A. an alien, sold to B. in New Orleans thirteen bonds of the
State of Louisiana, delivered them to him, and received from him
payment for them in full. Both parties contemplated the purchase
and delivery of valid and
Page 163 U. S. 386
lawful obligations of the state, and both regarded the bonds so
delivered as such valid and lawful obligations. It turned out that
the bonds were absolutely void, having never been lawfully put into
circulation. B. thereupon sued A. in the Circuit Court of the
United States for the Eastern District of Louisiana to recover the
purchase money paid for
them.
Held:
(1) That as the sale was a Louisiana contract, the rights and
obligations of the parties must be determined by the laws of that
state.
(2) That by the civil law, which prevails in Louisiana,
warranty, whilst not of the essence, is yet of the nature of the
contract of sale, and is implied in every such contract unless
there be a stipulation to the contrary.
(3) That by the rule of the common law both in England and in
the United States, the doctrine is universally recognized that
where commercial paper is sold without endorsement or without
express assumption of liability on the paper itself, the contract
of sale and the obligations which arise from it, as between vendor
and vendee are governed by the common law relating to the sale of
goods and chattels, and that the undoubted rule is that in such a
sale, the obligation of the vendor is not restricted to the mere
question of forgery
vel non, but depends upon whether he
has delivered that which he contracted to sell, this rule being
designated, in England, as a condition of the principal contract as
to the essence and substance of the thing agreed to be sold, and in
this country being generally termed an implied warranty of identity
of the thing sold.
(4) That whilst the civil law enforces in the contract of sale
generally the broadest obligation of warranty, it has so narrowed
it, when dealing with credits and incorporeal rights, as to confine
it to the title of the seller and to the existence of the credit
sold, and,
e converso, the common law, which restricts
warranty within a narrow compass, virtually imposes the same duty
by broadening the warranty as regards personal property so as to
impose the obligation on the vendor to deliver the thing sold as a
condition of the principal contract or by implication of warranty
as to the identity of the thing sold, and thus, by these processes
of reason, the two great systems, whilst apparently divergent in
principle, practically work substantially to the same salutary
conclusions.
(5) That B. is entitled to recover the sum so paid by him, with
interest from the time of judicial demand.
Plaintiffs below (plaintiffs in error here) commenced their
action to recover the sum of $8,383.75, with interest from judicial
demand, the facts averred in the petition being substantially as
follows: in February, 1889, the defendant sold to plaintiffs
thirteen bonds of the State of Louisiana, which
Page 163 U. S. 387
were described in and annexed to the petition; that the price
paid for these bonds was the amount sought to be recovered, and the
bonds were (we quote from the petition)
"sold and delivered to your petitioners as good, valid, and
legal bonds of the State of Louisiana. . . . Petitioners aver that
the said Richards delivered to them the above-described bonds . . .
as good and legal bonds of the State of Louisiana, and represented
them to be such; that petitioners received them as such, and paid
for them the market price for valid bonds, and held them for
several months without any knowledge or suspicion that the bonds
were not such as they were represented to be."
The petition then avers that after the sale and delivery of the
bonds, in September, 1889, it was discovered that they were not
valid, that they had never been lawfully issued by the state, and
were at time of the sale declared by the Constitution of the State
of Louisiana to be null and void, and that the state, through its
officials, treated them as wholly invalid. The prayer was, as
already stated, for a judgment for the amount which had been paid
as the purchase price of the bonds.
The answer of the defendant denied all the material allegations
contained in the petition except insofar as the same were admitted
or confessed. It averred that on the day of the sale, the 27th of
February, 1889, the defendant was the owner of the bonds described
in the petition; that they were payable to bearer, and were, on the
face thereof, bonds and obligations of the State of Louisiana, and
purporting to be issued under valid acts of the legislature,
sanctioned by the Constitution of the State of Louisiana; that when
sold to the plaintiff, the bonds were not mature according to their
terms, and were so drawn that the title thereof passed by delivery.
The answer, moreover, averred that the defendant acquired the bonds
long prior to the date of the sale to the plaintiffs,
"by purchase in open market, for a full and valuable
consideration in money, before the maturity thereof, in full and
exact good faith, and with no knowledge, suspicion, or belief of
any defect in the title or obligation of said bonds, or any
outstanding equity relating thereto, to change, modify, or
Page 163 U. S. 388
destroy the obligation as written and contained in said bonds
severally."
After admitting the sale, as alleged in the petition, for the
price therein stated, the answer declared
"that it is true that at the time of the delivering of said
bonds to the plaintiffs as aforesaid, this defendant did represent
the same to be good and legal obligations and bonds of the State of
Louisiana, and believed then, and still believes, that the same are
in all things valid and legal obligations of the state in the hands
of all good faith holders thereof, and that it is true, as stated
in said petition, that the plaintiffs received said bonds,
believing the same valid, and paid therefor the full market value
thereof, in open market of that day."
After making the admission "that, if the plaintiffs are entitled
to recover anything from this defendant, the amount of such is
correctly stated in the prayer of petition herein," the answer
concluded by the following:
"But, as to all other matters and obligations set forth and
contained in said petition, this defendant specially denies and
traverses the same, and avers that the said several bonds so by him
sold and delivered to the said plaintiffs are, each and all of
them, in the hands of said plaintiffs, good, valid, complete, and
existing obligations of the State of Louisiana to pay to the said
plaintiffs the sums of money named in said bonds at the time and on
the terms and conditions written in the bonds, and that there is
and has been no breach of warranty of the title thereof by this
defendant."
The cause was submitted to the court without the intervention of
a jury, the parties having previously entered into a stipulation in
writing, commencing with the following recital: "That the following
shall be taken as the statement of facts in this cause, and shall
stand and be taken as a special verdict in the cause." The facts
embraced in the stipulation relate, on the one hand, to the sale
and the title held by the defendant (the vendor) to the bonds at
the time of the sale, and the representations made when the sale
took place, and, on the other hand, to the nature and validity of
the bonds sold. As to the first of these questions, the stipulation
declares:
"1. The defendant, prior to the sale of the bonds to the
plaintiffs, as averred in the petition, was the
bona fide
holder
Page 163 U. S. 389
of each and all of the bonds described in said petition, having
acquired each and all of said bonds in open public market for full
market value, with no notice whatsoever of any alleged vice or
alleged illegality of the bonds, and the statements in that
respect, as set forth in defendant's answer herein, are true."
"2. The defendant so acquired said bonds long before he or the
public knew that it was charged by any person that said bonds were
illegally issued, and the impress of the seal of the state and the
signatures of the several officers of the state, whose names
appeared on said bonds, are each and all of them genuine and true,
and in no manner forgeries."
The facts stated in the stipulation, with reference to the
authority under which the bonds were issued, and their validity, we
summarize as follows:
Under two acts of Congress, the one passed in 1827, c. 97, 4
Stat. 244, the other in 1862, c. 130, 12 Stat. 503, the State of
Louisiana received from the United States public lands, to be
applied, as directed in the act first mentioned, to the use of such
seminary of learning as the legislature of the state might direct,
and in the other to the establishment and support of an
agricultural and mechanical college. From the sale of the lands
thus received by the state, sums of money came under its control.
These sums to the credit of the two educational purposes -- that
is, the seminary and the agricultural and mechanical college --
were invested in bonds of the State of Louisiana, which bonds were
held in trust by the state as the property of the two funds in
question.
In 1874, the State of Louisiana, by act No. 3 of the session of
1874, adopted a general funding plan for all its outstanding bonds
and for certain designated warrants. The law in question provided
for the issue of new bonds for the said bonds and debts at the rate
of sixty cents on the dollar of new bonds for every dollar of
fundable debt. The bonds thus provided to be issued were commonly
called "Consolidated Bonds," were negotiable in form, and were all,
without reference to the debt for which they were exchanged, of
like tenor except as to the serial numbers and amount of the bond,
and contained on
Page 163 U. S. 390
their face no indication whatever of the particular debt to
retire which they were issued. The statement of facts recites
"that the holder or purchaser of such consolidated bonds who
purchased the same in the market had no means of ascertaining for
what prior obligation of the state said bonds had been given in
exchange."
The execution of the act of 1874 was confided to a board called
the "Funding Board" or "Board of Liquidation." The funding law was
ratified by a constitutional amendment, which hence made that law a
part of the Constitution of the State of Louisiana.
The board of liquidation, at the request of the proper state
officers, issued consolidated bonds in exchange for the state bonds
held by the state as above stated, in trust for the seminary and
the agricultural and mechanical college funds. By this exchange,
the sum of money received by the state from the proceeds of the
land granted by Congress for the two purposes aforesaid was
curtailed forty percent, as the bonds issued to replace those
previously held were in amount equal to only sixty percent of the
retired bonds. The consolidated bonds which were thus issued to
retire those theretofore held for account of the two trust funds
went into the hands of the state treasurer for the benefit of the
respective funds, and these bonds bore on their face no indication
of the debt for which they were issued. Indeed, they were in form
like any other of the bonds issued under the act of 1874.
By the terms of an ordinance adopted by a constitutional
convention held in the State of Louisiana in 1879 (which ordinance
was approved by the same popular vote which ratified the
constitution), it was provided
"that the interest on the consolidated bonds of the state be
reduced from seven percentum to two percentum per annum for five
years, from the first of January, 1880, three percentum for fifteen
years, and four percentum per annum thereafter, the ordinance
moreover requiring that the bonds should be presented to the state
treasurer or an authorized agent of the state in order to have
stamped thereon interest reduced in accordance with the
ordinance."
The holders of the consolidated bonds were, however, given the
right, instead of accepting this reduction,
Page 163 U. S. 391
of applying to the state treasurer to obtain new bonds at the
rate of seventy-five cents on the dollar.
An act of the legislature of the State of Louisiana, passed to
execute this provision of the constitution, provided for the
printing of the new bonds, and for their issue, upon request, in
exchange for outstanding consolidated bonds at the reduced rate,
and further provided for the cancellation of the consolidated
bonds, when surrendered for exchange, by the following provision
found in section 8 of the act in question:
"That the governor shall furnish to the state treasurer a large
stamp having on it the words: 'Cancelled by the issue of new bonds
under the ordinance of the Constitution relative to state debt.'
And the treasurer shall stamp the same upon each consolidated bond
as soon as it is surrendered to him."
In order to make good the loss to the seminary fund which had
been produced by issuing consolidated bonds to that fund, the
second paragraph of article 233 of the Constitution of the State of
Louisiana provided as follows:
"The debt due by the state to the seminary fund is hereby
declared to be one hundred and thirty-six thousand dollars, being
the proceeds of sale of lands heretofore granted by the United
States to the state for the use of a seminary of learning, and said
amount shall be placed to the credit of said fund on the books of
the auditor and treasurer of the state as a perpetual loan, and the
state shall pay an annual interest of four percent on said amount
from January 1, 1880, for the use of said seminary of learning, and
the consolidated bonds of the state now held for use of said fund
shall be null and void after the 1st day of January, 1880, and the
General Assembly shall never make any provision for their payment,
and they shall be destroyed in such manner as the General Assembly
may direct."
A like provision as to the agricultural and mechanical college
fund was made by the third paragraph of the same article of the
Constitution. After fixing the amount of the fund and directing the
credit of the same on the books of the state and the payment of an
annual interest for the use of the agricultural and mechanical
college, the paragraph provides:
"The consolidated bonds of the state now held by the state
Page 163 U. S. 392
for the use of said fund shall be null and void after the 1st
day of January, 1880, and that the General Assembly shall never
make any provision for their payment, and they shall be destroyed
in such manner as the General Assembly may direct."
At the time of the adoption of the Constitution of 1879, the
consolidated bonds, which belonged to the seminary and to the
agricultural and mechanical college, were held by the state
treasurer for account of the funds in question, and they continued
to be so held by him certainly up to the end of June, 1882. In a
report made to the governor for the year 1878, Antoine Dubuclet,
State Treasurer of the State of Louisiana, stated that he had in
his possession, representing the investment of the agricultural and
mechanical college fund, consolidated bonds of the state, numbered
from 710 to 905, inclusive. On January 1, 1880, E. A. Burke, the
State Treasurer of Louisiana, in his official report to the
governor, made the following statement of the two funds:
Mechanical and Agricultural College
196 bonds, of $1,000 each, issued by
the State of Louisiana under Act No.
3 of 1879, Nos. 710 to 905, inclusive . . . . . . $196,000
2 bonds, of $500 each, issued by the
State of Louisiana under Act No. 3
of 1879, Nos. 42 and 43 . . . . . . . . . . . . . 200
--------
$196,200
The same report also stated the following as regards the
seminary fund:
Louisiana state University or Seminary Fund
164 bonds, of $500 each, issued by the
State of Louisiana under Act No. 3
of 1879, Nos. 1,902 to 2,065, inclusive . . . . . $ 82,000
2 bonds, of $500 each, issued by the
State of Louisiana under Act No. 3 of
1879, Nos. 4, 184 and 4, 185. . . . . . . . . . . 200
1 bond, of $1,000, consolidated debt city
of New Orleans, dated July 1, 1852,
No. 492 . . . . . . . . . . . . . . . . . . . . . 1,000
--------
$ 83,200
Page 163 U. S. 393
To the extent that these official publications afforded means of
ascertaining the particular consolidated bonds which had been
issued to and were held by the state treasurer for account of the
two trust funds in question, they necessarily qualify the previous
statement that there was nothing from which the public could
ascertain the particular consolidated bonds which had been issued
to and were held by these trust funds. The thirteen bonds covered
by the sale from which the controversy results were as follows:
six, bearing serial numbers between 710 to 905, were consolidated
bonds issued to the mechanical and agricultural college fund. Six,
bearing numbers between 1,902 and 2,065, were consolidated bonds
issued to the seminary fund. One of the bonds was a consolidated
bond issued under the funding act of 1874, which had been
surrendered to the state treasurer, E. A. Burke, for exchange for a
new bond at the rate of seventy-five cents on a dollar and reduced
interest. At the time of this surrender, the new bond at the
reduced rate was issued, and the bond in question was returned into
the treasury for cancellation under the provisions of the
constitution of the state. The whole of the thirteen bonds were
fraudulently issued by the state treasurer, who put them on the
market surreptitiously and without authority. The precise date at
which the bonds were acquired by the defendant below (plaintiff in
error here) is not mentioned in the statement of facts. They must
have been so acquired, however, after the end of June, 1882, and
before the 27th of February, 1889, since the statement of fact
discloses that the bonds were held by the state treasurer up to the
first-named date, and that they were sold to the plaintiffs on the
second-named date. E. A. Burke, the state treasurer, by whom these
acts were done, was treasurer from 1878 to 1888. The statement of
facts discloses that, during his term of office, legislative
committees examined his books, and made a favorable report, and
that at the end of his term of office, a committee also examined
them, with like result. The statement establishes that the public
were unaware that the treasurer had unlawfully issued the bonds in
question, and after their issue, until the discovery of that fact,
the coupons therefrom were regularly
Page 163 U. S. 394
paid by the state, including the coupons falling due on the 1st
day of July, 1889, and after that date, in consequence of the
discovery of the wrong, the state officers declined further to pay
the coupons of said bonds, and the auditor and treasurer of the
state, in September, 1889, gave notice to the world that the bonds
above described, and issued as above stated, were null and void,
and not legal debts of the state. It was further admitted that E.
A. Burke, who was treasurer of the state as above mentioned, and
who was charged with the custody of the bonds, had been indicted
for their conversion to his own use, and that he is now, and has
been since 1889, a fugitive from justice, and that the governor has
been authorized by the legislature to issue a reward for his
apprehension.
There was judgment for defendant, 46 F. 727, and the present
writ of error was prosecuted.
Page 163 U. S. 395
MR. JUSTICE WHITE, after stating the case, delivered the opinion
of the Court.
Page 163 U. S. 396
A strict construction of the pleadings would create the
impression that the sale out of which the controversy arose was
made upon an express oral warranty of the validity of the bonds
sold. As, however, the case was submitted upon an agreed statement
of facts which does not declare this to be a fact, and as both
parties, as well as the court below, assumed such not to be the
case, we will pretermit this aspect of the subject and consider the
case upon the theory that the only warranty, if any, is one to be
implied from the nature of the contract.
It is obvious from the facts just detailed that the thirteen
bonds which were sold by the defendant in error to the plaintiff in
error were at the time of the sale, absolutely void. The twelve
which originally belonged to the two college funds were in express
terms declared by the constitution of the state to be "null and
void," and the General Assembly was forbidden to make any provision
"for their payment," and they were ordered to be "destroyed in such
manner as the General Assembly may direct." This provision of the
constitution was in existence while the bonds were in the hands of
the state and before they were fraudulently and surreptitiously
sold. Indeed, these bonds were never lawfully put into circulation,
because, having been originally issued to represent trust funds
belonging to the state, they were held by officers of the state for
its account. The remaining bond was also void under the
constitution of the state, since it had been, under the express
terms to that instrument, surrendered to the state treasurer for
cancellation and another bond issued in its stead.
The bonds were undoubtedly sold by the defendant in error as
lawful obligations of the state. Both parties to the contract of
sale so considered. The pleadings and the statement of facts leave
no question on this subject. The controversy here presented is
wholly between the vendor and vendee as to the nature and extent of
the obligation of warranty resulting from the sale. We are
therefore not concerned with whether the defendant at the time of
the sale stood in the attitude of a third holder of negotiable
paper for value before maturity. Even if the were in such a
condition, and at the time of the sale
Page 163 U. S. 397
there was a constitutional provision which rendered the bonds
void and incapable of enforcement, it is clear that the delivery by
the vendor to the vendee of bonds stricken with constitutional
nullity was not the delivery of an existing obligation within the
meaning of the contract if it imported a warranty of the existence
of the bonds which it covered. The admission being that both
parties contemplated the delivery of valid obligations, bonds of
that character being outstanding, if warranty of existence was
implied by law, such purpose was not fulfilled by the delivery of a
mere equity, which one of the parties, the seller, claims was
existing in his behalf. Valid bonds, and not the mere claim by the
seller to enforce invalid bonds, was the object of the contract.
This is especially true in view of the fact, just referred to, that
at the date of the sale, the constitution of the state in express
terms forbade the enforcement of twelve of the bonds and
practically stipulated to the same effect as to the other.
The sale was a Louisiana contract. We must consequently
determine the rights and obligations of the parties by the law of
that state. By the civil law, which prevails in Louisiana,
warranty, while not of the essence, is yet of the nature, of the
contract of sale, and is therefore implied in every such contract
unless there be an express stipulation to the contrary.
Bayon
v. Vavasseur, 10 Martin 61;
Strawbridge v. Warfield,
4 La. 23. The following provisions on the subject of warranty are
found in the Louisiana Code: "The seller is bound to two principal
obligations, that of delivery and that of warranting the thing
which he sells." C.C. 2475.
"Although at the time of the sale no stipulations have been made
respecting the warranty, the seller is obliged, of course, to
warrant the buyer against the eviction suffered by him from the
totality or part of the thing sold and against the charges claimed
on such thing which were not declared at the time of the sale."
C.C. 2501.
"Even in case of stipulation of no warranty, the seller in case
of eviction is liable to a restitution of the price, unless the
buyer was aware at the time of the sale, of the danger of eviction,
and purchased at his risk and peril."
C.C. 2505.
Page 163 U. S. 398
These articles of the Louisiana Civil Code, which do but
formulate the principles of the civil law as to warranty, are not
wholly in accord with the doctrines of the common law. The
distinction between the two systems may be briefly summed up by
saying that the one, the civil law doctrine, finds its expression
in the maxim
caveat venditor, while the rule of the common
law is conveyed by the aphorism,
caveat emptor. It is
unnecessary to determine the scope, under the Louisiana law, of the
obligation of warranty as to property generally, since we are in
this case concerned only with its limit when arising from the sale
of a credit or other incorporeal right. The code of that state
contains express provisions defining the extent of the obligations
arising in such case. "He who sells a credit or an incorporeal
right, warrants its existence at the time of the transfer, though
no warranty be mentioned in the deed." C.C. 2646. "The seller does
not warrant the solvency of the debtor unless he has agreed so to
do." C.C. 2647. These provisions, instead of causing the obligation
of warranty in a sale of an incorporeal right to be broader than in
the case of tangible property, on the contrary make it
narrower.
As, then, under the law of Louisiana, the seller, under the
contract of sale, was obliged to warrant the existence of the thing
sold, the case of the defendant in error involves the practical
contention that a bond which at the time of the sale was declared
by the constitution of the state to be nonexisting is yet, for the
purposes of the sale, to be treated as an existing obligation. This
proposition is an obvious contradiction in terms, and, of course,
refutes itself. In
Knight v. Lanfear, 7 Rob. (La.) 172,
where a treasury note had been sold without recourse and it was
found that the note had been redeemed and cancelled, and thereafter
had been purloined and reissued, and the word "cancelled" erased,
the court held that the seller was bound to return the price.
In
Pugh v. Moore, 44 La.Ann. 211, plaintiff sought to
recover the purchase price of five bonds identical in character
with the bonds embraced in the sale here in controversy, four of
them being mechanical and agricultural
Page 163 U. S. 399
college bonds unlawfully issued under similar circumstances to
those here presented and one being a consolidated bond unlawfully
issued after its surrender in exchange for another bond. The
Supreme Court of Louisiana, after elaborate consideration, held,
for one among other reasons, that, the seller having been obligated
to the warranty of the existence of the bonds at the time of the
sale, and the bonds being void under the Constitution, he was
obliged to return the price. This implied obligation to warrant the
existence of the claim at the time of the sale has also been
frequently recognized in a collateral way by the court of last
resort of the State of Louisiana. Thus, where the owner of several
notes, secured by one mortgage, has transferred some of the notes,
and where, on a sale of the mortgaged property to pay the debt, the
proceeds have proven inadequate to pay all the notes, the settled
doctrine in Louisiana is that, in consequence of the obligation of
the seller to warrant the existence of the debt, he cannot take a
part of the proceeds of the mortgaged premises to pay the notes
retained by him, and thus frustrate the right of his transferee to
take the entire amount of the security to the extent necessary to
pay the notes transferred.
Salzman v. Creditors, 2 Rob.
(La.) 241.
The provision of the civil law of Louisiana imposing upon the
seller of a credit or incorporeal right the obligation of
warranting the existence of the debt at the time of the sale is not
original in the Code of that state, but was drawn in so many words
from the Code Napoleon, article 1693. It was not new in that Code,
and but expressed the settled rule of the Roman and ancient law.
L.L. 4, 5, 7, 10, 11, ff. de Hacredit vel act. vendit.; L. 68 sec.
1; L. 74, ff. de Evictionib.; L. 30, ff. de Pignor et Hyp. 13 Merl.
Repert. verbo "Garantie des Creances."
Where the provisions of the Louisiana Code and the Code Napoleon
are identical, the expositions of the civil law writers and the
adjudications of the French courts are persuasive as to the proper
construction of the Louisiana Code.
Viterbo v.
Friedlander, 120 U. S. 707,
120 U. S. 728;
Groves v. Sentell, 153 U. S. 465,
153 U. S.
478.
Page 163 U. S. 400
Marcade, in his Commentary on the Law of Sale, thus states the
rule:
"All sales of a credit subject the seller, unless there be a
stipulation to the contrary, to a guaranty of the existence and the
validity of the credit, as also of his right of ownership to it.
Article 1693 speaks, it is true, only of the guaranty of the
existence of the credit. But, as the credit existing today, if
subsequently declared to have been void, would in contemplation of
law have never existed, and also as it would be equally immaterial
for the buyer if the credit had a real existence, if that existence
was available only to some one else, it is evident that, by an
existing credit is to be understood one which validly exists as the
property of him who transfers it. The one who transfers, then, is
held to guaranty in three cases: 1. if at the time of the sale the
credit did not exist, either because it had never existed, or
because it was extinguished by compensation, by prescription or
otherwise; 2. if the credit should be declared to have been void of
the obligation be rescinded; 3. if it belonged to another person
than the transferor."
Marcade, De La Vente 335.
Troplong, in his learned treatise on the same subject, thus
expounds the doctrine:
"In the sale of a credit, as in that of every other object,
legal warranty is always understood. The vendor guaranties to the
vendee the existence of the credit at the moment of the transfer
although there should be no expression in the contract to that
effect. It is this which caused Ulpian to say:"
"When a credit it sold, Celsus writes in the ninth book of the
Digest, that the seller is not obliged to guaranty that the debtor
is solvent, but only that he is really a debtor, unless there has
been an express agreement between the parties on this subject."
"This guaranty is more strictly obligatory in the sale of a
credit than in other matters, because the right to a credit is
neither visible or palpable, as it is in the case of other movable
or immovable property. . . . And here let there be no
misunderstanding. Do not confound the credit with the title by
which it is established. Both law and reason exact that the credit
should exist at the time
Page 163 U. S. 401
of the sale, and it is not sufficient that a title should have
been delivered to the buyer. The title is not the credit. It can
materially subsist while the credit is extinguished. Thus, if the
credit had been annihilated by compensation or by prescription, it
would serve no purpose to deliver to the buyer a title which would
have nothing but the appearance of life. The buyer in such case
would have a right to avail himself of the warranty."
2 Troplong, De La Vente, sections 931, 932.
And Laurent, the latest and fullest commentator, says:
"Article 1693 says 'that the seller guaranties the existence of
the credit.' We must understand this word 'existence' in the sense
given to it by tradition. 'Whoever,' says Loyseau,"
"sells a debt or a rent, guaranties that it is due and lawfully
constituted, because, without distinction in all contracts of sale,
the seller is bound to three things by the very nature of the
contract, (1) that the thing exists; (2) that it belongs to him,
and (3) that it had not been engaged to another."
"Pothier resumes this doctrine by saying 'that the guaranty of a
right consists in the undertaking that the right sold is really due
to the vendor.' And the Code is yet more brief, since it speaks
only of the existence of the debt. We must therefore see what the
existence of the debt signifies according to the explanation of
Loyseau. Firstly, the vendor is held to guaranty that the debt
exists and subsists (
'soit et subsiste'). If the debt has
never existed because one of the conditions necessary for the
existence of the contract makes default, the vendor has sold
nothing. There is no object. He is held by the guaranty. This is
obvious. The same rule would apply if the debt had existed, but was
extinguished at the time of the transfer, because it is as if it
had never existed. Such would be the case of a credit which was
prescribed, or which had been extinguished by compensation. . . .
'It is necessary, in the second place, that the credit should be as
constituted,' says Loyseau. 'If it is stricken with a vice which
renders it void, the vendee has a right to the warranty.' This is
not doubtful, since the right is really annulled or rescinded,
because the judgment which has annulled
Page 163 U. S. 402
the credit destroys it as if it had never existed."
Laurent, vol. 24, Nos. 540-542.
The views thus expressed by the foregoing writers are
substantially concurred in by the French commentators. Duranton,
vol. 9, p. 183; Aubrey & Rau, vol. 5, p. 442. The courts of
France from an early day have applied the same principle.
In
Prat v. Dervieux the facts were these: Dervieux
transferred the amount of a claim against the government, which by
a subsequent liquidation of accounts was compensated by a claim
held by the government which resulted from another matter. The
Court of Cassation held that, under article 1693 of C.N., the
obligation to guaranty the existence of the claim at the time of
the sale compelled the seller to restore the price. Journal Du
Palais, 1807, p. 311.
In
Revel v. Lippman, a transfer was made of a claim
against the government, which was stated to be subject to a future
settlement of accounts. On the ultimate liquidation it was found
that nothing was due, and the Court of Cassation held that the
obligation therefore arose to return the price paid on the sale.
Journal du Palais, 1825, p. 963.
Of course, this warranty of existence, as established by the law
of Louisiana, and as found in France and other civil law countries,
does not govern a contract of sale when the object contemplated by
a sale is a thing whether existing or not existing; in other words,
where the parties buy, not an existing obligation, but the chance
of there being one. This is illustrated by
Knight v. Lanfear,
supra, where the court, per Martin, J., said, in speaking of
the thing sold:
"Whatever may be its value, if it be not in substance what the
purchaser believed he was receiving, his error must invalidate the
sale, because it prevented his consent;
non videtur qui errat,
consentire."
And, in speaking of a sale of doubtful or nonexisting things,
this great judge said:
"This claim was a fair object of sale, if its nature had been
disclosed, but that was concealed, and was probably unknown to
them, and what was offered for sale was something quite different
from this claim. "
Page 163 U. S. 403
The same distinction has been considered and applied by the
courts of France.
Dulac c. Clausel et Cie, Lyons, Nov. 30,
1849, Journal du Palais, 1, 1852, 32.
The defendant in error does not dispute that the foregoing
principles exist in and are controlling under the Louisiana law,
under the law of France, and also under the civil law generally
from which the law of Louisiana is derived. But, while thus
admitting, he denies that the contract of sale, involved in this
case was governed either by the Louisiana Code or the general
principles of the civil law. This proposition rests on the
contention that when the Civil Code of Louisiana was compiled, its
framers contemplated the simultaneous enactment of a Commercial
Code which was then drafted, and therefore omitted from the former
Code the necessary provisions to govern commercial contracts under
the hypothesis that the latter would also be enacted; that, in
consequence of the failure to adopt the Commercial Code, the courts
of Louisiana have held that cases arising under the law merchant
are governed by that law, in the absence of an express statutory
requirement to the contrary. From this premise the conclusion is
drawn that, as the contract in question involved the sale of
negotiable bonds, the obligation in their nature, and the sale are
commercial in their nature, and are controlled by the law merchant,
by which, it is asserted, the vendor in such a case, when selling
in good faith, warrants only that the signatures to the paper sold
are not forgeries. In a restricted sense, the part of the
proposition relating to the operation of the law merchant, in the
State of Louisiana, is well founded.
Harrod v. Lafayre, 12
Martin 29;
Wagner v. Kenner, 2 Rob. (La.) 122;
Barry
v. Insurance Co., 12 Martin 498;
McDonough v.
Millaudon, 5 La. 489. While this is true, the contention is
yet erroneous in a two-fold sense: first in presupposing that a
mere contract of sale of commercial paper, without recourse, is
governed as to the obligations between the vendor and vendee by the
law merchant; second in assuming that in such a sale, either under
the principles of the civil law or what the argument presumes to be
the law merchant, the only warranty resting
Page 163 U. S. 404
upon the vendor is that of the genuineness of the signatures to
the paper sold.
In
Pugh v. Moore, supra, the Supreme Court of Louisiana
expressly held that the contract of sale there considered (which
was similar to the one here involved) was governed and controlled
by the provisions of the Civil Code of Louisiana, and like rulings
were previously expressed in
Sun Mutual Insurance Co. v. Board
of Liquidation, 31 La.Ann. 176, and in
State v. Board of
Liquidators, 29 La.Ann. 77. A like rule is maintained in the
jurisprudence of France, where, in addition to the Code Napoleon or
Civil Code, there is a Commercial Code regulating mercantile
contracts. This is shown by the decision in a case where the vendor
transferred certain notes without recourse, and in consequence of
the forgery of some of them was held liable to return the price.
Laurent, vol. 24, p. 535, thus states the case:
"The Court of Cassation had applied the same principle to
commercial matters. The case is worthy of citation. Exchange
dealers sold a certain number of notes of the Austrian bank of 100
florins each. These notes having been presented to the Bank of
Vienna by the transferees, twenty-six among them were declared to
be forged. From this arose an action in warranty, which was
defeated in the first instance by the tribunal of the Seine. The
claim was recognized on appeal. When the case came before the Court
of Cassation, it was contended that the Paris court had made an
erroneous application of article 1693 in declaring an exchange
dealer a guarantor of the value of false bank notes which he had
delivered in good faith to a particular person by way of sale or
transfer. The guaranty, it was said, by those who transferred a
forged bank note, is not different in fact from that which is
incurred by a merchant, an exchange broker, or banker, who has,
without intention and without knowledge, negotiated in good faith
commercial effects, such as bills of exchange or notes to order,
upon which there are false signatures. The guaranty in such cases
is regulated by the commercial law. And it results from articles
140 and 187 of the Commercial Code that he who had not endorsed,
but
Page 163 U. S. 405
who has delivered from hand to hand, as he has received them,
commercial paper is subject to no guaranty, because the absence of
his signature indicates that he had no intention to become the
guarantor of the sale, and that the buyer has dealt on the faith of
the apparent title which he has accepted, and as a consequence he
has a right to no guaranty. But the Court of Cassation rejected
this contention and decided that the guaranty is of the nature of
the sale, and that it would be contrary to both law and equity to
hold that the delivery of a forged bank bill, although made in good
faith, did not give rise to recovery on the part of him who had
paid the price."
None of the authorities referred to by counsel for defendant in
error sustains the proposition heretofore stated with reference to
the supposed existence and applicability of the law merchant and
the results which it is claimed flow therefrom. On the contrary,
both in England and in the United States the doctrine is
universally recognized that where commercial paper is sold without
endorsement or without express assumption of liability on the paper
itself, the contract of sale, and the obligations which arise from
it, as between vendor and vendee, are governed by the common law
relating to the sale of goods and chattels. So also the undoubted
rule is that in such a sale, the obligation of the vendor is not
restricted to the mere question of forgery
vel non, but
depends upon whether he has delivered that which he contracted to
sell, this rule being designated in England as a condition of the
principal contract as to the essence and substance of the thing
agreed to be sold, and in this country being generally termed an
implied warranty of identity of the thing sold.
Benjamin on Sales (4th Am. ed.), sec. 600, says:
"When the vendor sells an article by a particular description,
it is a condition precedent to his right of action [to recover the
price agreed to be paid by the vendee] that the thing which he
offers to deliver, or has delivered, should answer the
description."
And, in sec. 607, the author says:
"Under this head may also properly be included the class of
cases in which it has been held that the vendor who sells
Page 163 U. S. 406
bills of exchange, notes, shares, certificates, and other
securities is bound, not by the collateral contract of warranty,
but by the principal contract itself, to deliver, as a condition
precedent, that which is genuine, not that which is false,
counterfeit, or not marketable by the name or denomination used in
describing it."
It is upon this general principle of the common law, not upon
any peculiar doctrine of commercial law, that the cases in the
common law courts proceed. Thus, in
Jones v. Ryde, 5
Taunt. 488 (1814), where an action was brought to recover the
damages sustained by a discount of an altered bill, Gibbs, C.J.,
said (p. 492):
"Both parties were mistaken in the view they had of this navy
bill, the one in representing it to be a navy bill of this
description, the other in taking it to be such. Upon its afterwards
turning out that this bill was to a certain extent a forgery, we
think he who took the money ought to refund it to the extent to
which the bill is invalid. The ground of the defendant's resistance
is that the bill is not endorsed, and that whensoever instruments
are transferred without endorsement, the negotiator professes not
to be answerable for their validity. This question was much mooted
in
Fenn v. Harrison, 3 T.R. 757, and it is true to a
certain extent,
viz., that in the case of a bill, note, or
other instrument of the like nature, which passes by endorsement,
if he who negotiates it does not endorse it, he does not subject
himself to that responsibility which the endorsement would bring on
him,
viz., to an action to be brought against him as an
endorser; but his declining to endorse the bill does not rid him of
that responsibility which attaches on him for putting off an
instrument as of a certain description which turns out not to be
such as he represents it. The defendant has, in the present case,
put off this instrument as a navy bill of a certain description. It
turns out not to be a navy bill of that amount, and therefore the
money must be recovered back."
Chambre, J., said (p. 494):
"I really cannot entertain a doubt on the question. If the
defendant's doctrine could prevail it would very materially
Page 163 U. S. 407
impair the credit of these instruments. They are not in practice
endorsed, or not beyond the first taker. A man takes this security
looking to the persons who are to pay it. He takes it on the
presumption that it is a navy bill. It was once a navy bill, but
from the moment wherein it was altered, it became of no value
whatsoever. It is unnecessary to go into the authorities."
In
Wilkinson v. Johnson, 3 B. & C. 428 (1824), one
who had taken up a bill for honor subsequently discovered that the
signatures were forgeries. He was held entitled to recover upon the
general doctrine of the common law relating to contracts.
In
Young v. Cole, 3 Bing.N.C. 724 (1827), recovery was
sought for the amount of certain Guatemala bonds which had been
sold for account of the defendant, and which, after the sale, were
discovered not to be a marketable commodity on the stock exchange,
because not stamped as required by an advertised notice of the
government of Guatemala, given prior to the sale, but subsequent to
the time when the bonds had been issued and put into circulation.
The claim of the plaintiff was adjudged to be well founded,
although there was no question of forgery or alteration, upon the
common law principle already stated.
Lament v. Heath, 15 M. & W. 486 (1846), was an
action to recover from the defendant the amount paid him for
certain Kentish Coast Railway scrip which, after delivery to the
plaintiff, turned out to have been issued without authority. The
defendant was a stockbroker, and was employed by the plaintiff to
purchase the scrip. A verdict having been returned for the
plaintiff, a new trial was granted on the ground that, as the proof
showed that the article purchased was the only article known in the
market as "Kentish Coast Railway Scrip," the question for the jury
was not whether the scrip was genuine scrip, but whether it was the
identical thing which the plaintiff contracted to buy. This ruling
therefore accords with the principles of the former cases, and
illustrates the distinction between an implied condition of the
sale as the essence of the thing sold, and the ascertainment of
whether the contract
Page 163 U. S. 408
of sale in the purview of the parties embraced a particular
object, just as it appeared to be, whether existing or not, whether
valid or invalid. In this respect, this case is entirely in harmony
with the opinion of Martin, J., heretofore referred to. It,
moreover, very pointedly refutes the contention that a particular
state of the law of warranty applies to the transaction of a sale
and purchase of negotiable paper without recourse, since the scrip
in question was nonnegotiable.
In
Gompertz v. Bartlett, 2 El. & Bl. 849 (1853), an
unstamped bill of exchange endorsed in blank, purporting to be a
foreign bill, was sold, without recourse, by the holder, who was
not a party to the bill. It proved to have been drawn in England,
and was in consequence invalid for want of a stamp, and could not
be enforced against the parties. The vendor and purchaser at the
time of sale were both alike ignorant of this defect. It was held
that the purchaser was entitled to recover back the price from the
vendor on the ground that the article sold as a foreign bill,
although not forged or altered, did not answer the description by
which it was sold. Counsel for defendant contended that
"as the bill was sold without recourse, nothing turned on the
peculiar character of a bill of exchange, and the case was the same
as if the sale had been of any other specific chattel, sold without
a warranty, when the maxim,
caveat emptor applies."
Lord Campbell, C.J., replied (p. 850):
"If the purchaser receives what answers the description of the
article sold, he cannot, in the absence of a warranty, recover for
a defect in its quality. In such a case,
caveat emptor.
But it will be put against you here that you sold a foreign bill,
and that the thing delivered was not a foreign bill at all."
The counsel for plaintiff stated his case in the following
words, which, in view of the language previously quoted from the
defendant's counsel, make clear the fact that it was not disputed
that the transaction was governed by the common law applicable to
sales:
"The plaintiff's proposition is that if a thing was sold as
being an article of a specific description, and if, from a latent
defect unknown to both parties, it was in substance not an article
of that specific description, but an article of no value,
Page 163 U. S. 409
the purchaser is entitled to recover back the price he has paid
for it, not on the ground of a breach of warranty, but because he
has paid for the thing sold, and what he has received is not the
thing sold, but of a different kind."
In
Gurney v. Womersley, 4 El. & Bl. 133 (1854), an
action was brought by a firm of bill brokers to recover the amount
paid on the discount of a bill transferred by mere delivery, where
the signatures, with one exception, were forgeries. It was held
that, though there was no endorsement or guaranty, and therefore no
warranty of the solvency of the parties to the bill, there was a
total failure of consideration, and plaintiffs were entitled to
recover back the money paid for the bill from the party with whom
the transaction was had. Coleridge, J., observed (p. 141):
"The vendor of a specific chattel, it is not disputed, is
responsible if the article be not a genuine article of that kind of
which the seller represents it to be. And the question raised
really is what is the extent of the want of genuineness for which
he is responsible? Without laying down the limits, it is clear to
me that this case fell much within them. In effect, here, the
defendants said to the plaintiffs, 'Will you take, without recourse
to us, this bill which purports to bear the acceptance of P. &
C. Van Notten?' By doing so, they represented it to be their
acceptance, as it purported to be, and sold it, as answering that
description."
Wightman, J., said (p. 142):
"In considering whether a defect in an article renders it not an
article of the kind of which it was represented to be on the sale,
or is merely a breach of a collateral warranty, much must depend
upon the special circumstances and terms of the rule. Here, I think
that the bill, not being an acceptance of P. & C. Van Notten,
fails in what was the substance of the description by which it was
held."
Lord Campbell, C.J., said (p. 143):
"I am of opinion that, though the defendants, by not endorsing
or guarantying the bill, preserved themselves from warranting the
solvency of any of the parties, yet they did undertake that the
instrument was what it purported to be.
Page 163 U. S. 410
It is not disputed that in fact the discount of their bill by
the plaintiffs was solely on the faith of its being an acceptance
of P. & C. Van Notten, which it was not; and, in consequence of
its being so, it was valueless. The possibility of recourse against
the estate of Anderson, a convict and a bankrupt, did not prevent
there being a total failure of consideration."
The cases in the American courts, while declaring the same rule
as that recognized in England, place it upon a theoretical basis
differing somewhat from that announced by the English courts --
that is, instead of pronouncing it a condition of the principal
contract that the thing sold, in its essence and substance, must be
delivered, declare that there is an implied warranty of identity,
or, in other words, that the thing sold is what it purports to be.
Daniel, in his treatise on Negotiable Paper (§ 733
a),
calls attention to the different definitions given to the same
obligation by the American and English courts, and indicates the
view that the form of expression used by Benjamin in the passage
already quoted is the more accurate one.
Aside, however, from the mere garb in which the thought is
clothed, the American and English courts are in full accord. This
is shown by the case of
Utley v. Donaldson, 94 U. S.
29,
94 U. S. 45,
where Benjamin on Sales is approvingly referred to, as also
Flynn v. Allen, 57 Penn.St. 482, and
Webb v.
Odell, 49 N.Y. 583, both of which cases, as, also, the line of
American adjudications which enforce the same doctrine, are noted
in the margin of this opinion.
*
Page 163 U. S. 411
Many of the controversies covered by the cases referred to arose
in consequence of the sale of a forged note, but the principles
upon which all the authorities proceed do not confine the right of
recovery to such a case, but rest upon the general doctrine to
which we have already referred. In fact, no case is reported
wherein the obligation, as between vendor and vendee, in the sale
of negotiable paper, is claimed to be controlled other than by the
general principles of the common law, though in three cases --
Baxter v. Duren, 29 Me. 140,
Fisher v. Rieman, 12
Md. 497, and
Ellis v. Wild, 6 Mass. 321 -- the deduction
was made, from the law respecting the sale of goods, that on a sale
of negotiable paper, there was, under the principle of
caveat
emptor, no implied warranty even that the signatures to the
paper were not forged.
Ellis v. Wild was, however,
expressly overruled in
Merriam v. Wolcott, 3 Allen 258,
260, and from the allusions to
Baxter v. Duren contained
in the later Maine decisions previously noted in the margin, it is
doubtful whether the early ruling in Maine would now be followed
there. The three cases referred to, it is needless to say, are
practically disregarded by the entire current of American and
English authority, and stand alone. They are disavowed by the
defendant in error here, since his argument admits that there is a
warranty of the genuineness of the signatures, to an apparent
negotiable instrument, thereby conceding the subsistence of the
obligation to warrant the existence or identity of the thing sold,
and yet seeking to avoid its consequences by limiting it to
nonexistence resulting from a particular nullity. There is an
exceptional case,
Littauer v. Goldman, 72 N.Y. 506 (1878),
which holds that the common law obligation as to the implied
warranty of identity in the thing sold, in the case of commercial
paper extends only to the genuineness of the instrument. The case
was one involving the nullity of a usurious note, and, if correctly
decided, would be authority for the proposition that there was a
peculiar species of warranty in the sale of commercial paper,
Page 163 U. S. 412
differing from all others -- in other words, that there was a
law merchant of warranty where there was no commercial contract.
The opinion in this case illustrates the same contradictory
position presented here by the argument of the defendant in error,
to which we have just called attention -- that is, that it admits
the common law rule and then denies its essential result by
eliminating conditions of nonexistence which are necessarily
embraced by it. It follows that this New York decision leads
logically to the view expressed in the Maine and Maryland cases
just referred to, for either the principle of warranty of identity
must be accepted or rejected. It cannot be accepted and its
legitimate and inevitable results be denied. The rule there
announced was in conflict with previous decisions in New York, and
the decision is strongly criticized by the Court of Errors and
Appeals of New Jersey in
Wood v. Sheldon, 42 N.J.L. 421,
425.
In
Giffert v. West, 33 Wis. 617 (1873), where a note
was sold which was void for usury, the vendee was allowed to
recover the consideration paid by him, and his right to do so was
based upon the general doctrine that one making a sale is bound, as
a condition of the principal contract, to an implied warranty of
the existence of the thing sold.
In
Hannum v. Richardson, 48 Vt. 508 (1875), a very
clear statement of the doctrine is found. There, an endorser sold a
negotiable promissory note without recourse. The note had been
given for intoxicating liquors sold in Vermont in violation of law,
and on that account was void at its inception. It was claimed that
the defendant knew of the invalidity of the note when he
transferred it. The court, however, held that knowledge on the part
of the seller was not necessary to fix his liability, saying (p.
510):
"By endorsing the note 'without recourse,' the defendant refused
to assume the responsibility and liability which the law attaches
to an unqualified endorsement, so that, in respect to such
liability, it may perhaps be regarded as standing without an
endorsement. If it be so regarded, then in what position do these
parties stand in respect to the transaction? The principle is well
settled that where personal property of any
Page 163 U. S. 413
kind is sold, there is, on the part of the seller, an implied
warranty that he has title to the property, and that it is what it
purports to be, and is that for which it was sold, as understood by
the parties at the time, and in such case, knowledge on the part of
the seller is not necessary to his liability."
On p. 511 the court further observed:
"The note in question was not a note. It was not what it
imported to be, or what it was sold and purchased for. It is of no
more effect than if it had been a blank piece of paper for which
the plaintiff had paid his fifty dollars. In this view of the case,
we think the defendant is liable upon a warranty that the thing
sold was a valid note of hand."
Nor is there any foundation for the assertion that
Otis v.
Cullum, 92 U. S. 447, and
the cases of
Orleans v. Platt, 99 U. S.
676, and
Aetna Life Ins. Co. v. Middleport,
124 U. S. 534,
both of which cite
Otis v. Cullum, support the doctrine
that a sale of commercial paper without recourse is not, as between
the vendor and vendee, governed by the ordinary rule of the common
law. On the contrary, that case expressly rested its conclusion on
the decision in
Lament v. Heath, supra, which latter case,
as we have seen, while enforcing the principles of the common law,
considered that, under the particular facts there presented, it was
a question for the jury to determine whether the scrip delivered
was the kind of scrip which the defendant had ordered purchased.
That case not only, as has already been stated, concerned
nonnegotiable paper, but its decision involved no question of the
scope of the warranty, but solely what was the thing bought. Nor
does the case of
Otis v. Cullum justify the assumption
that this Court laid down the rule that a mere sale of commercial
paper, as between vendor and vendee, when the sale was made without
recourse, created some peculiar and exceptional warranty to be
considered in this particular as the law merchant. It is true that
in expressing the general doctrine, Mr. Justice Swayne said:
"The seller is liable
ex delicto for bad faith, and
ex contractu there is an implied warranty on his part that
they belong to him, and are not forgeries. Where there is no
express stipulation, there is no liability beyond this."
But in
Page 163 U. S. 414
using this language as to the extent of the warranty, the mind
was directed to that form of nonexistence which more commonly
obtains, and the expression is a mere illustration of the rule
de eo quod plerumque fit. If this were a case where a
vendee claimed to recover back the price paid by him on a purchase
of negotiable securities, which pass by delivery from hand to hand,
on the averment that, after the sale, it had developed that they
were not valid, although not forgeries, because the law under which
they had been issued was constitutionally void or
ultra
vires, the claim of implied warranty of existence would be
without merit for the reason that such a state of fact would
present a case of a sale of securities, whether valid or invalid,
hence engendering no implication of warranty of existence. Under
the state of facts thus supposed, the purpose of the parties to
make a contract of that nature would legally result from the fact
that they were both necessarily equally chargeable with notice of
want of power, and therefore would be both presumed to have acted
with reference to such knowledge. This is
Otis v. Cullum.
But it is not the case at bar, since it is here admitted that both
parties, in entering into the contract of sale, contemplated valid
securities, of which there were many outstanding, and those
delivered were void not because of a want of power to enact the law
under which they were issued or because they were
ultra
vires for some other legal cause, but because they were
stricken with nullity by a constitutional provision adopted after
the act authorizing the issue of the securities, and where nothing
on the face of the bonds indicated that they were illegal. The
distinction pointed out by the foregoing statement not only
illustrates the correctness of the decision in
Otis v.
Cullum, but also demonstrates the error of attempting to
extend it to the state of facts presented in the case under
consideration. Indeed, in examining and applying
Otis v.
Cullum, the fact that it does not control a case like this has
been recognized. Daniel, Neg.Inst. § 734
a;
Rogers v.
Walsh, supra; Cincinnati, New Orleans &c. Railway v. Citizens'
National Bank, 24 Week.Law Bul. 198, 211.
The foregoing analysis of the principles and review of the
Page 163 U. S. 415
authorities governing the law of sale of negotiable paper,
transferred without recourse as between vendor and vendee, clearly
demonstrates the unsoundness of the positions upon which the
defendant in error relies, since it affirmatively establishes that
there is no peculiar warranty in a sale of commercial paper and
that the reasoning by which it is attempted to prove its existence
is a mere misconception of the principles of the common law
relating to the sale of goods and chattels.
In passing, however, it is worthy of note that while the civil
law enforces in the contract of sale generally the broadest
obligation of warranty, it has so narrowed it, when dealing with
credits and incorporeal rights, as to confine it to the title of
the seller and to the existence of the credit sold, and,
e
converso, the common law, which restricts warranty within a
narrow compass, virtually imposes the same duty by broadening the
warranty as regards personal property so as to impose the
obligation on the vendor to deliver the thing sold as a condition
of the principal contract, or by implication of warranty as to the
identity of the thing sold. By these processes of reason, the two
great systems, while apparently divergent in principle, practically
work substantially to the same salutary conclusions.
There are many questions discussed in the brief of counsel which
we do not notice, and which we content ourselves with saying are
without merit. The views above stated are controlling and decisive
of the case, and lead necessarily to the reversal of the judgment.
As the case was heard upon a stipulation waiving a jury, and upon
an agreed statement of facts, it is our duty, in reversing, to
direct that the proper judgment be entered below.
Fort Scott v.
Hickman, 112 U. S. 150, and
cases there cited.
It follows that
The judgment of the circuit court must be reversed and the
case be remanded with directions to enter judgment for plaintiffs
for $8,383.75, with interest from judicial demand, and costs, and
it is so ordered.
*
Thrall v. Newell, 19 Vt. 202, 206 (1847);
Lyons
v. Miller, 6 Grat. 427, 439 (1849);
Aldrich v.
Jackson, 5 R.I. 218 (1858);
Barton v. Trent, 3 Head
167, 169 (1859);
Bank v. Jarvis, 20 N.Y. 226, 229 (1859);
Merriam v. Wolcott, 3 Allen 258 (1861);
Bell v.
Cafferty, 21 Ind. 411, 413 (1863);
Swanzey v. Parker,
50 Penn.St. 441, 450 (1865);
Morrison v. Lovell, 4 W.Va.
346, 350;
Webb v. Odell, 49 N.Y. 583 (1872);
Worthington v. Cowles, 112 Mass. 30 (1873);
Snyder v.
Reno, 38 Ia. 329, 333 (1874);
Giffert v. West, 33
Wis. 617 (1873); 37 Wis. 115, 117 (1875);
Hannum v.
Richardson, 48 Vt. 508 (1875);
Hussey v. Sibley, 66
Me.192 (1876);
Hurst v. Chambers, 12 Bush 155, 158 (1876);
Allen v. Clark, 49 Vt. 390 (1877);
Bankhead v.
Owen, 60 Ala. 457, 461 (1877);
Smith v. McNair, 19
Kan. 330 (1877);
Challiss v. McCrum, 22 Kan. 157, 161
(1879);
Rogers v. Walsh, 12 Neb. 28 (1881);
Milliken
v. Chapman, 75 Me. 306, 317 (1883);
Daskam v. Ullman,
74 Wis. 474, 476 (1889);
Palmer v. Courtney, 32 Neb. 773
(1891);
Ware v. McCormack, 28 S.W. 157 (Ky., 1894);
Brown v. Ames, 61 N.W. 448 (Minn., 1894).
