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Villa v. Rodriguez/Opinion of the Court

ERROR to the Circuit Court for the District of California; the case being thus:

George Alexander filed a bill in the court below against Jacinto Rodriguez and George Steele with three others, his brothers, to redeem a ranch of land near San Luis Obispo, in California, known as the Rancho Corral de Piedra, from an instrument which he averred to be a mortgage upon the land; an instrument whose history was much disputed, but which seemed essentially thus:

In 1852, Jos e Maria Villavicencia, called for brevity Villa, being owner of the ranch in question, having at the time seven children, to wit, five sons and two daughters-most of the children being yet minors-conveyed it to them. He died in the following year, leaving these children and their mother, his wife, surviving him. The mother, with these children, lived upon the ranch, and having her brother, Jacinto Rodriguez, an active business man, 'of superior intelligence,' living in the city of Monterey. The widow was extremely poor, and her children were reared as laborers. She could write her name, but not much more. Two of her daughters, at a later date, got to be educated, and one, at least, of the sons. Before December, 1860, she became involved in debt and borrowed money of her brother Jacinto, for which she and three of her children (four others being still minors, and one other being absent), gave him, on the 4th December, of the same year just named, a mortgage for $4000, bearing 24 ''per cent. per year interest, for 5 years, and providing that the same should be compounded every six months; and in case he should sue upon it, he should also be allowed counsel fees'' at 5 per cent.; and should he pay taxes on the land, all amounts so paid should bear the same interest, and become a part of the mortgage debt; all payable, according to the California usage, in gold coin. On the 13th November, 1862, Rodriguez paid an additional sum of $1172, to redeem the land from a tax sale, which the widow's failure to pay the taxes on it had brought about.

In the winter of 1863-4, no rain fell in California, and a drought so severe was the consequence, that the crops failed and the cattle starved. The people were suffering and disheartened. Property could not be sold. The cattle of this family perished during this season, and they had nothing laid by, nor any property except a few horses. In this state of things, Rodriguez called upon his sister and her children. His visit, as stated in his own words, was under the following circumstances:

'I had a mortgage on the ranch. I remarked to my sister that it was time to settle our business, because the mortgage could not last a lifetime. She told me to come whenever I pleased to make a settlement. I went subsequently to her house, and told her and several of the children that I had come for the settlement of our affairs. Then she and the rest of the family-for they were all there except one, who was not in the country at the time-said that they had consulted together and had determined to sell me the ranch; to convey it to me on account of the money in the mortgage which they owed me. They told me they had determined to do that, because, if I put it up for sale, some other person would certainly buy it, and then they would never get it; and that they preferred that I should finally be the owner, because I was the one who had saved them on a former occasion, when they were about to lose the ranch on another mortgage. Then I told them, 'If you are all agreed to convey to me your rights, I will accept your proposition with great pleasure, and will take no steps to sell the ranch.' They told me, 'Yes,' that they were determined to do that, and that they did it with great pleasure. Then I told them, 'It is well, but here is a thing I have to say to you: there is Antonio (this was the youngest son), who is not yet of age; if, when he comes of age, he makes a conveyance to somebody else, that will give me some trouble.' He said that I might confide in him; that he would do nothing of the kind, that he had been benefited by the use of these moneys as well as the rest of the family. I said, 'It is very well if that is so; I trust to you.' Then I said, 'Very well, I shall cause the conveyance to be drawn up in order to close the mortgage. I shall bring the recorder here,' &c., and the whole family told me go and get the titulo made out, and that they would be sure and comply with what they had said.'

At this time, as the reader will have noted, Rodriguez had his money secured on only three-sevenths of the property.

By the laws of California, mortgaged land and the mortgage on it both pay taxes. In this case, therefore, Rodriguez was paying taxes on his mortgage and the land was also paying taxes. Accordingly, among the motives which he gave for his wanting a deed was this one:

'When I came and settled my affairs with my sister, I said that it did not suit me to pay taxes twice. If they did not pay the taxes on the ranch, I had to pay them.'

Accordingly, on the 29th April, 1864-three years and five months after the mortgage had been given having passed-and the original debt of $4000, with the $1172 paid in 1862 to redeem the land from the tax sale, amounting now, at the rates of interest fixed, to about $10,000-all the children except the one who was 'not in the country at the time'-including the youngest, the 'Antonio' above referred to and not yet of age-conveyed the ranch by a deed on its face absolute, to Rodriguez. The consideration expressed in the deed was the discharge of the grantees from all debt and the cancellation of the mortgage then held by the grantee. The mortgage, which secured the greater part of this debt, was immediately discharged on the county records. Antonio, the minor child, conveyed anew, when coming of age, February 17th, 1865. The other child, who had been out of the country when the already-mentioned deed was made by the widow and other children, conveyed May 20th of the year above stated. The consideration paid to this last was $100 in gold.

Rodriguez being now thus vested with the shares of the widow and whole seven children, on the 22d July, 1866, demised the ranch by a 'lease and agreement of sale' to George Steele and the three others, his brothers, for five years, from the 1st August, 1866, with a right of purchase by them at the end of the term, or within five days afterwards, for $25,000, gold; and he covenanted 'that he would, by a sufficient deed, release and quit-claim to the lessees or their heirs and assigns, free from all incumbrances created by him, all right and title which he then had to the premises, or which he might thereafter acquire from the United States, or from any of the heirs of Jos e Maria Villavicencia.'

The Villa family were informed of this lease in a general way, both before and after its execution.

Under this contract the Steeles went into possession of the property, began the construction of improvements, stocked the land with cattle, and established dairies. The Villa family remained on the ranch in the old ranch house, with certain lands around it, which gave them the means of pasturing their horses. The males of the family were employed by the Steeles in hauling timber, in fencing the land, and in building houses of the Steeles, and generally in the construction of the improvements to be made under the covenants of the lease.

About this time the Villa family were advised by some persons more educated than themselves, that the deed made to their uncle, if attacked in law, might be set aside and they become again possessed of the ranch (now grown very valuable), subject to paying the money advanced by their uncle. Accordingly, five of the children, and the widow, conveyed to a sixth one (Fulgencio), without valuable consideration, all their right in the ranch. At this time Fulgencio was in the employ of the Steeles; but substituting one of his brothers in his place, he left them, proceeded to San Francisco, and on the 26th day of December, 1867, executed to one George Alexander a deed conveying all his right, title, and interest in the said lands. The consideration, as set forth in the deed, was $35,000. But the real money consideration paid was $1000, with a promise that, should Alexander succeed in recovering the premises, the family should receive $35,000 and a conveyance of 350 acres of land, including the ranch house. Alexander, being thus vested with a paper-title to six-sevenths of the land, filed the bill below against Rodriguez and the Steeles, to be declared owner of that portion of the land, subject to the debt which first rested on it.

The bill set forth that the Villa family being poor, and both they and Rodriguez, desirous of avoiding the payment of taxes upon land and mortgage both, had an account concerning the moneys due upon the mortgage, and for the money advanced to effect the redemption from the tax sale; that there was found to be due upon the mortgage, for principal and interest, $8610, and for the moneys advanced to effect the redemption, $1172, with interest from November 12th, 1862, and that it was then agreed, in order to avoid the payment of taxes, both upon the lands and mortgage, that the widow and children should convey the lands to Rodriguez, by deed of conveyance purporting to convey the same in fee, but that such deed should in fact be, and was intended to be a mortgage upon three-sevenths, for the security and payment of the debt of $8610, and upon five-sevenths for the repayment of the $1172, and interest, as aforesaid; and that the mortgagors should have the right to redeem the lands upon the repayment of the said several sums, and interest thereon; that the grantors accordingly remained in possession of the premises, described, as owners; that the deed was, at the time of its execution, intended by all the parties to be, and was, in fact, a mortgage to secure the payment of the two above-named sums, respectively, and that the same was true of the conveyances subsequently made by the two other children.

The bill set forth further, that the Steeles, in 1866, had taken possession of all the lands so granted, except an adobe dwelling-house, situated on them, and about fifty acres of land surrounding it, and had since then continued, and now were in possession of the same, and had used and occupied the same for agricultural and dairy purposes; that the value of this use and occupation had been, and was $3500 a year, and that upon a fair settlement of the rents and profits, nothing would be found to be due Rodriguez, either upon the mortgage debt, or upon the other sum advanced, or otherwise.

Rodriguez and the Steeles answering, denied that the deeds were intended to be a security, and alleged that the transaction was a bon a fide sale for full value; that the widow and children had been in possession only of a small part (twelve acres), and of this but as tenants of Rodriguez; that the use and occupation of the whole tract-it being a wilderness-was not worth more than $100, except in virtue of great outlays by the Steeles, $14,000 at least; and that with these, it did not exceed $500 a year; that the rent of $3500, agreed on, had been punctually paid to Rodriguez; that the widow and children had seen the Steeles put into possession, and the improvements made without any objection; conversing with the Steeles daily, and the Villa children working for them on and about the very premises; and that the Steeles were to be regarded purchasers bon a fide, without notice.

The evidence (which included Rodriguez's account of the matters already given) consisted, with that of others persons, of the testimony of one Charles Dana, the county clerk, who went with Rodriguez to take an acknowledgment of the deed by the widow and the five children. Dana said:

'In the course of a conversation, which was wholly unsolicited, Mr. Rodriguez stated to me, that his object in getting the family to execute the deed was to secure his money, and save the property for the benefit of his sister and her family, while if it remained in their hands he might lose his money, and his sister and her children would lose the whole property. He said they had done wisely in trusting to him, as he intended to deal justly by his sister. He mentioned also by their so doing, he would avoid paying taxes on the mortgage, while as it then stood, they paid on the premises and he on the mortgage. Then he generally mentioned that they would not have cause to regret the steps they had taken. That he would save the property for them, and save himself at the same time. There was a short conversation between Rodriguez and Mrs. Villa, in my presence, and that of the rest of the grantors. Mrs. Villa asked Rodriguez whether the instrument was in strict accordance with the private conversation which had taken place between them, and the agreements which they had made. He answered that it was in accordance with all the agreements and understandings which had been had between the two. Then Mr. Rodriguez requested me to read the deed, which I did. Mrs. Villa, when the reading was over, stated that it did not mention any of the agreements they had made. Rodriguez, to the best of my recollection, stated that it did; that they ought not to distrust him, as he was taking all these steps for their interest. Thereupon they executed the deed, and I took their acknowledgments. At the time when the deed was executed, I observed that the family were not very willing to sign the deed unless under the agreements and conversations which had taken place between them and Mr. Rodriguez, and then the remarks which I have said, I distinctly recollect, were made.'

'The agreement that we made with my brother, when he obtained the signatures, was that it was to be a security for his money. With this understanding, I informed my children of the conversation that took place with my brother. He told me not to distrust him.'

'My mother stated that my uncle said he would take no advantage of us, but wanted merely to get his money, and that we should not distrust him.'

'I signed the paper because my uncle came to the ranch and had a talk with my mother, and requested her that she should speak to us, that we might sign.'A third and fourth, with four other witnesses-ten in all supported this account of the transaction. One of the witnesses, named Cappe-a letter, however, of whom to Rodriguez, treating him as being so far absolute owner as to be able to dispose of the property, was produced-said:

'Mr. Rodriguez came from Monterey, and came to see me, and said he wanted to know what lawyer he could employ to make some papers. I told him Mr. Van Ness. Then we went to see Van Ness next day. He told me that he wanted to have a deed made from his sister and all her children, to secure him for his debt which they owed to him, because he was paying taxes for the property and the mortgage, being, both the property and the mortgage, the same thing, and he paying the taxes twice, and by having a deed made to him, the boys would not be in debt any more.'

So this Van Ness, who, however, had drawn the deeds for an absolute conveyance, and had been for two years trying to purchase the land from Rodriguez:

'Mr. Rodriguez had said to me and written to me several times, that his object was to save the valuable portion of the property for his sister and her children, and that if he could dispose of two leagues lying back towards the mountain, that sum would cancel his debt, and leave all that the family would require.'

To return to the statement of Rodriguez himself. He said:

'I told them, 'I don't wish to speculate upon you, because you are my relations, and you have treated me well; and if I can sell this ranch for enough to reimburse myself for my outlays, as well as interest, I will return you the surplus money, if any; and, also, if I can sell a portion of the ranch, or enough to reimburse myself for my advance, I will do the same, and return to you the unsold portion of the ranch; but if I cannot sell it, I will lose the money."

Rodriguez himself asserted in the most positive manner that the instrument was not meant to be a mortgage of the land itself, but was meant to put the title completely in him. He acknowledged that he had promised to return the surplus. His testimony ran thus:

Question. Was there any agreement between you, that the deed should be a mortgage?

Answer. No, sir; as far as the mortgage was concerned, I had one already. I wanted the title of ownership.

Question. Did you say anything in that conversation to Mr. Dana about giving the surplus to the family?

Answer. I stated at the ranch, and again stated to my sister, afterwards, that I would return the surplus money; but it was no obligation of mine. It may be that I said so to Charles Dana at the time. I told him I was much pleased with having settled my business, and also with being the owner of that ranch; that if I had not interfered with that business they would have been deprived of this ranch many a year ago.

Pedro Rodriguez, a brother of Jacinto, testified:

'In 1864, towards the end of May, my sister told me she had sold the ranch to Jacinto. They were all present except Jos e and Fulgencio. During the whole time they expressed that they sold it with great pleasure. In 1864, my sister told me she wanted to look her a house somewhere in San Luis Obispo, to dwell in, so that whenever Jacinto should require the ranch, she could be ready to leave there with the same pleasure that she had took in selling the ranch.'

Desidero Rodriguez, also a brother, testified that his sister told him of having sold the ranch to Jacinto:

'She stated to me that she lived on the ranch through the favor of my brother, and that whenever he had any use for it she would leave the same; quit the house on it with much pleasure, and go and live even under a tree.'

Jos e Rodriguez, a third brother, stated that he had heard a conversation between the family two or three days before the deed was made, and that they all said that they were going to convey their rights to Jacinto; that they did so with much pleasure; and that after the execution, he heard them all say, that they were living on the ranch 'with his permission; that at any hour, whether in the daytime or at night, they had to quit it.'

The actual quantity of land conveyed was 20,135 acres. Its value in 1864, when the deed was made, was perhaps $20,000, and in 1866, when leased to the Steeles, hardly less than $30,000.

By a statute of California, 'to regulate the interest of money,' passed March 13th, 1850, it is thus enacted:

'3856. § 1. Where there is no express contract in writing, fixing a different rate of interest, interest shall be allowed at rate of 10 per cent. per annum, for all moneys after they become due on any bond, bill, promissory note or other instrument of writing.

'3857. § 2. Parties may agree in writing for the payment of any rate of interest whatever, on money due or to become due on any contract.

'3858. § 3. The parties may, in any contract in writing, whereby any debt is secured to be paid, agree that if the interest on such debt is not punctually paid it shall become a part of the principal, and thereafter bear the same rate of interest as the principal debt.'

The conclusion of the court below, from all the evidence in the case, was that the deed and the testimony of Rodriguez disclosed the true nature of the transaction, viz., that the land was conveyed not in security for, but in satisfaction and extinguishment of the precedent debt; but under the expectation, founded on Rodriguez's assurances, that any surplus of the price at which it might be sold over and above the amount necessary to reimburse Rodriguez, would be by the latter appropriated to the benefit of the family.

Whatever trust, therefore, was created, referred itself, according to this view, to the proceeds, and did not attach itself to the land or in any way impair the right of Rodriguez to dispose of it.

A decree being made accordingly Alexander appealed to this court.

Messrs. M. Blair and F. A. Dick, for the appellant:

The evidence is overwhelming to show that the parties regarded the deed as a continued security for the debt, and that the expectation was that Rodriguez would treat the land as a security and not as his absolute property. To what else than making the transfer a mortgage could the private conversations and understandings, spoken of by Dana, refer to? But whether the instrument was in fact meant as a mortgage equity will, under circumstances like the present, intervene and make it so. It is the case of a sharp, intelligent, trading city brother, dealing with a poor and uneducated widowed sister and his young nephews and nieces, on a farm as yet a wilderness,-his debtors, his supposed beneficiaries,-in a short, cruel way, unknown even to a money-lender.

The principles laid down in Morris v. Nixon, in this court-a leading case, but less strong than ours is-that where confidential relations exist between a debtor and creditor, and a conveyance is made by the debtor to the creditor, it will be treated as a mortgage, if the consideration of the deed is the debt, and this is the construction in equity of such a transaction. The rule does but iterate what the Leading Cases in Equity declare to be a well-settled rule of equity.

The question is not whether the instrument is a mortgage or not; but conceding that it is a mortgage, the question is of what is it a mortgage? The decree below declares that the deed was a transfer with power to sell, a deed, with a view to a claim on the surplus of proceeds when the tract should be sold; in other words, that it was a mortgage on proceeds, and not a mortgage on the land as a thing. We have not appealed. It is the other side who appeals; seeking to reverse the decree below, and to have the mortgage declared to have been one on the land as a res; and not on it as a source of money by sale. That the view taken by the court below was a true view of the nature of the deed; that the 'private conversations,' 'agreements, and understandings' between Rodriguez and his sister, were to this effect, and not to the making of the instrument a mortgage on the land as a thing, all the testimony shows. The view of the court below is consistent with almost all the testimony, and is the only view that is. It is entirely consistent even with the testimony of Dana, relied on as conclusive to show a mortgage of the res; and consistent with what the counsel of the other side assert that the testimony is overwhelming to show; namely, 'that the parties regarded the deed as a continued security for the debt, and that the expectation was, that Rodriguez would treat the land as a security, and not as his absolute property.' The question, here and now, we repeat, is not whether there was a mortgage, but on what the mortgage was; on land or the proceeds of land? If the view taken by the court below be not absolutely consistent with the testimony of some of the Villas, it is to be remembered that these persons testify under the pressure of great interest, and under the greatest temptation, so to shape their testimony, as to get the $35,000 dependent on success. What a lure in such a case to perjury. The view which would look on the matter in the way that we here-on this appeal-contend for, looks on a natural and a fair arrangement. The debt to Rodriguez was a real one; he had advanced his money, gold coin, of course. Monstrous on the Atlantic coast, the rate of interest was not unusual in California, where a frightful taxation on the mortgage, as well as a less one on the land, reduced the net interest to reasonable sums. Rodriguez was in trade. He had need of his money. Perhaps he had himself borrowed it, and if he borrowed he probably borrowed at the rates that he lent. He had redeemed the land. He says: 'Convey the property to me. I sponge your debt. We will avoid double taxes. I will sell the land and repay myself; and if I sell for more than you owe me, you shall have the surplus; if I cannot sell it, I will lose the money.' What was there unconscionable in this? It was a family transaction, to be sure; and with needy relatives. But can a man have nothing to do with needy relatives, under penalty of being regarded in everything that he does do, as a robber? If he cannot give them money, is he to let them perish because he cannot lend it to them? because any arrangements, however advantageous then, will not stand, if afterwards-in years, and by accidents which could not have been foreseen-the property rises in value, and others, strangers, not he, grow rich? The property had to be sold. The Villas could not pay the taxes. Rodriguez had redeemed once, and now was paying double taxes. Who better could sell to advantage than he? And could he not better sell with a title in his own name, than agent of a widow and parcel of children; some liable to marry, die and leave minors, or otherwise embarrass the title? Could he have sued any of the Villas after this transfer for the money lent or advanced to them? No one will assert that he could. If he could not, the transaction was not a mortgage, though it may well be a transfer with a power to sell, leaving a trust on surplus proceeds.

So far as Rodriguez is concerned, it is the same thing whether the instrument is declared a mortgage or an absolute conveyance with a claim on surplus proceeds. But to the Steeles, the difference is enormous. A mortgage takes all their immense improvements. Now the reason why a lease with a right to purchase in fee was made, instead of a conveyance in fee and a mortgage, is sufficiently inferable from what is shown as to the laws of California. It was to avoid double taxation on the same property. The transaction was quite lawful. But if the Steeles are not bon a fide purchasers without notice-which we might assert that they were-certainly they have great equities; equities almost equal to that class of persons. Their vendor came to them with a perfect paper title. No mortgage was on record. They were suffered to take possession without a word of protest, or any intimation of the rights now set up. They were permitted to make the valuable improvements under the eyes of the Villas, the real complainants here. Several of the sons entered into their employ, and a lease was finally procured from them for the house and grounds the family were occupying. For more than a year the rights now set up, if suspected to exist, were entirely concealed.

The appellant was the purchaser of a litigious claim. He paid a mere nominal consideration in cash, and offered to ignorant and illiterate witnesses, the strongest temptation to fraud and perjury. He should not be favored in a court of equity.

Reply: The Steeles were speculators, not purchasers in any sense; certainly not purchasers without notice. For they held under an executory contract, and could ask at best for but a quit-claim deed.

Mr. Justice SWAYNE delivered the opinion of the court.

This is an appeal in equity from the decree of the Circuit Court of the United States for the District of California. The appellant was the complainant in the court below. The decree was against him.

He seeks to redeem the premises in controversy according to the prayer of his bill. The defendant, Rodriguez, claims an indefeasible estate in them as regards the complainant and those from whom he derives title. The other defendants claim under a contract of purchase made with Rodriguez. The validity of the complainant's title, if his grantor had anything to convey, is not questioned. Nor is the original title of his grantor and of those who conveyed to him denied. But the defendants insist that the title of all those parties was vested absolutely in Rodriguez by deeds duly made and recorded before the conveyances to the complainant and his grantor were executed. The complainant insists that Rodriguez, after, as before, the legal title was conveyed to him, held the premises only as security for a debt. This is the hinge of the controversy between the parties.

The entire tract, of which the premises in controversy form a part, was conveyed by Jos e Maria Villavicencia on the 13th of April, 1852, to his seven children. He died in 1853. The widow and five of the children conveyed to Fulgencio, also one of the children, on the 16th of December, 1867. On the 26th of the same month Fulgencio conveyed to the complainant. By virtue of this conveyance he claims six-sevenths of the tract. That proportion is his if his title be valid.

The widow is the sister of the defendant, Rodriguez. On the 4th of December, 1860, she and three of the children, the other four being under age, executed to Rodriguez, for money then borrowed, a note for four thousand dollars, payable a year from date, and bearing interest at the rate of two per cent. a month, payable at the end of each six months thereafter; the interest, 'if not so paid, to be added to the principal and draw interest at the same rate, compounding in the same manner.' A mortgage upon the entire tract was given at the same time by the makers of the note to secure its payment. The mortgage contained a provision, that in default of the payment of the interest as stipulated, the principal should become due and payable at the option of the mortgagee, and that the mortgage might thereupon be foreclosed and the premises sold to satisfy the mortgage debt, and that out of the proceeds of the sale the mortgagee should be authorized to retain, besides his debt and costs, a counsel fee of five per cent. upon the amount found to be due. The mortgage contained a further provision that the mortgagee might pay all taxes and incumbrances on the property, and that the amount of such advances should be secured by the mortgage, and should also bear interest at the rate of two per cent. per month. Rodriguez subsequently paid $1172 to redeem the property from a sale for taxes. On the 29th of April, 1864, the widow and five of the children conveyed to him by a deed absolute in form. It is recited in the deed that the debt secured by the mortgage then amounted to about $10,000. On the 17th of February, 1865, one of the children, who was a minor when this deed was executed, and hence had not joined in it, also conveyed to Rodriguez. Nothing was paid to the grantor. On the 20th of May, 1865, the other and seventh child, who had then become of age, executed a like conveyance. The consideration paid was $100.

On the 22d of July, 1866, Rodriguez demised the premises so conveyed to him to his co-defendants, Edgar W., Isaac C., and Rensselaer E. Steele. The defendant, George Steele, subsequently became interested in this contract by an arrangement with the lessees. The leasehold term was for five years from the 1st of August, ensuing its date. Rodriguez stipulated that at the end of the term or within five days thereafter the lessees might purchase by paying him $25,000 in gold, and upon such payment being so made he covenanted that he would, by a sufficient deed, release and quit-claim to the lessees or their heirs and assigns, free from all incumbrances created by him, all the right and title which he then had to the premises or which he might thereafter acquire from the United States or from any of the heirs of Jos e Maria Villavicencia.

The lessees and their assignees insist that they are bon a fide purchasers without notice.

This proposition cannot be maintained. The contract gave them the option-it did not bind them-to buy at the time specified. That time had not arrived when this bill was filed. Non constat that they would then exercise their election affirmatively and pay the stipulated price. But this point is not material. The doctrine invoked has no application where the rights of the vendee lie in an executory contract. It applies only where the legal title has been conveyed and the purchase-money fully paid. The purchaser then holds adversely to all the world, and may disclaim even the title of his vendor.

This contract calls for a quit-claim deed. The result would be the same if such a deed had been executed and full payment made, without notice of the adverse claim. Such a purchaser cannot have the immunity which the principle sought to be applied gives to those entitled to its protection. This contract may, therefore, be laid out of view. It is no impediment to the assertion of the complainant's rights, whatever they may be. It does not in any wise affect them.

The law upon the subject of the right to redeem where the mortgagor has conveyed to the mortgagee the equity of redemption, is well settled. It is characterized by a jealous and salutary policy. Principles almost as stern are applied as those which govern where a sale by a cestui que trust to his trustee is drawn in question. To give validity to such a sale by a mortgagor it must be shown that the conduct of the mortgagee was, in all things, fair and frank, and that he paid for the property what it was worth. He must hold out no delusive hopes; he must exercise no undue influence; he must take no advantage of the fears or poverty of the other party. Any indirection or obliquity of conduct is fatal to his title. Every doubt will be resolved against him. Where confidential relations and the means of oppression exist, the scrutiny is severer than in cases of a different character. The form of the instruments employed is immaterial. That the mortgagor knowingly surrendered and never intended to reclaim is of no consequence. If there is vice in the transaction the law, while it will secure to the mortgagee his debt, with interest, will compel him to give back that which he has taken with unclean hands. Public policy, sound morals, and the protection due to those whose property is thus involved, require that such should be the law.

The terms exacted for the loan by Rodriguez were harsh and oppressive. The condition of the widow and orphans might well have touched his kindred heart with sympathy. It seems only to have whetted his avarice. Two per cent. a month-and this, if not paid as stipulated, to be compounded-was a devouring rate of interest. It was stipulated that the further advances should bear interest at the same rate. He demanded an adjustment when, from the failure of the crops and other causes, the property was greatly depressed, and he knew the widow and her children had no means of payment. The alternatives presented were an absolute conveyance of the property or a foreclosure and sale under the mortgage. He was anxious to procure the deed, and exulted when he got it. The debt and advances, with the interest superadded, were much less than the value of the property. The note and mortgage were executed by three of the children and the widow-the deed by the widow and five of the children. The other two children conveyed at later periods. The consideration of the conveyance by the four children not parties to the note and mortgage was such that if an absolute title passed, their deeds must be regarded as deeds of gift of their shares of a valuable estate. Dana, who took the acknowledgment of the deed executed by the widow and five children, testifies that the widow inquired whether the deed contained all the agreements between her and Rodriguez. Dana translated it to her. She complained that the agreements were omitted. Rodriguez insisted that they were in the deed, and added 'that they ought not to distrust him, as he was taking all these steps for their interest.' The widow and children then executed the deed. Dana, speaking of a subsequent conversation with Rodriguez, on the same day, 'which was altogether unsolicited,' says: 'he stated to me that his object in getting the Villavicencia family to execute the deed aforesaid was to secure his money, money which he had loaned or advanced to them, and save the property for the benefit of his sister and her family, while if it remained in their hands he might lose his money, and his sister and her children would lose the whole property. He said they had done wisely in trusting him, as he intended to deal justly by his sister.' Rodriguez was examined as a witness. Referring to a period shortly preceding the execution of this deed, he says: 'Afterwards I had with them further conversation, and told them, I don't wish to speculate upon you, because you are my relations, and you have treated me well. If I can sell the ranch for enough to reimburse myself for my outlays as well as interest, I will return you the surplus money, if any; and, also, if I can sell a portion of the ranch, or enough to reimburse myself for my advance, I will do the same, and return to you the unsold portion of the ranch, but if I have bad luck and cannot sell it, I will lose my money.' Elsewhere, in the same deposition, he says: 'I stated at the ranch, and again stated to my sister afterwards, that I would return the surplus money, but it was no obligation of mine. It may be that I said so to Charles Dana at that time.'

He made the same admissions to other persons who are in no wise connected with this litigation. Their testimony is found in the record. It is unnecessary to extend the limits of this opinion by accumulating and commenting upon it. The widow and five of the children, all who have been examined, testify that they understood the deeds to be only security for the debt. This explains the transaction as to those who were not parties to the note and mortgage. There is no other way of accounting for their conduct. The testimony of Rodriguez alone is sufficient to turn the scale against him. He cannot repudiate the assurances upon which his grantors were drawn in to convey. To permit him to do so would give triumph to iniquity. The facts indisputably established bring the case clearly within those principles by the light of which, in determining the rights of the parties, the judgment of this court must be made up. The complainant stands in the place of those from whom he derives title. He is clothed with their rights, and is entitled to redeem six-sevenths of the premises upon paying that proportion of the mortgage debt and interest. The former must be held to include the amount advanced, as well as that represented by the note, and the latter be settled by the terms of the contract and the law of California. The rents, issues, and profits, and improvements made upon the premises must also be taken into the account.

THE DECREE IS REVERSED, and the cause will be remanded to the Circuit Court with directions to enter a decree and proceed

IN CONFORMITY TO THIS OPINION.

title: Villa v. Rodriguez/Opinion of the Court


text: Talk:Villa v. Rodriguez/Opinion of the Court

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


text:
Hanauer v. Doane

ERROR to the Circuit Court for the Eastern District of Arkansas.

This was an action by Doane against L. & J. Hanauer, to recover the amount of two promissory notes, dated in February, 1867. These notes were originally given by the said L. & J. Hanauer, under the firm of L. Hanauer & Co., to one Hunter, in settlement of an account between them and the firm of Hunter & Oakes, which had mostly accrued in the years 1860, 1861, and 1862. A portion of this account was for items of private and family use; the residue was partly for supplies and commissary stores for the Confederate army sold by Hunter & Oakes to L. Hanauer, a recognized supply contractor of the Confederate government; and partly for due-bills issued by Hanauer, as such contractor, to other persons in payment of army stores and supplies, and taken up by Hunter & Oakes at Hanauer's request, under a promise to redeem the same.

The question in the case was whether the notes sued on, having been given for the consideration mentioned, were valid.

The defendants asked the court to charge thus:

'1. If the jury find that Hunter & Oakes sold to L. Hanauer a quantity of goods and chattels knowing that the said Hanauer was purchasing them as supplies for the rebel army to carry on the war against the United States, and that the price of the same form a part of the consideration of the notes sued on, them they will find for the defendants.

'2. If they find that L. Hanauer, acting as a purchasing agent for the Confederate States, in rebellion, gave out notes or due-bills for supplies furnished the rebel army with the knowledge of the persons from whom such purchases were made, of the use to which the said supplies were to be put, and that, during the time when the said due-bills were in the course of being issued, the said Hanauer made an agreement with said Hunter & Oakes that the latter should take up said due-bills and charge them to said Hanauer, the said Hunter & Oakes knowing the purpose for which the same were issued, and that the price of said due-bills so taken up forms any part of the consideration of the notes sued on, then they will find for the defendants.'

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

'If these due-bills were taken up by Hunter & Oakes, after they were issued to the parties to whom they were payable, and upon the promise of Hanauer that he would redeem them, then, as between Hanauer and Hunter & Oakes, the surrender by Hunter & Oakes to Hanauer of such due-bills so taken up by them, would constitute a good and sufficient consideration for the amount thereof. And this is the law, although you may find that the parties to whom the due-bills were payable knew at the time of making the sale of supplies or property to L. Hanauer that he intended to turn the same over to the rebel army, and that Hunter & Oakes had notice of these facts. To affect the validity of the notes sued on, as to that part of the consideration made up of these due-bills, you must be satisfied that Hunter & Oakes were interested in furnishing the supplies to the rebel army for which the due-bills were given, or that what they did in the premises was done for the purpose or with the view of aiding in furnishing supplies to the rebel army, otherwise giving aid and comfort to the rebellion.

'Then, as to the other item, comprising a part of the consideration of the notes sued, the account of Hunter & Oakes against Hanauer as supply contractor for supplies sold to Hanauer. It is asserted that Hunter & Oakes knew that the articles mentioned in this account were purchased by Hanauer to be turned over as supplies to the rebel army, and the defendant maintains that this knowledge of the use intended to be made by Hanauer of these goods made the sale illegal, and that the amount of these sales having been included in the notes sued on, they are illegal and void. This is not the law. Bare knowledge, on the part of Hunter & Oakes, that Hanauer intended or expected to turn the goods and property purchased from them over to the rebel army as supplies for said army would not make such sale of goods and property illegal and void. To make the sale of goods from Hunter & Oakes to Hanauer illegal and void, it must appear that Hunter & Oakes had some concern in furnishing the supplies to the rebel army, or that it was part of the contract between Hunter & Oakes and Hanauer that such goods should go to the support of the rebel army, or that the design of Hunter & Oakes, in making such sale, was to aid in furnishing supplies to the rebel army, or otherwise give aid and comfort to the rebellion. But if the goods were sold by Hunter & Oakes in the common and ordinary course of trade, and the only inducement to the sale of the goods on the part of Hunter & Oakes was the price agreed to be paid by Hanauer for the same, then the sale was a legal and valid sale, although Hunter & Oakes knew that Hanauer intended or expected to turn such goods over to the rebel army.'

Judgment having gone for the plaintiff, the defendant, Hanauer, brought the case here on exceptions to the charge; the question in this court being, of course, the same one as in the court below, to wit, whether the notes sued on, having been given for the consideration mentioned, were valid.

Messrs. Watkins and Rose, for the plaintiffs in error; Mr. A. H. Garland, contra.

Mr. Justice BRADLEY delivered the opinion of the court.

title: Hanauer v. Doane


text: Talk:Hanauer v. Doane

title: Talk:Hanauer v. Doane


text:
Hanauer v. Doane/Opinion of the Court

We have already decided, in the case of Texas v. White, that a contract made in aid of the late rebellion, or in furtherance and support thereof, is void. The same doctrine has been laid down in most of the circuits, and in many of the State courts, and must be regarded as the settled law of the land. Any contract, tinctured with the vice of giving aid and support to the rebellion, can receive no countenance or sanction from the courts of the country. Are the notes in suit of this kind? A portion of their consideration was stores and supplies furnished to the army contractor of the Confederate government, and another portion was due-bills issued for the same consideration, and received by Hunter & Oakes with full notice of their character. If either of these portions of the consideration on which the notes were given was illegal, the notes are void in toto. Such is the elementary rule, for which it is unnecessary to cite authorities.

On the trial of the cause below, the judge in charging the jury, instructed them that if Hunter & Oakes took up Hanauer's due-bills for value, at his request and on the faith of his promise to redeem them, made after he had given them out for supplies, these due-bills would constitute a good consideration for the notes. We do not think that this was a correct statement of the law. If Hanauer had borrowed money from Hunter & Oakes to redeem the due-bills himself, the transaction would have been different, and the loan of money would have been legal, although Hunter & Oakes had known for what purpose Hanauer wanted the money. They would have been one degree farther removed from the unlawful transaction. But, instead of this, they became the holders of the due-bills, knowing for what purpose and on what consideration they had been issued; and hence their title was no better than that of the original holders. To vitiate this title it was not necessary, as stated by the judge, that Hunter & Oakes should have been interested in furnishing the supplies for which the due-bills were given; nor that what they did should have been done with the view of aiding the rebel cause. If the due-bills were invalid in the hands of the original holders, they were invalid in the hands of Hunter & Oakes. Whether they were invalid depends on the solution of the question whether the sales of supplies to Hanauer, for the use of the Confederate army, was, or was not, an illegal transaction. We think it was. But on this subject it is proper to examine the views of the judge at the trial.

With regard to that portion of the consideration of the notes which consisted of supplies sold by Hunter & Oakes to Hanauer for the Confederate army, the judge instructed the jury that bare knowledge on the part of Hunter & Oakes that Hanauer intended, or expected, to turn the goods over to the rebel army, would not make the sale illegal and void, but that, to make it so, it must appear that Hunter & Oakes had some concern in furnishing the supplies to the rebel army, or intended to aid therein. In this instruction we think the judge erred. With whatever impunity a man may lend money or sell goods to another who he knows intends to devote them to a use that is only malum prohibitum, or of inferior criminality, he cannot do it, without turpitude, when he knows, or has every reason to believe, that such money or goods are to be used for the perpetration of a heinous crime, and that they were procured for that purpose. In the words of Chief Justice Eyre, in Lightfoot v. Tenant, 'the man who sells arsenic to one who, he knows, intends to poison his wife with it, will not be allowed to maintain an action on his contract. The consideration of the contract, in itself good, is there tainted with turpitude which destroys the whole merit of it. . . . No man ought to furnish another with the means of transgressing the law, knowing that he intended to make that use of them.' On this declaration Judge Story remarks: 'The wholesome morality and enlarged policy of this passage make it almost irresistible to the judgment; and, indeed, the reasoning seems positively unanswerable.' Can a man furnish another with the means of committing murder, or any abominable crime, knowing that the purchaser procures them, and intends to use them, for that purpose, and then pretend that he is not a participator in the guilt? Can he wrap himself up in his own selfishness and heartless indifference and say, 'What business is that of mine? Am I the keeper of another man's conscience?' No one can hesitate to say that such a man voluntarily aids in the perpetration of the offence, and, morally speaking, is almost, if not quite, as guilty as the principal offender.

No crime is greater than treason. He who, being bound by his allegiance to a government, sells goods to the agent of an armed combination to overthrow that government, knowing that the purchaser buys them for that treasonable purpose, is himself guilty of treason or a misprision thereof. He voluntarily aids the treason. He cannot be permitted to stand on the nice metaphysical distinction that, although he knows that the purchaser buys the goods for the purpose of aiding the rebellion, he does not sell them for that purpose. The consequences of his acts are too serious and enormous to admit of such a plea. He must be taken to intend the consequences of his own voluntary act.

The decision of Chief Justice Eyre, in the case above referred to, has been followed in several other English cases. It was followed by Lord Ellenborough in Langton v. Hughes, where a druggist sold drugs of a noxious and unwholesome nature to a brewer, knowing that they were to be used in his brewery, contrary to law, and it was held that he could not recover the price. It was also followed by Chief Justice Abbott, in Cannan v. Bryce, where it was held that money lent to a man to enable him to settle his losses on an illegal stockjobbing transaction, could not be recovered back. Said the Chief Justice: 'If it be unlawful in one man to pay, how can it be lawful for another to furnish him with the means of payment? . . . The means were furnished with a full knowledge of the object to which they were to be applied, and for the express purpose of accomplishing that object.' In that case the lender had no interest whatever in the unlawful transaction, and was only connected with it, as Hunter & Oakes were in this case, by knowing the object for which the money was borrowed. These cases were followed by the Court of Errors of New York, in the case of De Groot v. Van Duzer. Chancellor Walworth, in that case, observes that, 'those cases in which an independent contract has been held void from a mere knowledge of the fact of the illegal end in view, proceed upon the ground that the party having such knowledge intended to aid the illegal object at the time he made the contract.'

There are cases to the contrary; but they are either cases where the unlawful act contemplated to be done was merely malum prohibitum, or of inferior criminality; or cases in which the unlawful act was already committed, and the loan was an independent contract, made, not to enable the borrower to commit the act, but to pay obligations which he had already incurred in committing it. Of the latter class was the case of Armstrong v. Toler; of the former, those of Hodgson v. Temple, and others cited in the argument. In Hodgson v. Temple, where a buyer of spirituous liquors was known to be carrying on a rectifying distillery and a retail liquor shop at the same time, contrary to law, the vendor of the spirits was held entitled to recover the price. Sir James Mansfield said: 'The merely selling goods, knowing that the buyer will make an illegal use of them, is not sufficient to deprive the vendor of his just right of payment; but to effect that, it is necessary that the vendor should be a sharer in the illegal transaction.' This seems to have been the view taken by the judge who tried this cause below, and which he applied to this case. In our judgment it is altogether too narrow a view of the responsibility of a vendor in such a case as the present. Where to draw the precise line between the cases in which the vendor's knowledge of the purchaser's intent to make an unlawful use of the goods, will vitiate the contract, and those in which it will not, may be difficult. Perhaps it cannot be done by exact definitions. The whole doctrine of avoiding contracts for illegality and immorality is founded on public policy. It is certainly contrary to public policy to give the aid of the courts to a vendor who knew that his goods were purchased, or to a lender who knew that his money was borrowed, for the purpose of being employed in the commission of a criminal act, injurious to society or to any of its members. This is all that we mean to decide in this case.

JUDGMENT REVERSED, AND A NEW TRIAL ORDERED.

title: Hanauer v. Doane/Opinion of the Court


text: Talk:Hanauer v. Doane/Opinion of the Court


text:
Thomas v. City of Richmond

ERROR to the Circuit Court for the Distirct of Virginia, on a suit upon certain notes issued during the rebellion by the city corporation of Richmond; the case being thus:

A statute Virginia passed in 1854, and reproduced in the code of 1860, thus enacts:

'SECTION 15. All members of any association, or company, that shall trade or deal as a bank, or carry on banking without authority of law, and their officers and agents therein, shall be confined in jail not more than six months, and fined not less than $100, nor more than $500.

'SECTION 16. Every free person, who, with intent to create a circulating medium, shall issue, without authority of law, any note or other security, purporting that money or other thing of value is payable by, or on behalf of, such person, and every officer and agent of such person therein, shall be confined in jail,' &c.

'SECTION 17. If a free person pass or receive in payment any note or security, issued in violation of either of the two preceding sections, he shall be fined not less than $20 nor more than $100.'

'SECTION 19. In every case where a note of a less denomination than $5 is offered or issued as money, whether by a bank, corporation, or by individuals, the person, firm, or association of persons, corporation, or body politic so issuing, shall pay a fine of $10.'

By the charter of the city of Richmond, that city 'may contract or be contracted with,' and is endowed generally with 'all the rights, franchises, capacities, and powers appertaining to municipal corporations.' The charter also provides that 'the council of the city may in the name and for the use of the city contract loans, and cause to be issued certificates of debt or bonds.'

In this state of things the city of Richmond, in April, 1861, upon the breaking out of the rebellion, passed an ordinance for the issue by the city of $300,000, of corporation notes of $2, $1, 50 cents, and 25 cents; and the notes were accordingly issued; the city receiving in exchange the bank notes of the State then in circulation, between which and gold the difference at the time, compared with what it became subsequently, was small; five per cent. to ten per cent.

On the 19th March, 1862, and the 29th of the same month and year, a so-called 'legislature of Virginia,' the body being composed of representatives from parts of the State in rebellion against the Federal government, passed an act, by whose language the issue of the sort of notes in question was made valid, and the city obliged to redeem them.

In October, 1868, the rebellion being now suppressed, and the city refusing to pay the notes, one Thomas and others, holders of a quantity of them, brought assumpsit against the city of Richmond, in the court below, to recover certain ones which they held. The declaration contained a special count on the notes and the common money counts. The defendants pleaded the general issue and the statute of limitations. A jury being waived, the case was tried by the court, which found:

1st. That the notes were void when they were issued, because they were issued to circulate as currency, in violation of the law and policy of the State of Virginia, and,

2d. That the said notes were not made valid or recoverable by the acts of the 19th March, 1862, and 29th March, 1862, or either of them, because the said acts were passed by a legislature not recognized by the United States, and in aid of the rebellion.

The court accordingly gave judgment for the defendant. To review that judgment the case was brought here by the plaintiff.

Mr. Conway Robinson, for the plaintiff in error:

1. Under the powers which the city of Richmond had, by its charter, it might receive from those who would lend or advance it, the amount now in question, and might agree to refund it.

2. The amount has been actually received by the city in money or its equivalent. This money the city is under an obligation to refund, and there is a right of action for it as money lent or money received. 'It is not the policy of the law,' says Alderson, B., 'that he who has another man's money may keep it.'

Whether the notes be valid or void, the holders may recover on the money counts. Under the statute of 9 Anne, c. 16, a note for money lent to game with was void; yet an action was maintained for money lent under a parol contract. In A. D. 1760, where the bill of exchange included 300, lent by the plaintiff to Sir John Bland, at the time and place of play, though by force of the bill the plaintiff could not recover anything (the statute making that utterly void), yet the King's Bench gave judgment for  300, under the common count for money lent.

Whatever may be the structure of the statute of Virginia in respect to prohibition and penalty about small notes, it is not to be taken for granted that the legislature meant that contracts in contravention of it were to be void in the sense that they were not to be enforced in a court of justice.

But if this were otherwise, prior enactments against small notes is repealed, by the act of March 19th, 1862, so far as in conflict therewith; and by the latter there is a release of forfeitures and penalties incurred before its passage; neither is there anything in Texas v. White, which should prevent the latter act having full effect.

Mr. John A. Meredith, contra, for the city.

Mr. Justice BRADLEY delivered the opinion of the court.

title: Thomas v. City of Richmond


text: Talk:Thomas v. City of Richmond

title: Talk:Thomas v. City of Richmond


text:
Thomas v. City of Richmond/Opinion of the Court

First. The court finds as a fact that the notes upon which the present action is brought were issued to circulate as currency; and, as matter of law, that this was in violation of the law and policy of Virginia, and that, therefore, the notes were void.

The first question is, whether the issue of notes as currency by the Common Council of the city of Richmond, in April, 1861, was against the law and policy of Virginia. The issue of notes as a common currency, or circulating medium, is guarded with much jealousy by all governments as touching one of its most valuable prerogatives, and as deeply affecting the common good of the people. Almost every State has stringent laws on the subject, and it may be said to be against the public policy of the country to allow individuals or corporations to exercise this prerogative without express legislative sanction. The State of Virginia, like all the other States, had a law of this kind in operation at the time the notes in question were issued. The issue of the notes in question was clearly in violation of this law; and it will be perceived that the 17th section makes the receipt of such notes in payment, as well as the issue and passing of them, a penal offence.

But the charter of the city of Richmond has been referred to for the purpose of showing that the Common Council had power to issue such notes. One of the grants of power relied on is, that the city is made a corporation with power to contract and be contracted with, and generally with 'all the rights, franchises, capacities, and powers appertaining to municipal corporations.' In a community in which it is against public policy, as well as express law, for any person or body corporate to issue small bills to circulate as currency, it is certainly not one of the implied powers of a municipal corporation to issue such bills. Such a corporation 'can exercise no power which is not, in express terms, or by fair implication, conferred upon it.' Another clause of the charter to which reference has been made authorizes the council to borrow money and to issue the bonds or certificates of the city therefor. But this cannot be seriously urged as conferring the right to issue such bills as those now in suit. Such city securities as those authorized by the charter are totally different from bills issued and used as a currency or circulating medium. The distinction is well understood and recognized by the whole community. A power to execute and issue the one class cannot, without doing violence to language, be deemed to include power to issue the other. We do not hesitate to say, therefore, that the Common Council of Richmond had no power or authority to issue such paper, and that they could not bind the city thereby.

It is contended, however, that although the notes themselves should be deemed void, yet the city received the money therefor, and ought not, in conscience, to retain it; and, therefore, that the action can be maintained on the count for money had and received.

If the defendant were a banking or other private corporation, and had issued notes contrary to law, and had incurred penalties therefor, no penalty being imposed upon the receiver or holder of the notes, this argument might be sound. In the case of The Oneida Bank v. The Ontario Bank, in which the defendant had issued post notes contrary to a statute of New York, it was held that the holder could recover the money advanced therefor. 'The argument for the defendant against this position,' says Chief Justice Comstock, 'rests wholly on the idea that Perry, in receiving the post-dated drafts, was as much a public offender as the bank or its officers issuing them. . . . But such were not the relations of the parties. . . . Whatever there was of guilt, in the issuing of the drafts, it was the creature of the statute. . . . By that authority, and that alone, the bank is prohibited from issuing, but not the dealer from receiving; and the punishment is denounced only against the individual banker, or the officers, agents, and members of the association. . . . If the issuing of the drafts was prohibited, and if they were also void, Perry, nevertheless, had a right to demand and recover the sums of money which he actually loaned to the defendant.' This is in accordance with the general principles of law on this subject. Lord, Mansfield, in Smith v. Bromley, as long ago as 1760, laid down the doctrine, which has ever since been followed, in these whords: 'If the act be in itself immoral, or a violation of the general laws of public policy, both parties are in pari delicto, but where the law violated is calculated for the protection of the subject against oppression, extortion, and deceit, and the defendant takes advantage of the plaintiff's condition or situation, then the plaintiff shall recover.' In that case the plaintiff had given the defendant money to sign her brother's bankrupt certificate, and she was allowed to recover it back, the law prohibiting any creditor from receiving money for such a purpose. Whilst the general principle has been frequently recognized, the application of it to particular cases has been somewhat diverse. Mr. Frere, in his note to Smith v. Bromley, thus sums up the result of the cases: A recovery can be had, as for money had and received (1st) where the illegality consists in the contract itself, and that contract is not executed-in such case there is a locus poenitentiae, the delictum is incomplete, and the contract may be rescinded by either party; (2d) where the law that creates the illegality in the transaction was designed for the coercion of one party and the protection of the other, or where the one party is the principal offender and the other only criminal from a constrained acquiescence in such illegal conduct in such cases there is no parity of delictum at all between the parties, and the party so protected by the law, or so acting under compulsion, may, at any time, resort to the law for his remedy, though the illegal transaction be completed.

Now, in cases of bills, or other obligations, illegally issued by a banking or other private corporation, which has received the consideration therefor, it would enable them to commit a double wrong to hold that they might repudiate the illegal obligations, and also retain the proceeds. Hence, where the parties are not in pari delicto, actions are sustained to recover back the money or other consideration received for such obligations, though the obligations themselves, being against law, cannot be sued on. The corporation issuing the bills contrary to law, and against penal sanctions, is deemed more guilty than the members of the community who receive them whenever the receiving of them is not expressly prohibited. The latter are regarded as the persons intended to be protected by the law; and, if they have not themselves violated an express law in receiving the bills, the principles of justice require that they should be able to recover the money received by the bank for them. But if the parties are in pari delicto, as, if the consideration as well as the bills or other obligation is tainted with illegality or immorality, as it would be if loaned or advanced for the purpose of aiding in any illegal or immoral transaction, or if the receiving as well as passing or issuing the bills is forbidden by law, then the holder is without legal remedy, and the parties are left to themselves.

But, in the case of municipal and other public corporations, another consideration intervenes. They represent the public, and are themselves to be protected against the unauthorized acts of their officers and agents, when it can be done without injury to third parties. This is necessary in order to guard against fraud and peculation. Persons dealing with such officers and agents are chargeable with notice of the powers which the corporation possesses, and are to be held responsible accordingly. The issuing of bills as a currency by such a corporation without authority is not only contrary to positive law, but, being ultra vires, is an abuse of the public franchises which have been conferred upon it; and the receiver of the bills, being chargeable with notice of the wrong, is in pari delicto with the officers, and should have no remedy, even for money had and received, against the corporation upon which he has aided in inflicting the wrong. The protection of public corporations from such unauthorized acts of their officers and agents is a matter of public policy in which the whole community is concerned. And those who aid in such transactions must do so at their peril.

According to these principles no recovery could have been had against the city, either on the bills themselves or on a claim for money had and received. It was against the law of the State to issue them. It was a penal offence in both the person who paid and the person who received them, and they were issued by a municipal corporation which had no power, and which was known to have no power to issue them.

It was insisted further, however, that the legislature, in March, 1862, passed laws which authorized, and even required, the city to redeem these bills. But,

Secondly. The court found that these laws were passed by a legislature not recognized by the United States and in aid of the rebellion, and, therefore, that these notes were not made valid thereby.

The fact thus found, that the laws referred to were passed in aid of the rebellion, is conclusive on the subject. We have already decided, in Texas v. White, and just now in the case of Hanauer v. Doane, that a contract made in aid of the rebellion is void, and cannot be enforced in the courts of this country. The same rule would apply, with equal force, to a law passed in aid of the rebellion. Laws made for the preservation of public order, and for the regulation of business transactions between man and man, and not to aid or promote the rebellion, though made by a mere de facto government not recognized by the United States, would be so far recognized as to sustain the transactions which have taken place under them. But laws made to promote and aid the rebellion can never be recognized by, or receive the sanction of, the courts of the United States as valid and binding laws. To recognize them as such would be derogatory to the dignity and authority of the government of the United States, and would be setting too light an estimate upon so great an offence.

JUDGMENT AFFIRMED.


text: Talk:Thomas v. City of Richmond/Opinion of the Court


text:
Smith v. Sheeley

ERROR to the Circuit Court for the District of Nebraska; the case being thus:

In February, 1857, Mitchell being an occupant of part of a lot in the now city of Omaha-a site which at that time was still part of the public lands-gave to Redick a power of attorney to 'sell and convey' it. The instrument, after this grant of power, went on:

'And the said Redick is hereby authorized and empowered to sell and convey such interest as I have in the said lots of land, and such title as I may have to the same, and no other or better title. And it is hereby understood, and these presents are upon this express consideration, that I shall not hold myself personally liable or responsible for the acts of my said attorney in conveying any of the aforesaid lots beyond quit-claiming whatever titles I have in said premises, without recourse on me, and to that extent and that only.'

In the following March the mayor of Omaha, being empowered by the Territorial legislature of the Territory, and availing himself of the powers given to him under what is known as the Town Site Act of Congress, of May 23d, 1844, 'for the relief of the citizens of towns upon lands of the United States,' paid a certain sum into the Treasury of the United States and got a grant by patent of 138 acres of the public land, where the town of Omaha now stands, 'in trust for the several use and benefit of the occupants of land it the city of Omaha, according to their respective interests.' The lot which Mitchell had authorized Redick to convey was embraced in this grant; and in April, 1857, the mayor, reciting the patent to him in trust, as already stated, for the occupants of lands in Omaha, conveyed the lot to Mitchell.

Redick, now, May, 1857, under his old power of attorney, made before the issue of the patent to the mayor, or the deed of the mayor to Mitchell, made a deed of 'quit-claim' of the lot in consideration of $1175, which he received, to the 'Nehama Valley Bank.' This 'bank' was one which the Territorial legislature of Nebraska, in February, 1857, had passed an act to incorporate. The terms of the charter gave it 'power to issue bills, deal in exchange, and to buy and possess property of every kind.' Congress, however, as long ago as 1836, had passed an act providing—

'That no act of the Territorial legislature of any of the Territories of the United States, incorporating any bank or any institution with banking powers or privileges, hereafter to be passed, shall have any force or effect whatever, until approved and confirmed by Congress.'

The act of the Nebraska legislature never was approved or confirmed by Congress.

In this condition of things Mitchell, in May, 1863, in consideration of $1, as appeared by the instrument, made a deed of quit-claim of the same lot to one Smith, the lot being then worth $2000, and under that title Smith brought ejectment in the court below. Judgment being given against him, he brought the ease here on error.

Mr. J. M. Woolworth, for the plaintiff in error:

1. The authority to Redick limited, in express terms, his power to convey such title as Mitchell at the time of making the power had. Mitchell at that time had no title to the lot. He occupied it only. This uncertain and shadowy right he authorized Redick to convey, and no other.

2. The charter of the so-called 'Nehama Valley Bank' had not 'any force or effect whatever.' It was therefore void. There was thus no grantee. The deed conveyed nothing, and Mitchell still remained owner. Being owner, his title passed to Smith, who ought to have had judgment.

Messrs. J. I. Redick and C. Briggs, contra:

1. The power is 'to sell and convey.' The subsequent language was not to confine the power to the then title, but to limit the grantor's responsibility.

2. In Orchard v. Hughes, this same act of Congress, of 1836, was set up to avoid paying a debt. The defence was not sustained. The effort here is of as bad a kind.

Mr. Justice DAVIS delivered the opinion of the court.

title: Smith v. Sheeley


text: Talk:Smith v. Sheeley

title: Talk:Smith v. Sheeley


text:
Smith v. Sheeley/Opinion of the Court

It is insisted, in behalf of the plaintiff in error, that Redick had no authority to make this deed in Mitchell's name, because the power under which he acted directed him to convey such title as Mitchell then had, which was only a possessory right. It is true that in February, 1857, when the power of attorney was given, Mitchell had not the legal title to the lot, but as the mayor of Omaha conveyed it to him a short time afterwards, it is a fair presumption that he was, at the date of the execution of the power, one of the class of persons who were entitled to a deed from the mayor under the provisions of the Town Site Act of 1844. If so, he was to all practical purposes the real owner of the property, and intended that Redick should sell and convey something more than a 'mere uncertain and shadowy right,' as the plaintiff in error claims.

But, in the state of the proof it is not necessary to look into the power of attorney to see the extent of the authority conferred, because the subsequent conduct of Mitchell renders it an unimportant subject of inquiry. It would be grossly unjust for Mitchell, having acquired the legal title, to let Redick, under a power of attorney executed before the title was obtained, make a deed in his name to the bank, appropriate to himself the money received for the sale of the property, and then, six years afterwards, disavow the act of his attorney on the plea that he had exceeded his authority. The law will not permit this to be done, and estops Mitchell from setting up such a claim.

It is insisted, however, as an additional ground of objection to this deed, that the bank was not a competent grantee to receive title. It is not denied that the bank was duly organized in pursuance of the provisions of an act of the legislature of the Territory of Nebraska, but, it is said it had no right to transact business until the charter creating it was approved by Congress. This is so, and it could not legally exercise its powers until this approval was obtained, but this defect in its constitution cannot be taken advantage of collaterally. No proposition is more thoroughly settled than this, and it is unnecessary to refer to authorities to support it. Conceding the bank to be guilty of usurpation, it was still a body corporate de facto, exercising at least one of the franchises which the legislature attempted to confer upon it, and in such a case the party who makes a sale of real estate to it, is not in a position to question its capacity to take the title, after it has paid the consideration for the purchase.

If, prior to the execution of the deed, there had been a judgment of ouster against the corporation at the instance of the government, the aspect of the case would be different.

There is no error in the record, and the judgment is

AFFIRMED.

title: Smith v. Sheeley/Opinion of the Court


text: Talk:Smith v. Sheeley/Opinion of the Court


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United States v. New Orleans Railroad

APPEAL from the Circuit Court for the District of Kentucky.

This was a suit instituted by the United States, as the holder of a number of the first and second mortgage bonds of the New Orleans and Ohio Railroad Company, against that company, and one Trimble, trustee of them, to foreclose the mortgages given to secure the said bonds. These mortgages were executed in 1858 and 1860, respectively, and convered all the company's property of every kind, with a stipulation to include also all future acquired property. The trustee of the mortgages and several individual bondholders were made parties, and the bill contained proper allegations as to the impracticability of making all of them parties. After a final decree of foreclosure and sale, and whilst the execution was in the hands of the marshal, it transpired that a portion of the rolling stock, consisting of two locomotives and ten cars, had been sold to the railroad company by the United States in 1866, and that, simultaneously with the sale, the company gave to the United States a bond for the purchase-money, wherein it was stipulated that the latter should have a lien therefor upon the property sold, and that the company should not sell it or part with it until payment of the price, without the written consent of the United States. Hereupon the respective solicitors of all the parties, complainant and defendant, directed the marshal, in writing, not to sell the said locomotives and cars. The rest of the property was sold, but brought less than the amount of the mortgage bonds.

The parties, then, by their respective solicitors, filed a written statement of the facts in relation to said locomotives and cars, adding to what is above stated the further fact that the bond given for the purchase-money thereof was not recorded, and that its contents were unknown to all the bondholders of the railroad company except Mr. Trimble, the trustee of the mortgages. Upon this statement the question whether the United States had a superior equity in this property to that of the bondholders under the mortgages was submitted to the court for its decision, and the court decided that they had a superior equity, and made a decree to that effect. This was the decree appealed from.

Messrs. Carlisle and McPherson, for the appellant:

1. The court below has undertaken to adjudicate the question of property as between the United States on one part and the other bondholders on the other part, without any pleadings upon which the decree could be based, and without any such proceedings, however irregular, as would answer the purpose of proper pleadings and process, by giving the bondholders an opportunity to litigate the question. It has thus been acting in a case where it had no jurisdiction.

2. It has been settled in this court that a railroad company can mortgage not only its acquisitions in esse or presenti, but those in posse or futuro as well. A mortgage of property to be acquired, was enforced to the displacement of a vendor's lien in the recent case of Galveston Railroad Company v. Cowdrey. The mortgage here was of that sort; and on the authority of that case should displace the lien of the United States.

Mr. B. H. Bristow, Solicitor-General, and Mr. C. H. Hill, Assistant Attorney-General, contra.

Mr. Justice BRADLEY delivered the opinion of the court.

title: United States v. New Orleans Railroad


text: Talk:United States v. New Orleans Railroad


text:
United States v. New Orleans Railroad/Opinion of the Court

The appellants contend, first, that the court had no authority to make the decision; that the proceeding was wholly irregular, without proper pleadings, and coram non judice. This objection hardly comes with a good grace from the appellants, who all joined in submitting the question to the court. But the jurisdiction was undoubted. A court of equity, in a suit for the foreclosure of a mortgage, clearly has cognizance of all questions relating to priority of lien on the property in litigation, as between the parties to the suit and those whom they lawfully represent. The mode in which the jurisdiction shall be exercised is not so much a matter of substance as of form. Ordinarily a reference to a master before the final decree would be the formal method to pursue, but where, from oversight or other cause, this has been omitted, the parties may certainly agree (as was done here) to submit the matter to the court, upon a statement of facts, after the decree.

The appellants contend, in the next place, that the decision upon the facts was erroneous; that the mortgages, being prior in date to the bond given for the purchase-money of these locomotives and cars, and being expressly made to include after-acquired property, attached to the property as soon as it was purchased, and displaced any junior lien. This, we apprehend, is an erroneous view of the doctrine by which after-acquired property is made to serve the uses of a mortgage. That doctrine is intended to subserve the purposes of justice, and not injustice. Such an application of it as is sought by the appellants would often result in gross injustice. A mortgage intended to cover after-acquired property can only attach itself to such property in the condition in which it comes into the mortgagor's hands. If that property is already subject to mortgages or other liens, the general mortgage does not displace them, though they may be junior to it in point of time. It only attaches to such interest as the mortgagor acquires; and if he purchase property and give a mortgage for the purchase-money, the deed which he receives and the mortgage which he gives are regarded as one transaction, and no general lien impending over him, whether in the shape of a general mortgage, or judgment, or recognizance, can displace such mortgage for purchase-money. And in such cases a failure to register the mortgage for purchase-money makes no difference. It does not come within the reason of the registry laws. These laws are intended for the protection of subsequent, not prior, purchasers and creditors.

Had the property sold by the government to the railroad company been rails, as in the case of the Galveston Railroad Company v. Cowdrey, or any other material which became affixed to and a part of the principal thing, the result would have been different. But being loose property, susceptible of separate ownership and separate liens, such liens, if binding on the railroad company itself, are unaffected by a prior general mortgage given by the company, and paramount thereto.

In the case before us, the United States, at the time of making the sale, reserved a lien on the property, and imposed a condition of non-alienation until the price should be paid. Taken all together the transaction amounts to a transfer sub modo, and the lien must be regarded as attaching to the property itself, and as paramount to any other liens arising from the prior act of the company.

DECREE AFFIRMED.


text: Talk:United States v. New Orleans Railroad/Opinion of the Court


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The Spray

APPEAL from the Circuit Court for the District of California, in a case of collision; the facts being thus:

On the morning of the 4th of March, 1868, the schooners Lane and Spray were proceeding along the coast of California, the Lane bound for Mendocino harbor and the Spray for Little River, a very small harbor, or as it was called in the evidence, a 'hole in the coast,' about three miles further to the southward. Resort is had by vessels to this place only for the purpose of getting lumber, and the wharfage is so bad that but one vessel can load at a time; considerable detentions as regards vessels not reaching the wharf being the consequence. The Lane was considerably in advance of the Spray. The master of the Lane did not enter Mendocino harbor, as he intended, because of a signal on shore placed there to warn vessels that it would be dangerous to enter the harbor at that time, and accordingly he ran down the coast with the intention of going into Little River. Having accomplished about two-thirds of the distance between the harbors, and finding he was too far in-shore to weather the ledge of rocks which forms the northerly side of the entrance to Little River harbor, he jibed his mainsail and stood off-shore. In doing this his main sheet parted, and thereupon he lowered his mainsail, hoisted his foresail, and stood off under his foresail until he could repair the damage. As soon as this was effected he lowered his foresail, wore his vessel around, and stood directly in for the harbor, under mainsail and jib. At this time he was distant from the shore about one and a half miles, and directly off the entrance to the harbor, and the Spray was distant from the Lane at least five miles, and running three or four times as fast. The master of the Spray, who, it appeared, mistook the Lane for a vessel called the Ellen Adelia, and which he knew was going, as he was himself, after lumber, did not change her course on account of the Lane, and in passing the outer edge of the ledge of rocks, if not over the reef itself, the Spray, owing to the ground-swell made by the breakers, collided with the Lane, striking the vessel with her stem, about midships. The course of the vessels and their position with reference to each other will be better understood by stating that, after the Lane headed in to the harbor, she sailed on the side of a right-angled triangle, the Spray upon its hypothenuse, and they met where these joined.

The District Court, considering that the collision was caused by an attempt on the part of the Spray to cross the track and get ahead of the Lane, when the latter was too far in advance of her to do so, condemned the Spray, and the Circuit Court affirmed the decree. From that decree this appeal came.

Mr. T. T. Crittenden, for the appellant; Mr. C. E. Whitehead, contra.

Mr. Justice DAVIS delivered the opinion of the court.

title: The Spray


text: Talk:The Spray

title: Talk:The Spray


text:
The Spray/Opinion of the Court

This case has been twice adjudged against the appellant. The question presented by the record is purely one of fact, and it is not only clear that the lower courts have done the appellants no wrong, but that the weight and effect of the evidence does not admit of controversy. In such a state of case we do not feel called upon, in order to vindicate our judgment, to make any extended comment on the testimony, nor would it serve any useful purpose to do so. We shall, therefore, content ourselves with stating the conclusions we have reached concerning the case.

It is proved that the Lane was in the channel, pursuing the usual course of vessels entering the harbor, while the Spray took an unusual course to effect her object. In doing this her master jeoparded his own boat, and through the ground-swell caused by the breakers, the Spray was thrown into the Lane, and produced the injury. But her master had no right, in his eagerness to get ahead of the Lane, to run his boat into breakers, which rendered her unmanageable. It is conceded that the Lane, being in advance, had the prior right to enter the harbor, but it is urged that her conduct in standing off-shore and lowering her mainsail justified the master of the Spray in adopting the conclusion that she did not entertain the purpose of entering the harbor. It may be true, that while the boat was in this condition, a watchful seaman would have been deceived as to her intention, but this cannot be said after she wore round and headed directly for the harbor. This change of course was a notification of the actual purpose of the Lane, and was effected time enough for the master of the Spray, if observant, to have avoided the collision. Instead, however, of going further out into the open sea, as he should have done after this change of course, he continued in the same track he was pursuing, regardless of his own safety or the rights of others. It is a little singular that he should have been in such a hurry to reach the harbor if in good faith he believed the Lane was bound further down the coast. But the theory that he thought the schooner ahead was not going into the Little River is an afterthought. It is clear from the evidence that he supposed this vessel was the Ellen Adelia, and that he knew she was bound for the same port as himself. And it is equally clear that he wanted to get there in advance of her, if he could, so as to obtain the first load. It seems that the principal objects of the boats engaged in the Little River trade is to obtain lumber, and that they are often detained there a considerable length of time for want of proper facilities for loading. Indeed, so limited are these facilities that only one vessel can be loaded at a time, and necessarily the one which arrives first is served first. With knowledge of this condition of things, and for the purpose of securing the prior right, the master of the Spray ventured upon dangerous ground in order to cut across the schooner, and must suffer the consequences of his own recklessness.

JUDGMENT AFFIRMED.

title: The Spray/Opinion of the Court


text: Talk:The Spray/Opinion of the Court

title: Talk:The Spray/Opinion of the Court


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Shoemaker v. Kingsbury

ERROR to the Circuit Court for the District of Kansas.

Suit for damages for personal injuries happening on a ran car; the case being thus:

In 1867, Shoemaker and another were contractors for building the Eastern Division of the Union Pacific Railway in Kansas; and in October of that year they ran a construction train over a portion of the road, carrying material for it. To this train was attached what was called a 'caboose car'-a car for the accommodation of the men connected with the train, who had their 'sleeping bunks' in this car, and who stored their tools there, as also the lamps used on the cars. The road was not yet delivered over to the Pacific Railway Company, and the contractors did not wish to carry passengers. Persons, however, were sometimes carried on the caboose car, and sometimes fare had been charged for their passage, but not always.

In this state of things, one Kingsbury, a sheriff in Kansas, and a deputy marshal, wanted to make an arrest on the line of the road, and he applied for passage as far as to a place called Wilson's Creek, asking the conductor to stop the train there, in order that he might make the arrest. He was accordingly taken on the train, and the train stopped until he had made the arrest.

A part of the fare charged was paid by Kingsbury on the cars, and the balance afterwards. The train ran from Ellsworth to Walker's Creek in Kansas. In going towards Walker's Creek the train was made up and ran in the usual way of making up and running railway trains, the engine being in front, with the caboose and flat-cars attached in regular order. But on the return from Walker's Creek, as there was, as yet, no turntable on the road, the usual order for making up such trains was reversed, and both engine and tender were backed over the road, a distance of more than fifty miles: the tender being ahead, the engine next, the caboose and other cars attached, and following in regular order. When about three miles from Ellsworth, on this return trip, both the engine and tender were thrown from the track and upset. At the time this accident occurred, Kingsbury was riding in the caboose car with the conductor of the train, and either jumped out or was thrown out, which of the two did not exactly appear. Whichever of the two things was true he was hurt, and for the injuries which he received he brought the action below.

The accident was occasioned by the engine running against a young ox, which leaped on to the track about twenty feet in front of the advancing train, from grass or weeds five or six feet high, growing on the sides of the road. The train was running at its usual rate of speed. The accident occurred just after dark; but it was a moonlight night, and the engineer testified that he could have seen an animal two hundred yards distant on the track; that the animal was only about twenty feet from the engine when first seen. He continued his testimony thus:

'As soon as I saw the animal I shut off the steam, and seized the lever to reverse the engine, and had it about half over when the engine went off the track. Something struck me on the head and I did not know anything more. I was injured. I did what I thought was best to be done to stop the train. The whistle lever was in the top of the cab. I did not whistle for brakes. I had no time to do so after I saw the animal and before the engine went off the track. The train could have been stopped in about one hundred and fifty yards. When danger appears, the first thing to be done is to reverse the engine and then sound the whistle for brakes. Both could not be done at the same time. In order to reverse and blow the whistle two motions are necessary-first, to cut off the steam, and then take hold of the lever to throttle valve and move it over. It takes both hands to reverse. The whistle is sounded by a lever in the top of the cab. Brakemen would know, by shutting off steam and reversing, that something was the matter. It would take about ten seconds to do all this. I did it as quick as I could. I could have done nothing more than I did do.'

There was no fence on the sides of the road. The plaintiff had been several times before over the road and knew its condition, and the manner in which the trains were made up and run.

The court, among other instructions, gave the following as a fifth to the jury, to which the defendants excepted:

'When it is proved that the car was thrown from the track, and the plaintiff injured, it is incumbent on the defendants to prove that the agents and servants in charge of the train were persons of competent skill, OF GOOD HABITS, and in every respect qualified and suitably prepared for the business in which they were engaged, AND that they acted on this occasion with reasonable skill, and with the utmost prudence and caution; and if the disaster in question was occasioned by the least negligence, or want of skill or prudence on their part, then the defendants are liable in this action.'

There was no evidence in the case in relation to the skill, habits, or qualifications of the agents and servants of the defendants, except what arose from the fact that the engineer had been employed on a railroad about four years, and had been engineer for more than two years, and that the fireman had been on a railroad for about eighteen months.

Verdict and judgment having gone for the plaintiff, the defendants brought the case here on error.

Messrs. A. P. Usher and William T. Otto, for the plaintiffs in error:

Even if these two defendants, contractors only for building the Union Pacific Railroad, had been general carriers of passengers for hire-and 'common carriers' of freight and baggage had been, in short, the Union Pacific Railroad Company itself-and offering, like railroad companies generally, to carry everybody who applied to them to be carried, and all freight and baggage offered-the first part of the instruction-the part italicized and ending with the words, 'were engaged'-would have been erroneous. The instruction must be taken in reference to the facts of this case. The question was one of foresight, care, and skill. None other can arise in the case even of general carriers of passengers. Their obligation is distinguished from that of 'common carriers' or general carriers of goods for hire. This distinction is universally received, and the question is always one as to the application of this rule under the special sort of carriage, as whether by horse coaches or rail cars, sailing vessels or steamers; the case in regard to all vehicles impelled by steam, being, of course, vastly different, we admit, in application from those impelled by feeble agents.

In Boyce v. Anderson, this court, Marshall, C. J., delivering its judgment, decides 'that the doctrine of common carriers does not apply to the carrying of intelligent beings:'

title: Shoemaker v. Kingsbury


text: Talk:Shoemaker v. Kingsbury

title: Talk:Shoemaker v. Kingsbury