National Bank of Washington v. Texas
87 U.S. 72

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U.S. Supreme Court

National Bank of Washington v. Texas, 87 U.S. 20 Wall. 72 72 (1873)

National Bank of Washington v. Texas

87 U.S. (20 Wall.) 72

Syllabus

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

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