text:
Robinson v. Elliott/Opinion of the Court

'It appears to us this instruction was calculated to confuse and mislead the jury to the prejudice of the defendant. . . . If it was intended to say that the defendant could not hold possession after the date of the mortgage, it is certainly erroneous. If some other point of time was intended to be indicated at which the possession of the defendant should cease to be rightful, it should have been more specific, especially in view of the fact that the date when the debts secured by the mortgage were to become due is not stated particularly, and the right to retain said possession was to remain in the mortgagor until the maturity and failure to pay said debts.'

The case was reversed for the error contained in the instruction given.

It must be admitted that this opinion of the Supreme Court, in which the judge undertakes to state the case, is wanting in perspicuity in the statement of the facts. But the record clearly shows that the validity of the mortgage was in question; and that the Circuit Court had assumed in its instruction, just as the circuit judge has decided here, that if the mortgagor after the mortgage was executed, kept possession of the goods and sold and dealt with them as his own, the mortgage would be fraudulent and void.

If we are right as to what is the law in Indiana on this question, and if the validity of the mortgage is to be settled, as of course it is to be, by that law, we may rest the argument here. As for the authority of cases decided in other States of the Union that the mortgage is invalid, it is enough to say that the opinion of the Supreme Court of Maine, the Supreme Court of Massachusetts, with Shaw as its chief, the Supreme Court of Michigan, with Cooley as its chief, the Supreme Court of Iowa, with Dillon as its chief, the Circuit Court of the United States for the first circuit, Story, J., presiding; and the Supreme Court of Indiana, the State where, and under whose statutes the question arises, are arrayed against the vacillating and unsatisfactory rulings of New York, rendered under peculiar constructions of their statutes, against the cases in Illinois, under their very peculiar statutes, and the cases in Ohio, and perhaps Wisconsin and Missouri, following the same line of argument.

Mr. W. E. Niblack, contra, contended—

That no question about the respective domains of law and fact could arise in this case; the proceeding being by bill in chancery, and the case being made by a demurrer to it.

That while in Maple v. Burnside, relied on by the other side, the case was so confusedly stated, that it was difficult to say exactly what it was, there was nothing in the report to show that the mortgage contained any provision permitting the mortgagee to remain in possession and deal with the goods, and that the judgment established no right in a mortgagor of chattels even in Illinois to do so.

That the tenth section of the statute of Indiana did not change this rule of the common law, and that the argument of the plaintiff in error went to the extent of allowing the enactment, that a mortgage of chattels, where possession did not accompany the title, should nevertheless be valid when recorded, to set up as valid every fraudulent device which under the aspect of a mortgage might be put on record in pursuance of the statute.

That from the case of Grantham v. Hawley, decided so far back as the time of Hobart, it had been settled that a mortgage was void as to after-acquired property except where the mortgagor had a present actual interest in it or concerning it; that there must be something in praesenti of which the thing in futuro was to be the product, or with which it was to be connected as necessary for its use, or as incident to it, constituting a tangible, existing basis for the contract. The future property must be an accretion to the property already owned by the mortgagor, either by adding the future to the present, or by growth. Thus, to take Hobart's illustration, that while one might mortgage all the wool which should grow for a term of years on any number of sheep owned by him at the time, he could not mortgage the wool to be grown on any sheep at all if he did not own them; a position for the principle of which the counsel cited cases from nearly every State in the Union.

And in short, that although the question might appear, to some extent, an open one in Indiana, a reference to the notes, English and American, upon Twyne's case in Smith's Leading Cases, would show that the judicial mind of both England and the United States had ascertained and fixed the rule that after-acquired chattels were not subject to lien by way of mortgage; that this rule was moreover a wise one, since to sanction a contrary rule and so to give effect to transactions like the one under consideration, would open a door to frauds innumerable and of the most extensive sort.

Mr. Justice DAVIS delivered the opinion of the court.

There are few subjects which have been more discussed in the courts of this country, with less uniformity of decision, than that of sales and mortgages of personal goods, without delivery of possession. In Indiana the statute of 13th Elizabeth has been adopted, and two provisions applicable to this case engrafted on it. The first declares that 'no assignment of goods by way of mortgage shall be valid against any other person that the parties thereto, when such goods are not delivered to the mortgagee, or assignee, and retained by him, unless such assignment or mortgage' shall be duly recorded. And the second says, 'that the question of fraudulent intent in all cases shall be deemed a question of fact.'

Prior to the incorporation of these provisions in the statute it was necessary to the validity of chattel mortgages in Indiana that there should be a manual delivery of the mortgaged property to the mortgagee, who should continue to hold the same in his possession. These provisions changed the law in this particular, and permitted the retention of the possession of personal property by the mortgagor in a chattel mortgage given as a security for the payment of debts. And there can be no question that in Indiana a mortgage, which simply allows the mortgagor to retain the possession and use of the property until breach of the condition is, when duly recorded, prim a facie valid. But it is insisted that the effect of these provisions is also to make a mortgage of a stock of goods, containing a provision authorizing the mortgagor to retain possession for the purpose of selling in the usual course of trade, prim a facie valid, and that the court cannot, as a matter of law, pronounce it fraudulent. This, we think, is going beyond what the legislature intended. If registration was intended, as we think it was, as a substitute for delivery of possession, it was not meant to be a protection for all the other stipulations contained in a mortgage. If so, it could be used as a cover for any fraudulent transaction, which would have to be treated, on the theory advanced, as valid, until the contrary was shown.

It is true the law conferred on the parties the right to agree that the possession of the property could remain with the mortgagor, provided the mortgage be recorded; but if the mortgage contains other provisions, which, on legal principles, vitiates the whole instrument, it is difficult to see how recording it could make it even prim a facie valid. The Bill of Sales Registration Act in England makes void all bills of sale not filed as required, if unaccompanied by possession. An eminent writer in speaking of this act says: 'Of course the mere fact of due registration of a bill of sale, under this act, does not necessarily make it good against creditors. The act was not passed with a view of making good a title which was not good before, but for the protection of creditors.' And to the same effect is Wood v. Lowry.

It is argued, however, that there can be no such thing in this class of cases as constructive fraud, because under the statute the question of fraudulent intent is one of fact. But the Supreme Court of Indiana has decided the question differently. The statute of that State for the prevention of frauds embraces twenty-two sections. The tenth relates to the registration of chattel mortgages; the seventeenth enacts that every assignment, &c., of any estate in lands, or of goods, made with intent to hinder, delay, or defraud creditors, shall be void; and the twenty-first declares that the question of fraudulent intent, in all cases arising under the provisions of this act, shall be deemed a question of fact. It will thus be seen that the last section applies to conveyances of land as well as to assignments of goods by way of mortgage. In Jenners and others v. Doe on the demise of Pomeroy and others, the question was whether a deed of trust on certain lands was void as to creditors who did not consent to it. The court of original jurisdiction held the deed void upon its face as a question of law. It was contended that this ruling was erroneous, and that in all cases the instrument must be referred to the jury in connection with the facts. But the Supreme Court held the ruling to be correct. They say that the provisions embraced in the seventeenth and twenty-first sections of the statute have declared, not changed, the law on the subject; that the court must, in the first instance, determine upon the legal effect of a written instrument, and if that be to delay creditors it is rejected. If, however, on its face it conforms to the law, it is received in evidence, and the question of the intent with which it was executed is an open one for the jury. It would seem to be the view of the court in this case, as well as in the preceding one in the same volume, of Nutter v. Harris, that the twenty-first section applies to cases of actual or meditated and intentional fraud, and is not applicable to written instruments which the law adjudges to be fraudulent on their face and consequently void.

There is, therefore, nothing in the way of the consideration of the main question involved in this controversy on its merits.

If chattel mortgages were formerly, in most of the States, treated as invalid unless actual possession was surrendered to the mortgagee, it is not so now, for modern legislation has, as a general thing (the cases to the contrary being exceptional) conceded the right to the mortgagor to retain possession, if the transaction is on good consideration and bon a fide. This concession is in obedience to the wants of trade, which deem it beneficial to the community that the owners of personal property should be able to make bon a fide mortgages of it, to secure creditors, without any actual change of possession.

But the creditor must take care in making his contract that it does not contain provisions of no advantage to him, but which benefit the debtor, and were designed to do so, and are injurious to other creditors. The law will not sanction a proceeding of this kind. It will not allow the creditor to make use of his debt for any other purpose than his own indemnity. If he goes beyond this, and puts into the contract stipulations which have the effect to shield the property of his debtor, so that creditors are delayed in the collection of their debts, a court of equity will not lend its aid to enforce the contract. These principles are not disputed, but the courts of the country are not agreed in their application to mortgages, with somewhat analogous provisions to the one under consideration. The cases cannot be reconciled, by any process of reasoning, or on any principle of law. As the question has never before been presented to this court, we are at liberty to adopt that rule on the subject which seems to us the safest and wisest. It is not difficult to see that the mere retention and use of personal property until default is altogether a different thing from the retention of possession accompanied with a power to dispose of it for the benefit of the mortgagor alone. The former is permitted by the laws of Indiana, is consistent with the idea of security, and may be for the accommodation of the mortgagee; but the latter is inconsistent with the nature and character of a mortgage, is no protection to the mortgagee, and of itself furnishes a pretty effectual shield to a dishonest debtor. We are not prepared to say that a mortgage under the Indiana statute would not be sustained which allows a stock of goods to be retained by the mortgagor, and sold by him at retail for the express purpose of applying the proceeds to the payment of the mortgage debt. Indeed, it would seem that such an arrangement, if honestly carried out, would be for the mutnal advantage of the mortgagee and the unpreferred creditors. But there are features engrafted on this mortgage which are not only to the prejudice of creditors, but which show that other considerations than the security of the mortgagees, or their accommodation even, entered into the contract. Both the possession and right of disposition remain with the mortgagors. They are to deal with the property as their own, sell it at retail, and use the money thus obtained to replenish their stock. There is no covenant to account with the mortgagees, nor any recognition that the property is sold for their benefit. Instead of the mortgage being directed solely to the bon a fide security of the debts then existing, and their payment at maturity, it is based on the idea that they may be indefinitely prolonged. As long as the bank paper could be renewed, Robinson consented to be bound, and in Mrs. Sloan's case it was not expected that the debt would be paid at maturity, but that it would be renewed from time to time, as the parties might agree. It is very clear that the instrument was executed on the theory that the business could be carried on as formerly by the continued indorsement of Robinson, and that Mrs. Sloan was indifferent about prompt payment. The correctness of this theory is proved by the subsequent conduct of the parties, for the mortgagees remained in possession of the property, and bought and sold and traded in the manner of retail dry-goods merchants, from July 7th, 1871, to August 7th, 1873. During this period of twenty-five months Robinson indorsed as usual, and Mrs. Sloan was content with the payment of a small portion of the principal of her debt. Instead of getting it renewed, as contemplated by the mortgage, she seems to have been willing to let it remain dishonored, and the fair inference from the averments of the bill is that Robinson would have continued to indorse, and Mrs. Sloan exhibit the same easy indifference on the subject of her indebtedness, if the death of Seth Coolidge had not dissolved the firm and compelled an inventory and appraisement, showing the desperate condition of the mortgagors. It hardly need be said that a moargage which, by its very terms, authorizes the parties to accomplish such objects is, to say the least of it, constructively fraudulent.

Manifestly it was executed to enable the mortgagors to continue their business and appear to the world as the absolute owners of the goods, and enjoy all the advantages resulting therefrom. It is idle to say that a resort to the record would have shown the existence of the mortgage, for men get credit by what they apparently own and possess, and this ownership and possession had existed without interruption for ten years. There was nothing to put creditors on their guard. On the contrary, this long-continued possession and apparent ownership were well calculated to create confidence and disarm suspicion. But apart from this, security was not the leading object. If so, why does Mrs. Sloan's note remain overdue for twenty-one months, and why does Robinson continue to indorse? This conduct is the result of trust and confidence, which, as Lord Coke tells us, are ever found to constitute the apparel and cover of fraud.

In truth, the mortgage, if it can be so called, is but an expression of confidence, for there can be no real security where there is no certain lien.

Whatever may have been the motive which actuated the parties to this instrument, it is manifest that the necessary result of what they did do was to allow the mortgagors, under cover of the mortgage, to sell the goods as their own, and appropriate the proceeds to their own purposes; and this, too, for an indefinite length of time. A mortgage which, in its very terms, contemplates such results, besides being no security to the mortgagees, operates in the most effectual manner to ward off other creditors; and where the instrument on its face shows that the legal effect of it is to delay creditors, the law imputes to it a fraudulent purpose. The views we have taken of this case harmonize with the English common-law doctrine, and are sustained by a number of American decisions. In the American editor's note to Twyne's case, most of the cases in this country on the subject are collected and classified.

It is contended by the appellants that the rulings of the Indiana courts are in favor of the validity of this mortgage, and the main case relied on to support this position is Maple v. Burnside. The facts of this case are stated in the opinion of the court in a way to render it difficult for any practitioner outside of the State to understand the application to them of the legal rules which are discussed, but there is nothing to show that the mortgage there considered contained any provision permitting the mortgagor to remain in possession of the property and deal with it as his own, nor does the judgment of the court involve any such question. The case would seem to be chiefly valuable as an authoritative exposition of certain points of nisi prius practice. Although we have been unable to find any case from Indiana of similar facts with the one at bar, yet the decision in the New Albany Insurance Company v. Wilcoxson, would seem to imply that when such a case did arise it would be decided in accordance with the views we have presented. The point ruled in that case is, that if a mortgage is executed merely to protect property in the hands of the mortgagor from his creditors other than the mortgagee, the mortgagor retaining possession and the right of disposition, and these facts appear upon the face of the mortgage, it would be fraudulent and void as against other creditors, and should be so declared by the court. And the court, to sustain this proposition, refer to Freeman v. Rawson, a standard authority in this class of cases, for the views we have advanced on this subject.

Finally, it is insisted if the mortgage is held void in law, still the delivery of the goods in pledge vests a sufficient lien, prim a facie, to enable the appellants to enforce their lien in equity.

The answer to this is, that the case made by the bill does not proceed upon such a delivery at all, but upon the mortgage and seizure under it. Besides, if the appellants could turn the proceeding into a voluntary pledge by the debtors, it would not help them, for it would violate the preference clause of the Bankrupt Act, as they got the goods only twelve days before the petition in bankruptcy was filed.

DECREE AFFIRMED.


text: Talk:Robinson v. Elliott/Opinion of the Court

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


text: Tucker v. Ferguson

title: Tucker v. Ferguson


text: Talk:Tucker v. Ferguson

title: Talk:Tucker v. Ferguson


text:
Tucker v. Ferguson/Opinion of the Court

APPEAL from the Circuit Court for the Western District of Michigan.

The Flint and P ere Marquette Railway Company was a railway corporation of Michigan, and the present suit was a bill in equity brought by Tucker et al., trustees for the holders of bonds issued by the said company, which bonds were secured by a mortgage and deed of trust executed by the company to them, the said Tucker et al., as trustees, upon lands granted by Congress to the State of Michigan, and by that State granted, in a qualified way, to the company to aid in constructing a road which it was about to make; the object of the bill having been to restrain one Ferguson et al., who were supervisors and assessing officers of Osceola County, Michigan, from levying and collecting local taxes upon the said lands situate in the said county.

The general purpose of the bill was to restrain the assessment of taxes at any time on the lands granted by Congress, during the term allowed for the completion of the road. But if the court should think there was no ground for so general a restraint, then to restrain the collection of taxes which had been already assessed on the lands for the year 1873; the bill alleging that in no event were they taxable prior to April 1st, 1874.

The case, more particularly stated, was thus:

On the 3d of June, 1856, Congress granted to the State of Michigan, to aid in the construction of certain proposed railroads, including one from Flint, in the southeasterly part of the State, to P ere Marquette, on Lake Michigan, in the northwestern part-a distance of about one hundred and seventy miles, much of the western part of which especially was a wilderness-every alternate section of land designated by odd numbers, for six sections in width on each side of said roads, 'which lands,' said the act of Congress granting them, 'shall be held by the State of Michigan for the use and purpose aforesaid.' By the terms of the first section of the act the lands were to be located in no case further than fifteen miles from the lines of the road, and it was enacted that they should be 'exclusively applied' in the construction of the road; 'disposed of only as the work progressed, and applied to no other purpose whatsoever.'

Section third enacted that the lands thus granted to the State, should 'be subject to the disposal of the legislature thereof for the purpose aforesaid, and no other, and that the railroads shall be and remain public highways for the use of the government of the United States, free from toll or other charges upon the transportation of any property or troops of the United States.'

'That the lands hereby granted to said State shall be disposed of by said State only in manner following; that is to say, that a quantity of land not exceeding one hundred and twenty section for each of said roads, and included within a continuous length of twenty miles of each of said roads, may be sold; and when the governor of said State shall certify to the Secretary of the Interior that any twenty continuous miles of any of said roads is completed, then another quantity of land hereby granted, not to exceed one hundred and twenty sections for each of said roads having twenty continuous miles completed as aforesaid, and included within a continuous length of twenty miles of each of such roads, may be sold, and so, from time to time, until said roads are completed; and if any of said roads is not completed within ten years, 2 no further sales shall be made, and the lands unsold shall revert to the United States

Section fifth enacted that the United States mail should be transported over the road, under the direction of the Post-Office Department, at such price as Congress might by law direct.

On the 12th of February, 1857, and, of course, after the passage of the act of Congress, the Flint and P ere Marquette Company was organized under the general railroad law of Michigan. And two days after this, again, that is to say, on the 14th of February, 1857, the State of Michigan by an act enacted,

'That the lands, franchises, rights, powers, and privileges granted to, and conferred upon, the State of Michigan by an act of Congress, approved June 3d, 1856, be, and the same are hereby, accepted, with the restrictions and upon the terms and conditions contained in said act of Congress.'

'SECTION 2. So much of the aforesaid lands, &c., as are or may be granted and conferred in pursuance of said act of Congress, to aid in the construction of a railroad,. . . from Flint to p ere Marquette, are hereby vested fully and completely in the Flint and P ere Marquette Railway Company, according to the provisions of the act of Congress relating thereto, and the direction of the board of control hereby appointed. The said railroad company shall be subject to all the conditions, restrictions, and obligations imposed upon them by this act, as hereinafter provided.

'SECTION 3. The lands, &c., hereby conferred upon and vested in the railroad company, shall be exclusively applied in the construction of its line of road, and to no other purposes whatsoever.'

Section seventh enacted that after the completion of twenty continuous miles of road, the company might sell sixty sections of land in any twenty continuous miles of line of road, &c.; 'and after the full and final completion of the entire length of its road, and the acceptance of the same by the board of control herein provided, then the company may sell the remainder of the lands, &c., and not before.' The act further enacted,

'None of the lands hereby granted shall be liable to taxation for seven years from 1st September next [i. e., shall not be liable till September, 1863], except such parts as shall be sold or be improved.'

'SECTION 8. . . . For the purpose of properly managing and disposing of the lands. . . the governor of the State of Michigan, together with six commissioners to be nominated by the governor and confirmed by the senate, are hereby constituted a board of control of the same, whose duty it shall be to manage and dispose of such lands in aid,' &c.

'SECTION 12. The said railroad company shall at all times and in all matters be subject to the laws of this State, and to such rules and regulations as may from time to time be enacted and provided by the legislature of the State of Michigan, in regard to the management and disposition of the said lands, not inconsistent with the provisions of this act and the act of Congress making the said grant of lands to this State, and they shall be entitled to all the immunities and privileges conferred by said laws.'

'Provided, That nothing herein contained shall be so construed as to relinquish the right of the State to any specific tax imposed upon any railroad company within this State.'

The company was bound by the nineteenth section to complete and put in running order at least twenty continuous miles during each year after 1st December, 1857, and to complete the road within seven years from 15th November next, 1857, i. e., by the 16th of November, 1864; a term, however, by both State legislation and act of Congress subsequently enlarged till March 3d, 1876.

At the time when the Flint and P ere Marquette Railway Company was organized, all railroad companies in Michigan were liable, under a general railroad act (section forty-five), to a specific tax of one per cent. on their 'paid in capital stock.' Of course, in the case of a company like the P ere Marquette, and the other companies provided for in the act of Congress,-built, all of them, chiefly by the land grant,-the tax was a light one.

The twentieth section of the present act, which raised one of the important questions in the case, now made for the Flint and P ere Marquette Company, as well as for the others, a heavier tax. The section was as follows:

'SECTION 20. In consideration of the grants of land and other privileges hereby conferred. . . the said several railroad companies are hereby required, within sixty days from and after the first day of each and every year, to pay into the treasury of this State, ''as a specific annual tax, one per cent. upon the cost of the road and its equipments and appurtenances of whatever kind; and it shall be lawful for the legislature of this State, in their discretion, after ten years, to impose upon either or each of said railroad companies the payment of a further tax upon the gross or total earnings of such road of not exceeding two per cent.; which said above several taxes shall be in lieu of all other taxes to be imposed within this State''.'

The Flint and P ere Marquette Company accepted the grant made by this act.

It may be here stated, that it was afterwards enacted by Congress that the State of Michigan might authorize the sale of sixty sections, whenever the governor might certify that ten additional miles was completed. The original act, it will be remembered, had prescribed a sale of one hundred and twenty sections, on a certificate of twenty miles completed, &c. This last matter is, perhaps, unimportant.

As the reader will doubtless have observed, in reading what goes before, Congress granted the lands which it did grant to the State, to be disposed of 'only' in a certain manner in the act of grant stated. They were to be 'sold' from time to time, as certain lengths of the road were completed; and no other manner of disposing of them is stated in the act as contemplated. And the State of Michigan in accepting the lands, accepted them 'with the restrictions and upon the terms and conditions contained in said act of Congress.' It was soon found, however, as the road progressed westward, that it was coming to regions which were uninhabited, and that the land there being in a wilderness could not be sold for twenty miles ahead of even a completed twenty miles of road; that is to say, could not be sold in advance of the construction of the road through them. It was the road itself which first gave value to them. Thus is happened that no money could be got out of the lands by sale in advance of a road through the twenty miles. A plan of obviating this difficulty now suggested itself. It being found that the bonds of the company (which now had a part of its road completed) could be sold, and the funds requisite to finish the rest of the road raised on such bonds, provided they were secured by mortgage with power of sale in the mortgagee on the unsold lands, it was resolved to carry out an arrangement on this basis. The company did accordingly in September, 1866, by a mortgage and trust deed containing a power of sale and terms and conditions for the management of the trust, convey to Tucker et al. as trustees, 153,600 acres of land as security for bonds to the amount of $500,000, which bonds were issued and sold, and which were now outstanding. . . except such portions thereof as had been taken up and cancelled from the proceeds of land sold for that purpose.

Subsequently the company, desiring to raise a further sum of money to enable it to prosecute the further construction of its road, made, September, 1868, a second mortgage and trust deed, by which it mortgaged and conveyed all the remaining lands of the land grant for the purpose of securing bonds to the amount of $2,500,000, which were issued and sold upon the market.

It did not appear from anything in the transcript of the record sent here, what value the lands mortgaged bore to the amount of bonds issued.

Tucker and the other, as trustees, were to hold said lands together with other property in said trust deed mentioned, as security for such bondholders. The second mortgage and trust deed, like the first, contained a power of sale.

In this way funds were obtained and the road was in process of completion, when a difficulty occurred between the trustees and the assessors of Osceola County, which was the cause of the present suit.

The reader will remember that by the twentieth section of the act of the legislature of Michigan accepting the grant from Congress, it was enacted that the railroad company should pay into the treasury of the State, ''as a specific annual tax, one per cent. upon the cost of the road and its equipments and appurtenances of whatever kind; and that the said twentieth section made it lawful for the legislature of the State, after ten years, to impose upon the company the payment of a further tax upon the gross or total earnings of such road of not exceeding two per cent.; which said above several taxes,' the section declared, shall be in lieu of all other taxes to be imposed within this State''.'

By two subsequent acts-one of the 14th and one of the 15th of February, 1859-this twentieth section was repealed; the company was to sell one hundred and twenty sections on completing twenty miles, and not sell any sections before; was to have a right when the road was finished through its entire length and accepted by the board of control, to sell all the remaining lands; all the lands granted were declared to be free from taxation for seven years, from September 1st, 1859, i. e., till September 2d, 1866, and the company was declared to be subject to the tax imposed in the already mentioned forty-fifth section of the general railroad law of 1855, by which section a tax of one per cent. upon the capital stock paid in was imposed, which tax of one per cent. upon the capital stock paid in, it was by the new acts enacted—

'Shall be in lieu of all other taxes upon the property of the said company, whether real, personal, or mixed, except penalties by this act imposed.'

This tax of one per cent. on capital paid in-necessarily a very small tax, as we have already remarked, in the case of a road built chiefly or wholly by land grants of Congress-was, of course, more favorable to the company than that laid by the twentieth section of the old act now repealed.

On the 18th of April, 1871, came another act, laying by its thirty-seventh section-an act and a section of much importance in this case-a new tax; that is to say, 'an annual tax upon gross receipts.' The section, after laying this tax, proceeded:

'This tax shall be in lieu of all other taxes upon the property of said company, whether real, personal, or mixed, except penalties imposed by law, except real property not necessary for carrying on the ordinary operations or franchises of their road.

'Provided, Only such lands granted to any railroad company shall be liable to local taxation as are or may be opposite to and coterminous with the constructed portion and portions of said roads respectively.

'And provided further, That no such lands shall be subject to taxation until after the expiration of three years from and after the 1st day of April, A.D. 1871, and until after three years from the date of the certificate showing that such lands have been earned by said railroad company, after which time said lands shall be taxed as other lands, except as hereinafter provided.

'And provided further, That the lands of the several land-grant railroad companies, opposite to and coterminous with their lines as now in operation, shall be subject to taxation in two years from said 1st day of April, A.D. 1871.'

Finally, came an act of May 1st, 1873, a 'general railroad law,' as it was called, and the cause of the present difficulty. This act, which provided for the incorporation of railroad companies, the details of their organization, and which prescribed a great variety of rules, regulations, &c., in regard to their stock, routes, rights, liabilities, power to borrow money, obligation to pay, & c., &c., enacted:

'SECTION 3. Every company. . . shall, on or before the 1st day of July in each year, pay to the State treasurer an annual tax upon the gross receipts of said company; which amount or tax shall be in lieu of all other taxes upon the property of such companies, except such real estate as is owned and can be conveyed by such corporation under the laws of this State and not actually occupied in the exercise of its franchises, and not necessary or in use in the proper operation of its road; but such real estate so excepted shall be liable to taxation in the same manner, for the same purposes, and to the same extent, and subject to the same conditions and limitations as to assessment for taxation, to taxation, and to the collection and return of taxes thereon as is other real estate in the several townships within which the same may be situated.'

Under this law-the Flint and P ere Marquette Railway not being yet finished, but on the contrary having forty miles yet to make out of the hundred and seventy which if finished it would consist of-the defendants below, Ferguson and others, supervisors of Osceola County, taxed for the year 1873 the lands which the company had by the two mortgages already mentioned, mortgaged with power of sale to Tucker and others, to raise funds to complete the road; these lands being none of them opposite to or coterminous with the line of the railroad in operation in April, 1871.

There had been issued and sold of the bonds, and were still outstanding in the hands of purchasers, on the 1st of January, 1873:

Under the mortgage and trust deed of 1863, $146,

"  "      "" 1868,   2,224,

title: Tucker v. Ferguson/Opinion of the Court


text: Talk:Tucker v. Ferguson/Opinion of the Court


text: Ross v. Jones

title: Ross v. Jones


text: Talk:Ross v. Jones

title: Talk:Ross v. Jones


text:
Ross v. Jones/Opinion of the Court

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

On the 11th of June, 1864, Congress enacted that:

'Whenever, during the existence of the present rebellion, any action. . . shall accrue against any person who by reason of resistance to the execution of the laws of the United States, or the interruption of the ordinary course of judicial proceedings, cannot be served with process; OR whenever after such action. . . shall have accrued such person cannot, &c.

'The time during which such person shall so be beyond the reach of legal process, shall not be deemed or taken as any part of the time limited by law for the commencement of such action.'

In addition to this, this court has repeatedly decided that during the civil war, the courts of the United States in the insurrectionary States were closed, and that statutes of limitation did not run against suitors having a right to sue in the Federal courts.

It has also decided that in Arkansas the war was flagrant from April, 1861, till April, 1866.

In the State just named, actions of assumpsit are barred by the statute of limitations in five years.

'SECTION 1. Any person bound as security for another in any bond, bill, or note, for the payment of money, or the delivery of property, may, at any time after action hath accrued thereon, by notice in writing, require the person having such right of action forthwith to commence suit against the principal debtor and other party liable.

'SECTION 2. If such suit be not commenced within thirty days after the service of such notice, and proceeded in with due diligence, in the ordinary course of law, to judgment and execution, such security shall be exonerated from liability to the person notified.

In this condition of the law, on the 31st of January, 1860, Rives gave to Bull-both persons being citizens of Arkansas-a promissory note, payable on the 1st of November, 1861. Bull indorsed it to Jones, of Memphis, Tennessee; both the States of Tennessee and Arkansas having, in the late civil war, been members of the so-called Confederate States of America. The note was not paid at its maturity, and it having been protested, notice of the dishonor, &c., was given to Bull.

Bull died in November, 1869, and letters of administration on his estate were granted to one Ross.

Jones, now, October 13th, 1871, brought assumpsit on the note against the administrator, Ross, on the indorsement of Bull, his intestate.

The defendant pleaded two pleas.

1. The first plea was the statute of limitations of five years.

'That from the 1st of June, 1861, to the 2d of April, 1866, a war existed between the United States and the Confederate States, including the State of Arkansas, where during all that period the said Bull resided, and that during all that period the courts of the United States in and for the State of Arkansas were, by reason of the said war, closed, and no process could be issued therefrom or served on the said Bull, the authority of the United States therein being resisted, &c. That the said Bull died in said State on the 15th November, 1869, and that letters testamentary were granted, &c.; and that, counting out the period of the said war, the plaintiff's cause of action did accrue within five years next before the said grant of letters on the estate of Bull.'

'That during the said rebellion, and on account thereof, the said courts were so closed that legal process could not be issued against this defendant from the month of May, 1861, until the month of March, 1865, and not longer; without this, that said courts were so closed from the 1st day of June, 1861, to the 6th of August, 1865.'

'Because it puts in issue a matter of public law pleaded in the said replication.'

The court sustained this demurrer.

2. The second plea (which was founded on the abovequoted statute about persons bound as security for another in any bill, note, &c.) was thus:

'That Bull was only an indorser on the note, and, as such, only security; that Rives was the principal, and had ample property and effects out of which to make the debt, and that after the note had become due and payable and been protested for non-payment, to wit, on the 1st day of January, 1861, Bull had given notice to Jones to bring suit upon the note immediately, and that in default of then doing so he, Bull, would hold himself free from all liability on the same. But that Jones had not brought suit on the note for more than the space of thirty days, nor indeed until the bringing of the present suit, October, 1871.'

The plaintiffs demurred to this plea because:

'1. The indorsement of Bull made him primarily liable to the plaintiffs on his contract of indorsement. His contract was separate and distinct from that of Rives, the maker of the note. There was no unity or privity of contract between Rives and Bull; and Bull was in no sense the surety of Rives on his contract.

'2. The liability of Bull on his contract as indorser became perfect on protest of the note and notice, and he could not discharge it by the matter set up in the plea under the statute of Arkansas.'

The court sustained this demurrer. Both demurrers being thus sustained, judgment was given for the plaintiff; and the administrator brought the case here, assigning for errors—

1. That the court erred in sustaining the plaintiff's demurrer to defendant's rejoinder to his replication to plea of statute of limitation.

2. That the court erred in sustaining the demurrer to defendant's third plea.

Messrs. S. F. Clark and S. W. Williams, for Bull's administrator, the plaintiff in error:

I. In regard to the first error assigned.

The replication is founded upon the act of Congress of June 11th, 1864.

The gist of the replication is the fact that the courts were closed, and that no legal proceedings could be had for a certain length of time during the war, under this act of Congress. And the real issue, if it raises any at all, is whether the courts were so closed a sufficient length of time to take the case out of the operation of the statute. The act does not provide any particular length of time during which the statute of limitation should cease to run, but only during such time as the courts were closed, and thus left it a matter of fact to be determined by evidence. It being a matter of fact, the rejoinder is a special traverse.

The demurrer admits the truth of the rejoinder, i. e., that the courts were not closed from June 1st, 1861, to April 2d, 1866, but only from the month of May, 1861, to the month of March, 1865, which would not be a sufficient length of time to take the case out of the operation of the statute. Now, it is plain that if the gist of the replication is the time during which, under the act of Congress, the courts were closed, then the rejoinder sets up a matter of fact, and the rejoinder is well pleaded. But no matter what is the substance of the replication if the rejoinder pleads only matters of law, then the replication is obnoxious to the same objection. A bad rejoinder is good enough for a bad replication. The effect of demurrer, in such case, is to reach back to the replication.

In such cases judgment must be given against the party committing the first fault in pleading, which is here the plaintiff's. And if the demurrer be sustained, the judgment should be against the replication, and the court erred in not so deciding. If the judgment on the demurrer is right, then the plea of the statute of limitations is unanswered, and as the plea is a good bar, the final judgment should have been for the defendant.

The replication plainly sets up the war and the closing of the courts thereby, as jointly operating under the act of Congress referred to, to intercept the running of the statute. The allegation of neither one of these facts alone would have been an answer to the plea. The act does not contemplate a case where the war might have existed, but where the courts were nevertheless open, and the parties were at liberty to prosecute their actions. Yet that was the fact here, and in all or most cases where both parties to the suit resided in the States in insurrection. The case, therefore, does not come within the principle involved in Hanger v. Abbott, a case between a debtor and creditor, citizens of two opposing belligerents at war. The parties here were at all times citizens of Arkansas and Tennessee, respectively-both States being States of the Southern Confederacy and same belligerent in the war. Intercourse between these States was not at any time interdicted, either by proclamation of the President or as an effect of the war. A payment of the debt at any time would have been legal. At any time the plaintiffs were at liberty to sue on the claim, provided any court had been open having jurisdiction of the cause. And it is judicially known that the court which tried this case below was open and doing business as early as April, 1864. From that time, at least, there was no impediment, either in law or fact, in the way of the plaintiff's recovering his debt. It has never been held in England that civil war and commotion in any manner arrested or suspended the laws, except between communities as to whom belligerent rights had attached, and non-intercourse had been declared. By one unbroken chain of decisions, from Henry the Eighth's time to the present, it has been held that insurrection and civil war did not interfere with the running of their various laws of limitation.

Had the statute of limitations ceased to run by operation of our civil war, there would not have been the act of Congress of the 11th June, 1864.

II. As to the second error assigned, that the court below erred in sustaining the plaintiff's demurrer to defendant's second plea.

The action of the court below assumed that an indorser of a note is not a 'security' within the statute of Arkansas, which authorizes securities to insist upon the obligee to use diligence in pursuing the principal; that it is the duty of the indorser to take up the note, and thus pursue his remedy over against the maker or other party. This no doubt is true with reference to indorsers in due course of business under the law merchant. But the statute of Arkansas gives a specific right to this remedy to 'any person bound as security for another in any bond, bill, or note,' &c. And the facts alleged in the plea, which are admitted by the demurrer, make him a security within that statute. The statute certainly contemplates that a party can become connected in some way as 'security' in a note. But how can he become so more fitly than in the way here resorted to? His being a security is a matter of fact, and does not at all depend upon the form of his relation to the note. He may be security in many ways, as indorser or as maker.

It will not do to say that a party cannot, as an indorser, be a security. The utmost that the law, independent of the statute, declares, is that he is not such by virtue of the relationship. And it has been always held that he might prove himself so in fact, in order to entitle himself to the rights of a security as against the principal.

'But although an indorser stands in the relation of a security to the drawer, in consequence of an indorsement of an accommodation note, or of a special promise of the latter to save him harmless, he does not lose his character as indorser, as respects the holder of the note, and he cannot be made liable on the note without a demand and notice. He continues indorser, with all the privileges of a surety.'

I. As to the first error assigned.

The replication does not rest on the act of Congress so much as it rests on what this court has adjudged in several cases since the war broke out, and especially what it adjudged in Batesville Institute v. Kauffman, and where it held that the war was flagrant in Arkansas from April, 1861, to April, 1866, and that the courts of the United States, in contemplation of law, were closed during that time, and that hence the statutes of limitation did not run during it. That is all matter of law.

Counting out this period, the action was not barred.

The replication to the plea of limitation set up, in effect, that the courts were closed during that period.

The rejoinder to the replication alleged, in effect, that the courts were closed for a shorter period, which presented a matter of law merely, and the demurrer was properly sustained to it.

The counsel for the plaintiff in error insists that inasmuch as both parties resided within the States in rebellion, the limitation was not suspended during the legal period of the war in Arkansas. But whatever countenance such a doctrine may find in the cases referred to in Plowden, Levinz, Keble, and other reporters of cases during the different civil wars in England, it has no countenance in the decisions of this court.

In Adger v. Alston, the plaintiff below was a citizen of South Carolina, and the defendant's intestate a citizen of Louisiana, and the court applied the principle settled in Hanger v. Abbott.

In Batesville Institute v. Kauffman, the plaintiff resided in Louisiana and the defendant was domiciled in Arkansas, and the court held that the statutes of limitation were suspended during the period above stated.

The demurrer to the rejoinder was, therefore, still properly sustained.

II. As to the second error assigned.

The statute of Arkansas enacts that a surety in any bond, bill, or note, may give the holder notice to sue the principal in writing, and if he fails to do so within thirty days the surety shall be discharged.

This plea was demurred to, on the grounds: 1. That the indorsement of Bull made him primarily liable to plaintiffs on his contract of indorsement. That his contract was separate and distinct from that of Rives, the maker of the note. That there was no unity or privity of contract between Rives and Bull, and Bull was in no sense the surety of Rives on his contract. 2. That the liability of Bull on his contract as indorser became perfect on protest of the note and notice, and he could not discharge it by the matter set up in the plea under the Arkansas statute.

The Supreme Court of Arkansas has never decided that an indorser of a bill or note was a surety under the above statute.

The indorser of a note or bill is not a surety within the meaning of this statute.

The note was dated and payable in Tennessee, and the contract of the maker governed by the laws of Tennessee. The indorsee lived in Tennessee, and could in no event be affected by an Arkansas statute.

The contract of an indorser renders him primarily liable to the holder. He stands in the attitude of the drawer of a new bill. This is text-book law.

The indorser cannot, like a surety, call upon the holder of the note to proceed and collect it of the maker; for the indorser, though in the nature of a surety, is answerable upon an independent contract, and it is his duty to take up the note when dishonored. An accommodation indorser stands in the relation of a surety towards the party for whose accommodation the indorsement is made, and may recover against him the costs to which he has been subjected; but he does not thereby lose the character of an indorser, as respects the holder of the note.

Mere indulgence or delay by the holder to sue the maker, will not discharge the indorser. There is no obligation to use the diligence, as is generally the case against a principal, in order to hold a surety liable, at least where the surety calls upon the creditor to act.

If the holder of a promissory note be called upon by the indorser, after the note has become due, to prosecute the maker, of whom the amount might then be collected, but who afterwards becomes insolvent, and he neglects so to do, this will not discharge the indorser.

Mr. Justice CLIFFORD delivered the opinion of the court.

1st. That the court erred in sustaining the demurrer of the plaintiffs to the rejoinder filed by the defendant to the plaintiffs' replication to the first special plea of the defendant.

2d. That the court erred in sustaining the demurrer of the plaintiffs to the third plea of the defendant.

I. Unsealed written contracts are barred by the statute of limitations of that State in five years from maturity, and it appears that the note described in the declaration matured on the first of November next after its date, but the record shows that the indorser deceased on the fifteenth of November, 1869, leaving the note unpaid and outstanding. Under the laws of the State the general statute of limitations runs from the maturity of the contract to the granting of administration upon the estate of the decedent, when the general statute ceases to run and the statute of limitations applicable to the estates of deceased persons begins to run.

The case, therefore, on both points, is one entirely clear.

Hence the defendant pleaded that the cause of action did not accrue to the plaintiffs at any time within five years next before the grant of letters of administration upon the estate of the deceased indorser.

War, when duly declared or recognized as such by the war-making power, imports a prohibition to the subjects or citizens of all commercial intercourse and all correspondence with citizens or persons domiciled in the enemy country. Total inability, therefore, on the part of an enemy creditor to sustain any contract in the tribunals of the other belligerent, exists by the law of nations during the continuance of the war, but the restoration of peace removes the disability and opens the doors of the courts.

Unquestioned right to sue is the status of the creditor if the contract was made during peace, but the effect of war is to suspend the right, not only without any fault on the part of the creditor, but under circumstances which make it his duty to abstain from any such attempt. His remedy is suspended by the acts of the two governments and by the law of nations, not applicable to the contract at its date, but which comes into operation in consequence of an event over which he has no control.

Peace, it is said, restores the right and the remedy, but as that cannot be if the statute of limitations continues to run during the period the creditor is rendered incapable of suing, it necessarily follows that the operation of the statute is also suspended during the same period.

Attempt is made to distinguish the case before the court from the case in which that rule of decision was first promulgated by this court, but it is clear that the attempt must be unsuccessful, as the same doctrines have since been applied in a case where a mortgagee, who was a citizen and resident of one of the Confederate States, brought a suit after the close of the war upon a bond and mortgage executed prior to the war by citizens of one of the loyal States, and the court held that the period from the proclamation of the blockade to the proclamation that the war was closed, must be deducted in the computation of the time which the statute of limitations of the loyal State had run against the right of action.

Extended discussion of that topic is quite unnecessary, as the oft-repeated decisions of this court have established the rule that the statute of limitations was suspended in the rebellious States during the existence of the late rebellion, and the express decision of this court is that the war was flagrant in that State for the whole period specified in the replication filed by the plaintiffs.

Viewed in the light of that decision it is clear that the rejoinder filed by the defendant is insufficient and that the ruling of the Circuit Court adjudging it bad was correct.

II. Due demand of the marker, protest, and notice to the indorser of non-payment are admitted, and it is alleged that the indorser subsequently, by a certain notice in writing, required the plaintiffs, as holders of the note, to sue the maker and the indorser at a time when the maker was solvent and able to pay the same, and that the plaintiffs omitted for more than thirty days to comply with the terms of the notice, during which time the market became insolvent.

Based on these facts the second defence set up is that the indorser was discharged by the neglect of the holders of the note to comply with the terms of that notice, which must depend in a great measure upon the nature of the obligation that the indorser assumed by his contract of indorsement. If the holder of a negotiable promissory note does anything, the effect of which is to suspend, impair, or destroy the right of the prior parties to indemnity from those otherwise liable over to them, he cannot resort to the parties affected by his conduct to make good the default of the maker of the instrument.

Simple indulgence, however, or mere delay to enforce payment, without a binding contract to give time, will not, under the general rules of commercial law, have that effect, even in the case of a party occupying strictly the contract relation of a surety.

Indorsers, it is sometimes said, are sureties, but their contract, which is a new one as compared with the marker of the note, differs in some important respects from that of the surety, who is a joint promisor with the principal, as the holder of such an instrument is under no obligation to use diligence to enforce payment against the maker in order to hold the indorser.

Even in a case where the holder of a promissory note was, after the note fell due, called upon by the indorser to prosecute the maker, of whom the amount might then have been collected, but who afterwards became insolvent, and the holder neglected to do as requested, still it is held that such neglect will not discharge the indorser.

Judicial decisions of high authority deny that the indorser is to be regarded as a surety after his liability is fixed by due presentment, demand, and notice of the dishonor of the note, and insist that when his liability is fixed by those acts of the holder, that he, the indorser, becomes a principal debtor himself, subject only to the condition that the holder shall do no act to suspend, impair, or destroy his remedy over against prior parties to whom he has a right to resort for a remedy; and support to that view is certainly derived from the conceded fact that the indorser is answerable upon an independent contract, which makes it his legal duty to pay the note when duly presented and demanded and due notice is given to him of its dishonor; and also from the fact, which is also conceded, that he has not the same reason as may exist in common cases of suretyship to compel the creditor to active diligence against the maker, as he has in general the complete power, by paying the note, to reinstate himself in the possession and ownership of the same, and thus to entitle himself to a personal remedy against the maker.

Doubtless the indorser is in some respects a surety, but his principal relation to the instrument is that expressed by the commercial term applied to every party who contracts that obligation. Such a party to such an instrument contracts with the indorsee and every subsequent holder to whom the note is transferred, as follows: (1.) That the instrument and antecedent signatures are genuine. (2.) That he, the indorser, has a good title to the instrument. (3.) That he is competent to bind himself in such a contract. (4) That the maker is competent to bind himself to the payment, and that he will, upon due presentment of the note, pay it at maturity. (5.) That if, when duly presented, it is not paid by the maker, he, the indorser, will, upon due and reasonable notice being given him of the dishonor, pay the same to the indorsee or other holder.

Confirmation that the indorser is not a surety in the general sense is also derived from the fact that he stands in the attitude of the drawer of a new bill, and that he is not primarily liable to make the payment, but only in case of the default of the maker and proof of due presentment, protest, and notice of dishonor, and that even then he cannot be joined with the maker, as the surety proper may be, because the maker and indorser are liable on different contracts.

Suppose that is so, when the theory is tested by the rules of commercial law, still it is insisted by the defendant that the contract of the indorser in this case was made in the State where he resides, and that the indorser, by the law of that State, is discharged, for the reason that the holder of the note omitted to seek his remedy against the maker, as thereto requested by the indorser.

Support to that defence as exhibited in the second assignment of errors is attempted to be drawn from the statute of the State where the indorser resides, which provides in effect that a surety in any bond, bill, or note, may give the holder notice to sue the principal in writing, and if the holder fails to do so within thirty days the surety shall be discharged.

Founded on that statute the defendant alleges that the indorsement was made in that State, and the allegation also is that the consideration of the note was a debt due from the maker to the plaintiffs, and that it was made payable to the decedent and was by him indorsed merely as a means of procuring his liability for the payment of the said debt due to the plaintiffs.

Grant that the contract of indorsement was actually executed in that State, still it is the better opinion that the case is not governed by the statute of that State already referred to, for the reason that the statute of the State does not include the contract of an indorser.

Sureties in a note who become joint promisors with the maker, it may be conceded, are within the terms of that statute, as they stand in the same relation to the principal as in a bond given for the payment of money or the delivery of property. Authority to give the described notice arises immediately after the bond, bill, or note falls due, which evidently refers to the lapse of time specified in the contract; but the absolute obligation to pay does not arise in the case of an indorser before notice of dishonor, which can never be given to the indorser till after the note is presented to the maker, and he has refused or neglected to fulfil his promise to pay, so that the notice in writing requiring the holder to sue the indorser with the maker, would seem to be inapplicable before the liability of the indorser is fixed by demand of payment of the maker and his refusal to comply, and notice is given to the indorser of the dishonor of the note.

Evidently the statute contemplates that the cause of action will accrue against the principal and surety at the same time, which is never the case with the indorser and maker. Such a notice may unquestionably be given by a surety proper, whether his contract is expressed in a bond, bill, or note, as soon as the instrument falls due; but it would be unreasonable to suppose that an indorser would give such a notice before his liability had become fixed, as it may be that such a demand to sue would operate as waiver of the right to notice of the dishonor of the note. Nor is it necessary to extend the operation of the statute so as to include an indorser, in order to satisfy the literal scope of the language employed. 'Persons, bound as security for another,' are the words of the statute, which undoubtedly includes sureties proper in a bond, bill, or note, but it would be extending the words of the statute beyond their reasonable meaning, to hold that it includes an indorser whose liability is fixed by the required notice of the dishonor of the bill or note.

Beyond all doubt the statute is one passed in derogation of the common law, even if restricted to sureties in the general sense, but it would be even more so, if by a broad construction, it could be extended to include indorsers upon bills of exchange and negotiable promissory notes.

Statutes passed in derogation of the common law, it is everywhere held, should be construed strictly, nor is there any subject-matter to which that rule should be applied with greater intensity than where the attempt is made to change by local legislation the rules of commercial law, applicable to that class of commercial instruments. Remedies of a statutory character, where the right to be enforced was unknown at the common law, are to be followed with strictness, both as to the methods to be pursued and the cases to which they are to be applied.

When a statute alters the common law the meaning shall not be strained beyond the meaning of the words, except in cases of public utility, as when the end in view appears to be more comprehensive than the enacting words.

Where the expression is in general terms, statutes are to receive such a construction as may be agreeable to the rules of the common law in cases of that nature, for statutes are not presumed to make any alteration in the common law, beyond what is expressed in the statute.

Argument to show that the statute in question, if it be construed to include the indorser of a bill or note, is in derogation of the rule of the commercial law, is scarcely necessary, as it appears to be well settled that it is no part of the duty of the holder of a note which has been dishonored and due notice thereof given to the indorser, to sue the maker merely because the indorser requests him so to do. On the contrary the holder has his choice to sue any one of the parties to the note who is in default, and it is the duty of the indorser, if he desires to secure the amount against the maker, to pay the note himself and thus to entitle himself to bring a suit against that party.

Such a holder, says Judge Story, is perfectly at liberty to sue any or all the parties at his pleasure, and he is not bound to any diligence in seeking his reimbursement. Nor can the indorser insist that the holder should, upon his request, use any such diligence. His remedy is to pay the note and then to seek recourse against the maker or any other party liable over to him.

Such an indorser, that is, one whose liability is fixed by due notice of the maker's default, is not entitled to the aid of a court of equity as a surety, as he has the right to pay the amount of the note to the holder, and to be subrogated to all his rights as against the maker.

None of these suggestions are intended to deny the wellknown rule that the maker of the note is in general the principal debtor, nor that all the other parties are in a special sense sureties for him; they, if indorsers, being liable only in case of his default, unless they have waived demand and notice. Though all the other parties are sureties in respect to the maker, still they are not co-sureties, but each prior party is a principal in respect to each subsequent party.

An indorser of a promissory note, though in the nature of a surety, is not for all purposes entitled to the privileges of that character, as he is answerable upon an independent contract, and it is his duty to take up the note when it is dishonored.

Unquestionably there is in some respects a resemblance between the indorser and a surety, but in others there is none, as he does not in any case lose his character of indorser nor can he be made liable on the note without proof of due demand and notice.

Proof of the kind, if the demand and notice are season able and in due form, removes every condition from his liability except that the holder will do no act to suspend, impair, or destroy his right to indemnity from such other parties to the instrument as are bound to save him harmless.

Negotiable promissory notes, like bills of exchange, are commercial paper in the strictest sense, and as such must ever be regarded as favored instruments, as well on account of their negotiable quality as for their universal convenience in mercantile transactions. Hence the law encourages their use as a safe and convenient medium for the settlement of balances among mercantile men, and any course of judicial decision calculated to restrain or impede their unembarrassed circulation would be contrary to the soundest principles of public policy.

Mercantile law is a system of jurisprudence recognized by all commercial nations, and upon no subject is it of more importance that there should be, as far as practicable, uniformity of decision throughout the world.

Apply these several suggestions to the case and it follows that the statute, when properly construed, does not include the indorser of a negotiable promissory note whose liability has become absolute by due notice of the dishonor of the note.

title: Ross v. Jones/Opinion of the Court


text: Talk:Ross v. Jones/Opinion of the Court

title: Talk:Ross v. Jones/Opinion of the Court


text:
Evansville and Crawfordsville Railroad Company v. Androscoggin Mills

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

The Evansville and Crawfordsville Railroad Company was a railroad company incorporated by the State of Indiana, and having a railroad between Evansville, in the southern part of Indiana, and Crawfordsville, in the northern. The road is part of a line of road for the transportation of cotton between the cotton fields of the South and the cotton mills of the North. For the purpose, apparently, of procuring freights over its road, this company had established an agency at Columbus, in Mississippi, and was in the habit of making contracts there for the transportation of cotton from that place to Boston, Massachusetts, its own road forming one link of the chain of transportation.

On the 10th of January, 1873, Mitchell & Co. shipped, from the said Columbus, in Mississippi, to B. F. Bates, the treasurer of the 'Androscoggin Mills,' an incorporated company in New England, two hundred bales of cotton, to be delivered at Boston.

The bill of lading, creating the contract between the parties, was as follows, viz.:

EVANSVILLE AND CRAWFORDSVILLE RAILROAD COMPANY.

Great through Fast Freight Route to all points North and East, via Pennsylvania Central, Erie, and New York Central Railroads.

CONTRACT FOR THROUGH RATE.

A. E. SHRADER,

General Freight Agent, Evansville, Indiana.

This reliable through line makes the shipment of cotton and tobacco a specialty, and guarantees quick time and delivery in good order.

COLUMBUS, MISS., January 10th, 1873.

Received from Mitchell & Co. the following packages (contents unknown), in apparent good order, viz.:

Mark, consignees, and destination. Articles. Weight,

Subject to correction.

 B. F. Bates, Treas., Boston, Mass. 200 bales cotton.

The Evansville and Crawfordsville Railroad Company hereby agree that, upon arrival at Evansville, and delivery of the property above described and consigned, they will receive and forward said property to destination upon the following conditions: That the shipper, owner, and consignee do hereby release the said Evansville and Crawfordsville Railroad Company, and the boats and railroads will which they connect, from the acts of Providence, or from damage or loss by fire or other casualty while in depots or places of transhipment; also, damage or delays by unavoidable accidents; also, loss by fire, collision, or dangers of navigation, or for loss or difference in weights, torn baggage, or condition of said property.

THE EVANSVILLE AND CRAWFORDSVILLE RAILROAD COMPANY WILL NOT BE LIABLE FOR LOSS OR DAMAGE BY FIRE, FROM ANY CAUSE WHATEVER.

All property shipped on this contract will be subject to the expense of necessary repairs and remarking. In the event of loss or damage under the provisions of this agreement, the value or cost at the point of shipment shall govern the settlement of the same. Said property to be forwarded immediately after its arrival at Evansville, or as soon thereafter as it is ready for shipment, and to be delivered at Boston, Massachusetts, upon the payment of the freight and charges as herein specified.

In witness whereof the agent hath affirmed to four bills of lading of this tenor and date, one of which being accomplished the others to stand void.

Through rate $10.25 per bale, from Columbus to Boston.

L. Q. AYRES, Agent.

The words in small capital letters at or near the bottom of the preceding page were printed, in the bill of lading, in red ink, so as to be conspicuous. Those in bold face in the twelve lines before, are here so put by the Reporter, being words on which the question partly turned.

The cotton was burned on the way from Columbus to Evansville; that is to say, was burned before it ever reached Evansville.

The Androscoggin Mills now sued the Evansville and Crawfordsville Railroad Company, declaring upon that clause of the contract which contained the provision that 'upon the arrival at Evansville and delivery of the property above consigned, they will receive and forward said property to destination upon the following conditions;' conditions among which, as the reader has noted, was one that the company would not be liable for loss by fire while in depots or places of transhipment; and another, that they would not be liable for loss by fire, collision, or dangers of navigation, or loss or difference in weights, &c. And as the cotton had not arrived at Evansville when the loss occurred, the argument of the Androscoggin Mills was that the condition of an exemption from liability in the case of a loss by fire did not attach, and that the railroad company was to be subjected to the loss upon the general principle of its liability as a common carrier.

On demurrer the court below was of the opinion that this position was a sound one, and gave judgment against the Evansville and Crawfordsville company.

From that judgment the company appealed.

Mr. A. Inglehart, for the plaintiff in error:

I. The bill acknowledges receipt of the cotton at Columbus, Mississippi, but only undertakes to carry the same when it arrives at Evansville; and to construe the undertaking according to its terms, the railroad company is not liable till the goods reached Evansville. Now, as the goods never reached Evansville, and were never delivered to the company within the terms of the contract sued on, there is no liability at all.

II. But if the court should hold the bill of lading to be a contract to carry from Columbus to Boston, then clearly the whole contract with all its conditions and stipulations is also extended to the whole distance.

The exemption, which is declared in the most general terms, 'The Evansville and Crawfordsville Railroad Company will not be liable for loss by fire for any cause whatever,' is surely as broad as the obligation to carry. It is almost equivalent in words to saying that the company will not be liable for loss by fire wherever occurring.

This declaration is made the subject of a new and isolated paragraph, displayed, by red ink, as a prominent and pervading feature of the contract.

As confessedly the loss occurred without the fault of the company, it is under the exemption not liable.

This company, it is obvious, was seized and pervaded by a sense of peril from fire. We have no less than three provisions in about as many lines, against liability for loss by it. Can it be supposed that the company meant to say that if a fire occurred on the first part of the route they would pay the loss with pleasure, but that if it occurred on the second they would not pay it at all?Mr. Charles Denby, contra:

The opposing counsel admits the receipt by the company's agent of the cotton at Columbus, Mississippi, and the position is that there was no contract to carry from Columbus to Evansville at all, but only to carry from Evansville to Boston. Hence, that there can be no liability for the loss between Columbus and Evansville. But what was the company to do with the cotton after receiving it unless to carry it? keep it forever at Columbus?

Having received the cotton at Columbus it was the plain duty of the company to deliver it in Boston. The plaintiff had lost all power or control over it, and it being exclusively in the hands of the company it must be responsible for its safe delivery at Boston via Evansville, where the company had agreed to receive and to forward it, upon the restricted terms of the bill of lading as applied to that portion of the route from Evansville to Boston.

Flanders, in his authoritative work on Shipping, considers this exact case. He says:

'The responsibility attaches from the moment of the receipt. . . . Contracts to forward goods from one place to another and distant place, subject the party as common carrier for the whole route, although his own transportation line extends only part of the distance, and the loss occurs on a portion of the route in which he is not interested.'

It is quite plain, however, in looking at the bill of lading, that the exemptions do have a special reference to the transit from Evansville to Boston; and so plain is this, that the other side is actually led into the position that unless and until the cotton got to Evansville, there was not even a contract to carry at all.

Anybody looking at the bill of lading will see that while in general there is a contract to carry all the way through from Columbus to Boston, the exemptions-the earlier ones confessedly have an exclusive reference to carriage between Evansville, where the company's road begins, and Boston. That is a matter to be decided by 'inspection.' 'Upon arrival at Evansville and delivery of the property' there, it is that the company will receive and forward it upon 'the following conditions.' Does not the condition in red ink follow, and follow without a word interposited to show that it does not come into operation until 'upon arrival and delivery at Evansville, and delivery of the property.' What has red ink or a new paragraph devices of the printer merely-got to do with the legal interpretation of a contract? Either may make the exemption more conspicuous, but neither can make it apply to that which it would not have applied to, had it been in black ink or without the paragraph. The exemption is sensible enough as it stands. The bill makes three exemptions about fire:

1. 'Damage OR loss by fire while in depots or places of transhipment.'

2. 'Damage or delays by unavoidable accident; also loss by fire; i. e., loss by fire arising by unavoidable accident, or else, perhaps, loss by fire whether occurring in depots, &c., or not.'

3. 'Loss or damage from any cause whatever.'

We have here a progressive series of exemptions. The first two have confessedly reference to the transit between Evansville and Boston. Why shall the third not have the same? The third only extends what the first two less fully provide for. It may attempt to extend the exemption to an unlawful degree in attempting to exempt 'from loss or damage by fire from any cause whatever.' But the question here is not about the lawfulness of it, but as to what it applies.

We admit that the exemptions, meant to be secured by the bill, are confusedly stated. But there is less difficulty in interpreting them as we would interpret them, than in the way in which the other side would interpret them, than in you would apply the red-letter exemption to the whole transit, of what effect are the two exemptions confessedly confined to the partial transit between Evansville and Boston?If you confine it to the transit between Columbus and Evansville, then you give, for that part of the road, an exemption greater than that for the other; that other which it is plain from other provisions was the part more particularly meant to be guarded. The construction is, perhaps, one of a balance of difficulties. The difficulties of the construction sought to be set up by the other side are more weighty than those of the one sought to be maintained by us.

Mr. Justice HUNT delivered the opinion of the court.


text: Talk:Evansville and Crawfordsville Railroad Company v. Androscoggin Mills


text:
Evansville and Crawfordsville Railroad Company v. Androscoggin Mills/Opinion of the Court

Had the bill of lading contained nothing more than the terms and clauses in the part of it which is before the redletter clause, the argument made in behalf of the Androscoggin Mills would be a strong one. We must, however, examine the whole contract, and construe and give effect to all its provisions.

This bill of lading, in the first place, is a contract covering the cotton during the entire period of its transmission from Columbus to Boston, and over every part of the route. Not only is this the general law of the bill of lading, from the fact that Columbus was the place of receiving, and Boston the place of delivering, the cotton, but this bill of lading is emphatic in its declaration that such is its character. It is headed, 'Great through fast route to all points north and east,' &c. It says: 'This reliable through line makes the shipment of cotton and tobacco a specialty;' 'contract for a through rate;' and again, 'Through rate $10.25 per bale from Columbus to Boston.' It is evident, therefore, that the cotton is the subject of the contract of carriage not only from Evansville to Boston, to which the plaintiffs in error would confine it, but from Columbus to Evansville as well.

Bearing this in mind, it will be observed in the second place, that the contract separates itself into two parts-one, limiting the liability of the railroad company from Evansville to Boston, the other governing its liability generally. Thus the portion already referred to as relied upon by the defendants in error, undoubtedly was intended to be limited in its range. The liability under it and the exemption also, is expressly made dependent on the arrival of the goods at Evansville, and until they have so arrived, neither the liability nor the exemption commences. We can, however, be asked to hold that the liability or the exemption on a portion of the route is entirely omitted from the terms of a bill of lading which provides for transportation over the whole route, and where the compensation is specified as covering the whole route, only where it so appears by the plainest language. No doubt terms might be used in a bill of lading for the transportation of cotton from Mississppi to Massachusetts, by which exemptions from liability for loss by fire while in a railroad car from Evansville northward should be made, and no such exemptions should be made while the cotton was on the deck of a steamboat. We should not, however, expect to find such provisions, and we should require them to be clearly expressed.

All of the first general paragraph of the bill of lading may fairly be said to relate to the conditions upon which the transportation from Evansville northward shall be made. In its general terms we have already considered that paragraph.

A new subject, however, is taken up in the next sentence. It is not only the beginning of another paragraph, with the usual space between it and what precedes it, but it is printed in red ink, while what precedes it is in ordinary black type. Its importance in the opinion of the shippers is thus manifested. Attention is called to it as involving important provisions. Dropping the reference to Evansville, and the arrival of the goods there, it uses the most general terms: 'The Evansville and Crawfordsville Railroad Company will not be liable for loss or damage by fire, from any cause whatever.' It is an evident addition to the contract as expressed in the first clause. The railroad company there define the terms and conditions upon which they will be liable after the property has reached Evansville. While on the passage from Evansville northward, non-liability for loss by fire is twice stipulated for,-once while in depots or places of transhipments, and again in general terms,-the evident object and intent of the first clause is to affect this part of the route only. A new branch of the contract is then taken up, and the difference is intended to be made plain to the eye as well as the understanding. In the red-ink clause they use terms applicable to the entire contract of shipment, viz.: They 'will not be liable for loss or damage by fire, from any cause whatever.' No language of limitation is used. It is as if they had said, 'Should damage by fire occur to this cotton during any part of the route, and from any cause whatever, this company will not be liable.'

It is quite unreasonable to suppose that the company here intended to guard themselves against a liability for which they had twice already stipulated that they should not be liable, to wit, of loss fire after the cotton had reached Evansville. The clause in red was intended to cover the whole contract. Wherever, whenever, or however they would by law be liable for a loss by fire, from that liability they intended to relieve themselves. The exemption was intended to be as broad as was the original liability.

A careful reading of the bill of lading shows that the red-ink clause not only, but all that follows it, must have been understood by the parties to cover the whole route, and not to be limited to a part of the distance only. Thus, after providing an exemption from liability for loss by fire from any cause whatever, the bill of lading goes on to say, 'All property shipped on this contract will be subject to the expense of necessary repairs and remarking.' Can it be doubted that if the sacks of this cotton had required repairing or remarking from causes occurring before it reached Evansville, that it would have been a proper item of expense under this clause? 'In the event of loss or damage under the provisions of this agreement (it proceeds) the value or cost at the point of shipment shall govern the settlement of the same.' No one can doubt that the value at Columbus will govern the amount of a recovery under this clause. And again, the clause, 'Said property to be forwarded immediately after its arrival at Evansville,. . . and to be delivered at Boston upon the payment of freight and charges,' is, by its very terms, applicable to goods not yet at Evansville, when the contract takes effect.

We are of opinion that the argument of the defendants in error, upon which the judgment below was based, that the exemption from liability by fire was limited to fire occurring after the cotton had been received at and shipped from Evansville, was erroneous. The exemption covers the entire route.

JUDGMENT REVERSED, and judgment upon the demurrer ordered in favor of

THE PLAINTIFFS IN ERROR.


text: Talk:Evansville and Crawfordsville Railroad Company v. Androscoggin Mills/Opinion of the Court


text: Bailey v. New York Central Railroad Company


text: Talk:Bailey v. New York Central Railroad Company