Case Name: National Bank of Washington v. Texas
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1873-10
Citations: 20 Wall. 72
Docket Number: 
Parties: National Bank of Washington v. Texas.
Judges: 
Reporter: United States Reports
Volume: 87
Pages: 72–92

Head Matter:
National Bank of Washington v. Texas.
1. A note payable to bearer, though overdue and dishonored,.passes by delivery the legal title to the holder, subject to such equities as may be asserted by reason' of its dishonor.
2. Any one disputing the title of the holder of such paper takes the burden of establishing, by sufficient evidence, the facts necessary to defeat it.
3. There is no competent evidence in this chancery suit that the bonds in, Controversy; which Were issued by the United States to the State of Texas, though overdue when they passed from the treasury of the State, . were ’issued by the State or received by the person to whom they were delivered' for any treasonable or other unlawful purpose.-
4. The absence of the indorsement of the governor of the State on the bonds does not raise a presumption of such unlawful purpose under the circumstances of this case. .
5. The cases of Texas v. White and Chiles (7 Wallace, 718), Same v.Harden-berg (10 Id. G8), and Same v. Huntington (16 Id. 402), considered, and their true result ascertained and applied to the present case.
Appeal from the Supreme Court of the District of Columbia; the case being thus :
The United States, on the 1st of January, 1851, issued to the State of Texas for the sale of a portion of- her north western territory, five thousand coupon bonds of $1000 each, numbered successively from N'o. 1 to No. 5000, and “redeernable after the 31st day of December, 1864.” They were made on their face all payable “to bearer,” arid declared to be transferable on delivery. .The coupons, which extended to December 31st, 1864, and no farthet, were equally payable “ to bearer.” These bonds were known as Texas indemnity bonds. ■ , •
On the 16th of December, 1851, in anticipation of the bonds being delivered to it, the State of Texas passed an' act authorizing their governor to receive them from the United States,
.“And when received, to deposit them in the treasury of the State of Texas, to be disposed of. as may be provided by law; provided, that no bond issued as' aforesaid', as a portion of the said $.5,000,000 of stock, payable to bearer, shall be available in the hands of any holders until the same shall have been indorsed in the city of Austin, by the governoi; of the State of .Tex'as.”
After this act of December 16th, 185T, and between that. day and the 11th of February, 1860, the State of .Texas passed thirteen different'acts, providing for the sale or disposal of the whole $5,000,000 of these bonds; for lawful State purposes; as ex gr., paying the public debt of the State; the erection of a State capítol; to establish a system of schools, &<;., &c., the Construction of railroads: the terms of none of these acts requiring an indorsement of the bonds, by the governor,.as required in the'above-quoted act of December 16th, 1851, nor any of them designating by ’numbers on them the particular bond& to be appropriated to'the' particular objects authorized. Subsequently to this- again, the rebellion having broken out, and the State having gone over to the rebel side, and there being, a large nu’mber of. the bonds still undisposed of in the Slate treasury,;.the legislature of Texas, by an act of January 11th, 1862, repealed the act of December 16th, 1851 (making an indorsement necessary), and the then authorities of Texas, through its “ military board,” in January, 1865, sold or transferred, as was said, and 'as in former cases in this court was sup* posed to be shown, certain of the bonds, but not all of them,, to two persons, White and Chiles, for the purpose of aiding the rebellion. In those cases — the eases, na’mety, of Texas v.- While and Chiles, and Texas v. Hardenberg, — it was determined that as against the true, that is to say, the loyal State of.Texas (particular citizens of which had stopped payment of them at the Federal treasury), no title had passed to bonds which had been thus-transferred; and that notwithstanding'the transfer, the reconstructed State might reclaim the bonds or their proceeds,
How many bonds were transferred to White and Chiles, or what were their exact numbers, was not well ascertained; but, as already said, it was well known that the bonds transferred to White and Chiles did not comprise the whole issue for $5,000,000, and that a considerable-number of them had been transferred under" one or -other of the thirteen enactments already mentioned. In particular, it appeared that one hundredirand forty-eight of them (numbered from 4694 to 4842 inclusively) had been transferred, in pursuance of a-statute, to the Southern Pacific Bailroad Company; some of which the company paid out to- contractors for work done on the road. These bonds were not indorsed- by the governor.
In this state of things the State, of Texas brought her. complaint in chancery in the court'below against the First NationalBank of Washington, W. S. Huntington;its cashier, and others, for discovery and relief in regard to certain of these Texas indemnity bonds, of whjgh the bill alleged that, the. State had been dispossessed ,by- fraud or treasonable-, practices. The number now claimed was nineteen; thus •numbered:
- “ Numbers 4226,4227,4229, 4703,'4705, 4706,4748,4813, 4825, 4843, 4844, 4912, 4927- 4928, 4929, 4960, 4961, 4962, 4963.” -
The bill alleged that these indemnity, bonds were each for the sum of $1000, dated January 1st, 1851, Redeemable after December 31st, 1864, and that those'in controversy were received and remained in the treasury of the State of Texas until after the period fixed for redemption. It was alleged that in the year 1865 the- insurrectionary power which had usurped control of the State, made a contract with White and Chiles by which from one hundred and forty-five to one hundred and sixty-two of the bonds were delivered to them, in consideration of which they agreed to furnish means to carry on the war against the United' States in which that State was then engaged, with others, under the name of the Confederate States of America.
It was further alleged that these bonds,-then overdue, afterwards came to the hands of the defendants, who purchased them with full notice of the purpose for-which théy had been delivered to White and Chiles.
It was also alleged that said bonds were never indorsed by the governor of the State of Texas in such manner as by the law of Texas was required, by reason of which no'legal title to the same passed from the State, or was vested in the parties to whom they were delivered. The defendants were required to answer under oath, and a decree against them in regard to the bonds left with Tqylpr, or for other relief, was prayed.
The bank and Huntington answered and admitted the purchase of some'of the Texas indemnity bonds, and having others as agents for the owners of them.-' They gave a list of all these, specifying those hbld in their own right and those held as agents. They averred that the bonds had all been paid to them in full by the Treasury of the United States before this suit was commenced, and that those owned by themselves were purchased for value (namely, ninety-eight cents to the dollar), without'notice of any of the matters'set up in. the complainant’s bill.
They denied all knowledge on their part, that the bonds claimed by them were part of the bonds issued to Chiles and White, or had been issued in aid of the rebellion ; and they denied also the facts that they were so issued. And 'they denied the statements of the bill’in these matters. A general replicatioir was filed'and testimony taken.
To make out its case, the State pf Texas adduced the testimony of Mr. R. W. Taylor, the Comptroller of the.Treasury of the Uuited States, aud of Mr. G. W. Paschall, one pf the attorneys for the complainant. Mr. Taylor’s deposition was 'a'long one.. What follows are extracts which bear 'principally oh the case. . He. is under examination by the ,'complainant's cbuusél.
■“ Question|. I see-it-, stated that these bonds came through the hands pf J. P. White. Do your investigations enable you to say they Were part of the bonds received by' White and Chiles?
“Answer. Ido not know anything more about-that than what fs to be gathered from the general appearance óf the transaction. There was nothing at that' time known here about the White and Chiles purchase; at least I had heard nothing of it.
“ Question. But from 'this general appearance of which you speak, what is your opinion as to their having .been part-of the same bonds?
“Answer.- From all the circumstances, my opinion is, those were of the White and Chiles bonds. That is only an opinion, however."
CROSS-EXAMINED.
“ Question; Do you know of your own knowledge that White and-'Chiles, or either of them,, ever saw one of these bonds? /■■“Answer. 1 knew it only from the.papers-on file in the depart,-ment, that is, from my opinion Of - what those papers show.
“. Question.., It w.ould be a very tedious process (and I presume you could not do it) to furnish the various papers from Which you make up your opinion ?
“■Answer.. They are too numerous for me to present now, and I might'add, .that one would have to study them very'carefully -and make his calculations-as to the different bonds.
“ Question, Would .you not have to do so by, ascertaining the entire number of bonds, and then tracing those bonds into the hands of persons other than White and Chiles; - would not your opinion bo based upon the eoriclusionthaf, inasmuch as so many bonds were in the h'árfds'of other-people, it followed,.as á neces sary result', that if White and Chiles had any, they must be those ?■
“Answer. It wouldhc by taking the seven hundred and eighty-two bonds .that were not indorsed, and tracing .them back, by the evidence, into the hands of those parties who held them at different times, and ascertaining in some instances, the particular numbers that were known to be in tbe bands of particular parties beforó the transaction between White and Gbilós and the military board, and taking others ágain, that'came from the' State of Texas, and then drawing my conclusions as to what were White and Chiles bonds.”
Mr. Baseball said in reply-to''questions in chief and on cross-examination:
“I 'was employed by Governor Pease to prosecute this suit, and caused it to-be instituted in 1868; and judging from a careful examination made in Texas and in the'Treasury Department here, Pfeel'confident that the bonds redeemed for the bank, described by .Mr.-Taylor, were part of tbe bonds which passed through the hands of White and Chiles. I judge tins from circumstances which he has stated. ,. I did satisfactorily to^ myself, identify those paid to Huntington, &c., because I found an affidavit of a brother.of White attached to them, and was thus able to trace them us having cotne,through White. I inferred s.o from the fact that they passed through the hands of White’s brother, and through the hands of a' Nashville man named Douglass. I thought'I saw clearly’that they appertained to that class, and, from .those numbers,- knowing that the authorities off Texas had taken off the bonds, consecutively, from No. 1 of tbe 782. I knew about where these numbers would begin,, but/was a.t a loss about the precise numbers; because. I wanted to describe them in Tedas, and! I could not certainly identify them.”
Such, in the main, was the Complainant’s case. As this court held’that it was it itself insufficient, the evidence by the other side is but .adverted to. That evidence tended to s.how that in the case"of all the bonds the cashier of the bank had gone, prior to purchasing them, to the Treasury of the United States, aud had made full inquiry about them, that the Comptroller of the. Treasury had advised that bond fide holders of such bonds shbuld be paid; that fnany such tjonds were paid, and that the purchases here were made in view of this action; that of the nineteen bonds notv in question, fifteen or sixteen had been bought in December, 1865, and in August and September, 1866, from Jay Cooke & Co., and three from Simon Wolf, of New York, acting as agent for various residents there; that of the fifteen or sixteen bought from Jay Cooke & Co., at least six were of the number transferred to the Southern Pacific Railroad Company; that four had never been delivered to the military board; that leaving the’remaining'to rest on the fact (among other facts) that they came from Jay Cooke & Co., who were not shown , to .have ever- stood in relations of any sort with Chiles and - White.
The court below decreed in favor of 'the complainant as to-the nineteen bonds, and the defendants took this appeal.
Messrs. B. R. Hoar.and J. Hubley Ashton, for the appellants,
conténded that on the complainant’s-own case, as proved, the bill ought to have been dismissed; that the testimony of Taylor, and Páschall fell within the case of Carter v. Boehm, in which Lord Mansfield said of such testimony: /‘It is mere opinion, which is not evidence;” that all the allegations of the bill were denied' by answers responsive to it; and was not.sustained by any evidence Oveicoming-the denials; thatHunürfgton v.: Texds had decided that the State must prove not only "unlawful issue and use, but also the f urther fact of notice to the defendant;, that-though express notice was here averred, none was iproved; that the , doctrine of constructive notice, applicable-to dishonored private mercantile paper, payable to order on a day certain,.could not be applied to public seeur.itiés ' like these, under the circumstances . attending . them,- when purchased in the open market after the day had ■passed when, by their, tenor, they were redeemable; that they'were "issfied as stock, not payable- to bearer on any certain day, but “ redeemable after the 31si day of Décember, >1864;” that they .stated that interest would be paid for fourteen years, but that after December, 1864, the bonds might. be redeemed at the pleasure.of the United States; that the bonds were not dishonored; that dishonor and non-payment at maturity, in the case of private mercantile paper, were not necessarily the same thing; that a npte on demand was manure' and demand.able at once, but was riot dishonored until after such a lapse.of time that the law considered the paper ought to have been paid, and that every, one was .bouud to suppose that payment-must' haye been demanded and refused within'that time;’that MivAttorney-General Black-had held,, after full consideration, that the reason of the rule which makés ordinary bills and, notes, .when transferred after maturity, subject to prior equities, did not apply to treasury .notes of the Ünited States,, redeemable after one year from their date, and that a.purchaser for value of such a note, after maturity, was entitled to the same protection.as the bond file holder of ordinary commercial paper taken before maturity.
The counsel contended further, that it was-clear,enough,' viewing the bonds specifically, that these particular bonds had not been the bonds of White and Chilés;- ten of jbem assuredly had not been so, and .the presumptions were that the others hadmot been.
That even if it were clear ihatstthey all had passed under, the White and Chiles- transaction!that the State ought not. to recover; that this.court was reviewing the decree below in its capacity as á court of equity,; that the pl-operty had been acquired honestly and in good faith for a, full consideration, without knowledge or notice of that transaction, and after due and full inquiry instituted a,t the Treasury Department, whose duty it was, as this court has said, to ascertain and decide whether the bonds had or had not been issued in aid of the rebellion.
Messrs. H. T. Merrick and T. J. Durant,
having referred to the ease of Texas v. White and Chiles, to show the historyof the Texas indemnity bonds, and referred to the testimony of Messrs. Taylor and Paschal as that of persons intimately acquainted with the history of the bonds now specifically invol ved,. submitted—
■That upon the state of facts shown, the absence of the indorsement of the governor raised a presumption against the validity of the alienation of the bonds.; and that the cause of justice would best be subserved by giving effect to this presumption,, and requiring the holder of a bond not indorsed to prove that it had been issued by the State for some lawful and proper purpose.
That, ciréitmstánces. having'been proved establishing illegality in the original1 transfer of the bonds, the burdemof showing that value'was given for them before maturity was cast upon the holder; and if it. appeared that-he took, them after they became due, he wduld be regarded as having taken, them subject to all the rights and equities of the State, and. could not protect a defective title by any rule of commercial law.
That the questions involved in this case-were all decided, in Texas-v. White and'Chiles; that'they again came before the court in the; case of Texas v. Hardenberg-, in which the court, Referring to the opinion in the casé of White and Chiles, says:
“This conclusion leaves but one question for consideration, namqly, whether Hardenberg at the’ time-he purchased the bonds had notice of the equity of the State of Texas. This qilestión was not'concluded by the decree, but it was fully considered by .the court upon the former ‘.argument, and.our, conclusion, as stated in the opinion, as then delivered, was that Hardenberg, as Well as thejother purchasers of indemnity bondsabout the sanie .time, was affebted by,such notice. We will not restate what we then said; it is only necessary to-say, that we have reconsifi-ered the grounds, of that,decision, and,are still,-satisfied with it.”
That thé expressions in the opinion delivered in: While and _ Chiles, and referred to in the above extract, would be found on page 732 of 7th Wallace, and were as follows:
“ We think it clear, if a State, by a public act of her legislature, imposes restrictions upon the alienation of her property, that every person who takes a transfer of such property must be hold affected by notice of them. Alienation, in disregard of such restrictions, can convey no title to the alienee.”
The learned counsel, referring to the opinion of the court in the subsequent case of Huntington v. Texas, as qualifying and explaining the fundamental principles announced in the preceding cases, and regulating their application, submitted that it did not in any way annul the fundamental principles declared in those previous cases, but, on the contrary, reaffirmed them.
7 Wallace, 700, where the history of the bonds is given in full.
10 Id. 68.
See Report o£ Mr. Comptroller Taylor, submitted .to Mr. Secretary McCulloch, August 15th, 1865.
Nos. 4703, 4705, 4706, 4748; 4813,‘4825.
Nos. 4960,-4961, 4962, 4963.
3 Burrow, 1905.
16 Wallace, 412.
9 Opinions of the Attorneys-Generai, 413 ; and see 11 Id. 332.
Smith v. Sac County, 11 Wallace, 146; Lardner v. Murray, 2 Id., 121; Andrews v. Pond, 13 Peters, 65; Swift v. Tyson, 16 Id. 1; Goodman v. Simonds, 20 Howard, 365.

Opinion:
Mr. Justice MILLER
delivered the opinion of the court.
Waiving for the present the question whether the bonds were overdue in the sense which puts a purchaser of dishonored negotiable paper on the inquiry as to defences which may be set up against it, it is quite clear that they were transferable by delivery after due the same as before. To invalidate the title so acquired by a purchaser, it is necessary to make out some defect in that title.
The main allegation of the bill is that these are part of the bonds'issued to White aud Chiles, in aid of the rebellion. All knowledge of this, fact is denied by defendants, and the. fact itself is denied. Conceding that their denial of the fact, about which perhaps they know nothing^ had no. other effect than to put in issue the allegation of plaintiff's bill on that subject, it remained for plaintiff to establish its truth by evidence.
This it attempted to do. Two witnesses alone are relied on for this purpose, namely, Taylor, the Comptroller of the-Treasury of the United States, and Paschal, one of the attorneys for complainauts. The former was examined at much length, and gave it as his opinion, from certain calculations made by him, based upon papers in his office and information received by him from officers of the State.of Texas, and other sources, that these bonds were of the White and Chiles issue. He says that it is only an opinion, and it is evident from his deposition that the data.on which he bases that opinion are far from conclusive. It is not 'Worth while to waste words in proving that such testimony is wholly incompetent to establish any fact, Or rather to show that it is not evidence at all.
The deposition of Paschal is to the effect that by reason of his connection with the suit of Texas v. White and Chiles, he had become familiar with a number of facts from which he had satisfied himself that these bonds were of the White and Chiles lot. As the matters on which this conclusion was founded-were all of them statenients of others, some verbal, some written, and all. of them capable of being proved, no reason is.perceived why the witness should be substituted for the court in weighing these facts, and making the proper inferences. The same observation applies with--equal force to Taylor's testimony.
Not only is there no evidence that these bonds were irregularly or improperly issued, or were issued for' any treasonable or other unlawful purpose, but there is -evidence that there were at the time these depositions were taken, bonds greatly exceeding in amount those in controversy, issued lawfully to a railroad company, which were not identified by their numbers, or in any other manner, so as to prove that the bonds in controversy were not these bonds. Nor was there any evidence tracing all the bonds lawfully issued ,so as to show where these were or to repel the presumption that they were of that class. In short, the testimony on this branch of the subject is an absolute failure.
But it -is said that as these bonds did not bear the indorsement of the governor of the State of Texas, this fact alone was sufficient to prove that they were- unlawfully obtained from its treasury, ánd. that the rights of the State should therefore be protected in this suit.
The-opinions .of this, court in-the cases of Texas v. White arid Chiles, and Same v. Hardenberg, are much relied on in support of this proposition, and in fact are supposed to control this case in all respects. But while it is true that the bonds in question in both those' cases (they were, in fact, but one case) were the bonds delivered to White and Chiles, and that some very important questions were decided concerning the relation of the State of Texas to the Union, and the validity, of her legislation while under control of the enemy during the war of the rebellion,' it is also true that the very matters of which the preseut bill is full, but of which there is a fiat denial and no proof whatever were supported in that case by sufficient evidence. On.an examination of the report of that case it will be seen that .the court was of opinion that it was established both in evidence and by the answers of some of the parties that the bonds then in ,con7 troversy were all of them issued to White and Ghiles, and the illegal contract on which they w.ere issued was in evidence, and the court was further of opinion that the parties' defendant had notice of those facts.
It is true that in the first of these cases the eminent judge who delivered the opinion, in addition .to deciding that the bonds were overdue when delivered to.White-and Chiles, and for that reason subject to an" inquiry as to the manner in which they obtained possession of them, gave as an additional reason why defendants could not hold them as bond fide purchasers, that they had not been indorsed by the governor as required by the statute of Texas. ¡And for that purpose he entered into an argument to show that the .State could by statute,, while those bonds were in her possession, limit their negotiability by requiring as one of its conditions the indorsement of the governor. . He, also said in reference to the repeal of that statute'by the rebeilegislature. of Texas, jn view of the supposed treasonable pdrpose.of it, that it was void'. . All of this, however, was-unnecessary to the. decision of .that case* and the soundness of the proposition may be doubted.
In the subsequent case of Texas v. Huntington, which was an action at law in reference to some of the bonds in the same category as those now before ,us, the justice who delivered the abovementioned opinion, qualifies it so far as to say that the repealing statute, though passed by a rebel legislature, is-not void-in'its application to bonds not issued for treasonable purposes. This is sufficient to relieve the present case of any embarrassment growing out of that branch of the opinion in the case of Texas v. White and Chiles.
This latter case, Texas v. Huntington, on a careful examination of it must be héld to dispose of the one before us. It is said, among other^things, that no óné other than a-holder of the bonds, or one who having held them has received the proceeds, with notice of the illegal transfer, for an illegal purpose^ caiv'fee held liable to the claim of the reconstituted State." Again : " Whether there was evidence in the present case establishing the fact of the unlawful issue and use, and the further fact of notice.to defendants, within the principles heretofore laid down, as now explained and qualified, is a question for the jury."
In the case before us, which is a suit in equity, it was a question for the chancellor, to be established by evidence. As we have already said, there is no proof either of the unlawful issue or use, or purpose, nor of any notice to defendants of the probable existence of these facts.
Decree reversed, with directions to
Dismiss the bill.
7 Wallace, 718.
10 Id. 68.
16 Wallace, 402.