1. A note payable to bearer, though overdue and dishonored,
passes by delivery the legal title to the holder, subject to such
equities as may be asserted by reason of its dishonor.
2. Anyone disputing the title of the holder of such paper takes
the burden of establishing, by sufficient evidence, the facts
necessary to defeat it.
3. There is no competent evidence in this chancery suit that the
bonds in controversy, which were issued by the United States to the
State of Texas, though overdue when they passed from the treasury
of the state, were issued by the state or received by the person to
whom they were delivered for any treasonable or other unlawful
purpose.
4. The absence of the endorsement of the governor of the state
on the bonds does not raise a presumption of such unlawful purpose
under the circumstances of this case.
5. The cases of
Texas v. White &
Chiles, 7 Wall. 718,
Same v.
Hardenberg, 10 Wall. 68, and
Same
v. Huntington, 16 Wall. 402, considered and their
true result ascertained and applied to the present case.
The United States, on the 1st of January, 1851, issued to the
State of Texas for the sale of a portion of her northwestern
Page 87 U. S. 73
territory, five thousand coupon bonds of $1,000 each, numbered
successively from No. 1 to No. 5,000, and "redeemable after the
31st day of December, 1864." They were made on their face all
payable "to bearer," and declared to be transferable on delivery.
The coupons, which extended to December 31, 1864, and no farther,
were equally payable "to bearer." These bonds were known as Texas
indemnity bonds.
On the 16th of December, 1851, in anticipation of the bonds'
being delivered to it, the State of Texas passed an act authorizing
their governor to receive them from the United States,
"And when received to deposit them in the Treasury of the State
of Texas,
to be disposed of as may be provided by law,
provided that no bond issued as aforesaid, as a portion of the
said $5,000,000 of stock, payable to bearer, shall be available in
the hands of any holders
until the same shall have been
endorsed in the City of Austin by the Governor of the State of
Texas."
After this Act of December 16, 1851, and between that day and
the 11th of February, 1860, the State of Texas passed thirteen
different acts providing for the sale or disposal of the whole
$5,000,000 of these bonds; for lawful state purposes, as
ex
gr., paying the public debt of the state; the erection of a
state capitol; to establish a system of schools &c., the
construction of railroads, the terms of none of these acts
requiring an endorsement of the bonds by the governor, as required
in the above-quoted act of December 16, 1851, nor any of them
designating by numbers on them the particular bonds to be
appropriated to the particular objects authorized. Subsequently to
this again, the rebellion having broken out, and the state having
gone over to the rebel side, and there being a large number of the
bonds still undisposed of in the state treasury, the Legislature of
Texas, by an Act of January 11, 1862, repealed the Act of December
16, 1851 (making an endorsement necessary), and the then
authorities of Texas, through its "military board," in January,
1865, sold or transferred, as was said, and as in former cases in
this Court was supposed
Page 87 U. S. 74
to be shown, certain of the bonds, but not all of them, to two
persons, White & Chiles, for the purpose of aiding the
rebellion. In those cases -- the cases, namely, of
Texas v.
White & Chiles, [
Footnote
1] and
Texas v. Hardenberg, [
Footnote 2] -- it was determined that as against the
true -- that is to say the loyal -- State of Texas (particular
citizens of which had stopped payment of them at the federal
Treasury), no title had passed to bonds which had been thus
transferred, and that notwithstanding the transfer, the
reconstructed state might reclaim the bonds or their proceeds.
How many bonds were transferred to White & Chiles or what
were their exact numbers was not well ascertained, but as already
said, it was well known that the bonds transferred to White &
Chiles did not comprise the whole issue for $5,000,000, and that a
considerable number of them had been transferred under one or other
of the thirteen enactments already mentioned. [
Footnote 3] In particular, it appeared that one
hundred and forty-eight of them (numbered from 4694 to 4842
inclusively) had been transferred, in pursuance of a statute, to
the Southern Pacific Railroad Company, some of which the company
paid out to contractors for work done on the road. These bonds were
not endorsed by the governor.
In this state of things, the State of Texas brought her
complaint in chancery in the court below against the First National
Bank of Washington, W. S. Huntington, its cashier, and others, for
discovery and relief in regard to certain of these Texas indemnity
bonds, of which the bill alleged that the state had been
dispossessed by fraud or treasonable practices. The number now
claimed was nineteen, thus numbered:
"Numbers 4226, 4227, 4229, 4703, 4705, 4706, 4748, 4813, 4825,
4843, 4844, 4912, 4927, 4928, 4929, 4960, 4961, 4962, 4963. "
Page 87 U. S. 75
The bill alleged that these indemnity bonds were each for the
sum of $1,000, dated January 1, 1851, redeemable after December 31,
1864, and that those in controversy were received and remained in
the Treasury of the State of Texas until after the period fixed for
redemption. It was alleged that in the year 1865, the
insurrectionary power which had usurped control of the state made a
contract with White & Chiles by which from one hundred and
forty-five to one hundred and sixty-two of the bonds were delivered
to them, in consideration of which they agreed to furnish means to
carry on the war against the United States in which that state was
then engaged, with others, under the name of the Confederate States
of America.
It was further alleged that these bonds, then overdue,
afterwards came to the hands of the defendants, who purchased them
with full notice of the purpose for which they had been delivered
to White & Chiles.
It was also alleged that said bonds were never endorsed by the
Governor of the State of Texas in such manner as by the law of
Texas was required, by reason of which no legal title to the same
passed from the state or was vested in the parties to whom they
were delivered. The defendants were required to answer under oath,
and a decree against them in regard to the bonds left with Taylor
or for other relief was prayed.
The bank and Huntington answered and admitted the purchase of
some of the Texas indemnity bonds and having others as agents for
the owners of them. They gave a list of all these, specifying those
held in their own right and those held as agents. They averred that
the bonds had all been paid to them in full by the Treasury of the
United States before this suit was commenced, and that those owned
by themselves were purchased for value (namely, ninety-eight cents
to the dollar), without notice of any of the matters set up in the
complainant's bill.
They denied all knowledge on their part that the bonds claimed
by them were part of the bonds issued to Chiles & White or had
been issued in aid of the rebellion, and
Page 87 U. S. 76
they denied also the facts that they were so issued. And they
denied the statements of the bill in these matters. A general
replication was filed and testimony taken.
To make out its case, the State of Texas adduced the testimony
of Mr. R. W. Taylor, the Comptroller of the Treasury of the United
States, and of Mr. G. W. Paschall, one of the attorneys for the
complainant. Mr. Taylor's deposition was a long one. What follows
are extracts which bear principally on the case. He is under
examination by the complainant's counsel.
"
Question. I see it stated that these bonds came
through the hands of J. P. White. Do your investigations enable you
to say they were part of the bonds received by White &
Chiles?"
"
Answer. I do not know anything more about that than
what is to be gathered from the
general appearance of the
transaction. There was nothing at that time known here about the
White & Chiles purchase; at least I had heard nothing of
it."
"
Question. But
from this general appearance of
which you speak, what is your opinion as to their having been part
of the same bonds?"
"
Answer. From all the circumstances,
my opinion
is those were of the White & Chiles bonds.
That is
only an opinion, however."
"
CROSS-EXAMINED"
"
Question. Do you know of your own knowledge that White
& Chiles, or either of them, ever saw one of these bonds?"
"
Answer. I knew it only from the papers on file in the
department -- that is,
from my opinion of what those papers
show."
"
Question. It would be a very tedious process (and I
presume you could not do it) to furnish the various papers from
which you make up your opinion?"
"
Answer. They are too numerous for me to present now,
and I might add that one would have to study them very carefully
and make his calculations as to the different bonds."
"
Question. Would you not have to do so by ascertaining
the entire number of bonds and then tracing those bonds into the
hands of persons other than White & Chiles; would not your
opinion be based upon the conclusion that inasmuch as so many bonds
were in the hands of other people, it followed, as a necessary
Page 87 U. S. 77
result that if White & Chiles had any, they must be
those?"
"
Answer. It would be by taking the seven hundred and
eighty-two bonds that were not endorsed and tracing them back, by
the evidence, into the hands of those parties who held them at
different times and ascertaining in some instances the particular
numbers that were known to be in the hands of particular parties
before the transaction between White & Chiles and the military
board, and taking others again that came from the State of Texas
and then drawing my conclusions as to what were White & Chiles
bonds."
Mr. Paschall said in reply to questions in chief and on
cross-examination:
"I was employed by Governor Pease to prosecute this suit and
caused it to be instituted in 1868, and judging from a careful
examination made in Texas and in the Treasury Department here, I
feel confident that the bonds redeemed for the bank, described by
Mr. Taylor, were part of the bonds which passed through the hands
of White & Chiles.
I judge this from circumstances which he
has stated. . . . I did,
satisfactorily to myself,
identify those paid to Huntington &c., because I found an
affidavit of a brother of White attached to them, and was thus able
to trace them as having come through White. I
inferred so
from the fact that they passed through the hands of White's
brother, and through the hands of a Nashville man named Douglass.
I thought I saw clearly that they appertained to that
class, and from those numbers, knowing that the authorities of
Texas had taken off the bonds, consecutively, from No. 1 of the 782
I knew
about where these numbers would begin, but
I
was at a loss about the precise numbers, because I wanted to
describe them in Texas, and I could not certainly identify
them."
Such, in the main, was the complainant's case. As this Court
held that it was in itself insufficient, the evidence by the other
side is but adverted to. That evidence tended to show that in the
case of all the bonds the cashier of the bank had gone, prior to
purchasing them, to the Treasury of the United States, and had made
full inquiry about them, that the Comptroller of the Treasury had
advised that
bona fide holders of such bonds should be
paid; that many such
Page 87 U. S. 78
bonds were paid, and that the purchases here were made in view
of this action; that of the nineteen bonds now in question, fifteen
or sixteen had been bought in December, 1865, and in August and
September, 1866, from Jay Cooke & Co., and three from Simon
Wolf, of New York, acting as agent for various residents there;
that of the fifteen or sixteen bought from Jay Cooke & Co., at
least six were of the number transferred to the Southern Pacific
Railroad Company; [
Footnote 4]
that four had never been delivered to the military board; [
Footnote 5] that leaving the remaining
to rest on the fact (among other facts) that they came from Jay
Cooke & Co., who were not shown to have ever stood in relations
of any sort with Chiles & White.
The court below decreed in favor of the complainant as to the
nineteen bonds, and the defendants took this appeal.
Page 87 U. S. 81
MR. JUSTICE MILLER delivered the opinion of the Court.
Waiving for the present the question whether the bonds were
overdue in the sense which puts a purchaser of dishonored
negotiable paper on the inquiry as to defenses which may be set up
against it, it is quite clear that they were transferable by
delivery after due the same as before. To invalidate the title so
acquired by a purchaser, it is necessary to make out some defect in
that title.
The main allegation of the bill is that these are part of the
bonds issued to White & Chiles in aid of the rebellion. All
knowledge of this fact is denied by defendants, and the fact itself
is denied. Conceding that their denial of the fact, about which
perhaps they know nothing, had no other effect than to put in issue
the allegation of plaintiff's bill on that subject, it remained for
plaintiff to establish its truth by evidence.
This it attempted to do. Two witnesses alone are relied on for
this purpose -- namely Taylor, the Comptroller of the Treasury of
the United States, and Paschal, one of the attorneys for
complainants. The former was examined at much length, and gave it
as his opinion from certain calculations made by him, based upon
papers in his office and
Page 87 U. S. 82
information received by him from officers of the State of Texas
and other sources, that these bonds were of the White & Chiles
issue. He says that it is only an opinion, and it is evident from
his deposition that the data on which he bases that opinion are far
from conclusive. It is not worthwhile to waste words in proving
that such testimony is wholly incompetent to establish any fact, or
rather to show that it is not evidence at all.
The deposition of Paschal is to the effect that by reason of his
connection with the suit of
Texas v. White & Chiles,
he had become familiar with a number of facts from which he had
satisfied himself that these bonds were of the White & Chiles
lot. As the matters on which this conclusion was founded were all
of them statements of others, some verbal, some written, and all of
them capable of being proved, no reason is perceived why the
witness should be substituted for the court in weighing these facts
and making the proper inferences. The same observation applies with
equal force to Taylor's testimony.
Not only is there no evidence that these bonds were irregularly
or improperly issued or were issued for any treasonable or other
unlawful purpose, but there is evidence that there were at the time
these depositions were taken, bonds greatly exceeding in amount
those in controversy, issued lawfully to a railroad company, which
were not identified by their numbers or in any other manner so as
to prove that the bonds in controversy were not these bonds. Nor
was there any evidence tracing all the bonds lawfully issued so as
to show where these were or to repel the presumption that they were
of that class. In short, the testimony on this branch of the
subject is an absolute failure.
But it is said that as these bonds did not bear the endorsement
of the Governor of the State of Texas, this fact alone was
sufficient to prove that they were unlawfully obtained from its
treasury, and that the rights of the state should therefore be
protected in this suit.
The opinions of this Court in the cases of
Texas v.
White
Page 87 U. S. 83
& Chiles, [
Footnote
6] and
Same v. Hardenberg, [
Footnote 7] are much relied on in support of this
proposition, and in fact are supposed to control this case in all
respects. But while it is true that the bonds in question in both
those cases (they were in fact but one case) were the bonds
delivered to White & Chiles, and that some very important
questions were decided concerning the relation of the State of
Texas to the Union and the validity of her legislation while under
control of the enemy during the war of the rebellion, it is also
true that the very matters of which the present bill is full, but
of which there is a flat denial and no proof whatever, were
supported in that case by sufficient evidence. On an examination of
the report of that case it will be seen that the Court was of
opinion that it was established both in evidence and by the answers
of some of the parties that the bonds then in controversy were all
of them issued to White & Chiles, and the illegal contract on
which they were issued was in evidence, and the Court was further
of opinion that the parties defendant had notice of those
facts.
It is true that in the first of these cases, the eminent judge
who delivered the opinion, in addition to deciding that the bonds
were overdue when delivered to White & Chiles and for that
reason subject to an inquiry as to the manner in which they
obtained possession of them, gave as an additional reason why
defendants could not hold them as
bona fide purchasers
that they had not been endorsed by the governor as required by the
statute of Texas. And for that purpose he entered into an argument
to show that the state could by statute, while those bonds were in
her possession, limit their negotiability by requiring as one of
its conditions the endorsement of the governor. He also said in
reference to the repeal of that statute by the rebel legislature of
Texas, in view of the supposed treasonable purpose of it, that it
was void. All of this, however, was unnecessary to the decision of
that case, and the soundness of the proposition may be doubted.
Page 87 U. S. 84
In the subsequent case of
Texas v. Huntington,
[
Footnote 8] which was an
action at law in reference to some of the bonds in the same
category as those now before us, the Justice who delivered the
abovementioned opinion qualifies it so far as to say that the
repealing statute, though passed by a rebel legislature, is not
void in its application to bonds not issued for treasonable
purposes. This is sufficient to relieve the present case of any
embarrassment growing out of that branch of the opinion in the case
of
Texas v. White & Chiles.
This latter case,
Texas v. Huntington, on a careful
examination of it must be held to dispose of the one before us. It
is said, among other things,
"that no one other than a holder of the bonds, or one who having
held them has received the proceeds, with notice of the illegal
transfer, for an illegal purpose, can be held liable to the claim
of the reconstituted state."
Again:
"Whether there was evidence in the present case establishing the
fact of the unlawful issue and use, and the further fact of notice
to defendants, within the principles heretofore laid down, as now
explained and qualified, is a question for the jury."
In the case before us, which is a suit in equity, it was a
question for the chancellor, to be established by evidence. As we
have already said, there is no proof either of the unlawful issue
or use, or purpose, nor of any notice to defendants of the probable
existence of these facts.
Decree reversed with directions to dismiss the
bill.
[
Footnote 1]
74 U. S. 7 Wall.
700, where the history of the bonds is given in full.
[
Footnote 2]
77 U. S. 10 Wall.
68.
[
Footnote 3]
See Report of Mr. Comptroller Taylor, submitted to Mr.
Secretary McCulloch, August 15, 1865.
[
Footnote 4]
Nos. 4703, 4705, 4706, 4748, 4813, 4825.
[
Footnote 5]
Nos. 4960, 4961, 4962, 4963.
[
Footnote 6]
74 U. S. 7
Wall. 718.
[
Footnote 7]
77 U. S. 10 Wall.
68.
[
Footnote 8]
83 U. S. 16 Wall.
402.
MR. JUSTICE SWAYNE:
I concur in the judgment of the Court just announced, but as the
case involves important legal principles, I prefer to give my views
in a separate opinion.
Pursuant to the Act of Congress of September 9, 1850, [
Footnote 2/1] the United States issued to
the State of Texas their bonds to the amount of five millions of
dollars. They were denominated on their face "Texas Indemnity
Bonds." They
Page 87 U. S. 85
all bore date January 1, 1851. Each one was for $1,000. It was
certified on their face "that the United States of America are
indebted to the State of Texas or bearer" in that sum,
"redeemable after the 31st of December, 1864, with interest at
the rate of five percent per annum, payable on the first days of
January and July in each year, at the Treasury of the United States
on presentation and surrender of the proper coupon hereto
attached,"
and that the bond "is transferable by delivery." Coupons were
attached extending to December 31, 1864. Texas received them and
placed them in her treasury. On the 16th of December, 1851, her
legislature passed an act whereby it was provided
"That no bond issued as aforesaid, as a portion of the five
million of stock payable to bearer, shall be available in the hands
of any holder until the same shall have been endorsed in the City
of Austin by the Governor of the State of Texas."
A large portion of the bonds were endorsed by the governor and
disposed of pursuant to other acts of the legislature. Acts were
passed from time to time appropriating other portions for different
purposes. Some of these acts prescribed a different mode of
transfer, and some were silent upon the subject. Transfers were
made in such cases without the governor's endorsement. On the 11th
of January, 1861, the provision requiring his endorsement was
repealed. On the same day, a military board was created and
authorized to prepare the state for defense, and for that purpose
to use the bonds still in the treasury to the extent of a million
of dollars. This action was taken by the state with the view of
engaging in the war of the rebellion, then impending, against the
United States. On the 12th of January, 1865, the military board
entered into a contract with White & Chiles in pursuance
whereof $135,000 of the bonds were sold and delivered to them. On
the 15th of February, 1867, the State of Texas filed in this Court
an original bill against White & Chiles and others wherein it
was charged that the repeal of the requirement of the governor's
endorsement and the contract with White & Chiles were in aid of
the rebellion, and therefore void, and it sought to recover
back
Page 87 U. S. 86
the bonds or their value from White & Chiles and the other
defendants to whom it was alleged White & Chiles had
transferred portions of them. This Court decreed against White
& Chiles. [
Footnote 2/2] The
case stood over as against Hardenberg, one of the other defendants.
Subsequently a decree was rendered against him. [
Footnote 2/3] The state also sued William S.
Huntington, at law in the Supreme Court of the District of Columbia
for the conversion of certain of the bonds redeemed at the treasury
the proceeds whereof had gone to him. The state recovered as to
thirteen of these bonds and failed as to the residue. The judgment
was brought to this Court upon error and reversed. [
Footnote 2/4]
The case made in the record before us by the complainant, so far
as is necessary to state it, is as follows:
It is alleged that the military board for insurrectionary
purposes sold and delivered to White & Chiles one hundred and
thirty-five of the bonds; that thirty-three of these bonds, after
becoming past due, were sold to the bank or were placed in its
hands to collect for White & Chiles with full knowledge of the
manner in which White & Chiles had obtained them and in bad
faith on the part of the bank, and that the bonds had never been
endorsed in such manner as to pass the title out of the State of
Texas. The prayer is that the bank be enjoined from receiving the
amount due on the bonds from the United States; that they may be
delivered up to the state if still in the possession of the bank,
and if not that the bank may be decreed to pay their value to the
state. A copy of the contract of the military board with White
& Chiles is annexed to the bill.
The bank and Huntington answered jointly. The answer, among
other things:
Denies all knowledge of the transactions between the military
board and White & Chiles; it denies that they hold or claim the
bonds described in the bill; it denies that they were in any way
the agents of White & Chiles or bought any bonds from them; it
denies that they had any knowledge
Page 87 U. S. 87
that their bonds came through White & Chiles; it avers that
they had heard there would be difficulty about the White &
Chiles bonds, and before purchasing made diligent inquiry at the
Treasury Department; that no one there could identify the bonds in
question as White & Chiles' bonds, and that the bank bought
them believing they were not such; it avers that they knew the
Secretary of the Treasury had paid similar bonds, and gives a large
list of such bonds; it denies all knowledge of White &
Chiles.
The court below decreed against the bank for the value of
nineteen bonds and interest. Those bonds are numbered in the decree
as follows: 4226, 4227, 4229, 4703, 4705, 4706, 4748, 4813, 4825,
4843, 4844, 4912, 4927, 4928, 4929, 4960, 4961, 4962, and 4963.
The bank removed the case to this Court by appeal, and it is now
before us for review. The complainant did not appeal. This defines
the ground of the controversy in this Court between the parties and
narrows the circle of inquiry to the bonds numerically specified in
the decree.
There is neither proof nor admission in the record of the
execution of the contract of the military board with White &
Chiles. It must therefore be laid out of view.
Averments by the complainant vital in the case are denied by the
answer. The answer is responsive, and the denials absolute. This
throws the burden of proof upon the complainant, and the denials
are conclusive unless overcome by the testimony of two witnesses to
the contrary or the testimony of one witness, and circumstances
established otherwise equal in effect to the direct testimony of
another.
The effort of Texas to leave the Union was revolutionary. All
her legislative acts for the accomplishment of that object were
void. Her position has been aptly resembled to that of a county in
rebellion against the state. [
Footnote
2/5] While her enactments outside of the sphere of her normal
authority were
Page 87 U. S. 88
without validity, those within it, passed for the ordinary
administration of her powers and duties as a state, had the same
effect as if the rebellion had not occurred. The latter principle
springs from an overruling necessity. A different rule would
involve the dissolution of the social compact and resolve society
back into its original elements.
The repeal touching the governor's endorsement was an act of
ordinary legislation. It was therefore within the rule last
mentioned. If it had in view the promotion of the rebel cause, it
was too remote from that end, and its tendency too indirect, to
render it fatally liable to that objection. The repeal put an end
to the existence of the restriction. But if the restriction had not
been repealed, I cannot admit that the want of the endorsement
would have in any wise affected a
bona fide holder -- or
in other words, one who had honestly bought the bonds for a
valuable consideration without knowledge of any infirmity in the
title of his vendor. The United States made them payable "to the
State of Texas or bearer." Delivery passed the title. Texas could
not restrain their transferability in the markets of the world,
according to the law merchant, in any case without bringing home
notice to the party sought to be implicated or putting upon the
bonds something which must necessarily operate as a notice to every
buyer.
Winston v. Westfeldt [
Footnote 2/6] has an important bearing upon this
subject. There, the holder of a promissory note had been enjoined
from transferring it. He transferred it, underdue, by endorsement.
The endorsee gave a valuable consideration and took it without
notice of any defect. It was held that the title of the endorsee
was valid notwithstanding the injunction.
The fact that the bonds were overdue when the bank bought them
does not affect the case. The transferee of overdue negotiable
paper takes it liable to all the equities to which it was subject
in the hands of the payee. But those equities must attach to the
paper itself and not arise
Page 87 U. S. 89
from any collateral transaction. A debt due to the maker from
the payee at the time of the transfer cannot be set off in a suit
by the endorsee of the payee, although it might have been enforced
if the suit had been brought by the latter. [
Footnote 2/7] The result is the same whether the
transfer be made by endorsement or delivery. But the protection of
this principle is confined to the maker or obligor. It does not
apply as between successive takers. Actual notice is necessary to
affect them. There is no adverse presumption. Each one takes the
legal title, and his equity is equal to that of his predecessors.
"The equities being equal, the law must prevail." [
Footnote 2/8] The position of the transferee must
be at least as favorable as that of the assignee of a chose in
action. There, the assignee takes subject to the equity residing in
the debtor, but not to an equity residing in a third person against
the assignor.
Chancellor Kent, speaking of this rule in this class of cases,
says:
"The assignee can always go to the debtor and ascertain what
claims he may have against the bond or other chose in action which
he is about purchasing from the obligee, but he may not be able
with the utmost diligence to ascertain the latent equity of some
third person against the obligee. He has not any object to which he
can direct his inquiries, and for this reason the assignee, without
notice, of a chose in action was preferred in the late case of
Redfearn v. Ferrier, [
Footnote
2/9] to that of a third party setting up a secret equity
against the assignor. Lord Eldon observed in that case that if this
were not so, no assignment could ever be taken with safety.
[
Footnote 2/10]"
This reasoning is strikingly applicable in the case before us.
It was the duty of the cashier to inquire at the Treasury
Department. He did so, and learned that there was no objection to
any of the bonds but those which had been delivered to White &
Chiles, and he became
Page 87 U. S. 90
satisfied that those involved in this controversy did not belong
to that class. It was impossible for him to find and consult all
those through whose hands they might have passed before they were
offered to the bank.
If negotiable paper, underdue, be in the hands of a
bona
fide holder, any subsequent holder may avail himself of that
fact against the equity of the maker. [
Footnote 2/11] Every holder is presumed to have
acquired his title before the maturity of the instrument and
bona fide. The burden of proof rests upon the party
alleging the contrary. [
Footnote
2/12] It is only in case of dishonor that the equities of the
maker, or obligor, can be set up against a
bona fide
holder. It may be doubted whether these bonds belonged to that
class. [
Footnote 2/13] I have
preferred to consider the case in this aspect upon the hypothesis
most favorable to the complainant. It is unnecessary to resolve, in
this case, either way the doubt suggested.
The rights of the holders of commercial paper were largely
considered by this Court in
Goodman v. Simonds, [
Footnote 2/14] and in
Murray v.
Lardner. [
Footnote 2/15]
What was there said need not be repeated.
It remains to consider the case in the light of the evidence. In
order to maintain the decree, it is necessary for the complainant
to establish the following facts:
(1) That the bonds specified in the decree were of those
disposed of by the military board to White & Chiles;
(2) That the transaction was in aid of the rebellion;
(3) That the bank, before it bought, had notice of the infirmity
of the title of White & Chiles.
And these facts must be established by the measure of proof
requisite to overcome the responsive denials of the answer.
It is shown by the complainant's own testimony -- and there is
none to the contrary -- that six of the bonds here in
Page 87 U. S. 91
question were transferred and delivered by the authorities of
the state pursuant to an act of the legislature to the Southern
Pacific Railroad Company. They are numbered 4703, 4705, 4706, 4748,
4813, and 4825. It is proved by the same testimony that four more
were not of those delivered to White & Chiles. They are
numbered 4960, 4961, 4962, and 4963. It is also proved that five of
the bonds, Nos. 4843, 4844, 4927, 4928, and 4929, were sold to the
bank by Jay Cooke & Co. It is not shown when Cooke & Co.
acquired them. It is therefore presumed they bought them underdue
and
bona fide, and their title enures to the benefit of
their vendee. Three of the bonds, Nos. 4226, 4227, and 4229, were
bought by the bank of Wolf. There is some testimony tending to show
that he bought after they were due. But there is no such proof as
to his vendor. The presumption as to the latter is therefore
otherwise. This ends the controversy as to these eighteen bonds.
The remaining bond is No. 4912.
The only testimony in the record in any degree adverse to the
bank upon the points in issue is that of Comptroller Taylor and
that of Judge Paschal.
In his examination-in-chief, the comptroller said:
"From all the circumstances, my
opinion is those were
of the White & Chiles bonds.
That is only an opinion,
however."
On cross-examination:
"Q. Do you know, of your own knowledge, that White & Chiles,
or either of them, ever saw one of these bonds?"
"A. I know it only from the papers on file in the department --
that is,
from my opinion of what those papers show."
"They are too numerous for me to present here now, and I might
add that one would have to study them very carefully and make his
calculations as to the different bonds."
"It would be by taking the seven hundred and eighty-two bonds
that were not endorsed, and tracing them back by the evidence into
the hands of those parties who held them at different times, and
ascertaining, in some instances, the particular numbers that were
known to be in the hands
Page 87 U. S. 92
of particular parties before the transaction between White &
Chiles and the military board, and taking others, again, that came
from the State of Texas, and
then drawing my conclusions as to
what were White & Chiles' bonds."
With these admissions before us, it is sufficient to remark that
his testimony is clearly incompetent. [
Footnote 2/16] And if not so, it would be insufficient
to maintain in behalf of the complainant the issue between the
parties. The same remarks are applicable to the testimony of Judge
Paschal. So far as it affects this case, it is liable to the same
objections. He says, among other things:
"I was employed by Governor Pease to prosecute this suit, and
caused it to be instituted in 1868; and judging from a careful
examination made in Texas and in the Treasury Department here, I
feel confident that the bonds redeemed for the bank, described by
Mr. Taylor, were a part of the bonds which passed through the hands
of White & Chiles, and I judge this from the circumstances
which he has stated."
This is mere opinion, founded upon data not disclosed and in
part upon the opinion of another witness. Further remarks upon the
subject are unnecessary. There are other defects in the evidence
for the complainant, but it is unnecessary to advert to them.
Altogether it fails wholly to sustain the case made by the bill.
The decree of the court below is, in my opinion, properly
reversed.
[
Footnote 2/1]
9 Stat. at Large 446.
[
Footnote 2/2]
74 U. S. 7 Wall.
700.
[
Footnote 2/3]
77 U. S. 10 Wall.
68.
[
Footnote 2/4]
83 U. S. 16 Wall.
402.
[
Footnote 2/5]
Hickman v.
Jones, 9 Wall. 197.
[
Footnote 2/6]
22 Ala. 760.
[
Footnote 2/7]
Burrough v. Moss, 10 Barnewall & Cresswell 558;
Whitehead v. Walker, 10 Meeson & Welsby 696;
Hughes v. Large, 2 Pa.St. 103;
Gullett v. Hoy, 15
Mo, 400; Story on Bills § 220.
[
Footnote 2/8]
Judson v.
Corcoran, 17 How. 614.
[
Footnote 2/9]
1 Dow 50.
[
Footnote 2/10]
Murray v. Lilburn, 2 Johnson's Chancery 443.
[
Footnote 2/11]
3 Kent's Commentaries, 92; Chitty on Bills 221;
Smith v.
Hiscock, 14 Me. 449;
Fairclough v. Pavia, 9 Exch.
690;
Oulds v. Harrison, 10
id. 579.
[
Footnote 2/12]
Byles on Bills 165.
[
Footnote 2/13]
Opinions of the Attorneys General 413; 11
id. 332.
[
Footnote 2/14]
61 U. S. 20 How.
343.
[
Footnote 2/15]
69 U. S. 2 Wall.
110.
[
Footnote 2/16]
Armstrong v. Boylan, 1 Southard 76;
Morehouse v.
Mathews, 2 Comstock 514.
