Case Name: Smith v. Sac County
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1870-12
Citations: 11 Wall. 139
Docket Number: 
Parties: Smith v. Sac County.
Judges: 
Reporter: United States Reports
Volume: 78
Pages: 139–164

Head Matter:
Smith v. Sac County.
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.
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.
Error to the Circuit Court for the District of Iowa.
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 court-house.
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 7th, 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, &e.; that the proposition and the result of the vote thereon were duly recorded ás 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 court-house 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.”
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 court-house and issuing bonds in payment therefor; denies that any such bonds or coupons were issued, or any such contract let for building a court-house; 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 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 enaets 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 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 Criss, county judge of Sac County, for submitting to the vote of the people of-the county, ‘ whether or not a court-house should be erected in the same, to cost $10,000, in bonds, &e., 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 court-house in and for said county, did execute, October 1st, 1860, in bebalf 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 instalments 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, 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 3S1000 as a gratuity to the county judge as soon as the same were delivered by said county judge to said Meservy; and no court-house 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 com-mencing 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 herein-before found ; that the said coupons were, at the commencement of this action, and still wore, wholly unpaid.
“ And, as matter of law 1 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 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.
Mr. J. N. Rogers, for the plaintiff in error
(after remarking upon the insufficiency of the answer to raise the question or put in issue the facts of good faith and consideration paid for the bonds):
It is sufficiently obvious, from the very terms of this adjudication, that the question whether or not the plaintiff .was a holder in good faith and for value did not in fact at all enter into the decision of the case in the mind of the judge vTho pronounced it; but that he held the bonds to be “ wholly void as against the said county,” irrespective of the attitude of the holder.
The question now arises, however, whether this court can import into the special finding, by intendment, the addi tiona] fact that plaintiff is not a holder in good faith and for value, on the ground that fraud in the issue of the bonds is found; that this cast on the plaintiff the burden of proving himself to be a holder for value without notice; and that the verdict does not find affirmatively that he wo.s such holder.
Can the verdict be thus aided by intendment?
Assuming, for the purposes of the argument (what, however, is not law), that a special verdict can supersede the necessity of a plea, and by specially finding matter of defence not pleaded, and therefore not in issue, entitle a defendant to judgment thereon; and further assuming (what is not the case), that the facts found do amount, as mere matter of law, to fraud, and not merely to evidence tending to show fraud, we submit that a plea of such fraud, had one been interposed, would have been fatally defective on demurrer, if it did not contain an allegation that plaintiff took with notice, or without giviug value. What, then, it is necessary that the plea should allege, is it not equally necessary that the verdict should find? Otherwise, one-half of the issue, as material as the rest, is left undetermined on the record. Sow it would have been determined, had it been determined at all, this court, on error, cannot say. The rule as to the burden of proof is merely a rule of evidence to govern the court or jury on the trial in making up the verdict. It cannot supply the place of or supply defects in the verdict. There is no legal certainty that, because a fact is not specifically found in a special verdict, it was not proved. Hence arises the absolute necessity for the rule-; which the authorities recognize, that a special verdict to be good must find all the facts essential to entitle one party or the other to judgment, and that it cannot be aided by intendment or presumption. If it were not so, the parties would be left at the mercy of the judge or jury trying the case; for the parties can exercise no control over either judge or jury in framing the verdict. They cannot compel a finding either way upon any particular issue of fact. A material fact may be thoroughly proven, and yet a jury bringing in a special verdict may omit to find it, through inadvertence or otherwise; and a judge may do the same thing, if not so probably from inadvertence, from mistaken views of the law as to what facts are material and what are not. If he has formed an opinion that certain facts, of the existence of which he is satisfied, are sufficient to authorize a judgment, he will not be likely to trouble himself to pass on other issues which he regards as immaterial, especially if to do so would require the weighing and sifting of conflicting evidence. In suclrcase he will be apt to pass them over in silence.
Now, in such a case, the party against whom the judgment is rendered, on a finding of facts insufficient in themselves to support the judgment, is absolutely remediless, if the court of error is at liberty to add to the verdict by intendment, on the ground that a state of facts which he was bound to prove, not being affirmatively found, must be presumed not to exist. He may have proved it beyond question, or by a preponderance of evidence, and yet the court or jury may have omitted to find it, for one or the other of the reasons already suggested. If the fact is found either way, and the finding is against evidence, a motion for a new trial on that ground will afford the remedy. But if there is au entire omission to find either way upon the issue, and a finding upon it is an essential element in the facts on which judgment is to be based, there is no remedy, except to hold the verdict defective, and award a venire de novo. If in a court of error, it can be aided by intendment: if a fact essential to support' the judgment, but not found by the verdict, can be assumed, because the burden was on the opposite party to prove the contrary, and the .contrary is not found, then there is no safety for the rights of parties in case of a special verdict, since the judge or jury may find or omit to find upon such issues as they please, and are subject to uo control in the selection.
We are advised and believe that the plaintiff is a holder bond fide and for value, and can fully substantiate the fact by proof, and we submit that if the court is disturbed by want of a finding of that fact, that the ends of justice will be better satisfied by the award of a venire de novo, which will give both parties full opportunity to establish all material facts, than by resting an affirmance of this judgment upon a defence not pleaded, and on a fact not found, and (to say the least) perhaps not existing.
Mr. Oalusha Parsons, contra.
§ 2880.
§ 2917.
Act of March 3, 1865, g 4, 13 Stat. at Large, p. 501.
2d Tidd’s Practice (4th Am. ed., 1856), p. 896 (marginal page 897), note A; where all the authorities, and particularly the American cases are cited. See, also, Barnes v. Williams, 11 Wheaton, 415; Blake v. Davis, 20 Ohio, 231; Gould’s Pleadings, chap. 10, § 62.

Opinion:
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 defences.
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, 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 bond 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 text books of Chitty, Story, Parsons, an<^ 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, 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 defence." Aud 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 indorsed 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 as the same were delivered by said county judge to said Meservy, and no court-house 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 court-house and never built it 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 court-house was not built is only the natural result of such a proceeding. That the bonds should turn up in the possession of some one else was to be expected. But to' hold that, after all this was shown in defence, such holder should have a judgment on those bonds, without any proof that he purchased them for value or that lie 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.
Chitty on Bills, 260, 648.
Story on Promissory Notes, § 196.
2 Parsons on Notes and Bills, 438.
3 Hurlstone & Norman, 284.