Case ID: us-ct-cl_20/html/0416-01.html
Source: Caselaw Access Project
Author: {"author": "Scofield, J., Nott, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

BROWN, RILEY & CO. v. THE UNITED STATES. E. D. BANGS & CO. v. THE SAME. MORTON, ROSE & CO. v. THE SAME. E. N. CLARK & CO. v. THE SAME. THE MANHATTAN SAVINGS INSTITUTION v. THE SAME.
    [Nos. 12274, 12276, 12278.
    Decided June 1, 1885.]
    These are Manhattan Bank robbery cases, the issue being' between the four first-named claimants and the Manhattan Bank, the United States being only stakeholders. The facts are almost identical with those found in the previous cases (113 U. S. R., 476; 18 C. Cls. R., 386). The counsel for the Manhattan Bauk rely upon a point presented by the previous cases, but not expressly determined by the Supreme Court — the effect, of the alteration in the serial numbers of the bonds when purchased by the present holders.
    
      I. Where a fact relied upou by one of the parties was found by the court below and discussed in its opinion, and alluded to in the opinion of the court aboye, and the judgment, notwithstanding that fact, was reversed, it necessarily formed a factor in the decision of the appellate court; and in another action between other parties upon similar facts the point involved is stare deeisis, though not expressly determined by the court above.
    II. Where United States bonds were purchased in good faith at their market value, and without notice, knowledge, or suspicion that they had been stolen, the purchaser acquired a good title, notwithstanding that the serial numbers had been altered so as to make them appear to be bonds which had been called for redemption, and the alteration could be seen with a magnifying glass.
    
      The Reporters' statement of the (aso:
    These cases, by stipulation, were presented upon substantially the same facts that were found in the cases of Morgan v. The United States and Von Hoffman v. The Same (113 U. S. B., 476; 18 C. Cls. B., 386). The only difference in the facts was that in the former cases the stolen bonds were bought by the claimants of a firm that had “high respectability and standing in London and elsewhere,” while in the present cases they apparently were bought from unknown persons.
    
      Mr. J. Hubley Ashton for Brown, Biley & Co.:
    It is settled law in this country that the material alteration of a deed, bill of exchange, promissory note, negotiable bond, or any other executory written contract, by the unlawful or unauthorized act of a stranger, is a mere spoliation or mutilation of the instrument, and not an “alteration” which avoids or vitiates it. An alteration by a stranger is simply a nullity, and recovery may be had upon the instrument as if it remained in its original condition. (See 1 G-reenleaf, Ev., sec. 566; 2 Daniel, Neg. Insts., 349; 2 Wharton on Contracts, sec. 702; 2 Parsons, Bills and Botes, 574; U. S. v. Spaulding, 2 Mason, 482; U. S. v. Linn, 1 How., 110; Waring v. Smith, 2 Barb.,Ch. B., 135; Medlin v. Platte Go., 8 Mo., 235; Rubbering v. Kohlbreelcer, 22 Mo., 597; Presbury v. Michael, 33 Mo., 543; Neff v. Horner, 63 Pa., 327; Robertson v. May, 91 Pa., 246; Hunt v. Gray, 35 N. J., 233 ; Bigelow v. Stilphen, 35 Vt., 521; Nichols v. Johnson, 10 Conn., 197; Fullerton v. Sturges, 4 Ohio St., 536; BrooTcs y. Allen, 62 Xnd., 406; Davis v. Carlisle, 6 Ala., 707.) '
    
      In the cases cited by the Manhattan Bank, where the alterations were held to avoid the instruments, the alterations not only changed and varied the written contracts, completely destroying their identity, but the alterations were made by actual parties to the instruments (not by strangers), and the suits were brought by indorsees, deriving their title from and claiming under the parties who effected the alterations. But the innocent holder of a negotiable security, payable to bearer, does not take his title from that of any previous holder, but under the original contract of the promisor, as construed by the law. No previous holder is a party to the instrument. The bona-fide holder for value is an original payee. The thief who stole such securities had no title to them whatever. The innocent holder does not claim under or through the thief in form or in substance. He does not claim to be invested with any transmitted right whatever. He claims solely by force of the original promise of the maker, made directly to himself as the bearer of the instrument.
    It follows, therefore, that the thief who has stolen such securities is a mere stranger, and his act in altering them, whether in a material or immaterial particular, is simply spoliation ; and, consequently, a subsequent innocent holder can no more be affected by the act of the spoliator, in changing such a security, for which he (the holder) honestly paid value, than can any person acquiring a title antecedent to such alteration. {Comm. v. Emigrant Industrial Savings Bank, 98 Mass., 18; City of Elizabeth v. Force, 29 N. J. Eq., 591; Birdsall v. Bussell, 29 N. Y., 220.)
    The Supreme Court has decided that where there is not upon the face of the instrument.anything indicating an alteration, or casting a suspicion upon its validity, the burden of proving where and by whom the alteration was made is cast upon the defendant. (U. S. v. Linn, 1 How., 112,113.)
    
      Mr. H. G. Cady for the Manhattan Savings Institution:
    1. Those who have acquired possession since the right to payment of these United States bonds accrued upon call have taken only, as against the Manhattan Savings Institution, the unlawful title of the robbers. (Texas v. White, 74 U. S. R., 735; Vermilye v. Adams Express Go., 88 id., 144.) A party who takes a negotiable instrument after it is payable gets no better title than tbe original transferrer. It is incumbent upon bim to look after bis title. (Mayor of Griffon v. City Bank, 58 Ca., 584; Daniels on Nego. Instruments, § 1506, see 3d ed., note 1; Executor v. Com. of Va., 18 Ur at., 777.)
    2. Tbe altered bonds were changed in tbe numbers to avoid detection and gain an unlawful advantage, and tbe alteration was a fraud, wbieb renders them void. (Stevens v. Graham,, 7 Serg. & Rawle, 508; Mitchell v. Ringgold, 3 Har. & Johns., 159 Citizens’ Bank v. Richmond, 121 Mass., 110; Byles on Bills, ch„ 24, 323; Daniels, id.; Wade v. Withington, 1 Allen, 561.)
    3. If tbe alteration be fraudulent, it is not important whether it is material or not. (1 Green leaf on Evidence, § 568.) It is void as to tbe bolder. (Daniels, id., § 1410.)
    4. But these alterations are material; tbe numbers are a part of tbe inscriptions provided for by tbe act authorizing tbe issue and to be called under tbe E. S., § 3697. The numbers are necessary to enable tbe government to fix upon the amounts to be paid from time to time, and tbe dates of payment, and to identify tbe obligation. (13 Stat. L., 468.) Tbe alteration varied tbe legal effect of tbe bonds and their operation, and so was material. It destroyed their identity, and so was material. It changed the time of payment, and so was material. (Daniels on Evidence, §§ 1373,1377; Davis v. Jennev, 1 Metcalf, 221.)
    5. It is no answer that tbe alteration existed when the parties presenting tbe bonds acquired possession. Tbe burden of explaining tbe alteration lies on tbe bolder. {Burchfield v. Moore; Ellis v. Blackburn, 3 Q. B., 683; Daniels on Evidence, § 1412.)
    6. Tbe Manhattan Savings Institution, tbe lawful owner, without complicity with or being affected by tbe alteration, is entitled to payment upon tbe facts and tbe law. {Biersol v. Grimes, 30 Ind., 130).
   Scofield, J.,

delivered the opinion of tbe court:

These cases involve tbe ownership of certain United States coupon bonds,

Tüe Manhattan Savings Institution claims them all, and.the several other parties claim tbe portions of them set forth in their respective petitions.

The cases were transmitted to this court by the Secretary of the Treasury, under section 1063, Rev. Stat., in order that the ownership as between the contending parties might be judicially determined.

Prior to October 27, 1878, the said institution had in its possession and was the legal owner of all the bonds in controversy. On that day its banking-house was entered by burglars, who broke open the safe and stole a large quantity of bonds, including those in dispute.

Some months after the theft, the portions of the stolen bonds set forth in the petition of the several claimants were purchased by said claimants in good faith, at their full market value, and without any notice, knowledge, or suspicion that the same had been stolen.

Prior to these purchases the bonds had been called for payment by the Secretary of the Treasury and the call had matured. This fact is in part relied upon by the savings institution to defeat payment of them to the other claimants.

After the bonds were stolen, and before the claimants purchased them, the serial numbers of the bonds were altered. The alteration was so skillfully executed that it could only be detected by the use of a magnifying glass. This fact is also relied upon by the institution to defeat a recovery by the parties claiming adversely to itself.

The cases of J. S. Morgan & Co. and L. Von Hoffman & Co., involving the same questions of law and growing out of facts exactly similar, were tried in this court at its last term. In those cases the questions now raised here were presented, discussed, and ruled upon by this court (18 C. Gis. R., 386). The cases were appealed to the Supreme Court and the decisions of this court reversed (113 U. S. R., 476).

According to the decision of the Supreme Court in those cases, the pending cases must be ruled against the Manhattan Savings Institution and in favor of the other claimants. It is true, as stated in argument, that the effect of the alteration in the serial numbers on the bonds was not discussed in the opinion of the Supreme Court. In this court, however, the alterations were presented in the findings of fact, and discussed ■ and ruled upon in the opinion. In the Supreme Court, also, the alterations were mentioned with the other facts of the cases. Necessarily they constituted a factor in the decision.

Guided by these opiuious of the Supreme Court, the Court of Claims decides that Brown, Riley & Co. are entitled to recover as principal $1,500, and as interest $32.25; E. D. Bangs & Co. are entitled to recover as principal $2,000, and as interest $44; Morton, Rose & Co. are entitled to recover as principal $1,000, and as interest $11.33; E. W. Clark & Co. are entitled to recover as principal $2,000, and as interest $25.67.

The petition of the Manhattan Savings Institution is dismissed.

Judgments will be entered in the several cases in accordance with these decisions.

Nott, J.,

dissenting:

Some future philosophic writer, commenting upon the civilization of our time, will probably say that “ during the latter half of the nineteenth century the American courts went wild on what was called the negotiability of bonds and debentures and govern m ent securities, carrying the doctrine, indeed, to such extremes that their decisions furnished a safe basis upon which burglars or bank robbers might do business.” £‘ The business,” he will add, “ had its personal risks, but from a financial point of view was safe, being profitable; and as men will al ways be found willing to take great risks for great rewards, the business of bank robbery was carried in a short time to a degree of perfection which produced some very astonishing results, one of which was that a robber was substantially tree to sell his plunder to anybody except the true owner.”

There are four cases now before the court nominally against the government, really against the Manhattan Bank, all growing out of the Manhattan Bank robbery; and the question which they present is whether the Manhattan Bank, from whom the bonds were stolen, or the adverse claimants, who bought them directly or indirectly from the robbers, have the better title. I did not sit in the previous cases of Morgan and the Manhattan Bank (18 C. Cls. R., 386), which have just been reversed by the Supreme Court (113 U. S. R., 476), and do not assume to have as thorough a knowledge of the latter decision as if I had; but I perceive that the point presented by these cases was not positively ruled upon by the court above, and I deem it one which should not be taken stare decisis by implication.

The facts presented by one of these cases are substantially the facts of each.

Messrs. Morton, Bose & Co., of London, bought a bond which is said to be the bond now in suit. The bond which they thought they were buying is not the bond upon which they now declare. The thing which they assumed to buy, and supposed they were buying, was bond No. 202887, a bond which had been called and which the government stood ready to pay. But when they sent this bond to the Treasury, it appeared that the veritable bond No. 202887 had already been presented and paid, and that this purchase of theirs, whatever it might be, was not bond No. 202887.

At this juncture somebody bethought himself of buying a magnifying glass, and under its influence it appeared that the number of the bond had been changed by the partial erasure and alteration of one figure; that is to say, it became plain that the original number was 202897; but at the same time it likewise became plain that Messrs. Morton, Bose & Co., while paying their money for bond No. 202887, had in fact never so much as had that bond in their possession. To maintain an action on the bond which they did not buy, but did get, they have to file, as it were, a bill in equity to correct the instrument declared upon; that is to sa.y, they have to show that it is not what it now purports to be, bond 202887, and that its true number before the alteration was No. 202897.

If some poor farmer innocently and ignorantly had bought a horse of the same thief who sold this bond to Messrs. Morton, Bose & Co., the law would hold him accountable, and courts would tell him that he who deals with a stranger deals at his own risk, and that the vendor can give no better title to the property than he has himself. The rule which excepts mercantile paper from the operation of this principle of law cannot be gainsaid, but the application of it in this case carries it to a perilous extreme.

When Messrs. Morton, Bose & Co. bought this bond, whatever its number was or seemed to be, they knew, as all the world knew, that bonds of that issue and amount had been stolen. They also knew, as all the world knew, that the one ear-mark, the one tangible, perceptible thing which individualized the bond and distinguished it from all other bonds of the series was its number. It is said that the number had been so skillfully altered tba-t the erasure could only be detected by the aid of a magnifying glass. I grant this. But I hold that when Messrs. Morton, Bose & Co. bought a $1,000 bond in their own counting-house from a stranger whom they did not know, whom they had never seen before and never expected to see again, they were bound to use a magnifying glass or bear the consequences of their own recklessness.

It is the duty of an inferior tribunal to carry out fully and in good faith the rulings of its appellate court. But the decision in Morgan’s Case is not one which should be extended by so much as a hair’s breadth; and the hair’s breadth required by this case will put every banker in the world upon the side of the thief.

Davis, J., did not sit in this case and took no part in the decision.