text:
Jennisons v. Leonard/Opinion of the Court

There is but a single question of law in the case, viz.: are the facts found sufficient to support the judgment? This question may be affected by a greater or less number of considerations, but it is the sole question.

There are no exceptions to the rulings of the court in the progress of the trial, and no objection of that character can now be heard. We are authorized by the statute of March 3d, 1865, where the finding of facts is special, to review 'the determination of the sufficiency of the facts found to support the judgment,' and we are authorized to examine no other question. In ordering judgment for the plaintiff, certain propositions of law are announced by the judge as having been held by him. These are important only as they necessarily and of themselves affect the question, whether the facts found are sufficient to support the judgment, and they are no more important than if they had not been thus announced. No specific exception is or can be taken to them.

It is contended that the vendor had no right, under the contract of September 1st, 1866, to re-enter upon the premises, and take possession of the down timber. This contention is based upon the idea that time was not of the essence of the contract, and that although Cole was in arrears of payment to an amount exceeding $5000, this gave no right to the vendor to declare the contract forfeited. Conceding that the intention of the parties determines the question, the claim can scarcely be sustained in relation to a sale of timber lands, where the entire value of the estate consists in the timber standing upon them, and when it is provided that there shall be monthly payments, to be regulated by the quantity of timber cut, and when it is provided that a given quantity shall be cut during every month. That the parties should not have intended to require the payments to be kept up in the ratio of the cutting, and that the vendor should not have intended to reserve his only practical protection in this respect, viz., a right of entry in the case of a failure, cannot readily be believed.

The Jennisons entered into possession of the premises, as mortgagees of Cole, in the hope of saving their debt from him by operating under his contract, and they agreed with his vendor to pay the sums due and becoming due under his contract as long as they should operate under their mortgage. A dispute arising as to the amount thus to be paid, 'they abandoned the lands, and the vendor entered into peaceable possession' for the alleged breach, viz., the non-payment of $5280, and took possession of all the timber that had been cut and had not been removed.

Looking at the circumstances that Cole had refused to perform, and had surrendered and assigned all his interest in the contract and the timber; that the Jennisons had ceased their operations and had abandoned the land; that Leonard had entered into possession of the land and the timber cut, and had caused the same to be removed and sawed into boards; that the right of the Jennisons extended only to such timber as had been cut when their mortgage was executed; that there is no evidence that the timber in question had then been cut, it seems sufficiently plain, not only that Leonard was the owner of and lawfully in possession of the timber and lumber in question, but that his right was assented to by all parties who were in a condition to question it. The Jennisons not only failed to show any title to the lumber at any time, but voluntarily abandoned whatever interest they might be supposed to have had.

It is urged that Leonard took certain swamp lands in Ottawa as collateral security for the performance of his contract by Cole. If we suppose this to be true, we do not see that it is very important. The payments were large in amount ($27,000, with interest), extending over a period of three years. That certain lands, neither the quality nor value of which is stated, except that they were swamp lands, were agreed to be given in security, will not affect the construction of the contract or the right to relief under it. It is sufficient, however, to say that though the contract contains an agreement to convey the swamp lands, there is no finding that these lands were conveyed to the plaintiff. It rested in agreement merely, and there is nothing to justify the suggestion that the swamp lands were ever conveyed by Cole.

The claim that the instrument we have been discussing is a lease, does not require much consideration. It has neither a lessor, a lessee, nor a subject of demise. The only valuable portion of it, the timber, was expected to be exhausted in procuring the means of its own payment. When the supposed demise should terminate there would be no reversion left to the vendor that would be worth the taking.

Nor is there more foundation for the suggestion that the Jennisons were tenants at will and entitled to three months' notice to quit. They did not wait for a notice to quit. Without regard to the order or effect of their going, they went when they were ready, leaving Leonard to take care of his own interest as well as he was able.

This was one of the sales of real estate by contract, so common in this country, in which the title remains in the vendor and the possession passes to the vendee. The legal title remains in the vendor, while an equitable interest vests in the vendee to the extent of the payments made by him. As his payments increase, his equitable interest increases, and when the contract price is fully paid, the entire title is equitably vested in him, and he may compel a conveyance of the legal title by the vendor, his heirs, or his assigns. The vendor is a trustee of the legal title for the vendee to the extent of his payment. The result of this state of things is quite unlike that of a conveyance subject to a condition subsequent which is broken, and when re-entry or a claim of title for condition broken is necessary to enable the vendor to restore to himself the title to the estate. The legal title having, in that case, passed out of him, some measures are necessary to replace it. In the case of a contract like that we are considering no legal title passes. The interest of the vendee is equitable merely, and whatever puts an end to the equitable interest-as notice, an agreement of the parties, a surrender, an abandonment-places the vendor where he was before the contract was made.

No mode of terminating an equitable interest can be more perfect than a voluntary relinquishment, by the vendee, of all rights under the contract, and a voluntary surrender of the possession to the vendor. The finding of the court shows that this took place in relation to the premises in question, and that the surrender was accepted by the vendor.

We may safely say, then: first, that no importance is to be attributed to the circumstance, that the contract contains no clause of re-entry; or second, to the fact that the vendor has sought to enforce payment of the amounts which became due to him before the surrender and abandonment; and third, that there can be no doubt about the intention of the parties in making the contract, that the payments and the cutting should proceed in the ratio specified; or fourth, that when the payments ceased it was intended, and is the law, that the cutting should also cease; or fifth, that by the facts appearing by the finding of the court the plaintiff below is entitled to a judgment for the value of the lumber taken from his possession, with interest.


text: Talk:Jennisons v. Leonard/Opinion of the Court

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


text:
Railroad Land Company v. Courtright

[Syllabus from pages 310-312 intentionally omitted]

ERROR to the Supreme Court of Iowa.

On the 31st of January, 1870, Milton Courtright brought, in a District Court of the State of Iowa, an action against the Iowa Railroad Land Company for the possession of certain real property situated in that State, being part of the lands embraced in the act of Congress approved May the 15th, 1856. That act granted to the State, for the purpose of aiding in the construction of a railroad from Lyons City, in that State, northwesterly, to a point of intersection with the main line of the Iowa Central Air-Line Railroad, near Maquoketa, and thence to the Missouri River, alternate sections of land, designated by odd numbers, for six sections in width on each side of the road, to be selected within fifteen miles therefrom, with a provision that if it should appear, when the route of the road was definitely fixed, that the United States had sold of the lands thus designated any sections or parts of sections, or the right of pre-emption had attached to them, other lands of equal quantity in alternate sections might be selected from adjoining lands of the United States. And the act declared that the lands thus granted should be exclusively applied to the construction of the road, and be subject to the disposal of the legislature for that purpose and no other, and only in the manner following, that is to say: a quantity of land, not exceeding one hundred and twenty sections, and included within a continuous length of twenty miles of the road, might be sold; and when the governor of the State should certify to the Secretary of the Interior that any continuous twenty miles of the road were completed, then another like quantity of the land granted might be sold, and so from time to time until the road was completed; and that if the road was not completed within ten years no further sales should be made, and the lands unsold should revert to the United States.

The State of Iowa, by act of its legislature, passed on the 14th of July, 1856, accepted the grant thus made, and provided for the execution of the trust. By that act the State granted to the Iowa Central Air-Line Railroad Company, a corporation created by its legislature for the construction of the railroad, 'the lands, interests, rights, powers, and privileges' conferred by the act of Congress, upon the express condition, however, that in case the company should fail to have completed and equipped seventy-five miles of the road within three years from the first day of December then next following, and thirty miles in addition in each year thereafter for five years, and the remainder of its whole line in one year thereafter, or on the first of December, 1865, then it should be competent for the State to resume all rights to the lands remaining undisposed of by the company, and all other rights conferred by the act.

The company accepted the grant from the State, with its conditions, and immediately thereafter caused a survey and location of the line of the road to be made, a map of which was filed in the proper offices in the State and at Washington. During the years 1857 and 1858 the company performed a large amount of grading upon the road, principally between Lyons and Maquoketa.

The plaintiff was one of the contractors who did the grading, and he received in payment for his work construction bonds and land scrip of the company. These were afterwards surrendered, and in consideration thereof the land in controversy was sold and conveyed by the company to him. The land thus conveyed was a part of the first and only one hundred and twenty sections sold by the company, and these sections were selected within a continuous twenty miles of the line of the road. The selections were approved by the Secretary of the Interior, and the sections were certified by him to the State. Those, however, selected were not from lands lying along the eastern end of the road, as they might have been, but from lands lying further west.

Although the company did a large amount of grading, as already mentioned, it never completed any part of the road, and in March, 1860, the legislature of Iowa resumed the lands, interests, rights, powers, and privileges conferred upon the company, and repealed the clauses of the act granting them. Subsequently, during the same month, it conferred the same lands, rights, powers, and privileges upon the Cedar Rapids and Missouri River Railroad Company, another corporation created under its laws, declaring, however, that the right, title, and interest held by the State in the lands, and nothing more, was conferred.

This grant by the State was recognized by the act of Congress of June 2d, 1864, amendatory of the original act of 1856. By its fourth section it was expressly provided that nothing in the act should be construed to interfere with, or in any manner impair, any rights acquired by any railroad company named in the original act, or the rights of any corporation, person, or persons, acquired through any such company, nor be construed to impair any vested rights of property, but that such rights should be reserved and confirmed. The new company afterwards transferred all its interest in the lands to the defendant, the Iowa Railroad Land Company.

The question at issue between the parties, and litigated in the State District Court, was whether the plaintiff, Courtright, took a good title to the lands in controversy by the conveyance from the first company, the Iowa Central Air-Line Railroad Company; or whether that title failed to pass to the plaintiff by reason of the time in which the lands were sold, being in advance of the construction of twenty miles of the road; and of the place of their selection, not being along the line of the proposed road from its commencement on the east; and of the failure of that company to construct the length of road designated within the time prescribed, such construction being insisted upon as a condition precedent; and therefore passed by the grant of the State in March, 1860, to the Cedar Rapids and Missouri River Railroad Company, and by conveyance from that company to the defendant, the Iowa Railroad Land Company.

The District Court gave judgment for the plaintiff, and the Supreme Court of the State affirmed that judgment; and the case was brought here on writ of error.

Messrs. I. Cook, N. M. Hubbard, and J. F. Wilson, for the plaintiffs in error; Mr. Platt Smith, contra.

Mr. Justice FIELD, after stating the case, delivered the opinion of the court, as follows:

title: Railroad Land Company v. Courtright


text: Talk:Railroad Land Company v. Courtright


text:
Railroad Land Company v. Courtright/Opinion of the Court

The question for determination is, whether the plaintiff took a good title to the lands in controversy under the conveyance from the first company, the Iowa Central Air-Line Railroad Company, or whether that title is vested in the last company, the Iowa Railroad Land Company.

It is contended by the defendants, first, that under the act of Congress of May 15th, 1856, no lands could be sold by the State until twenty continuous miles of the road were constructed; second, that if one hundred and twenty sections could be sold in advance of such construction, they could only be taken from lands adjoining the line of the road from its commencement on the east; and third, that the grant by the State to the first company was upon conditions precedent, which not having been complied with, the title did not pass. Neither of these positions can, in our judgment, be maintained. The act of Congress by its express language authorized a sale of one hundred and twenty sections in advance of the construction of any part of the road. It was only as to the sale of the remaining sections that the provision requiring a previous completion of twenty miles applied. It is true it was the sole object of the grant to aid in the construction of the railroad, and for that purpose the sale of the land was only allowed, as the road was completed in divisions, except as to one hundred and twenty sections.

The evident intention of Congress in making this exception was to furnish aid for such preliminary work as would be required before the construction of any part of the road. No conditions, therefore, of any kind were imposed upon the State in the disposition of this quantity, Congress relying upon the good faith of the State to see that its proceeds were applied for the purposes contemplated by the act.

Nor was there any restriction upon the State as to the place where the one hundred and twenty sections should be selected along the line of the road, except that they should be included within a continuous length of twenty miles on each side. They might be selected from lands adjoining the eastern end of the road or the western end, or along the central portion.

The act of Congress of May 15th, 1856, was a grant to the State in praesenti; it passed a title to the odd sections designated, to be afterwards located. When the line of the road was fixed, and the location of the odd sections thus became certain, the title of the State acquired precision, and at once attached to the land. And the act of the State of July 14th, 1856, was also a grant in praesenti to the first railroad company. That company took the title and interests of the State upon the terms, conditions, and restrictions expressed in the act of Congress. The further conditions as to the completion of the road imposed by the State were conditions subsequent and not conditions precedent, as contended by the defendants. The terms, in which the right is reserved by the act of the State to resume the lands granted, imply what the previous language of the act declares, that a present transfer was made, and not one dependent upon conditions to be previously performed. The right is by them restricted to such lands as at the time of the resumption had not been previously disposed of. The resumption, therefore, of the grant by the failure of the first company to complete the road did not impair the title to the lands, which the act of Congress authorized to be sold in advance of such completion, and which were sold by that company.

We are of opinion, therefore, that the plaintiff took a good title to the premises in controversy by his conveyance from that company. The judgment of the court below is, therefore,

AFFIRMED.


text: Talk:Railroad Land Company v. Courtright/Opinion of the Court


text:
Chambers County v. Clews

ERROR to the District Court for the Middle District of Alabama.

Clews & Co. brought an action at law, in the court below, against Chambers County, Alabama, to procure payment of certain coupons attached to ninety-three bonds of $1000 each, issued by the county.

The bonds purported to be issued in aid of a certain railroad named in each of them, and to have been issued under the authority and in pursuance of an act of the legislature of the State of Alabama, approved December 31st, 1868.

The statute authorized a subscription and loan by the county only upon the basis of a proposal in writing from the railroad company, made by the president and a majority of its directors, proposing that the county should take an amount of its capital stock, to be named, at a certain price per share, and pay for the same in such bonds of the county as should be specified in the proposal. This proposition was to be submitted to the qualified electors of the county for their acceptance or rejection. Notice of the terms and amount of the proposed subscription was required to be published. If a majority of the qualified voters voted for 'subscription,' the proposition of the company was to be deemed to be accepted, and the subscription authorized to be made in the manner and upon the terms set forth in the application, and the bonds might be issued in payment thereof.

The plaintiffs alleged in their complaint that they were the owners and holders of the bonds and coupons mentioned, 'and that they were purchased by them for value before any of them fell due.'

Each bond was set out-each being for $1000-and each being declared to be one of a series issued by the said county of Chambers under authority and in pursuance of an act of the legislature of the State of Alabama entitled 'An act to authorize the several counties, towns, and cities of Alabama to subscribe to the capital stock of such railroads throughout the State as they may consider most conducive to their interests;' and approved December 31st, 1868.

Pleas: 1st. A special plea that the bonds were issued by the authorities of Chambers County in payment of a subscription to the stock of the railroad company named, under the act of December 31st, 1868, and that the said company did not, prior to or since the issuing of the bonds, by its president and a majority of its directors, propose to the defendants that they should take and subscribe for a certain amount of stock at a certain price per share, and pay for the same in the bonds of the county; that the bonds were issued without authority of law and were void, and that the plaintiffs were not bona fide holders of them without notice.

2d. The general issue.

To the special plea the plaintiff demurred specially. That the plea amounted to the general issue was not among the causes assigned for demurrer. On the other, he took issue. The demurrer was sustained, and the cause tried on the plea of general issue alone, without verification.

On the trial the plaintiffs produced the bonds and coupons, and offered to read the same in evidence. To this the defendants objected, for the reason—

1st. That there was no evidence that the bonds were authorized to be issued by the defendants.

This objection was overruled.

2d. That there was no evidence that the seal annexed was the seal of the probate judge, or of the defendants.

This objection also was overruled; there being no denial of the execution by plea verified by affidavit, as required by section 2682 of the code of 1867, which provides that—

'All written instruments, the foundation of the suit, purporting to be signed by the defendant, his partner, agent, or attorney in fact, must be received in evidence without proof of the execution, unless the execution thereof is denied by plea verified by affidavit.'

3d. That there was no revenue stamp on either the bonds or coupons, as it was said by the counsel for the defendant there should have been by the statutes then in force. [But the bill of exceptions disclosed nothing as to what stamps, if any, were on the bonds or coupons.]

This objection also was overruled and the bonds and coupons let in.

On the trial the deposition of Clews, one of the plaintiffs, was read without objection. He said:

'The ninety-three bonds of the county of Chambers were received by my said firm in good faith and for value paid, both I and my firm relying upon the good faith and credit of said county of Chambers that said bonds and the coupons thereto attached would be paid, according to the tenor and effect thereof.'

The defendant also offered as a witness Mr. Pennington, the president of the railroad company, who, on cross-examination, said:

'The plaintiffs got the bonds in April, 1870, from J. C. Stanton, to whom they had been transferred on account of advances made by Stanton after the election in the county of Chambers as to the subscription to the stock of said railroad company, but before the actual issue of the bonds, and on an agreement that the bonds should be transferred when issued. The plaintiffs obtained the bonds in April, 1870, under advances made at that time, and an agreement to make future advances, which they have done to about $100,000, and hold the bonds as collateral security for the advances.'

The defendant now, to show that the proposition had been made to the county to subscribe before the railroad company was fully organized, and while it was simply located, which he alleged it could not legally do under the act of December 31st, 1868, proposed to read a transcript from the records of the Court of County Commissioners of Chambers County, containing the letter of the president of the road (bearing a certain date) making the proposition; the action of the Commissioners' Court of the county ordering an election; and the order of an issue of bonds as upon an election held.

This record of the Commissioners' Court stated that the president of the said railroad company, 'as the said railroad is now located by said company, proposed in writing that the following application be granted.' The bill of exception proceeded:

'The plaintiffs inquired of the defendant whether his transcript was offered in connection with any other evidence, or whether any other evidence was proposed in connection with said transcript. The defendant answered these questions in the negative. The plaintiffs objected to the said transcript being read in evidence, on the ground that it was illegal as well as irrelevant testimony. And the court sustained the objection.'

It was also set up that the act of the Alabama legislature, under which the county made the subscription, was unconstitutional; inasmuch as it was an act authorizing the issue of county bonds for a private purpose: a proposition overruled by the court.

Verdict and judgment having been rendered for the plaintiffs, the defendant brought the case here on exceptions to the admission or rejection of the evidence, as already stated, and for erroneous judgment on the demurrer to the special plea.

Mr. R. T. Merrick, for the plaintiff in error; Mr. S. F. Rice, contra.

Mr. Justice HUNT delivered the opinion of the court.

title: Chambers County v. Clews


text: Talk:Chambers County v. Clews

title: Talk:Chambers County v. Clews


text:
Chambers County v. Clews/Opinion of the Court

The special plea was demurred to specially, and the demurrer was sustained by the court. We have held many times, in relation to bonds of this character, that where the persons appointed by law to certify that the preliminary requisites have been complied with, do so certify, that their certificate is conclusive in favor of the holder who, on the strength of such certificate, pays his money for the bonds without notice of the defect or illegality. We have never, however, held that such defect or irregularity could not be set up by the maker of the bonds where the suit upon them was brought by one who had not paid value for them, or who had notice of the defect or irregularity. In this lies the difficulty with the demurrer to the plea we are considering. The plea alleges in substance that no legal proposal was made to the county by the railroad in question. This proposal is undoubtedly a matter of substance. The statute authorizes a subscription and loan by the county only upon the basis of a proposition in writing, such as it prescribes. The proposition is a necessary preliminary without which there can be no legal action in issuing the bonds. Where a plea avers that there was no such proposition, and avers also that the plaintiffs are not bona fide holders of the bonds without notice, a case is stated in which the validity of the bonds cannot be sustained by any holding of this court.

While we think there was error in the judgment upon this plea, it seems to have been a harmless one. The defendants had another plea which covered the same ground. In Chute v. Winegar, we held that where a plea had been improperly stricken out, but no harm had resulted therefrom, that it was not cause for reversing the judgment.

The parties in this case went to trial on the plea of the general issue, without verification, and a jury was impanelled and sworn to try the issue as joined. The plaintiffs claimed to recover the amount of certain coupons 'attached to ninety-three of the bonds of the said corporation.' One of the bonds was set forth, purporting that the county of Chambers acknowledged its indebtedness for $1000 as therein stated, the same being recited to be one of a series of bonds issued by the said county of Chambers under authority and in pursuance of an act of the legislature of the State of Alabama.

To this complaint the defendant answered that it did not undertake and promise in manner and form as the plaintiffs had complained against it, and of this it put itself upon the country, and the plaintiff did the like. This issue involved everything that was involved in the special plea. Neither of them involved the factum of the bonds. The special plea did not purport to deny their execution, but assuming such execution by the professed agents of the county, alleged that it was without authority of law and that the bonds were void. The general issue did not involve it, as by the practice in Alabama the execution of a written instrument cannot be questioned unless the defendant by a sworn plea denies its execution.

Both pleas did involve the question of authority. When the plaintiffs alleged that certain persons for the county of Chambers had issued their bonds, that they were the bonds of the corporation, they thereby alleged that the persons issuing them had power and authority to act for the county in issuing them. When the defendant denied that in fact it undertook and promised, as the plaintiffs in their complaint alleged, but not denying that in form its bonds were issued, it denied the authority of the persons who so professed to act in its behalf. The same issue in this respect was presented in the two pleas.

The issue of bon a fides and notice was also presented by each of said pleas. The plaintiffs alleged in their complaint that they were the owners and holders of the bonds and coupons mentioned, 'and that they were purchased by them for value before any of them fell due.' This allegation was specifically denied in the special plea, where it was averred that the plaintiffs were not bon a fide holders without notice. It was also denied by the general issue, which denied the purchase and holding entirely, as well as the purchase for value before maturity. In assumpsit any matter which shows that the plaintiff never had a cause of action may be proved under the general issue.

The logical and orderly mode of a trial, where it was intended to investigate the issue we have been considering, would be this: To sustain their claim the plaintiffs produce the bonds and coupons. The execution not being put in issue, this establishes the plaintiff's case, and establishes presumptively that they are holders for value before maturity without notice. The defendant then produces such proof as it may possess that the plaintiffs were not holders for value, or that they received the coupons after maturity, or that they had notice of the defects alleged. If it establishes either of these points the question of authority in the agent is then open.

The question and the order of proof in these respects would be the same, whether the trial was had upon the general issue or upon the special plea. It seems quite clear that the judgment upon the demurrer to this plea worked no harm to the defendant.

From the evidence given on the trial it would appear that such was the understanding of the parties. This is shown by what is said in the deposition of Mr. Clews, which was read without objection, and in what the defendant proved by Mr. Kennedy, the president of the railroad company.

On the trial the plaintiffs produced the bonds and coupons and offered to read the same in evidence. To this the defendants objected, for the reason that there was no evidence that the bonds were authorized to be issued by the defendants, and that there was no evidence that the seal annexed was the seal of the probate judge, or of the defendants. We have already considered this point, and have shown that the objection was not valid for either of the reasons mentioned. There was no issue upon the execution of the bonds.

It was further objected that there was no revenue stamp upon the bonds, as required by the act of Congress. We have no knowledge whether there were stamps of any amount or to what amount upon these papers. The bill of exceptions is silent upon that point. Its assumption in an objection as a ground of objection is no evidence of the fact. The fact must appear by the record as an existing fact in the case. If the objector wishes the point to be passed upon by the appellate court, he must take care that the fact shall sufficiently appear in the record. We do not discuss the question farther.

The constitutionality of the act of the legislature authorizing the issue of these bonds has been examined by the Supreme Court of Alabama, and the act has been held to be valid.

These decisions are binding upon us, and we see no occasion to controvert them.

Further evidence in relation to the proposal was offered by the defendant. The defendant's counsel was inquired of whether any other evidence was proposed in connection therewith, meaning to inquire, as we understand, whether evidence of want of ownership or of good faith for value, or a knowledge of the defects alleged was intended to be offered. The question was answered in the negative, and the evidence was excluded. We think this ruling was right.

None of the objections are well taken, and the

JUDGMENT IS AFFIRMED.


text: Talk:Chambers County v. Clews/Opinion of the Court


text: Clarion Bank v. Jones Assignee

title: Clarion Bank v. Jones Assignee


text: Talk:Clarion Bank v. Jones Assignee

title: Talk:Clarion Bank v. Jones Assignee


text:
Clarion Bank v. Jones Assignee/Opinion of the Court

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

'SECTION 35. That if any person, being insolvent or in contemplation of insolvency, within four months before the filing of the petition by or against him, with a view to give a preference to any creditor or person having a claim against him. . . procures any part of his property to be. . . seized on execution. . . the person. . . to be benefited thereby. . . having reasonable cause to believe such person is insolvent, and that such attachment, &c., is made in fraud of the provisions of this act, the same shall be void, and the assignee may recover the property or the value of it from the person so receiving it, or so to be benefited.

'SECTION 39. That any person residing and owing debts. . . who being bankrupt or insolvent, or in contemplation of bankruptcy or insolvency, shall. . . give any warrant to confess judgment, or procure or suffer his property to be taken on legal process with intent to give a preference to one or more of his creditors. . . shall be deemed to have committed an act of bankruptcy, and. . . shall be adjudged a bankrupt on the petition of one or more of his creditors.'

These provisions of law being in force, S. & W. Burns were lumbermen and merchants, doing business as partners, in the county of Jefferson, Pennsylvania. They became indebted to the Clarion Bank in the sum of $10,000, the bank having discounted their two notes for $5000 each. The one note was due July 16-19, 1867, and the other August 6-9.

On the 9th of July, S. Burns, one of the partners, having died, the officers of the bank insisted upon a change of the security, and the surviving partner, yielding to their importunity, gave the bank an acknowledgment of the debt, payable one day after date, coupled with a warrant of attorney to confess judgment for the debt and costs.

On the 18th of July, the judgment was entered up in Clarion County, under the warrant of attorney authorizing it, and by exemplification it was transferred to Jefferson, where Burns lived, and had his property and business.

On the 19th of July the attorney of the bank filed his praecipe for a fieri facias, which was probably issued on the same day or the next day. On the 22d of July the sheriff of Jefferson County had the writ certainly in his hands, and made a levy on Burns's goods. The property levied on remained in the sheriff's hands, unsold, for want of time to sell it before the return day of the writ.

To the next term afterwards a venditioni exponas was issued, under which the sheriff sold the goods and paid the bank $9359.50. The balance of the debt and costs was afterwards made by a sale of land in Clarion County.

On the 30th of July, 1867, Burns filed his petition for the benefit of the Bankrupt law in the District Court of the United States for the Western District of Pennsylvania, sitting at Pittsburg.

Upon this petition he was adjudged a bankrupt by the District Court on the 9th day of September, 1867.

His property was assigned by the register in bankruptcy to one Jones, on the 29th of November, 1867, who on the 6th of January, 1869, a year and more afterwards, brought suit in the court below to recover back from the Clarion Bank the debt which it had collected from Burns, the bankrupt.

The declaration alleged—

That Burns suffered or procured process to be issued out of the Common Pleas of Jefferson, and that thereupon a large amount of his property was seized, and the proceeds thereof received by the bank on account of its claim against BurnsThat within four months after he procured or suffered the seizure he filed his petition and was adjudicated a bankrupt.

That he was insolvent at the time he gave the note, with warrant of attorney to confess judgment, and did it with a view to give a preference to the Clarion Bank.

That the Clarion Bank accepted the judgment and received the proceeds of the execution, having reasonable cause to believe that Burns was insolvent.

That the judgment, exemplification, execution, and payment of proceeds on the bank's claim were all in fraud of the Bankrupt Act.

That the facts above stated made it the duty of the plaintiff to recover the property seized, or the value thereof, and concluded as in trespass on the case for a tort, to the damage of the plaintiff $30,000.

Plea not guilty, with a special traverse of every fact alleged in the declaration, except the judgment note, the execution and levy.

The case came on for trial in November, 1870, before a jury.

The plaintiff produced sundry witnesses whose testimony tended to prove that Burns was insolvent when he gave the judgment-note, and that the defendant had reasonable cause to believe or suspect him of insolvency.

On the other hand the defendant produced witnesses whose testimony tended to prove, that at the date of the judgment and afterwards when it was entered of record the debtor (Burns) was not insolvent, that he did not then contemplate insolvency or bankruptcy, and that the defendant had no reasonable cause to believe or suspect him of being insolvent.

In the course of the trial the plaintiff having given such evidence as he deemed necessary of the fraud committed on the Bankrupt law, proposed to ask the sheriff of Jefferson County, who sold the personal property of S. & W. Burns, on the writ already mentioned, the actual value, in his opinion, of such property.

The question was objected to because the evidence would be incompetent, and because the plaintiff could not recover more than the amount for which the property sold at sheriff sale.

The objection was overruled, and the evidence admitted, under exception of the defendant.

The defendant offered to prove by W. Burns, the surviving partner, that the issuing of the execution and the entry of the judgment was a surprise to and wholly unexpected by him, and that from the time he was first apprised of it he opposed the bank in both judgment and execution, and endeavored to have the original judgment opened.

The plaintiff objected to the foregoing offer as introducing evidence irrelevant and incompetent.

The court rejected the first part of the offer, but allowed the defendant to show what the witness did in opposition to the enforcement of the judgment and execution.

The defendant proposed to prove by him, the same witness, that upon the entry of confession of judgment by the Clarion Bank, in Jefferson County, and issuing of execution, he came down to Pittsburg, consulted his Pittsburg creditors, and notified them of the state of affairs; and that, at their instance, he went into voluntary bankruptcy, they and he believing that in some way or other, under the provisions of the Bankrupt law, then new to all, the execution and all proceedings thereon might be set aside; that it was a part of the agreement and understanding of the witness and the creditors that the proceeding in bankruptcy was, if they were successful in defeating the bank executions, to be then superseded by arrangement and withdrawn, and the witness to be allowed to resume possession of his mills, &c., and an extension given him, this proof to be accompanied by proof that from and after the issuing of the bank's execution the defendant, Burns, fought and opposed the same.

The plaintiff objected to the offer as introducing evidence irrelevant and incompetent. The objection was sustained, and the evidence rejected, under exception by the defendant.

'That every one is presumed to intend that which is the necessary and unavoidable consequence of his acts, and therefore when W. Burns signed and delivered to the defendant in this case the judgment note dated July 9th, 1867, payable one day after date, giving to the defendant the right to enter the same of record and issue execution thereon without delay, for a debt which was not then due it, it afforded the strongest grounds for the presumption that the debtor intended to give to his creditors a preference, and that the said creditor intended to obtain such preference, thereby enabling him to make his money on execution before any other creditor could interfere; and that in such case it was wholly immaterial whether the preference was voluntary on the part of the debtor or given at the urgent solicitation of the preferred creditor.

'That if the quantity and value of the assets of the said Burns had not materially diminished from July 9th, 1867, when the judgment note was given, till July 30th, when he filed his petition in bankruptcy, and September 9th, when he was adjudicated a bankrupt, on his own petition, they may find that he was insolvent on the said 9th day of July.

'That the measure of damages was the value of the property seized and sold by virtue of the execution issued on the judgment, confessed on said judgment note, in the counties of Clarion and Jefferson.'

The defendant asked the court to charge as follows:

'1st. In this case the plaintiff must recover (if at all) under the provisions of the thirty-fifth or thirty-ninth section of the Bankrupt Act, as the bankrupts, whose assignee sues in this case, to wit, S. & W. Burns, were not so adjudicated in an adverse proceeding in bankruptcy presented by their petitioning creditors, but went into bankruptcy voluntarily. The thirty-ninth section does not apply to this case, and as the thirty-fifth section does not specify, among the acts it exhibits, as does the thirty-ninth section, 'the giving any warrant to confess judgment,' no recovery can be had under that section, and the verdict of the jury must be for the defendant.'This charge the court refused to give.

The defendant also requested the court further to charge:

'2d. That while under the Bankrupt Act this court has the right to restrain the further action of parties litigant in cases arising under and referred to by the act, from further proceedings in said case during the pendency of the same, and while they are yet undetermined in the State courts, that is to say, while the said cases are yet without judgment, execution, sale of defendant's property, and distribution of proceeds, and while this court has the right and power to restrain proceedings on unfair securities, when given in fraud of the Bankrupt Act, whether of record or not of record; yet this court has not the right or power to, and will not take jurisdiction in a suit of this kind, when the judgment of a State court has been perfected by levy or sale and distribution of proceeds of sale of a defendant's property among the lien creditors of a defendant, entitled by virtue of their liens under State courts to receive distribution.'

This charge also the court refused to give.

Verdict and judgment having been given for the assignee in $15,557, the bank brought the case here. The admission of the evidence objected to by the defendant, the refusal to admit that offered by him, the giving of the charges given, and the refusal to give those requested, were the matters assigned for error.

Mr. J. S. Black, for the Clarion Bank, plaintiff in error:

The important question is whether the debtor procured his personal property to be seized under the execution. If the seizure was not made by his procurement with a fraudulent design on his own part to deprive the other creditors of their proper share of his assets, then it was a plain violation of the Bankrupt law to let the plaintiff below recover.

The defendant proposed to prove affirmatively by Burns, the debtor, that the seizure, so far from being procured by him, was a surprise upon him and wholly unexpected; that as soon as he learned what use was going to be made of the warrants of attorney which he had given, he opposed the whole proceeding and endeavored to have the judgment opened.

The court ruled out so much of the evidence as would have shown that there was no collusion or concert between the debtor and the defendant, and consequently no procurement of the seizure by the debtor, but consented to receive proof of the acts which he did in opposition to it. It somewhat surprises us to find that, after this, the court rejected all evidence (mentioned in the defendant's second offer) of the debtor's acts in opposition to the execution and levy. This evidence, with that previously offered and partially rejected, directly tended to clear up all doubts about the most material fact in issue, and we think made out a complete defence. But it was rejected as irrelevant and incompetent. The Clarion Bank was convicted of a fraud upon the other creditors of Burns, in the face of the fact that those other creditors of Burns conspired to use the Bankrupt law as a fraud upon the bank.

The charge of the court, as well as all its rulings in the course of the trial, proceeded upon a misconception, then prevalent, of the Bankrupt law, but since rectified in Wilson v. The City Bank. A special error in addition was committed in permitting the plaintiff to give evidence of the value of property sold, for the purpose of swelling the verdict beyond the amount made out of it and paid to the bank.

We assert, as true principles of law in the construction of the Bankrupt Act, the following propositions:

1. A creditor may take from his debtor one security for his debt as well as another-a judgment note as well as a promissory note; and in any case a proper use of the remedies which the law of the State puts into his hands is no fraud upon the Bankrupt law.

2. Where the creditor institutes proceedings for the recovery of his just debt in the State court, and obtains a judgment which is a lien upon the debtor's land, or takes out an execution, which is a lien upon his personal property, the debtor cannot divest such lien by afterwards applying for the Bankrupt law.

3. The acceptance of a warrant of attorney to confess judgment by a creditor from a debtor known to be insolvent is not in itself a fraud upon other creditors; nor is it made an offence against the Bankrupt law. The thirty-ninth section simply declares it to be an act of bankruptcy on the part of the debtor, but does not enumerate the acceptance of it among the acts which a creditor is forbidden to do under the penalty of losing his debt.

4. The only legal ground of recovery that could exist in this case was that the debtor procured the seizure of his personal property under the execution issued by the bank in violation of the thirty-fifth section.

5. To justify a recovery under the thirty-fifth section it was necessary to show that the debtor wilfully and actively engaged in getting the seizure made with the fraudulent intent to pay the debt to the bank out of property which ought to be devoted equally to all his creditors alike, and that the creditor knowing, or having good cause to believe him insolvent, took advantage of his fraud and made himself a party to it by accepting its fruits.

6. If the debtor opposed the levy-tried his utmost to prevent it-was wholly unwilling that his property should be taken by one creditor while the others were left unpaid; if the execution was sprung upon him by surprise, and he fought the levy and sale until every expedient of opposition was exhausted, it is unreasonable to say that he fraudulently procured the seizure to be made, and equally unreasonable to allege that the bank could have united with him in a fraud which he never committed.

7. If Burns, the debtor, conspired with the Pittsburg creditors to petition under the Bankrupt law, not in good faith for the purpose of being discharged, but merely as a means of defeating the rights of the Clarion Bank, then the petition and the proceedings under it were a fraud upon the bank, which takes away all title from the assignee to recover in this action either for the use of the debtor or the creditors.

8. Under no circumstances could the plaintiff recover more than the amount made by the sheriff's sale.

[The learned counsel raised certain other questions not within the errors assigned.]

Mr. George Shiras, contra.

Mr. Justice CLIFFORD delivered the opinion of the court.

Assignees of the bankrupt's estate may recover back money or other property paid, conveyed, sold, assigned, or transferred contrary to the provisions of the Bankrupt Act, if such payment, pledge, assignment, transfer, or conveyance was made within four months before the filing of the petition by or against the debtor, and with a view to give a preference to one or more of the creditors of the bankrupt, or to a person having a claim against him, or who was under any liability on his account, provided the debtor was insolvent or in contemplation of insolvency, and the person receiving such payment or conveyance had reasonable cause to believe that a fraud on the Bankrupt Act was intended, or that the debtor was insolvent.

Two notes of $5000 each were discounted by the defendant corporation for the firm of which the debtor is the surviving partner. Each note was made payable four months after date and neither had become payable at the date of the transaction which is the subject of complaint. They were dated as follows, to wit: the first April 16th, 1867, and the second March 16th, in the same year, and each was indorsed by the firm of which the debtor was a member. Subsequently the senior partner of the firm deceased, and on the 9th of July next after the dates of the notes the officers of the bank insisted upon a different security, and the debtor yielding to their importunity gave the bank a new note, payable one day after date, for the sum of ten thousand dollars, with interest, coupled with a warrant of attorney to confess judgment against him for the amount as of any term, with costs of suit, waiving inquisition, and agreeing to the condemnation of any property that may be levied upon by any execution which may issue forthwith on failure to comply with the conditions hereof, also hereby waiving the benefit of the exemption laws, or any act of Assembly, relative to executions now in force or hereafter to be passed, as more fully set forth in the record.

Armed with that power the creditor, on the eighteenth of the same month, entered judgment against the debtor for the sum of $10,300 in one of the State courts, under the warrant of attorney annexed to the note, and by exemplification transferred the same to the county where the debtor resided and was engaged in business.

Promptitude seems to have characterized the whole transaction, and on the nineteenth of the same month the creditor filed a praecipe for a fieri facias, which it appears was issued on the same day, and on the twenty-second of the same month the sheriff seized certain quantities of white pine boards, amounting in the whole to a million and two hundred thousand feet, and three days later the same officer seized the stock of goods owned by the debtor. Suffice it to say that such proceedings followed that the goods seized were sold and the net proceeds were paid over to the creditor, amounting to nine thousand three hundred and fifty-nine dollars and six cents, and that the balance of the judgment was afterwards paid by a sale of the lands of the debtor situated in another county.

By the record it also appears that the debtor, during the same month, filed his petition in the District Court praying to be adjudged a bankrupt, and that he was so adjudged on the ninth of September following. Pursuant to those proceedings the plaintiff's below was duly appointed the assignee of the bankrupt's estate, and on the sixth of January of the next year he instituted this suit to recover back the property, or the value of it, so received by the creditor.

Briefly stated, what the plaintiff alleges is, in substance and effect, that the debtor, being then and there insolvent, with a view to give a preference to the creditor, executed and delivered to him the said bond or note with the warrant to confess judgment thereon against him for the specified amount; that all the proceedings which led to the judgment, execution, and levy were had with intent to give the creditor a preference over his other creditors, and that the creditor bank accepted the bond or note with the warrant to confess judgment and received the proceeds of the sale of the property having reasonable cause to believe that the debtor was insolvent, and that the bond or note, judgment, exemplification, execution, and payment were made in fraud of the provisions of the Bankrupt Act.

Several counts were filed, but the particulars in which they differ are not material to the questions presented in the assignment of errors. Nor is it necessary to reproduce the pleas filed by the defendant, as it will be sufficient to say that they controvert every material allegation of the declaration, except the execution and delivery of the note and warrant to confess judgment.

Witnesses were introduced by the plaintiff tending to show that the debtor was insolvent when he gave the bond or note with the warrant to confess judgment, and that the debtor gave it to secure a preference to the creditor over his other creditors, and that the defendant had reasonable cause to believe that the debtor was insolvent, and that the bond or note with the warrant to confess judgment was given in fraud of the provisions of the Bankrupt Act.

On the other hand the defendant introduced witnesses whose testimony tended to prove that the debtor at that time was not insolvent, that he did not then contemplate insolvency or bankruptcy, and that the defendant had no reasonable cause to believe or suspect that he was insolvent or that he contemplated anything of the kind.

Matters of that sort, however, are not now in issue, as they were submitted to the jury, and the record shows that the verdict of the jury was in favor of the plaintiff. All such matters having been settled by the verdict of the jury nothing remains except to re-examine the questions of law presented in the bill of exceptions, or such of them as are embodied in the assignment of errors, which are substantially as follows: (1.) That the court erred in charging the jury as requested by the plaintiff in his third prayer. (2.) That the court erred in charging the jury as requested by the plaintiff in his sixth prayer. (3.) That the court erred in charging the jury as requested by the plaintiff in his eighth prayer. (4.) That the court erred in refusing to charge the jury as requested by the defendants in their first prayer. (5.) That the court erred in refusing to charge the jury that the Circuit Court will not take jurisdiction in such a suit, where it appears that the judgment of a State court has been perfected by levy or sale and distribution of the proceeds of the sale of a defendant's property among his lien creditors. (6.) That the court erred in permitting the plaintiff to give evidence as to the value of the property beyond the amount made out of it and paid to the bank. (7.) That the court erred in rejecting the offer of the defendants to prove by the debtor that he did not procure the execution to be issued or the seizure of the goods to be made.

I. Three of the errors assigned are addressed to the charge of the court, which was substantially as follows:

1. 'That every one is presumed to intend that which is the necessary and unavoidable consequence of his acts, and that the evidence introduced that the debtor signed and delivered to the defendants the judgment note payable one day after date, giving to them the right to enter the same of record and to issue execution thereon without delay, for a debt which was not then due, affords a strong ground to presume that the debtor intended to give the creditor a preference and that the creditor intended to obtain it, and that it is wholly immaterial whether the preference was voluntary or was given at the urgent solicitation of the creditor.'

Persons of sound mind and discretion must in general be understood to intend, in the ordinary transactions of life, that which is the necessary and unavoidable consequences of their acts, as they are supposed to know what the consequences of their acts will be in such transactions. Experience has shown the rule to be a sound one and one safe to be applied in criminal as well as civil cases. Exceptions to it undoubtedly may arise, as where the consequences likely to flow from the act are not matters of common knowledge, or where the act or the consequence flowing from it is attended by circumstances tending to rebut the ordinary probative force of the act or to exculpate the intent of the agent. Nor is it any valid objection to the charge that the rule as stated is not one of universal application, as the court is not able to perceive that it was too broadly stated for the case to which it was applied, and the court is the better satisfied with that conclusion in view of the fact that the record shows that witnesses were examined upon the same subject and that their testimony tended to prove the same issue.

Equally unfounded also is the objection to the closing paragraph of the instruction in question, as it is obviously immaterial whether the debtor gave the preference with or without solicitation from the creditor, if the evidence showed that he gave it as alleged in the declaration; for if he gave it the fact that he was urged to do so by the creditor would constitute no defence to the action.

2. 'That if the jury find that the quantity and value of the assets of the debtor had not materially diminished from the date when the judgment note was given till the day when he filed his petition in bankruptcy and the day when he was adjudged a bankrupt, they may find that he was insolvent when he gave the judgment note.'

Even taken separately, it would be impossible to hold that the circumstantial facts embodied in the instruction did not tend to prove the hypothesis assumed by the plaintiff, and it is well settled that the force and effect of evidence, whether direct or circumstantial, should be left to the jury; but much other evidence was given to prove the same issue, and it would be an unreasonable construction of the charge to suppose that the court in submitting that proposition to the jury intended to exclude from their consideration all the other evidence in the case which was applicable to the same issue, and it is clear that the instruction, when viewed in the light of the circumstances under which it was given, is entirely unobjectionable.

3. 'That the measure of damages is the value of the property seized and sold by virtue of the execution issued on the judgment obtained against the debtor.'

Instead of that, it is contended by the defendants that the amount realized by the defendants is conclusive as to the value of the property seized and sold; but the plaintiff was not a party to that proceeding, and the express provision of the Bankrupt Act is that the assignee may in such a case recover the property, or the value of it, from the person so receiving it or so to be benefited by it. Sold as the property was at a judicial sale it cannot be recovered in specie, and the only remedy of the assignee is for the value of it, and no doubt is entertained that the rule prescribed as the measure of damages by the Circuit Court is correct.

4. 'That the Circuit Court erred in refusing to charge the jury that inasmuch as the thirty-fifth section of the Bankrupt Act does not specify the giving of a warrant to confess judgment as a prohibited act, that no recovery in this case can be had under that section, and that the verdict must be for the defendant.'

Much discussion of the proposition embodied in that prayer cannot be necessary, as it is repugnant to the words of that section and to the repeated decisions of this court upon the same subject.

5. Complaint is also made that the court below erred in refusing to charge that the court would not take jurisdiction of such a case where the claim had passed in rem judicatam, and that the goods had been sold upon the execution issued upon the judgment, but it is too clear for argument that the proposition is inconsistent with the provisions of the Bankrupt Act and utterly opposed to the settled doctrines of this court, which is all that need be said upon the subject.

6. Evidence was given by the plaintiff to show the value of the goods seized and sold, and the defendants excepted to the ruling of the court in admitting that evidence, upon the ground that the amount realized by the sale of the property was the true measure of damages, but the court here is of a different opinion, for the reasons already given, which need not be repeated.

7. Burns, the debtor, was called and examined by the defendants as a witness, and they offered to prove by him that the entry of the judgment and the issuing of the execution were a surprise to and wholly unexpected by him, and that from the time he was first apprised of it he opposed the proceeding and endeavored to have the judgment opened.

Under the ruling of the court the defendants were allowed to prove all acts which the witness did in opposition to the enforcement of the judgment, but the court rejected the first part of the offer of proof, to wit, that the entry of the judgment and the issuing of the execution were a surprise to the debtor, and the defendants excepted to the ruling and now assign that ruling for error.

Well-founded doubts may arise whether even what the debtor did in opposition to the enforcement of the judgment was material to the issue between the parties, as the whole matter, when the debtor gave the note and warrant to confess judgment, passed entirely beyond his control. By his own voluntary act he empowered the defendants to enforce the payment of the amount whenever they pleased, in spite of any opposition he could make. Opposition, under such circumstances, being wholly unauthorized, and gratuitous and useless, it could not serve to unfold, explain, or qualify the antecedent act of giving the note and warrant to confess judgment, as he knew, when he executed and delivered the instrument to the defendants, that it gave them the irrevocable power to enter the judgment and create the lien on his property, and to sue out the execution and to seize and sell the property to pay the debt; but the evidence of what the debtor did in that behalf was admitted, and the ruling of the court not having been made the subject of an exception by either party, it is not necessary to express any decided opinion as to its admissibility.

Suppose the acts of the debtor in that regard were admissible, still it is quite clear that it was wholly immaterial whether the course pursued by the defendants in entering the judgment and issuing the execution was expected or unexpected by the debtor, as he had given them full power to do everything which they did do, whether he consented at the moment or not, and in spite of every opposition which he could make. Surprised or not the debtor must have known that the defendants, as against him, were plainly in the exercise of their legal rights as derived from him under the note and warrant to confess judgment. When he gave the instrument conferring that power he knew beyond peradventure that the defendants could enter the judgment for the amount of the note whenever they should see fit, and that the judgment when entered would or might become a lien on his property, and that it would secure to the creditor a preference over all his other creditors, even in opposition to any remonstrance or entreaty he might make to the contrary.

Such circumstances unexplained would certainly have some tendency to show that the debtor procured his property to be seized on the execution with a view to give a preference to the favored creditor, but it is not necessary further to define in this case the force and effect of such an instrument as evidence to support such a charge, as other evidence was introduced by the plaintiff to prove that issue, which is conclusively established by the verdict of the jury. Power to enter the judgment was expressly conferred by the warrant duly executed by the debtor, and the direct effect of the judgment was to give the defendants a lien or the means of effecting a lien upon the property of the debtor, and to authorize the defendants to sue out the execution and cause the property subject to the lien to be seized and sold to make the money to pay the judgment.

Viewed in the light of these suggestions, it is obvious that it was wholly immaterial whether the debtor was surprised or not at the consequences, as they had all flowed from his own voluntary act.

Several other questions were discussed at the argument, but inasmuch as they are not within the errors assigned in the record it is unnecessary to give them any separate examination.

DECREE AFFIRMED.


text: Talk:Clarion Bank v. Jones Assignee/Opinion of the Court


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Bailey v. Glover

APPEAL from the Circuit Court for the Southern District of Alabama.

Bailey, assignee in bankruptcy of Benjamin Glover, and appointed as such December 1st, 1869, filed a bill on the 20th of January, 1873 (three years and seven weeks, therefore, after the date of his appointment) against Elenora Glover, wife of the bankrupt, Hugh Weir, his father-in-law, and Nathaniel Glover, his son, to set aside certain conveyances.

The bill alleged that Glover, the bankrupt, owed Winston & Co. $13,580, and that judgment had been obtained against him for that debt; that Glover was a man of fortune-possessed of at least $50,000 in different kinds of property-and owed no debt but the one just mentioned; that being thus entirely solvent and able to pay that debt, but fraudulently intending to avoid its payment by applying for the benefit of and getting a discharge under the Bankrupt law, he previously to applying conveyed, without any or upon grossly inadequate considerations, all his estate to the defendants; and then with fraudulent intent filed a petition in voluntary bankruptcy, setting forth that he owed the debt to Winston & Co., that this was the only debt which he did owe, and that he had no property or effects whatever except such as the law exempted from execution.

The bill further alleged that on his petition as aforesaid he was, on the 11th of April, 1870, discharged under the Bankrupt Act; Winston & Co. proving their debt as creditors; and he, the complainant, being appointed assignee in the bankruptcy.

The bill further alleged that the bankrupt and his wife, son, and father-in-law-these being the already-named defendants in the case-kept secret their said fraudulent acts, and endeavored to conceal them from the knowledge both of the assignee and of the said Winston & Co., whereby both were prevented from obtaining any sufficient knowledge or information thereof until within the last two years, and that even up to the present time they had not been able to obtain full and particular information as to the fraudulent disposition made by the bankrupt of a large part of his property.

It also alleged that the surviving partner of Winston & Co., in December, 1871, filed a petition in the District Court against the bankrupt in order to have his discharge set aside for this fraud, but before process could be served on the bankrupt he died.

These were the material allegations of the bill, and if true they showed, of course, a very clear case of fraudulent conspiracy, between the bankrupt and his family connections, to defraud the only creditor named in his petition-a scheme of gross fraud, in short-concealed by the defendants from the knowledge of the assignee and from Winston & Co., against whom the fraud was perpetrated.

The defendants demurred to the bill, because the suit was not brought within two years from the appointment of the assignee, and their demurrer was sustained. This appeal was taken from the decree of the court dismissing the bill, and the sole question here was, whether on the case made by the bill this decision of the Circuit Court was right.

The second section of the Bankrupt Act of 1867, under which section the case arose, reads as follows:

'The Circuit Court shall have concurrent jurisdiction of all suits at law or in equity, brought by the assignee, against any person claiming an adverse interest; or by such person against the assignee touching the property of the bankrupt transferable to or vested in the assignee; but no suit at law or in equity shall in any case be maintainable by or against such assignee, or by or against any person claiming an adverse interest, touching the property or rights of property aforesaid, in any court whatsoever, unless the same shall be brought within two years from the time of the cause of action accrued for or against such assignee.'

Mr. P. Phillips, for the appellant:

The demurrer admits:

1st. That the defendants hold the property in fraud of the creditors.

2d. That they so concealed the fraud that the assignee only came to the knowledge of it within a year from filing the bill.

The question then is, whether the second section of the Bankrupt Act protects persons fraudulently obtaining property from the bankrupt, in the enjoyment of the fruits of their fraud, if they are able to conceal from the assignee the knowledge of their fraud for two years?

To answer such a proposition in the affirmative shocks one's moral sense, and if it is to prevail we must find in the words of the section instruction so explicit as to leave no room for construction. No such words exist there. We submit rather that the action does not accrue while the fraud is concealed.

Independently of this, the second section does not apply to the present proceeding. It refers to suits brought by the assignee 'against any person claiming an adverse interest.' The present fraudulent possessors of the bankrupt's property never made known their interest. The assignee by their concealment had no knowledge of their claim. The evident intention of the section was to apply the limitation when an adverse interest was asserted. In such a case it was only reasonable that a statute of limitation should exist. To apply it to an interest concealed, and of which the assignee could have no knowledge, would be unreasonable.

Mr. S. J. Cumming, contra:

The right of the complainant to bring this suit accrued on his appointment, and under the second section of the act he could bring it only within two years from the time the cause of action accrued. This bill was not filed until more than two years after the cause of action accrued; in fact, not until more than two years after the final discharge of the bankrupt. The eighth section of the Bankrupt Act of 1841 is similar to the second section of the act of 1867, now under consideration. On that section numerous decisions which would go to sustain the demurrer have been made.

The bill attempts to take the case out of the statute by alleging that the fraud was not discovered until within two years before the filing thereof. The answer to this is two-fold:

First. That the complainant does not, by the allegations of his bill, bring the case within the exception to the ordinary statute of limitations.

Second. That the statute is imperative, admitting of no exceptions as to any tribunal, and consequently sets aside the rule invoked as to bankruptcy cases under the act.

Mr. Justice MILLER delivered the opinion of the court.

title: Bailey v. Glover


text: Talk:Bailey v. Glover

title: Talk:Bailey v. Glover


text:
Bailey v. Glover/Opinion of the Court

Counsel for the appellant argues that the provision of the second section of the Bankrupt Act has no application to the present case because it is not shown that the defendants have set up or asserted any claim to the property now sought to be recovered adverse to that of the assignee. It is rather difficult to see exactly what is meant by this proposition. The suit is brought to be relieved from some supposed claim of right or interest in the property on the part of the defendants. If no such claim exists, it does not stand in the way of complainant, and he does not need the aid of a court of equity to set it aside. If it is intended to argue that until some one asserts in words that he claims a right to property transferred to the assignee by virtue of the act, which is adverse to the bankrupt, the statute does not begin to run though such person is in possession of the property, acting as owner, and admitting no other title to it, we think the construction of the proviso entirely too narrow.

This is a statute of limitation. It is precisely like other statutes of limitation and applies to all judicial contests between the assignee and other persons touching the property or rights of property of the bankrupt transferable to or vested in the assignee, where the interests are adverse and have so existed for more than two years from the time when the cause of action accrued, for or against the assignee. Such is almost the language in which the provision in expressed in section 5057 of the Revised Statutes.

It is obviously one of the purposes of the Bankrupt law, that there should be a speedy disposition of the bankrupt's assets. This is only second in importance to securing equality of distribution. The act is filled with provisions for quick and summary disposal of questions arising in the progress of the case, without regard to usual modes of trial attended by some necessary delay. Appeals in some instances must be taken within ten days; and provisions are made to facilitate sales of property, compromises of doubtful claims, and generally for the early discharge of the bankrupt and the speedy settlement of his estate. It is a wise policy, and if those who administer the law could be induced to act upon its spirit, would do much to make the statute more acceptable than it is. But instead of this the inferior courts are filled with suits by or against assignees, each of whom as soon as appointed retains an attorney, if property enough comes to his hands to pay one, and then instead of speedy sales, reasonable compromises, and efforts to adjust differences, the estate is wasted in profitless litigation, and the fees of the officers who execute the law.

To prevent this as much as possible, Congress has said to the assignee, you shall commence no suit two years after the cause of action has accrued to you, nor shall you be harassed by suits when the cause of action has accrued more than two years against you. Within that time the estate ought to be nearly settled up and your functions discharged, and we close the door to all litigation not commenced before it has elapsed.

But the appellant relies in this court upon another proposition which has been very often applied by the courts under proper circumstances, in mitigation of the strict letter of general statutes of limitation, namely, that when the object of the suit is to obtain relief against a fraud, the bar of the statute does not commence to run until the fraud is discovered or becomes known to the party injured by it.

This proposition has been incorporated in different forms in the statutes of many of the States, and presented to the courts under several aspects where there were no such statutes. And while there is unanimity in regard to some of these aspects there is not in regard to others.

In suits in equity where relief is sought on the ground of fraud, the authorities are without conflict in support of the doctrine that where the ignorance of the fraud has been produced by affirmative acts of the guilty party in concealing the facts from the other, the statute will not bar relief provided suit is brought within proper time after the discovery of the fraud.

We also think that in suits in equity the decided weight of authority is in favor of the proposition that where the party injured by the fraud remains in ignorance of it without any fault or want of diligence or care on his part, the bar of the statute does not begin to run until the fraud is discovered, though there be no special circumstances or efforts on the part of the party committing the fraud to conceal it from the knowledge of the other party.

On the question as it arises in actions at law there is in this country a very decided conflict of authority. Many of the courts hold that the rule is sustained in courts of equity only on the ground that these courts are not bound by the mere force of the statute as courts of common law are, but only as they have adopted its principle as expressing their own rule of applying the doctrine of laches in analogous cases. They, therefore, make concealed fraud an exception on purely equitable principles.

On the other hand, the English courts and the courts of Connecticut, Massachusetts, Pennsylvania, and others of great respectability, hold that the doctrine is equally applicable to cases at law.

As the case before us is a suit in equity, and as the bill contains a distinct allegation that the defendants kept secret and concealed from the parties interested the fraud which is sought to be redressed, we might rest this case on what we have said is the undisputed doctrine of the courts of equity, but for the peculiar language of the statute we are considering. We cannot say in regard to this act of limitations that courts of equity are not bound by its terms, for its very words are that 'no suit at law or in equity shall in any case be maintained. . . unless brought within two years,' &c. It is quite clear that this statute must be held to apply equally by its own force to courts of equity and to courts of law, and if there be an exception to the universality of its language it must be one which applies under the same state of facts to suits at law as well as to suits in equity.

But we are of opinion, as already stated, that the weight of judicial authority, both in this country and in England, is in favor of the application of the rule to suits at law as well as in equity. And we are also of opinion that this is founded in a sound and philosophical view of the principles of the statutes of limitation. They were enacted to prevent frauds; to prevent parties from asserting rights after the lapse of time had destroyed or impaired the evidence which would show that such rights never existed, or had been satisfied, transferred, or extinguished, if they ever did exist. To hold that by concealing a fraud, or by committing a fraud in a manner that it concealed itself until such time as the party committing the fraud could plead the statute of limitations to protect it, is to make the law which was designed to prevent fraud the means by which it is made sucessful and secure. And we see no reason why this principle should not be as applicable to suits tried on the common-law side of the court's calendar as to those on the equity side.

While we might follow the construction of the State courts in this matter, where those statutes governed the case, in construing this statute of limitation passed by the Congress of the United States as part of the law of bankruptcy, we hold that when there has been no negligence or laches on the part of a plaintiff in coming to the knowledge of the fraud which is the foundation of the suit, and when the fraud has been concealed, or is of such character as to conceal itself, the statute does not begin to run until the fraud is discovered by, or becomes known to, the party suing, or those in privity with him.

The result of this proposition is that the decree of the Circuit Court sustaining the demurrer and dismissing the bill must be REVERSED, with directions for further proceedings,

IN CONFORMITY TO THIS OPINION.

title: Bailey v. Glover/Opinion of the Court


text: Talk:Bailey v. Glover/Opinion of the Court


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Mitchell v. United States (88 U.S. 350)

APPEAL from the Court of Claims. That court found the following facts:

At the beginning of the late rebellion, Mitchell, the claimant and appellant, lived in Louisville, Kentucky. He was engaged in business there. In July, 1861, and after the 17th of that month, he procured from the proper military authority of the United States in Kentucky a pass permitting him to go through the army lines into the insurrectionary territory. He thereupon went into the insurgent States and remained there until the latter part of the year 1864. He then returned to Louisville. While in the Confederate States he transacted business, collected debts, and purchased from different parties 724 bales of cotton. He took possession of the cotton and stored it in Savannah. Upon the capture of that place by General Sherman the cotton was seized by the military authorities. It was subsequently sold by the agents of the government. The proceeds, amounting to the sum of $128,692.22, were now in the treasury. Mitchell bought the cotton in November and December, 1864. He remained within the insurrectionary lines from July, 1861, until after the capture of Savannah by the arms of the United States.

The Court of Claims was equally divided in opinion as to whether the claim of Mitchell could be sustained, and accordingly dismissed his petition. Mitchell then removed the case to this court by appeal, assigning for error that on the facts found the Court of Claims should not have dismissed the petition, but should have decided that he acquired a valid title to the cotton.

Mr. J. B. Harlan, for the appellant; Mr. G. H. Williams, Attorney-General, and Mr. John Goforth, Assistant Attorney-General, contra.

Mr. Justice SWAYNE, having stated the case, delivered the opinion of the court, as follows:

title: Mitchell v. United States (88 U.S. 350)


text: Talk:Mitchell v. United States (88 U.S. 350)


text:
Mitchell v. United States (88 U.S. 350)/Opinion of the Court

At the time when Mitchell passed within the rebel lines the war between the loyal and the disloyal States was flagrant. It speedily assumed the largest proportions. Important belligerent rights were conceded by the United States to the insurgents. Their soldiers when captured were treated as prisoners of war, and were exchanged and not held for treason. Their vessels when captured were dealt with by our prize courts. Their ports were blockaded and the blockades proclaimed to neutral nations. Property taken at sea, belonging to persons domiciled in the insurgent States, was uniformly held to be confiscable as enemy property. All these things were done as if the war had been a public one with a foreign nation. The laws of war were applied in like manner to intercourse on land between the inhabitants of the loyal and the disloyal States. It was adjudged that all contracts of the inhabitants of the former with the inhabitants of the latter were illegal and void. It was held that they conferred no rights which could be recognized. Such is the law of nations, flagrante bello, as administered by courts of justice.

While such was the law as to dealings between the inhabitants of the respective territories, contracts between the inhabitants of the rebel States not in aid of the rebellion were as valid as those between themselves of the inhabitants of the loyal States. Hence this case turns upon the point whether the appellant was domiciled in the Confederate States when he bought the cotton in question.

When he took his departure for the South he lived and was in business at Louisville. He returned thither when Savannah was captured and his cotton was seized. It is to the intervening tract of time we must look for the means of solving the question before us. There is nothing in the record which tends to show that when he left Louisville he did not intend to return, or that while in the South he had any purpose to remain, or that when he returned to Louisville he had any intent other than to live there as he had done before his departure. Domicile has been thus defined: 'A residence at a particular place accompanied with positive or presumptive proof of an intention to remain there for an unlimited time.' This definition is approved by Phillimore in his work on the subject. By the term domicile, in its ordinary acceptation, is meant the place where a person lives and has his home. The place where a person lives is taken to be his domicile until facts adduced establish the contrary.

The proof of the domicile of the claimant at Louisville is sufficient. There is no controversy between the parties on that proposition. We need not, therefore, further consider the subject.

A domicile once acquired is presumed to continue until it is shown to have been changed. Where a change of domicile is alleged the burden of proving it rests upon the person making the allegation. To constitute the new domicile two things are indispensable: First, residence in the new locality; and, second, the intention to remain there. The change cannot be made except facto et animo. Both are alike necessary. Either without the other is insufficient. Mere absence from a fixed home, however long continued, cannot work the change. There must be the animus to change the prior domicile for another. Until the new one is acquired, the old one remains. These principles are axiomatic in the law upon the subject.

When the claimant left Louisville it would have been illegal to take up his abode in the territory whither he was going. Such a purpose is not to be presumed. The presumption is the other way. To be established it must be proved. Among the circumstances usually relied upon to establish the animus manendi are: Declarations of the party; the exercise of political rights; the payment of personal taxes; a house of residence, and a place of business. All these indicia are wanting in the case of the claimant.

The rules of law applied to the affirmative facts, without the aid of the negative considerations to which we have adverted, are conclusive against him. His purchase of the cotton involved the same legal consequences as if it had been made by an agent whom he sent to make it.

JUDGMENT AFFIRMED.


text: Talk:Mitchell v. United States (88 U.S. 350)/Opinion of the Court


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Hotchkiss v. National Banks

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

This was a suit to compel the defendants to surrender to the complainant three coupon bonds of the Milwaukee and St. Paul Railway Company, each for $1000, of which he professed to be owner, and which he alleged were received by the defendants in bad faith, with notice of his rights. The instruments were dated May 6th, 1863; by each of them the company acknowledges its indebtedness to certain persons named, or bearer, in the sum designated, and promises to pay the amount to the bearer on the 1st of January, 1893, at the office of the company in the city of New York, with semi-annual interest at the rate of seven per cent. per annum, on the presentation and surrender of the coupons annexed as they severally become due, with a provision that in case of non-payment of interest for six months the whole principal of the bond shall become due and payable.

Immediately following this acknowledgment of the indebtedness of the company and its promise of payment, there was in each of these instruments a further agreement of the company to make what is termed 'the scrip preferred stock,' attached to the bond, full-paid stock at any time within ten days after any dividend shall have been declared and become payable on such preferred stock, upon surrender, in the city of New York, of the bond and the unmatured interest warrants.

The several instruments also stated that the bonds were parts of a series of bonds issued by the company, amounting to $2,200,000, and that upon the acquisition of certain other railroads the issue of bonds might be increased in certain designated amounts; that the bonds were executed and delivered in conformity with the laws of Wisconsin, the articles of association of the company, the vote of the stockholders, and resolution of the board of directors; and that the bearer of each bond was entitled to the security derived from a mortgage of the property and franchises of the company, executed to certain designated trustees, and to the benefits to be derived from a sinking fund, established by the mortgage, of all such sums of money as are received from the sales of lands granted to the company by the United States or by the State of Wisconsin.

To each of these bonds there was originally attached by a pin the certificate of scrip preferred stock which is referred to in the body of the instrument. This certificate was to the effect that the complainant was entitled to ten shares of the capital stock of the company, designated as 'scrip preferred stock;' and that upon the surrender of the certificate and accompanying bond, and all unmatured coupons thereon, at any time within ten days after any dividends should have been declared and become payable on the full stock of the preferred stocks of the company, the complainant should be entitled to receive ten shares of such full-paid preferred stock, and that this scrip preferred stock was only transferable on the books of the company at their office in the city of New York, in person or by attorney, on the surrender of the certificate.

In November, 1868, these bonds, with coupons and certificates attached, belonged to the complainant, and during that month were stolen from a bank in Bridgeport, Connecticut, together with a large amount of other property there on deposit. They were received in January and February, 1869, by the defendants, banking institutions in the city of New York, as collateral security for notes discounted by them, and were now held as such security for those notes, or new notes given in renewal of them, and they were received without actual notice of any defect in the holders' title. At that time the certificates of scrip preferred stock, originally pinned to the bonds, were detached from them.

And the questions for determination were, whether the agreement in the instruments as to the scrip preferred stock affected their negotiability, and whether the absence of the certificates attached was a circumstance sufficient to put the banks upon inquiry as to the title of the holder.

Mr. F. N. Bangs, for the appellant; Mr. J. S. Woodward, for the Tradesmen's National Bank, one of the appellees; and Mr. Henry N. Beach, for the National Shoe and Leather Bank of the City of New York, another.

title: Hotchkiss v. National Banks


text: Talk:Hotchkiss v. National Banks

title: Talk:Hotchkiss v. National Banks


text:
Hotchkiss v. National Banks/Opinion of the Court

Mr. Justice FIELD, having stated the case, delivered the opinion of the court, as follows: The character and form of the instruments which are the subject of controversy in the present suit, would seem to furnish an answer to the questions that are raised before us. The agreement respecting the scrip preferred stock is entirely independent of the pecuniary obligation contained in the instrument. The latter recites an indebtedness in a specific sum, and promises its unconditional payment to bearer at a specified time. It leaves nothing optional with the company. Standing by itself it has all the elements and essential qualities of a negotiable instrument. The special agreement as to the scrip preferred stock in no degree changes the duty of the company with respect either to the principal or interest stipulated. It confers a privilege upon the holder of the bond, upon its surrender and the surrender of the certificate attached, of obtaining full preferred stock. His interest in and right to the full discharge of the money obligation is in no way dependent upon the possession or exercise of this privilege.

Whether the privilege was of any value at the time the bonds were received by the defendants we are not informed, nor in determining the negotiability of the bonds is the value of the privilege a circumstance of any importance. Its value can in no way affect the negotiable character of the instrument. An agreement confessedly worthless, providing that upon the surrender of the bonds the holder should receive, instead of full paid-up stock in the railway company, stock in other companies of doubtful solvency, would have had the same effect upon the character of the instrument.

In Hodges v. Shuler, which was decided by the Court of Appeals of New York, we have an adjudication upon a similar question. There the action was brought upon a promissory note of the Rutland and Burlington Railway Company, by which the company promised, four years after date, to pay certain parties in Boston one thousand dollars, with interest thereon semi-annually, as per interest warrants attached, as the same became due; 'or, upon the surrender of this note, together with the interest warrants not due, to the treasurer, at any time until six months of its maturity, he shall issue to the holders thereof ten shares in the capital stock in said company in exchange therefor, in which case interest shall be paid to the date to which a dividend of profits shall have been previously declared, the holder not being entitled to both interest and accruing profits during the same period.'

It was contended that the instrument was not in terms or legal effect a negotiable promissory note, but a mere agreement, and that the indorsement of it operated only as a mere transfer, and not as an engagement to fulfil the contract of the company in case of its default. But the Court of Appeals held otherwise. 'The possibility seems to have been contemplated,' says the court, 'that the owner of the note might, before its maturity, surrender it in exchange for stock, thus cancelling it and its money promise, but that promise was nevertheless absolute and unconditional, and was as lasting as the note itself. In no event could the holder require money and stock. It was only upon a surrender of the note that he was to receive stock, and the money payment did not mature until six months after the holder's right to exchange the note for stock had expired. We are of opinion that the instrument wants none of the essential requirements of a negotiable promissory note. It was an absolute and unconditional engagement to pay money on a fixed day, and although an election was given to the promisees, upon a surrender of the instrument six months before its maturity, to exchange it for stock, this did not alter its character or make the promise in the alternative in the sense in which that word is used in respect to promises to pay.'

In Welch v. Sage, the effect of the certificate attached to the bonds issued by the Milwaukee and St. Paul Railway Company, identical with those in this case, was considered by the same Court of Appeals, and the court there held that the certificate constituted no part of the bond; that the latter was entire and perfect without it, and that the admission of the debt and the promise to pay were in no degree qualified by it.

The absence of the certificates, at the time the bonds were received by the defendants, was not of itself a circumstance sufficient to put the defendants upon inquiry as to the title of the holder. There is no evidence in the case, as already observed, that the privilege which the certificates conferred was of any value; and if it had value no obligation rested upon the holder to preserve the certificates. He was at liberty to abandon the privilege they conferred and rely solely upon the absolute obligation of the company to pay the amount stipulated. The absence of the certificates when the bonds were offered to the defendants amounted to little if anything more in legal effect than a statement by the holder that in his judgment they added nothing to the value of the bonds. In the case of Welch v. Sage, already cited, it was held that the absence of the certificate from the bond when taken by the purchaser would not of itself establish the fact that the purchaser was guilty of fraud or bad faith, although it would be a circumstance of some weight in connection with other evidence.

The law is well settled that a party who takes negotiable paper before due for a valuable consideration, without knowledge of any defect of title, in good faith, can hold it against all the world. A suspicion that there is a defect of title in the holder, or a knowledge of circumstances that might excite such suspicion in the mind of a cautions person, or even gross negligence at the time, will not defeat the title of the purchaser. That result can be produced only by bad faith, which implies guilty knowledge or wilful ignorance, and the burden of proof lies on the assailant of the title. It was so expressly held by this court in Murray v. Lardner, where Mr. Justice Swayne examined the leading authorities on the subject and gave the conclusion we have stated.

In the present case it is not pretended that the defendants, when they took the bonds in controversy, had notice of any circumstances outside of the instruments themselves, and the absence of the certificates referred to in them, to throw doubt upon the title of the holder.

We see no error in the rulings of the court below, and its judgment is, therefore,

AFFIRMED.


text: Talk:Hotchkiss v. National Banks/Opinion of the Court