 1875, a warrant of attachment was duly issued in an action commenced on that day in the Supreme Court of the State of New York, by Dickerson against Spaulding, a nonresident. William C. Conner, sheriff of the city and county of New York, to whom the warrant was directed, levied it, the same day, on the straw goods in controversy in this action which were at the time the property of Spaulding. On the ground that they were perishable, an order was on the 27th of that month made in the cause, directing the sheriff to sell them. Pursuant to that order, they were sold August 1 for the sum of $1,156.50. Judgment was entered in the action September 15, in favor of the plaintiff, for $2,175.85. An execution issued thereon was received by the sheriff on that day. He returned it five days thereafter, showing that the amount made, being the proceeds of the sale less expenses, had been paid by him to the attorney of the plaintiff.

Spaulding was a resident of Massachusetts. On July 23, 1875, a petition in bankruptcy was filed against him by creditors in the District Court of the United States for the District of Massachusetts, and he was adjudged a bankrupt on the fourth day of the following September. The deed of assignment was executed by the register in bankruptcy to William H. Long, the appointed assignee, on the 21st of that month.

On Jan. 21, 1876, Long, as assignee, commenced in the Superior Court of the city of New York the present action, against Conner, the sheriff, to recover the value of the goods, on the ground that the sale so made was a wrongful conversion of property, the title to and right of possession in which had at the time, by the operation of the Bankrupt Act, become vested in him as assignee of Spaulding.

This action was removed by the plaintiff therein to the Circuit Court of the United States. The answer of Conner denied 'that he knew or in any way had any notice or intimation of said alleged proceedings in bankruptcy until subsequently to such sale, and until after the payment over by this defendant of the money so received by him upon such sale, as hereinafter set forth.' Upon the trial the judge instructed the jury that upon these admitted facts the sheriff was guilty of a conversion of the property in question Aug. 1, 1875, in selling it under the order of the Supreme Court of New York; that he was consequently liable to pay to the plaintiff the market value thereof on that date, with interest; and that the only question submitted for their determination was the amount of damages.

The trial resulted in a judgment for $1,186.43 in favor of the plaintiff, to reverse which this writ of error is prosecuted.

The form of the charge assumed the truth of the foregoing allegation in the defendant's answer, as to his want of actual notice of the proceedings in bankruptcy.

The question now to be considered and determined is, whether there is error in this charge.

The solution of this question depends upon the force to be given to the fourteenth section of the act of March 2, 1867, c. 176, now sect. 5044 of the Revised Statutes, which reads as follows:--

'As soon as an assignee is appointed and qualified, the     judge, or when there is no opposing interest, the register      shall, by an instrument under his hand, assign and convey to      the assignee all the estate, real and personal, of the      bankrupt, with all his deeds, books, and papers relating      thereto, and such assignment shall relate back to the      commencement of the proceedings in bankruptcy, and by      operation of law shall vest the title to all such property      and estate, both real and personal, in the assignee, although      the same is then attached on mesne process as the property of      the debtor, and shall dissolve any such attachment made      within four months next preceding the commencement of the      bankruptcy proceedings.'

In Hampton v. Rouse (22 Wall. 263, 275), it was declared by Mr. Justice Clifford, delivering the opinion of the court, that the plain meaning of this section was, that, 'until an assignee is appointed and qualified, and the conveyance or assignment is made to him, the title to the property, whatever it may be, remains in the bankrupt.' It is equally plain that, when the assignment is made, it operates retrospectively. The title of the bankrupt in the interval is defeasible, and, when the assignment is made, is divested as of the date when the petition was filed. All titles derived under or through him, originating subsequently to that date, are, by force of law and without regard to the knowledge or the motives of the claimant, overreached and defeated. Bank v. Sherman, 101 U.S. 403. The statute declares that the title of the assignee shall thus vest by relation to the commencement of the proceedings in bankruptcy, although the property is then attached on mesne process as the property of the debtor.

It is urged in argument on behalf of the plaintiff in error that the act divests the title of property held by virtue of an attachment only when it is so held at the date of the execution and delivery of the assignment, and not at the time of filing the petition in bankruptcy; and that, consequently, when, as in the present case, the attachment proceedings had resulted in a disposition of the goods, prior to the actual conveyance to the assignee, the title to them would not pass to him. To hold otherwise, it is said, would, in opposition to the plain provisions of the law, defeat the legitimate operation of an attachment, which had been commenced more than four months prior to the inception of the bankruptcy proceedings; for it might well be that under such a writ property might be held undisposed of at the date of filing the petition in bankruptcy. But it is equally true that property so held might remain subject to the attachment at the date of the conveyance to the assignee, and the supposed difficulty is not removed by the suggested construction of the act. It is removed, however, by considering the whole section, from which it appears that it is the title to property, subject to an attachment, only when levied within four months next preceding the commencement of the bankruptcy proceedings, which becomes vested in the assignee by relation, the same attachment being thereby dissolved as of that date.

One consequence is, that if property of the debtor levied on under such an attachment has been sold prior to the filing of the petition in bankruptcy, but thereafter the proceeds of the sale remain in the hands of the sheriff, or before the assignment have been applied to the payment of the judgment in the attachment suit, the rights of the assignee attach to the money and cannot follow the property sold; for the latter not being subject to the attachment at the commencement of the bankruptcy proceedings, the title thereto is thereby transferred to the assignee; but the attachment being dissolved upon that event, the right to the proceeds of the sale passes under the assignment, released from the claims of all parties to the attachment suit, as of the date of the commencement of the proceedings in bankruptcy. And in such a case the plaintiff in the attachment suit, having received the proceeds of the sale on his judgment, would be liable to an action by the assignee for that sum of money had and received to his use; or, if it remained in the hands of the sheriff, the assignee might become a party to the action, and obtain an order of the court requiring the amount to be paid directly to himself.

Another result is, that if the property has been sold under the attachment after the commencement of the bankruptcy proceedings, no title passes by the sale, for the property ceased, at that time, to be the property of the bankrupt, and became the property of the assignee, a stranger to the action and not affected by it; and both the plaintiff in the attachment and the purchaser at the sheriff's sale would be liable to the assignee for a conversion of his property,-the one for having caused its sale, the other for having taken possession of it as owner.

Upon this point there can scarcely be any diversity of opinion, for it would be difficult to give to this feature of the bankrupt law any less effect without depriving it of all substantial operation, and defeating its obvious policy. It was, undoubtedly, deemed an essential element in any efficient system, the main purpose of which was to secure to all the creditors of the bankrupt an equal participation in his effects, not only as against his fraudulent and collusive dispositions, but also as against the zealous competition among creditors, in their heedless race of diligence, to obtain priority. For this reason every title to property sought to be acquired by a seizure and sale under an attachment, belonging to one subsequently declared to be a bankrupt, is defeated, if the attachment be levied within four months next previous to the institution of the bankruptcy proceeding; and the creditor, at whose instance and for whose benefit the sale was made, and the purchaser who, having acquired possession of the property, asserts a claim of ownership, are each liable for a tortious conversion of the property of the assignee, unless, as before stated, the property has been sold under the attachment before the filing of the petition in bankruptcy, in which case the title of the assignee vests in the proceeds of sale.

In Duffield v. Horton (73 N. Y. 218), it was decided that a debtor of the bankrupt, whose obligation had been subjected to an attachment, levied within four months next preceding the bankruptcy proceedings, was liable to the assignee, notwithstanding he, without actual knowledge of the bankruptcy, had previously paid it to the sheriff, upon a judgment rendered against the bankrupt in the attachment proceedings. In that case the court say: 'The payment by the defendants to the sheriff of the debt due Yerkes was without authority, and did not discharge the obligation either to Yerkes or the plaintiffs. The lien of the sheriff was discharged and the payment was voluntary. There was no process against the defendants or their property, neither was there any judgment or order of any court, in obedience to which the money was paid. The judgment and execution was a general judgment and execution against Yerkes, and not a judgment specifically subjecting the debt to the payment of the judgment and requiring the defendants to pay it or the sheriff to collect and apply it.'

In the course of the same decision the New York Court of Appeals intimates an opinion that 'the sheriff could not probably be sued, being an officer of the court, and receiving the money as such;' and cites in support of it the cases of Johnson v. Bishop, 1 Woolw. 324, and Bradley v. Frost, 3 Dill. 457.

The former of these cases-Johnson v. Bishop (supra)-was an action of detinue, brought by the assignee of Loeb, a bankrupt, to recover possession of godds attached and held by the sheriff as the property of Loeb & Co., of which firm Loeb was the sole member. The attachment suit had been brought in a State court of Iowa, and the action of the assignee in the District Court of the United States for that district. The District Court had dismissed the cause for want of jurisdiction, and the assignee prosecuted a writ of error to the Circuit Court. It was admitted in the opinion of that court, delivered by Mr. Justice Miller, that, on the facts alleged, the title to the goods vested in the assignee as soon as the assignment was executed, and with that title he acquired a right of immediate possession; but it was held that he must apply to the State court for the recognition and enforcement of his rights, or, waiting till the sheriff had parted with the possession, prosecute a party who could not shelter himself behind the jurisdiction of a court of law, and that he could not maintain an action against the sheriff for the recovery of the possession of the property, and damages for its detention. 'The property,' it was said, 'is held by the sheriff under writs rightfully issued, and his possession is the possession of the court by the command of whose writ he seizes it. And so long as the proceedings in virtue of which it was taken are pending, that possession will not be interfered with by any other court.'

In answer to the argument that the bankruptcy proceedings operated to discharge the attachment at once, without any order in that behalf, so that the sheriff was left without any authority to hold the property, the opinion proceeds as follows: 'It may be true that the attachments have ceased to have any binding force. But whether they have or not is the question; and this question depends, not only upon a proposition of law here urged upon us, but also upon two questions of fact: that is, whether Loeb has been adjudicated a bankrupt, and whether he was the only member of the firm of Loeb & Company. Of the principle of law the State court is bound to take judicial notice; but of the two facts stated, it is not bound to take such notice. No court is bound to take judicial notice of the proceedings of another court. If material to a controversy before it, it must be informed thereof by the pleadings; and if the allegations are denied, they must be proven by the record. The State court can have no knowledge or even notice of the proceedings in the Federal court, by which its right to possess and adjudicate the property in question is affected. It should be informed in a proper way of those proceedings, before its possession is interfered with or assailed.' p. 328. And in support of this conclusion reliance was had upon the cases of Hagan v. Lucas, 10 Pet. 400; Pulliam v. Osborne, 17 How. 471; Taylor v. Carryl, 20 id. 583; Freeman v. Howe, 24 id. 450; Ex parte Dorr, 3 id. 103; and Buck v. Colbath, 3 Wall. 334.

The principle of this decision was expressed in the opinion of the court in the case of Doe v. Childress (21 Wall. 642), in which Mr. Justice Hunt said: 'Where the power of a State court to proceed in a suit is subject to be impeached, it cannot be done except upon an intervention by the assignee, who shall state the facts and make the proof necessary to terminate such jurisdiction;' and adding: 'This rule gains, whether the four months' principle is applicable, or whether it is not applicable.'

The case of Johnson v. Bishop (supra), however, does not decide the question now before us, whether, after the State court has exhausted its jurisdiction over the attached property, the sheriff, as well as the plaintiff and the purchaser, may not be proceeded against for a conversion of the property at the suit of the assignee, who at the time of the sale had become in law its owner.

Bradley v. Frost (supra) was such in its circumstances from the present; and in that the circuit judge, upon the principle decided in Johnson v. Bishop, held that the sheriff was not liable, but not without expressing doubt of the correctness of his decision. The ground of his judgment was, that the property levied on under the attachment was at the time the acknowledged property of the debtor, and thereby came into the lawful possession of the court, was held by the sheriff as its officer, and sold by him in obedience to a command directing him to sell, not generally, as in case of an ordinary execution upon a personal judgment, the property of the judgment debtor, but specifically, the very property in the custody of the court, and upon which it acted in rem.

The case is thus brought within the terms of the first of the two classes of legal process described in Buck v. Colbath (supra), 'those in which the process or order of the court describes the property to be seized, and which contain a direct command to the officer to take possession of that particular property,'-the sale being substituted for the seizure,-in respect to which, it is said, 'he has no discretion to use, no judgment to exercise, no duty to perform, but to seize the property described;' and from which, it is added, it follows, 'as a rule of law of universal application, that if the court issuing the process had jurisdiction in the case before it to issue that process, and it was a valid process when placed in the officer's hands, and that in the execution of such process he kept himself strictly within the mandatory clause of the process, then such writ or process is a complete protection to him, not only in the court which issued it, but in all other courts.' p. 343.

On the other hand, in the case of those writs 'in which the officer is directed to levy the process upon property of one of the parties to the litigation, sufficient to satisfy the demand against him, without describing any specific property to be thus taken,' it is declared, in the same opinion (p. 344), that 'the officer has a very large and important field for the exercise of his judgment and discretion. First, in ascertaining that the property on which he proposes to levy is the property of the person against whom the writ is directed; secondly, that it is property which by law is subject to be taken under the writ; and, thirdly, as to the quantity of such property necessary to be seized in the case in hand. In all these particulars he is bound to exercise his own judgment, and is legally responsible to any person for the consequences of any error or mistake in its exercise to his prejudice. He is so liable to plaintiff, to defendant, or to any third person whom his erroneous action in the premises may injure.' And 'the court can afford him no protection against the parties so injured; for the court is in nowise responsible for the manner in which he exercises that discretion which the law reposes in him, and in no one else.'

It is manifest that the act of the sheriff, for which he is sought to be charged in the present action, is not within the rule established as to the latter class of cases; for he neither had nor exercised any discretion in making the sale, and, doing only what he was specifically and in terms commanded to do by the order of the court, the court is responsible for his obedience.

It is argued, however, that the proceedings in bankruptcy, prior to the sale, had the effect of ousting the jurisdiction of the State court in the attachment suit, so that thereafter its order to sell was a nullity, incapable in law of any effect, and, therefore, incompetent to protect the officer against the consequences of executing it. But if the jurisdiction of the court became vacated, in the sense that after the assignment in bankruptcy its action was void, in respect of all persons and for all purposes, then it also follows that it thereby lost the legal custody of the attached property, and the sheriff held it afterwards, not officially, but merely as a private person; and he could not, consequently, defend against an action of replevin, brought by the assignee to recover possession of the specific property. This conclusion, upon the principles and authorities already referred to, we have already excluded; but the same reasoning would support the defence of the officer, in an action for a conversion of the property sold in obedience to the order of the court, and, therefore, not by him, but by the court itself. Otherwise, the judge who made the order would be equally liable for the tort with the sheriff who executed it.

It is true, ordinarily, and in the case of private persons acting voluntarily, that in case of a conversion of the goods of another, in which both principal and agent are concerned, both are severally liable, and the servant cannot justify under orders from a master; for, as was said by Lord Ellenborough in Stephens v. Elwall (4 Mau. & Sel. 259), 'a person is guilty of a conversion who intermeddles with my property, and disposes of it, and it is no answer that he acted under authority from another, who had himself no authority to dispose of it.'

But this rule has its limitations, and does not apply even in cases of private persons exercising a public employment, when the act complained of is in the discharge of a duty to the public incident thereto: as in Greenway v. Fisher (1 Car. & P. 190), where the defence was that the defendant, who was a common carrier, had merely shipped the goods in the ordinary course of business, Abbott, C. J., said: 'The distinction between this case and that of a servant is, that here there is a public employment; and as to a carrier, if, while he has the goods, there be a demand and a refusal, trover will lie; but while he is the mere conduit-pipe in the course of trade, I think he is not liable.'

And such undoubtedly is the law. The reason and policy of it apply with even greater force to a person acting in an official capacity, such as a sheriff, where the act, for the consequences of which it is sought to make him liable, is the direct and express command of a court, whose precepts he is under the highest obligation to obey without question and without hesitation.

The rule of duty and of liability is thus stated with admirable force by Hosmer, C. J., in Watson v. Watson (9 Conn. 140, 146): 'Obedience to all precepts committed to him to be served is the first, second, and third part of his duty; and hence, if they issue from competent authority, and with legal regularity, and so appear on their face, he is justified for every action of his, within the scope of their command.' The action in that case was replevin, and the following extract from the same opinion is pertinent to the present inquiry. The learned judge said: 'It was said in the argument of this case, that no difference exists, as to the proceedings of an officer, if the plaintiff has no property in the goods to be replevied, between the taking of property on a replevin, and the taking of the goods of A., upon a process commanding him to take the goods of B.; that is, the caption in both cases is equally a trespass. No remark can be more unfounded, for the difference is immense and distinctly marked. In the case of the replevin, the officer does what by legal authority he is commanded to do; and in the other case, he does what he was not commanded to do. In replevin, the property is identified and described, and the command is, Take this specific property. In the case of a process commanding the taking of the goods of A., without any identification or description, the command is, Take the goods of A., if any such there are, but not the goods of any other person. From the nature of the case last put, the officer must act on his own inquiry, and is bound to all the responsibility of his action.' p. 147.

So, in Savacool v. Boughton (5 Wend. (N. Y.) 170), the rule was, as we think, correctly stated by Marcy, J., that if the subject-matter of a suit is within the jurisdiction of a court, but there is a want of jurisdiction arising from some other cause, for example, as to the person or place, the officer who executes process issued on such suit is no trespasser, unless the want of jurisdiction appears by such process.

The same rule was sustained by Nelson, C. J., in Webber v. Gay, 24 id. 485. In Wilmarth v. Burt (7 Metc. (Mass.) 257, 259), Shaw, C. J., said: 'As a general rule, the officer is bound only to see that the process, which he is called upon to execute, is in due and regular form, and issues from a court having jurisdiction of the subject. In such case he is justified in obeying his precept, and it is highly necessary to the due, prompt, and energetic execution of the commands of the law that the should be so.'

To the same effect are Twitchell v. Shaw (10 Cush. (Mass.) 46), and Clarke v. May, 2 Gray (Mass.), 410. The same principle was applied to the proceedings of a court-martial, by this court, in Dynes v. Hoover, 20 How. 65.

In the present case it is admitted that the State court had full and perfect jurisdiction, in all respects, until it was terminated by the proceedings in bankruptcy. But the fact that put an end to its jurisdiction did not appear by its own record, and consequently was one of which the sheriff could not, by legal possibility, have official notice; and without that, he was bound to obey the order of that court, to whom he was responsible, directing the sale of the property, which, so far as he was concerned, at the time it was made, was an exercise of jurisdiction as legitimate as the issuing of the original attachment under which the property had been lawfully taken and held. Indeed, the general rule is, that where an attachment has been dissolved, no action can be maintained against the sheriff for a return of the property, until he have notice by the record of the fact; or if it has taken place, by the act of the parties, dehors the record, then not until notice of the extrinsic facts, which have satisfied it, has been brought home to him. Drake, Attachments, sect. 426; Livingston v. Smith, 5 Pet. 90.

These considerations, leading to the exoneration of the sheriff from the responsibility sought to be imposed upon him in such cases, derive additional force from the circumstance that the transaction which is supposed to entail liability upon him not only operates retrospectively, but occurred in a different jurisdiction, to which he was not responsible. The proceedings in bankruptcy were had in a court of the United States sitting in the district of Massachusetts. The defendant below was sheriff of a court of the State of New York. It is entirely true that the act of Congress prescribing a uniform rule as to bankruptcies, passed in pursuance of an express grant of power in the Constitution of the United States, is the paramount law throughout the territorial jurisdiction of the national government. It is as truly the law of each State, as it is, and because it is, a law of the United States. The assignment in bankruntcy made in one district, so far as its operation is matter of law, operates with the same effect in all districts. And it operates upon the title to the property of the bankrupt wherever it is situate, so as to preserve it, according to the provisions of the act, for distribution under it, and so that the title shall pass, as it requires, without regard to any dealing with it, which it forbids. Whatever hardship, if any, may follow to private persons who sell or buy it, and attempt to divert it to their own use, falls upon them, as in other cases, where titles fail, even in the hands of innocent, because ignorant, purchasers. But they are volunteers, seeking only their private interests, and take the chances of all the consequences of their conduct. The maxim to which they are subject is 'caveat emptor.' It is not so with the sheriff, who, as a public officer of the court, obeys its precepts, regular on their face, without notice of any want or failure of jurisdiction; who is not at liberty to exercise any discretion, and has no choice but to obey. The language of Mr. Justice Miller in delivering the opinion of this court in Eyster v. Gaff (91 U.S. 521, 524), though spoken in reference to a different state of facts, is applicable to the present case. 'It is a mistake,' he said, 'to suppose that the bankrupt law avoids of its own force all judicial proceedings in the State or other courts the instant one of the parties is adjudged a bankrupt. There is nothing in the act which sanctions such a proposition. The court, in the case before us, had acquired jurisdiction of the parties and of the subject-matter of the suit. . . . It could not take judicial notice of the proceedings in bankruptcy in another court, however seriously they might have affected the rights of the parties to the suit already pending.'

There is no language in the Bankrupt Act that, either expressly or by any necessary implication, requires us to hold the officer liable in such circumstances; nor is its policy defeated or thwarted by refusing to do so. The opposite conclusion is based upon an inference from the doctrines relating to the conversion of personal property, and, in our opinion, is the result of a misapplication of the principle invoked.

The court below took a different view of the law, following a prior decision in the same circuit in Miller v. O'Brien (9 Blatchf. 270), in which the circuit judge, Woodruff, said: 'It accords with our sense of justice to say that they [sheriffs] ought not to be held liable for their acts in the execution of process, done in good faith, without actual notice of any proceedings in bankruptcy against the debtor.' He nevertheless felt constrained to adopt 'the reasoning and the principles upon which the same question was settled in England under the bankrupt law of that country,' referring to Balme v. Hutton (9 Bing. 471), and Garland v. Carlisle, 4 Cl. & Fin. 693.

And these cases have been pressed upon us in this argument as authorities entitled to be followed. They are entitled, certainly, to very respectful examination.

The principal case in England is that of Cooper v. Chitty (1 Burr. 20), decided by Lord Mansfield in 1756. It arose, as did all the subsequent cases, under the Bankrupt Act of 13 Eliz., c. 7, which, after authorizing the appointment of commissioners for managing and disposing of the bankrupt's estate, enacted that every direction, order, bargain, sale, and other thing done by the persons so authorized, shall be good and effectual in the law against the said offender or offenders, debtor or debtors, &c., and against all other person or persons claimimg by, from, or under such offender or offenders, debtor or debtors, by any act or acts had, made, or done after any such persons shall become bankrupt. The action was trover against the sheriffs of London by the assignees of a bankrupt to recover the value of goods levied on and sold under an execution upon a judgment recovered against the bankrupt, the goods having been seized after an act of bankruptcy, and sold after the assignment was executed. The officers were adjudged liable for a conversion. It appears from the report of the arguments and judgment that in no prior case had the sheriff been held liable in such circumstances, and several were cited to the contrary. These Lord Mansfield either distinguished from the case before him, or overruled as without authority; and, in answer to the argument of hardship to the officers, laid stress upon the fact, that in the case before him the sheriffs knew of the bankruptcy before they sold the goods.

Lord Mansfield's decision in that case controlled the course of judicial opinion upon the question until Balme v. Hutton (2 Cromp. & J. 19) was decided in the Court of Exchequer in 1831. In the course of his opinion in that case, Lord Lyndhurst said: 'The sheriff does not act of his own accord or for his own benefit; he acts as a ministerial officer in execution of the command he receives from a court of justice in the King's name; and if what he does is, at the time he does it, in strict obedience to that command; if it be what the court itself, if it could itself have acted, would have done; and if it be at that time justifiable by the writ under which he acts,-it is a strong measure to say that subsequent events shall make that a wrongful act in the sheriff which, at the time he did it, was rightful, and shall make him answerable as a wrong-doer for what, at the time he did it, it was his duty to do.' He also showed, by an elaborate review of the earlier authorities, that in such a case the sheriff had been uniformly protected by his process, and concluded that Cooper v. Chitty decided only that a sale by the sheriff, with notice of the bankruptcy, was a wrongful conversion by the sheriff, and a sufficient foundation for an action of trover; but that it left the case of the sheriff, upon a sale without notice, as much protected as before. He then proceeded to show that the subsequent decisions had overlooked the distinction on which Cooper v. Chitty was founded, and were a departure from the true rule as established by the earlier authorities, and gave judgment for the defendant. But this judgment was reversed in 1833 by the Court of Exchequer Chamber. Balme v. Hutton, 1 Cromp. & M. 262.

The question came finally before the House of Lords in the year 1837, in the case of Garland v. Carlisle (4 Cl. & Fin. 693), where it was settled by a decision against the sheriff, who, before the passing of the 6 Geo. IV., c. 16, having no notice of a previous act of bankruptcy committed by a trader, seized his goods under a ''fi. fa.'', but withdrew upon an arrangement entered into between the execution creditor and the trader, receiving his poundage in the ordinary manner. A commission was afterwards issued on this act of bankruptcy, and it was held that the assignees might maintain trover against the sheriff for the goods seized, the receipt of poundage being considered evidence of a conversion by the sheriff. The judges were called upon for their opinions, and the majority, who gave opinions against the sheriff, relied largely upon the language of 13 Eliz., c. 7, and upon the settled course of decision, which it was thought to be inexpedient to reverse.

Mr. Justice Vaughan, one of the minority judges, in stating the ground of his opinion, said (p. 771): 'Being, therefore, of opinion that there is no legislative enactment by which the sheriff is rendered expressly liable, but assuming, for the sake of argument, that the general terms in which the clauses to which I have referred are expressed, may be thought so large as to be of universal application, and consequently to comprehend the sheriff, I think, for the reasons I have stated, that the law would imply an exception in his favor, arising out of his official character and duty, being an officer of justice compelled by stern necessity to execute the King's writ, 'Necessitas, quidequid coegit defendit."

The final judgment was given against the sheriff. Great stress was put upon the long-established series of decisions to that effect. Lord Brougham, although concurring, said: 'I may say, however, that I agree particularly with one of the learned judges, Mr. Justice Coltman, in his expression of opinion, that had the case been an entirely new case, and now to be decided for the first time, I might have come to a different conclusion upon it; but that as it is, a whole current of decision unbroken for so many years, from 1756 to 1831, has disposed of the question, and we are not now left at liberty to form an opinion upon it. I do not, however, think that Cooper v. Chitty absolutely decided this question, though it certainly decided the principle. The more that case is examined, the less, as it appears to me, will it be found to have decided the question, if, indeed, it does not rather operate as an argument against the side for which it is now quoted.' Lord Denman dissented.

The question is now a new one in this court, and we are not fettered by an inveterate course of decisions upon it. We are at liberty, in view of all appropriate considerations, to decide it upon reason and not by precedent. And we are satisfied, upon grounds already stated, that in doing so we shall reach conclusions entirely satisfactory, and supported, as we believe, by recognized principles of law. It is a sufficient reason, in our judgment, for not following the English decisions, that in 1839, shortly after the House of Lords had declared its inability to disregard the course of previous decision, Parliament, recognizing the injustice and inexpediency of the rule thus finally established judicially, interposed by the act of 2 & 3 Vict., c. 29, and by several sucessive acts, which had the effect to protect the sheriff in the performance of his official duty against such actions as the present. Indeed, some relief had been introduced by the Bankrupt Act of 6 Geo. IV., c. 16, passed in 1825. Edwards v. Scarsbrook, 3 B. & S. 280; Slater v. Pinder, Law Rep. 6 Ex. 228. This legislation we regard as evidence of the highest character that the rule in question ought never to have been judicially established. Its effect was not so much to change as to restore the law. It was in fact a legislative reversal of the judgment of the House of Lords. It cannot be assumed that Congress intended, in the Bankrupt Act of 1867, to restore a rule of liability which had become obsolete in England nearly thirty years before.

In our opinion, the judgment below should have been for the plaintiff in error; and it is, therefore, reversed.

The cause will be remanded, with instructions to grant a new trial; and it is

So ordered.

title: Conner v. Long/Opinion of the Court


text: Talk:Conner v. Long/Opinion of the Court

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Walker v. Powers

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

The facts are stated in the opinion of the court.

The case was argued by Mr. Joseph P. Wittemore for the appellants, and by Mr. William F. Cogswell for the appellees.

MR. JUSTICE MILLER delivered the opinion of the court.

title: Walker v. Powers


text: Talk:Walker v. Powers

title: Talk:Walker v. Powers


text:
Walker v. Powers/Opinion of the Court

This is a suit in chancery by Walker and Whittemore, the general purpose of which is to declare null and void certain sales and conveyances of real estate in New York, owned by Nelson P. Stewart, and to subject it to the payment of his debts. At the time of the transactions mentioned in the bill he was a citizen of Michigan. He died there in the year 1863, and George K. Johnson was appointed administrator of his estate in 1874. No letters of administration were issued in New York.

The debt on which Walker counts was a simple-contract debt, which was allowed by the probate judge in Michigan. The foundation of Whittemore's claim for relief is two judgments. One was recovered by him against Stewart in a court of New York on the 20th of August, 1862, and docketed on the 28th of that month in Monroe County, where the land in controversy is situated; the other was rendered in favor of Elisha W. Chester, docketed about the same time, and assigned to Whittemore in 1872.

As regards the judgment in favor of Whittemore, the bill alleges that he, after the death of Stewart, instituted a proceeding in the nature of a scire facias against the terre-tenant in the proper court, and obtained an order under which the property so frequently mentioned in the bill as 'Congress Hall,' a hotel in the city of Rochester, was sold to him on a bid amounting to the debt, interest, and costs, and that he received the sheriff's deed for the property, on which he brought an action of ejectment, which is now pending.

The bill then charges a variety of transactions connected with the sale of this and other real estate under judicial proceedings against Stewart in his lifetime, and with conveyances made by him of the same, all of which are said to be fraudulent, and in pursuance of a conspiracy on the part of Stewart, the purchasers and others, to hinder and delay his creditors, and defeat them in the collection of their debts. The bill alleges that other large debts are held by numerous creditors, in behalf of whom, as well as of the complainants, the bill purports to be brought. Some of the real estate is alleged to be in the hands of innocent purchasers for value. Most of those charged with conspiracy are dead. The heirs or devisees of Stewart, though named, are not parties to the bill; nor, indeed, can they be made defendants, because they and the complainants are citizens of Michigan. The administrator lives in that State, and though a creditor, as the bill alleges, to the amount of $80,000, is not made a party, nor is any reason given why he did not take out administration in New York, as it would have been eminently proper for him to do.

The bill was dismissed on demurrer, and this appeal is taken by the complainants.

It will be perceived that Whittemore, the principal complainant, founds his right to relief on two totally distinet causes of action. In one he asserts that, by virtue of a judicial sale, he is the owner of Congress Hall, and has a complete legal title thereto, on which he is prosecuting an action of ejectment. The bill shows that, by the sale under which he became such owner, his judgment against Stewart was satisfied; and as the execution must be presumed to have been returned to the proper office with the sheriff's proceeding indorsed, the judgment stands satisfied by the record of the court in which it was rendered. He has made no attempt to set aside this satisfaction, but, on the contrary, he is by this bill insisting on the fruit of that satisfaction, by endeavoring to remove the cloud on his title, created by the fraudulent proceedings of which he complains. In reference to that judgment he is no longer a creditor of Stewart, nor has he any debt chargeable on or provable against Stewart's estate. What interest founded on this judgment has he, then, in any other property which Stewart held in his lifetime, or in the administration of the assets of his estate? How can he, on the foundation of that judgment, inquire into frauds in regard to other property than that which he bought? What interest apart from the judgment in favor of Chester has he in common with other creditors of Stewart, and how can he maintain any joint suit with them?

So far from being able to do this, or having any common interest with them, he asserts a right in conflict with their interests. If the claim of the defendants who are in possession of Congress Hall, the only property of much value mentioned in the bill, should be declared void as against Stewart's creditors, then, while it is their interest to subject it to the general administration among all the creditors, we have Whittemore asserting that this result inures to his sole benefit, as he has already taken steps by which he has become the exclusive owner when the frauds are swept out of the way.

It is impossible to see, therefore, what interest founded on that judgment Whittemore has in a general administration of the assets of Stewart, or that he has any interest in common with Walker or the other creditors, or a right to call upon the defendants other than those setting up claim to Congress Hall.

This view involves no hardship on Whittemore. He has satisfied his debt against Stewart's estate by the purchase of that property. The matters he now sets up can be litigated with the adverse claimants in a separate suit, which would concern him and them alone.

In reference to the judgment in favor of Chester, on which, as his assignee, Whittemore asks relief, it is urged as ground of demurrer, that Chester being a citizen of the same State with Stewart, his assignee is incapable of prosecuting this suit in a Federal court. It was brought in 1876, and the question here raised must be decided by a construction of the act of March 3, 1875, c. 137. 18 Stat., pt. 3, p. 470.

The first section of that act, after declaring in terms intended to be exhaustive, the jurisdiction of the Circuit Courts of the United States, and certain limitations on that jurisdiction, as to residence and service of process on defendants, adds this further restriction: 'Nor shall any Circuit or District Court have cognizance of any suit founded on contract in favor of an assignee, unless a suit might have been prosecuted in such court to recover thereon, if no assignment had been made, except in cases of promissory notes, negotiable by the law merchant, and bills of exchange.'

Since Whittemore cannot sustain this suit on the ground of his own judgment against Stewart, because that is satisfied by the sale of property, the only other ground on which he can succeed is as the owner of this judgment in favor of Chester. That judgment is, then, the foundation of his suit in the Circuit Court. It is a cause of action which he holds by assignment from a party who cannot sue in that court. Without this cause of action he has no standing in court, and has no right to ask the court to inquire into the other matters alleged in the bill. It is as much the foundation of his right to bring the present suit as if it were a bond and mortgage on which he was asking a decree of foreclosure. See Sheldon v. Sill, 8 How. 441.

If, then, the judgment is a contract, it gives Whittemore no right to sue in the courts of the United States for New York. There is some conflict in the authorities as to whether a judgment eo nomine is a contract. In 1 Story on Contracts, sect. 2, they are divided into three classes, in the first of which judgments are mentioned with recognizances, statutes staple, &c. It is, however, permissible in all cases, where justice requires it, to inquire into the nature of the demand on which the judgment was rendered. If rendered on a contract, the judgment is a contract, the nature and extent of the liability having been thereby judicially ascertained.

The bill in this case alleges that 'the debt on which this judgment was recovered accrued in the year 1858.' It was, therefore, recovered on a contract, and the present suit is a suit to give a remedy on that contract, and any decree rendered in favor of the complainant would be intended to enable him to recover the money due on the contract.

The Circuit Court, if the judgment of Chester had been there recovered, might have jurisdiction of the case to remove obstructions to the enforcement of its own judgment, no matter who for the time being was its owner. But where a party comes for the first time in a court of the United States to obtain its aid in enforcing the judgment of a State court, he must have a case of which the former court can entertain original jurisdiction. Christmas v. Russell, 5 Wall. 290.

It remains to be seen whether the suit can be prosecuted further on the part of Walker.

A very learned argument, with a review of the authorities, is made by counsel for the appellants to show that it is not essential to the relief sought that there should be a judgment and an execution returned nulla bona.

We do not think it necessary to enter upon the consideration of that question as the case is presented to us.

If what we have already said of the standing of Whittemore is sound, the bill is liable to the objection of multifariousness-one of the points specified in the demurrer-on almost every ground on which that objection may be taken to a bill in chancery.

1. There is a misjoinder of parties complainant.

There are but two complainants. Whittemore, as we have seen, has no standing in the court, and is, therefore, improperly joined with Walker, if Walker has such a standing; and the defendants cannot be required, in litigating with Walker any right he may have against them, to contest with Whittemore, who on his own showing has no right in that court. It is true the difficulty could have been removed if Whittemore had by an amendment been dismissed from the case. This might have been done after the demurrer was sustained. But no such leave was asked, and the bill, as it originally stood, was dismissed.

2. The causes of action and the relief sought in regard to Congress Hall and the other property are distinct, in some respects antagonistic, and such as cannot properly be joined in the same suit. Whittemore seeks to have his title established in regard to Congress Hall, and the cloud on it created by the fraudulent sales and conveyances removed, so that he may be declared to be the owner of that property. In this matter no one is interested but himself and one of the defendants. The prayer of the bill is that the other property may be subjected to the payment of Stewart's debts; and in this Walker and all the other creditors of Stewart are interested, and Ten Eyck also as defendant.

A case bearing a strong analogy to the one before us is Emans v. Emans, 14 N. J. Eq. 114.

After a partition of real estate among part owners, a controversy arose as to its fairness, which was submitted to arbitrators. They awarded that the defendant should convey to the complainant 23.30 acres to equalize the partition. The bill prayed that the defendant might be decreed specifically to perform the award; if not, that the court should declare how much more and what lands he should convey to make the partition equal; and, lastly, for general relief. On demurrer for multifariousness the court says: 'The leading object of this bill is to enforce specific performance of an award of arbitrators. The submission to arbitration related to the fraud or unfairness of a partition of certain lands devised to the parties, and included the power of making a just partition. A new partition was in fact made. If the award cannot be enforced, the bill further asks that the court will relieve against the unfairness or fraud of the partition. Now, it is apparent that these are matters of a distinct character. The one relates to the validity of the submission and award and the power and propriety of enforcing a specific performance, and the other to the equity and fairness of the partition. The matters involve totally distinct questions, requiring different evidence, and leading to different decrees.'

Another analogous case is Sawyer v. Noble and Randall, 55 Me. 227.

Sawyer and Noble were partners. The bill charges Noble with many improper transactions justifying a dissolution of the partnership, and, among others, a fraudulent and pretended sale of the stock in trade and the good-will of the business to Randall, his co-defendant. It prays that this sale may be set aside and the partnership dissolved, and an account and settlement be had between the complainant and Noble. The court says: 'It is obvious that Randall is in no way interested in the partnership affairs of Sawyer, and that the settlement of the affairs of the firm and the rescission of a fraudulent sale are distinct and unconnected matters, and properly to be determined in separate suits.'

By multifariousness 'is meant the improperly joining in one bill distinct and independent matters, and thereby confounding them; as, for example, the uniting in one bill of several matters, perfectly distinct and unconnected, against one defendant, or the demand of several matters of a distinct and independent nature against several defendants in the same bill.' Story, Eq. Pl., sect. 271. In Daniell's Chancery Practice, 335, it is said in explanation of this that 'it may be that the plaintiffs and defendants are parties to the whole of the transactions which form the subject of the suit, and, nevertheless, those transactions may be so dissimilar that the court will not allow them to be joined together, but will require distinct records.'

3. It seems to us, also, though of that we are not quite so sure, that if this real estate is to be subjected to the payment of Stewart's debts, Frederick S. Stewart, Helen W. McConnell, and Adeline M. Johnson, who are alleged to be his only heirs and the devisees in his unprobated will, should be parties to the bill. The mere allowance of the debt of Walker by the Probate Court is not conclusive evidence against them in a suit to reach the real estate of their ancestor and devisor.

The State where the lands sought to be reached are situate has, by statute, enabled her courts to entertain jurisdiction of necessary parties not within reach of process, and greatly modified the rules of practice and pleading. It is possible that this bill, or some part of it, might, by making additional parties, be sustained in one of her courts. But we are satisfied that the effort to prosecute it in the Circuit Court of the United States, with the misjoinder of some parties and the nonjoinder of others,-with the connection of matters totally distinct in the right asserted and the relief sought,-and with the principal party complainant entitled to no relief there, is attended with insuperable difficulties, and that the bill was properly dismissed.

Decree affirmed.

title: Walker v. Powers/Opinion of the Court


text: Talk:Walker v. Powers/Opinion of the Court


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Thompson v. Insurance Company

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

This was an action on a policy of insurance for $5,000, issued by the Knickerbocker Life Insurance Company, the defendant in error, on the life of John Y. Thompson, for the benefit of his wife, Ruth E. Thompson, the plaintiff in error. The policy bore date Jan. 24, 1870, and was to continue during his life, in consideration of an annual premium of $410.20, payable on or before the twenty-fourth day of January in every year. He died Nov. 3, 1874. The complaint was in the usual form, setting forth the contract contained in the policy, his death, and the performance of the conditions of the policy by him and the plaintiff. The company pleaded the general issue, and two special pleas, which set up in substance the same defence. The second plea, after setting forth the provisions of the policy for the payment of the annual premium, proceeds as follows:--

'Under said policy an annual credit or loan of a portion of said premium was provided for, and said policy also contained a condition or proviso that the omission to pay the said annual premium on or before twelve o'clock noon on the day or days above designated for the payment thereof, or that the failure to pay at maturity any note, obligation, or indebtedness (other than the annual credit or loan) for premium or interest due under said policy or contract, shall then and thereafter cause said policy to be void without notice to any party or parties interested therein.

'The defendant further says that the said annual premium was not paid on or before the twenty-fourth day of January, A. D. 1874, and thereupon the defendant did give tiem for the payment of said premium upon the condition named in the note hereinafter mentioned, and for the payment of said premium did take certain promissory notes of said Thompson, one of which was as follows:--

'$109.] NEW YORK, Jan'y 24th, 1874.

'Nine months after date, without grace, I promise to pay to the Knickerbocker Life Insurance Company one hundred and nine dollars, at Mobile, Alabama, value received, in premium on policy No. 2334, which policy is to be void in case this note is not paid at maturity, according to contract in said policy.

'No. 2334 was an error, No. 2331 being intended.'

It then avers that the note was not paid when it became due, Oct. 24, 1874, and that by reason thereof the policy became void and of no effect before the death of the assured.

To these pleas four replications were filed, numbered 2, 3, 4, and 5, as follows:--

'2d, That the said policy of insurance was renewed by said defendant on the twenty-fourth day of January, 1874, and continued in force until Jan. 24, 1875. That the payment of said note at maturity was not a condition precedent as alleged. That the said Thompson had the money in hand, was ready and willing and intended to pay said note, but that before the maturity thereof he was taken violently ill, and before and at the time the same fell due was in bed, prostrated by a fatal disease, and in this condition remained until he died on the third day of November, 1874; that during all this time he was mentally and physically incapable of attending to his business, or knowing of and performing his obligations, and was non compos mentis; that the existence of said note was not known to the plaintiff.

'3d, That it was, and had been for many years before, and on the day said note fell due, the uniform usage and custom of said defendant in such cases to give notice of the day of payment to its policy-holders; such is and was the uniform usage and custom with all insurance companies, and the said defendant had in all cases adopted and acted on said usage, and in all its dealings with said Thompson had adhered to said usage, and gave notice of the day when such payments fell due; yet said defendant in this case failed to give any notice of the day of payment of said note, notwithstanding they knew said Thompson was in the city of Mobile, and was sick. Plaintiff avers that said Thompson was ready and willing to pay, had said notice been served as in previous cases, but acting on said usage he was deceived by want of said notice, and that the plaintiff had no notice of the existence of said note, or when the same fell due, wherefore and whereby said note was not paid.

'4th, That on the twenty-fourth day of January, 1874, said policy was renewed and entered in full force for one year, to wit, until Jan. 24, 1875. That said note was for the balance of the premium of that year, which defendant agreed should be deferred and paid as set out on said note; that by said agreement said policy was not to become void on the non-payment of the note alone at maturity as alleged in said plea, but was to become void at the instance and election of said defendant, and plaintiff avers that said defendant did not elect to cancel said policy or take any steps to avoid it or give any notice of such intention during the life of said John Y. Thompson, or since, and still holds said note against said estate of said Thompson.

'5th, And for further replication to the first and second special pleas by said defendant pleaded, plaintiff says that it was the general usage and custom adopted by said defendants, and practised by them before and after the making of said note, not to demand punctual payment of such premium notes on the days they fell due, but to give days of grace thereon, to wit, for thirty days thereafter, and the said defendants had repeatedly so done with said Thompson and others, and they led said Thompson to believe and rely on such leniency in this case, and thereby said Thompson was deceived, and said note not paid, and he did rely on them for such notice.'

Demurrers to these replications were sustained by the court. The case was then tried upon the plea of the general issue. On the rejection of evidence at the trial, the same questions presented by the replicatious were raised. Exceptions were taken in due form and preserved on the record.

The was a judgment for the defendant. The plaintiff thereupon sued out this writ of error.

The policy having been renewed and continued in force by the company for a year on Jan. 24, 1874, when the note in question was given, the payment of that note, if a condition at all, was a condition subsequent operating by way of defeasance, and mere non-payment ad diem was not alone sufficient to effect an absolute forfeiture of the insurance. Insurance Company v. French, 30 Ohio St. 240.

The whole contract evidenced by the policy and the note, taken together, means, that, after the renewal receipt was given, the policy was voidable at the option of the company, and unless a forfeiture should be asserted and declared, at the proper time, the insurance remained. The case is essentially different from a purely unilateral contract, where the risk has not fully attached for the particular year in which the death occurred, and is like a release which is subject to be avoided by the happening of a condition subsequent, as, for example, the non-payment of a composition. The release is good and operative, unless itself subsequently avoided. Newington v. Levy, Law Rep. 5 C. P. 607.

The distinction between a precedent and a subsequent condition is as well marked in this contract as in others. Giddings v. Insurance Company, 102 U.S. 108; 2 Langdell, Cases on Contracts, p. 1009. There are no technical words whereby such conditions are distinguished. The governing rule is the fair intention of the parties to be collected from the transaction. Porter v. Shepard, 6 T. R. 668; Finlay v. King's Lessee, 3 Pet. 346; Nicoll v. New York & Erie Railroad Co., 12 N. Y. 121.

In the present case it cannot be supposed that it was intended that the mere non-payment of a fractional part of the premium ad diem should operate as the non-performance of a condition precedent. It would be unconscionable and oppressive to give the contract that effect. Pordage v. Cole, 1 Wms. Saund. 320 b; Campbell v. Jones, 6 T. R. 570; Boone v. Eyre, 1 H. Bl. 273, note; 2 W. Bl. 1312; Graves v. Legg, 9 Ex. 709; Ellen v. Topp, 6 id. 424.

The condition in question being at most a condition subsequent operating by way of defeasance, its performance was excused by the inevitable accident alleged by the plaintiff, and the liability of the company became absolute, in accordance with settled principles of jurisprudence. People v. Bartlett, 3 Hill (N. Y.), 570; People v. Manning, 8 Cow. (N. Y.) 297; Carpenter v. Stevens, 12 Wend. (N. Y.) 589; Wolfe v. Howes, 20 N. Y. 197; Baldwin v. New York Life Insurance Co., 3 Bosw. (N. Y.) 530; Davis v. Gray, 16 Wall. 203.

The court erred in not overruling the defendant's demurrers. Insurance Company v. Eggleston, 96 U.S. 572; Helme v. Philadelphia Life Insurance Co., 61 Pa. St. 107; Insurance Company v. French, 30 Ohio St. 240; Mayer v. Mutual Life Insurance Co., 38 Iowa, 304; Hanley v. Life Association of America, 69 Mo. 380; Leslie v. Knickerbocker Life Insurance Co., 63 N. Y. 27; Nicoll v. New York & Erie Railroad Co., supra; Newington v. Levy, supra; Teutonia Life Insurance Co. v. Anderson, 77 Ill. 384; Howell v. Knickerbocker Life Insurance Co., 44 N. Y. 276; Mutual Benefit Life Insurance Co. v. Hillyard, 37 N. J. L. 444; Martine v. Insurance Company, 53 N. Y. 339; Code of Alabama, sect. 3001.

Mr. J. Hubley Ashton and Mr. Thomas N. McCartney for the plaintiff in error.

Mr. Fletcher P. Cuppy and Mr. Thomas H. Herndon, contra.

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

title: Thompson v. Insurance Company


text: Talk:Thompson v. Insurance Company

title: Talk:Thompson v. Insurance Company


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Thompson v. Insurance Company/Opinion of the Court

The questions presented for review in this case arise on the rulings of the court below on the demurrers of the defendant.

It appears from the special pleas that the policy contained the usual condition that it should become void if the annual premiums should not be paid on the day when they severally became due, or if any notes given in payment of premiums should not be paid at maturity.

The replications do not pretend that the note given for premium, which became due on the twenty-fourth day of October, 1874, was ever paid, or that payment thereof was ever tendered, either during the life of Thompson or after his death; but it is contended that such payment was not necessary in order to avoid the forfeiture claimed by the defendant.

First, it is contended that the mere taking of notes in payment of the premium was, in itself, a waiver of the conditional forfeiture; and for this reference is made to the case of Insurance Company v. French, 30 Ohio St. 240. But, in that case, no provision was made in the policy for a forfeiture in case of the non-payment of a note given for the premium, and an unconditional receipt for the premium had been given when the note was taken; and this fact was specially adverted to by the court. We think that the decision in that case was entirely correct. But in this case the policy does contain an express condition to be void if any note given in payment of premium should not be paid at maturity. We are of opinion, therefore, that whilst the primary condition of forfeiture for non-payment of the annual premium was waived by the acceptance of the notes, yet, that the secondary condition thereupon came into operation, by which the policy was to be void if the notes were not paid at maturity.

Beside this general answer the plaintiff set up, in her replications, various excuses for not paying the note in question, which are relied on for avoiding the forfeiture of the policy.

In the second replication the excuse set up is, that before the note fell due Thompson became sick and mentally and physically incapable of attending to business until his death on the third day of November, 1874, and that the plaintiff was ignorant of the outstanding note. We have lately held, in the case of Klein v. Insurance Company (supra, p. 88), that sickness or incapacity is no ground for avoiding the forfeiture of a life policy, or for granting relief in equity against forfeiture. The rule may, in many cases, be a hard one; but it strictly follows from the position that the time of payment of premium is material in this contract, as was decided in the case of New York Life Insurance Co. v. Statham, 93 U.S. 24. Prompt payment and regular interest constitute the life and soul of the life insurance business; and the sentiment long prevailed that it could not be carried on without the ability to impose stringent conditions for delinquency. More liberal views have obtained on this subject in recent years, and a wiser policy now often provides express modes of avoiding the odious result of forfeiture. The law, however, has not been changed, and if a forfeiture is provided for in case of non-payment at the day, the courts cannot grant relief against it. The insurer may waive it, or may by his conduct lose his right to enforce it; but that is all.

The third replication sets up a usage, on the part of the insurance company, of giving notice of the day of payment, and the reliance of the assured upon having such notice. This is no excuse for non-payment. The assured knew, or was bound to know, when his premiums became due. Insurance Company v. Eggleston (96 U.S. 572) is cited in support of this replication. But, in that case, the customary notice relied on was a notice designating the agent to whom payment was to be made, without which the assured could not make it, though he had the money ready. As soon as he ascertained the proper agent he tendered payment in due form. It is obvious that the present case is very different from that. The reason why the insurance company gives notice to its members of the time of payment of premiums is to aid their memory and to stimulate them to prompt payment. The company is under no obligation to give such notice, and assumes no responsibility by giving it. The duty of the assured to pay at the day is the same, whether notice be given or not. Banks often give notice to their customers of the approaching maturity of their promissory notes or bills of exchange; but they are not obliged to give such notice, and their neglect to do it would furnish no excuse for non-payment at the day.

The fourth replication sets up a parol agreement of defendant made on receiving the promissory note, that the policy should not become void on the non-payment of the note alone at maturity, but was to become void at the instance and election of the defendant, which election had never been made. As this supposed agreement is in direct contradiction to the express terms of the policy and the note itself, it cannot affect them, but is itself void. We did hold, in Eggleston's case, it is true, that any agreement, declaration, or course of action on the part of an insurance company, which leads a party insured honestly to believe that by conforming thereto a forfeiture of his policy will not be incurred, followed by due conformity on his part, will estop the company from insisting upon the forfeiture. An insurance company may waive a forfeiture or may agree not to enforce a forfeiture; but a parol agreement, made at the time of issuing a policy, contradicting the terms of the policy itself, like any other parol agreement inconsistent with a written instrument made contemporary therewith, is void, and cannot be set up to contradict the writing. So, in this case, a parol agreement supposed to be made at the time of giving and accepting the premium note cannot be set up to contradict the express terms of the note itself, and of the policy under which it was taken.

The last replication sets up and declares that it was the usage and custom of the defendants, practised by them before and after the making of said note, not to demand punctual payment thereof at the day, but to give days of grace, to wit, for thirty days thereafter; and they had repeatedly so done with Thompson and others, which led Thompson to rely on such leniency in this case. This was a mere matter of voluntary indulgence on the part of the company, or, as the plaintiff herself calls it, an act of 'leniency.' It cannot be justly construed as a permanent waiver of the clause of forfeiture, or as implying any agreement to waive it, or to continue the same indulgence for the time to come. As long as the assured continued in good health, it is not surprising, and should not be drawn to the company's prejudice, that they were willing to accept the premium after maturity, and waive the forfeiture which they might have insisted upon. This was for the mutual benefit of themselves and the assured, at the time; and in each instance in which it happened it had respect only to that particular instance, without involving any waiver of the terms of the contract in reference to their future conduct. The assured had no right, without some agreement to that effect, to rest on such voluntary indulgence shown on one occasion, or on a number of occasions, as a ground for claiming it on all occasions. If it were otherwise, an insurance company could never waive a forfeiture on occasion of a particular lapse without endangering its right to enforce it on occasion of a subsequent lapse. Such a consequence would be injurious to them and injurious to the public.

But a fatal objection to the entire case set up by the plaintiff is, that payment of the premium note in question has never been made or tendered at any time. There might possibly be more plausibility in the plea of former indulgence and days of grace allowed, if payment had been tendered within the limited period of such indulgence. But this has never been done. The plaintiff has, therefore, failed to make a case for obviating and superseding the forfeiture of the policy, even if the circumstances relied on had been sufficiently favorable to lay the ground for it. A valid excuse for not paying promptly on the from an excuse for not paying from an excuse for not payint at all.

Courts do not favor forfeitures, but they cannot avoid enforcing them when the party by whose default they are incurred cannot show some good and stable ground in the conduct of the other party, on which to base a reasonable excuse for the default. We think that no such ground has been shown in the present case, and that it does not come up to the line of any of the previous cases referred to, in which the excuse has been allowed. We do not accept the position that the payment of the annual premium is a condition precedent to the continuance of the policy. That is untrue. It is a condition subsequent only, the non-performance of which may incur a forfeiture of the policy, or may not, according to the circumstances. It is always open for the insured to show a waiver of the condition, or a course of conduct on the part of the insurer which gave him just and reasonable ground to infer that a forfeiture would not be exacted. But it must be a just and reasonable ground, one on which the assured has a right to rely.

Judgment affirmed.


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Hale v. Finch

Error to the Supreme Court of the Territory of Washington.

The facts are stated in the opinion of the court.

Mr. John H. Mitchell for the plaintiffs in error.

Mr. Elbridge G. Lapham, contra.

MR. JUSTICE HARLAN delivered the opinion of the court.

title: Hale v. Finch


text: Talk:Hale v. Finch

title: Talk:Hale v. Finch


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Hale v. Finch/Opinion of the Court

On the first day of May, 1864, the Oregon Steam Navigation Company, then engaged in the transportation, for hire, of freight and passengers on the Columbia River and its tributaries, purchased a steamboat, called the 'New World,' from the California Steam Navigation Company, then engaged in like business upon the rivers, bays, and waters of the State of California.

The terms of the sale are embodied in a written agreement, from which it appears that the consideration was $75,000, and the covenant and agreement of the vendees, not only that they would not 'run or employ, or suffer to be run or employed, the said steamboat 'New World' upon any of the routes of travel upon the rivers, bays, and waters of the State of California for the period of ten years from the first day of May, 1864,' but that its machinery should not be 'run or employed in running any steamboat, vessel, or craft upon any of the routes of travel, or on the rivers, bays, or waters of' that State for that period. The Oregon Steam Navigation Company, in that agreement, further stipulated, that, in case of any breach of their covenant and agreement, they would pay the California Steam Navigation Company the sum of $75,000 in gold coin of the United States 'as actual liquidated damages,'-such stipulation, however, not to have the effect to prevent the latter from taking such other remedy, by injunction or otherwise, as they might be advised.

On the 18th of February, 1867, the Oregon Steam Navigation Company sold the 'New World' to Henry Winsor, Clanrick Crosby, N. Crosby, Jr., and Calvin H. Hale, and executed to Winsor a bill of sale stating the consideration to be $75,000. That instrument, after setting out the covenant of the vendors to warrant and defend the steamboat and all its appurtenances against all persons whomsoever, recited that 'it was understood and agreed' that the sale was 'upon the express condition' that the steamboat should not run, nor its machinery be used in running, any other steamboat, vessel, or craft, within ten years from the first day of May, 1867, on any of the routes of travel on the rivers, bays, or waters of the State of California, or on the Columbia River and its tributaries.

At the time of the making of that bill of sale Winsor and his associates, with L. D. Howe and A. R. Elder as their sureties, executed an additional writing, similar in all respects to that before mentioned as having been executed by the Oregon Steam Navigation Company on the 1st of May, 1864, except that Winsor and his associates, in the paper by them signed, covenanted and agreed that the 'New World' should not, for the period of ten years from May 1, 1867, be run, or suffered to be run or employed, nor its machinery used in any other steamboat on the rivers, bays, or waters of the State of California, or on the Columbia River and its tributaries.

On the 5th of March, 1867, Winsor executed to Hale a bill of sale of the 'New World,' reciting a consideration of $75,000, and by the terms of which the former, for himself, his heirs, executors, and administrators, promised, covenanted, and agreed to and with Hale to warrant and defend the title to the steamboat, her boilers, engines, machinery, tackle, apparel, &c.

On the 23d of November, 1867, Hale executed to Finch, the defendant in error, a bill of sale, reciting a consideration of $50,000, and containing among others the following clauses:--

'And I, the said Calvin H. Hale, have, and by these presents do promise, covenant, and agree, for myself, my heirs, executors, and administrators, to and with the said Duncan B. Finch, his heirs, executors, administrators, and assigns, to warrant and defend the whole of said steamboat 'New World,' her engines, boilers, machinery, and all the other before-mentioned appurtenances, against all and every person and persons whomsoever.

'And it is understood and agreed that this sale is upon this express condition, that said steamboat or vessel is not within ten years from the first day of May, 1867, to be run upon any of the routes of travel on the rivers, bays, or waters of the State of California, or the Columbia River or its tributaries, and that during the same period last aforesaid the machinery of the said steamboat shall not be run, or be employed in running any steamboat or vessel or craft upon any of the routes of travel on the rivers, bays, or waters of the State of California, or the Columbia River and its tributaries.'

At the same time a separate written agreement was entered into between Finch and Hale, from which it appears that the former, in terms, covenanted and agreed to do various things which have no connection with this case, and need not, therefore, be here specified. It is only important to observe, as to that separate agreement, that it did not embrace any covenant or agreement whatever on the part of Finch against the use of the steamboat 'New World,' or of its machinery, upon the waters of California, or upon the Columbia River or its tributaries.

The present action was brought against Finch by Hale and those associated with him in the purchase from the Oregon Steam Navigation Company.

The complaint avers that, in all of said transactions, Winsor, as the defendant well knew, represented his co-plaintiffs as well as himself; that the defendant, in violation of his promise and agreement, made at the time he purchased the steamboat, caused, suffered, and permitted the same to be taken to San Francisco, on or about the first day of October, 1868, and from that date up to May 1, 1874, caused, suffered, and permitted it to be run upon the routes of travel on the rivers, bays, and waters of California; that on Oct. 5, 1869, the Oregon Steam Navigation Company sued the plaintiffs and their sureties, Howe and Elder, to recover the sum of $75,000, fixed as liquidated damages for the breach of the covenants and agreements contained in the within memorandum of Feb. 18, 1867,-the ground of said action being that the defendants therein had run the steamboat 'New World,' or suffered and permitted it to be run, on the rivers, bays, and waters of California, after Nov. 1, 1868, and prior to May 1, 1874, which acts, it is averred, are the same now complained of as constituting a breach of the defendant's alleged agreement of Nov. 23, 1867 (20 Wall. 64); and that, in said action, the Oregon Steam Navigation Company recovered a judgment against the present plaintiffs for $75,000, which sum, with $4,000 expended in defending the suit, they had been compelled to pay.

Judgment is asked against Finch for $79,000 in damages, for the violation of his alleged agreement and promise.

The answer puts in issue all the material allegations of the complaint, except the fact that the steamboat, subsequently to the purchase by Finch, was used upon the waters of the State of California during the period charged.

The defendant, in addition, pleads: 1. That the alleged agreement was void under the Statute of Frauds and Perjuries of the Territory, in that it was not, and is not, to be performed in one year from the making thereof, and was not, nor was any note or memorandum thereof, in writing, signed by the defendant, according to the provision of the statute; 2. That the steamboat was taken to California, and run upon the waters and bays of that State, by the leave and license of the plaintiff, given to the defendant on the first day of July, 1868; 3. That the action is barred by the limitations of three and six years, prescribed by the statute of the Territory.

There was a verdict for the defendant, in obedience to a peremptory instruction by the court, and the judgment rendered thereon was affirmed by the Supreme Court of the Territory. From that judgment of affirmance this writ of error is prosecuted.

Upon the filing in the Supreme Court of the Territory, of the judgment and mandate of this court, in Oregon Steam Navigation Co. v. Winsor (20 Wall. 64), that cause was remitted to the court of original jurisdiction, for further proceedings according to law. The defendants therein obtained leave to withdraw, and did withdraw, their answers. Judgment by default was thereupon entered against them for the sum of $75,000, the amount fixed as actual liquidated damages, with interest and costs. Satisfaction thereof was entered at the same term of the court. That judgment, it is contended, by the present defendant, was obtained by collusion between the parties to that action. It is further claimed that it has never, in fact, been satisfied. Whether these charges are true, we need not here inquire. And it is scarcely necessary to say that that judgment is not conclusive of the rights of the present defendant. He was not a party to that action, nor notified of its pendency. He had no opportunity or right, in that case, to controvert the claim of the Oregon Steam Navigation Company, to control the defence, to introduce or cross-examine witnesses, or to prosecute a writ of error to the judgment. Railroad Company v. National Bank, 102 U.S. 14. Besides, that case was founded upon the written covenant and agreement of Winsor and his associates with the Oregon Steam Navigation Company, while the liability of Finch to the plaintiffs in this action depends altogether upon the construction which may be given to the bill of sale executed to him by Hale. If the record of the case of the Oregon Steam Navigation Co. v. Winsor, &c., is competent evidence in this action, for any purpose, it can only be to show the amount of damages which Winsor and his associates have sustained, by reason of the 'New World' being run on the waters of California after Finch became owner.

But the liability of those parties for such damages arose out of the covenant and agreement which they made with the Oregon Steam Navigation Company. With that transaction, however, Finch had no connection, and unless he made a similar covenant and agreement with those from whom he purchased,-thereby becoming interested in keeping the covenant and agreement made with that company by Winsor and his associates,-he cannot be affected by the judgment obtained against the latter.

This brings us to the main contention on behalf of the plaintiffs in error; viz., that the language of the bill of sale from Hale to Finch, if interpreted in the light of all the circumstances attending its execution, imports a covenant upon the part of the latter that he would not use or permit the use by others, of the steamboat or its machinery, within a prescribed period, either upon the waters, rivers, and bays of California, or upon the Columbia River and its tributaries. If, however, the language, properly interpreted, imports only a condition, for breach of which the vendor had no remedy other than by suit to recover the property sold, then it is, as indeed it must be, conceded, that the judgment below is right.

We are of opinion that the latter construction is the proper one.

If we look both at the circumstances preceding, and at those immediately attending, the purchase by Finch, and if we even impute to him full knowledge of everything that occurred, as well when the Oregon Steam Navigation Company made its original purchase, as when it subsequently sold to Winsor and his associates,-all which counsel for plaintiffs contends we are bound, by the settled rules of law, to do,-what do we find?

The written memorandum between that company and the California Steam Navigation Company, in words aptly chosen, shows, as we have seen, an express covenant and agreement, upon the part of the former, that neither the 'New World' nor its machinery should be used on the waters of California within ten years from May 1, 1864, and also that a certain sum, as actual liquidated damages, should be paid for any breach of such covenant and agreement. The bill of sale from the Oregon Steam Navigation Company to Winsor and his associates does not contain any words of covenant or agreement. But that company, in view of its express covenants to the California Steam Navigation Company, took care to exact from its vendees a separate written obligation, in which the latter, in express terms, covenanted and agreed with that company, in like manner as the latter had covenanted and agreed with the California Steam Navigation Company. The next writing executed is the bill of sale from Winsor to Hale. It shows nothing more than a covenant to warrant the title to the steamboat, and makes no reference, in any form, to any waters from which the steamboat should be excluded. Then comes the bill of sale executed by Hale to Finch. Its material portions are the same in substance, and, in language, almost identical with that given by the Oregon Steam Navigation to Winsor. Each contains a covenant and agreement, upon the part of the vendor, simply to warrant and defend the title to the steamboat, its machinery, &c., against all persons whomsoever. But each recites, let it be observed, only an agreement that the sale is upon the express condition that it shall not be used or employed upon those waters. Upon the sale by the Oregon Steam Navigation Company to Winsor and his associates, the former, as we have seen, was careful to take the separate obligation of the latter, with surety, containing covenants and agreements, described in such terms as to show that the draughtsman, as well as all parties, knew the difference between a covenant and a condition. The same criticism may be made in reference to the separate writing signed by Finch and Hale, at the time of the execution by the latter of the bill of sale to the former. The latter writing shows, it is true, several covenants and agreements upon the part of Finch, but no covenant or agreement in reference to the use of the boat, such as is found in the writings which passed between the California Steam Navigation and the Oregon Steam Navigation, or such as are contained in the separate agreement between the latter and Winsor and his associates.

If, therefore, we suppose (which we could not do without discrediting some of the testimony) that Finch, at the time of his purchase, had knowledge of all the papers executed upon prior sales of the 'New World,' the absence, as well from the bill of sale accepted by him, as from the written agreement of the same date, signed by him and Hale, of any covenant or agreement that he would not use that vessel, or permit it to be used, on the prohibited waters within the period prescribed, quite conclusively shows that he never intended to assume the personal responsibility which would result from such a covenant.

It thus appears that the circumstances, separately considered, militate against the construction for which plaintiff contends.

But if we omit all consideration of the circumstances under which the bill of sale from Hale to Finch was executed, and look solely at the language employed in that instrument, there seems to be no ground upon which the claim of plaintiff can stand. The words are precise and unambiguous. No room is left for construction. It is undoubtedly true, as argued by counsel, that neither express words of covenant, nor any particular technical words, nor any special form of words, is necessary in order to charge a party with covenant. 1 Roll. Abr. 518; Sant v. Norris, 1 Burr. 287; Williamson v. Codrington, 1 Ves. 511, 516; Courtney v. Taylor, 7 Scott, N. R. 749. 'The law,' says Bacon, 'does not seem to have appropriated any set form of words which are absolutely necessary to be made use of in creating a covenant.' Bac. Abr., Covenant, A. So in Sheppard's Touchstone, 161, 162, it is said: 'There need not be any formal words, as 'covenant,' 'promise,' and the like, to make a covenant on which to ground an action of covenant, for a covenant may be had by any other words; and upon any part of an agreement in writing, in whatsoever words it be set down, for anything to be or not to be done, the party to or with whom the promise or agreement is made may have his action upon the breach of the agreement.' Mr. Parsons says, 'Words of proviso and condition will be construed into words of covenant, when such is the apparent intention and meaning of the parties.' 2 Parsons, Contracts, 23. There are also cases in the books in which it has been held that even a recital in a deed may amount to a covenant. Farrall v. Hilditch, 5 C. B. N. S. 840; Great Northern Railway Co. v. Harrison, 12 C. B. 576; Severn and Clerk's Case, 1 Leon. 122. And there are cases in which the instrument to be construed was held to contain both a condition and a covenant; as, 'If a man by indenture letteth lands for years, provided always, and it is covenanted and agreed between the said parties, that the lessee should not alien.' It was adjudged that this was 'a condition by force of the proviso, and a covenant by force of the other words.' Co. Litt. 203 b.

But according to the authorities, including some of those above cited, and from the reason and sense of the thing, a covenant will not arise unless it can be collected from the whole instrument that there was an agreement, or promise, or engagement, upon the part of the person sought to be charged, for the performance or non-performance of some act. Comyns, in his Digest (Covenant, A, 2), says that 'any words in a deed which show an agreement to do a thing, make a covenant.' 'But,' says the same author, 'where words do not amount to an agreement, covenant does not lie; as, if they are merely conditional to defeat the estate; as, a lease, provided and upon condition that the lessee collect and pay the rents of his other houses.' Comyns, Dig., Covenant, A, 3. The language last quoted is found also in Platt's Treatise on the Law of Covenants. Law Library, vol. iii. p. 17. It there appears in connection with his reference to the case where A. leased to B. for years, on condition that he should acquit the lessor of ordinary and extraordinary charges, and should keep and leave the houses at the end of the term in as good plight as he found them. In such case, the author remarks, the lessee was held liable to an action for omitting to leave the houses in good plight, 'for here an agreement was implied.'

Applying these doctrines to the case before us, its solution is not difficult. Without stopping to consider whether a covenant upon the part of Finch could arise out of a bill of sale which he did not sign, but merely accepted from his vendor (Platt, Covenants, ch. 1), it is sufficient to say that the instrument contains no agreement or engagement or promise by him that he would or would not do anything. There is, in terms, a covenant by Hale to Finch to defend the title to the boat and its machinery against all persons whomsoever. This is immediately followed by language implying an agreement that the sale was upon the express condition that neither the boat nor its machinery should be used within a prescribed time upon certain waters. It is the case of a bare, naked condition, unaccompanied by words implying an agreement, engagement, or promise by the vendee that he would personally perform, or become personally responsible for its performance. The vendee took the property subject to the right which the law reserved to the vendor, of recovering it upon breach of the condition specified. The vendee was willing, as the words in their natural and ordinary sense indicate, to risk the loss of the steamboat when such breach occurred, but not to incur the personal liability which would attach to a covenant or agreement upon his part, that he would not use, and should not permit others to use, the boat or its machinery upon the waters and within the period named. If this be not so, then every condition in a deed or other instrument, however bald that instrument might be of language implying an agreement, could be turned, by mere construction and against the apparent intention of the parties, into a covenant involving personal responsibility. The vendor having expressly, and the vendee impliedly, agreed that the sale was upon an express condition,-stated in such form as to preclude the idea of personal responsibility upon the part of the vendee,-we should give effect to their intention, thus distinctly declared.

This conclusion disposes of the case, and relieves us of the necessity of considering other questions of an interesting nature which counsel have discussed.

Judgment affirmed.

title: Hale v. Finch/Opinion of the Court


text: Talk:Hale v. Finch/Opinion of the Court

title: Talk:Hale v. Finch/Opinion of the Court


text:
National Bank v. Johnson

ERROR to the Supreme Court of the State of New York.

This action was brought in the Supreme Court of the State of New York by Johnson, to recover of the National Bank of Gloversville penalties alleged to have been incurred by it under sects. 5197 and 5198 of the Revised Statutes of the United States.

These sections are as follows:--

'SECT. 5197. Any association may take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidence of debt, interest at the rate allowed by the laws of the State, Territory, or district where the bank is located, and no more, except that where by the laws of any State a different rate is limited for banks of issue organized under State laws, the rate so limited shall be allowed for associations organized or existing in any such State under this title. When no rate is fixed by the laws of the State or Territory or district, the bank may take, receive, reserve, or charge a rate not exceeding seven per centum, and such interest may be taken in advance, reckoning the days for which the note, bill, or other evidence of debt has to run. And the purchase, discount, or sale of a bona fide bill of exchange, payable at another place than the place of such purchase, discount, or sale, at not more than the current rate of exchange for sight-drafts, in addition to the interest, shall not be considered as taking or receiving a greater rate of interest.

'SECT. 5198. The taking, receiving, reserving, or charging a rate of interest greater than is allowed by the preceding section, when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. In case the greater rate of interest has been paid, the person by whom it has been paid, or his legal representatives, may recover back, in an action in the nature of an action of debt, twice the amount of the interest thus paid from the association taking or receiving the same; provided such action is, commenced within two years from the time the usurious transaction occurred. That suits, actions, and proceedings against any association under this title may be had in any circuit, district, or territorial court of the United States, held within the district in which such association may be established, or in any State, county, or municipal court in the county or city in which said association is located, having jurisdiction in similar cases.'

The facts are undisputed. The defendant, a national banking association, doing business at Gloversville, New York, from Nov. 10, 1874, to Feb. 7, 1876, discounted for the plaintiff, at the rate of twelve per cent per annum, commercial paper and promissory notes amounting to $158,003. The amount of interest thereon which he paid, and received, was $6,564.88, and received, was $6,594.88, being an excess of $2,735.36 beyond the rate of allowed by the general laws of the State. The paper discounted was mostly business paper, that is, negotiable promissory notes, which he held and owned, and on which he could have maintained actions against the prior parties. A small portion was accommodation paper, but not known by the bank to be such, and nothing upon its face indicated that to be its character. All the paper was paid to the bank at maturity, or before the present action was brought. He indorsed all the notes at the times when they were discounted, and the proceeds were entered to his credit in his bank account.

Upon these facts judgment was rendered in his favor for $5,470.72, twice the amount of the interest paid in excess of seven per cent per annum, to reverse which this writ of error is prosecuted by the bank.

Mr. Francis Kernan for the plaintiff in error.

Johnson was not entitled to recover. By the long-settled law of New York it is neither usurious nor unlawful for persons or copartnerships to do precisely what the bank did in regard to this business paper.

The transaction was not a loan of money, but a purchase of the paper, and it is immaterial whether Johnson indorsed it or guaranteed its payment or not. 3 Rev. Stat. N. Y. (5th ed.) p. 72, &c.; Munn v. Commission Company, 15 Johns. (N. Y.) 44; Cram v. Hendricks, 7 Wend. (N. Y.) 569; Cobb v. Titus, 10 N. Y. 198; Rapelye v. Anderson, 4 Hill (N. Y.), 472.

Corporations organized under the act of Congress of June 3, 1864, c. 106, are upon the same footing as a natural person in the State where they are located, so far as relates to the rate of interest on a loan, and to the amount of discount at which they may become the owners of commercial business paper. Rev. Stat. U.S., sects. 5197, 5198; Tiffany v. National Bank of Missouri, 18 Wall. 409; First National Bank v. National Exchange Bank, 92 U.S. 122; Hintermister v. National Bank, 64 N. Y. 212.

A large portion of the banking transactions in that State consists of acquiring business paper at a stipulated rate of discount. It would be contrary to the policy and spirit of the act, and seriously detrimental to those institutions, if they are to be liable to a heavy penalty for taking such paper at the same rate of discount at which it may be lawfully purchased by a natural person. Tiffany v. National Bank of Missouri, supra.

The provisions of the act were intended to prevent national banks from violating the usury laws of the State. In New York, where this transaction took place, it was usurious to loan or advance money to a party upon his own paper, or upon paper made for his accommodation, at a greater rate of interest or discount than seven per cent per annum; but it was not usurious or illegal to acquire, at an agreed discount exceeding that rate, business paper, that is to say, paper valid in his hands and whereon he could, against the prior parties thereto, maintain an action.

Penal provisions should not be extended to a case not clearly within their intent and meaning. Here full effect is given to them by applying the statute only to transactions which are usurious by the laws of New York. If this transaction was not usurious by them, then the bank did not incur any penalty. Rev. Stat. U.S., sect. 5198.

If the bank had not authority to become the owner of commercial paper by purchase, it did not become liable to the plaintiff, nor could he successfully raise the question as to its want of power. National Bank v. Whitney, 103 U.S. 99.

Mr. Clayton M. Parke, contra.

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

title: National Bank v. Johnson


text: Talk:National Bank v. Johnson

title: Talk:National Bank v. Johnson