1. It is not required that a writ of error be allowed by a
judge. It is enough that it is issued and served by copy lodged
with the clerk of the court to which it is directed.
2. A mistake in the date of the writ of error is not important,
when it is clear that such mistake is a clerical one merely, and
when, from the judgment described and the number given to it, the
party cannot be misled.
3. A statute declared by its title to be "an act to suppress
private^ banking," and making it penal to "erect, establish,
institute, or put in operation, or to issue any bills or notes for
the purpose of erecting, establishing, or putting in operation any
banking institution, association, or concern," covers with its
prohibition not only the primary steps in establishing and putting
into operation the bank, but also the whole range of its
transactions, by which illegitimate currency is imposed on a
community,
Page 71 U. S. 448
and contracts made in furtherance of such transactions are as
void as those made to give it original operation.
4. A bill of exchange drawn in one state upon a party in
another, the known and common purpose of both parties being to
carry on a business declared unlawful by statute of the first
state, is void as to the drawer in the hands of a party to the bill
having notice of its true character.
5. As between the parties, the delivery of negotiable paper,
signed and endorsed in blank, authorizes the receiver to fill it up
in conformity with the authority given him, but it does not
authorize him to do more, nor give him power to fill it up at
pleasure. In a suit by the drawee upon such paper against drawer or
endorser, the burden of proof that an agreement as to filling up
had been violated is on the defendant, but if he can make the
proof, it will avail him.
Error to the District Court of the United States for the
Northern District of Mississippi, the suit having been by Lanier,
curator of the succession of John J. McMahon, of New Orleans,
against Davidson, on a bill of exchange drawn, as was alleged, by
Davidson and others, and judgment having been given in favor of the
plaintiff.
The case, as stated by THE CHIEF JUSTICE, was thus:
A statute of Tennessee, enacted in 1827 and entitled "An act to
suppress private banking," made it penal to erect, establish,
institute, or put in operation or to issue any bills or notes for
the purpose of erecting, establishing, or putting in operation any
banking institution, association, or concern.
In January, 1856, this act being in force, several persons, of
whom one Richard M. Kirby seems to have been the principal,
undertook to establish a banking association or company in Memphis,
Tennessee, under cover of a charter granted by the State of
Arkansas for a corporation styled "The Cincinnati and Little Rock
Slate Company." Their object was to issue bills for circulation as
money, and use them in the cotton trade.
About the time of the organization of the company, Kirby visited
McMahon, of whose estate the defendant in error is curator, at New
Orleans, and exhibited the charter and explained the views of the
company, whereupon McMahon agreed to act as its treasurer and
financial agent.
In pursuance of this arrangement, circulating notes of the
Page 71 U. S. 449
company, to the amount of twelve thousand dollars, were sent to
McMahon, who used them, as far as he could, for currency. He also
made advances to the company by accepting and paying bills drawn on
him, and in the result, became its creditor in a sum somewhat
exceeding eleven thousand dollars.
At the time of the arrangement with McMahon, Davidson, the
plaintiff in error, and one J. B. Ellis, were members of the
company, but afterwards withdrew. Subsequently, however, upon the
request of Kirby, Davidson, with two others, consented to sign, and
Ellis consented to endorse several bills of exchange in blank, and
among them that on which the suit below was brought. All the bills
seem to have been addressed to McMahon as drawee. Shortly before or
very soon after this transaction, H. M. True, the secretary and
treasurer of the company at Memphis, absconded, taking with him all
the cash in his possession.
There was some obscurity, and perhaps some contradiction of
evidence in the record, as to the time and purpose of signing and
endorsing the blank bills of exchange. Kirby stated that they were
signed and endorsed before the absconding of True, to enable
himself to protect the circulation of the company. Another witness
said that they were signed and endorsed after that event, at the
suggestion of Kirby, to relieve McMahon from the consequences of
True's theft; but this witness said also that he only knew the
object of the bills from a statement by Kirby, made when the other
parties were not present, and was not confident as to the time of
signing and endorsement.
However these things may have been, it was certain that the
bills were sent by Kirby to McMahon, in July, 1856, and were filled
up some months later, after vain attempts to obtain payment of the
balance due him.
All the bills, when they went into McMahon's hands, seemed to
have had engraved on their face the formal parts of a bill of
exchange, with the name of the place of date, "Memphis, Tenn.," and
the direction to the drawer, "John J. McMahon, New Orleans," and
all but one seemed to have
Page 71 U. S. 450
borne the words, "Exchange for $1,000" in the upper left hand
corner. In other respects, as to time of date, amount to be paid,
and time of payment, they were left blank. The one now in
controversy was filled up with the date, "July 15, 1856," with the
time of payment, "eight months after date," with the sum to be
paid, "eight thousand nine hundred and ninety-two dollars and
forty-four cents," and with a stipulation for "eight percent
interest from maturity until paid." Thus filled up, the bill sued
on read as follows:
"Exchange for $8,992.44."
"MEMPHIS, TENN., July 15, 1856"
"Eight months after date of this, our first of exchange (second
unpaid), pay to the order of J. B. Ellis eight thousand nine
hundred and ninety-two dollars and forty-four cents, value
received, and charge the same to account of your obedient servants,
with eight percent interest from maturity until paid."
"JAS. R. FERGUSON"
"J. LOCKE"
"THOMAS J. DAVIDSON"
"TO JOHN J. MCMAHON, New Orleans"
"Endorsed: J. B. ELLIS, Ripley, Miss."
"RICHARD M. KIRBY"
Upon the trial, the court charged the jury that if McMahon's
object in advancing his money was to enable the company to put into
operation a banking company in violation of the laws of Tennessee,
the jury must find for the defendant, and also that if McMahon
agreed with Kirby to redeem the circulation, intending thereby to
enable the company to go into operation, and the company did go
into operation, issuing bank notes in pursuance of that agreement,
then the transaction was illegal, and the plaintiff could not
recover.
But the following instructions, numbered in the record 5th, 6th,
and 7th, were also given by the court:
"5. If, at the time the bills were given, the holder, McMahon,
knew that the money would be used for the purpose of carrying on a
banking company contrary to the laws of Tennessee, and if the
banking company was then in operation,
Page 71 U. S. 451
then the consideration of the bills is not affected by the use
made of the proceeds of the bill, and the plaintiff is entitled to
recover, unless the defense is sustained on some other ground."
"6. The signing of a bill of exchange in blank, is the giving of
the holder an unlimited authority to fill it up at pleasure, and
the party so drawing or endorsing is bound by the act of the party
filling up the same."
"7. If the bills sued on were signed in blank, and delivered to
Kirby to be sent in blank to McMahon, that would authorize him,
McMahon, to fill up the bills and insert any rate of interest that
was lawful, and the jury should find for the plaintiff, unless the
defense is made out and sustained on some other ground."
It was upon these instructions, considered in connection with
the evidence, that the questions to be decided in this case
arose.
Before arguing the merits, a motion to dismiss the writ of error
was made.
The judgment of the district court for $11,312.42 was rendered
on the 6th of June, 1860. On the 7th, a writ of error was sued out,
and a copy was lodged with the clerk of the court on the same day,
and bond for supersedeas given in double the amount of the
judgment. A citation was also issued, dated 16 April, which was
served on the 14th September, 1860, and the record, with the writ
of error and the citation, was returned to the next term of this
Court. Another citation and apparently another writ of error, were
issued on the 7th of June. Of the last-mentioned writ and citation
there seemed to have been no service.
Page 71 U. S. 453
THE CHIEF JUSTICE delivered the opinion of the Court, and after
stating the case went on thus:
Before proceeding to consider the questions arising on the
instructions regarded in connection with the evidence, a motion to
dismiss the writ of error must be disposed of.
It is objected to the writ of error that it was not allowed by
any judge; but this is not required. It is enough that it was
issued and served by copy lodged with the clerk of the court to
which it was directed.
It is objected to the citation that it was dated 16 April, which
was before the date of the judgment; but it is clear from the
number which it bears, taken in connection with the judgment it
describes, that it was issued after the rendition on the 6th of
June. The date must have been a mere clerical error, and the
service on the 14th of September was regular and sufficient.
The fact that another writ of error and another citation, not
served, were issued, cannot prejudice the writ and citation which
were duly issued and served.
It is also urged that the appeal bond was not approved by the
judge. But it is a fair inference from the acts of the
Page 71 U. S. 454
judge, in signing the citation, and in witnessing the appeal
bond, that he approved of the security. The Judiciary Act does not
in terms require that the judge shall put his approval of the bond
in writing, nor can a writ of error be treated as a nullity because
sufficient security is not given. This Court will take care, on
application, that the rights of the defendant in error be not
prejudiced by the omission, but will not dismiss the writ except on
failure to comply with such terms as it may impose. [
Footnote 1]
The motion to dismiss in this case must be denied.
The first question upon the merits arises upon the fourth and
fifth instructions. The court had already charged in substance that
a contract in consideration of aid to be given in putting in
operation an illegal banking company in Tennessee was void. From
the fifth instruction, taken in connection with those which
preceded, and with the evidence, the jury must have understood that
in the judgment of the court a contract in consideration of aid in
promoting the objects and effecting the purposes of an illegal
banking company, when once in operation, was valid.
We think this construction of the statute of Tennessee too
narrow. The intention of the act was declared by its title. It was
an act to suppress private banking. Its object was the protection
of the people against the evils of an unauthorized currency -- than
which hardly any object of legislation is more important. The
currency measures all values, and is the medium, directly or
indirectly, of all exchanges. To keep it sound, and to guard it as
far as possible from fluctuation are among the most imperative
duties and among the most difficult problems of government.
In the construction of this act it was the duty of the court
below, as it is ours here, to give effect to its obvious intention,
if that can be done without disregarding settled rules of
interpretation.
What, then, is the true sense of the prohibition to erect,
establish, institute, or put in operation any banking company,
Page 71 U. S. 455
or to issue any bills or notes with intent or purpose to do so?
What is meant by putting in operation or establishing a banking
company? We think that this language has a much wider import than
mere commencement of business. To establish a company for any
business means complete and permanent provision for carrying on
that business, and putting a company in operation may well include
its continued as well as its first or original operation.
This construction is supported by the prohibition to issue bills
or notes. Taking the act of establishment and putting in operation,
in the restricted sense of the instructions, the issue of
circulation could not precede but must follow those acts. The
prohibition of such issues, therefore, must be taken as proof that
the legislature did not use the words in that sense.
The emission and circulation of unauthorized notes and bills as
money was the main object and business of the company, and it was
precisely this object and business which the legislature intended
to defeat and prohibit.
We must construe the act, therefore, as covering with its penal
prohibition the whole range of devices by which illegitimate
currency is imposed on the community. It prohibits the use of such
currency during the whole period of the establishment of an illegal
company, and applied as completely to the last as to the first step
of its operations. Any other construction would frustrate the
legislative intent and leave the great mischief, which the statute
was made to prevent, wholly without restraint or check.
It was quite clear, upon the evidence, that McMahon entered into
the transaction, which resulted in the bill sued on, in the
expectation of profit from aiding the operation of the prohibited
banking company. He was engaged with its officers and stockholders
in the scheme of imposing upon the community a prohibited and
fraudulent currency. His name was upon its circulating bills, and
his credit promoted their circulation. His curator cannot look to
the law for remedies against his associates in this illegal
undertaking.
With this view of the statute and we cannot
Page 71 U. S. 456
distinguish this case from that of
Brown v. Tarkington,
[
Footnote 2] decided at the
last term. In that case, we held that notes given for a balance
found due on a settlement of accounts with an illegal banking
company, and for advances to redeem its circulation, could not be
enforced in favor of a payee who had been participant in the
illegal business. The bill in this case, in our judgment, is of the
same character.
It was urged in argument that the contract we have been
considering was made in Louisiana, and not invalid by the laws of
that state. But this is not so. The bill of exchange was made in
Tennessee. It bears date at Memphis, and was signed there, and the
contract of the defendant below was to be performed there. We by no
means say that it would be valid if made in Louisiana. It is not
necessary to consider that question; the laws of Tennessee
determine the question of its validity, and we think that according
to those laws it was invalid.
In our judgment, therefore, the fifth instruction was
erroneous.
The sixth and seventh instructions remain to be considered. The
sixth announced, without qualification, the proposition that the
holder of a bill of exchange, signed and endorsed in blank, has
unlimited authority to fill it up at pleasure and bind the signer
and endorser by his act.
This instruction cannot be sustained. The delivery of a bill of
exchange signed and endorsed in blank only authorizes the receiver,
as between himself and the drawer and endorser, to fill it up in
conformity with the authority given him. If there has been no
agreement, the authority is general; if there has, it must be
pursued. The burden of proof that there was an agreement, and that
its terms have been violated is in such a case upon the defendant;
but if he can make the proof it will avail him. No person, unless
authorized, either directly or by just inference from the nature of
the transaction, can fill up a blank bill for his own benefit, nor
can such a bill be enforced against the drawer
Page 71 U. S. 457
and endorser in favor of anyone who takes it in bad faith --
that is, with knowledge that it has been filled up without
authority or in fraud. [
Footnote
3]
It is highly probable that the court below intended that its
instructions should be taken with this limitation, but it was too
general in its terms, and was, we think, calculated to mislead the
jury.
The seventh instruction directed the jury in substance to find
for the plaintiff if satisfied that the bill was signed in blank
and delivered to Kirby to be sent to McMahon. It asserted that
McMahon had the right in the case supposed to fill up the bill with
any amount due him and make the drawers and endorsers liable on the
bill to himself.
It is doubtless true that, subject to the limitations just
stated, the delivery of a signature in blank is in general an
authority to the holder to fill it up as he thinks proper. This
rule, in its application to negotiable instruments, was very
clearly stated by MR. JUSTICE CLIFFORD in
The Bank of
Pittsburgh v. Neal, [
Footnote
4] as follows:
"Where a party to a negotiable instrument entrusts it to the
custody of another, with blanks not filled up, whether it be for
the purpose to accommodate the person to whom it was entrusted, or
to be used for his own benefit, such negotiable instrument carries
on its face an implied authority to fill up the blanks and perfect
the instrument; and as between such party and innocent third
parties the person to whom it was so entrusted must be deemed the
agent of the party who committed such instrument to his custody --
or in other words, it is the act of the principal, and he is bound
by it."
But the instruction before us went much further. It asserted the
right of a drawee to fill up a blank bill and hold the drawers and
endorsers, and this without any other authority than such as is
implied in the fact that the bill was sent to him by the last
endorser with the consent of the other endorser and of the
drawers.
Page 71 U. S. 458
Now it is quite clear that this fact implies no such authority.
The only inference to be drawn from the circumstance that the bill
was sent to McMahon in blank is that it was sent to him for
acceptance. The structure of the paper excludes any other
hypothesis. If, having received the bill in blank, he had accepted
it and negotiated it to a third person, without notice of facts
impeaching its validity between the antecedent parties, those
parties would have been bound to the holder. But he, as drawee,
could not transfer the bill to anybody without previous acceptance,
and still less could he treat it as an obligation to himself.
We think there was error in these instructions as well as in the
fifth.
The judgment of the district court must therefore be
reversed and the cause remanded for new trial in conformity with
this opinion.
[
Footnote 1]
Martin v. Hunter's
Lessee, 1 Wheat. 361;
Catlett v.
Brodie, 3 Wheat. 553.
[
Footnote 2]
70 U. S. 3 Wall.
377.
[
Footnote 3]
3 Kent's Com. 119; 10 Smedes & Marshall 590.
[
Footnote 4]
63 U. S. 22 How.
107.
