1. In a suit on a negotiable security, when the defendant has
shown strong circumstances of fraud in the origin of the
instrument, this casts upon the holder the necessity of showing
that he gave value for it before maturity.
Page 78 U. S. 140
2. In a case submitted to the court without a jury which finds
the facts constituting such fraud, and does not find that the
plaintiff gave value for the paper, the judgment was rightfully
given for the defendant.
Samuel Smith sued the County of Sac, Iowa, on certain interest
coupons attached to bonds purporting to have been issued by the
county for the erection of a courthouse.
According to the form of pleading in the Iowa courts, by
petition and answer, which is adopted in the circuit court for that
district, the plaintiff set out in a petition the adoption by vote
of the people of the county, at a special election held July 7,
1860, of a proposition submitted to them by the county judge,
providing for the erection of a courthouse, to cost $10,000, and
the issuing of the bonds to that amount &c.; that the
proposition and the result of the vote thereon were duly recorded
as required by law; that the bonds with coupons were issued
accordingly; and after describing, by number and otherwise,
twenty-five of the coupons, averred that the plaintiff was the
owner and holder of them, that he received them in good faith
before maturity
and paid value therefor, and that the same
are valid and legal claims against the county. Copies of the
proposition submitted, the record of the vote thereon, and the
bonds and coupons were made part of the petition. The bonds were
payable to bearer, signed by the county judge, and with the county
seal affixed, and recited on their face that they were
"issued by the said county, in accordance with a vote of the
legal voters thereof, at a special election holden on Saturday, the
7th day of July, A.D. 1860, pursuant to a proclamation made by the
county judge of said county, according to the statutes of the state
of Iowa in such case made and provided, for the purpose of erecting
a courthouse in Sac City, the county seat of said county, as per
said proclamation."
The concluding clause reads thus:
"In witness whereof, I, Eugene Criss, County Judge of said
County of Sac, have hereunto affixed my name, and caused the seal
of Sac County to be attached
at Sac City this first day of
October, A.D. 1860. "
Page 78 U. S. 141
The coupons were payable to the holder and signed by the county
judge. The answer opened thus:
"The defendant for answer denies that any such election as is
set out in the petition was called or held; denies that the
electors of said county (a majority of them) are in favor of
building a courthouse and issuing bonds in payment therefor; denies
that any such bonds or coupons were issued, or any such contract
let for building a courthouse; denies that the county judge had any
authority to call such election, or make such contract, or issue
such bonds or coupons; defendant further denies each and every
allegation in plaintiff's petition."
Various statements, intended to defeat the claim, were then
made.
It was stated by counsel at the bar, that the Revised Code of
Iowa [
Footnote 1] enacts that
an answer shall contain
"a general denial of
each allegation of the petition,
or else of any knowledge or information thereof, sufficient to form
a belief, OR a specific denial of each allegation of the petition
controverted by the defendant, or of any knowledge or information
thereof sufficient to form a belief. And also enacts [
Footnote 2] that every material allegation of
the petition, not controverted by the answer, must for the purposes
of the action be admitted to be true."
The case was submitted to the court, under the act of Congress
authorizing the trial of issues of fact in the circuit courts, by
the court, without a jury, and which [
Footnote 3] provides that "the finding of the court upon
the facts, which finding may be either general or special, shall
have the same effect as the verdict of a jury," and further
that
"When the finding is special, the review may also extend to the
determination of the sufficiency of the facts found to support
the judgment."
The court, on the evidence, found as the facts:
"1st. That an order and proclamation was made by Eugene
Page 78 U. S. 142
Criss, County Judge of Sac County, for submitting to the vote of
the people of the county, 'whether or not a courthouse should be
erected in the same, to cost $10,000, in bonds &c., and whether
or not a tax should be levied,' &c., as the same was alleged in
the plaintiff's petition."
"2d. That an election was held on the 7th July, 1860, in
pursuance of the said order and proclamation; and that the
proposition was adopted by a majority of the votes cast at said
election."
"3d. That the proposition and order for the submission of the
same, together with a statement of the result of the election, was
afterwards, by and under the direction of the said county judge,
entered and recorded at large in the office of the said county
judge in the 'Minute Book' of the county judge and county
court."
"That by the said record entry the said order for the submission
of the said proposition to the vote of the people purported to have
been made at a session of the county court on the 4th day of June,
A.D. 1860; but that the said record was not in fact made and
entered in the 'Minute Book' at that time, nor until after the
execution and delivery of the bonds, as hereinafter found, and that
the said order was entered in said 'Minute Book' in June, 1861,
after the said county judge had ceased to have any power or
jurisdiction over the financial business of the county."
"4th. That the said county judge of said county, having entered
into a contract in behalf of said county with one W. N. Meservy for
the erection by the said Meservy of a courthouse in and for said
county, did execute, October 1st, 1860, in behalf of the county, by
affixing thereto his signature as such county judge and the lawful
seal of said county, and deliver to Meservy, in pursuance of the
terms of the contract, ten bonds, purporting to be the bonds of the
county, dated &c., and coupons annexed, for the annual
installments of interest to grow due thereon as aforesaid, being
for one hundred dollars each, and payable to bearer at said bank,
or receivable for taxes at the county treasury of said county, at
the option of the holder. Said bonds and coupons were all expressed
in the same words and figures as set forth in the plaintiff's
petition."
"5th. That the said county judge in fact signed, sealed, and
delivered said bonds and coupons as aforesaid at Fort Dodge,
Page 78 U. S. 143
in the
County of Webster and State of Iowa, and not within
the County of Sac, and that the contractor, Meservy, gave one of
said bonds for $1,000 as a gratuity to the county judge as soon as
the same were delivered by said county judge to said Meservy, and
no courthouse was in fact ever built by said contractor or any
other person in pursuance of said contract."
"6th. That the plaintiff Smith was, at the time of commencing
this action and still is the holder and owner of twenty-five of the
coupons, being those declared on; that he became such holder by
transfer thereof to him before maturity, and after the entry of
said proceedings in the 'Minute Book,' as hereinbefore found; that
the said coupons were, at the commencement of this action, and
still were, wholly unpaid."
"And, as matter of law 'arising upon, and resulting
from the
facts hereinbefore found,' the court was of opinion and
adjudged that the said bonds and coupons were
wholly void
as against the said County of Sac, and that the defendant was
entitled to judgment."
To this opinion and judgment the plaintiff excepted.
On the case's coming here, the point was raised whether a
finding that the plaintiff had had value for his bonds was not
indispensable to sustain the judgment. There was not, as will have
been observed, any finding of that fact, nor did the record present
evidence to show it.
Page 78 U. S. 146
MR. JUSTICE MILLER delivered the opinion of the Court.
The plaintiff sets out in his petition all the proceedings, by
vote of the county, which he deems necessary to authorize the issue
of the bonds, with a copy of one of the bonds and coupons, and
after describing, by number and otherwise, twenty-five of the
coupons, avers that he is the owner and holder of them, that he
received them in good faith before maturity and paid value
therefor, and that the same are valid and legal claims against the
county.
The defendant answers denying each and every allegation of the
petition, and then sets up that the bonds were issued without
authority of law, failure of consideration, and other defenses.
The denials of the first part of the answer, though not strictly
in the form required by the rule, put in issue every material fact
alleged in the petition. It therefore made an issue on the
plaintiff's allegation that he became the holder of said coupons
before maturity, and that he paid value therefor so far as that
might become material to be shown on the trial.
The parties having by stipulation submitted the case to the
court without a jury, and the court made a special finding of
facts, on which it held the law to be for defendant, and rendered a
judgment accordingly, the question before us is whether the
judgment is justified by the facts found?
Treating the bonds and coupons sued on in this case,
Page 78 U. S. 147
which are payable to bearer, as negotiable paper, and conceding
to its fullest extent the protection which commercial usage throws
around such paper in the hands of a
bona fide purchaser
for value before maturity, it is nevertheless undoubtedly true that
circumstances may be shown in connection with the origin of such
paper which will devolve upon the holder the burden of showing that
he
did give value for it before maturity. This principle
is asserted in the textbooks of Chitty, [
Footnote 4] Story [
Footnote 5] Parsons, [
Footnote 6] and others, and is so laid down and sustained
by numerous citations of authorities by the learned American
annotator of Smith's Leading Cases, p. 752. In one of the latest of
the English cases,
Hall v. Featherstone, [
Footnote 7] Pollock, C.B., says:
"If there are any circumstances in the nature of fraud or
illegality which can be left to the jury, proof of these
circumstances will cast on the plaintiff the onus of showing that
he gave value for the bill."
To which Martin, Baron, added:
"I think there was, at the close of the defendant's case,
evidence for the jury in support of the plea. The authorities have
established a principle which is contrary to the general rule, by
which a defendant is bound to prove all the facts necessary to
constitute a defense."
And Bramwell said:
"The cases have established that if there be fraud or illegality
in the inception of a bill or in the circumstances under which it
was taken by the person who endorsed it to plaintiff, he must prove
consideration. That is established beyond controversy."
With this statement of the law on that subject, we approach the
examination of the facts found by the court.
The fifth finding is
"That the county judge in fact signed, sealed, and delivered
said bonds and coupons at Fort Dodge, in the County of Webster, and
State of Iowa, and not within the County of Sac, and that the
contractor, Meservy, gave one of said bonds as a gratuity to the
county judge as soon
Page 78 U. S. 148
as the same were delivered by said county judge to said Meservy,
and no courthouse was ever built by said contractor or any other
person in pursuance of said contract."
Now the coupons sued on, being part of the transaction here
referred to, was there not enough in what the court finds to
devolve upon the plaintiff the necessity of showing that he
purchased for value? In the language of Chief Baron Pollock, "were
there not circumstances in the nature of fraud, proof of which cast
on the plaintiff the onus of showing that he gave value for the
bonds?" They are circumstances from which no court or jury could
fail to find fraud in the inception of the bonds on which he sued.
Besides he had, perhaps unnecessarily, but expressly, averred that
he had paid value, and this had been denied by defendant, so that
the issue was fairly raised by the pleadings. He not only failed to
prove that he gave value, but it does not appear that he offered
any evidence to that effect. The bill of exceptions, which recites
much that was offered and submitted in evidence, is silent on this
point.
The sixth finding of the court is that the plaintiff was at the
time of commencing this action and still is the holder and owner of
the twenty-five coupons declared on in the petition, that he became
such holder by
transfer thereof to him before maturity,
and after the entry of the proceedings on the minute book
&c.
It must be taken, then, that plaintiff did not show that he was
a holder for value. There is neither finding nor evidence that he
gave value, and the statement that he became the holder by
transfer before maturity does not imply that he was a
purchaser in any sense or received them on any consideration
whatever.
Under these circumstances, the plaintiff can occupy no better
position than Meservy, to whom the bonds were originally delivered
by the county judge.
If Meservy had been plaintiff, ought the judgment to have been
other than what it is on the record presented to us?
He contracted to build the courthouse and never built it
Page 78 U. S. 149
or attempted to do so. He received under this contract ten
thousand dollars of what purported to be the bonds of the county.
These bonds were signed, and the county seal, which was necessary
to their validity, affixed by a person assuming to act as county
judge in another county, at the place where Meservy resided, and as
soon as the transaction was completed, one of the bonds was given
by Meservy as a gratuity to the person who had thus played the part
of county judge. That the county judge should have left his own
county and his official place of business, should have put the seal
of the county in his pocket, and gone to meet Meservy in a place
without the limits of his jurisdiction, should there have concocted
these bonds, and on delivering ten of them to Meservy have received
back one of them without any consideration but Meservy's
satisfaction at the completion of the transaction, and that this
should create in Meservy's favor a right of action against the
county, is more than we can affirm. That the courthouse was not
built is only the natural result of such a proceeding. That the
bonds should turn up in the possession of someone else was to be
expected. But to hold that, after all this was shown in defense,
such holder should have a judgment on those bonds, without any
proof that he purchased them for value or that he gave any
consideration for them at all is in our judgment pushing the
doctrine which gives sanctity to negotiable paper beyond any just
principle or any decided case.
We think the judgment of the circuit court was right, and it is
accordingly
Affirmed.
[
Footnote 1]
§ 2880.
[
Footnote 2]
§ 2917.
[
Footnote 3]
Act of March 3, 1865, § 4, 13 Stat. at Large p. 501.
[
Footnote 4]
Chitty on Bills 260, 648.
[
Footnote 5]
Story on Promissory Notes § 196.
[
Footnote 6]
2 Parsons on Notes and Bills 438.
[
Footnote 7]
3 Hurlstone & Norman 284.
MR. JUSTICE CLIFFORD, dissenting.
Coupons attached as interest warrants to bonds for the payment
of money lawfully issued by municipal corporations are negotiable
instruments, and as such, when they are payable to order and are
endorsed in blank, or are made payable to bearer, are transferable
by delivery and are subject to the same commercial rules and
regulations, so far as
Page 78 U. S. 150
respects the title and rights of the holder, as negotiable bills
of exchange and promissory notes. [
Footnote 2/1]
Holders of such instruments, if the same are endorsed in blank
or are made payable to bearer, stand upon the same footing as the
holders of negotiable bills of exchange or promissory notes, and
are as effectually shielded from the defense of prior equities
between the original parties to the instrument, if unknown to them
at the time of the transfer, as the holders of any other class of
negotiable instruments. [
Footnote
2/2]
Such instruments are protected from defenses of the kind when in
the possession of an endorsee not merely because they are
negotiable, but also because they are regarded as commercial
instruments, and as such are favored as well on account of their
negotiable quality as their general convenience in mercantile
affairs. [
Footnote 2/3]
Bonds for the payment of money, with interest warrants attached,
are now universally classed with bills of exchange and promissory
notes as negotiable instruments, and as such are everywhere
encouraged as a safe and convenient medium for the settlement of
balances among mercantile men, and any course of judicial decision
calculated to withdraw such instruments from the operation of the
general rules of commercial law usually applied in controversies
respecting the title to the same, or to restrain or impede their
free and unembarrassed circulation, would be contrary to the
soundest principles of public policy. [
Footnote 2/4]
On the first day of October, 1860, ten bonds, each for the sum
of one thousand dollars, payable to bearer, one each succeeding
year till the whole sum was paid, with interest at the rate of ten
percentum per annum, were issued by the defendant corporation "for
the purpose of erecting a courthouse
Page 78 U. S. 151
in Sac City, the county seat of the county," as alleged in the
recitals of each bond. They were numbered from one to ten
inclusive, and they also contained the recital that they "were
issued by the county in accordance with a vote of the legal voters
thereof" at a special election, holden on the day therein
mentioned, pursuant to a proclamation made by the county judge,
according to the statutes of the state in such case made and
provided.
Annexed to the several bonds were the coupons, one or more, as
provided in the same, for the payment of the annual interest, and
the plaintiff being the holder of twenty-five of those coupons
instituted the present suit to recover the amount, together with
six percent interest from their maturity, and he alleged in his
declaration that he was the holder and owner of the coupons therein
described; that he received the same in good faith before their
maturity, and that he paid value for the same at the time of their
transfer; that the bonds and coupons were issued by the county
under and by virtue of a legal and competent authority conferred
upon the officers and agents of the county, and that the same are
valid and legal claims against the defendant corporation.
Most of the allegations of the declaration are denied in the
answer, but the defendants do not specifically deny that the
plaintiff paid value for the coupons at the time he became the
holder and owner of the instruments. They deny that any such
election as that set forth was ever called or held, or that the
county judge had any authority to call such an election or to make
any contract to build a courthouse or to issue any such bonds or
coupons, or that any such bonds or coupons were ever issued, and
they append to those specific denials a general denial of each and
every allegation of the declaration, which really amounts to
nothing in any case in that jurisdiction, as the code of the state,
which is adopted by the circuit court, provides that every material
allegation of the declaration not denied in the answer shall be
considered as admitted. [
Footnote
2/5] Where the general issue may
Page 78 U. S. 152
be pleaded, the rule would be different, but the code expressly
abolishes the general issue and adopts the rule that every material
allegation of the declaration is admitted unless it is specifically
denied in the answer. [
Footnote
2/6]
Apart from the preceding denials, the defendants also allege
that the bonds and coupons were issued without authority and that
the plaintiff, at the time he purchased the same, had full
knowledge of those facts.
Special matters in avoidance of the claim of the plaintiff are
also set up as a defense in the third article of the answer, in
which the defendants allege that the county judge, or the person
claiming to act as such, entered into a contract for the building
of a courthouse at Sac City, the county seat of the county, to be
commenced and completed at the times therein specified; that the
county judge agreed and undertook in behalf of the county to pay
the contractor for erecting and completing the courthouse the sum
of ten thousand dollars, and to issue the bonds of the county to
that amount, as described in the declaration; that the bonds and
coupons were subsequently issued in pursuance of the contract, and
that they were delivered to the contractor, but that the contractor
wholly failed and refused to build the courthouse, whereby the
consideration of the bonds and coupons wholly failed, and the
defendants allege that the plaintiff, at the time he purchased the
bonds, had full and complete knowledge of all these facts and that
he took the same subject to the rights and equities of the
defendant corporation.
Before the trial, the parties filed a stipulation in writing
agreeing that the case might be heard and determined by the court
without the intervention of a jury, and the record shows that it
was so determined. Where the case is so tried, the finding of the
court may be either general or special, and the express provision
is, that the finding shall have the same effect as the verdict of a
jury. [
Footnote 2/7]
Exceptions may be taken to the rulings of the court made in the
progress of the cause, and when the rulings are duly
Page 78 U. S. 153
presented by a bill of exceptions, they may be reexamined in
this Court by writ of error if it is an action at law or by appeal
if it is a suit in equity. Evidently, when the finding is general,
the legal effect of the proceeding is in every respect the same as
the verdict of a jury at common law, as nothing is open to
reexamination except the rulings of the court; but when the finding
is special, it is expressly enacted that "the review may also
extend to the determination of the sufficiency of the facts found
to support the judgment."
Special findings were made by the court, from which it appears
that the questions, whether a courthouse should be erected, to cost
ten thousand dollars in the bonds of the county, and whether a tax
sufficient to liquidate the demands as they became due should be
annually levied, were duly submitted to the voters of the county;
that the propositions were adopted, at a special election held on
the day therein mentioned, by a majority of all the votes cast at
the election, and that the proposition and the order for the
submission of the same, together with a statement of the result of
the election, were afterwards entered and recorded at large in the
minute book of the county court, as alleged by the plaintiff; that
the county judge made the contract for the erection of a
courthouse, as alleged, and that he executed in behalf of the
county the ten bonds described in the declaration, affixing thereto
his signature as such county judge and the lawful seal of the
county, and that he delivered the same to the contractor in
pursuance of the terms of the contract, and that correct copies of
the bonds and coupons are contained and set forth in the record.
Had the findings of the court stopped there, all undoubtedly would
agree that the plaintiff ought to recover, as it is universally
admitted that the transferee of a negotiable instrument, made
payable subsequent to its date, holds it clothed with the
presumption that it was negotiated to him, at the time of its
execution, in the usual course of business and for value, and
without notice of any equities between the prior parties to the
instrument. [
Footnote 2/8]
Page 78 U. S. 154
Such is the settled rule of commercial law applicable to
negotiable instruments, and it was so framed and is so administered
in order to encourage the free circulation of negotiable paper by
giving confidence and security to those who receive it for value,
and this principle is so comprehensive in respect to such
negotiable instruments as pass by delivery that the title and
possession are considered as one and inseparable, and in the
absence of any explanation, the law presumes that the party in
possession holds the instrument for value until the contrary is
made to appear, and the burden of proof is on the party impeaching
his title. [
Footnote 2/9]
In the ordinary course of business, the holder is presumed to be
prima facie a holder for value, and he is not bound to
introduce any evidence to show that he gave value for the
instrument until the other party has clearly proved that the
consideration of the instrument was illegal, or that it was
fraudulent in its inception, or that it had been lost or stolen
before it came to the possession of the holder. [
Footnote 2/10]
Possession, even without any explanation, is
prima
facie or presumptive evidence that the holder is the proper
owner or lawful possessor of the instrument, and Judge Story says
that nothing short of fraud, not even gross negligence, is
sufficient to overcome that presumption and invalidate the title of
the holder as inferred from possession. [
Footnote 2/11]
In this last case, Lord Denman said the owner of a bill is
entitled to recover upon it if he came by it honestly, and that
fact is implied
prima facie by possession, and to meet the
inference so raised, fraud, felony, or some such matter, must be
proved. [
Footnote 2/12]
Page 78 U. S. 155
Coupon bonds of the ordinary kind, payable to bearer, said the
court in the case of
Murray v. Lardner, [
Footnote 2/13] pass by delivery, and a purchaser
of them in good faith is unaffected by want of title in the vendor,
adding, what is undoubted law, that the burden of proof on a
question of such faith lies on the party who assails the
possession. [
Footnote 2/14]
Apply those rules in a suit in the name of the transferee
against the maker, and it is clear that the plaintiff, where the
case is tried to the jury under the general issue, has nothing to
do except to prove the signatures to the instrument and introduce
the same in evidence, as the instrument goes to the jury clothed
with the presumption that the plaintiff became the holder of the
same for value at its date in the usual course of business, without
notice of anything to impeach his title. [
Footnote 2/15]
Clothed, as the instrument is, with those several presumptions,
the plaintiff is regarded as a
bona fide holder for value,
without notice of any equities between the antecedent parties, and
therefore is entitled to recover upon the instrument
notwithstanding any defect or infirmity in the title of the person
from whom he derived it, as, for example, even though such person
may have acquired it by fraud, or even by theft or robbery.
[
Footnote 2/16]
Comment was made at the argument upon the matter stated in the
third finding, that the order for the submission was not, in fact,
recorded in the minute book of the county court at the time it
purports to have been entered; but the same finding shows that it
purports to have been recorded at that time; and the sixth finding
shows that the plaintiff became the holder and owner of the
twenty-five coupons described in the declaration, before maturity,
and after the entry of the proceedings in the minute book, which
shows to a demonstration that he, as the transferee of the
coupons,
Page 78 U. S. 156
cannot be affected by any delay of the recording officer in
entering the proceedings in the minute book of the county
court.
Money may be borrowed by a county to aid in the erection of
public buildings, and it is well settled law that a municipal
corporation, in exercising such an authority, may issue its bonds
as the means of accomplishing the object. [
Footnote 2/17]
When a corporation has power, under any circumstances, to issue
negotiable securities, the settled rule in this Court is that the
bona fide holder has a right to presume that they were
issued under the circumstances which give the requisite authority,
and they are no more liable to be impeached for any infirmity in
the hands of such a holder than any other commercial paper.
[
Footnote 2/18]
Objection to the validity of the bonds and coupons is also made
because the third finding of the court shows that the proceedings
were not recorded till after the county judge had ceased to have
jurisdiction over the financial business of the county. Reference
is there made to the fact that the power to make such orders and to
submit such questions to the people of the county had, before the
proceedings were recorded, been transferred from the county judge
to the supervisors of the county, but this Court held, in the case
of
Supervisors v. Schenck, [
Footnote 2/19] that such an irregularity would not
invalidate such securities in the hands of subsequent holders
without notice, and there can be no doubt that the rule as there
laid down is correct. By the findings it appears that the plaintiff
became the holder and owner of these coupons before maturity and
after the proceedings were correctly entered in the minute book,
and it is not found, nor could it be, that he had any notice
whatever of the supposed irregularities. [
Footnote 2/20]
Page 78 U. S. 157
Evidence that he had notice of any defect in the title is
entirely wanting, but the case of the plaintiff in respect to the
payment of value does not depend solely nor chiefly upon the
presumption to that effect, which always arises in favor of a
transferee from the possession of the instrument. Usually that
presumption is considered sufficient, but the case of the plaintiff
is much strengthened from the fact that the allegation in the
declaration that he paid value for the coupons is not specifically
denied in the answer. Taken together, as these several matters must
be, they establish the conclusion that the plaintiff did pay value
for the coupons at the time of the transfer, and if so, then he
clearly is entitled to recover, as it is expressly found by the
court that they were transferred to him before maturity, and it is
not pretended that he had any notice whatever of the supposed
defects in the proceedings, or of any equities between the obligors
of the bonds and any prior holder of the coupons.
No courthouse was ever built by the contractor, but a valid
contract for the erection of such a public building was made
between the contractor and the county judge, acting in behalf of
the county, at the time the bonds and coupons were executed and
delivered, and it is well settled law that such an executory
contract is a good consideration for a negotiable instrument, and
that the failure to perform the contract is no defense to the
negotiable instrument in the hands of an innocent holder. If one
will issue his negotiable paper and send it into the world in
consideration of an engagement of the party with whom he deals to
do some act for his benefit in the future, he declares in effect
that he will pay the note or bill according to its terms to anyone
who shall become the holder for value in the usual course of
business. [
Footnote 2/21]
Considerations founded upon reciprocal promises of the parties
are of common occurrence in business, and bills and notes supported
by such considerations have always been held valid, and the
principle is as applicable to corporations as individuals.
Page 78 U. S. 158
Interest warrants or coupons, each for the sum of one hundred
dollars for the annual installments of interest, were annexed to
each bond, payable at the Metropolitan Bank in the City of New
York, and the concluding recital of each bond was as follows:
"In witness whereof I, Eugene Criss, County Judge of said County
of Sac, have hereunto affixed my name and caused the seal of Sac
County to be attached, at Sac City, the first day of October, A.D.
one thousand eight hundred and sixty."
Title and possession of such coupons are one and inseparable, as
the holder is entitled to the same privileges and immunities as an
endorsee having taken a note by endorsement in the course of
business before it has become due. He is not subject to any
equities as between the promissor and the original payee, nor to
the setoff of any debt, legal or equitable, which the latter may
owe to the former.
By giving a negotiable instrument payable to bearer at a future
day the maker of the instrument promises to pay the amount to any
person to whom it may be transferred before the day of payment,
without claiming to setoff any demand which he then has or may
acquire against the promissor. Possession is plenary evidence of
title "until other evidence is produced to control it." [
Footnote 2/22]
Where the theory that the plaintiff paid value for the
instrument depends solely upon the
prima facie presumption
arising from the possession of the instrument the defendant may, if
the pleadings admit of such a defense, prove that the instrument
originated in illegality or fraud, and the rule is, if he
establishes such a defense, that a presumption arises that a
subsequent holder gave no value for it, and it is also true that
such a presumption will support a plea that the holder is a holder
without consideration, unless the presumption is rebutted by the
plaintiff by showing that he gave value, in which event the
plaintiff is still entitled to recover. [
Footnote 2/23]
Page 78 U. S. 159
But the defendant is not permitted to put the plaintiff to proof
of the consideration he gave for the instrument unless the
defendant can prove that the instrument was obtained from the
defendant or from some intermediate party by undue means, as by
fraud or force, or that it was lost or stolen, or that it was
originally infected with illegality. [
Footnote 2/24]
Nothing of the kind was found by the circuit court, and the only
evidence introduced to support any such theory was what is detailed
in the fifth finding of the court, by which it appears that the
county judge signed, sealed, and delivered the bonds and coupons to
the contractor at Fort Dodge, in the County of Webster, in that
state, and not in the County of Sac, as recited in the respective
bonds; and that the contractor gave one of the bonds as a gratuity
to the county judge as soon as the same were delivered to him by
the contractor.
Such evidence, if it had been introduced to a jury, might
possibly have had some slight tendency to prove fraud in the
inception of the instruments, and it may also be conceded that the
fact reported that the contractor gave one of the bonds to the
county judge, would have been admissible in evidence, as a
circumstance tending to prove the same theory, but if the jury did
not find that the instruments were fraudulent in their inception a
court of errors could not supply the omission, as the act of
Congress does not give to this Court power to do more than "to
review the questions presented in the bills of exceptions and to
determine, where the finding is special," whether the facts found
are sufficient to support the judgment.
Unless the finding is special the act of Congress does not give
this Court jurisdiction to reexamine anything except the rulings of
the court, but when the finding is special the court may also
determine the question whether the facts
Page 78 U. S. 160
found are sufficient to support the judgment, showing to a
demonstration that the special findings of the court are regarded
as governed by the same rules as the special verdict of a jury.
They must be governed by the same rules as a special verdict
because they are required to be reviewed "upon a writ of error,"
where the suit is an action at law, and the twenty-second section
of the Judiciary Act provides that there shall be no reversal of a
judgment in an action at law for any error of fact in any case
removed here under that section. [
Footnote 2/25]
Forty-five years ago, this Court decided that matters of fact in
actions at law, brought here by writ of error, could not be
submitted to the judgment of this Court, and the rule adopted on
that occasion has never been qualified by any subsequent decision.
[
Footnote 2/26]
Authority to determine issues of fact brought here under that
provision does not exist in this Court, to matter what may be the
evidence as reported in the record, as the power to try and
determine the facts is, by the express terms of the act, vested in
the circuit court and not in the Supreme Court. All this Court can
do is to reexamine the rulings, if any, presented in the bill of
exceptions and to determine whether "the facts found" -- that is,
the facts found by the circuit court -- are sufficient to support
the judgment rendered thereon by that court; and in making that
determination, the Supreme Court, acting as a court of errors, must
be governed exclusively by the facts found in the circuit court to
which the writ of error is addressed.
Fraud in the inception of the bonds and coupons is not found by
the circuit court, and in the absence of such a finding it is
settled law that the holder is presumed to be a holder for value in
the usual course of business, and without notice of any equities
between the antecedent parties. He is presumed to be a holder for
value, and the Supreme Court,
Page 78 U. S. 161
as a court of errors, cannot import into the special finding by
intendment anything which the finding does not contain. Mere
evidence of fraud cannot be taken into consideration by this Court
in a case brought here by a writ of error under that act of
Congress, as the jurisdiction of the court is expressly limited to
a review or reexamination of the questions whether the findings of
the circuit court are sufficient to support the legal conclusion
adopted by the circuit court. Such findings cannot be enlarged by
intendment any more than a special verdict, and it is the very
essence of a special verdict that the jury should find the facts on
which the appellate court is to pronounce the judgment according to
law, and the court in giving judgment is confined to the facts so
found.
Repeated decisions of this Court have determined that every
special verdict, in order to enable the appellate court to act upon
it, must find the facts and not merely state the evidence of facts,
as where it states the evidence merely without stating the
conclusions of the jury a court of errors cannot act upon such
matters even though the evidence reported may be sufficient to
justify the assumed conclusion. [
Footnote 2/27]
Jurisdiction to adjudicate upon evidence in a suit brought here
under the twenty-second section of the Judiciary Act is not
conferred upon this Court, nor can this Court perform the office of
a jury by drawing the conclusions of fact from the evidence given
at the trial, nor is it in the power of the parties to impose such
a jurisdiction upon this Court, as the jurisdiction and power of
the court are settled and defined by the Constitution and the laws
of Congress. [
Footnote 2/28]
Nothing short of conclusions of fact will answer the requirement
of the law in a court of errors, whether the foundation of the
judgment is an agreed statement, a special verdict, or a special
finding under the recent act of Congress, as in the case before the
court. What is required is that the findings shall contain the
conclusions of fact, or, as the rule
Page 78 U. S. 162
is stated in a recent decision of this Court,
"a statement of
the ultimate facts or propositions
which the evidence is intended to establish, and not the evidence
on which those ultimate facts are supposed to rest. [
Footnote 2/29]"
Whether the foundation of the judgment be a statement of facts,
a special verdict, or a special finding, the statement must be
sufficient
in itself, without inferences or comparisons or
balancing of testimony or weighing evidence, to justify the
application of legal principles which must determine the case.
[
Footnote 2/30]
Where the essential facts in a special verdict are not
distinctly found by the jury the Supreme Court will not
reexamine them, but the court will award a new venire and remand
the cause to the court below, as an appellate court of errors
cannot intend what is not found, nor can a judgment be rendered in
any case where the special verdict is defective in stating the
evidence of the fact instead of the fact itself, which is the
precise difficulty in the present record. [
Footnote 2/31]
Sufficient facts, however, are not reported in this record to
warrant a jury in finding that the bonds and coupons described in
the declaration were fraudulent in their inception, but if that
were so still there ought to be a new trial, that the plaintiff may
have an opportunity to show that he paid value for the coupons, in
which event he would be entitled to a verdict.
Full authority was vested in the county judge to execute the
bonds, and the mere fact that he was temporarily in another county
of the state when he signed his name to the same and affixed the
seal of the county thereto is not of itself sufficient to
invalidate the bonds, even if the evidence be admissible to
contradict the recitals which the bonds contain, as those facts are
not necessarily evidence of any fraudulent
Page 78 U. S. 163
intent. He may have been detained there by sickness or accident,
and he may have executed the bonds while there to prevent delay or
a breach of the agreement as to time with the contractor.
Negotiable securities of a corporation which upon their face
appear to have been duly issued by the corporation and in
conformity with the provisions of their charter are valid in the
hands of a
bona fide holder thereof without notice,
although such securities were in point of fact issued at a place
and for a purpose not authorized by the character of the
corporation. [
Footnote 2/32]
Unquestionably these securities are in due form and purport on
their face to have been executed at Sac City in the County of Sac,
and there is not a scintilla of evidence that the plaintiff, as a
subsequent transferee, had the slightest knowledge that the
recitals did not speak the truth.
Evidence was also offered, as appears by the fifth finding, that
the contractor gave one of the bonds as a gratuity to the county
judge as soon as they were delivered in execution of the contract.
Such evidence might have some tendency to prove fraud in the
transaction, but it is not the same thing as fraud. On the
contrary, it was only a circumstantial fact from which an inference
of fraud might or might not be drawn by a jury or other tribunal
authorized to draw such inference from all the evidence in the
case.
Inferences of fact, said Tindal, C.J., in
Tancred v.
Christy, [
Footnote 2/33]
"must be drawn by the jury, and cannot be drawn by a court of
errors." Ultimate facts, said MR. JUSTICE MILLER, or propositions
which the evidence is intended to establish, is what is required,
and not the evidence on which those ultimate facts are supposed to
rest, and he added that the finding must be sufficient in itself,
without inferences or comparisons or balancing of
testimony or weighing evidence. [
Footnote 2/34]
Page 78 U. S. 164
Apply those rules to the present case, and it is clear that the
findings are not sufficient to support the judgment, and that there
should be a new venire, giving the defendants an opportunity to
show, if they can, that the bonds were fraudulent in their
inception, and the plaintiff an opportunity to show, if he can,
that he paid value for the coupons at the time of the transfer.
[
Footnote 2/1]
White v. Railroad
Co., 21 How. 575;
Murray v.
Lardner, 2 Wall. 110;
Moran v.
Miami Co., 2 Black 722;
Mercer Co.
v. Hacket, 1 Wall. 83;
Gelpcke v.
Dubuque, 1 Wall. 176;
Meyer
v. Muscatine, 1 Wall. 385.
[
Footnote 2/2]
Chester v. Dorr, 41 N.Y. 282;
Turnbull v.
Bowyer, 40
id. 460.
[
Footnote 2/3]
Thomson v. Lee
County, 3 Wall. 327;
Park Bank v. Watson,
42 N.Y. 492.
[
Footnote 2/4]
Goodman v.
Simonds, 20 How. 364.
[
Footnote 2/5]
Revision, 531.
[
Footnote 2/6]
Revision 508, 519.
[
Footnote 2/7]
13 Stat. at Large 501.
[
Footnote 2/8]
Goodman v. Harvey, 4 Adolphus & Ellis 870;
Goodman v.
Simonds, 20 How. 365;
Noxon v. De Wolf, 10
Gray 346.
[
Footnote 2/9]
Wheeler v. Guild, 20 Pickering 551;
Collins v.
Martin, 1 Bosanquet & Puller 648;
Miller v. Race,
1 Burrow 452;
Peacock v. Rhodes, 2 Douglass 633;
Grant
v. Vaughan, 3 Burrow 1516;
Lawson v. Weston, 4
Espinasse 56.
[
Footnote 2/10]
Story on Bills, 4th ed., § 416; Byles on Bills, 10th ed. 119;
Mills v. Barber, 1 Meeson & Welsby 425;
Sistermans
v. Field, 9 Gray 336.
[
Footnote 2/11]
Story on Bills § 415;
Uther v. Rich, 10 Adolphus &
Ellis 784;
Bailey v. Bidwell, 13 Meeson & Welsby 73;
Raphael v. Bank of England, 33 English Law and Equity 276;
Stephens v. Foster, 6 Carrington & Payne 289,
Arbouin v. Anderson, 1 Adolphus & Ellis N.S. 498.
[
Footnote 2/12]
Wyman v. Fisk, 3 Gray 238;
Bailey v. Bidwell,
13 Meeson & Welsby 76;
Smith v. Braine, 16 Adolphus
& Ellis N.S. 244.
[
Footnote 2/13]
69 U. S. 2
Wall. 121.
[
Footnote 2/14]
Ranger v. Cary, 1 Metcalf 369.
[
Footnote 2/15]
Pettee v. Prout, 3 Gray 503;
Bank v. Leighton,
Law Rep., 2 Exchequer 61;
Way v. Richardson, 3 Gray
413.
[
Footnote 2/16]
Chitty on Bills, 12th ed. 257;
Bank of Bengal v.
Macleod, 7 Moore's Privy Council 35;
Backhouse v.
Harrison, 5 Barnewall & Adolphus 1105.
[
Footnote 2/17]
Code § 114; Revision § 250;
Hull v. Marshall Co., 12
Ia. 142;
Rogers v.
Burlington, 3 Wall. 666;
Seybert v.
Pittsburg, 1 Wall. 272.
[
Footnote 2/18]
Supervisors v.
Schenck, 5 Wall. 784;
Gelpcke v.
Dubuque, 1 Wall. 203;
Savings Co. v. New
London, 29 Conn. 174;
Tash v. Adams, 10 Cushing
252.
[
Footnote 2/19]
72 U. S. 5
Wall. 780.
[
Footnote 2/20]
State v. Delafield, 8 Paige 533;
S.C., 2 Hill
177.
[
Footnote 2/21]
Davis v. McCready, 17 N.Y. 232.
[
Footnote 2/22]
Pettee v. Prout, 3 Gray 503;
Magee v. Badger,
34 N.Y. 248;
Hoge v. Lansing, 35
id. 137.
[
Footnote 2/23]
Fitch v. Jones, 5 Ellis & Blackburne 238;
Smith
v. Braine, 16 Q.B. 244;
Hall v. Featherstone, 3
Hurlstone & Norman 287;
Tucker v. Morrill, 1 Allen
528; 2 Parsons on Bills and Notes 438.
[
Footnote 2/24]
Byles on Bills, 10th ed. 119;
Harvey v. Towers, 6
Exchequer 656;
Mather v. Maidstone, 1 C.B., N.S. 273;
Mills v. Barber, 1 Meeson & Welsby 425;
Percival
v. Frampton, 2 Crompton, Meeson & Roscoe, 180.
[
Footnote 2/25]
1 Stat. at Large 85.
[
Footnote 2/26]
Barnes v.
Williams, 11 Wheat. 415;
Shankland v.
Washington, 5 Pet. 397;
Suydam
v. Williamson, 20 How. 434.
[
Footnote 2/27]
Suydam v.
Williamson, 20 How. 432.
[
Footnote 2/28]
Ewing v.
Burnet, 11 Pet. 41;
United
States v. Laub, 12 Pet. 1;
Richardson
v. Boston, 19 How. 263.
[
Footnote 2/29]
Burr v. Des Moines
Co., 1 Wall. 102.
[
Footnote 2/30]
Seward v. Jackson, 8 Cowen 412;
United
States v. Adams, 6 Wall. 111;
Mumford v.
Wardwell, 6 Wall. 432; 3 Blackstone's Com. 378.
[
Footnote 2/31]
Barnes v.
Williams, 11 Wheat. 415; 2 Tidd's Practice, 4th
Amer. ed. 896.
[
Footnote 2/32]
Supervisors v.
Schenck, 5 Wall. 784;
Stoney v. Life Ins.
Co., 11 Paige 635.
[
Footnote 2/33]
12 Meeson & Welsby 323.
[
Footnote 2/34]
Burr v. Des Moines
Co., 1 Wall. 102; 1 Archbold, Practice, 11th ed.
451.