Mechanics' & Traders' Bank v. Union Bank,
89 U.S. 276 (1874)

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U.S. Supreme Court

Mechanics' & Traders' Bank v. Union Bank, 89 U.S. 22 Wall. 276 276 (1874)

Mechanics' & Traders' Bank v. Union Bank

89 U.S. (22 Wall.) 276


1. The Constitution did not prohibit the creation by military authority of courts for the trial of civil causes during the civil war in conquered portions of the insurgent states. The establishment of such courts was the exercise of the ordinary rights of conquest.

2. A court established by proclamation of the Commanding General in New Orleans on the 1st of May, 1862, on the occupation of the city by the government forces will, in the absence of proof to the contrary, be presumed to have been authorized by the President.

3. Though called, in the order establishing it, a Provost Court, a larger jurisdiction than one over minor criminal offenses might in fact have validly been given to it by the power which constituted it.

4. Whether such court acted within its jurisdiction in a case where one bank of the State of Louisiana was claiming from another bank of the same state a large sum of money is not a question for this Court to determine, but a question exclusively for the state tribunals.

The State of Louisiana, as is known, during the late rebellion joined the rebel forces. On or about the 29th of April, 1862, however, the government forces under General Butler -- then in command of the conquering and occupying army and commissioned to carry on the war in the Department

Page 89 U. S. 277

of the Gulf, a department which included Louisiana -- took possession of New Orleans. At the time of his thus occupying the city, the only money then circulating there was notes issued by the rebel confederacy -- "Confederate notes." In the confusion of things for a few days after the capture, it did not appear plainly to the people generally what would be done about these notes, and there being no other sort of money whatever in general circulation, General Butler, on the 1st of May, 1862, in the necessities of the case, issued a proclamation allowing the circulation of them "until further orders."

On the day following, by general order, he established a court. The powers of the court were not defined otherwise than by the order establishing it. The order said:

"Major J. M. Bell, volunteer aid-de-camp, of the division staff, is hereby appointed Provost Judge of the City of New Orleans, and will be obeyed and respected accordingly."

"Captain J. H. French, aid-de-camp and acting inspector general, is hereby appointed Provost Marshal of the City of New Orleans, and Captain Stafford, volunteer aid-de-camp Deputy Provost Marshal. They will be obeyed and respected accordingly."

No direct authorization or approval of this court by the President was shown, nor any direct evidence that it was not authorized by him or that he disapproved it.

At different dates between the 5th and 13th of May, 1862, the Union Bank of New Orleans lent to the Mechanics' and Traders' Bank there $130,000 in Confederate notes, which still had a circulation of a certain kind. Whether any specific agreement was made between the two banks as to the sort of notes in which the money borrowed should be returned -- that is to say, whether it was agreed that it should be returned in Confederate notes or whether there was no understanding or agreement in relation to the payment except that tacitly understood, that it should be returned in notes as current at the time of payment as were the Confederate notes when borrowed -- this was a matter not clear; the great weight of evidence, however, as the reporter read

Page 89 U. S. 278

it, being that there was no understanding in the case other than that last mentioned.

On the 16th of May, 1862, General Butler by general order directed that on the 27th following -- that is to say, within eleven days -- all circulation of or trade in Confederate notes should cease within his department. The depreciation of them, of course, was rapid and great, though the Confederation not yet having fallen to pieces, the notes had some circulation, though a circulation at a great discount compared with good money in other places in the South.

In this depreciated state of them, the Mechanics' and Traders' Bank, on the 26th of May -- that is to say, the day before the notes were to cease circulating in New Orleans, and thereabouts -- not then owning any such amount of the notes, tendered to the Union Bank in Confederate notes the $130,000 borrowed, with interest. The Union Bank declined to receive them, and soon after brought suit in the Provost Court to recover in good money the $130,000 lent. That court dismissed the suit, holding that the loan was payable as the borrowing bank had offered to pay it -- that is to say, in Confederate money. However, the parties were summoned afterwards before General Butler, who heard an argument from the counsel of the borrowing bank. On a still later day they appeared again before the Provost Court, when the counsel of the borrowing bank being about to make an argument to show the rectitude of the former decision, the provost judge, according to the testimony of the president of that bank, said that he had been ordered to reopen the case and grant a new trial; that counsel "need read no law to him, for the case would be decided under orders." The borrowing bank accordingly paid the $130,000 and interest in lawful money of the United States, paying it, however, under protest.

It may be here stated as part of the general history of things -- though no part of this appeared in the record -- that on the 20th of October, 1862 -- a little less than six months after General Butler established his court already mentioned -- the federal occupation in Louisiana having now

Page 89 U. S. 279

become secure and more extended, President Lincoln himself established at New Orleans, in a formal way, by commission, under the seal of the United States, what was called the "Provisional Court," declaring that it should be a court of record for the State of Louisiana and appointing Mr. Charles A. Peabody judge thereof. This court was in form authorized to hear and determine all causes, civil and criminal. [Footnote 1]

Page 89 U. S. 280

The lending bank now sued the other bank in one of the inferior courts of Louisiana to recover the money.

Its petition adverted to certain clauses of the Constitution, among them to those clauses which ordain that,

"The judicial power of the United States shall be vested in one Supreme Court and in such inferior courts as the Congress may from time to time ordain."

And also that,

"The President . . . shall nominate, and by and with the advice of the senate . . . shall appoint judges of the Supreme Court, and all other officers of the United States whose appointments are not herein otherwise provided for."

And assuming, apparently, that the court established by General Butler, if not meant to be a mere provost's court -- that is to say, a court confined to the trial of criminal matters and therefore without jurisdiction in a civil one such as this suit -- was of necessity meant by the said Butler to be an establishment by him as a commanding officer of the United States in an occupied city, of a court of the United States, with a judge of the same appointed by him, it went on to submit that:

"The ordaining and establishing by General Butler of the said court, the appointment of Major Bell as the judge thereof by the said general, and the action and proceedings of the latter in the premises were acts in violation of the Constitution, and consequently null and void, conferring no right on the Union Bank to invoke the authority of the said Bell to obtain from him judgment in behalf of the said bank against the defendant compelling it to pay to the said bank the sum adjudged by Bell to be due to it."

It submitted further:

"That if the court had been one endowed with perfect jurisdiction, the interference of General Butler in the administration by its judge of its justice, and causing him to make decisions 'under orders,' rendered void all that he did."

It then alleged that it did not owe to the Union Bank the money which it had been made to pay under an order at

Page 89 U. S. 281

once unjust and in violation of the Constitution, and which had been made effective only through military force, and that all this being so it was entitled ex aequo et bono to have back the money thus taken away.

The petition admitted, as respected the Union Bank, that in all that it had done it had acted as it thought that it ought to act, and had been seeking to recover what it deemed to be a just debt by a proceeding which it deemed a fair one. Accordingly all claim for damages was waived.

Previously to the case's coming on to be heard before the inferior state court of Louisiana, that state adopted a constitution, of which the 149th article was thus:

"All rights, actions, prosecutions, claims, contracts, and all laws in force at the time of the adoption of this constitution and not inconsistent therewith shall continue as if it had not been adopted; all judgments and judicial sales, marriages, and executed contracts made in good faith and in accordance with existing laws in this state rendered, made, or entered into, between the 26th day of January, 1861, and the date when this constitution shall be adopted are hereby declared to be valid,"


Having heard the case, the state court in which the suit was brought said:

"Conceding for the sake of argument the incompetence of the Provost Court to render the judgment it did against the borrowing bank, the practical effect of its judgment, viz., the payment of the money, cannot now be inquired into with a view to its restitution, for two reasons:"

"1st. There was a valid obligation on the part of the borrowing bank to pay the amount borrowed, and after the money has been paid, it is immaterial, in a civil point of view, by what means the payment was enforced. Had the officers of the Union Bank forcibly taken the money from the vaults of the other bank, the latter could not recover it if the taker was a legal creditor to the amount taken."

"2dly. Whether the Provost Court was or not a competent court in law, it was a court in fact, and the admission of the plaintiff in his petition of the good faith of the Union Bank brings the case within the terms of article 149 of the Constitution

Page 89 U. S. 282

of Louisiana, [Footnote 2] and secures for the judgment obtained under such circumstances the validity which probably it did not previously possess."

The case being then taken to the supreme court of the state on appeal, that court said:

"The important question is was the judgment which the plaintiff was compelled to pay an absolute nullity, and can he recover from the defendant the amount paid by reason of said judgment?"

"This raises the question whether General Butler had the right after the capture of the city in May, 1862, to appoint a judge to try civil cases. If he had this right, the judgment was not an absolute nullity, and the amount paid by the plaintiff cannot be recovered. If the judge had the right to hear and determine the case, the plaintiff cannot recover the money paid in satisfaction thereof, even though it be conceded that there was not sufficient proof to authorize the judgment or that the debt was for Confederate money."

"Under the Constitution, the United States has the right to make war, to raise and to support armies and navies, to suppress insurrections, and to repel invasions. The measures to be taken in carrying on war and suppress insurrections are not defined, and the decision of all such questions is in the discretion of the government to whom these powers are confided by the Constitution."

"When the United States captured the City of New Orleans in 1862, the civil government, existing under the Confederacy, ceased to have authority. As an incident of war powers, the President had the right to establish civil governments, to create courts, to protect the lives and the property of the people."

"The question is, had the general commanding the military forces of the United States which captured the city the right to establish the provisional court called the Provost Court which rendered the judgment against the plaintiff? We are of the opinion that he had. This was an exercise of the war powers of the United States, presumably with the consent and authorization of the President, the commander in chief."

"The plaintiff paid a judgment rendered by a competent

Page 89 U. S. 283

court, established by the United States in the exercise of its war powers (the only authority competent to organize a court in this city at the time), and has no cause of action against the Union Bank for the money paid in pursuance of the decree of that court. The United States had authority to establish this Court, and the judgment is validated by article 149 of the Constitution of Louisiana."

The judgment in favor of the Union Bank was accordingly affirmed.

From that judgment the case was brought here as within section 709 of the Revised Statutes.

The errors assigned were that the Supreme Court of Louisiana erred:

"1st. In holding that the President had a right to authorize General Butler to establish a court of civil jurisdiction in New Orleans in May, 1862."

"2d. In holding that it was to be presumed that the President did authorize General Butler to establish the court of Judge Bell, with the civil jurisdiction attributed to it by the opinion of the court."

"3d. In holding that the court of Judge Bell had jurisdiction to render its judgment against the Mechanics' and Traders' Bank, and that the said judgment was not a nullity."

"4th. In holding that, supposing the judgment of the Provost Court to have been originally void, it was validated, and so made a bar to the claim of the plaintiff in error, by force of the 149th article of the Constitution of Louisiana. "

Page 89 U. S. 293

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