G. performed work for the District of Columbia and received
therefor in January, 1874, certificates of indebtedness of the
Board of Public Works of the District. He pledged these
certificates as collateral for a 60-days note for an amount much
less than their face, and made a general transfer of them to the
pledgee. Before the maturity of the note,
Page 127 U. S. 134
his creditor absconded. He then notified the President and the
Treasurer of the Board verbally of the transfer, and verbally
protested to the Board against payment of the certificates to the
persons who had become holders of them. In June, 1874, the Board
was abolished, and a Board of Audit was created to examine and
audit for settlement the outstanding certificates of indebtedness
issued by it. In October, 1874, G. filed a bill in equity for the
purpose, among other things, of restraining the Board of Audit from
allowing these certificates to their holders. On demurrer, a
restraining order, which had been made under this bill, was
dissolved. The Board of Audit then allowed the certificates to
their holders, and 3.65 bonds of the District were issued for them.
G. then commenced this action against the District.
Held
that he had been guilty of gross negligence in the matter which
prevented him from recovering against the District.
The case is stated in the opinion of the Court.
MR. JUSTICE MILLER delivered the opinion of the Court.
This is an appeal from the Court of Claims by the claimant,
Andrew Gleason, who brought suit in that court against the District
of Columbia, founding his demand upon certain certificates of the
Board of Public Works which were delivered to him, showing an
indebtedness due on account of work done for the defendant, the
District of Columbia.
It appears that Gleason borrowed money from one Rudolph
Blumenburgh, to whom he gave his note for $30,000, due in sixty
days, on the 13th of January, 1874, depositing as collateral
security the certificates already mentioned, which he endorsed in
blank. Before the maturity of that note, Blumenburgh absconded.
These certificates afterwards turned up, were presented to the
Board of Audit for adjudication, and were allowed by it to the full
amount expressed on their face, certificates of the Board of Audit
being issued for them to the parties presenting them, while the
original certificates of the Board of Public Works were cancelled.
The holders of these certificates of the Board of Audit afterwards
received bonds
Page 127 U. S. 135
of the District of Columbia, called "3.65 Bonds," in exchange
therefor.
The Court of Claims finds that, when Gleason discovered that
Blumenburgh had absconded with his certificates of the Board of
Public Works, he saw Magruder, Treasurer of that Board, and
notified him that Blumenburgh had these certificates, protested
against the payment of them, and also notified Mr. Shepherd, who
was President of the Board of Public Works. It is a fair inference
from this finding that this notification was given in a
conversation, and was not in writing. The opinion of the Court of
Claims speaks of it as a verbal notification.
On the 20th of June, 1874, Congress passed an act, 18 Stat. 116,
abolishing the Board of Public Works, and creating a commission to
exercise all the power and authority theretofore lawfully vested in
the Governor or Board of Public Works of the District, with certain
limitations. By the sixth section of that act, the First and Second
Comptrollers of the Treasury of the United States were constituted
a Board of Audit "to examine and audit for settlement," among other
things, "the debt purporting to be evidenced and ascertained by
certificates of the Auditor of the Board of Public Works." In this
class of debts were, of course, included the certificates issued to
Gleason, and by him endorsed to Blumenburgh. The character of this
Board and its functions are commented on in the case of
Laughlin v. District of Columbia, 116 U.
S. 485.
On the 13th day of October, 1874, four months after the passage
of this bill, after the creation of the Board of Audit, and after
the powers of government in the District of Columbia had been
transferred to the Commissioners, Gleason filed his bill in equity
in the Supreme Court of the District against the Commissioners, the
Board of Audit, the Comptroller of the District of Columbia, and
the Sinking Fund Commissioners of the District, alleging that he
was the owner of the certificates now the subject of controversy. A
restraining order was made enjoining the issuing of certificates,
and Blumenburgh from receiving them, but on the 5th day of November
afterwards, this restraining order was, at the instance of the
Page 127 U. S. 136
members of the Board of Audit, and on general demurrer,
dissolved so far as it affected the members of that Board. There is
no finding, nor any evidence in the record, as to what became of
that suit so far as it related to the Commissioners and Comptroller
of the District, the Sinking Fund Commissioners, and
Blumenburgh.
As the finding shows that 3.65 bonds, negotiable on their face,
were issued for the entire amount of the certificates of the Board
of Audit, it is clear that if Gleason recovers in this action, the
District of Columbia will have to pay twice the amount of his
recovery. We think it equally clear under the facts of the case
that the fault in the matter lies with Mr. Gleason. He placed his
original certificates, which were issued by the Board of Public
Works, in the hands of Blumenburgh with an unlimited endorsement,
when he might have made a statement that they were held as security
for the sum which he had borrowed. He knew, as the Court of Claims
finds to be the fact, that this class of securities was bought and
sold in the open market by the moneyed men of the District of
Columbia, and that they were treated and considered as negotiable
instruments. Although this Court has decided that they were not, in
the full sense of that term, negotiable as commercial paper, yet
Gleason must have known that he was placing them in the hands of
Blumenburgh in a manner and in a condition which would enable him
to perpetrate a fraud either upon Gleason himself or upon some
other person to whom he might sell them. When he discovered that
Blumenburgh had absconded and that his certificates could not be
found, the steps which he took to protect himself or the District
of Columbia were very inefficient as compared with what he might
have taken, since he merely gave a verbal notice of the facts to
Shepherd and Magruder, the President and Treasurer, respectively,
of the Board of Public Works. He made no representations in writing
giving an accurate and full description of the certificates, as he
might have done. He might also, while the Board of Public Works was
an existing body, have brought his suit against them of the same
character as the one he afterwards brought against the
Page 127 U. S. 137
Commissioners and the Board of Audit. This he did not do, but,
on the contrary, when he finally initiated legal proceedings, the
parties to whom he had given the notice were no longer officers of
the District of Columbia, nor is there any evidence that the
statement or warning which he gave to Shepherd and Magruder ever
came to the knowledge of the Commissioners or was brought to the
attention of the other proper officers of the District who might
have been bound in a decree in the case.
As to the Board of Audit, it is very clear that the Supreme
Court of the District could not rightfully, at the instance of
Gleason, enjoin it from proceeding to perform the very duty which
was appropriate to that condition of affairs then existing --
namely to audit the claims represented by these certificates to
determine whether the District of Columbia was responsible for
them, and if so to whom it was responsible. The Board of Audit, in
accordance with the statute under which it was created, gave public
notice that it would hear and examine into all these claims. Mr.
Gleason seems to have contented himself with the very imperfect
notice which he had given to the persons representing the District
government. He did not appear before the Board of Audit at any
time. He does not seem to have inquired whether these certificates
were presented before them or to have made any effort to ascertain
whether they would consider them or when their examination would be
undertaken. He offered no evidence of his interest in or his right
to the certificates. They came before that Board, as it is fair to
presume, with the endorsements and transfers upon them, so that
prima facie a case was made out entitling the parties who
presented them to receive the certificates of the Board for their
amount.
In thus standing aloof and supposing, if he did so suppose, that
the Board of Audit would hunt up the evidence of the fact that he
had an interest in these certificates and take upon itself the
business of presenting a case against the certificates as they came
before it, of which claim it knew nothing and had no evidence, and
which Gleason himself did not come forward to establish, he was
guilty of the grossest negligence --
Page 127 U. S. 138
a negligence which must now prevent him from recovering against
the District of Columbia the amount of those certificates or any
part of them. Throughout the whole transaction, he has shown a want
of diligence and care -- first by placing in the possession of
Blumenburgh, with an unlimited endorsement, these instruments for
which he received an advance of the amount of money agreed upon
between them, and second by the imperfect notices that he gave when
he found that Blumenburgh had absconded with his certificates. The
efforts he then made to protect himself, or the District of
Columbia were wholly inefficient, and not such as the case required
of him. Verbal notice in a conversation with the President and
Treasurer of the Board of Public Works, even if that body had
continued in existence, was not such notice as the case demanded.
His entire neglect also to make any appearance before the Board of
Audit or to assert any claim before that body, established
especially for the purpose of adjudicating upon such claims as his
against the Board of Public Works, and his knowledge of the fact
that he had himself placed in the hands of others the means of
asserting the claim which he now brings against the District of
Columbia, are all evidence of such laches and neglect as in our
judgment precludes his right to recover in this action.
The principle on which this case was decided in the Court of
Claims was, we think, established by the judgment of this Court in
Laughlin v. District of Columbia, already cited. There,
the Court said:
"The statute authorizing the Board [of Audit] gave notice to
Laughlin [who was in a similar condition to Gleason] that he must
himself appear before that tribunal to assert his rights as against
the holder of his certificates, or take some other steps to prevent
their payment, and if he did not, that his claim against the
District might be lost. The Board, even if his letter had been
brought to its attention, would not have been compelled to give him
any other notice to appear than that which he already had. As he
failed to appear at all, there was nothing for the Board to do but
to act upon the evidence which was before it, and decide
accordingly. Pp.
116 U. S. 490-491. "
Page 127 U. S. 139
That is precisely what was done in the present case. We think
the judgment of the Court of Claims in the matter was correct, and
it is accordingly
Affirmed.