Spain v. Hamilton's Administrator, 68 U.S. 604 (1863)
U.S. Supreme CourtSpain v. Hamilton's Administrator, 68 U.S. 1 Wall. 604 604 (1863)
Spain v. Hamilton's Administrator
68 U.S. (1 Wall.) 604
1. A transfer by a party of his "right and, claim for and commission or compensation for services rendered, or to be rendered to any body corporate," in a class of claims mentioned generally in the transfer, is not such an assignment, even in equity, of a compensation subsequently earned as will give the transfer priority against junior assignees (without notice) of portions of a fund designated and appropriated to answer this claim the case being one where, on the one hand, the older transferee did not make inquiries as to what body corporate the claim for commissions was against, and did not give notice of the paper executed in his favor, to such body corporate, nor to a third party to whom this body, subsequently to the older transfer, but prior to the junior ones, devoted a fund to answer these commissions, and where, on the other hand, the junior transferees did make exact inquiries and obtain precise evidences and accurate information as to the fund from which the commissions were to be derived, and did immediately notify to the party then holding the fund, the nature and extent of their claims, and did generally take measures to prevent all other persons being misled by the supposition that the fund still remained in the power of the party who had transferred this claim for commissions upon it. Such an assignment
as the one first above mentioned is a blind assignment, and the party claiming under it cannot come into equity for priority against even junior assignees in a case where the claims of these last are on a fund specifically, and are moreover precise, well understood, and have been vigilantly protected.
2. The general doctrine of equity that a party complaining of usury can have relief only for the excess above lawful interest applies to the case of a person standing in the position of a claimant through bill in equity of priority on a fund another claimant upon which, as defendant, is the alleged usurer. The fact that the suit is a mere contest between different parties for a fund and a contest, therefore, in which each claimant may in some senses be considered an actor does not force the alleged usurer into the position of a complainant or plaintiff, and so expose him to the penalty incurred by a person seeking as plaintiff to recover a usurious debt -- that is to say, to the loss of the entire claim.
3. Where the promise to pay a sum above legal interest depends upon a contingency, and not upon any happening of a certain event, the loan is not usurious. Nor will usurious interest be inferred from a paper which,
while referring to payment of a sum above the legal interest, is "uncertain and so curious" that intentional bad device cannot be affirmed.
MILLER and SWAYNE, JJ., dissented in this case.
This was a bill in equity filed in the Circuit Court for the District of Columbia by S. Spain, guardian of Mrs. McRae, a lunatic, against the administrator of the late James Hamilton, of South Carolina and Texas, extensively known as "General James Hamilton," and against Corcoran and Riggs, Hill and others, the said bill claiming priority in the distribution of a fund in the Treasury of the United States originally belonging to Hamilton and arising by the assumption of the United States, in September, 1850, of certain debts of the Republic of Texas, which fund, or the source of it, rather, Hamilton, having become embarrassed and insolvent, had assigned in divers ways and to various extents to different persons, parties plaintiff and defendant in this suit.
The case in its outlines as proved, or by agreements made in the case admitted, was essentially this, the leading facts being derived from the stating part of the opinion of the learned Justice (WAYNE, J) who delivered the judgment of the Court.
The Republic of Texas, prior to its annexation to the United States, had issued a large number of bonds which
were due, unpaid, and the subject of speculation and purchase in different parts of the Union. Hamilton, who held a considerable amount of the bonds, had become familiar with the affairs of Texas, and especially with all that related to its debts, and was anticipating that if that republic was annexed to the United States, those debts would all be paid. He became, accordingly, an active and energetic advocate of annexation. The trustees of the Bank of the United States also owned a large amount of the bonds. But these had been pledged, in a greatly depreciated state, to a certain Wetmore, one of the defendants, as security for a loan which he had made to the bank. If, however, the bonds should be paid, enough would be obtained to pay the debt due by the bank to Wetmore and leave a large surplus remaining. And Hamilton, being already the agent of some of the bondholders and desirous to have the agency for others, applied to the trustees of the bank to represent them. On the 16th of October, 1845, the trustees accordingly wrote Hamilton a letter in which, adverting to his knowledge of the fact that they had
"now only a contingent resulting interest in the bonds dependent upon the payment by us of the amount for which they are now held by Mr. Wetmore in pledge,"
they say as follows:
"If you will devote your best efforts to securing the recognition and payment of said claims, and your effort shall be successful, then we agree to allow you a commission of 10 percent on whatever sum or amount of our claim, through your instrumentality, shall be recognized and paid over to us over and above the amount for which the said bonds are pledged. The limitation of time during which this agreement on our part can with certainty be continued is only to the 20th of March next ensuing, but we are willing, with the concurrence of Mr. Wetmore or in case we should then or sooner obtain the entire control of those bonds and securities now in his hands, to extend the said time to two years from this date."
The 20th of March, the first limitation, passed without the recognition by Texas of its bonds and without the payment
of the debt due by the bank to Wetmore. Of course Wetmore's legal right to retain the Texas bonds was continued, and Hamilton was left without any claim upon the bank for commission or compensation under the agreement.
On the 16th September, 1850, however, the trustees wrote to Wetmore a letter reciting that Hamilton had rendered his services, as he had agreed, "so far as in his power, without however realizing the money," and then, referring to an act of Congress recently passed for the payment, in part, of the Texas bonds, among which the trustees had been "informed by General Hamilton, are the bonds held by them," the letter goes on as follows:
"The trustees, at the particular request of General Hamilton, have instructed me to say to you if they should not have previously redeemed the bonds, that upon the final adjustment and payment of the said bonds first above mentioned, either by the Treasury of the United States, in the manner provided for in said act of Congress or otherwise, to the satisfaction of the said trustees, pursuant to their said agreement with General Hamilton, you will be pleased to hold, subject to the order of General James Hamilton, one-tenth of any sum over and above the amount of your claim against the said bonds."
This claim of Wetmore, originally 50,000 sterling, had, at the date of this letter, been reduced by payments from the bank to $55,493.24, with interest from December 9, 1842.
Upon the bottom of this letter of 16 September, 1850, Wetmore, on presentation of the same to him, wrote as follows:
"In conformity with the above order, I will, when received by me, pay over to James Hamilton or to his order the tenth of the money or stock that may be received either at Austin, Texas, or at Washington, D.C., on the above certificates, subject, however, to the conditions of the above order and to a lien I hold by assignment for $2,500, which sum I loaned General Hamilton in August last, with interest."
"W. S. WETMORE"
Between the dates of the letters to Hamilton and that to Wetmore -- that is to say on the 12th February, 1850 -- Hamilton,
who, as former trustee of Mrs. McRae already mentioned, had become indebted to her estate, and was now under arrest for the debt -- executed a paper to her succeeding trustee or committee, Spain, the complainant, which purported to secure this debt. It "transferred, assigned and made over" to Spain, committee &c.,
"All my right and claim for any commission or compensation for services rendered or to be rendered by me to any and every other person and body corporate in the prosecution of any claim or claims for any and every such person and body corporate on the government of Texas, subject to any previous assignment thereof."
As illustrating the special temper and character of Hamilton, referred to by the court and indicated in the record, it may be mentioned that his debt to Mrs. McRae had arisen from a misappropriation of the funds of her estate in his hands as trustee. "Consulting," as his answer said, "the suggestions rather of a sanguine temperament than the admonitions of experience," he had invested about $50,000 of her property "in one of the finest and most promising sugar estates in Texas, supposed to be an investment surpassed by none in the United States," which, in the end, however, the answer proceeded to state, "yielded more sap than sugar," and being sold on first encumbrances, did not bring enough to pay them.
When Hamilton proposed to give the transfer, he made no mention of any Texas bondholders whom he represented, nor did he state that the bonds of the bank were held in pledge by Wetmore; nor did Spain -- or rather the person who was acting for him (the arrangement having been made by a third party in his behalf) -- make the least inquiry, so far as appeared, from Hamilton as to any of these things, nor was notice ever given to the bank about it. It did not appear that Spain knew anything about it until long after.
This was the claim for which priority on the fund was asserted by the bill filed. The opposing claims were as follows:
1. A claim of Wetmore, himself, to the extent of $2,500, for
money which, by an agreed statement in the case, it was conceded that he had lent to Hamilton on the 30th August, 1850, being the debt referred to in the paper mentioned ante, p. <|68 U.S. 607|>607, signed by him at the bottom of the letter from the trustees to him of 16th September, 1850, and for which, as he there states, he had taken an assignment at the time.
2. A claim of Corcoran & Riggs, of Washington. Hamilton needing money in that city had applied to these persons, bankers there, for $25,000. They advanced the sum to him on the 21st September, 1850, taking an order from him on Wetmore for $30,000, "to be paid out of the first moneys received after your claims shall have been satisfied," which order Corcoran & Riggs immediately transmitted to Wetmore, who, on the 24th of the same month, "accepted" it.
3. A claim by the estate of one Hill, made partly under an original claim and partly by subrogation to the rights of James Robb & Co. As far back as 1848, Hamilton, reciting that the trustees of the Bank of the United States had agreed to pay him a commission of 10 percent on somewhere about a million of dollars &c., assigned one-half of "all his interest and property in the commission" in trust for Hill a creditor and friend. In regard to this it did not appear that notice had been given to anyone, and the history of the whole transaction, Hill being dead, was not very clear. The claim, so far as it arose from substitution to a claim of James Robb & Co., was plainer, and thus: Hamilton owing Robb a large sum, made, on the 30th April, 1851, a transfer of the "order" of 16 September, 1850, by the trustees of the bank on Wetmore, and by him accepted, the order being subject, as was stated in the transfer, to the claim of Wetmore himself for $2,500, and to that of Corcoran & Riggs for $30,000. Robb wrote immediately to Wetmore, saying to him:
"We have taken an assignment from General James Hamilton of his residuary interest in an order &c., of the Bank of the United States, addressed to you, dated September 16, 1850. Be pleased to make a note of this assignment, a notarial copy of which we will send to you, and hold the claim subject to our order or that of W. Hoge & Co. "
This letter and the notarial copy were received by Wetmore, who at once acknowledged their receipt to W. Hoge & Co. The history of the substitution of Hill is told by the following letter, which was duly received and preserved by Wetmore.
"NEW ORLEANS, 28 May, 1853"
"MY DEAR SIR: Having confided in Gen'l Hamilton's promises until our patience became exhausted with their continued violation, we commenced suit and obtained judgment and seizure against sundry securities pledged, including the residuary interest on the Texas claim you hold, after the payment of the advances made by yourself and Mr. Corcoran. Mr. H. R. W. Hill of this city, who is a large creditor of General Hamilton, in order to secure the margin of securities covered by our judgment and seizure, has arranged to liquidate our claim against Hamilton, and we shall therefore subrogate him, Mr. Hill to our interest in the Texas debt represented by you."
"Very respectfully, your ob't serv't,"
"W. S. WETMORE"
On the day previous to the date of this letter, Hamilton had executed to Hill, he present and accepting, an assignment of the order previously conveyed to Robb and now by him surrendered.
So far as respected these three claims, in their common outlines alike, and there being nothing to show that the claimants in any one of them had the least knowledge of the paper executed by Hamilton to Spain, any more than Spain had of what was going on between them.
The claim of Corcoran & Riggs was, however, embarrassed by evidence not common to the other two claims, and was the subject in the bill of a charge of usury. At the time the money was advanced, a paper, drawn by Hamilton and in his writing, was executed by him and by Corcoran for his firm, as follows:
"[Private and confidential]"
"The following memorandum agreement witnesseth:"
"That Messrs. Corcoran & Riggs have agreed to loan James Hamilton, on a certain order of the trustees of the Bank of the United
states on William Wetmore, Esq., of New York, $25,000, at an interest of 6 p.c., reimbursable on the payment of its public debt, on his order on William Wetmore for $30,000."
"In case J. Hamilton does not procure Messrs. Corcoran & Riggs the agency at Washington for the settlement of said debt, then J. Hamilton is to allow a commission on the loan of $2,000, to be added to the interest of 6 p.c. The balance of the said $30,000 is to be credited to J. Hamilton's account on final settlement."
"This contract is not in prejudice of a liberal remuneration which Messrs. Corcoran & Riggs have agreed to allow J. Hamilton in the event of procuring said agency."
"CORCORAN & RIGGS"
"WASHINGTON, Sept. 21, 1850"
As to this paper, the answer of Corcoran said that it was executed at "Hamilton's instance and request, and after the whole matter of the said loan had been fully consummated;" that, neither suspecting nor conscious of any illegal motive or stipulation, they readily signed the said memorandum without noticing its terms or having their attention at all drawn to the artful manner in which it appears to be expressed; that even after the controversies involved in this suit had arisen, they had readily furnished the copy of said memorandum upon which the said charge of usury was based, and that the loan was entered on their books as a loan of $25,000, at 6 p.c. As respected the proposed agency, their answer said as follows:
"The said Hamilton had proposed to procure for defendants the agency at Washington for the settlement of the Texas debt, stipulating at the same time that he should have a 'liberal compensation' from them should he succeed in so doing, as it was supposed that such agency would be profitable to these defendants in their business of bankers. In order to accomplish this object, of which the said Hamilton appeared to be very confident, he represented that it would be necessary for him to go to Texas, provided with the influence of certain persons, who were in friendly relations with these defendants and disposed to oblige them, and to induce them to exert themselves in the premises, and to confide in his assurances that he could and would procure
such agency, he proposed that he would pay to them the sum of $2,000 if he failed in his undertaking, which, on the other hand, if he succeeded, he should have from them a 'liberal compensation.' It was this matter, and this only, which the said Hamilton represented it expedient to keep 'private and confidential,' from motives entirely personal to himself. These defendants accordingly did put themselves to considerable inconvenience in providing the said Hamilton with the means of procuring said agency in the profits of which he was to participate. But they repeat that the said arrangement was altogether distinct from the said loan, and was in its nature wholly contingent, and was no part of the consideration of the said loan, which was at 6 percent interest only. And that the said Hamilton himself so considered it is shown by the manner in which he refers to it in the original letter from him to them, now produced."
This letter expressed a wish to make some arrangement in regard to the security of the loan of $25,000, "preserving our contingent contract inviolate in good faith."
Some reference to dates, in connection with the public history of Texas and of its admission into the Union, was given by the learned judge who delivered the opinion, and this, with a statement of the parties' knowledge and proceedings in connection therewith, will give a perfectly full view of the case.
On the 1st March, 1845, Congress passed an act for the admission of Texas into the Union, and an ordinance having been passed July 4 of that year accepting the conditions proposed by Congress, a joint resolution was passed the same year declaring Texas admitted. On the 20th March, 1848, the State of Texas itself passed an "act for ascertaining the debts of the late republic," and with a view, as was generally understood, of their being ultimately assumed by the federal government. This act required creditors to file their bonds with the auditor and controller of the state. Two years afterwards -- that is to say September 9, 1850 -- Congress passed an act declaring that it would issue for Texas $10,000,000 in stock bonds, provided, however, that no more
than a portion of the fund should be issued until the creditors of Texas holding its bonds and certificates should file in the Treasury releases of all claims against the United States on their account. It was prescribed that the secretary should give notice, by advertisement for ninety days, of the time for payment of the Texas bonds on which releases had been made, and that no payment would be made on those which had not been presented thirty days before the time appointed for payment. All the legislation and government's action upon it to consummate its intention was known, of course, by persons interested in the payment of Texas bonds, and as appeared by the complainant's bill, were known to the appellant, Spain.
Spain did not take steps to secure his bonds until the 18th June, 1851. Being then in Galveston, he at that time, and as his bill stated, "with a view to make his assignment effectual, and to fasten notice thereof upon the government of Texas," caused a certified copy of the assignment to him, addressed to the Treasurer of Texas at Austin, its capital, to be deposited in the post office. Mr. May also, a connection and friend of Mrs. McRae, acting for Spain, prior to the 9th September, 1851, and in accordance with public notice given 22 March of that year to the creditors of Texas, "notified to the Secretary of the Treasury of the United States the transfer to Spain," with a view to prevent the payment of the claim so transferred to anybody other than the said Spain. Both these notices were received at the departments to which they were sent.
Under the act of the Texas Legislature, Wetmore filed his bonds, on the 9th of November, 1849, and getting certificates of debt, which he lodged at the earliest day with the Treasurer of the United States. The original Texas bonds had been delivered to him by the bank when he made his loan, and had always remained in his possession and control. And a portion of his debt being still unpaid, the certificates issued by the United States in lieu of the Texas bonds, were made out to him and in his name, he having stated, however, in an affidavit filed at the Treasury in Washington,
on which they were issued, that as to one-tenth, he had no claim except for $2,500, and stated also the exact history of the orders of Corcoran & Riggs and of Robb, with the substitution of Hill upon him. On the 11th April, 1854 (subsequently to the certificates' being thus made out), the bank paid the balance of its debt, and Wetmore immediately transferred to them nine-tenths of the new or substituted certificates. The remaining one-tenth, amounting to $72,505.12, was still in the Treasury of the United States, and it was this which was the subject of dispute for priority, the sum being large enough to pay Wetmore, Corcoran & Riggs, and Hill as substituted to Robb, but not large enough to pay them and Spain also.
It was agreed by counsel
"that for the purpose of ascertaining the several parties to this controversy and the origin and character of the fund claimed by them, that the fund now in the Treasury of the United States, amounting to $72,505.12, became due and payable to Hamilton under an agreement entered into by the Bank of the United States, which is evidenced by the two letters of the trustees of the 16th October, 1845, to Hamilton, and 16th September, 1850, to Wetmore."
Several other agreements were made the substance of which is presented in the case as already stated. Good faith and conformity to the instructions of the letter to Wetmore were considered by the court, in stating the facts of the case, to be conceded to him in accepting Hamilton's order in favor of Corcoran & Riggs, and there was no evidence -- but, on the other hand, the contrary of it -- that either Wetmore, Corcoran & Riggs, Robb or Hill had knowledge of the paper executed 12 February, 1850, to Spain, till 10 May, 1856 (about the time the bill was filed), when Wetmore heard of it.
The court below held that the letter of the trustees to Hamilton (the letter of 16th October, 1845) gave him no lien on the Texas bonds for his commissions, but "only a personal claim against the bank for his ten percent;" that accordingly "the notice of the complainant to Texas was void," that the legal title of the one-tenth under mortgage,
and the letter of the trustees to Wetmore of the 9th of September, 1850, with the assent and at the request of Hamilton, was in Wetmore, and was not intended to be reconveyed; that the condition in the letter to Wetmore, by which any reverter on payment of the mortgage debt could be claimed, was for the benefit of the bank only, and that by accepting the deed of 11th April, 1854, for the nine-tenths, they renounced any such benefit as to the remaining one-tenth; that from the 16th September, 1860, Wetmore was trustee to pay Hamilton's debts. The court decreed that they should be paid in this order:
1. Wetmore's own $2,500, with interest from date of loan.
2. Corcoran & Riggs, $30,000, this sum being less than the $25,000 lent with interest on it.
3. Hill assignee of Robb, his debt with interest.
Any balance was ordered to be reported into court.
It was from this decree that the appeal came to the Supreme Court.