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United States v. Union Pacific Railroad Company (91 U.S. 72)/Opinion of the Court

The Union Pacific Railroad Company, conceding the right of the government to retain one-half of the compensation due it for the transportation of the mails, military and Indian supplies, and apply the same to reimburse the government for interest paid by it on bonds issued to the corporation to aid in the construction of its railroad and telegraph line, seeks to establish by this suit its claim to the other moiety. The United States, on the other hand, having paid interest on these bonds in excess of the sums credited to the company for services rendered by it, insist upon their right to withhold payment altogether. One of the grounds on which this right is sought to be maintained is by reason of the general right of set-off, which, as a general proposition, exists in the government, and is commonly exercised by it when settling with those having claims against it. But, manifestly, the rules applicable to ordinary claimants for services rendered the United States do not apply to this controversy. The bonds in question were issued in pursuance of a scheme to aid in the construction of a great national highway. In themselves they do not import any obligation on the part of the corporation to pay; and whether, when the United States have paid interest on them, a liability to refund it is imposed on the company, depends wholly on the conditions on which the bonds were delivered to and received by it. These conditions are embodied in the legislation of Congress on the subject; and if, on a fair interpretation of it, the corporation is found to be now a debtor to the United States, the deduction for interest paid on the bonds can be lawfully made. But, if the converse of this proposition is true, the government cannot rightfully withhold from the corporation one-half of its earnings.

In construing an act of Congress, we are not at liberty to recur to the views of individual members in debate, nor to consider the motives which influenced them to vote for or against its passage. The act itself speaks the will of Congress, and this is to be ascertained from the language used. But courts, in construing a statute, may with propriety recur to the history of the times when it was passed; and this is frequently necessary, in order to ascertain the reason as well as the meaning of particlar provisions in it. Aldridge v. Williams, 3 How. 24; Preston v. Browder, 1 Wheat. 120.

Many of the provisions in the original act of 1862 are outside of the usual course of legislative action concerning grants to railroads, and cannot be properly construed without reference to the circumstances which existed when it was passed. The war of the rebellion was in progress; and, owing to complications with England, the country had become alarmed for the safety of our Pacific possessions. The loss of them was feared in case those complications should result in an open rupture; but, even if this fear were groundless, it was quite apparent that we were unable to furnish that degree of protection to the people occupying them which every government owes to its citizens. It is true, the threatened danger was happily averted; but wisdom pointed out the necessity of making suitable provision for the future. This could be done in no better way than by the construction of a railroad across the continent. Such a road would bind together the widely separated parts of our common country, and furnish a cheap and expeditious mode for the transportation of troops and supplies. If it did nothing more than afford the required protection to the Pacific States, it was felt that the government, in the performance of an imperative duty, could not justly withhold the aid necessary to build it; and so strong and pervading was this opinion, that it is by no means certain that the people would not have justified Congress if it had departed from the then settled policy of the country regarding works of internal improvement, and charged the government itself with the direct execution of the enterprise.

This enterprise was viewed as a national undertaking for national purposes; and the public mind was directed to the end in view, rather than to the particular means of securing it. Although this road was a military necessity, there were other reasons active at the time in producing an opinion for its completion besides the protection of an exposed frontier. There was a vast unpeopled territory lying between the Missouri and Sacramento Rivers which was practically worthless without the facilities afforded by a railroad for the transportation of persons and property. With its construction, the agricultural and mineral resources of this territory could be developed, settlements made where settlements were possible, and thereby the wealth and power of the United States largely increased; and there was also the pressing want, in time of peace even, of an improved and cheaper method for the transportation of the mails, and of supplies for the army and the Indians.

It was in the presence of these facts that Congress undertook to deal with the subject of this railroad. The difficulties in the way of building it were great, and by many intelligent persons considered insurmountable.

Although a free people, when resolved upon a course of action, can accomplish great results, the scheme for building a railroad two thousand miles in length, over deserts, across mountains, and through a country inhabited by Indians jualous of intrusion upon their rights, was universally regarded at the time as a bold and hazardous undertaking. It is nothing to the purpose that the apprehended difficulties in a great measure disappeared after trial, and that the road was constructed at less cost of time and money than had been considered possible. No argument can be drawn from the wisdom that comes after the fact. Congress acted with reference to a state of things believed at the time to exist; and, in interpreting its legislation, no aid can be derived from subsequent events. The project of building the road was not conceived for private ends; and the prevalent opinion was, that it could not be worked out by private capital alone. It was a national work, originating in national necessities, and requiring national assistance.

The policy of the country, to say nothing of the supposed want of constitutional power, stood in the way of the United States taking the work into its own hands. Even if this were not so, reasons of economy suggested that it were better to enlist private capital and enterprise in the project by offering the requisite inducements. Congress undertook to do this, in order to promote the construction and operation of a work deemed essential to the security of great public interests.

It is true, the scheme contemplated profit to individuals; for, without a reasonable expectation of this, capital could not be obtained, nor the requisite skill and enterprise. But this consideration does not in itself change the relation of the parties to this suit. This might have been so if the government had incorporated a company to advance private interests, and agreed to aid it on account of the supposed incidental advantages which the public would derive from the completion of the projected railway. But the primary object of the government was to advance its own interests, and it endeavored to engage individual co-operation as a means to an end,-the securing a road which could be used for its own purposes. The obligations, therefore, which were imposed on the company incorporated to build it, must depend on the true meaning of the enactment itself, viewed in the light of contemporaneous history.

It has been observed by this court, that the title of an act, especially in congressional legislation, furnishes little aid in the construction of it, because the body of the act, in so many cases, has no reference to the matter specified in the title. Hadden v. The Collector, 5 Wall. 110. This is true, and we have no disposition to depart from this rule; but the title, even, of the original act of 1862, incorporating the appellee, seems to have been the subject of special consideration, for it truly discloses the general purpose of Congress in passing it. It is 'An act to aid in the construction of a railroad and telegraph line from the Missouri River to the Pacific Ocean, and to secure to the government the use of the same for postal, military, and other purposes.' That there should, however, be no doubt of the national character of the contemplated work, the body of the act contains these significant words: 'And the better to accomplish the object of this act,-namely, to promote the public interest and welfare by the construction of said railroad and telegraph line, and keeping the same in working order, and to secure to the government at all times (but particularly in time of war) the use and benefits of the same for postal, military, and other purposes,-Congress may at any time, having due regard for the rights of said companies named herein, add to, alter, amend, or repeal this act.' 12 Stat. p. 497. Indeed, the whole act contains unmistakable evidence, that, if Congress was put to the necessity of carrying on a great public enterprise by the instrumentality of private corporations, it took care that there should be no misunder-standing about the objects to be attained, or the motives which influenced its action.

If it had been equally explicit in the provision regarding the bonds to be issued in aid of the company, there would have been no occasion for this suit. But even in this particular, looking to the motives which prompted the act and to the objects intended to be effected by it, we do not think there is any serious difficulty in getting at the true meaning of Congress. The act itself was an experiment. It must be considered in the nature of a proposal to enterprising men to engage in the work; for, with the untried obstacles in the way, there was no certainty that capital could be enlisted. If enlisted at all, it could only be on conditions which would insure, in case of success, remuneration proportionate to the risk incurred.

The proffered aid was in lands and interest-bearing bonds of the United States. There is no controversy about the terms on which the lands were granted; and the only point with which we have to deal relates to the nature and extent of the obligation imposed by Congress on the company to pay these bonds. It is not doubted that the government was to be reimbursed, both principal and interest; but the precise question for decision is, whether the company was required to pay the interest before the maturity of the principal.

The solution of this question depends upon the meaning of the fifth and sixth sections of the original act of 1862, and the fifth section of the amendatory act of 1864. The fifth section of the original act contains the undertaking of the government, and the sixth defines the obligation of the company. By the fifth it is provided, that, on the completion of the road in sections of forty miles, there shall be issued and delivered to the company a certain number of interest-bearing bonds of the United States, maturing thirty years after date, with interest payable semi-annually. And 'to secure the repayment to the United States, as 'hereinafter provided,' of the amount of said bonds, together with all interest thereon which shall have been paid by the United States,' it is further provided that the issue and delivery of the bonds shall constitute a first mortgage on the property of the company, with a right reserved to the government to declare a forfeiture and take possession of the road and telegraph line in case 'of the refusal or failure of the company to redeem said bonds, or any part of them, when requested to do so by the Secretary of the Treasury, in accordance with the provisions of the act.' The manifest purpose of this section is to take a lien on the property of the corporation for the ultimate redemption of the bonds, principal and interest; but the manner and time of redemption are left for further provision.

That the government was expected in the first instance to pay the interest is clear enough; for the mortgage was taken to secure the repayment of the bonds, 'together with all interest thereon which shall have been paid by the United States.' This phrase implies a prior payment by the United States, whatever may be the duty of the corporation in regard to reimbursement as subsequently defined. Besides this, when repayment is spoken of, it is understood that something has been advanced which is to be paid back. Apart from this, had it been the intention that the corporation itself should pay the interest as it fell due, apt words denoting such a purpose would have been used. But when and how the reimbursement was to be made was declared to be 'as hereinafter provided,'-that is, in conformity with the terms prescribed in another portion of the act; and that this is so is evident enough from the latter part of the section, which directs the Secretary of the Treasury to enforce the forfeiture and take possession of the road on failure of the corporation to redeem said bonds, or any part of them (referring to the different periods of their issue), according to the plan of redemption thus provided, or, in other words, 'in accordance with the provisions of this act.' The obligations imposed on the corporation, or assumed by it, in relation to the repayment of the bonds, are set forth entire in the sixth section; which, on account of its importance, is here given at length:--

'SECT. 6. And be it further enacted, That the grants aforesaid are made upon condition that said company shall pay said bonds at maturity, and shall keep said railroad and telegraph line in repair and use, and shall at all times transmit despatches over said telegraph line, and transport mails, troops, and munitions of war, supplies and public stores, upon said railroad, for the government, whenever required to do so by any department thereof; and that the government shall at all times have the preference in the use of the same for all the purposes aforesaid (at fair and reasonable rates of compensation, not to exceed the amounts paid by private parties for the same kind of service); and all compensations for services rendered for the government shall be applied to the payment of said bonds and interest until the whole amount is fully paid. Said company may also pay the United States, wholly or in part, in the same or other bonds, treasury notes, or other evidences of debt against the United States, to be allowed at par; and after said road is completed, until said bonds and interest are paid, at least five per centum of the net earnings of said road shall also be annually applied to the payment thereof.'

Leaving out of consideration the parts of this section not pertinent to the present inquiry, there are three things, and three only, which the corporation is required to do concerning the bonds in controversy. 1st. To pay said bonds at maturity. 2d. To allow the government to retain the compensation due the corporation for services rendered, and apply the same to the payment of the bonds and interest until the whole amount is fully paid. 3d. To pay over to the government, after the road shall have been fully completed, five per cent of the net earnings of the road, to be appropriated to the payment of the bonds and interest.

If the language used is taken in its natural and obvious sense, there can be no difficulty in arriving at the meaning of the condition 'to pay said bonds at maturity.' As commonly understood, the word 'maturity,' in its application to bonds and other similar instruments, refers to the time fixed for their payment, which is the termination of the period they have to run. The bonds in question were bonds of the United States, promising to pay to the holder of them one thousand dollars thirty years after date, and the interest every six months. This obligation the government was required to perform; and, as the bonds were issued and delivered to the corporation to be sold for the purpose of raising money to construct its road, it is insisted that Congress must have meant to impose a corresponding obligation on the corporation. In support of this construction, it is sought to give to the word 'maturity' a double signification, applying it to each payment of interest as it falls due, as well as to the principal. But this is extending, contrary to all legal rules, the operation of words by a forced construction beyond their real and ordinary meaning. Courts cannot supply omissions in legislation, nor afford relief because they are supposed to exist. 'We are bound,' said Justice Buller in an early case in the King's Bench, 'to take the act of Parliament as they have made it: a casus omissus can in no case be supplied by a court of law, for that would be to make laws; nor can I conceive that it is our province to consider whether such a law that has been passed be tyrannical or not.' Jones v. Smart, 1 T. R. 44-52.

Lord Chief Baron Eyre, in Gibson v. Minet, 1 H. Bl. 569-614, said, 'I venture to lay it down as a general rule respecting the interpretation of deeds, that all latitude of construction must submit to this restriction; namely, that the words may bear the sense which by construction is put upon them. If we step beyond this line, we no longer construe men's deeds, but make deeds for them.' This rule is as applicable to a statute as to a deed. The words 'to pay said bonds at maturity' do not bear the sense which is sought to be attributed to them. They evidently imply an obligation to pay both principal and interest when the time fixed for the payment of the principal has arrived, but not to pay the interest as it accrues. It is one thing to be required to pay principal and interest when the bonds have reached maturity, and a wholly different thing to be required to pay the interest every six months, and the principal at the end of thirty years. The obligations are so different, that they cannot both grow out of the words employed; and it is necessary to superadd other words in order to include the payment of semi-annual interest as it falls due. Neither on principle nor authority is such a plain departure from the express letter of the statute warranted, especially when it leads to so great change in the condition annexed to the grant.

The failure to perform that condition is a cause of forfeiture. If the natural meaning of the words be adopted as the true meaning, there can be no forfeiture until the bonds themselves have matured. On the contrary, if the construction contended for be allowed, the grant is subject to forfeiture on each occasion that six months' interest falls due and is not met by the corporation. It would require a pretty large inference to draw from the language used authority to vary in a particular so essential the terms of a condition assumed by the corporation when it assented to the act. Besides this, when Congress imposed this condition, it well knew that the undertaking of the government bound it to pay interest every six months, and the principal at the time the bond matured. With this knowledge, dealing as it did with the relations the company was to bear to the government on the receipt of these bonds, it would, had it intended to exact the payment of interest before their maturity, have declared its purpose in unequivocal language. But if the words, 'to pay said bonds at maturity,' do not give notice that this exaction was intended, neither do the other provisions of the sixth section. They created no obligation to keep down the interest, nor were they so intended. The provision for retaining the amount due for services rendered, and applying it towards the general indebtedness of the company to the government, cannot be construed into a requirement that the company shall pay the interest from time to time, and the principal when due. It was in the discretion of Congress to make this requirement, and then, as collateral to it, provide a special fund or funds out of which the principal could be discharged. This Congress did not choose to do, but rested satisfied with the entire property of the company as security for the ultimate payment of the principal and interest, and in the mean time, with special provisions looking to the reimbursement of the government for interest paid by it, and to the application of the surplus if any remained, to discharge the principal. The company, for obvious reasons, might be very willing to accept the bonds on these terms, and very unwilling to make an absolute promise to pay the interest as it accrued. If it were in a condition, either during the progress or on the completion of the road, to earn any thing, there would be no hardship in applying the compensation due it; but, as can be readily seen, if it were required to raise money every six months to pay interest, when all its available means were necessary to the prosecution of the work, the burden might be very heavy. Congress did not see fit to impose it, and thus place the company in a position to incur a forfeiture of all its grants in case of failure to provide the means to pay current interest. Besides, it is fair to infer that Congress supposed that the services to be rendered by the company to the government would equal the interest to be paid. That this was not an unreasonable expectation is shown by the published statistics of the vast ost of transporting military and naval stores and the mails to the Pacific coast by the modes of transit then in use.

The views presented on the provision for retaining the compensation are equally applicable to the provision, that, after the road is completed, five per cent of its net earnings shall be annually applied to the payment of bonds and interest. It is not perceived how, on any principle of construction, an obligation of the corporation to pay the interest on the bonds every six months after they shall have been issued can be based on this provision, any more than on the other. Each created a reserved fund, out of which the government was to be reimbursed in the first instance the interest it had paid, leaving the surplus, if any, to be applied to the payment of the principal.

In addition to all that has been said, there is enough in the scheme of the act, and in the purposes contemplated by it, to show that Congress never intended to impose on the corporation the obligation to pay current interest. The act, as has been stated, was passed in the midst of war, when the means for national defence were deemed inadequate, and the public mind was alive to the necessity of uniting by iron bands the destiny of the Pacific and the Atlantic States. Confessedly the undertaking was beyond the ability of unaided private capital. Only by the helping hand of Congress could the problem, difficult of solution under the most favorable circumstances, be worked out. Local business, as a source of profit, could not be expected while the road was in course of construction, on account of the character of the country it traversed; and whether, when completed, it would prove valuable as an investment, was a question for time to determine. But vast as was the work, limited as were the private resources to build it, the growing wants as well as the existing and future military necessities of the country demanded that it be completed. Under the stimulus of these considerations Congress acted, not for the benefit of private persons, nor in their interest, but for an object deemed essential to the security as well as to the prosperity of the nation.

Compelled as it was to incorporate a private company to accomplish its object, it proffered the terms on which it would lend its aid. If deemed too liberal now, they were then considered, with the lights before it, not more than sufficient to engage the attention of enterprising men, who, if not themselves possessing capital, were in a position to command the use of it. These terms looked to ultimate security rather than immediate reimbursement, inasmuch as the corporation would require all its available means in construction; and to require it, while the work was in progress, to keep down the interest on the bonds of the United States, might seriously cripple the enterprise at a time when the primary object of Congress was to advance it. There could, however, be no reasonable objection to the application 'of all compensation for services rendered for the government' from the outset, and of 'five per cent of the net earnings after the completion of the road' to the payment of the bonds and interest. These exactions were accordingly made.

Of necessity there were risks to be taken in aiding with money or bonds an enterprise unparalleled in the history of any free people, the completion of which, if practicable at all, would require, as was supposed, twelve years. But these risks were common to both parties. Congress was obliged to assume its share, and advance the bonds, or abandon the enterprise; for clearly the grant of lands, however valuable after the road was finished, could not be available as a resource for building it.

If the road were a success, in addition to the benefits it would confer on the United States, the corporation would be in a situation to repay the advances for interest and the principal when due. If, on the contrary, it proved to be a failure, subjecting the private persons who invested their capital in it to a total loss, there would be left the entire property of the corporation, of which immediate possession could be taken by the government on a declaration of forfeiture.

The circumstances under which the act of 1862 was passed, the purposes to be accomplished by it, and its scope and effect, are inconsistent with the position assumed by the appellant.

Notwithstanding the favorable terms proposed by Congress, the enterprise languished. The effect of this was the amendatory act of 1864. By it the grant of lands was doubled, a second in lieu of a first mortgage accepted by the government, and a provision inserted that 'only one-half of the compensation for services rendered for the government by said companies (meaning this and the auxiliary companies incorporated at the same time) shall be required to be applied to the payment of the bonds issued by the government in aid of the construction of said road.'

This provision was, without doubt, intended merely to modify the original act, so as to allow the government to retain only one-half of such compensation, instead of all. That act applied the whole compensation 'to pay the bonds and interest;' and it cannot be supposed that Congress intended to relinquish the right thereby secured to make the application in the first place to the interest, and then to the principal. The purpose could have been nothing more than to surrender the right to retain the whole of the companies' earnings for services to the government, and to accept, in lieu of it, the right to retain the half. This very material change was intended, doubtless, as a substantial favor to the companies; but, on the principle contended for by the appellant, it would be of no value. Of what possible advantage could it be to them to receive one-half of their earnings, if they were subject to a suit to recover it back as soon as it was paid? And this is the effect of the provision, if they are debtors to the government on every semi-annual payment of interest. They could not, in the nature of things, have accepted the stipulation with an understanding that any such effect would be given it. If the government consents to diminish its security, so that only half of the money due for services is to be applied to the payment of the interest or principal, what is to become of the other half? There is no implication that the government shall keep it; and, if not, who is to get it? Assuredly the companies who have earned it.

It is very clear that the Congress of 1864 did not suppose, in making this concession, that it would be barren of results; but, as the rights of the parties have been settled by the construction given to the original provision on this subject, it is unnecessary to consider the question further.

The practice for a series of years was in conformity with the views we have taken of the effect of the charter, until the Secretary of the Treasury withheld the payment of the money earned by the companies for services rendered the government. His action brought the subject to the attention of Congress; and the act of March 3, 1871 (16 Stat., p. 525, sect. 9), was passed, directing that one-half of the money due the Pacific Railroad companies for services rendered, either 'heretofore or hereafter,' be paid them, leaving open the question of ultimate right for legal decision.

Another act was subsequently passed, by virtue of which this suit was instituted by the appellee. Act of March 3, 1873, 17 Stat., p. 508, sect. 2. It is contended that this act repeals that portion of the charter of the company which contains the provisions we have discussed. But, manifestly, its purpose was very different. Although it directs the Secretary of the Treasury to withhold all payments to the companies on account of freights and transportation, it at the same time authorizes any company thus affected to bring suit in the Court of Claims for 'such freight and transportation;' and in such suit 'the right of such company to recover the same upon the law and the facts shall be determined, and also the rights of the United States upon the merits of all the points presented by it in answer thereto by them.' This means nothing more or less than the remission to the judicial tribunals of the question, whether this company, and others similarly situated, have the right to recover from the government one-half of what they earned by transportation; and this question is to be determined upon its merits.

The merits of such a question are determined when the effect of the charter is ascertained and declared. It is hardly necessary to say that it would have been idle to authorize a suit, had Congress intended to repeal the provision on which alone it could be maintained.

Counsel have dwelt with special emphasis upon the consequences which would result from a decision adverse to the appellant. We cannot consider them in disposing of the questions arising upon this record. The rights of the parties rest upon a statute of the United States. Its words, as well as its reason, spirit, and intention, leave, in our opinion, no room for doubt as to its true meaning. We cannot sit in judgment upon its wisdom or policy. When we have interpreted its provisions, if Congress has power to enact it, our duty in connection with it is ended.

Judgment affirmed.


text: Talk:United States v. Union Pacific Railroad Company (91 U.S. 72)/Opinion of the Court

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National Bank of Commerce of Boston v. Merchants' National Bank of Memphis

ERROR to the Circuit Court of the United States for the District of Massachusetts.

This was a suit brought by the Merchants' National Bank of Memphis against the National Bank of Commerce of Boston for alleged negligence in surrendering three bills of lading attached to three drafts,-two at thirty days, and one on sight,-which were sent by the Metropolitan National Bank of New York to the defendant, who surrendered the bills of lading to the drawees upon their acceptance of the drafts. These were drawn against the cotton mentioned in the bills of lading. The defendant had no information that the drafts had been discounted by the Bank of Memphis, and no instructions either to surrender the bills upon acceptance, or to hold them until payment of the drafts. The defendant had received through the same bank in New York drafts to a large amount on the same parties, accompanied by bills of lading, which they had always surrendered on acceptance, except in one instance, when special instructions were given to hold the latter until the accompanying draft was paid.

A verdict was rendered for the plaintiff.

Several questions were raised in the court below; but it is not deemed material to mention any thing more than two portions of the charge of the court, which were as follows:--

'In the absence of any consent of the owner of the bill of exchange, other than such as may be implied from the mere fact of sending for collection a bill of exchange, the bank so receiving the two papers for collection would not be authorized to separate the bill of lading from the bill of exchange, and surrender it before the bill of exchange was paid.'

'If the Metropolitan Bank merely sent to the defendant bank the bill of exchange with the bills of lading attached 'for collection,' with no other instructions, either express or implied from the past relations of the parties, they would not be justified in surrendering on acceptance only.'

To both of these instructions the defendant excepted.

Messrs. H. W. Paine and H. C. Hutchins for plaintiff in error.

In the absence of instructions, the plaintiff in error was authorized to infer that the bills of lading were annexed to the drafts to secure their acceptance, and were to be surrendered on acceptance. Lanfear v. Blossom, 1 La. Ann. 148; Coventry v. Gladstone, L. R. 4 Eq. 493; Gurney v. Behrend, 3 Ell. & Bl. 622; Shepherd v. Harrison et al., L. R. 4 Q. B. 196; Schuchardt et al. v. Hall et al., 36 Md. 590; Bryan v. Nix, 4 M. & W. 775; Marine Bank of Chicago v. Wright et al., 48 N. Y. 1; Shepherd v. Harrison et al., L. R. H. of L. 5, 116; Wisconsin Bank v. Bank of British N. A., 21 Upper Canada Queen's Bench, 284; Clark v. Bank of Montreal, 13 Grant's Ch. (Upper Canada) 211.

Mr. W. G. Russell, contra.

The later authorities in England and this country hold, that the holder of a draft, discounted bona fide for value, with the bill of lading attached, holds it as security for payment, and not for acceptance merely. Gilbert v. Guignon, L. R. 8 Ch. 16 (1872); Seymour v. Newton, 105 Mass. 272; Newcomb v. Boston & Lowell R.R., 115 Mass. 230; Stollenwerck et al. v. Thacher et al., 115 Mass. 224. The bank which holds the bill of exchange and the bill of lading attached 'for collection' holds them in trust for both parties, and is under obligation not to detach one from the other.

MR. JUSTICE STRONG delivered the opinion of the court.


text: Talk:National Bank of Commerce of Boston v. Merchants' National Bank of Memphis


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National Bank of Commerce of Boston v. Merchants' National Bank of Memphis/Opinion of the Court

The fundamental question in this case is, whether a bill of lading of merchandise deliverable to order, when attached to a time draft and forwarded with the draft to an agent for collection, without any special instructions, may be surrendered to the drawee on his acceptance of the draft, or whether the agent's duty is to hold the bill of lading after the acceptance for the payment. It is true, there are other questions growing out of portions of the evidence, as well as one of the findings of the jury; but they are questions of secondary importance. The bills of exchange were drawn by cotton-brokers residing in Memphis, Tenn., on Green & Travis, merchants, residing in Boston. They were drawn on account of cotton shipped by the brokers to Boston, invoices of which were sent to Green & Travis; and bills of lading were taken by the shippers, marked in case of two of the shipments 'To order,' and in case of the third shipment marked 'For Green & Travis, Boston, Mass.' There was an agreement between the shippers and the drawees that the bill of lading should be surrendered on acceptance of the bills of exchange; but the existence of this agreement was not known by the Bank of Memphis when that bank discounted the drafts, and took with them the bills of lading indorsed by the shippers. We do not propose to inquire now whether the agreement, under these circumstances, ought to have any effect upon the decision of the case. Conceding that bills of lading are negotiable, and that their indorsement and delivery pass the title of the shippers to the property specified in them, and therefore that the plaintiffs, when they discounted the drafts and took the indorsed railroad receipts or bills of lading, became the owners of the cotton, it is still true that they sent the bills with the drafts to their correspondents in New York, the Metropolitan Bank, with no instructions to hold them after acceptance; and the Metropolitan Bank transmitted them to the defendants in Boston, with no other instruction than that the bills were sent 'for collection.' What, then, was the duty of the defendants? Obviously, it was first to obtain the acceptance of the bills of exchange. But Green & Travis were not bound to accept, even though they had ordered the cotton, unless the bills of lading were delivered to them contemporaneously with their acceptance. Their agreement with their vendors, the shippers, secured them against such an obligation. Moreover, independent of this agreement, the drafts upon their face showed that they had been drawn upon the cotton covered by the bills of lading. Both the plaintiffs, and their agents the defendants, were thus informed that the bills were not drawn upon any funds of the drawers in the hands of Green & Travis, and that they were expected to be paid out of the proceeds of the cotton. But how could they be paid out of the proceeds of the cotton if the bills of lading were withheld? Withholding them, therefore, would defeat alike the expectation and the intent of the drawers of the bills. Hence, were there nothing more, it would seem that a drawer's agent to collect a time bill, without further instructions, would not be justified in refusing to surrender the property against which the bill was drawn, after its acceptance, and thus disable the acceptor from making payment out of the property designated for that purpose.

But it seems to be a natural inference, indeed a necessary implication, from a time draft accompanied by a bill of lading indorsed in blank, that the merchandise (which in this case was cotton) specified in the bill was sold on credit, to be paid for by the accepted draft, or that the draft is a demand for an advance on the shipment, or that the transaction is a consignment to be sold by the drawee on account of the shipper. It is difficult to conceive of any other meaning the instruments can have. If so, in the absence of any express arrangement to the contrary, the acceptor, if a purchaser, is clearly entitled to the possession of the goods on his accepting the bill, and thus giving the vendor a completed contract for payment. This would not be doubted, if, instead of an acceptance, he had given a promissory note for the goods, payable at the expiration of the stipulated credit. In such a case, it is clear that the vendor could not retain possession of the subject of the sale after receiving the note for the price. The idea of a sale on credit is that the vendee is to have the thing sold on his assumption to pay, and before actual payment. The consideration of the sale is the note. But an acceptor of a bill of exchange stands in the same position as the maker of a promissory note. If he has purchased on credit, and is denied possession until he shall make payment, the transaction ceases to be what it was intended, and is converted into a cash sale. Everybody understands that a sale on credit entitles the purchaser to immediate possession of the property sold, unless there be a special agreement that it may be retained by the vendor; and such is the well-recognized doctrine of the law. The reason for this is, that very often, and with merchants generally, the thing purchased is needed to provide means for the deferred payment of the price. Hence it is justly inferred that the thing is intended to pass at once within the control of the purchaser. It is admitted that a different arrangement may be stipulated for. Even in a credit sale, it may be agreed by the parties that the vendor shall retain the subject until the expiration of the credit, as a security for the payment of the sum stipulated. But, if so, the agreement is special, something superadded to an ordinary contract of sale on credit, the existence of which is not to be presumed. Therefore, in a case where the drawing of a time draft against a consignment raises the implication that the goods consigned have been sold on credit, the agent to whom the draft to be accepted and the bill of lading to be delivered have been intrusted cannot reasonably be required to know, without instruction, that the transaction is not what it purports to be. He has no right to assume and act on the assumption that the vendee's term of credit must expire before he can have the goods, and that he is bound to accept the draft, thus making himself absolutely responsible for the sum named therein, and relying upon the vendor's engagement to deliver at a future time. This would be treating a sale on credit as a mere executory contract to sell at a subsequent date.

If the inference to be drawn from a time draft accompanied by a bill of lading is, not that it evidences a credit sale, but a request for advances on the credit of the consignment, the consequence is the same. Perhaps it is even more apparent. It plainly is, that the acceptance is not asked on the credit of the drawer of the draft, but on the faith of the consignment. The drawee is not asked to accept on the mere assurance that the drawer will, at a future day, deliver the goods to reimburse the advances: he is asked to accept in reliance on a security in hand. To refuse to him that security is to deny him the basis of his requested acceptance: it is remitting him to the personal credit of the drawer alone. An agent for collection having the draft and attached bill of lading cannot be permitted, by declining to surrender the bill of lading on the acceptance of the bill, to disappoint the obvious intentions of the parties, and deny to the acceptor a substantial right which by his contract is assured to him. The same remarks are applicable to the case of an implication that the merchandise was shipped to be sold on account of the shipper.

Nor can it make any difference that the draft with the bill of lading has been sent to an agent (as in this case) 'for collection.' That instruction means simply to rebut the inference from the indorsement that the agent is the owner of the draft. It indicates an agency. Sweeny v. Easter, 1 Wall. 166. It does not conflict with the plain inference from the draft and accompanying bill of lading that the former was a request for a promise to pay at a future time for goods sold on credit, or a request to make advances on the faith of the described consignment, or a request to sell on account of the shipper. By such a transmission to the agent, he is instructed to collect the money mentioned in the drafts, not to collect the bill of lading; and the first step in the collection is procuring acceptance of the draft. The agent is, therefore, authorized to do all which is necessary to obtaining such acceptance. If the drawee is not bound to accept without the surrender to him of the consigned property or of the bill of lading, it is the duty of the agent to make that surrender; and if he fails to perform this duty, and in consequence thereof acceptance be refused, the drawer and indorsers of the draft are discharged. Mason v. Hunt, 1 Doug. 297.

The opinions we have suggested are supported by other very rational considerations. In the absence of special agreement, what is the consideration for acceptance of a time draft drawn against merchandise consigned? Is it the merchandise? or is it the promise of the consignor to deliver? If the latter, the consignor may be wholly irresponsible. If the bill of lading be to his order, he may, after acceptance of the draft, indorse it to a stranger, and thus wholly withdraw the goods from any possibility of their ever coming to the hands of the acceptor. Is, then, the acceptance a mere purchase of the promise of the drawer? If so, why are the goods forwarded before the time designated for payment? They are as much, after shipment, under the control of the drawer, as they were before. Why incur the expense of storage and of insurance? And if the draft with the goods or with the bill of lading be sent to a bank for collection, as in the case before us, can it be incumbent upon the bank to take and maintain custody of the property sent during the interval between the acceptance and the time fixed for payment? (The shipments in this case were hundreds of bales of cotton.) Meanwhile, though it be a twelvemonth, and no matter what the fluctuations in the market value of the goods may be, are the goods to be withheld from sale or use? Is the drawee to run the risk of falling prices, with no ability to sell till the draft is due? If the consignment be of perishable articles,-such as peaches, fish, butter, eggs, &c.,-are they to remain in a warehouse until the term of credit shall expire? And who is to pay the warehouse charges? Certainly not the drawees. If they are to be paid by the vendor, or one who has succeeded to the place of the vendor by indorsement of the draft and bill of lading, he fails to obtain the price for which the goods were sold.

That the holder of a bill of lading, who has become such by indorsement and by discounting the draft drawn against the consigned property, succeeds to the situation of the shipper, is not to be doubted. He has the same right to demand acceptance of the accompanying bill, and no more. If the shipper cannot require acceptance of the draft without surrendering the bill of lading, neither can the holder. Bills of lading, though transferable by indorsement, are only quasi negotiable. 1 Parsons on Shipping, 192; Blanchard v. Page, 8 Gray, 297 a. The indorser does not acquire a right to change the agreement between the shipper and his vendee. He cannot impose obligations or deny advantages to the drawee of the bill of exchange drawn against the shipment which were not in the power of the drawer and consignor. But, were this not so in the case we have now in hand, the agents for collection of the drafts were not informed, either by the drafts themselves or by any instructions they received, or in any other way, that the ownership of the drafts and bills of lading was not still in the consignors of the cotton. On the contrary, as the drafts were sent 'for collection,' they might well conclude that the collection was to be made for the drawers of the bills. We do not, therefore, perceive any force in the argument pressed upon us, that the Bank of Memphis was the purchaser of the drafts drawn upon Green & Travis, and the holder of the bills of lading by indorsement of the shippers.

It is urged that the bills of lading were contracts collateral to the bills of exchange which the bank discounted, and that, when transferred, they became a security for the principal obligation; namely, the contract evidenced by the bills of exchange,-for the whole contract, and not a part of it; and that the whole contract required not only the acceptance, but the payment of the bills. The argument assumes the very thing to be proved; to wit, that the transfer of the bills of lading were made to secure the payment of the drafts. The opposite of this, as we have seen, is to be inferred from the bills of lading and the time drafts drawn against the consignments, unexplained by express stipulations. The bank, when discounting the drafts, was bound to know that the drawers on their acceptance were entitled to the cotton, and, of course, to the evidences of title to it. If so, they knew that the bills of lading could not be a security for the ultimate payment of the drafts. Payment of the drafts by the drawees was no part of the contract when the discounts were made. The bills of exchange were then incomplete. They needed acceptance. They were discounted in the expectation that they would be accepted, and that thus the bank would obtain additional promisors. The whole purpose of the transfers of the bills of lading to the bank may, therefore, well have been satisfied when the additional names were secured by acceptance, and when the drafts thereby became completed bills of exchange. We have already seen, that whether the drafts and accompanying bills of lading evidenced sales on credit, or requests for advancements on the cotton consigned, or bailments to be sold on the consignor's account, the drawees were entitled to the possession of the cotton before they could be required to accept; and that, if they had declined to accept because possession was denied to them concurrently with their acceptance, the effect would have been to discharge the drawers and indorsers of the drafts. The demand of acceptance, coupled with a claim to retain the bills of lading, would have been an insufficient demand. Surely the purpose of putting the bills of lading into the hands of the bank was to secure the completion of the drafts by obtaining additional names upon them, and not to discharge the drawers and indorsers, leaving the bank only a resort to the cotton pledged.

It is said, that, if the plaintiffs were not entitled to retain the bills of lading as a security for the payment of the drafts after their acceptance, their only security for payment was the undertaking of the drawees, who were without means, and the promise of the acceptors, of whose standing and credit they knew nothing. This may be true; though they did know that the acceptors had previously promptly met their acceptances, which were numerous, and large in amount. But, if they did not choose to rely solely on the responsibility of the acceptors and drawers, they had it in their power to instruct their agents not to deliver the cotton until the drafts were paid. Such instructions are not infrequently given in case of time drafts against consignments; and the fact that they are given tends to show that in the commercial community it is understood, that, without them, agents for collection would be obliged to give over the bills of lading on acceptance of the draft. Such instructions would be wholly unnecessary, if it is the duty of such agents to hold the bills of lading as securities for the ultimate payment.

Thus far, we have considered the question without reference to any other authority than that of reason. In addition to this, we think the decisions of the courts and the language of many eminent judges accord with the opinions we avow. In the case of Lanfear v. Blossom, 1 La. Ann. 148, the very point was decided, after an elaborate argument both by the counsel and by the court. It was held that 'where a bill of exchange drawn on a shipment, and payable a certain number of days after sight, is sold, with the bill of lading appended to it, the holder of the bill of exchange cannot, in the absence of proof of any local usage to the contrary, or of the imminent insolvency of the drawee, require the latter to accept the bill of exchange, except on the delivery of the bill of lading; and when, in consequence of the refusal of the holder to deliver the bill of lading, acceptance is refused, and the bill protested, the protest will be considered as made without cause, the drawee not having been in default, and the drawer will be discharged.' This decision is not to be distinguished in its essential features from the opinions we have expressed. A judgment in the same case to the same effect was given in the Commercial Court of New Orleans by Judge Watts, who supported it by a very convincing opinion. 14 Hunt's Merchants' Magazine, 264. These decisions were made in 1845 and 1846. In other courts, also, the question has arisen, What is the duty of a collecting bank to which time drafts, with bills of lading attached, have been sent for collection? and the decisions have been, that the agent is bound to deliver the bills of lading to the acceptor on his acceptance. In the case The Wisconsin Marine & Fire Insurance Company v. The Bank of British North America, 21 Upper Canada Queen's Bench, 284, decided in 1861, where it appeared that the plaintiff, a bank at Milwaukee, Wis., had sent to the defendants, a bank at Toronto, for collection, a bill drawn by A. at Milwaukee on B. at Toronto, payable forty-five days after date, together with a bill of lading, indorsed by A., for certain wheat sent from Milwaukee to Toronto, it was held, that, in the absence of any instructions to the contrary, the defendants were not bound to retain the bill of lading until payment of the draft by B., but were right in giving it up to him on obtaining his acceptance. This case was reviewed in 1863 in the Court of Error and Appeals, and the judgment affirmed. 2 Upper Canada Error and Appeal Reps. 282. See also Goodenough v. The City Bank, 10 Upper Canada Com. Pleas, 51; Clark v. The Bank of Montreal, 13 Grant's Ch. 211.

There are also many expressions of opinion by the most respectable courts, which, though not judgments, and therefore not authorities, are of weight in determining what are the implications of such a state of facts as this case exhibits. In Shepherd v. Harrison et al., L. R. Q. B., vol. iv., p. 493, Lord Cockburn said, 'The authorities are equally good to show, when the consignor sends the bill of lading to an agent in this country to be by him handed over to the consignee, and accompanies that with bills of exchange to be accepted by the consignee,' that that 'indicates an intention that the handing over of the bill of lading, and the acceptance of the bill or bills of exchange, should be concurrent parts of one and the same transaction.' The case subsequently went to the House of Lords, 5 H. L. 133; when Lord Cairns said, 'If they (the drawees) accept the cargo and bill of lading, and accept the bill of exchange drawn against the cargo, the object of those who shipped the goods is obtained. They have got the bill of exchange in return for the cargo; they discount, or use it as they think proper; and they are virtually said for the goods.' In Coventry v. Gladstone, 4 L. R. Eq. 493, it was declared by the Vice-Chancellor that 'the parties shipping the goods from Calcutta, in the absence of any stipulation to the contrary, did give their agents in England full authority, if they thought fit, to pass over the bill of lading to the person who had accepted the bill of exchange' drawn against the goods, and attached to the bill of lading; and it was ruled that an alleged custom of trade to retain the bill of lading until payment of the accompanying draft on account of the consignment was exceptional, and was not established as being the usual course of business. In Schuchardt et al. v. Hall et al., 39 Md. 590, which was a case of a time draft, accompanied by a bill of lading, hypothecated by the drawer, both for the acceptance and payment of the draft, and when the drawers had been authorized to draw against the cargo shipped, it was said by the court, 'Under their contract with the defendants, the latter were authroized to draw only against the cargo of wheat to be shipped by the 'Ocean Belle;' any they (the drawees) were, therefore, not bound to accept without the delivery to them of the bill of lading.' See also the language of the judges in Gurney v. Behrend, 3 Ell. & Bl. 622; Marine Bank v. Wright, 48 N. Y. 1; Cayuga Bank v. Daniels, 47 id. 631.

We have been unable to discover a single decision of any court holding the opposite doctrines. Those to which we have been referred as directly in point determine nothing of the kind. Gilbert v. Guignon, L. R. 8 Ch. 16, was a contest between two holders of several bills of lading of the same shipment. The question was, Which had priority? It was not all whether the drawee of a time draft against a consignment has not a right to the bill of lading when he accepts. The drawer had accepted without requiring the surrender of the first indorsed bill of lading; and the Lord Chancellor, while suggesting a query whether he might not have declined to accept unless the bills of lading were at the same time delivered up to him, remarked, 'If he was content they should remain in the hands of the holder, it was exactly the same thing as if he had previously and originally authorized that course of proceeding; and that (according to the Chancellor's view) was actually what had happened in the case.' Nothing, therefore, was decided respecting the rights of the holder of a time draft, to which a bill of lading is attached, as against the drawee. The contest was wholly inter alios.

Seymour v. Newton, 105 Mass. 272, was the case of an acceptance of the draft, without the presentation of the bill of lading. In that respect, it was like Gilbert v. Guignon. No question, however, was made in regard to this. The acceptor became insolvent before the arrival of the goods; and all that was decided was, that, under the circumstances, the jury would be authorized to find that the lien of the shippers had not been discharged. It was a case of stoppage in transitu. It is true, that, in delivering the opinion of the court, Chief Justice Chapman said, 'The obvious purpose was, that there should be no delivery to the vendee till the draft should be paid.' But the remark was purely obiter, uncalled for by any thing in the case. Newcomb v. The Boston & Lowell Railroad Corporation, 115 Mass. 230, was also the case of acceptance of sight drafts, without requiring the delivery of the attached bills of lading: and the contest was not between the holder of the drafts and the acceptor; it was between the holder of the drafts with the bills of lading and the carrier. We do not perceive that the case has any applicability to the question we have now under consideration. True, there, as in the case of Seymour v. Newton, it was remarked by the judge who delivered the opinion, 'The railroad receipts were manifestly intended to be held by the collecting bank as security for the acceptance and payment of the drafts.' Intended by whom? Evidently the court meant by the drawees and the bank; for it is immediately added, 'They continued to be held by the bank after the drafts had been accepted by Chandler & Co. (the drawees), and until at Chandler & Co.'s request they were paid by the plaintiff; and the receipts with the drafts still attached were indorsed and delivered by Chandler & Co. to the plaintiff.' In Stollenwerck et al. v. Thacher et al., 115 Mass. 224 (the only other case cited by the defendants in error as in point on this question), there were instructions to the agent to deliver the bill of lading only on payment of the draft; and it was held that the special agent, thus instructed, could not bind his principal by a delivery of the bill without such payment. Nothing was decided that is pertinent to the present case. In Bank v. Bayley, reported in the same volume, p. 228, where the instructions given to the collecting agent were, so far as it appears, only that the drafts and bills of lading were remitted for collection, and where acceptance was refused, Chief Justice Gray said, 'The drawees of the draft attached to each of the bills of lading were not entitled to the bill of lading, or the property described therein, except upon acceptance of the draft.' It is but just to say, however, that this remark, as well as those made by the same judge in the other Massachusetts cases cited, was aside from the decision of the court.

After this review of the authorities cited, as in point, in the very elaborate argument for the defendants in error, we feel justified in saying, that, in our opinion, no respectable case can be found in which it has been decided that when a time draft has been drawn against a consignment to order, and has been forwarded to an agent for collection with the bill of lading attached, without any further instructions, the agent is not justified in delivering over the bill of lading on the acceptance of the draft.

If this, however, were doubtful, the doubt ought to be resolved favorably to the agent. In the case in hand, the Bank of Commerce, having accepted the agency to collect, was bound only to reasonable care and diligence in the discharge of its assumed duties. Warren v. The Suffolk Bank, 10 Cush. 582. In a case of doubt, its best judgment was all the principal had a right to require. If the absence of specific instructions left it uncertain what was to be done further than to procure acceptances of the drafts, and to receive payment when they fell due, it was the fault of the principal. If the consequence was a loss, it would be most unjust to cast the loss on the agent.

Applying what we have said to the instruction given by the learned judge of the Circuit Court to the jury, it is evident that he was in error. Without discussing in detail the several assignments of error, it is sufficient for the necessities of this case to say that it was a mistake to charge the jury, as they were charged, that 'in the absence of any consent of the owner of a bill of exchange, other than such as may be implied from the mere fact of sending 'for collection' a bill of exchange with a bill of lading pasted or attached to a bill of exchange, the bank so receiving the two papers for collection would not be authorized to separate the bill of lading from the bill of exchange, and surrender it before the bill of exchange was paid.' And again: there was error in the following portion of the charge: 'But if the Metropolitan Bank merely sent to the defendant bank the bills of exchange with the bills of lading attached for collection, with no other instructions, either expressed or implied from the past relations of the parties, they would not be so justified in surrendering (the bills of lading) on acceptance only.' The Bank of Commerce can be held liable to the owners of the drafts for a breach of duty in surrendering the bills of lading on acceptance of the drafts, only after special instructions to retain the bills until payment of the acceptances. The drafts were all time drafts. One, it is true, was drawn at sight; but, in Massachusetts, such drafts are entitled to grace.

What we have said renders it unnecessary to notice the other assignments of error.

The judgment of the Circuit Court is reversed, and the record is remitted with directions to award a new trial.


text: Talk:National Bank of Commerce of Boston v. Merchants' National Bank of Memphis/Opinion of the Court


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Long v. Converse

ERROR to the Supreme Judicial Court of the State of Massachusetts.

On the 20th of July, 1870, a bill was filed in the Supreme Judicial Court of Massachusetts for the foreclosure of a mortgage, executed by the Boston, Hartford, and Erie Railroad Company, to secure the payment of certain bonds. The bill prayed a sale of the mortgaged property, and the appointment of receivers. Henry N. Farwell was named as one of the defendants, he being one of the trustees under the mortgage, and also one of the directors of the company. Process was served upon him July 21, 1870.

On the 2d of August, 1870, an order was made appointing receivers, with authority to take possession of all the property of the railroad company, including all moneys, credits, choses in action, evidences of debt, books, papers, and vouchers.

On the 1st of March, 1871, the railroad company was adjudged a bankrupt by the District Court of the United States for the District of Massachusetts; and on the 18th of the same month an assignment of its property, according to the provisions of the Bankrupt Act, was made to Charles S. Bradley, Charles L. Chapman, and George M. Barnard, as assignees. This assignment was made to include all the property of which the company was possessed on the 21st of October, 1870.

On the 20th of September, 1871, the receivers of the railroad company filed in the Supreme Judicial Court their petition against George W. Long and John C. Watson, alleging, in substance, that, when the order appointing them receivers was made, Farwell had in his possession, as one of the officers of the railroad company, certain coupons of bonds of the Hartford, Providence, and Fishkill Railroad Company, and of bonds of the city of Providence, which were the property of the Boston, Hartford, and Erie Railroad Company, and which, by the decree, he was ordered to deliver to them; that the railroad company had no right to sell or transfer the coupons, or put them in circulation; that he had no right to the coupons or their possession; that, notwithstanding this, he had, subsequently to their appointment as receivers, transferred to Long and Watson five hundred of the coupons of the bonds of the city of Providence; and that Long and Watson, at the time, had full knowledge of the rights of the railroad company, and that Farwell had no power or authority to make the transfer.

The petitioners asked that Long and Watson might be ordered to deliver the coupons to them, and restrained from collecting the money due thereon.

Long and Watson answered this petition, denying that Farwell, at the time of the appointment of the receivers, held the coupons in trust for the railroad company, and averring that he held them as collateral security for a debt owing to him by the Hartford, Providence, and Fishkill Railroad Company. Having no knowledge whether the Boston, Hartford, and Erie Railroad Company had authority to sell the coupons, or put them in circulation, they left the petitioners to make such proof of that fact as they might deem material. They admitted the transfer to them by Farwell after the appointment of the receivers, but denied any knowledge of the rights of the railroad company, and averred that they purchased the coupons of Farwell in good faith, believing that he had the right to make the transfer.

Subsequently, on the 27th of June, 1872, they filed an amendment to their answer, setting up the bankruptcy of the railroad company and the assignment to the assignees, and concluding as follows: 'Wherefore these respondents submit that the said petitioners had not, at the date of the filing of the said petition, if they ever had, any right to the possession of any of the property of the said Boston, Hartford, and Erie Railroad Company, and particularly to the possession of the coupons in said petition alleged to be the property of the said company, and in the possession of these respondents.'

The cause was referred to a special master. Upon the coming in of his report, exceptions were filed; and at the April Term, 1872, an entry was made on the docket of the court, as follows: 'Plaintiffs' exceptions sustained. Decree for the receivers upon the evidence reported.' The cause was then continued. On the 28th August, 1872, the assignees in bankruptcy filed in the cause a paper addressed to the court, in which they represented, that 'having read. . . the proposed decree of this court against George W. Long and John C. Watson, ordering them to surrender and deliver up to the receivers the coupons of the bonds of the city of Providence described in the petition against them, we do assent to said decree, and to the delivery of the coupons to the receivers, as therein ordered.'

Afterwards, on the 5th of May, 1873, a decree in form was entered by the court, in which it was 'found as a matter of fact, and further ordered, adjudged, and decreed, that the respondents, George W. Long and John C. Watson, took the interest coupons sought in this petition to be recovered of them, to wit, &c., under circumstances which preclude said Long and Watson from claiming the right of holders for value in good faith; and that, as against the petitioners in said petition, said Long and Watson acquired no better title to said coupons than Henry N. Farwell himself had, and that said Farwell had no right or title to the same; and that the right to the possession of and the title to said coupons are now in the petitioners,. . . notwithstanding the amended answer of said defendants and the alleged adjudication in bankruptcy and subsequent assignment made therein.' Thereupon it was further decreed that the receivers recover of Long and Watson the money which it appeared they had collected during the pendency of the suit from the city of Providence upon the coupons received by them from Farwell.

To reverse this decree, the present writ of error has been prosecuted by Long and Watson.

The error assigned is, that the court below held that the right and title to the coupons in controversy were in the defendants in error, as receivers of the Boston, Hartford, and Erie Railroad Company; and that they were entitled to maintain suit to recover the same, notwithstanding the adjudication of the bankruptcy of that company, and the assignment of all its property by register in bankruptcy to assignees in bankruptcy before suit brought by the defendants in error.

Mr. Benjamin F. Butler, with whom was Mr. Causten Browne, for the plaintiffs in error.

First, The question presented by the assignment of error is one within the jurisdiction of this court.

1. This was a final decree in a suit in equity in the highest court of law or equity of the State of Massachusetts.

Though in form, under the practice in Massachusetts, this petition is entitled in the suit in which the receivers were appointed, it was really a bill in equity, and the suit was in all respects a suit in equity.

2. There was drawn in question the validity of an authority exercised under a State, on the ground of its being repugnant to the laws of the United States; and the decision was in favor of such authority.

The receivers were officers of the State court; and the validity of their authority as such officers, after the bankruptcy of the railroad company and the assignment of its property, was directly drawn in question, on the ground of its being repugnant to the Bankrupt Law of the United States; and the decision was expressly in favor of such authority.

Second, The receivers of the Boston, Hartford, and Erie Railroad Company were not entitled to maintain suit for the recovery of the coupons in controversy after the adjudication of the bankruptcy of that company, and the assignment of all its property by a register in bankruptcy to assignees in bankruptcy duly elected and appointed.

The statute of the United States, the paramount law of the land, in force at the time of the commencement of proceedings in bankruptcy against the company, provided that, as soon as the assignee in bankruptcy was appointed and qualified, the judge of the District Court, or, in case of no opposing interest, the register, 'shall, by an instrument under his hand, assign and convey to the assignee all the estate, real and personal, of the bankrupt, with all his deeds, books, and papers relating thereto; and such assignment shall relate back to the commencement of said proceedings in bankruptcy; and thereupon, by operation of law, the title to all such property and estate, both real and personal, shall vest in said assignee,' &c. 14 Stat. 522, sect. 14.

The statute is explicit and peremptory that the title to all the property and estate of the bankrupt shall, upon assignment duly made to the assignee in bankruptcy, vest by operation of law in such assignee.

It is submitted, that, after such assignment, the assignee, and he alone, is entitled to bring suit for the possession of property claimed to be the property of the bankrupt. Smith v. Buchanan, 8 Blatch. 153.

The cases in which it has been held that the United States bankruptcy courts will not interfere with property in possession of a State court do not apply in this case.

Whether or not the principle of those cases can be maintained it is not necessary to discuss. They are distinguished from this case by the fact that in all of them the officers of the State court were actually in possession of the property in controversy at the time of the commencement of the proceedings in bankruptcy. Sedgwick v. Menck, 6 Blatch. 156; Clark v. Bininger, 3 N. B. R. 524; Alden v. Railroad Co., 5 id. 230; Beecher v. Bininger, 7 Blatch. 171.

The question of the right of receivers appointed by a State court to maintain suit for the recovery of the alleged property of a bankrupt, after an adjudication in bankruptcy and the assignment thereunder, has never been decided.

It cannot be contended that the decree appointing the receivers of its own force put them into possession of the property in controversy. The decree cannot be so construed. Its language and spirit are directly opposed to such a construction.

To hold that the mere appointment of receivers by a State court ipso facto puts them into possession of all the debtor's property would be to deal an almost fatal blow at the Bankrupt Law; for if, as has been held, the Bankruptcy Court will not interfere with property in the possession of receivers, and the mere fact of their appointment puts them in possession, it will be an easy matter to avoid the operation of that law, or make proceedings under it a solemn farce, by simply suing the debtor, and procuring the appointment of a receiver of his property.

It is submitted that the defendants in error were not entitled to maintain their suit in the court below; and that the decree should be reversed, with directions to dismiss the petition.

Mr. Benjamin F. Brooks and Mr. James J. Storrow for defendants in error.

It is clear that the amended answer does not set up any title in the plaintiffs in error accruing to them under any statute of the United States. It is well settled that the right to bring a writ of error under the second clause of the twenty-fifth section of the old Judiciary Act is given to the party who claims the right or the title under the statute, the construction of which is drawn in question: it is for him to exercise it or not as he sees fit, to protect his own interests. The writ is not given to strangers, volunteers, mere trespassers or wrong-doers, who hold not under, but adversely to, such right or title. Henderson v. Tennessee, 10 How. 311, and cases cited; Hale v. Gaines, 22 id. 149; Verden v. Colman, 1 Black, 472.

The act of 1867, sect. 2, under which this writ was brought, re-enacted in this respect the language of the old law; the only change made serving to make the case still stronger against the plaintiffs in error. For the language of the old law, which seemed to give some color to the idea that it was enough that the right claimed was such that it 'drew in question the construction of any clause of. . . a statute of the United States,' was omitted; and the present act is in terms restricted (as by the decisions of this court the former act was restricted) to cases of a 'right, title, &c., claimed under. . . any statute of the United States.' R. S., sect. 709, follows the act of 1867.

The first part of sect. 2 of the act of 1867 (R. S. sect. 709) must receive the same construction. It is true that the receivers exercise an authority given by the State court, the power of which the plaintiffs in error deny; and they assign a statute of the United States as the ground of their denial. But the same reasons which led the court in Murdock v. Memphis (20 Wall. 590) to hold that a very striking change of language did not indicate an intention to change the old construction with regard to the questions raised will lead the court now to say that a re-enactment of the language without variation in the same section forbids any inference of an intention to inaugurate a change in the settled rule as to the persons who are entitled to raise the questions; and to hold that a different rule applied in resisting a claim made by State authority, and asserting an immunity claimed under Federal authority, would be, not merely to introduce discord into the law, but to provide grounds for opposite decisions in the same case. Indeed, the language of this part of the section is less strong in favor of the plaintiffs' claim than the language of the act of 1789, upon which the cases first above cited were decided.

The writ should therefore be dismissed for want of jurisdiction.

MR. CHIEF JUSTICE WAITE delivered the opinion of the court.

title: Long v. Converse


text: Talk:Long v. Converse

title: Talk:Long v. Converse


text:
Long v. Converse/Opinion of the Court

Our jurisdiction in this case depends upon the effect to be given to that provision of the Judiciary Act which authorizes this court to re-examine the decisions of the highest court of a State in certain cases, 'where any title, right, privilege, or immunity is claimed under' any statute of the United States.

The plaintiffs in error did not claim under the assignees in bankruptcy. They set up the title of the assignees, not to protect their own, but to defeat that of the receivers appointed by the State court. They claimed adversely to both the receivers and assignees. They did not even allege that the assignees had ever attempted to assert title. The contest was one originally for the possession of certain papers. The decree for money was given, because, pending the suit, the papers sought for had been exchanged for money, and the receivers were willing to accept the exchange. In the absence of the assignees from the case, the decree could have no effect upon their title to the coupons or money. If, when the demand was made by the receivers, the plaintiffs in error had surrendered the coupons, that surrender would have been a complete defence to a future action by the assignees, inasmuch as they had not before that time asserted their claim, either by demand or notice. The title of the assignees to the property would not have been defeated by the transfer. Whatever rights they had against the plaintiffs in error could be enforced by an appropriate proceeding against the receivers. The whole effect of the surrender, so far as the assignees were concerned, was to transfer the custody of the property from the plaintiffs in error to the receivers. In this case the transfer was not voluntary, but in pursuance of a decree rendered by a court of competent jurisdiction, with the assent of the assignees. Under such circumstances, it is not easy to see how the assignees can proceed further against the parties, who have only obeyed the commands of the court. Clearly, their remedy, if they have any, is against the property in the hands of the receivers.

The second section of the act of Feb. 5, 1867 (14 Stat. 385), which was in force when this writ of error was brought, and which has been substantially re-enacted in the Revised Statutes (sect. 709), differs only from the twenty-fifth section of the Judiciary Act of 1789, so far as the provision now under consideration is concerned, in the substitution of the word 'immunity' for 'exemption.' In the old act, the words were 'title, right, privilege, or exemption;' in the last, 'title, right, privilege, or immunity.' This does not materially affect the rights of the parties in the present case. The words, when used in this connection and applied to the circumstances of this case, have substantially the same meaning.

The construction of this provision in the act of 1789 came before this court for consideration as early as 1809, in the case of Owing's Lessee v. Norwood, 5 Cranch, 344. That was an action of ejectment in a State court. The defendant, being in possession, set up an outstanding title in a third person under a treaty. The writ of error from this court was dismissed for want of jurisdiction. In the progress of the argument, Chief Justice Marshall used this language: 'Whenever a right grows out of or is protected by a treaty, it is sanctioned against all the laws and decisions of the States; and whoever may have this right, it is to be protected. But if the person's title is not affected by the treaty, if he claims nothing under a treaty, his title cannot be protected by a treaty. If Scarth or his heirs had claimed, it would have been a case arising under a treaty. But neither the title of Scarth nor of any person claiming under him can be affected by the decision of this case.' In Montgomery v. Hernandez, 12 Wheat. 129, a suit was brought in a State court by parties beneficially interested in a bond given to the United States by a marshal to secure the faithful performance of his official duties. The suit was in the names of the beneficiaries, and not in that of the United States for their use. It was insisted that there could be no recovery, because the action should have been prosecuted in the name of the United States; and this was assigned for error in this court. But it was said that 'the plaintiff in error did not and could not claim any right, title, privilege, or exemption by or under the marshal's bond, or any act of Congress giving authority to sue the obligors for a breach of the condition,' and that the court had no jurisdiction of the case on that ground. Again: the same question was presented and elaborately argued in Henderson v. Tennessee, 10 How. 311, decided in 1850. That also was an action of ejectment in a State court, in which the defendant set up an outstanding title in a third person, under an Indian treaty; and there, too, the writ was dismissed. In delivering the opinion of the court, Chief Justice Taney said, 'It is true, the title set up in this case was claimed under a treaty; but, to give jurisdiction to this court, the party must claim the right for himself, and not for a third person in whose title he has no interest. . . . The heirs of Miller appear to have no interest in this suit, nor can their rights be affected by the decision. The judgment in this case is no obstacle to their assertion of their title in another suit brought by themselves or any person claiming a legal title under them.' To the same effect are Hale v. Gaines, 22 How. 149, 160, and Verden v. Coleman, 1 Black, 472. This must be considered as settling the law in this class of cases; and it seems to be decisive of this case. The plaintiffs in error claim no title, right, privilege, or immunity under the Bankrupt Law. Their obligation to account for the coupons in their hands is not discharged by the law. The title of the assignees cannot be affected by the decree, except through their consent. It follows, therefore, that this case must be dismissed for want of jurisdiction.

Note.-Farwell v. Converse et al., in error to the Supreme Judicial Court of Massachusetts, differs from the preceding case in this, that the decree against Farwell was for the delivery of the coupons which still remained in his hands, and not for the money collected upon them. The writ in this case was, therefore, dismissed for the reasons appearing in the opinion given in that case.

title: Long v. Converse/Opinion of the Court


text: Talk:Long v. Converse/Opinion of the Court


text:
Sawyer v. Turpin

APPEAL from the Circuit Court of the United States for the District of Massachusetts.

On the fifteenth day of May, 1869, J. C. Bacheller, in order to secure a debt due by him to Novelli & Co., executed a bill of sale conveying his chattel interest in certain property to Turpin, one of the defendants below.

This conveyance was not recorded, nor was possession had thereunder.

On the 31st of July, 1869, Turpin having surrendered the bill of sale, Bacheller, in exchange therefor, executed to him a mortgage upon the same property. This mortgage was recorded on the 17th of the following September.

Bacheller filed his petition in bankruptcy the twenty-second day of October then next ensuing; and the appellants, his assignees, filed their bill in the District Court to set aside the mortgage as a fraudulent preference of a creditor, alleging that Bacheller was insolvent when the mortgage was given, and that Turpin, and Novelli & Co., the other defendants, knew of the fact.

The District Court passed a decree dismissing the bill, which was affirmed by the Circuit Court. The assignees appealed to this court.

The recording statutes of Massachusetts which apply to the case are set forth in the opinion of the court.

Mr. Benjamin Dean and Mr. J. G. Abbott for the appellants.

The question presented in this case is, whether the chattel mortgage of July 31, 1869, given by the bankrupt Batcheller to the defendant Turpin, is void as against the assignees, as being a fraudulent preference of a creditor under the Bankrupt Act.

The defendants cannot claim under the absolute conveyance of May 15, because it is admitted by them that it was surrendered. They took the mortgage under which they claim as collateral security for a pre-existing debt due from the mortgagor. He was then insolvent, and they knew it. The case comes exactly within the provisions of the Bankrupt Act, avoiding such transactions as fraudulent; and it is entirely immaterial that a prior conveyance of the same property was given up.

The conveyance of May 15 was null and void against creditors or their representatives, as it was never recorded, nor was possession of the mortgaged property given or taken under it. Stat. of Mass., ch. 151, sect. 1.

The Bankrupt Act substantially provides that a mortgage, to be valid against assignees, must be recorded according to the laws of the State where it is made. Bankrupt Act, sect. 14, prov. 2.

No sale or delivery was intended. The instrument of May 15 was given only as security for a debt, not to make an absolute sale of the property; so that, even between the parties, no title had passed before it was surrendered.

It has been repeatedly held, in reference to questions of bankruptcy and insolvency, that the validity of any instrument claimed under against an assignee must be determined by the state of facts existing at the time of its execution. Forbes v. Howe, 162 Mass. 427; Blodgett v. Hildreth, 11 Cush. 311; Paul v. Waite, 11 Gray, 190; Simpson v. Carlton, 1 Allen, 109; Denny v. Same, 2 Cush. 160.

Every conveyance by a bankrupt, which by the laws of the State where it is made is void against creditors, is also void against the assignee in bankruptcy. Allen v. Massey, 17 Wall. 357; Bank of Leavenworth v. Hunt, 11 id. 391; Kane, Assignee, v. Rice, Nat. Bank Reg., vol. x. 469; Edmondson v. Hyde, id. vol. vii. 1; Thornhill v. Link, id. vol. viii. 521; In re Wynne, id. vol. iv. 5, Chase, C. J.

title: Sawyer v. Turpin


text: Talk:Sawyer v. Turpin

title: Talk:Sawyer v. Turpin


text:
Sawyer v. Turpin/Opinion of the Court

The assignee takes what any creditor could take; otherwise the creditors, instead of gaining by the Bankrupt Act, are losers.

Mr. Joshua D. Ball for the appellees.

The surrender of the deed was a sufficient consideration for the mortgage.

Even if never recorded or exchanged for the mortgage, and if no possession had been taken, the deed, being valid as against Bacheller, would have been valid as against his assignees in bankruptcy.

Assignees in bankruptcy take, except in cases of fraud only, the rights of the bankrupt, and subject to all the equities and incumbrances which exist against the bankrupt; and an unrecorded mortgage of chattels, being valid as against the bankrupt, is valid as against his assignees. In re J. Dow, 6 N. B. R. 11; In re Griffiths, 3 id. 179; Sawyer v. Turpin, 5 id. 339, 346; Winslow v. McLellan, 2 Story, 495, 500; Mitchell v. Winslow, id. 630; Fletcher v. Morey, id. 555; Ex parte Newhall, id. 363; Fiske v. Hunt, id. 584; Parker v. Muggridge, id. 334.

An exchange of security, even after the debtor is known to be insolvent, is perfectly valid if the creditor by the exchange receives no more in value than he gives up. Stevens v. Blanchard, 3 Cush. 169.

The validity of the mortgage depends not upon the state of facts existing at its date; but, as it was exchanged for another form of security on the same property, its validity will be upheld because the security for which it was an exchange was valid, and made and delivered more than four months before proceedings in bankruptcy were commenced. Stevens v. Blanchard, supra; Winslow v. McLellan, 2 Story, 495, 500; Clark v. Iselin, 21 Wall. 360; Cook v. Tullis, 18 id. 340; Watson v. Taylor, 21 id. 378; Burnhisel v. Firman, 11 Nat. Bank Reg. 505; Catlin v. Hoffman, 9 id. 342.

The deed which was given up might have been recorded by Turpin at any moment. He could at any time have taken possession of the property, and exercised full and absolute control over it.

It is said, that, before the exchange, no possession had been taken under the deed, and that it had not been recorded.

Such a deed as between the parties was valid without possession or record. Gen. Stat. of Mass., ch. 151, sect. 1.

No rights of creditors had intervened when the exchange took place.

The Supreme Judicial Court of Massachusetts, in one of their leading decisions made in the year 1856, say, 'The time when the record shall be made is not specially prescribed; though it must undoubtedly precede the possession by others subsequently acquiring an interest in the mortgaged property. Rev. Stat., ch. 74, sect. 5. To prevent it passing to them, it will be sufficient that the record is made at any time before such possession is taken, though it be long after the execution of the mortgage.' Mitchell et al. v. Black et al., 6 Gray, 106. Briggs v. Parkman, 2 Metc. 258; Adams v. Wheeler, 10 Pick. 199; Seaver v. Spink, 8 Nat. Bank Reg. 218; Cragin v. Carmichael, 11 id. 511; In re Wynne, 4 id. 23; Gibson v. Warden, 14 Wall. 244.

MR. JUSTICE STRONG delivered the opinion of the court.

The only question presented by this appeal is, whether the mortgage given by the bankrupt on the thirty-first day of July, 1869, to Edward Turpin, the agent of Novelli & Co., was a fraudulent preference of creditors within the prohibition of the Bankrupt Act, and therefore void as against the assignees in bankruptcy. That it was a security given for the protection of a pre-existing debt, and that it was given within four months immediately preceding the filing of the petition in bankruptcy, are conceded facts. It may also be admitted that the bankrupt was insolvent when the mortgage was made, and that the creditors had then reason to believe he was insolvent.

The petition in bankruptcy was filed on the 22d of October, 1869. On the 15th of May next preceding that date, Bacheller, the bankrupt, who was indebted to Novelli & Co. in the large sum of $27,839 in gold, conveyed to Turpin, who was their agent, as a security for the debt, the building described in the subsequent mortgage of July 31. It was a frame building, erected upon leased ground; and Bacheller had, therefore, only a chattel interest in it. The conveyance was by a bill of sale absolute in its terms, having no condition or defeasance expressed; but it was understood by the parties to be a security for the debt due. It was in substantial legal effect, though not in form, a mortgage. Having been executed more than four months before the petition in bankruptcy was filed, there is nothing in the case to show that it was invalid. True, it was not recorded; and it may be doubted whether it was admissible to record. True, no possession was taken under it by the vendee; but for neither of these reasons was it the less operative between the parties. It might not have been a protection against attaching creditors, if there had been any; but there were none. It was in the power of Turpin to put it on record any day, if the recording acts apply to such an instrument; and equally within his power to take possession of the property at any time before other rights against it had accrued. These powers were conferred by the instrument itself, immediately on its execution. In regard to chattel mortgages, the recording statutes of Massachusetts, enacted in 1836, provide as follows: 'No mortgage of personal property hereafter made shall be valid against any other person than the parties thereto, unless possession of the mortgaged property be delivered to and retained by the mortgagee, or unless the mortgage be recorded by the clerk of the town where the mortgagor resides.' Rev. Stat. 473, ch. 74. The statute contains a clear recognition of the validity of an unrecorded chattel mortgage, as between the parties to it; though no possession be taken under it. And the General Statutes of the State, enacted in 1860 (Gen. Stat. 769, ch. 151), contain the same recognition. Their language is the following: 'Mortgages of personal property shall be recorded on the records of the town where the mortgagor resides when the mortgage is made, and on the records of the city or town in which he then principally transacts his business, or follows his trade or calling. If the mortgagor resides without the State, his mortgage of personal property within the State, when the mortgage is made, shall be recorded on the records of the city or town where the property then is. Unless a mortgage is so recorded, or the property mortgaged is delivered to and retained by the mortgagee, it shall not be valid against any person, other than the parties thereto, except as provided in the following section.' The exception extends only to mortgage contracts of bottomry, or respondentia, to transfers, assignments, or hypothecations of ships or vessels, and to transfers in mortgage of goods at sea or abroad. Neither of these acts prescribes when the record must be made, or the possession be taken; but, when made, the instrument takes effect, as against third persons as well as between the parties, from the time of its execution, unless intervening rights have been obtained. In Mitchell et al. v. Black et al., 6 Gray, 100, it was ruled by the Supreme Court of Massachusetts that one who had taken bills of sale of merchandise from his debtor as a security for money advanced, and who had allowed the debtor to sell portions of the merchandise in the usual course of his business as if he were the owner thereof, might take possession of it at any time in order to secure his debt; and that such taking of possession, though at a time when the debtor was known by himself and the creditor to be insolvent, was effectual, notwithstanding the State Insolvent Law, which contained provisions very like those of the Bankrupt Act. The court held unqualifiedly that the bills of sale, absolute as they were in terms, though in fact intended only as a security, and though unattended by possession of the property, and though not placed upon record, vested a complete title in the creditor, subject only to be defeated by the discharge of the debt, or by some intervening right acquired before the possession was taken. This was a case of bills of sale, like the present, not a case of a technical mortgage. In speaking of the registration of mortgages, the court said, 'The time when the record shall be made is not specifically prescribed by the statute, though it must undoubtedly precede the possession by others subsequently acquiring an interest in the mortgaged property. To prevent it from passing to them, it will be sufficient that the record is made at any time before such possession is taken, though it be long after the execution of the mortgage.'

It should not be doubted, then, that the bill of sale of May 15, 1869, conveyed to Turpin all Bacheller's interest in the frame building; that it was effective for the purposes for which it was made; and, no other rights having intervened, that it was a valid security, to the extent of the value of the property, for the debt due Novelli & Co. on the 31st of July, 1869, when the mortgage impeached by the bill was made. The mortgage covered the same property. It embraced nothing more. It withdrew nothing from the control of the bankrupt, or from the reach of the bankrupt's creditors, that had not been withdrawn by the bill of sale. Giving the mortgage in lieu of the bill of sale, as was done, was, therefore, a mere exchange in the form of the security. In no sense can it be regarded as a new preference. The preference, if any, was obtained on the 15th of May, when the bill of sale was given, more than four months before the petition in bankruptcy was filed. It is too well settled to require discussion, that an exchange of securities within the four months is not a fraudulent preference within the meaning of the Bankrupt Law, even when the creditor and the debtor know that the latter is insolvent, if the security given up is a valid one when the exchange is made, and if it be undoubtedly of equal value with the security substituted for it. This was early decided with reference to the Massachusetts insolvent laws (Stevens v. Blanchard, 3 Cush. 169); and the same thing has been determined with reference to the Bankrupt Act. Cook v. Tullis, 18 Wall. 340; Clark v. Iselin, 21 id. 360; Watson v. Taylor, 21 id. 378; and Burnhisel v. Firman, 22 id. 170. The reason is, that the exchange takes nothing away from the other creditors. It is, therefore, not in conflict with the thirty-fifth section of the act, the purpose of which is to secure a ratable distribution of the property of a bankrupt owned by him at the time of his becoming bankrupt, and undiminished by any fraudulent preferences given within four months prior thereto.

It follows that the mortgage of July 31 was not prohibited by the Bankrupt Act when it was given, and that it was valid. Hence, as it was recorded on the seventeenth day of September, 1869, pursuant to the requisitions of the State law, before any rights of the assignees in bankruptcy accrued, it cannot be impeached by them.

It has been argued, however, on behalf of the assignees, that the bill of sale of May 15 was an insufficient consideration for the mortgage, because, as alleged, there was an agreement between Bacheller and Turpin that it should not be recorded, and should be kept secret. If the fact were as alleged, it is not perceived that it would be of any importance; for it is undeniable that the bill of sale rested on a valuable consideration,-to wit, the debt of $27,839 in gold, due to Novelli & Co.; and it is not denied that it gave to Turpin the right to take possession of the property described in it. It was, therefore, a valuable security, even if there was an agreement not to record it. If it be said failure to put it on record enabled the debtor to maintain a credit which he ought not to have enjoyed, the answer is that the Bankrupt Act was not intended to prevent false credits. Its purpose is ratable distribution. But the evidence does not justify the assertion that there was in fact any agreement that the bill of sale should not be recorded, or that possession should not be taken under it.

Upon all points, therefore, the case is with the appellees, and the decree of the Circuit Court must be affirmed.

title: Sawyer v. Turpin/Opinion of the Court


text: Talk:Sawyer v. Turpin/Opinion of the Court