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Brooks v. Martin/Opinion of the Court

MARTIN filed a bill in equity in the Federal Court of Wisconsin to set aside a contract of sale which he had made to Brooks of his interest in a partnership venture, and for an account and division of the profits; the ground of the prayer being his own alleged embarrassed condition at the time of the sale; his ignorance of the partnership business; fraud on the part of the defendant, Brooks; concealment by Brooks of what he knew; misrepresentation in what he professed to tell; and want of consideration proportioned to the real value of the interest which the complainant had in the concern. The answer admitted the purchase by Brooks; but denied the fraud. The court gave the relief prayed; and from its decree herein an appeal, the present suit, came here.

The case, as proved by the evidence, and as shown and assumed by this court after a very careful examination of an immense mass of testimony,-twelve hundred pages closely printed,-set forth in part in the opinion, but, as involving very voluminously controverted issues of fact, not necessary, nor indeed possible, to be presented here, was in substance this.

On the 11th February, 1847, the United States, being then at war with Mexico, Congress passed a law by which warrants were directed to be issued to soldiers for a certain quantity of land each; but in order to protect the soldier entitled to the warrant against the rapacity of land brokers and others who would profit of his improvidence, the statute provided, by a ninth section, that any sale or contract going to affect the title or claim to any such bounty made prior to the issue of such warrant, should be 'null and void to all intents and purposes whatsoever.' Just after the passage of this statute, that is to say, in June, 1847, the complainant, Martin (who was a banker in New Orleans), Brooks, the defendant, and a certain Field, entered into a partnership at New Orleans; the ostensible object of the firm being 'the purchase and sale of bounty land warrants that may have been or may be issued under the law of Congress,' &c. The purchases and sales were to be conducted by Brooks and Field, and the money was to be furnished by Martin. Brooks was the brother-in-law of Martin, and had been a clerk in his banking-house. Field was a stranger. It was, therefore, agreed that Brooks should, in the actual management of affairs, represent Martin, and have full and exclusive control of the business; an agreement, of course, by which he obtained a preponderating influence in the management of the partnership over Field. The bill, indeed, alleged that Brooks had a power of attorney from Martin, authorizing him, on all occasions, to represent him in the partnership business. This fact was denied in the answer; but the answer admitted that Brooks was authorized by Martin to control the business. Martin advanced, in cash, over $57,000; and large purchases having been made of soldiers' claims, the parties closed their operations in New Orleans, where little was done after a few months in the way of purchasing warrants. Brooks then came to Washington to attend to the issue of warrants. Field, with two brothers of his, went to Wisconsin to locate the warrants and sell the lands. Martin still remained in New Orleans, carrying on his business of banker. From the time that Brooks and Field left New Orleans, the management of the entire business fell, apparently, under the direction of Brooks. None of it was conducted in New Orleans, nor, except five or six, which Brooks bought at the suggestion of Martin, were any further warrants bought there. The accounts were kept in Wisconsin, two thousand miles from where Martin was, and who had no opportunity of hearing anything about the partnership except as it was communicated to him by Brooks or Field, or one of the brothers Field, who were employed as clerks or agents in the business. No reports of the business were made to Martin; and, as the testimony showed, Brooks and Field managed it entirely without consulting him, irrespectively of his interest. The firm was known indifferently as Brooks & Field, and as Brooks, Field & Co.

In the winter of 1847-8, Martin failed in business, and his health, including specially, it seemed, his nervous condition, became considerably prostrated. During the winter just named, and when much embarrassed and absorbed about his business, he applied for information to Brooks, who was then in New Orleans, and who gave him a very discouraging account of everything; one, the court assumed, which might naturally make Martin 'glad to escape with a few thousand dollars which it owed him as a creditor;' an account which the court considered that it was impossible to regard as true.

In June, 1848, Martin, at the invitation of Brooks, went to Pittsburg, in Pennsylvania, to meet Brooks, who then and there, on the 28th June, 1848, bought out his interest in the partnership. Martin, at this time, had never been in the West, and, in fact, knew little or nothing as to the particulars of what had been done there. There was no evidence, indeed, except the answer of the defendant, which was discredited by facts, that Martin ever had a remote conception of the condition of the business. On the contrary, there were letters in the record begging for statements on that subject.

On the other hand, when Brooks and Martin met in Pittsburg, Brooks had just come from Wisconsin, where he saw Field and his brothers, and where he had the partnership books for examination, and spent several days in examining them. That he knew the real condition of the concern, and was fully and minutely informed as to every item of its business, was considered by the court as 'beyond dispute.'

It appeared, in addition, by letters from Brooks to one George Field, a brother of Field, the partner, written before the sale was made, that Martin had directed that all remittances should be made to him at Washington; showing by allusions in them to a remittance which George Field had proposed to make to Martin, and to certain friends and correspondents of his named Lake & Co., in New York, that Brooks specifically, and apparently with an interested motive, desired that no remittance should thus be made. In one letter, written June 20th, 1848, that is to say, eight days before the sale, and after he had invited and was expecting Martin to meet him at Pittsburg in contemplation of the purchase which he there made, Brooks says:

'I can hardly express to you how much I feel obliged to you for the soundness of the judgment that dictated to you to remit directly to me, rather than to New York or any other place, without my direction. I had been rendered somewhat unamiable the day before by a letter from George Field, in which he suggested the propriety of remitting directly to New York. I feared he had so directed you. ''It would have greatly embarrassed my operation. I want all advice'', as well as all remittances, to pass through myself. If Mr. Lake OR ANY ONE ELSE ask information in relation to our matters, refer him to me, advising me of the circumstance.'

The partnership at this date,-as the court, after a computation made by it on an analysis of the evidence, showed and assumed,-presented clear cash profits, $15,

It had, also, as the court showed, and assumed it to be proved, 45,000 acres of land, which, estimated at Government rates,-a low rate of estimate in view of the fact that they had been carefully selected by Field and his two brothers, one of whom had been sent to examine the land personally before the warrants were located, and who was early in the field and made judicious selections,-gave about 57,

of which Martin's share, for the partnership, by its terms, was not an equal one, came to $30,000.

The consideration of Brooks's purchase was an agreement by him to pay all debts of the partnership, about $45,000, and a payment, as he alleged, of $3000 to Martin, though, as Martin asserted, a payment of about one-half a balance due him on another account; which balance, it was evident, that Brooks was bound for. Brooks gave no security for his performance of his agreement to pay these debts.

At the time when this bill was filed, to wit, on the 3d of August, 1857, which was apparently so soon as Martin had examined into the facts of the case, ''all the claims purchased by the firm had been turned into land warrants, and the warrants had been sold or located. Where the purchase had been made prior to the date of the warrant granted, assignments were subsequently made by the soldier. A portion of the lands thus located had been sold, part for cash, partly on mortgage, and the assets of the partnership consisted now almost wholly of cash securities or of land''.

Besides a full denial of the offensive allegations, as made by the bill, the defendant set up as follows:That notwithstanding the statement in the articles of partnership that the business of the firm related to the purchase and sale of bounty land warrants and scrip, such was not the true purpose of its formation, nor the business which it really transacted; but that the partners intended, and really did engage in buying up the claims of the soldiers, who were then returning from Mexico by way of New Orleans, for bounty land or scrip, long before any scrip or land warrants were issued by the Government [a fact of which there appeared, indeed, by the evidence, to be no great doubt]; that this was an illegal traffic, forbidden by the act of Congress of February, 1847, above referred to, and against public policy; that, accordingly, the plaintiff could have no relief in a court of equity against his copartner, even if it were made to appear that the latter realized a large sum out of the venture, and defrauded the former of his share of the amount so realized.

2. That no such fiduciary relation existed between the parties, from the mere fact of partnership, or from anything shown in the case, as entitled the complainant to relief.

Mr. Howe for the appellant, Brooks.

1. It is quite apparent what was the true purpose of this partnership. However that purpose was veiled,-and the veil was but a transparent one,-the enterprise was set on foot to do exactly that thing which the sixth section of the act of Congress declared no one should do; to do that which the act makes 'null and void to all intents whatsoever.' That the traffic was actually one in claims is, in effect, confessed. The evidence on that point is conclusive. The suit, then, is brought in violation of a maxim of the very horn-books, Ex turpi caus a non oritur actio. In Russell v. Wheeler, the Supreme Court of Massachusetts say: 'No principle of law is better settled, than that no action will lie upon a contract made in violation of a statute, or of a principle of the common law.' In Shiffner v. Gordon, Lord Ellenborough laid it down as a settled rule, 'that when a contract which is illegal remains to be executed, the court will not assist either party in an action to recover for the non-execution of it.' In the New York case of Beldin v. Pitkin, Thompson, J., says: 'It is a first principle, and not to be touched, that a contract, in order to be binding, must be lawful.' Other cases, English and American, show how deep and firm are the foundations of the rule, and how far the rule itself will reach and ramify.

2. Partners, in a case like this, do not stand to each other in the relations of trustee and cestui que trust. All the partners were business men. Martin's business was that of a banker, a pursuit requiring great business intelligence and sharpness. Partners do not rely on each other as the ward relies on its guardian, or as the cestui que trust of any kind on her trustee. On the contrary, they consult as equals in capacity, caution, and ability, to take care, each, of himself; and guard themselves as often, one against the other, as all do, against third parties.

3. As respects facts, it is vain to say that Martin's mind was enfeebled, though his body may have been. This, indeed, is not pretended. He was competent, perfectly competent, to attend to business. The consideration was as much as the case called for. The concern was yet on the tide of experiment; a tide which was as likely to ebb as to flow, and which, in its ebb, might leave the shore strewed with wreck. Uncertainty and risk,-risks, civil and, perhaps, criminal,-belonged, as yet, to the whole enterprise. Without any doubt at all, the sales of their warrants by the soldiers, before the issue of them, were void to 'all intents.' Being void to 'all intents,' the soldiers could come forward at any time, and successfully claim the land as their own. Here is a fact to be kept constantly in view. What profits the concern would ultimately give was a matter which, like the 'means' of Signor Antonio in the Merchant of Venice, was still 'in supposition.' It was a worse case still; for the outlays were both certain and large; and what penalties might attend the violation of the statute, as we have said, remained to be seen.

Mr. Carpenter, contra.

1. We do not admit that the parties meant to violate the act of Congress. The act, moreover, did not declare it criminal to buy bounty rights. This case is analogous to cases arising under the Statute of Frauds, which declares contracts of certain kinds void, unless in writing. The contract, though voidable, has never been regarded as criminal.

But quite independently of this, the bill relates to transactions wholly subsequent to and independent of the purchase of the bounty rights. The case falls within the English precedent of Tenant v. Eliott. In that case, the defendant, a broker, effected an insurance for the plaintiff, which was illegal, being in violation of the navigation laws; but on a loss happening, the underwriters paid the money to the broker, who refused to pay it over to the insured, setting up the illegality upon which an action for money had and received was brought. The plaintiff recovered, on the ground that the implied promise of the defendant, arising out of the receipt of the money for the plaintiff, was a new contract, not affected by the illegality of the original transaction. The same principle was applied and enforced in Farmer v. Russell, and in Thomson v. Thomson, by Sir William Grant, as great a judge as ever sat in Chancery.

2. The general position taken on the other side, as to the relations of partners to each other, may be true in some cases. It is not true in all, nor true here. Brooks was not the partner, but the agent of Martin. He was his brother-in-law, and had been his clerk. He had a special knowledge of the condition of the business, which Martin had not. It matters not that the parties did not stand in the technical relation of trustee and cestui que trust. That is not essential in any case. The principle is a general one, and it applies to 'all cases where confidence is reposed, to agents, attorneys, solicitors, guardians,' &c. In all such cases, 'the transaction is scanned with the most searching and questioning suspicion.' The party must show that 'he took no advantage whatever of his situation; that he gave to his cestui que trust all the information which he possessed or could obtain upon the subject; that he advised him as he would have done in relation to a third party offering to become a purchaser, and that the price was fair and adequate.' And the onus is on the party purchasing.

3. How can these principles be applied, and the purchase stand? Martin relied wholly on Brooks, who systematically prevented his getting information. The letter of Brooks, June 20, 1848, to George Field, proves this fact, and proves, also, a fraudulent design. The purpose of this letter cannot be concealed. Neither was there any consideration. Brooks, indeed, agreed to pay the partnership debts; but, in the first place, the debts were far more than provided for by the vast profits; and, second, Brooks gave no security to pay them or save Martin harmless, if they had not been. As a partner, he was bound to pay them at any rate. So he gave nothing. Neither did Martin get anything, for he was bankrupt already; and the agreement to discharge the debts was of no value. Even if it had been, the consideration was wholly inadequate in view of the large profits made.

Mr. Justice MILLER, stating the facts of the case, as he proceeded, and showing that its different parts were proved by the testimony, delivered the opinion of the court to the following effect:

We think that, in point of fact, the allegation of the answer,-thatthe traffic in which this firm engaged was the buying up of soldiers' claims, before any scrip or land warrants were issued, and not the purchase and sale of bounty land warrants and scrip,-is true. We have as little doubt that the traffic was illegal. Undoubtedly, the main object of the ninth section of the act of February 11, 1847, was to protect the soldier against improvident contracts of the precise character of those developed in this record. It was a wise and humane policy, and no court could hesitate to enforce it, in a case which called for its application. If a soldier, who had thus sold his claim to Brooks, Field & Co., had refused to perform his contract, or to do any act which was necessary to give them the full benefit of their purchase, no court would have compelled him to do it, or given them any relief against him. And if they had, by any such means, got possession of the land warrant or scrip of a soldier, no court would have refused, in a proper suit, to compel them to deliver up such land warrant or scrip to the soldier. Or if Brooks, after the signing of these articles of partnership, had said to Martin, 'I refuse to proceed with this partnership, because the purpose of it is illegal,' Martin would have been entirely without remedy. If, on the other hand, he had said to Martin, 'I have bought one hundred soldiers' claims, for which I have agreed to pay a certain sum, which I require you to advance according to your agreement,' Martin might have refused to comply with such a demand, and no court would have given either of his partners any remedy for such a refusal. To this extent go the cases of Russell v. Wheeler, Sheffner v. Gordon, Belding v. Pitkin, and the others cited by counsel for appellant, and no further.

All the cases here supposed, however, differ materially from the one now before us. When the bill in the present case was filed, all the claims of soldiers thus illegally purchased by the partnership, with money advanced by complainant, had been converted into land warrants, and all the warrants had been sold or located. The original defect in the purchase had, in many cases, been cured by the assignment of the warrant by the soldier after its issue. A large proportion of the lands so located had also been sold, and the money paid for some of it, and notes and mortgages given for the remainder. There were then in the hands of defendant, lands, money, notes, and mortgages, the results of the partnership business, the original capital for which plaintiff had advanced. It is to have an account of these funds, and a division of these proceeds, that this bill is filed. Does it lie in the mouth of the partner who has, by fraudulent means, obtained possession and control of all these funds, to refuse to do equity to his other partners, because of the wrong originally done or intended to the soldier? It is difficult to perceive how the statute, enacted for the benefit of the soldier, is to be rendered any more effective by leaving all this in the hands of Brooks, instead of requiring him to execute justice as between himself and his partner; or what rule of public morals will be weakened by compelling him to do so? The title to the lands is not rendered void by the statute. It interposes no obstacle to the collection of the notes and mortgages. The transactions which were illegal have become accomplished facts, and cannot be affected by any action of the court in this case.

In Sharp v. Taylor, a case in the English Chancery, the plaintiff and defendant were partners in a vessel, which, being American built, could not be registered in Great Britain, according to the navigation laws of that kingdom. Nor could the owners, who were British subjects, residing in England, have her registered in the United States. They undertook to violate the laws of both countries by having her falsely registered in Charleston, South Carolina, as owned by a citizen and resident of that place. In this condition, she made several trips, which were profitable; and the defendant, colluding with Robertson, the American agent in whose name the vessel had been registered, refused to account with plaintiff for his share of the profits, or to acknowledge his interest in the ship. When plaintiff brought his suit in Chancery in England, the defendant set up the illegality of the traffic, and the violation of the navigation laws of both governments, as precluding the court from granting any relief, on the same principle that is contended for by the defendant in the present case. It will be at once perceived that the principle is the same in both cases, and that the analogy in the facts is so close that any rule on the subject which should govern the one ought also to control the other. The case was decided by Lord Chancellor Cottenham and from his opinion we make the following extracts: 'The answer to the objection appears to me to be this, that the plaintiff does not ask to enforce any agreement adverse to the provisions of the act of Parliament. He is not seeking compensation and payment for an illegal voyage. That matter was disposed of when Taylor' (the defendant) 'received the money; and plaintiff is now only seeking payment for his share of the realized profits. . . .. As between these two, can this supposed evasion of the law be set up as a defence by one against the otherwise clear title of the other? Can one of two partners possess himself of the property of the firm, and be permitted to retain it, if he can show that, in realizing it, some provision or some act of Parliament has been violated or neglected? . . .. The answer to this, as to the former case, will be, that the transaction alleged to be illegal is completed and closed, and will not be in any manner affected by what the court is asked to do between the parties. . . .. The difference between enforcing illegal contracts, and asserting title to money which has arisen from them, is distinctly taken in Tenant v. Elliot, and Farmer v. Russell, and recognized and approved by Sir William Grant, in Thomson v. Thomson.'

These cases are all reviewed in the opinion of this court in the case of McBlair v. Gibbes, and the language here quoted from the principal case is there referred to with approbation. We are quite satisfied that the doctrine thus announced is sound, and that it is directly applicable to the case before us.

The plaintiff alleges in his bill, that on the 28th day of June, 1848, he sold his interest in the partnership business to the defendant Brooks; that in making the sale he was overreached by the fraud of Brooks, who, by concealment of what he knew, and false representations in what he professed to tell, took advantage of the embarrassed financial condition of plaintiff, and his ignorance of the partnership business, and procured from him the sale for a consideration totally disproportioned to the real value of his interest in the concern. The defendant admits the purchase of plaintiff's interest, but denies the fraud, and insists that the transaction was in all respects fair and honest. The issue thus generally stated here, is the one mainly contested in the case; and so contested that a record of a thousand printed pages is mostly filled with testimony on this subject.

If the parties are to be regarded in this transaction as holding towards each other no different relations from those which ordinarily attend buyer and seller; and as, therefore, under no special obligation to deal conscientiously with each other, we are satisfied that no such fraud is proven as would justify a court in setting aside an executed contract. But there are relations of trust and confidence which one man may occupy towards another, either personally, or in regard to the particular property which is the subject of the contract, which impose upon him a special and peculiar obligation to deal with the other person towards whom he stands so related, with a candor, a fairness, and a refusal to avail himself of any advantage of superior information, or other favorable circumstance, not required by courts of justice in the usual business transactions of life. It is contended that the relation of Brooks towards Martin was of this character; and before we can dispose of the question of fraud, it is necessary to determine whether the claim thus set up is well founded; and if it is, what are the principles upon which courts of equity determine the validity of contracts between parties so situated. It is argued that the partnership existing between the parties constitutes of itself a relation which calls for the application of the principles which we have alluded to; and Judge Story, in recapitulating the confidential relations to which they are appropriate, mentions partner and partner as one of them. It is not necessary to decide here whether, in all cases, a sale by one partner to another of his interest in the partnership concern, will be scrutinized with the same closeness which is applied to fiduciary relations generally; for there are special circumstances in this case which bring it clearly within the rules applicable to that class of cases.

1. The defendant was not only the partner of plaintiff, but he was his special agent in the management of the business. The bill alleges that he had a power of attorney from plaintiff, authorizing him to represent, on all occasions, the interest of plaintiff in the conduct of the affairs of the firm; and although this is denied in the answer, and is not proven, the answer does state that at the time the partnership was formed, it was distinctly agreed between plaintiff and defendant that the latter was to have the full and exclusive control of the business, and should so far represent the plaintiff as to give defendant a preponderating influence in the management of the partnership over Mr. Field, the third partner. The record leaves no doubt that he acted throughout in accordance with this agreement.

2. It is abundantly established by the testimony that, within some two or three months after the partnership was formed, the parties closed their operations in New Orleans, after having invested over $50,000, advanced by Martin, in the purchase of soldiers' claims; and that thenceforth very little was done in the way of purchasing claims or warrants. That Brooks then came to Washington to procure the warrants to be issued, and Field went to Wisconsin to seek a market for their sale. From that time forward, Brooks and Field had the entire management of the business, mainly under the directing of Brooks; and none of it was conducted in New Orleans save the purchase of five or six warrants made by Brooks on Martin's suggestion, nor were any reports made of the business to Martin.

Brooks and Field thus managed the entire concern, at a distance of near two thousand miles from Martin, and, as we think the testimony shows, without consulting him in any way, and with very little regard for his large interest in the business.

Under these circumstances, Brooks must be held to have been not only the partner, but the special agent of Martin; and the purchase made by him of Martin's interest must be tested by the rules which govern such transactions as between principal and agent.

What are these rules? 'On the whole, the doctrine may be generally stated, that wherever confidence is reposed, and one party has it in his power, in a secret manner, for his own advantage, to sacrifice those interests which he is bound to protect, he will not be permitted to hold any such advantage.' Or, to speak more specifically, 'if a partner who exclusively superintends the business and accounts of the concern, by concealment of the true state of the accounts and business, purchase the share of the other partner for an inadequate price, by means of such concealment, the purchase will be held void.'

Speaking of a purchase by a trustee from his cestui que trust, Lord Chancellor Eldon says, in the case of Coles v. Trecothick, that though permitted, it is a transaction of great delicacy, and which the court will watch with the utmost diligence; so much, that it is very hazardous for a trustee to engage in such a transaction. 'A trustee may buy from the cestui que trust, provided there is a distinct and clear contract, ascertained to be such after a jealous and scrupulous examination of all the circumstances; provided the cestui que trust intended the trustee should buy; and there is no fraud, no concealment, no advantage taken by the trustee of information acquired by him in the character of trustee. I admit,' he says, 'it is a difficult case to make out, wherever it is contended that the exception prevails.' This has long been regarded as a leading case, and the above remarks have been often cited by other courts with approbation. We think them fully applicable to a purchase, by an agent from his principal, of the property committed to his agency.

We lay down, then, as applicable to the case before us, and to all others of like character, that in order to sustain such a sale, it must be made to appear, first, that the price paid approximates reasonably near to a fair and adequate consideration for the thing purchased; and, second, that all the information in possession of the purchaser, which was necessary to enable the seller to form a sound judgment of the value of what he sold, should have been communicated by the former to the latter.

In regard to the adequacy of the price, it is obvious that Brooks did not pay to Martin anything which he was not bound to pay before the sale was made, or assume any obligation under which he did not already rest; nor did Martin receive anything which Brooks did not then own him, or his promise to do anything for which Brooks was not previously bound. The only matter in which their relations were changed was, that Martin sold to Brooks his share of the profits of the business, and Brooks assumed to bear all Martin's share of the losses.

So the condition of the partnership business, at this time, shows a balance of $15,000 of profits, all of which was cash, or funds equal to cash. It further appears, that there were on hand and unsold over 45,000 acres of land, which, at the Government rate of $1.25 an acre, gives an aggregate value of $57,000. Add this to the $15,000 above mentioned, and we have $72,000 as the probable profits of the partnership venture, at the time of this sale.

It is said that the danger that soldiers would seek to reclaim the warrants, or the lands on which they had been located, under the provisions of the act of 1847, already mentioned, must have detracted largely from the amount which any prudent man would have given for Martin's interest in the concern. This danger was, however, a very remote and improbable one, and must have so appeared, when we consider that these claims have been bought from young men scattered over the different States of the Union, with no means of ascertaining where the warrants were located, or in whom the title was vested; and that the amount, in each case separately, was not worth the trouble and expense of the search and subsequent litigation. But while these considerations might have some weight, if the question of adequate price were otherwise in doubt, they can go but a little way to establish that point, in the circumstances of the present case.

Martin's share of the profits were $30,000, for which Brooks gave him substantially nothing.

Was Martin placed by Brooks in possession of all the information known to himself, and which was necessary to enable Martin to form a sound judgment of the value of what he was selling?

[His honor here examined the evidence on this question of fact,-some of it of an inferential kind,-minutely, and went on thus]:

But we are not left alone to this negative and inferential testimony on the subject. We have letters from Brooks to the Fields, written before the sale was made, in which he urges that all remittances shall be made to him at Washington, showing from the allusions in them to a proposed remittance to Martin, and to Lake & Co., who were Martin's correspondents in New York, that his intention was that no remittance should be made to Martin. When we consider that the letter of June 20th was written at a moment when he was expecting in a few days an interview with Martin, which he had himself suggested, and that he was no doubt then contemplating the very purchase which he made at the interview, and that he knew that Lake was the other partner in the firm of Martin & Co., we look upon it as remarkable; pointing clearly to one conclusion, namely, a determination to keep from Martin all the funds of the concern, and all information of its condition, in order that he might perform the operation of buying Martin's interest at a sacrifice.

We are of opinion, from a careful examination of the testimony, that Brooks occupied towards Martin a relation of confidence and trust, being his partner, his agent, and his brother-in-law, and having also entire control of the partnership business; that he took advantage of this position to conceal from Martin the prosperous condition of the concern, and purchased from him his interest, for a price totally disproportioned to its real value; and that, under such circumstances, it is the unquestionable duty of a court of chancery to set aside the contract of sale.

DECREE AFFIRMED WITH COSTS.

Mr. Justice CATRON dissented briefly; on the ground that the partnership, having been formed for the purpose of speculating in soldiers' claims to warrants, the original transaction was a fraud upon the act of Congress; violating public policy; and that in such a case equity does not interfere.

title: Brooks v. Martin/Opinion of the Court


text: Talk:Brooks v. Martin/Opinion of the Court

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text:
Badger v. Badger

BADGER died in 1818, leaving a widow and ten children, one of whom only was of age at that time; the others being minors, of different ages. One of them came of age in 1824; another in 1828; a third in 1831; a fourth in 1834; a fifth in 1835; a sixth in 1837. The eldest son, Daniel Badger, took administration on the estate in 1819, an uncle being joined with him; and soon after filed an inventory of the estate, its debts, and liabilities. In 1820, having settled on administration account, the administrators obtained leave from the court to sell certain portions of the real estate. None of these proceedings were the subject of question.

In 1827, they filed a further account, which had indorsed upon it what purported to be the written approval of the widow and heirs, the latter acting by their guardians. By this account they claimed credit for several thousand dollars, alleged to have been advanced for the estate, and in 1830 got leave from court to sell as much real estate as would pay this balance. Public sale of the real estate was accordingly made; when it was bought by a friend of Daniel Badger, the administrator, and soon afterwards conveyed to him. The widow died in 1855, aged 74.

In 1858, James Badger, a son and heir, whose age did not appear, further than from the fact of the father's death in 1819, and one of the persons who by his guardian, now dead, had approved of the account of 1827,-filed a bill against his brother Daniel, administrator, as aforesaid,-in the Circuit Court for the Massachusetts District, charging that the account of 1827 was false and fraudulent; that the real estate had been sold beneath its value, and bought in for his said brother, the administrator; that before this purchase he had silenced the objections of some of the heirs who opposed the sale by purchasing their shares; and had forged, or fraudulently procured the signature of the widow, his mother; and in this way had obtained license from the court to sell. The bill alleged, that 'the fraudulent acts and doings of the said Daniel were unknown to the complainant and his coheirs, until within five years last past,' and prayed an account, &c.

The answer of Daniel Badger, the defendant, denied the allegations of the bill generally; and, on the last point, denied 'that the complainant, or any of the said heirs-at-law of said intestate, did not have personal knowledge of all acts and doings of said Daniel (the administrator), in reference to the sale and purchase of these estates until within five years.'

There was much testimony from different members of the family; the charges of the bill being more or less supported by the evidence of heirs who had sold out what rights they had to James Badger, the complainant below. Some of the witnesses testified that Daniel, the defendant, who bore his father's name exactly, had often declared that, being the oldest son and bearing the paternal name, he was entitled to all the property. One of the witnesses was a daughter, born in 1807.

The court below dismissed the bill as being stale. On appeal the question was, whether this was rightly done?

Mr. Robb, for the complainant in error: We are entitled to the relief prayed for, unless we have lost our rights by the lapse of time, or the statutes of limitations, or are otherwise estopped from asserting them.

It may be true that courts of equity consider themselves bound by the statutes of limitations, which govern courts of law in like cases; and in many other cases they act upon the analogy of the limitations at law, as where a legal title would in ejectment be barred by twenty years' adverse possession; courts of equity will act upon the like limitations, and apply it to all cases of relief sought upon equitable titles or claims touching real estates. These, as abstract propositions, we do not controvert. But they do not furnish any ground for refusing the relief prayed for in this bill. If the defendants invoke the protection of this abstract principle, they must clearly bring themselves within it. It is not for the plaintiff to show that he is not barred by the statute, but for the defendants to show that he is; they must make it appear by a proper plea and proof, that they are entitled to the benefit of the limitation. It will be said that more than twenty years had elapsed since the sales took place, before this suit was commenced, and that this is apparent on the record. But it does not appear that this plaintiff became of age twenty years before the commencement of the suit. The inference is that he did not.

Nor are we barred by any rule of limitations, peculiar to courts of equity, because of alleged laches. We do not admit 'that courts of equity treat a less period than the one specified in the statute as a bar to the claim.' Story, J., says: 'In a case of trusts of lands, nothing short of the statute period, which would bar a legal estate or right of entry, would be permitted to operate in equity as a bar of the equitable estate.' Certainly no bar, either legal or presumptive, will begin to run until after the cause of action or suit has arisen; and in equity, in cases of fraud and mistake, it will begin to run only from the time of the discovery of such fraud or mistake, and not before. The license to sell, we assert and show, was procured by fraud.

Daniel Badger sustained to his mother and brothers and sisters, more especially the minors, a relation of peculiar trust and confidence, of both natural and legal obligation. He was not only administrator, and thus the guardian of their interests, but he was her son and their protector. It was his duty, imperatively imposed, to deal with them frankly and truthfully and honestly, and a court of equity will hold him strictly to it. If he suffered them to be deceived, this was a fraud upon them. But whether fraud or mistake, they will not be barred, either by the statute or by laches, until they discovered it. When was that? Certainly not until long after these sales took place. There can be no acquiescence without full knowledge of facts. Even a written acknowledgment of acquiescence in his acts, made in ignorance of their rights, would not bind them. In Michoud et al. v. Girod et al., this was so held, in the following words: 'Even acquittances given to an executor, without full knowledge of all the circumstances, where information had been withheld by the executor, are not binding.' And this court set aside and annulled a decree in favor of one of the executors for a large amount, although there had been a judgment in his favor by a competent court, after a full trial before arbitrators, and an allowance of the sum so found to be due him in the executor's account.

When did they first discover that they had been deceived and imposed upon by their brother? or, in other words, when did they first learn that their estates were not legally liable to be taken and sold for payment of debts? for not until that time will the limitation begin to run.

The bill alleges, substantially, that this was not known to them until within five years before the commencement of the suit. The answer does not deny this. It is, at least, evasive. The bill does not allege that they 'had no knowledge of the sale and purchase of these estates until,' &c., and the answer denies what is not alleged,-leaving the allegation unanswered.

Sufficient does not appear to make it the duty of this court to shield the defendant from accountability for his acts,-acts certainly never permitted to such a trustee,-on the ground that the plaintiff has grossly neglected to enforce his rights in the premises.

But, in cases of actual fraud, courts of equity do not adopt or follow the statutes of limitations; they will grant relief within the lifetime of the party who committed it, or within thirty years after it has been discovered, or become known to the party whose rights are affected by it.

The rule, as stated by the court, in Michoud et al. v. Girod et al., just cited, is universally recognized and applied by courts of equity. It has been affirmed by this court in subsequent cases, and we do not think it will be controverted. It was held, in that case, that 'a purchase, per interpositam personam, by a trustee or agent of the particular property of which he has the sale, or in which he represents another, whether he has an interest in it or not, carries fraud upon the face of it;' and that 'this rule applies to a purchase by executors, though they were empowered by the will to sell the estate;' and 'that a purchase so made by executors will be set aside.' The sales in the case at bar took place in 1830; the present suit was begun in 1858, and in the lifetime of the person upon whom the fraud is proved, and within thirty years after it had been discovered. There was sufficient motive for an heir's not attempting to set the sale aside, in the fact that the widow would have had her dower in whatever land might be recovered.

Mr. Merwin, contra.

Mr. Justice GRIER delivered the opinion of the court.

title: Badger v. Badger


text: Talk:Badger v. Badger

title: Talk:Badger v. Badger


text:
Badger v. Badger/Opinion of the Court

The numerous cases in the books as to dismissing a chancery bill because of staleness, would seem to be contradictory if the dicta of the chancellors are not modified by applying them to the peculiar facts of the case under consideration. Thus, Lord Erskine, in an important case once before him, says: 'No length of time can prevent the unkennelling of a fraud.' And Lord Northington, in Alden v. Gregory, with virtuous indignation against fraud, exclaims: 'The next question is, in effect, whether delay will purge a fraud? Never-while I sit here! Every delay adds to its injustice and multiplies its oppression.' In our own court, Mr Justice Story has said: 'It is certainly true that length of time is no bar to a trust clearly established; and in a cash where fraud is imputed and proved, length of time ought not, on principles of eternal justice, to be admitted to repel relief. On the other hand, it would seem that the length of time during which the fraud has been successfully concealed and practised, is rather an aggravation of the offence, and calls more loudly upon a court of equity to give ample and decisive relief.'

Now these principles are, no doubt, correct, but the qualifications with which they are stated should be carefully noted:

1st. The trust must be 'clearly established.'

2d. The facts must have been fraudulently and successfully concealed by the trustee from the knowledge of the cestui que trust.

The case of Michoud v. Girod, cited by the appellant's counsel, is an example of the class in which the concealment of the fraud was the aggravation of the offence. The facts of the case were 'clearly established' by records and other written documents, and the court were not called on to found their decree on the frail memory or active imaginations of ancient witnesses, who may not be able, after a great lapse of time, to distinguish between their faith and their knowledge, between things seen or heard by themselves, and those received from family or neighborhood gossip, or upon that most unsafe of all testimony, conversations and confessions,-remembered or imagined,-partially stated or wholly misrepresented. The fraudulent concealment was also clearly established. The heirs, who lived in Europe, were deceived by the false representations of the executor, and kept in total ignorance of the situation and value of the estate, having no other information on the subject than that communicated to them by him. The delay was not the consequence of any laches in the heirs, but was caused by the successful fraud of the executor, and was but an aggravation of the offence.

But the case before us has none of the peculiar characteristics of those to which we have referred. For more than twenty-five years the widow and heirs have acquiesced in this sale, and it is more than thirty since the administration account was settled, which is alleged to have been fraudulent. The guardian of the complainant, who approved the account, is dead; the widow died in 1855. Two of the heirs were of full age in 1831, and the others afterwards. This bill was filed in 1858. The bill does not state the age of complainant. But at the time of filing his bill, he must have been over forty years of age.

The whole transaction was public, and well known to the widow and the heirs, and their guardians. The purchase of the estate by the administrator could have been avoided at once, if any party interested disapproved of it. There was not and could not be any concealment of the facts of the case. The complainant claims as assignee of his elder brothers and sisters, and uses them as witnesses to prove the alleged fraud after a silence of over thirty years. They attempt to prove the signature of their mother to the documents on file in the court to be forged, and this after the death of the mother, who lived for twenty-eight years after the transaction without complaint or allegation either that her signature was fraudulently obtained or forged. A daughter, who was twenty-three years of age when this sale was made, and had full knowledge of the whole transaction, after near thirty years' silence, now comes forward to prove that her concurrence and assent was obtained by fraud; and now, after the death of the guardian and the mother, who could have explained the whole transaction, the aid of a court of chancery is demanded to destroy a title obtained by judicial sale, after the parties complaining, with full knowledge of their rights, have slept upon them for over a quarter of a century.

Now, the principles upon which courts of equity act in such cases, are established by cases and authorities too numerous for reference. The following abstract, quoted in the words used in various decisions, will suffice for the purposes of this decision:

'Courts of equity, in cases of concurrent jurisdiction, consider themselves bound by the statutes of limitation which govern courts of law in like cases, and this rather in obedience to the statutes than by analogy.

'In many other cases they act upon the analogy of the like limitation at law. But there is a defence peculiar to courts of equity founded on lapse of time and the staleness of the claim, where no statute of limitation governs the case. In such cases, courts of equity act upon their own inherent doctrine of discouraging, for the peace of society, antiquated demands, refuse to interfere where there has been gross laches in prosecuting the claim, or long acquiescence in the assertion of adverse rights. Long acquiescence and laches by parties out of possession are productive of much hardship and injustice to others, and cannot be excused but by showing some actual hindrance or impediment, caused by the fraud or concealment of the parties in possession, which will appeal to the conscience of the chancellor.

'The party who makes such appeal should set forth in his bill specifically what were the impediments to an earlier prosecution of his claim; how he came to be so long ignorant of his rights, and the means used by the respondent to fraudulently keep him in ignorance; and how and when he first came to a knowledge of the matters alleged in his bill; otherwise the chancellor may justly refuse to consider his case, on his own showing, without inquiring whether there is a demurrer or formal plea of the statute of limitations contained in the answer.'

The bill, in this case, is entirely defective in all these respects. It is true, there is a general allegation, that the 'fraudulent acts were unknown to complainant till within five years past,' while the statement of his case shows clearly that he must have known, or could have known, if he had chosen to inquire at any time in the last thirty years of his life, every fact alleged in his bill. That his mother was entitled to dower in the land if the sale was set aside, was no impediment to his pursuit of his rights, while her death may have removed the only witness who was able to prove that his complaint of fraud was unfounded, and that it was by the consent and desire of the family that the property was kept in the family name by the only one who was able to advance the money to pay the debts of the deceased; a fact fairly to be presumed from her silence and acquiescence for twenty-four years.

The court below very properly dismissed this bill, and refused to examine into accounts settled by the courts with the knowledge of all parties concerned, and commencing forty years and ending thirty years ago, and to grope after the truth of facts involved in the mists and obscurity consequent on such a lapse of time.

If a further reason were required for affirming this decree, it might be found in the statute of Massachusetts, declaring that 'actions for land sold by executors, administrators, or guardians, cannot be maintained by any heir or person claiming under the deceased or intestate, unless the same be commenced within five years next after the sale. But we prefer to affirm the decree for the reasons given, without passing any opinion on the effect of this statute.

DECREE AFFIRMED WITH COSTS.

title: Badger v. Badger/Opinion of the Court


text: Talk:Badger v. Badger/Opinion of the Court


text:
Page:Cournot Theory of Wealth (1838).djvu/29

 Rh affect the subdivision between the members of society of the gifts of nature and the rewards of labour.

This subject is still far too vast to be properly grasped by any one man. It affords inexhaustible material for unripe systems and slow investigations. How can we abstract the moral influences which enter into all these questions and which are entirely incapable of measurement? How are we to compare what may be called the material welfare of the Alpine shepherd with that of the Spanish idler or of the Manchester workingman; the convent alms with the poor-rates; the drudgery of the farm with that of the workshop; the pleasures and expenditures of a Norman noble in his feudal manor, with the pleasures and expenditures of his far-away descendant in a house in London or on a tour through Europe?

If we compare one nation with another, by what invariable tokens shall we determine the progress or decay of their prosperity? Shall it be according to population? In that case China would far excel Europe. According to the abundance of coin? The example of Spain, mistress of the Peruvian mines, turned the world away from this gross error long ago, and, in fact, before even the first crude notions of the true rôle of coin were developed. According to business activity? Then inland peoples would be very unfortunate compared with those whom proximity to the sea invites to a mercantile career. According to the high price of goods or of wages? Then some miserable island would surpass the most smiling and fertile countries. According to the pecuniary value of what economists call the annual product? A year when this value increases greatly may easily be one of great distress for the greatest number.


text:
Brobst v. Brobst (69 U.S. 96)

IN this case, in the court below, some questions had been disposed of finally by the Circuit and District Judges, and others were suspended by their inability to agree and a consequent division of opinion. An appeal was taken from the part covered by the final decree, and a certificate of division upon the residue of the case. No appeal bond had been entered.

A motion was now made to dismiss the appeal for want of an appeal bond entered into as required by the act of Congress. It was also objected that no appeal could be taken from the decision of the court below, until the certificate of division of opinion in the same cause between the judges was disposed of in this court.

Mr. Justice NELSON delivered the opinion of the court.

title: Brobst v. Brobst (69 U.S. 96)


text: Talk:Brobst v. Brobst (69 U.S. 96)

title: Talk:Brobst v. Brobst (69 U.S. 96)


text:
Brobst v. Brobst (69 U.S. 96)/Opinion of the Court

It appears that an appeal has been taken from that part of the case covered by the final decree, and a certificate of division upon the residue.

There is no objection to this practice. It has been recognized and acted upon in several instances in this court.

The questions arising on this appeal, and on the certificate of division, come up together, and are heard on the same record.

The omission to file the bond, under the circumstances, may be corrected by filing one in conformity with the act of Congress. The peculiar state of the record, and mode of bringing up the questions from the court below, probably misled the solicitors.

Let a rule be entered, that the appellant have sixty days from notice of it, to file a bond with the clerk of the court, to be approved by the proper officer, upon complying with which, this motion be dismissed; otherwise granted.


text: Talk:Brobst v. Brobst (69 U.S. 96)/Opinion of the Court


text:
Day v. Gallup

THE 25th section of the Judiciary Act provides that a final judgment in the highest court of law of a State, in which is drawn in question the validity of an 'authority exercised under the United States,' and the decision is against its validity, may be reviewed in this court. With this act in force, Gallup sued Derby & Day, Gear, and Allis, in a State court of Minnesota, in trespass, for taking and carrying away goods. On the 1st April, 1860, the defendants justified under certain writs of attachment and execution, issued out of the Federal court for Minnesota, in a certain suit therein pending, wherein Derby & Day were plaintiffs, and one Griggs defendant. In this suit judgment had been given 10th September, 1859, execution issued on the next day, and returned satisfied on the 19th. The justification set up that Allis was attorney of Derby & Day, and Gear, marshal of the United States; that the taking was by Gear as United States marshal, under and by virtue of the writs, and at the request of Derby & Day. The debt from Griggs to Derby & Day, the affidavits and order on which the attachment and the judgment on which the execution were issued, were also pleaded by the defendants below, and that the property was the property of Griggs. The plaintiff below replied, denying that the property was the property of Griggs, but not denying the character of the defendants, or that the taking was under Federal process.

Gallup's suit against Derby & Day, Allis, and the marshal, was brought to trial June 18th, 1860; but, before the swearing of a jury, was discontinued as to the marshal.

On trial of it against the remaining defendants, Derby & Day, and Allis, it was not contended by the plaintiff that any of these parties were guilty of any but a constructive taking; that is to say, of more than having authorized the marshal to seize under his process; and before the defendants had offered any evidence, and before there had been any proof of a suit pending in the Federal court, or of an attachment issued out of such court, or that the said goods had been taken under process, the defendants' counsel moved, on the part of the defendants, Derby & Day, and Allis, and also for each of them separately, to dismiss the case, on the ground that there was nothing in the evidence which showed that they, or either of them, had had anything to do with the act of Gear, the marshal, in taking the goods; a defence set up by Allis in his answer as to other defendants than the marshal, and as was said in the motion, not denied in the reply. This the court refused to do; the defendants excepting. The defendants then called the clerk of the Federal court, and gave in evidence the substance of the attachment suit of Derby & Day against Griggs; showing, or endeavoring to show, that the goods attached had originally been their goods; that Griggs had bought them on credit, and that the alleged sale by him to Gallup was a fraud; that the goods were in fact still the property of Griggs. They offered in evidence, also, the simple writ of attachment, which, under exception, the court refused to let go before the jury, unless the affidavit on which it was founded was also produced. Verdict was, however, given against Derby & Day, and Allis, the attorney, though afterwards set aside as to this last. Judgment having been entered against Derby & Day, the case was taken by writ of error to the Supreme Court of Minnesota, in which it was affirmed; and it was now before this court on writ of error, the question being whether there had been drawn in question, in that Supreme Court of Minnesota, any authority exercised under the United States.

Mr. Peckham for the plaintiff in error: The justification of the defendants below of the alleged trespass was under a writ of attachment issued out of the United States District Court. Here, then, is a valid defence under the authority of a United States court and marshal admitted on the record, and which the State court must have overruled, in order to have rendered the judgment they did. The proceeding is in Minnesota, and, of course, under its code. When a fact is stated in a pleading under the code of Minnesota, which constitutes of itself a defence, the intent to rely on it as such is a necessary inference.

And the court is bound to give judgment according to the pleadings, without any demurrer being interposed. A judgment entered upon a trial in the face of an admission by the pleadings, showing that there ought to be no such judgment, would be erroneous.

Now, under the case of Crowell v. Randall, this case, by necessary intendment, that the question must have been raised and was decided. Aside, too, from its being raised by the pleadings, it was raised, although unnecessarily, on the trial. For the defendants below objected, and excepted to being obliged to produce in evidence more than the simple writ of attachment, thus claiming that the simple taking under United States process was in itself a defence, and without producing the affidavits, &c., on which it was founded, which would, of course, be necessary to sustain a defence founded only on fraud.

It is true that Derby & Day were not asserted to be guilty otherwise than constructively; that is to say, as being plaintiffs in the suit, and as having directed the levy and received the benefits. But it is certain that if the act is justified in or by the actual doer, it must be justified by the constructive one also. The case is the same as if the proceeding were against the marshal alone.

Now, it is settled by Freeman v. Howe, in this court, that, as between State and United States courts, whenever an action has been commenced in one of them, the court in which it is commenced has exclusive jurisdiction over any res that may be in controversy, and over any 'question' that may arise in any stage of the litigation, whether immediate or ancillary. In this case, for example, that the question whether the marshal was a trespasser or not, involves a question of right and title to the property under the Federal process, which it belongs to the Federal and not State courts to determine; that is, to say it again, and in other words, that in the State courts (and vice vers  where the State court first commences the action) the property must be regarded as in the possession of the marshal as marshal'', or in the custody of the law. The case, in fact, decides that as the question 'of title to the property under the Federal process' can only be 'determined' in the Federal courts, it is incumbent on the State courts to leave that question to them, and that in the State courts the marshal can never be held as a trespasser where he has, in good faith, under process, levied on goods as the property of the defendant in the writ; the whenever the marshal would have a right to seize goods on the allegation or claim that they belonged to the defendant in his writ, his acts in such cases, in the State courts, must be regarded as official; and the question as to whom the goods did belong can be litigated only in the courts of the United States.''

The principle was, in fact, illustrated in the early case of Slocum v. Mayberry. 'If,' says Marshall, C. J., in that case, 'if the officer has a right, under the laws of the United States, to seize for a supposed forfeiture, the question, whether that forfeiture has been actually incurred, belongs exclusively to the Federal courts, and cannot be drawn to another forum. And if the seizure be finally adjudged wrongful, and without reasonable cause, he may proceed, at his election, by a suit at common law, or in the Admiralty, for damages for the illegal act.'

In Freeman v. Howe, it was held, that the case did 'involve a question of right and title to the property under the Federal process, which belonged to the Federal, and not State courts, to determine.'

In this case there was no possession of the res by the marshal as marshal, unless on the assumption of the exclusive authority of the Federal court to decide the question of title. If Gallup desired to bring his action of trespass in the State court, the proper way for him to have done, was first to have litigated the naked right of property in the Federal court. If successful in that, he then could have brought his action either of trespass or replevin. Such a course would not have been new. It was successfully pursued in Gelston v. Hoyt. In that case, the question of forfeiture was first litigated in the Federal court, and decided in favor of the claimant. The claimant then brought trespass in the State court, and recovered.

Mr. J. H. Bradley, contra: The State court, it will be conceded by the other side, had either exclusive or concurrent jurisdiction both of the parties and the subject-matter, unless that jurisdiction is concluded by the fact that the property was taken under process issued by the Federal court. Now, the title to the property had not been called in question in that court, and there had been no decision respecting it. The return of the execution, in that case, was dated 19th September, 1859; the complaint filed 26th September, 1859. The Federal court, therefore, at the time this suit was brought, had no possession of or control over the parties or the subject-matter. The case between Derby & Day v. Griggs, in the Federal court, had been decided; the money made on the execution, and the debt satisfied.

It is supposed the jurisdiction of the State court was concluded, by the fact that the alleged trespass was committed by the marshal in execution of process; and these parties assisting him, their liability will depend on his; and as at that time the Federal court had jurisdiction, this action could not be brought in the State court. The case of Freeman v. Howe is relied on. The principle on which that case rests, and which is the basis of all preceding cases in this court on that point, is that when the possession or control of person or property has been taken by a Federal court, in the exercise of its jurisdiction, it will retain that possession and control to the conclusion of the case. It follows, that all questions touching the rightfulness of such possession are to be decided by it. This court, in the case cited, has suggested the remedies for persons claiming such property, and not already parties to the suit. But neither the reasons given by the court, in the decision of those causes, or any one of them, nor the judgments themselves, can be read to exclude the State courts from providing remedies for injuries received by individuals from acts of the officers of the Federal court done colore officii, especially after the case between the parties in the Federal court is at an end, and the rights of the parties so injured have not been drawn in question and decided in the Federal court.

If the person or property is taken under an attachment, or under a proceeding in rem, the retention of possession is necessary to the due exercise of the jurisdiction of the Federal court; if it is taken under an execution, the process is returnable into that court, and that court claims the exclusive right to determine all the questions in the cause.

If an action had been brought by Gallup in the Federal court against these plaintiffs, it cannot be doubted or denied that he might have maintained it pending the suit between them and Griggs in that court. Or he might have resorted to one of the remedies suggested in Freeman v. Howe, to raise the question of the right of property. The first, because they were citizens of different States; the last, because that court had the custody and control of the property in dispute in another suit, between other parties. This last reason fails when that litigation is ended; and Gallup's rights, postponed as to the forum pending that suit, revive when the property is no longer in the custody or control of the Federal court, and his right to it has not been called in question and decided in that court. The result is, that the jurisdiction of the State court is suspended while the property is held in the custody of the law; it revives as soon as that custody ceases. If this be so, there is no error in the record from the State court.

But if this be not so, still the remedy by the action of trespass or case may be proceeded with, even while the property taken by the marshal is in the custody of the Federal court. It is unimportant where the property is. Even if it has been destroyed, this action may be prosecuted. The suits are between different parties, for different causes of action. The validity of the process of the Federal court is in nowise called in question; its exclusive jurisdiction over the parties and the subject-matter in controversy between them, is not interrupted; its process, from the impetration of the writ to the satisfaction of the judgment, is unimpaired. If these actions could be brought and maintained in that court, between proper parties, leaving the custody of the property where it was first put by the law, so here the State court, having concurrent jurisdiction, must be allowed to proceed with it, leaving the property still in the custody of the law. It never has been said by this court, that a State court has no jurisdiction to inquire into trespasses, vi et armis, committed by marshals under a pretence of process. The tests are: Is the subject-matter of the two suits the same? Can both suits be carried on without a conflict of authority between the two courts? If so, they may well be prosecuted in the two forums at the same time. If not, then the court which first obtained jurisdiction of the parties and the subject-matter will retain it to the end.

In the Federal court, a party is pursuing his remedy to recover a debt. That is the subject-matter of the suit. As part of the process in that suit, property is taken, and is to be held in the custody of the law until that cause is finally disposed of, unless that court shall in the meanwhile order it to be released. It will not tolerate the interference of any other court with property so situated.

In the State court having concurrent jurisdiction with the Federal court, the action is brought, not to recover possession of the property thus held in the custody of the law in the Federal court, but to recover damages for the unlawful taking. The cause of action, or subject-matter of this suit, is the injury sustained by the party from whom that property was taken under color of process. The process may be omni exceptione major; and yet the taking under the color of that process may be a trespass. Either court may have, and must have, the power to decide this last question without infringing on the jurisdiction of the other. The property is in the custody of the law, to enable that court to decide, not the right of property, but the demand in that suit. No question as to the authority of the Federal court to issue the process is involved, directly or indirectly. If it shall appear that the property was subject to that process, the marshal is justified. The process is good; but that does not afford protection to him for taking the property of another, for abusing the process. He is not sued qua marshal, but as trespasser. He sets up his defence qua marshal, and it fails, and that is a question which a State court is competent to try, equally with a Federal court.

Mr. Justice WAYNE delivered the opinion of the court.

title: Day v. Gallup


text: Talk:Day v. Gallup

title: Talk:Day v. Gallup


text:
Day v. Gallup/Opinion of the Court

The dates in this case show that at the time Gallup's suit was brought there was no case pending in the Federal court, respecting the goods which had been attached under that court's process, on attachment. On the 18th of June, 1860, before a jury was sworn in the case, it was dismissed as to Gear, the marshal. On that day a jury was sworn, and on the 20th of the month they returned a verdict for Gallup, with interest and costs. In fact, it becomes plain that the defendants did not then consider that there was any necessary connection between Gallup's complaint and themselves on account of the seizure and sale of the former's goods under the process of the Federal court; for on the trial of the cause, before any proof had been given that there had been a suit in the Federal court from which an attachment had been issued, or that the goods of Gallup had been seized and sold under its process, and after the defendants had examined witnesses and Gallup had rested his case upon that testimony, the defendants moved to dismiss Gallup's complaint as to all of them conjointly, and for each of them separately, on the ground that the defence of Allis in his answer was not denied in the reply as to the defendants, Derby & Day and Allis, or on the part of them separately, and because there was no evidence to connect them with the taking of the goods. The motion was refused; the defendants excepting to the decision of it. And then the defendants introduced as a witness the clerk of the Federal court; and he, to use the language of the record, proved substantially the suit in the Federal court of Derby & Day against Griggs, and the defendants regarded the sale by Griggs to Gallup as fraudulent. In no part of the record does it appear that the authority of Gear, as marshal, to take the goods, was drawn in question. Nor is it to be inferred from any pleading by the defendants. The facts are, that, from the return of the execution satisfied, the Federal court had no control over the parties. The case between the plaintiffs in error against Griggs had been decided, the money made on the execution, and the debt paid.

Upon the facts of the case, as they appear in the record, we have determined that no one of the questions described in the 28th section of the Judiciary Act necessarily arose or was decided by the Supreme Court of Minnesota. We think it unnecessary to particularize such decided questions as will give jurisdiction to this court under that act. We therefore dismiss the writ of error to the Supreme Court of Minnesota.

DISMISSAL ACCORDINGLY.

title: Day v. Gallup/Opinion of the Court


text: Talk:Day v. Gallup/Opinion of the Court

title: Talk:Day v. Gallup/Opinion of the Court


text:
Page:Cournot Theory of Wealth (1838).djvu/30

 16 According to the actual quantity of this product reckoned in the appropriate unit for each kind of goods? But the kinds of goods produced and the relative proportions are different for each country. How can comparisons be made in this respect? According to the rate of movement up or down whether of population or of annual product? Provided that the reckoning covers a sufficient time this is, to be sure, the least equivocal symptom of the welfare or misery of society; but how can this symptom help us except to recognize accomplished facts, and facts which have been produced, not only by economic causes in the ordinary meaning of the words, but also by the simultaneous cooperation of a multitude of moral causes.

We are far from wishing to depreciate the philanthropic efforts of those who seek to throw some light on social economy. It is characteristic only of narrow minds to decry medical science because physiological phenomena cannot be calculated as accurately as the planetary movements. Political Economy is the hygiene and pathology of the social system. It recognizes as its guide experience or rather observation; but sometimes the sagacity of a superior mind can even anticipate the results of experience. We only seek to make clear, that Political Economy fails to make progress by theory, towards its noble object of the improvement of the lot of mankind, either because the relations which it has to deal with are not reducible to fixed terms, or because these relations are much too complicated for our powers of combination and analysis.

6. On the other hand, as the abstract idea of wealth according to our conception constitutes a perfectly


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Humiston v. Stainthorp

STAINTHORP and Seguine had filed a bill in the Circuit Court for the Northern District of New York, against Humiston, for infringing a patent for moulding candles; and had obtained a decree against him.

The decree was that the complainants were entitled to a permanent injunction, and for an account of gains and profits, and that the cause be referred to a master to take and state the amount and report to the court.

A motion was now made to dismiss the cause for want of jurisdiction.

Mr. Gifford, in favor of the motion of dismissal: An appeal lies only from a final decree; this is an interlocutory one. A final decree in equity is one which finally decides and disposes of the whole merits of the case, and reserves no questions or directions for the future judgment of the court from which an appeal could be taken. This court will not allow a case to be divided up into a plurality of appeals.

In The Palmyra, restitution with costs and damages was decreed, and an appeal taken before the damages had been assessed. The court held that the decree was not final, and dismissed it. They say, 'The decree of the Circuit Court was not final in the sense of the act of Congress. The damages remain undisposed of, and an appeal may still lie upon that part of the decree awarding damages.'

The case of Barnard et al. v. Gibson, was one on letters patent. The decree referred it to a master to ascertain and report the damages. An appeal was taken; a motion made to dismiss it, and the motion was granted. The court say, 'The decree in the case under consideration is not final within the decisions of the court. The injunction prayed for was made perpetual, but there was a reference to a master to ascertain the damages by reason of the infringement.'

In Perkins v. Fourniquet, the decree was that the complainant was entitled to two-sevenths of certain property, and referred it to a master to take and report an account of it, reserving all other questions until the coming in of the master's report. It was held that this was not a final decree on which an appeal could be taken.

In Pulliam et al. v. Christian, the decree set aside a deed and directed an account from trustees. This was held not to be a final decree, and an appeal from it was dismissed.

In Craighead et al. v. Wilson, a bill was filed claiming property as heirs. A decree was made, which, among other things, referred it to a master to take an account. The court held that this decree was interlocutory, and that no final decree could be made until after the coming in of the master's report, and the appeal was dismissed.

In Crawford v. Points, a decree was made directing an account. An appeal was taken before the accounting. On a motion to dismiss the appeal, the court say, 'The decree is not final. . . An account is directed to be taken of the rents and profits, &c. While these things remain to be done, the decree is not final, and no appeal from it would lie to this court.'

In Beebe et al. v. Russell, the court thus distinguishes between the two sorts of decrees: 'A decree is understood to be interlocutory whenever an inquiry as to matter of law or fact is directed, preparatory to a final decision. When a decree finally decides and disposes of the whole merits of the cause, and reserves no further questions or directions for the future judgment of the court, so that it will not be necessary to bring the cause again before the court for its final decision, it is a final decree.'

These cases seem conclusive.

Mr. Norton, contra.

I. The precise question whether an appeal may be taken from such a decree does not seem to have arisen in this court, but the principles which have controlled the decisions concerning appeals, establish the right of appeal from the decree herein.

In Ray v. Law, it was held (Marshall, C. J.), 'That a decree for a sale under a mortgage is such a final decree as may be appealed from,' although in such cases there follows a decree confirming the sale, and it may be for execution for a deficiency. That case was followed in Whiting v. Bank of United States, the court saying, in reference thereto, 'This decision must have been made upon the general ground that a decree, final upon the merits of the controversy between the parties, is a decree upon which a bill of review would lie, without and independent of any ulterior proceedings.'

In Forgay v. Conrad, where the decree set aside as void certain deeds of lands and slaves, and directed an account of profits, and expressly retained a part of the bill for further decree, it was held that an appeal from same was well taken.

In Barnard v. Gibson, relied on by the other side, where the decree was for an injunction and an account of profits, and expressly reserved 'the question of costs and all other questions' not specifically passed upon, it was held that from such decree an appeal would not lie; and in that case this court did not undertake to reverse its former decisions, but to abide thereby.

Now the decree in this case, though different from that in either of the cases thus referred to, is much nearer that in Forgay v. Conrad than the one in Barnard v. Gibson, for it fully disposes of the merits, without reserving any question whatever, and leaves nothing uncompleted but an accounting, like that in Forgay v. Conrad; and upon the principle established in those cases, the appeal was well taken. That principle is, that whenever a decree decides the merits of the controversy, it is final, for the purposes of an appeal, though ulterior proceedings have to be had and a further or additional decree yet remains to be made. Thus in Forgay v. Conrad, the court say of the decree therein, 'undoubtedly it is not final, in the strict technical sense of the term,' and then adopting a wider view of the act of Congress, lay down the principle that when a decree decides the right in controversy, and permits it to be carried into execution, it is pro tanto, final for the purposes of an appeal. And the only way of reconciling Barnard v. Gibson with that case is, that it reserved the question of costs and other questions.

II. An appeal from such a decree as this is, should be allowed:

1st. Because it disposes of the entire merits, and leaves nothing but a mere accounting.

2d. Because the court below has power to render and enforce such a decree (and the practice of rendering and enforcing such decrees has become very general), and unless an appeal be allowed therefrom, the right of appeal to this court is virtually annulled in this class of cases, where the decree is for the complainant.

3d. Because the accounting in such cases is necessarily tedious and expensive, and should therefore be postponed until the merits are finally disposed of; for if the decree be reversed the accounting becomes a needless waste of time and money, and even if it be modified, as to the nature or extent of the patent or of the infringement of same, such accounting becomes almost equally useless.

Mr. Justice NELSON delivered the opinion of the court, and after stating the case said:

title: Humiston v. Stainthorp


text: Talk:Humiston v. Stainthorp

title: Talk:Humiston v. Stainthorp


text:
Humiston v. Stainthorp/Opinion of the Court

The decree is not final within the act of Congress providing for appeals to this court, according to a long and well-settled class of cases, some of which we only need refer to in disposing of the case.

MOTION GRANTED.


text: Talk:Humiston v. Stainthorp/Opinion of the Court


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Murray v. Lardner

LARDNER was the owner of three bonds of the Camden and Amboy Railroad Company, for $1000 each. They were coupon bonds of the ordinary kind, and payable to bearer. He resided in the country, about nine miles from Philadelphia, but had an office in that city, where he went to transact business two days in the week, Wednesdays and Saturdays. He kept the bonds in a fire-proof in this office.

Murray was a broker of character, engaged in the negotiation of such bonds in New York.

On the night of Wednesday, the 23d February, 1859, Lardner's fire-proof was broken open, and the three bonds stolen. The theft was not discovered till Saturday, the 26th. Notices of the robbery appeared in the Philadelphia Ledger (the newspaper of Philadelphia having the largest circulation there), and in leading New York papers, on Monday, the 28th. In the meantime, however, on the morning after the theft, to wit, on Thursday, the 24th, two days before the discovery of it (Saturday, the 26th), and four days before the first notices in New York (Monday, the 28th), these bonds were nogotiated to Murray, at his office in Wall Street, New York, for full value. The testimony of Parker-a broker in that city for the negotiation of loans, and a person, like Murray, of unquestionable character-presented the history of the transaction, in substance, thus:

'On the 24th of February, 1859, a man came into my office, and proposed to borrow $2000 on the three bonds in question. I did not know him. He was quite gentlemanly in appearance; very well dressed; manners unexceptionable; quite intelligent; answered questions without hesitation. Applications of this sort applications, I mean, from strangers-are not unusual; they occur often, though not every day. I asked the person who he was, and he said that he was Dr. A. D. Bates, of Milford, Sussex County, New Jersey. After some conversation with him, I took the bonds to effect a loan, and went to Mr. Murray, who I knew dealt in this particular species of security, and proposed to borrow from him $2000, on the three bonds, for Bates. Mr. Murray and I had some conversation as to the terms of the loan, and as to his charge for brokerage. At this interview, I said to Mr. Murray that Bates was a stranger to me. Murray said to this that he would have to satisfy himself how Bates came by the bonds, before he could make the loan, and asked me whether Bates had any city references. I told him that I had already asked Bates that same question; that he had no city references, but knew only physicians. I stated to Murray that Bates had told me that he had bought the bonds for investment, and now wanted the money to pay for some lands which he had purchased. After awhile, Bates came to my office again. I then went with him to Mr. Murray's office, where I introduced him to Murray. This was towards three o'clock. Murray asked him of whom he got the bonds. He said of Mr. Lardner, of Philadelphia; nothing else. Neither Murray nor I knew Mr. Lardner. Murray asked him if he was acquainted in the city. He replied, that he supposed, if he had time, that he could find a dozen people in the city that knew him; ladies and gentlemen. Murray asked him if he knew any physicians. He said that he knew Dr. Mott and Dr. Parker; very well known men in New York: he may have mentioned others. In reply to a question from Murray, whether he knew Dr. Hosack, the family physician of Murray, he answered that he did not; that Dr. Hosack was of the old school, and he, Bates, was of the new. Murray asked him if he knew Dr. Riggs, a physician of New Jersey, with whom he, Murray, had had some dealings. Bates said that he did by reputation. He told Murray what he wanted the money for. Murray told him he would lend him the money on the terms which he had named to me. The loan was accordingly made without further inquiry; Murray taking the bonds and paying the money, and Bates executing what is called a stock-note.'

The testimony of Murray was, in the main, corroborative of this, so far as it related to himself; particularly as to the inquiries which he, Murray, had made of Bates, as to his acquaintance with medical men, Drs. Hosack, Riggs, &c. He stated, however, that he had no remembrance of Parker's telling him that he did not know Bates, which, if it had been said, Murray thought would have awakened his suspicion. Murray admitted, however, that it was always his custom to know from whom securities came before dealing, and that it was the custom of brokers generally; but he added that he did not think it necessary to inquire about Bates, 'he being introduced by Parker.'

'Dr. A. D. Bates, of Milford, Sussex County, New Jersey,' was never seen, nor could be heard of, after the interviews above described. Neither could any such place as 'Milford, Sussex County, New Jersey,' from which place he stated that he came, be found on the maps of that State.

On detinue brought by Lardner for the three bonds, in the Circuit Court for the Southern District of New York, the defendant's counsel asked the court to charge,

'That there were no such suspicious circumstances attending the transaction between Bates and Murray as to put Murray on inquiry; and that Murray was not chargeable with bad faith by any omission on his part to inform himself in regard to the bonds, and Bates's title to them, further than he did.'

The court refused so to charge, and charged as follows:

'It will be for you, gentlemen of the jury, to say whether the defendant has made out,-as the burden lies upon the defendant, whether he has made out that he received the paper in good faith, without any notice of the defect of the title; in other words, of the theft from the plaintiff; or whether there were such circumstances of the character which I have described to you as would warrant the inference that there was ground of suspicion, and that he should have made further inquiry as to the character of the paper.'

The instruction was excepted to; and the jury having found for the plaintiff, Lardner, the correctness of the law, as thus given to them in charge, was the question before this court in error.

Mr. Carlisle, for Murray, the plaintiff in error: The bonds were ordinary coupon bonds, payable to bearer; such as by the most recent decisions of this court are declared to be 'negotiable by the commercial usages of the whole civilized world;' 'possessed of all the qualities of commercial paper.' They were entitled, therefore, to the immunities which, under the commercial law, attach to that species of security. Now, there was no evidence so much as tending to show knowledge, notice, or even reasonable grounds of suspicion, that the bonds were not the property of the person who negotiated them to Murray; nor any evidence tending to show that they were not taken by Murray bon a fide, and in the usual course of business. If this is so, there was error in submitting Murray's title to the verdict of a jury, who, by such submission, were empowered to dispose of his rights without any evidence, but simply as their notions of natural justice, without regard to the rules of law, might dictate. We submit that the charge was in conflict with the law, as finally settled by this court upon this questio vexatissima, in Goodman v. Simonds. On the ground that it has been thus decided, counsel at this bar need not consider or examine English cases at all. It would be disrespectful to this court to do so; for in this very court, and in the case cited, all the authorities, not only in this country but in England, were laboriously reviewed, and it was held to be error to have charged the jury that, 'if such facts and circumstances were known to the plaintiff as caused him to suspect, or as would have caused one of ordinary prudence to suspect that the drawer had no interest in the bill, &c., or right to use the bill for his own benefit, and by ordinary diligence he could have ascertained, &c., then they must find for the defendants.' There must be actual bad faith; a matter not at all here pretended. If the judgment of this court is to stand, the judgment below must be reversed.

Mr. J. H. Bradley, contra: The charge was as favorable to the defendant below as he had a right to ask. Any obligation less strict upon the purchaser of bonds like these, would encourage robberies of a class of securities held for investment, as much as, or more, than they are used in commerce.

Here was a man, a perfect stranger to every one concerned, confessedly not belonging to the city where he was attempting to borrow money,-offering bonds which he says that he had bought in another city still; not the place of his residence either. He comes unaccompanied by any one. He brings no note of introduction. He is not asked for any identification of himself; nothing in short to prove, even imperfectly, that such a man as 'Dr. A. D. Bates' existed, or that Sussex County, New Jersey, had such a town as Milford at all. He states that he got the bonds from Mr. Lardner; but he is not asked who Mr. Lardner is, nor when he got them, nor where is his broker's bill of purchase, the sort of bill given on every regular broker's sale. He looks well enough; is showishly dressed; is not a clown in manners, and can answer questions glibly. And this is his whole evidence of character when Mr. Murray accepts him as a negotiator in a large money transaction. Both Murray and Parker were impressed-Murray especially-with the idea that 'Dr. A. D. Bates' might be an impostor. It is plain that Parker did tell Murray that he did not know Bates. Why, else, did Murray inquire about Bates's knowing Dr. Hosack, &c., as it is admitted that he did? It is plain, also, they saw the danger of dealing with any person so wholly unvouched. And they did ask for references. They got them, too; but they never took the pains to follow them out, although they had time to do so. With a perfect sense of the propriety of having some knowledge, neither party takes the least pains to get any; and this in a case where the expression of even an intention to get it would have probably revealed the whole fraud, and, as Parker had the bonds in his possession, have restored them to their true and honorable owner, Mr. Lardner. The 'commissions' were too tempting. It was 'near three o'clock,' says the testimony. Delay might lose a customer-and 'commissions.' Quite uncertain-as it is obvious that these parties were-whether Bates was a thief or not, they still take as true his wholly unsupported account of everything, though as to how he came by the bonds they scarcely inquire.

Now, instructions of a court must be taken in reference to the facts. The facts here were undisputed, and upon them the instruction was singularly proper. It is contended that it was inconsistent with what is decided in Goodman v. Simonds in this court. But we think it quite consistent with what was there declared, interpreting one part of the opinion in that case by the other. The court there says:

'We now repeat, that a bon a fide holder of a negotiable in strument for a valuable consideration, without notice of facts which impeach its validity between the antecedent parties,. . . holds the title unaffected by those facts.'

It says, also, in another place:

'Unless it be first shown that he had knowledge of such facts and circumstances, at the time the transfer was made.' 'And the question, whether he had such knowledge or not, is a question of fact for the jury,' &c.

These abstract expressions might, or might not, if left by themselves, support the case of the other side. But the court brings them into closer limits, by declaring of the purchaser, as follows:

'While he is not obliged to make inquiries, he must not wilfully shut his eyes to the means of knowledge which he knows are at hand;. . . for the reason that such conduct, whether equivalent to notice or not, would be plenary evidence of bad faith.'

The parties here did shut their eyes to means of knowledge which they knew were at hand. They had a strong scent of fraud, and were on its track. But they would not respect the scent nor follow the track. In reference to the case, the judge's charge was consistent enough with what is above declared in this court, in Goodman v. Simonds.

A distinction exists between this case and the one just named and so much relied on by the other side, in that this case arises on coupon bonds; while that was on ordinary commercial paper. These bonds, it is to be remembered, are owned everywhere for investment. They are negotiable, we admit. But they are not bank bills, nor should they be put, in all respects, on the footing of bank bills, or even of mercantile paper. Bank paper is money, 'circulation,' 'currency.' Ordinary commercial paper is circulating continually among merchants. But these bonds are held for investment. In this particular case, Murray, alone of New York brokers, was in the habit of dealing in them. Bank bills must pass at once. You can't stop to inquire how the person offering them got them. He could not, perhaps, possibly tell. Moreover, the amount of bank bills that persons have at any one time is not often very large; and if stolen, 'hue and cry' is raised at once. The same thing is true, though in a less degree, of commercial paper. But these coupon bonds are different. If a man invests in them,-as every one does invest in them, and the rich largely,-he must count the amounts which are thus negotiable by thousands and tens of thousands, and hundreds of thousands of dollars. These bonds are put away. Here, then, are these securities in every man's house, in his chamber, in his office, in his counting-room; and he looks for them only when he cuts their coupons to collect his interest twice a year. Indeed, he may cut off several coupons at once, and so not see his bonds thus often. Their negotiability should have such protection as is needed for that class of securities; but the law should not give such protection to their negotiability as it does to that of bank bills, and so offer inducements to servants, clerks, &c., to steal and sell them.

The whole class of principles which Mr. Carlisle would maintain, it will be conceded, are in opposition to the law as laid down in Gill v. Cubitt by Lord Tenterden, a commercial lawyer by pre-eminence, and a judge as well acquainted with the extent to which the necessities of trade should control the general code of morals, as any judge who has succeeded him. His immediate successor, Lord Denman, spoke of him in a great case in the House of Lords, as 'one of the most learned and reflecting of judges;' one who 'understood the law of England, and had as good a right to give a confident opinion upon it as any of the most distinguished men who have at any time appeared in Westminster Hall.'  Mr. Justice SWAYNE delivered the opinion of the court.

title: Murray v. Lardner


text: Talk:Murray v. Lardner

title: Talk:Murray v. Lardner