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Bacon v. Rives/Opinion of the Court

This is a suit in equity. The complainants and appellants are John L. Bacon and H. E. C. Baskerville, partners as Bacon & Baskerville; John Stewart, Robert Ould, Robert H. Maury, and Isaac H. Carrington, trustees for the benefit of the creditors of William H. Macfarland, deceased, by virtue of a deed dated October 20, 1870; John W. Wright, sheriff of the city of Richmond, and as such administrator of William H. Macfarland.-all citizens of Virginia. The defendants are George C. Rives, a citizen of Texas, in his own right and as administrator with the will annexed of George Rives, deceased; J. Henry Rives, a citizen of Virginia, executor of George Rives, deceased; and Alfred L. Rives, a citizen of Alabama, and executor of William C. Rives, deceased. The suit was commenced on the twenty-second day of July, 1875, in the circuit court of Albemarle county, Virginia, and was thence removed, upon the petition of defendant George C. Rives, (in which the defendant Alfred L. Rives, executor of William C. Rives, united,) into the circuit court of the United States for the western district of Virginia. In the latter court a demurrer to the bill upon the part of the principal defendant, George C. Rives, was interposed upon the ground that the suit was barred by the statute of limitations, both of Texas and Virginia. The demurrer was sustained, and the bill dismissed.

The case made by the bill is, substantially, as follows:

In the summer of the year 1863, Bacon & Baskerville, John     Stewart, Robert H. Maury, William H. Macfarland, and William      C. Rives, uncle of the defendant George C. Rives, sent the      sum of $131,000, in 'confederate states treasury notes,'-the      currency, at that time, of Virginia, Louisiana, and Texas,-to      Col. James H. Stevens, then in Monroe, Louisiana, with      instructions to invest or expend the same in the purchase of      cotton on plantations in Louisiana and Texas, to remain      thereon until the civil war was ended. Of that sum Bacon &     Baskerville owned $48,000, Stewart $48,000, Maury $10,000,      Macfarland $5,000, and W. C. Rives $20,000. Subsequently,     however, Bacon & Baskerville became the owner of $80,000, and      Stewart $16,000, of the $131,000, the interest of the other      parties remaining the same as at the outset. The funds were * sent to Stevens by Bacon & Baskerville, by whom all     instructions were given and negotiations conducted. The     proceeds of the investment, it was understood, were to be      divided among the parties in proportion to their respective      interests.

About the third day of September, 1863, Stevens died in     Louisiana, en route to Texas, and without having invested any      of the funds transmitted to him. Shortly thereafter     complainants were notified by the widow of Stevens that she      held the $131,000 subject to their order. The defendant     George C. Rives wrote to the same effect to his cousin,      Alfred L. Rives, son and executor of W. C. Rives. Moved by     the advice and solicitation of W. C. Rives, as well as by the      encouraging character of certain letters written by George C.      Rives to Alfred L. Rives, (and which letters were exhibited      to complainants,) and influenced especially by the      declaration of the former in his letter that if the funds      were turned over to him he would act for the parties under      their instructions, and would save it by investing it in city      property in Austin, Texas, or in property which he      represented would pay well, and could be readily sold at any      time, the complainants made and appointed George C. Rives      their agent in the room and stead of Stevens. Complainants,     consequently, ordered and directed the funds, in the hands of      Mrs. Stevens, to be paid to George C. Rives, and towards the      close of the year 1863, or early in 1864, they were received      by the latter.

George C. Rives received the funds as agent and for the     benefit of complainants, to be invested in conformity with      specific instructions given by Bacon & Baskerville, the      managers and business negotiators of the enterprise, with the      concurrence of the joint owners of the funds, viz.: (1) That      the funds should be invested in cotton on plantations in      Texas, to remain thereon until the war ended, that being the      first and chief object of the whole venture. If that could     not be done, then (2) to invest them in ranch property,      meaning lands in Texas with cattle and horses thereon. If     that could not be done then (3) to invest them in town lots      in Austin.

Nothing was heard from George C. Rives upon the subject of     the proposed investment until, in response to a letter from      Bacon & Baskerville, under date of January 27, 1865, he wrote      a letter, under date of April 5, 1865, stating that he had      invested the funds in the transportation of cotton under      articles of partnership to continue during the war, and that      the business was under the management of an active partner, who gave his whole      time and attention to it; but he did not state who the active      partner was, nor how much of the funds he had so invested,      nor what property he had purchased therewith, nor what      proceeds, if any, had accrued to him from the investment. These departures from the instructions given to the agent     were not approved by complainants, and they hoped,      notwithstanding their orders had been disregarded, that a      fair and honest return would be made by their agent. After     the war ended, and after the expiration of 18 months without      any report or statement from their agent, Bacon &      Baskerville, in November, 1866, wrote to George C. Rives, at      Austin, Texas, asking an account of his agency, to which      letter no reply was made. On the twenty-sixth day of January,     1867, they again wrote to him at Austin, asking such account,      but no reply to that letter was received. Complainants,     consequently, 'almost reached the conclusion that Rives had      either died or left the country.' But in March, 1875,      learning, accidentally, that he was not only living, but for      several years then past had visited Virginia each summer,      they again wrote to him asking an account of his agency. No     reply came to that letter. At the same time they wrote, as     they had before done, to Alfred L. Rives, asking information      as to George C. Rives, but no reply was received, nor were      the letters written to the latter ever returned to the      writers through the dead-letter office.

As soon as possible after learning the whereabouts of George     C. Rives, complainants instituted this suit. They charge that     the retention by George C. Rives in his own possession of the      whole proceeds of the funds intrusted to him, his silence for      nearly 10 years, and his failure to render any account, arose      from an intention to defraud complainants out of the funds,      or the proceeds of their investment.

The bill further shows that George Rives, father of George C.     Rives, died in Virginia in 1874, possessed of a large estate,      real and personal, in which, by the will of his father, he      had a large interest, and that J. Henry Rives and Charles      Edward Rives qualified as his executors. The complainants ask     that the interest of George C. Rives in that estate, in      whatever form, be attached in the hands of the executors to      pay whatever may be shown to be due them. Attachments were     issued and served upon the executors, and were levied upon      that interest. It is also averred that W. C. Rives has died, and that Alfred L. Rives     is his executor; that Macfarland died in 1873, but before his      death he executed, on the twenty-ninth day of October, 1870,      a deed conveying all his property of every kind, in      possession or in action, to Robert Ould and Isaac H.      Carrington, trustees, for the benefit of his creditors, and      as no administration was had upon his estate, the same was      committed to the defendant Wright, sheriff of the city of      Richmond. It may be stated, in this connection, that after     the cause was removed from the state court, Charles Edward      Rives, an original defendant, died, and George C. Rives      became administrator de bonis non with the will annexed of      George Rives.

The prayer of the bill is that the defendants be required to     make, upon oath, full, true, and complete answers to all the      allegations of the bill; that George C. Rives be required to      render a full and complete account of all his actings and      doings as agent of complainants, and show what disposition or      investment he made of the funds intrusted to him, and what      the proceeds of such investment have been; and, if no      investment was made according to the instructions given, nor      any other investment of which complainants may choose to      avail themselves, that he be required to pay the value of the      funds intrusted to him as agent, with lawful interest      thereon.

Without waiving a full answer under oath to the bill, the     complainants ask that defendant George C. Rives be required      to answer the several special interrogatories embodied      therein, the object of which is to obtain from him      information as to whether he had received the $131,000 under      an engagement, as agent, to invest in the mode set out in the      bill; whether he had so invested it or not-if not, why not;      if so, in what kind of property he had invested, and what      disposition had been made of it or of its proceeds; and      whether, after the close of the war, he did not have in his      possession property purchased in whole or in part with the      proceeds of the investment; if so, of what did it consist,      and what has been done with it.

There was also a prayer for such other and further relief as     equity and justice required. Thus stood the suit when removed     from the state court.

J. Henry Rives, a citizen of Virginia, having been made a defendant, in his capacity as one of the executors of George Rives, it is contended that the suit was not removable into the circuit court of the United States. This position cannot be successfully maintained. Without giving all of the reasons which may be assigned in support of the right of removal, it is sufficient to say that he and Charles Edward Rives, executors of George Rives, had no interest in the question whether complainants have or not a cause of action against George C. Rives on account of the matters set out in the pleadings. They were neither necessary nor indispensable parties to the issue between the complainants and the principal defendant. It was of no moment to them whether the one or the other side in that controversy succeeded. It is true that the attachment (sued out by complainants before the removal of the suit) against George C. Rives was served upon the executors, and was levied upon his interest in the estate of his father. But they were made defendants, not because of any connection they had with the main controversy, but to the end that George C. Rives' interest in his father's estate might be reached and held, subject to such final decree as complainants might obtain against him. Though made, formally, defendants, the executors of George Rives occupied, substantially, the position of mere garnishees. Their citizenship was, consequently, immaterial. The necessary parties, on the respective sides of the controversy which is the foundation of the litigation, being citizens of different states, the relation of the executors to the suit was properly regarded as merely incidental, arising from the necessity of presserving the means whereby complainants might, if successful in this suit, obtain satisfaction of their demands against George C. Rives.

The remaining question to be considered relates to the defense of the statute of limitations presented by the demurrer to the bill. The contention of defendant is that the cause of action, if any, existed as far back as the close of the late civil war; that in Virginia and Texas the running of limitation was suspended by statute, in the former from some time in April, 1861, until January 1, 1869, and in the latter from some time in 1861 until March 30, 1870; that by the laws of Texas two years was the limitation to suits on oral, and four years to suits on written, contracts, while the limitation in Virginia to such suits as the present one was five years; consequently, excluding from the computation of time the periods of the suspension of the statute in the respective states, the plaintiffs' cause of action was barred. The defendant further insists that the law of Texas governs by reason of that provision in the Code of Virginia which declares that 'upon a contract which was made and was to be performed in another state or country, by a person who then resided therein, no action shall be maintained after the right of action thereon is barred by the laws of such state or country.' Code of Va. (Ed. 1873,) § 20, p. 1002.

In the view which the court takes of the case, it is unnecessary now to determine whether reference must be had to the law of the state where the suit is pending, or to that of the state where the alleged contract was to be performed. We are not satisfied that the cause of action, as set out in the bill, was, at the commencement of the suit, barred by limitation, as prescribed in either Texas or Virginia. The case, as now presented, discloses, not, perhaps, one of those technical trusts of which a court of equity has peculiar and exclusive jurisdiction, but yet, a trust, arising out of express agreement, under which the defendant George C. Rives received from complainants certain funds, which he undertook to invest in particular kinds of property, in conformity with specific instructions given by those whom he represented. His duty, under the law, although the agreement did not, in terms, so declare, was, from time to time, as the circumstances required, to inform those whom he represented of his acts, and, upon completion of the trust, to render an account of all he had done in the premises; or, if he elected not to execute the trust, to surrender the property or its proceeds. He received the funds, as has been seen, in the latter part of the year 1863, or early in 1864. He undertook to invest them, if practicable, in cotton on plantations in Texas, to remain thereon until the civil war was concluded. Failing in that, he was to invest in ranch property, or lands in Texas with cattle and horses thereon; failing in the latter, he was to invest in town lots in Austin, in that state. He gave, so the bill avers, no information whatever of his acts until the spring of 1865, when, in response to a letter from his principals, he wrote that he had invested the funds received by him in the transportation of cotton, under articles of copartnership, to continue during the war, and that the business was under the management of an active partner, who gave his whole time and attention to it. Whether that arrangement involved a violation of the laws of the United States, in reference to the shipment of cotton from the insurrectionary districts, does not now appear. But he withheld the name of that partner, and did not inform his principals of the result of that investment. From that time forward the defendant failed to communicate with complainants, or with any of them, as to what, if anything, had been accomplished in the execution of his trust. To letters making inquiries, and which, in the present attitude of the case, we may assume were received, no response was made.

Taking, then, the allegations of the bill to be true, as upon demurrer we must do, the existence of the trust is clearly established; it is still open or not wholly executed; it has never been disclaimed by clear and unequivocal acts or words, brought to the notice or knowledge of complainants or either of them; there has been no adverse holding of the original fund or of its proceeds; consequently the possession by the defendant George C. Rives, of the proceeds of the original funds, if invested at all, may be deemed the possession of those whom he undertook to represent. But it is suggested that while the agreement did not prescribe any period within which he was to make the investment, it was necessarily implied that it was to be performed within a reasonable time; consequently, it is argued, the statute would commence running after the lapse of such reasonable time, or from the moment when complainants were entitled to enforce force an accounting. Phillips v. Holman, 26 Tex. 280. To this it may be replied that whether the trustee was derelict in duty in not making the investment within any particular period, depends upon the special facts of the case. Having regard to all the circumstances, particularly such as were connected with the disturbed condition of the country for many years after the war closed, we cannot, upon the case made by the bill, fix the date when the defendant should, with reasonable diligence, have executed his trust, or say that there has been, upon the part of complainants, such delay as prevents them from applying to a court of equity for relief. Being called upon to execute what, consistently with the facts, as disclosed in the bill, appears to be a subsisting trust, or if it has been, in whole or in part, executed, to disclose when and how it was so executed, he should not be permitted to take shelter behind a demurrer which relies simply upon the statutory limitation, and confesses that he has kept his cestuis que trust in ignorance of what it was his duty to communicate. The complainants, it seems to the court, are entitled, upon well-established principles of equity, to a discovery as to the disposition, if any, which has been made of their property. Inquiry in that direction should not be cut off, since, upon the showing made, it does not clearly appear that the suit is barred by the statutes of limitation. Unless otherwise distinctly declared by the statute prescribing fixed periods for the commencement of suits, the cause of action is not, ordinarily, deemed to have accrued against, nor limitation to commence running in favor of the trustee of such a trust as the bill describes until the trust is closed, or until the trustee, with the knowledge of the cestuis que trust, disavows the trust, or holds adversely to the claim of those he represented.

And such seems to be the doctrine of the supreme court of Texas, by the laws of which state, the defendants insist, this case is to be determined as to the question of limitation. White v. Leavitt, 20 Tex. 705; Grumbles v. Grumbles, 17 Tex. 477. In the first of these cases a recovery was sought by the plaintiff for the value of certain goods consigned for sale to the defendants therein, and which had never been accounted for. The suit was not commenced until four years after the goods came to the hands of the consignee for sale. It was said by the court: 'The proof shows that the goods were held and disposed of by White & Co. in trust for Leavitt and there being no evidence that the trust was ever repudiated, the statute of limitations (two years) did not run upon the cause of action, as it has often been decided by this court.'

It is also suggested that the bill concedes that the complainants were informed by defendant, in the year 1865, that he had invested the funds placed in his hands in a way not authorized by the instructions given him, and, consequently, it is argued, the complainants had then a cause of action to recover such damages as they had sustained by reason of the disregard of their instructions. It may be that, upon final hearing, when the facts are fully disclosed, the court may be bound to hold the complainants estopped to complain of the defendant's departure from the instructions under which he received the funds in question. Even then, so far as can be now determined from the allegations in the bill, the defendant would be liable to account for the proceeds, if any, of his investment 'in the transportation of cotton under articles of partnership,' in the same way that he would be required to account for the proceeds of investments made in conformity to his instructions. It does not appear from the bill that the defendant intended, by investing in the particular mode stated in his letter, to assume a position of hostility to his principals, or to hold the proceeds, if any, of that investment in his own right.

As, therefore, it does not clearly or distinctly appear from the bill that the suit was barred by limitation, the demurrer should have been overruled. The facts, when fully developed, may present an altogether different case from that now disclosed. We can only consider the question of limitation in the light of the facts as alleged in the bill.

The decree is reversed, and the cause remanded for further proceedings in conformity with this opinion.

title: Bacon v. Rives/Opinion of the Court


text: Talk:Bacon v. Rives/Opinion of the Court

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


text:
Bailey v. New York Central Rail Road

Richard Crowley and S. F. Phillips, Sol. Gen., for plaintiff in error.

Joseph H. Choate and Sidney T. Fairchild, for defendant in error.

MATTHEWS, J.

title: Bailey v. New York Central Rail Road


text: Talk:Bailey v. New York Central Rail Road


text:
Bailey v. New York Central Rail Road/Opinion of the Court

On December 19, 1868, the New York Central Railroad Company, afterwards merged by consolidation into a new corporation, the defendant in error, adopted a preamble, resolutions, and sertificate, of which the following is a copy:

'Whereas, this company has hitherto expended of its earnings     for the purpose of constructing and equipping its road, and      in the purchase of read estate and other properties, with a      view to the increase of its traffic, moneys equal in amount      to 80 per cent. of the capital stock of the company; and     whereas, the several stockholders of the company are entitled      to evidence of such expenditure, and to reimbursement of the      same at some convenient future period; now, therefore,--

'Resolved, that a certificate, signed by the president and     treasurer of this company, be issued to the stockholders,      severally, declaring that such stockholder is entitled to 80 per cent. of     the amount of the capital stock held by him, payable ratably      with the other certificates issued under this resolution, at      the option of the company, out of its future earnings, with      dividends thereon at the same rates and times as dividends      shall be paid on the shares of the capital stock of the      company, and that such certificates may be, at the option of      the company, convertible into stock of the company whenever      the company shall be authorized to increase its capital stock      to an amount sufficient for such conversion.

'Resolved, that such certificates be delivered to the     stockholders of this company at the Union Trust Company, in      the city of New York, on the presentation of their several      certificates of stock, and that the receipt of the      certificate provided for in these resolutions shall be      indorsed on the stock certificate.'

The certificate issued under this authority reads as follows:

'Under a resolution of the board of directors of this     company, passed December 19, 1868, of which the above is a      copy, the New York Central Railroad Company hereby certifies      that ___, being the holder of ___ shares of the capital stock      of said company, is entitled to ___ dollars, payable ratably      with the other certificates issued under said resolution, at      the pleasure of the company, out of its future earnings, with      dividends thereon at the same rates and times as dividends      shall be paid upon the shares of the capital stock of said      company.

'This certificate may be transferred on the books of the     company on the surrender of this certificate.

'In witness whereof the said company has caused this     certificate to be signed by its president and treasurer, this      nineteenth day of December, 1868.'

The resolution was carried into effect by an issue of the contemplated certificates to the amount of $23,036,000, being 80 per cent. of its authorized capital of $28,795,000. Dividends were regularly paid to the holders of these certificates, equal to those declared and paid upon the capital stock, until the certificates were redeemed at par in the stock of the consolidated corporation, as then authorized by law. This consolidation took place in 1872. On March 3, 1870, an assessment was made by the proper officer of the internal revenue of a tax of 5 per cent. upon the amount of these certificates, being $1,151,800, with a penalty of $1,000 added, under section 122 of the internal-revenue act of 1864. 13 St. at Large, 284. From this assessment the railroad company appealed successively to the commissioner of internal revenue and the secretary of the treasury, upon which appeal a decision was rendered reducing the assessment to the sum of $460,720. This decision was based upon the ground that the issue of the certificates was a scrip dividend within the meaning of the 122d section of the internal-revenue act of 1864; but that as it had been made to appear that the earnings stated in the resolution to have been expended, accrued during the entire period of 15 years, from 1853 to 1868, of which only six years were covered by the income-tax law, which first took effect in September, 1862, the tax should be apportioned pro rata, by remitting nine-fifteenths, and assessing the tax upon the sum of $9,214,400, the amount of earnings assumed to have accrued during the period when they were subject to the tax. The assessment upon this sum being $460,720, with a penalty of 5 per cent., being $23,036, and interest at the rate of 1 per cent. per month, amounting to $64,153.48, were exacted by the collector, and paid under protest. To recover back these sums as illegally exacted, the defendant in error brought this action against the collector of internal revenue who had collected them.

On the first trial of the case, the circuit court charged the jury that the assessment was wholly illegal and void, the certificates not being a scrip dividend within the meaning of the law, and furnishing no basis for the assessment of any tax whatever, and that consequently their verdict must be for the plaintiff. There was a verdict accordingly, and the judgment thereon was reversed, and a new trial awarded, upon a writ of error, by this court, in a decision reported in 22 Wall. 604. The second trial, in the circuit court, resulted in a verdict and judgment for the plaintiff below for $499,432.68. To reverse that judgment is the object of the present writ of error.

The principal questions presented arise upon exceptions of the plaintiff in error to the charge of the circuit judge to the jury, and to his refusal to give certain instructions as requested. The substance of of the charge upon the main point was that while the certificates constituted a scrip dividend, which justified the assessment and constituted a complete prima facie defense to the action, nevertheless it was competent for the plaintiff to show what amount of the earnings of the company, accruing from September 1, 1862, to December 19, 1868, was represented by and included in the certificates; and that this amount alone being subject to the tax, the plaintiff was entitled to recover all in excess of that which had been exacted and paid. The opposing proposition of the defendant below, the request to give which as a charge to the jury was refused, was that the certificates were conclusive upon the railroad company of the amount of a scrip dividend subject to taxation without deduction.

The counsel for the plaintiff in error now contend that their position is established by the former decision of this court in this cause, already referred to, as reported in 22 Wall. 604. The actual and precise judgment of the court upon the former writ of error is, however, completely satisfied by the charge of the circuit court now in question; for the ruling on the first trial, held to be erroneous, was that the certificates constituted no basis whatever for taxation as a scrip dividend, and were not to be admitted or considered even as a prima facie defense to the action. The reversal at that time did not and could not, upon the record then presented, anticipate and prejudge the question now raised, whether those certificates were conclusive as to the amount of the taxable earnings represented by them. And there is nothing in the opinion of the court then pronounced which, properly understood, requires any conclusion to the contrary. In that opinion the nature of these certificates is described, and their character as scrip dividends defined. It is there stated that 'interest certificates of the kind were issued as evidence to the stockholders that an equal amount of the earnings of the company beyond current expenses had been expended for the objects stated in the preamble of the certificates, and to show that the respective stockholders were entitled to reimbursement of such expenditure at some convenient future period, and also to show that the stockholders were entitled to dividends on the same whenever dividends were paid on the shares of the capital stock; and that the certificates were to be paid out of the future earnings of the company, or to be converted, at the option of the company, into stock, if thereafter authorized to exercise that function. 'Such a paper, therefore, by whatever name it may be called, is, upon its face, evidence for each stockholder, to persons with whom he may have dealings, of the amount of the previous net earnings of the company; that such net earnings have been expended in constructing and equipping the railroad, and in the purchase of real estate and other properties appertaining to the same; and that the holders of the certificates will be entitled to dividends whenever dividends are paid upon the capital stock.'

These certificates were considered to be a dividend declared, as of profits which had been, at some previous time, earned and converted into capital by an investment in permanent improvements of the railroad, and it was as representing such earnings that they were considered the subject of a tax. Whether those profits had been earned since or before the passage of the act of congress imposing such a tax, does not appear from any recital in the certificates, and they were dealt with by the government itself upon the footing of not being taxable beyond the amount represented by them, which had actually been earned after the taking effect of the law. The treasury department, as has already been stated, reduced the assessment to six-fifteenths of the face of the certificates, upon the hypothesis that an equal proportion of the whole amount had accrued during each of the 15 years since the organization of the company, in 1853; and, in view of this reduction, Mr. Justice CLIFFORD, in the opinion referred to, added: 'Whether or not they are liable for the whole amount is not a question in this case.'

The question having thus been left open, it is now contended by the counsel for the plaintiff in error that, by the reason and terms of the law, the certificates are taxable as a scrip dividend upon the full nominal amount thereof.

The 122d section of the internal-revenue act of 1864, (13 St. at Large, 284,) under which the question arises, is as follows:

'Sec. 122. And be it further enacted that any railroad,     canal, turnpike, canal navigation, or slack-water company,      indebted for any money for which bonds or other evidence of      indebtedness have been issued, payable in one or more years after date,      upon which interest is stipulated to be paid, or coupons      representing interest, or any such company that may have      declared any dividend in scrip or money due or payable to its      stockholders as part of the earnings, profits, income, or      gains of such company, and all profits of such company      carried to the account of any fund, or used for construction,      shall be subject to and pay a duty of 5 per centum on the      amount of all such interest, or coupons, dividends, or      profits, whenever the same shall be payable,' etc.

It is now urged in argument, by the counsel for the plaintiff in error, that, upon the express terms of this section, the certificates in question, being a declaration of a dividend as part of the earnings, profits, income, or gains of the railroad company, are taxable upon the amount thereof without deduction; that the policy as well as the language of the act fixes the charge upon the declaration itself when made effectual as between the company and its stockholders, and, for the purposes of taxation, concludes both as to the amount subject to the tax; and that the rule is reasonable as furnishing an obvious standard and the only safe criterion for the assessment of the tax to prevent fraudulent evasions; and, consequently, that when such a dividend has once been declared, and ascertained to come within the description of the law as a subject of taxation, all the rest follows, and the amount declared is necessarily established as the amount to be taxed.

The soundness of this mode of interpretation, and its application to ordinary cases, may well be admitted; but it cannot be applied to every case without a careful regard to its necessary limitations.

It should be borne in mind, in the first place, that the tax provided for in this section of the act is an annual income tax, and its subject is the interest paid and profits earned by the company for each year, and year by year; and that both by the express letter of the law, and its necessary implications, the tax is not laid on any of these funds which came into being before the time prescribed in the act. And in the ordinary execution of the law it was contemplated that the funds to be taxed, and the tax imposed upon them, would be concurrent as to each fiscal year; the scheme of the statute being to levy the tax upon the income for the year ending on the thirty-first of December next preceding the assessment; and, while it would be altogether admissible to go back, for the purpose of assessing a tax upon a proper fund which had accrued during a previous year and escaped taxation, nevertheles the tax imposed would be for the omitted year. But no tax, in contemplation of the law, accrues upon the fund, except for the year in which the fund itself accrued. It is also to be remembered that the subject-matter of the tax is the net earnings of the company for the year for which they are taxed, which have been actually realized by it, or which the law assumes to have been. We repeat here what was said by Mr. Justice MILLER, speaking for the court, in Railroad Co. v. Collector, etc., 100 U.S. 598:

'The corporations mentioned in this section are those engaged     in furnishing road-ways and water-ways for the transportation      of persons and property, and the manifest purpose of the law      was to levy the tax on the net earnings of such companies. How were these 'earnings, profits, incomes, or gains' to be     most certainly ascertained? In every well-conducted     corporation of this character these profits were disposed of      in one of four methods, namely, distributed to its      stockholders as dividends, used in construction of its roads      or canals, paid out for interest on its funded debt, or      carried to a reserve or other fund remaining in its hands. Looking to these modes of distribution as the surest evidence     of the earnings which congress intended to tax, and as less      liable to evasion than any other, the tax is imposed upon all      of them. The books and records of the company are thus made     evidence of the profits they have made, and the corporation      itself is made responsible for the payment of the tax.'

It is true, indeed, that by the terms of the law the amount paid as interest on bonds is charged with a tax as part of the earnings, although there may have been no net earnings out of which to pay it; but the law proceeds upon a presumption which disregards what is merely exceptional. And we have no hesitation in saying that, in reference to a dividend declared as of earnings for the current year and paid as such to stockholders, whether in money or in scrip, no proof would be admissible, for the purpose of avoiding the tax, that no earnings had in fact been made. The law conclusively assumes, in such a case, that a dividend declared and paid is a dividend earned. It follows, also, from this view of the purpose of the law, that a fund taxed in one year as the profits of a railroad company, used for construction or carried to the account of any fund, has been taxed once for all, and cannot, as part of the earnings of the company, be assessed a second time. The tax for the year is upon the whole amount of the net earnings, distributed and enumerated under the heads pointed out in the statute, and when the tax has been imposed and collected upon them, or any specific part of them, there is no authority to levy any further additional tax. The profits that this year have been taxed as undivided, and invested in any corporate asset, if in the succeeding year it is embraced in a dividend declared and payable to stockholders, have already borne all the burden imposed by the law, and cannot again be subjected to an assessment for a new tax. There has been a difference of opinion upon the point, whether the tax imposed by this section is upon the corporation on account of its net profits, or upon the income of the stockholder or bondholder, although in the present case it is immaterial which of these alternatives is adopted. We are not aware, however, that it has ever been suggested, until now, that it might be both in succession; one year a tax upon the income of the corporation, and the next upon the same fund as the income of the individual. We do not think this an admissible construction.

It is necessary, in the application of these principles of the circumstances of the present case, to regard the special character of the certificates in question. It will be seen that they do not purport to be a declaration of a dividend as of the earnings of the company during the year in which the tax was assessed, or, indeed, for any particular year or series of years. The recital is that the company 'has hitherto expended of its earnings, for the purpose of constructing and equipping its road, and in the purchase of real estate and other properties, with a view to the increase of its traffic, moneys equal in amount to 80 per cent. of the capital stock of the company.' It was quite legitimate for the assessor to treat this as evidence of an amount of earnings which had never been taxed, and make the assessment accordingly. It was equally legitimate for the secretary of the treasury, upon proof that the accumulation had been going on from the organization of the company, in 1853, to apportion the amount in equal proportions for each year, and to deduct nine-fifteenths thereof for the years which had elapsed before the taking effect of the act taxing incomes. And it is entirely consistent with the declaration itself to show in point of fact what was the amount of earnings accrued during the period while the income-tax act was in force which had not been assessed for taxation as profits carried to construction or other account. The declaration in the certificates could not be conclusive of anything not inconsistent with it, for an estoppel only prohibits contrary allegations. The proof admitted on the trial below did not contradict the certificates, but only served to rebut a presumption, which, as matter of law, was not conclusive. Its tendency and effect were to exact from the company the full tax upon every dollar of its earnings, which had not previously paid its proper assessment, and which, in any form, was subject to taxation, and to relieve it only to the extent to which otherwise it would have been subjected to the payment of a second tax upon the same fund. This result, and the process by which it was reached, seem to us strictly to conform both to the letter and spirit of the law governing the subject.

This conclusion disposes of the substance of the case, as it sustains the rulings of the circuit court upon the main question. There were other exceptions to the charge, and to the refusal of the court to give instructions asked for by the plaintiff in error; but they are either covered by what has already been said, or seem to us not necessary to be specially mentioned. A point was raised as to certain items claimed to be included in the sum for which these certificates were issued, which, in the view we have taken, becomes immaterial; for, as we have decided that the jury could only consider the earnings realized in fact during the operation of the law from 1862 to 1869, it was immaterial what items existing prior to that period were also included in the aggregate sum for which the certificates were issued. Some exception also was taken to some comment on the part of the circuit judge as to the state of the evidence, but, in our opinion, the question which the jury had to decide was left to them fairly.

We find no error in the record, and the judgment is accordingly affirmed.


text: Talk:Bailey v. New York Central Rail Road/Opinion of the Court


text:
National Steam-Ship Company v. Tugman

[Syllabus from page 118 intentionally omitted]

[Statement of Case from pages 118-120 intentionally omitted]

John Chetwood, for plaintiff in error.

F. J. Fithian and J. R. Carmichael, for defendant in error.

HARLAN, J.

title: National Steam-Ship Company v. Tugman


text: Talk:National Steam-Ship Company v. Tugman


text:
National Steam-Ship Company v. Tugman/Opinion of the Court

The underlying question in this case is whether, within the meaning of the constitution and of the statutes determining the jurisdiction of the circuit courts of the United States, and regulating the removal of causes from state courts, a corporation created by the laws of a foreign state may, for the purposes of suing and being sued in the courts of the Union, be treated as a 'citizen' or 'subject' of such foreign state.

In Ohio & M. R. Co. v. Wheeler, 1 Black, 296, the court, speaking by Chief Justice TANEY, said that, in the previous case of Louisville, C. & C. R. Co. v. Letson, 2 How. 497, it had been decided, upon full consideration, 'that where a corporation is created by the laws of a state, the legal presumption is that its members are citizens of the state in which alone the corporate body has a legal existence; and that a suit by or against a corporation, in its corporate name, must be presumed to be a suit by or against citizens of the state which created the corporate body; and that no averment or evidence to the contrary is admissible for the purposes of withdrawing the suit from the jurisdiction of a court of the United States.' Marshall v. Baltimore & O. R. Co. 16 How. 314; Covington Drawbridge Co. v. Shepherd, 20 How. 232; ''Ins. Co. v. Ritchie'', 5 Wall. 542; Paul v. Virginia, 8 Wall. 178; Railroad Co. v. Harris, 12 Wall. 82.

To the rule, thus established by numerous decisions, the court adheres. Upon this branch of the case it is therefore only necessary to say that if the individual members of a corporation, created by the laws of one of the United States, are, for the purposes of suit by or against it in the courts of the Union, conclusively presumed to be citizens of the state by whose laws that corporation is created and exists, it would seem to follow, logically, that the members of a corporation, created by the laws of a foreign state, should, for like purposes, be conclusively presumed to be citizens or subjects of such foreign state. Consequently, a corporation of a foreign state is, for purposes of jurisdiction in the courts of the United States, to be deemed, constructively, a citizen or subject of such state.

But it is suggested that the petition for the removal of the action into the circuit court of the United States is radically defective, in that it does not show that the National Steam-ship Company was a corporation of a foreign state at the commencement of the action; that the allegation upon that point refers only to the time when the removal was sought. If, in suits in which the jurisdiction of the courts of the United States depends upon the character of the parties, it is material, under the act of March, 3, 1875, to show what the citizenship of the parties was at the commencement of the action, it is sufficient to say that the averment in the original complaint that the company is a foreign corporation, supplemented by the averment in the petition for removal that it is a corporation created by and existing under the laws of the united kingdom of Great Britain and Ireland, covers the whole period from the commencement of the action to the application for removal. It is not always necessary that the citizenship of the parties be set out in the petition for removal. The requirements of the law are met if the citizenship of the parties to the controversy sought to be removed is shown, affirmatively, by the record of the case. ''Ry. Co. v. Ramsey'', 22 Wall. 322; Robertson v. Cease, 97 U.S. 648.

The only remaining question which need be considered is whether the jurisdiction of the state court was, in any form, restored, after the company filed its petition and bond for removal. The defendant in error insists that it was. The petition was accompanied by a bond which, it is conceded, conformed to the statute, and was ample as to security. Upon the filing, therefore, of the petition and bond,-the suit being removable under the statute,-the jurisdiction of the state court absolutely ceased, and that of the circuit court of the United States immediately attached. The duty of the state court was to proceed no further in the cause. Every order thereafter made in that court was coram non judice, unless its jurisdiction was actually restored. It could not be restored by the mere failure of the company to file a transcript of the record in the circuit court of the United States within the time prescribed by the statute. The jurisdiction of the latter court attached, in advance of the filing of the transcript, from the moment it became the duty of the state court to accept the bond and proceed no further; and whether the circuit court of the United States should retain jurisdiction, or dismiss, or remand the action because of the failure to file the necessary transcript, was for it, not the state court, to determine.

Nor was the jurisdiction of the state court restored when the company, subsequently, consented to the order requiring the issues to be heard and determined by a referee selected by the parties, or when it appeared and contested the case, as well before the referee as in the state courts, up to final judgment. The right of the company to have a trial in the circuit court of the United States became fixed upon the filing of the petition and bond. But the inferior state court having ruled that the right of removal did not exist, and that it had jurisdiction to proceed, the company was not bound to desert the case, and leave the opposite party to take judgment by default. It was at liberty, its right to removal being ignored by the state court, to make defense in that tribunal in every mode recognized by the laws of the state, without forfeiting or impairing, in the slightest degree, its right to a trial in the court to which the action had been transferred, or without affecting, to any extent, the authority of the latter court to proceed. The consent, by the company, to a trial by referee was nothing more than an expression of its preference-being compelled to make defense in the state court-for that one of the several modes of trial permitted by the laws of the state. It is true that when the cause was taken up by the referee, as well as when heard in the supreme court of the state and in the court of appeals, the company protested that the circuit court of the United States alone had jurisdiction after the petition and bond for removal were filed. But no such protests were necessary, and they added nothing whatever to the legal strength of its position. When the state court adjudged that it had authority to proceed, the company was entitled to regard the decision as final, so far as that tribunal was concerned, and was not bound, in order to maintain the right of removal, to protest, at subsequent stages of the trial, against its exercise of jurisdiction. Indeed, such a course would scarcely have been respectful to the state court after its ruling upon the point of jurisdiction had been made.

What we have said upon this subject is fully sustained by our former decisions, particularly Railroad Co. v. Koontz, 104 U.S. 5; Railroad Co. v. Mississippi, 102 U.S. 135; Kern v. Huidekoper, 103 U.S. 485; and ''Ins. Co. v. Dunn'', 19 Wall. 214.

The judgments herein of the court of appeals of New York, and of the supreme court of New York, are reversed, and the cause is remanded, with directions that the latter court accept the bond tendered by plaintiff in error for the removal of the cause to the circuit court of the United States for the eastern district of that state, and proceed no further in the cause.


text: Talk:National Steam-Ship Company v. Tugman/Opinion of the Court


text:
User talk:70.0.231.177

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title: User talk:70.0.231.177


text:
Pritchard v. Norton

This action was brought by the plaintiff in error, a citizen of Louisiana, against the defendant, a citizen of New York, in the circuit court for the district of Louisiana, upon a writing obligatory, of which the following is a copy:

'State of New York, County of New York: Know all men by these     presents, that we, Henry S. McComb, of Wilmington, state of      Delaware, and Ex Norton, of the city of New York, state of      New York, are held and firmly bound, jointly and severally,      unto Richard Pritchard, of New Orleans, his executors,      administrators, and assigns, in the sum of fifty-five      thousand (55,000) dollars, lawful money of the United States,      for the payment whereof we bind ourselves, our heirs,      executors, and administrators firmly by these presents. Sealed with our seals and dated this thirtieth day of June, A. D. eighteen hundred and     seventy-four.

'Whereas the aforesaid Richard Pritchard has signed an appeal     bond as one of the sureties thereon, jointly and severally,      on behalf of the defendant, appellant in the suit of J. P.      Harrison, Jr., v. The New Orleans, Jackson & Great Northern      Railroad Co., No. 9,261 on the docket of the seventh district      court for the parish of Orleans:

'Now, the condition of the above obligation is such that if     the aforesaid obligors shall hold harmless and fully      indemnify the said Richard Pritchard against all loss or      damage arising from his liability as surety on the said      appeal bond, then this obligation shall be null and void;      otherwise, shall remain in full force and effect.

H. S. MCCOMB. [L. S.]

'EX NORTON. [L. S.]'

Richard Pritchard, of whom the plaintiff in error is executrix, had, on November 20, 1872, joined in a bond as surety for the New Orleans, Jackson & Great Northern Railroad Company, in a suspensive appeal taken by the latter from a judgment rendered against it in favor of Harrison, in the seventh district court for the parish of Orleans. A judgment was rendered on that appeal in the supreme court of the state, May 30, 1876, against the railroad company, in satisfaction of which Pritchard became liable to pay and did pay the amount, to recover which his executrix brought this action. The condition of this appeal bond was that the railroad company 'shall prosecute its said appeal and shall satisfy whatever judgment may be rendered against it, or that the same shall be satisfied by the proceeds of the sale of its estate, real or personal, if it be cast in the appeal; otherwise that the said Pritchard et al., sureties, shall be liable in its place.' The defendant set up, by way of defense, that the bond of indemnity sued on was executed and delivered by him to Pritchard in the state of New York, and without any consideration therefor, and that by the laws of that state it was void by reason thereof. There was evidence on the trial tending to prove that the appeal bond was not signed by Pritchard at the instance or request of McComb or Norton, and that there was no consideration for their signing and executing the bond of indemnity passing at the time, and that the latter was executed and delivered in New York. There was also put in evidence the provisions of the Revised Statutes of that state, (2 Rev. St. 406,) as follows: 'Sec. 77. In every action upon a sealed instrument, and  when a set-off is founded upon any sealed instrument,   the seal thereof shall only be presumptive evidence of a   sufficient consideration, which may be rebutted in the   same manner and to the same extent as if the instrument   were not sealed.

'Sec. 78. The defense allowed by the last section shall not     be made unless the defendant shall have pleaded the same, or      shall have given notice thereof at the time of pleading the      general issue, or some other plea denying the contract on      which the action is brought.'

At the request of the defendant the circuit court charged the jury that the indemnifying bond, in respect to its validity and the consideration requisite to support it, was to be governed by the law of New York, and not of Louisiana; and that if they believed from the evidence that the appeal bond signed by Richard Pritchard as surety was not signed by him at the instance or request of McComb and Norton, or either of them, and that no consideration passed between Pritchard and McComb and Norton for the signing and execution of the indemnifying bond by them, then that said bond was void for want and absence of any consideration valid in law to sustain it, and no recovery could be had upon it. The plaintiff requested the court to charge the jury that if they found from the evidence that the consideration for the indemnifying bond was the obligation contracted by Pritchard as surety on the appeal bond, and that the object of the indemnifying bond was to hold harmless and indemnify Pritchard from loss or damage by reason of or growing out of said appeal bond, then that the consideration for said indemnifying bond was good and valid, and is competent to support the action upon the bond for the recovery of any such loss or damage sustained by Pritchard. This request the court refused. Exceptions were duly taken to these rulings, which are now assigned for error, there having been a verdict and judgment for the defendant, now sought to be reversed.

Cephas Brainerd and George H. Bates, for defendant in error.

[Argument of Counsel from pages 126-128 intentionally omitted]

Henry C. Miller, for plaintiff in error.

MATTHEWS, J.

title: Pritchard v. Norton


text: Talk:Pritchard v. Norton

title: Talk:Pritchard v. Norton


text:
Pritchard v. Norton/Opinion of the Court

It is claimed on behalf of the plaintiff in error that by the law of Louisiana the pre-existing liability of Pritchard as surety for the railroad company would be a valid consideration to support the promise of indemnity, notwithstanding Pritchard's liability had been incurred without any previous request from the defendant below. This claim is not controverted, and is fully supported by the citations from the Civil Code of Louisiana of 1870, arts. 1893-1960, and the decisions of the supreme court of that state. Flood v. Thomas, 5 Martin, (N. S.) 562; N. O. Gas Co. v. Paulding, 12 Rob. 378; N. O. & C. R. Co. v. Chapman, 8 La. Ann. 98; Keane v. Goldsmith, 12 La. Ann. 560. In the case last mentioned it is said that 'the contract is, in its nature, one of personal warranty, recognized by articles 378 and 379 of the Code of Practice.' And it was there held that a right of action upon the bond of indemnity accrued to the obligee when his liability became fixed as surety by a final judgment, without payment on his part, it being the obligation of the defendants upon the bond of indemnity to pay the judgment rendered against the surety, or to furnish him the money with which to pay it.

The single question presented by the record, therefore, is whether the law of New York, or that of Louisiana, defines and fixes the rights and obligations of the parties. If the former applies, the judgment of the court below is correct; if the latter, it is erroneous. The argument in support of the judgment is simple, and may be briefly stated. It is that New York is the place of the contract, both because it was executed and delivered there, and because no other place of performance being either designated or necessarily implied, it was to be performed there; wherefore, the law of New York, as the lex loci contractus, in both senses being lex loci celebrationis and lex loci solutions, must apply to determine not only the form of the contract, but also its validity. On the other hand, the application of the law of Louisiana may be considered in two aspects, as the lex fori, the suit having been brought in a court exercising jurisdiction within its territory and administering its laws, and as the lex loci solutionis, the obligation of the bond of indemnity being to place the fund for payment in the hands of the surety, or to repay him the amount of his advance, in the place where he was bound to discharge his own liability.

It will be convenient to consider the applicability of the law of Louisiana, first, as the lex fori, and then as the lex loci solutionis.

1. The lex fori.

The circuit court of the United States sitting in the district of Louisiana, in a cause like the present, in which its jurisdiction depends on the citizenship of the parties, adjudicates their rights precisely as would a tribunal of the state, according to the laws of the state; so that, in that sense, there is no question as to what law must be administered. But in case of contract the foreign law may, by the act and will of the parties, have become part of their agreement, and in enforcing this, the law of the forum may find it necessary to give effect to a foreign law, which, without such adoption, would have no force beyond its own territory.

This, upon the principle of comity, for the purpose of promoting and facilitating international intercourse, and within limits fixed by its own public policy, a civilized state is accustomed and considers itself bound to do; but, in doing so, nevertheless adheres to its own system of formal judicial procedure and remedies. And thus the distinction is at once established between the law of the contract, which may be foreign, and the law of the procedure and remedy, which must be domestic and local. In respect to the latter the foreign law is rejected; but how and where to draw the line of precise classification it is not always easy to determine.

The principle is that whatever relates merely to the remedy and constitutes part of the procedure is determined by the law of the forum, for matters of process must be uniform in the courts of the same country; but whatever goes to the substance of the obligation and affects the rights of the parties, as growing out of the contract itself or inhering in it or attaching to it, is governed by the law of the contract.

The rule deduced by Mr. Wharton (Confl. Laws, § 401) as best harmonizing the authorities and effecting the most judicious result, and which was cited approvingly by Mr. Justice HUNT in Scudder v. ''Union Nat. Bank, 91 U.S. 411, is that 'obligations in respect to the mode of their solemnization are subject to the rule locus actum regit; in respect to their interpretation, to the lex loci contractus;'' in respect to the mode of their performance, to the law of the place of their performance. But the lex fori determines when and how such laws, when foreign, are to be adopted, and, in all cases not specified above, supplies the applicatory law.' This, it will be observed, extends the operation of the lex fori beyond the process and remedy, so as to embrace the whole of that residuum which cannot be referred to other laws. And this conclusion is obviously just, for whatever cannot, from the nature of the case, be referred to any other law, must be determined by the tribunal having jurisdiction of the litigation, according to the law of its own locality.

Whether an assignee of a chose in action shall sue in his own name or that of his assignor, is a technical question of mere process, and determinable by the law of the forum; but whether the foreign assignment, on which the plaintiff claims, is valid at all, or whether it is valid against the defendant, goes to the merits and must be decided by the law in which the case has its legal seat. Whart. Confl. Laws, §§ 735, 736. Upon that point Judge KENT, in the case of Lodge v. Phelps, 1 Johns. Cas. 139; 2 Caines, Cas. in Error, 321, said: 'If the defendant has any defense authorized by the law of Connecticut, let him show it, and he will be heard in one form of action as well as in the other.'

It is to be noted, however, as an important circumstance, that the same claim may sometimes be a mere matter of process, and so determinable by the law of the forum, and sometimes a matter of substance going to the merits, and therefore determinable by the law of the contract. That is illustrated in the application of the defense arising upon the statute of limitations. In the courts of England and America, that defense is governed by the law of the forum, as being a matter of mere procedure; while in continental Europe, the defense of prescription is regarded as going to the substance of the contract, and therefore is governed by the law of the seat of the obligation. 'According to the true doctrine,' says Savigny, (Private Int. Law, by Guthrie, 201,) 'the local law of the obligation must determine as to the term of prescription, not that of the place of the action; and this rule, which has just been laid down in respect to exceptions in general, is further confirmed, in the case of prescription, by the fact that the various grounds on which it rests stand in connection with the substance of the obligation itself.' In this view Westlake concurs, (Private Int. Law, Ed. 1858, § 250,) who puts it, together with the case of a merger in another cause of action, the occurrence of which will be determined by the law of the former cause, (Bryans v. Dunseth, 1 Martin, N. S. 412,) as equal instances of the liability to termination inherent by the lex contractus. But notwithstanding the contrary doctrine of the courts of England and this country, when the statute of limitations of a particular country not only extinguishes the right of action, but the claim or title itself, ipso facto, and declares it a nullity after the lapse of the prescribed period, and the parties have been resident within the jurisdiction during the whole of that period, so that it has actually and fully operated upon the case, it must be held, as it was considered by Justice STORY, (Confl. Laws, § 582,) to be an extinguishment of the debt, wherever an attempt might be made to enforce it. That rule, as he says, has the direct authority of this court in its support in Shelby v. Guy, 11 Wheat. 361-371; its correctness was recognized by Chief Justice TINDAL in Huber v. Steiner, 2 Bing. N. C. 202-211; and it is spoken of by Lord BROUGHAM in Don v. Lippmann, 5 Clark & F. 16, as 'the excellent distinction taken by Mr. Justice STORY.' Walworth v. Routh, 14 La. Ann. 205. The same principle was applied by the supreme court of Ohio in the case of the ''P., C. & St. L. Ry. Co. v. Hine's Adm'x'', 25 Ohio St. 629, where it was held that under the act requiring compensation for causing death by wrongful act, neglect, or default, which gave a right of action, provided such action should be commenced within two years after the death of such deceased person, the proviso was a condition qualifying the right of action, and not a mere limitation on the remedy. Bonte v. Taylor, 24 Ohio St. 628.

The principle that what is apparently mere matter of remedy in some circumstances, in others, where it touches the substance of the controversy, becomes matter of right, is familiar in our constitutional jurisprudence in the application of that provision of the constitution of the United States which prohibits the passing by a state of any law impairing the obligation of contracts; for it has been uniformly held that 'any law which in its operation amounts to a denial or obstruction of the rights accruing by a contract, though professing to act only on the remedy, is directly obnoxious to the prohibition of the constitution.' McCracken v. Hayward, 2 How. 612; Cooley, Const. Lim. 285. Hence it is that a vested right of action is property in the same sense in which tangible things are property, and is equally protected against arbitrary interference. Whether it springs from contract or from the principles of the common law, it is not competent for the legislature to take it away. A vested right to an existing defense is equally protected, saving only those which are based on informalities not affecting substantial rights, which do not touch the substance of the contract and are not based on equity and justice. Cooley, Const. Lim. 362-369.

The general rule, as stated by Story, (Confl. Laws, § 331,) is that a defense or discharge, good by the law of the place where the contract is made or is to be performed, is to be held of equal validity in every other place where the question may come to be litigated. Thus infancy, if a valid defense by the lex loci contractus, will be a valid defense everywhere. Thompson v. Ketcham, 8 Johns. 146; Male v. Roberts, 3 Esp. 163. A tender and refusal, good by the same law, either as a full discharge or as a present fulfillment of the contract, will be respected everywhere. Warder v. Arell, 2 Wash. (Va.) 282. Payment in paper-money bills, or in other things, if good by the same law, will be deemed a sufficient payment everywhere. 1 Brown, Ch. 376; Searight v. Calbraith, 4 Dall. 325; Barstsch v. Atwater, 1 Conn. 409. And, on the other hand, where a payment by negotiable bills or notes is, by the lex loci, held to be conditional payment only, it will be so held even in states where such payment under the domestic law would be held absolute. So, if by the law of the place of a contract equitable defenses are allowed in favor of the maker of a negotiable note, any subsequent indorsement will not change his rights in regard to the holder. The latter must take it ''cum onere. Ory v. Winter, 16 Martin, 277; Evans v. Gray, 12 Martin, 475; Chartus v. Caines'', 16 Martin, 1; Story, Confl. Laws, § 332.

On the other hand, the law of the forum determines the form of the action, as whether it shall be assumpsit, covenant, or debt. Warren v. Lynch, 5 Johns. 239; Andrews v. Herriot, 4 Cow. 508; Trasher v. Everhart, 3 Gill. & J. 234; Adams v. Ker, 1 Bos. & P. 360; Bank of U.S. v. Donally, 8 Pet. 361; Douglas v. Oldham, 6 N. H. 150. In Le Roy v. Beard, 8 How. 451, where it was held that assumpsit, and not covenant, was the proper form of action brought in New York upon a covenant executed and to be performed in Wisconsin, and by its laws sealed as a deed, but which in the former was not regarded as sealed, it was said by this court that it was so decided 'without impairing at all the principle that in deciding on the obligation of the instrument as a contract, and not the remedy on it elsewhere, the law of Wisconsin, as the Lex loci contractus, must govern.' It also regulates all process, both mesne and final. Ogden v. Saunders, 12 Wheat. 213; Mason v. Haile, Id. 370; Beers v. Haughton, 9 Pet. 359; Von Hoffman v. Quincy, 4 Wall. 553. It also may admit, as a part of its domestic procedure, a set-off, or compensation of distinct causes of action between the parties to the suit, though not admissible by the law of the place of the contract. Story, Confl. Laws, § 574; Gibbs v. Howard, 2 N. H. 296; Ruggles v. Keeler, 3 Johns. 263. But this is not to be confounded, as it was in the case of ''Second Nat. Bank of Cincinnati v. Hemingray'', 31 Ohio St. 168, with that of a limited negotiability, by which the right of set-off between the original parties is preserved as part of the law of the contract, notwithstanding an assignment. The rules of evidence are also supplied by the law of the forum. Wilcox v. Hunt, 13 Pet. 378; Yates v. Thompson, 3 Clark & F. 544; Bain v. ''Whitehaven, etc., Ry. Co.'' 3 H. of L. Cas. 1; Don v. Lippmann, 3 Clark & F. 1.

In Yates v. Thompson, supra, it was decided by the house of lords that in a suit in a Scotch court, to adjudge the succession to personalty of a decedent domiciled in England, where it was admitted that the English law governed the title, nevertheless it was proper to receive in evidence, as against a will of the decedent, duly probated in England, a second will which had not been proved there, and was not receivable in English courts as competent evidence, because such a paper, according to Scottish law, was admissible. In the case of Hoadley v. ''Northern Transp. Co.'' 115 Mass. 304, it was held that if the law of the place, where a contract signed only by the carrier is made for the carriage of goods, requires evidence other than the mere receipt by the shipper to show his assent to its terms, and the law of the place where the suit is brought presumes conclusively such assent from acceptance without dissent, the question of assent is a question of evidence, and is to be determined by the law of the place where the suit is brought. In a suit in Connecticut against the indorser on a note made and indorsed in New York, it was held that parol evidence of a special agreement, different from that imputed by law, would be received in defense, although by the law of the latter state no agreement different from that which the law implies from a blank indorsement could be proved by parol. Downer v. Chesebrough, 36 Conn. 39. And upon the same principle it has been held that a contract, valid by the laws of the place where it is made, although not in writing, will not be enforced in the courts of a country where the statute of frauds prevails, unless it is put in writing. Leroux v. Brown, 12 C. B. 801. But where the law of the forum and that of the place of the execution of the contract coincide, it will be enforced, although by the law of the place of performance required to be in writing, as was the case of Scudder v. ''Union Nat. Bank, 91 U.S. 406, because the form of the contract is regulated by the law of the place of its celebration, and the evidence'' of it by that of the forum.

The case of Williams v. Haines, 27 Iowa, 251, was an action upon a note executed in Maryland, and, so far as appears from the report, payable there, where the parties thereto then resided, and which was a sealed instrument, according to the laws of that state, in support of which those laws conclusively presumed a valid consideration. By the laws of Iowa, to such an instrument the want of consideration was allowed to be proved as a defense. It was held by the supreme court of that state, in an opinion delivered by Chief Justice DILLON, that the law of Iowa related to the remedy merely, without impairing the obligation of the contract, and, as the lex fori, must govern the case. He said: 'Respecting what shall be good defenses to actions in this state, its courts must administer its own laws and not those of other states. The common-law rules do not so inhere in the contract as to have the portable quality ascribed to them by the plaintiff's counsel, much less can they operate to override the plain declaration of the legislative will.' The point of this decision is incorporated by Mr. Wharton into the text of his Treatise on the Conflict of Laws, § 788, and the case itself is referred to in support of it. He deduces the same conclusion from those cases, already referred to, which declare that assumpsit is the only form of action that can be brought upon an instrument which is not under seal, according to the laws of the forum, although by the law of the place where it was executed, or was to be performed, it would be regarded as under seal, in which debt or covenant would lie, on the ground that a plea of want or failure of consideration is recognized as a defense in all actions of assumpsit. Whart. Confl. Laws, § 747.

It the proposition be sound, its converse is equally so; and the law of the place where a suit may happen to be brought may forbid the impeachment of a contract, for want of a valid consideration, which, by the law of the place of the contract, might be declared invalid on that account.

We cannot, however, accept this conclusion. The question of consideration, whether arising upon the admissibility of evidence or presented as a point in pleading, is not one of procedure and remedy. It goes to the substance of the right itself, and belongs to the constitution of the contract. The difference between the law of Louisiana and that of New York, presented in this case, is radical, and gives rise to the inquiry, what, according to each, are the essential elements of a valid contract, determinable only by the law of its seat; and not that other, what remedy is provided by the law of the place where the suit has been brought to recover for the breach of its obligation.

On this point, what was said in the case of The Gaetano and Maria, L. R. 7 Prob. Div. 137, is pertinent. In that case the question was whether the English law, which was the law of the forum, or the Italian law, which was the law of the flag, should prevail, as to the validity of a hypothecation of the cargo by the master of the ship. It was claimed that because the matter to be proved was, whether there was a necessity which justified it, it thereby became a matter of procedure, as being a matter of evidence. Lord Justice BRETT said: 'Now, the manner of proving the facts is matter of evidence, and, to my mind, is a matter of procedure, but the facts to be proved are not matters of procedure; they are matters with which the procedure has to deal.'

It becomes necessary, therefore, to consider the applicability of the law of Louisiana as—

2. The lex loci solutionis.

The phrase lex loci contractus is used, in a double sense, to mean, sometimes, the law of the place where a contract is entered into; sometimes, that of the place of its performance. And when it is employed to describe the law of the seat of the obligation, it is, on that account, confusing. The law we are in search of, which is to decide upon the nature, interpretation, and validity of the engagement in question, is that which the parties have, either expressly or presumptively, incorporated into their contract as constituting its obligation. It has never been better described than it was incidentally by Chief Justice MARSHALL in Wayman v. Southard, 10 Wheat. 48, where he defined it as a principle of universal law-'the principle that in every forum a contract is governed by the law with a view to which it was made.' The same idea had been expressed by Lord MANSFIELD in Robinson v. Bland, 2 Burr. 1077. 'The law of the place,' he said, 'can never be the rule where the transaction is entered into with an express view to the law of another country, as the rule by which it is to be governed.' And in Lloyd v. Guibert, L. R. 1 Q. B. 120, in the court of exchequer chamber, it was said that 'it is necessary to consider by what general law the parties intended that the transaction should be governed, or, rather, by what general law it is just to presume that they have submitted themselves in the matter.' Le Breton v. Miles, 8 Paige, 261.

It is upon this ground that the presumption rests that the contract is to be performed at the place where it is made, and to be governed by its laws, there being nothing in its terms, or in the explanatory circumstances of its execution, inconsistent with that intention. So, Phillimore says, (4 Int. Law. 469:) 'It is always to be remembered that in obligations it is the will of the contracting parties, and not the law, which fixes the place of fulfillment-whether that place be fixed by express words or by tacit implication-as the place to the jurisdiction of which the contracting parties elected to submit themselves.' The same author concludes his discussion of the particular topic (4 Int. Law, § 654, pp. 470-471) as follows: 'As all the foregoing rules rest upon the presumption that the obligor has voluntarily submitted himself to a particular local law, that presumption may be rebutted, either by an express declaration to the contrary, or by the fact that the obligation is illegal by that particular law, though legal by another. The parties cannot be presumed to have contemplated a law which would defeat their engagements.' This rule, if universally applicable,-which perhaps it is not,-though founded on the maxim, ut res magis valeat quam pereat would be decisive of the present controversy, as conclusive of the question of the application of the law of Louisiana, by which alone the undertaking of the obligor can be upheld. At all events, it is a circumstance highly persuasive in its character of the presumed intention of the parties, and entitled to prevail, unless controlled by more express and positive proofs of a contrary intent. It was expressly referred to as a decisive principle in Bell v. Packard, 69 Me. 111, although it cannot be regarded as the foundation of the judgment in that case. Milliken v. Pratt, 125 Mass. 374.

If now we examine the terms of the bond of indemnity, and the situation and relation of the parties, we shall find conclusive corroboration of the presumption that the obligation was entered into in view of the laws of Louisiana.

The antecedent liability of Pritchard, as surety for the railroad company on the appeal bond, was confessedly contracted in that state, according to its laws, and it was there alone that it could be performed and discharged. Its undertaking was that Pritchard should, in certain contingencies, satisfy a judgment of its courts. That could be done only within its territory and according to its laws. The condition of the obligation, which is the basis of this action, is that McComb and Norton, the obligors, shall hold harmless and fully indemnify Pritchard against all loss or damage arising from his liability as surety on the appeal bond. A judgment was, in fact, rendered against him on it in Louisiana. There was but one way in which the obligors in the indemnity bond could perfectly satisfy its warranty. That was, the moment the judgment was rendered against Pritchard on the appeal bond, to come forward in his stead, and, by payment, to extinguish it. He was entitled to demand this before any payment by himself, and to require that the fund should be forthcoming at the place where otherwise he could be required to pay it. Even if it should be thought that Pritchard was bound to pay the judgment recovered against himself, before his right of recourse accrued upon the bond of indemnity, nevertheless he was entitled to be reimbursed the amount of his advance at the same place where he had been required to make it. So that it is clear, beyond any doubt, that the obligation of the indemnity was to be fulfilled in Louisiana, and, consequently, is subject, in all matters affecting its construction and validity, to the law of that locality.

This construction is abundantly sustained by the authority of judicial decisions in similar cases.

In Irvine v. Barrett, 2 Grant, (Pa.) Cas. 73, it was decided that where a security is given in pursuance of a decree of a court of justice, it is to be construed according to the intention of the tribunal which directed its execution, and, in contemplation of law, is to be performed at the place where the court exercises its jurisdiction; and that a bond given in another state, as collateral to such an obligation, is controlled by the same law which controls the principal indebtedness. In the case of Penobscot & K. R. Co. v. Bartlett, 12 Gray, 244, the supreme judicial court of Massachusetts decided that a contract made in that state to subscribe to shares in the capital stock of a railroad corporation established by the laws of another state, and having their road and treasury there, is a contract to be performed there, and is to be construed by the laws of that state. In Lanusse v. Barker, 3 Wheat. 146, this court declared that 'where a general authority is given to draw bills from a certain place, on account of advances there made, the undertaking is to replace the money at that place.'

The case of Cox v. U.S. 6 Pet. 172, was an action upon the official bond of a navy agent. The sureties contended that the United States were bound to divide their action, and take judgment against each surety only for his proportion of the sum due, according to the laws of Louisiana, considering it a contract made there, and to be governed in this respect by the law of that state. The court, however, said: 'But admitting the bond to have been signed at New Orleans, it is very clear that the obligations imposed upon the parties thereby looked for its execution to the city of Washington. It is immaterial where the services as navy agent were to be performed by Hawkins. His accountability for non-performance was to be at the seat of government. He was bound to account, and the sureties undertook that he should account, for all public moneys received by him, with such officers of the government of the United States as are duly authorized to settle and adjust his accounts. The bond is given with reference to the laws of the United States on that subject. And such accounting is required to be with the treasury department at the seat of government; and the navy agent is bound by the very terms of the bond to pay over such sum as may be found due to the United States on such settlement; and such paying over must be to the treasury department, or in such manner as shall be directed by the secretary. The bond is, therefore, in every point of view in which it can be considered, a contract to be executed at the city of Washington, and the liability of the parties must be governed by the rules of the common law.' This decision was repeated in Duncan v. U.S. 7 Pet. 436.

These cases were relied on by the supreme court of New York in the case of Kentucky v. Bassford, 6 Hill, 526. That was an action upon a bond executed in New York conditioned for the faithful performance of the duties enjoined by a law of Kentucky authorizing the obligees to sell lottery tickets for the benefit of a college in that state. It was held that the stipulations of the bond were to be performed in Kentucky, and that, as it was valid by the laws of that state, the courts of New York would enforce it, notwithstanding it would be illegal in that state.

The case of Boyle v. Zacharie, 6 Pet. 635, is a direct authority upon the point. There Zacharie and Turner were resident merchants at New Orleans, and Boyle at Baltimore. The latter sent his ship to New Orleans, consigned to Zacharie and Turner, where she arrived, and, having landed her cargo, the latter procured a freight for her to Liverpool. When she was ready to sail she was attached by process of law at the suit of certain creditors of Boyle, and Zacharie and Turner procured her release by becoming security for Boyle on the attachment. Upon information of the facts Boyle promised to indemnify them for any loss they might sustain on that account. Judgment was rendered against them on the attachment bond, which they were compelled to pay, and brought suit against Boyle in the circuit court for Maryland, upon his promise of indemnity, to recover the amount they had been compelled to pay. A judgment was rendered by confession in that cause, and a bill in equity was subsequently filed to enjoin further proceedings on it, in the course of which various questions arose among them whether the promise of indemnity was a Maryland or a Louisiana contract. Mr. Justice STORY, delivering the opinion of the court, said: 'Such a contract would be understood by all parties to be a contract made in the place where the advance was to be made, and the payment, unless otherwise stipulated, would also be understood to be made there;' 'that the contract would clearly refer for its execution to Louisiana.' The very point was also decided by this court in Bell v. Bruen, 1 How. 169. That was an action upon a guaranty written by the defendant in New York, addressed to the plaintiffs in London, the latter having made advances in the latter place of a credit to Thorn. The operative language of the guaranty was 'that you may consider this, as well as any and every other credit you may open in his favor, as being under my guaranty.' The court said: 'It was an engagement to be executed in England, and must be construed and have effect according to the laws of that country;' citing Bank of U.S. v. Daniel, 12 Pet. 54. As the money was advanced in England, the guaranty required that it should be replaced there, and that is the precise nature of the obligation in the present case. Pritchard could only be indemnified against loss and damage on account of his liability on the appeal bond, by having funds placed in his hands in Louisiana wherewith to discharge it, or by being repaid there the amount of his advance. To the same effect is Woodhull v. Wagner, Baldw. 296.

We do not hesitate, therefore, to decide that the bond of indemnity sued on was entered into with a view to the law of Louisiana as the place for the fulfillment of its obligation; and that the question of its validity, as depending on the character and sufficiency of the consideration, should be determined by the law of Louisiana, and not that of New York.

For error in its rulings on this point, consequently, the judgment of the circuit court is reversed, with directions to grant a new trial. New trial ordered.


text: Talk:Pritchard v. Norton/Opinion of the Court


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Wing v. Anthony

This was a bill in equity to restrain the infringement by the defendants of reissued letters patent, dated September 25, 1860, granted to Albert S. Southworth, for certain improvements in taking photographic impressions. The original letters patent were dated April 10, 1855; the reissue, September 25, 1860. The answer of the defendants denied the novelty and the utility of the invention, denied infringement, and alleged that the invention described in the reissued patent was not the same invention described in the original patent. The circuit court, upon final hearing, dismissed the bill. To obtain a review of this decree the complainants have appealed to this court.

It appears from the evidence in this case, and is a matter of general knowledge, that a camera is the principal instrument used in taking photographic pictures. This is a rectangular, oblong box, in one end of which is inserted a tube containing a double convex lens, while at the other end is a plate-holder, immediately in front of which is a sliding shield. A plate of glass receives in a dark room a chemical preparation which renders it sensitive to the action of light. The plate is then put into the plate-holder at the end of the camera opposite the lens, the shield in front of the plate is withdrawn, and the rays of light passing through the lens from an object suitably placed in front of it fall upon the plate and produce there an image of the object. This is then perfected by certain other chemical processes, and is called a negative, and from it many copies may be printed. Thus photographic pictures are produced. The camera should be so arranged with relation to the object to be pictured that a right line drawn from the center of the object will pass directly through the axis of the lens and fall upon the plate at right angles. In this manner the best pictures are obtained. If this method is not followed the picture will be distorted and otherwise imperfect. It is conceded that prior to the date of Southworth's invention this object was accomplished by tilting the camera itself into different positions with respect to the object to be pictured, and in this manner bringing the center of the field of the lens upon different parts of the plate. Complainants contend that prior to Southworth's invention only one correct picture could be taken on the same plate, except in the manner just stated. The object of the invention covered by his original patent was to provide efficient means by which several correct pictures could be taken on different parts of the same plate. In the specification of his original patent he declares his invention to be 'a new and useful plate-holder for cameras for taking photographic impressions,' and says:

'The object of my invention is to bring in rapid succession different portions of the same plate, or different plates of whatsoever material prepared for photographic purposes, into the center of the field of the lens, for the purpose of either tinning them differently, that the most perfect may be selected, or of taking different views of the same object with the least delay possible, or of taking stereoscopic pictures upon the same or different plates with one camera.'

He then declares:

'My invention consists of a peculiarly-arranged frame, in which the plateholder is permitted to slide, by which means I am enabled to take four daguerreotypes on one plate at one sitting, different portions of the plate being brought successively opposite an opening in the frame, the opening remaining stationary in the axis of the camera while the plate-holder and plate are moved.'

The specification here proceeds to describe minutely the frame-holder by which the object of the invention is accomplished. The claim of the original patent is as follows:

'What I claim as my invention, and desire to secure by letters patent, is the within-described plate-holder in combination with the frame in which it moves, constructed and operated in the manner and for the purpose substantially as herein set forth.'

The specification of the reissued patent contains the following passages, which do not appear in the original specification:

'I have invented certain improvements in taking photographic impressions. * * * In taking daguerreotypes, photographs, etc., it has been customary to use a separate plate for each impression, the plate being removed from the camera and replaced by another when several impressions of the same object were to be taken, as in multiplying copies or for the purpose of selecting the best-timed pictures. This caused considerable delay and trouble, to obviate which is the object of my present invention, which consists in bringing successively different portions of the same plate or several smaller plates secured in one plate-holder into the field of the lens of the camera.'

'In carrying out my invention I have made use of a peculiarly-arranged frame, in which the plate-holder is permitted to slide, and in which the position of the plate-holder is definitely indicated to the operator, so that he can quickly and accurately adjust the plate or plates; the accompanying drawings and description so explaining the same that other skilled in the art may understand and use my invention.'

Then follows a description of the plate-holder which is identical with the description contained in the original specification, and is illustrated by the same drawings.

The reissue specification further declares:

'In this case, however,' that is, when it is desired to take more than four impressions on the same plate, 'I use suitable grooves, stops, or indices, by which the operator adjusts the positions of the plate substantially on the same principle that he uses the corners of the opening, k, in the above-describedapparatus. It is evident that my improvement may be embodied by causing the lens of the camera to be made adjustable in different positions with respect to the plate, while the plate remains stationary, so that different portions of the plate may be brought into the field of the lens. This I have tried, but do not consider it practically to be so good a plan as the foregoing, as it necessitates a change of position of the camera itself or of the objects.' The claim of the reissued patent was then stated as follows:

'What I claim as my invention and desire to secure by letters patent is bringing the different portions of a single plate, or several smaller plates, successively into the field of the lens of the camera, substantially in the same manner and for the purpose specified.'

A. A. Abbott, for appellants.

Edmund Wetmore, for appellees.

WOODS, J.

title: Wing v. Anthony


text: Talk:Wing v. Anthony

title: Talk:Wing v. Anthony


text:
Wing v. Anthony/Opinion of the Court

It is manifest that the reissued patent was taken out for the purpose of embracing under its monopoly what was not included by the original patent. The original patent was not, in the language of the statute, 'inoperative or invalid by reason of a defective or insufficient specification, or by reason of the patentee claiming as his own invention or discovery more than he had a right to claim as new.' The original claim was for a mechanism, namely, 'a plate-holder in combination with the frame in which it moves, constructed and operating in the manner and for the purpose' set forth in the specification. The claim of the reissued patent is plainly for a process, namely, 'the bringing of the different portions of a single plate, or several smaller plates, successively into the field of the lens of the camera, substantially in the manner and for the purpose specified.' This claim would cover any mechanism by which the different parts of the plate could be brought into the field of the lens. In fact, the specification of the reissued patent suggests a different contrivance, namely, the causing of the lens of the camera to be made adjustable in different positions with respect to the plate, while the plate remains stationary, so that different portions of the plate may be brought into the field of the lens. It is quite clear that the original patent covers a mechanism to accomplish a specific result, and that the reissued patent covers the process by which that result is attained, without regard to the mechanism used to accomplish it. The reissue is, therefore, much broader than the original patent, and covers every mechanism which can be contrived to carry on the process.

In the case of Powder Co. v. Powder Works, 98 U.S. 126, it was held by this court that when original letters patent were taken out for a process, the reissued patent would not cover a composition unless it were the result of the process, and that the invention of one involved the invention of the other.

The converse of this proposition was decided by this court in the case of James v. Campbell, 104 U.S. 356. In that case the court said that a patent for a process and a patent for an implement or a machine are very different things, and decided, in substance, that letters patent for a machine or implement cannot be reissued for the purpose of claiming the process of operating that class of machines, because if the claim for the process is anything more than for the use of the particular machine patented, it is for a different invention. To the same effect precisely is the case of Heald v. Rice, 104 U.S. 737. The present case falls within the rule laid down in the authorities cited.

Southworth's invention, as described in his original patent, must be limited to what is there set forth, namely, a mechanism for bringing successively different portions of the plate within the field of the lens. He did not discover the law that to get the best effect in taking pictures the plate, or part of the plate, on which the picture was to be taken should be brought into the field of the lens, nor did he invent the method of doing this by tilting the camera itself into different positions with respect to the object to be pictured. This law was known, and the practice mentioned was followed, long before Southworth's invention. His device was simply a new and specific means to take advantage of a well-known law of nature. In his reissue, by claiming as his invention the process of bringing different parts of the plate successively into the field of the lens, he seeks to put himself in as good a position as if he had been the first to discover the law referred to, and the first to invent the method of taking advantage of the law by tilting his camera into different positions. In claiming the process, he excludes all other mechanisms contrived to accomplish the same object. This he could not rightfully do.

We are of opinion that the claim of the reissued patent is for a different invention from that described in the original patent, and that the reissue is therefore void. Gill v. Wells, 22 Wall. 1; The Wood-paper Patent, 23 Wall. 566; Powder Co. v. Powder Works, 98 U.S. 126; Ball v. Langley, Id. 128; Miller v. Brass Co. 104 U.S. 350; Janes v. Canbell, Id. 356; Heald v. Rice, Id. 737; Johnson v. Flushing & North Side R. Co. 105 U.S. 539; Bantz v. Frantz, Id. 160.

The decree of the circuit court must be affirmed.

title: Wing v. Anthony/Opinion of the Court


text: Talk:Wing v. Anthony/Opinion of the Court