Case: The State National Bank of Boston v. The United States
Abbreviation: State National Bank v. United States
Decision Date: 1881-12
Docket Number: 
Citation: 17 Ct. Cl. 329
Volume: 17
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: The State National Bank of Boston v. The United States.
Judges: Nott, J., was not present at the hearing of this case, and took no part in its decision.
Pages: 329–344

Head Matter:
The State National Bank of Boston v. The United States.
On the Proofs.
Karlvioll, cashier of the United States Treasury in Boston, embesalesi, government . money and loans it to Garter. Subsequently Carter goes to the elaimant’s cashier and gets the bank’s draft on JYeiu Torkfor $125,000, promising to gire therefor his firm’s draft and certain collateral security, He then gives the banlds draft to Hartwell, who gives it to an officer of the Treasury to help in making good his own defalcation. The officer exchanges it with another bank for its drafts, which he sells. The elaimant’s cashier had no knowledge of the fraudulent purpose of Carter. It made no defense, but paid its own draft. The moneys received by the Treasury officer are in the Treasury.
I.Where a person indebted to tlie government fraudulently obtains a negotiable draft from a third person without consideration, and the government through its officers exchanges the draft for the negotiable paper of a bank, whiffii it sells, and obtains the value thereof in cash, no cause of action arises in favor of the third person, and the ’ government cannot be deemed to hold moneys which he should recover ex aequo et Tiono.
II.If a person indebted to the government by false and frauduleni representations borrows money from a third person, and the ’government officers, without knowledge of the fraud, receive the money and pay it into the Treasury, no action will lie to recover it back.
III.Where a person indebted to the government procures from a third person, by false and fraudulent representations, his draft, which the government officials dispose of to a bank in exchange for its paper, the drawer is bound to set up whatever defense he can urge against the payment of it. If he voluntarily pays it, he abandons every defense, and cannot afterward recover back the money in the hands of the government.
The Reporters’ statement of tbe case:
The following are the facts of the case as found by the court:
I. The claimant, in February and March, 1867, was a banking association and body corporate, duly established and organized under the laws of the United States, and having its place of business in the city of Boston, Massachusetts.
II. At the same time there was in Boston a firm of brokers, doing business under the name and style of Mellen, Ward & Co., of which firm Edward Garter was the junior member.
III. At the same time George D. Whittle was the chief clerk in the office of the assistant treasurer of the United States in Boston, and hád the general management of the office, and Julius F. Hartwell was disbursing clerk of the office, ordinarily called in the office paying-teller, or cashier.
IV. Prior to the 28th day of February, 1867, the said Mellen, Ward & Co., acting by and through the said Carter, had succeeded in inducing the said Hartwell to take out of the sub-treasury in Boston, at various times, and place in Carter’s hands, large amounts of money belonging to the United States, until, first and last, the sums which Hartwell so let Carter have aggregated a million to a.million and a quarter dollars. The money which thus passed out of the sub-treasury to Carter was used by Melleff, Ward & Co. in speculating in stocks. About the middle of February, 1867, when the amount-which Carter bad so obtained was very large, Hartwell informed Carter tbat in their use of the public money they were guilty of a crime, and showed him the United States statutes making their act a crime. This was the first information that Carter had of the criminal character of those transactions in the money of the government.
Y. Between the middle of February and the 1st of March, 1867, several conversations in regard to the matter were held between Carter and Hartwell,' in which Carter laid before Hart-well his general plan, without going into details. That general plan was for Carter to go on and make Hartwell’s money right for the examination of the sub-treasury which was expected to take place on the 1st of March, upon Hartwell’s solemn assurance that he would let Carter have the money out of the sub-treasury again on the 2d of March, after the examination should be over; and then Carter would with that money repay all the parties any moneys he had obtained; and then sell all the stocks and securities his firm held, and replace as much of the money in the sub-treasury as possible, so as to reduce the loss to the smallest possible amount; and Carter promised Hartwell that he would return all the money before the 1st of April, not to come out of the sub-treasury again. During the period aforesaid, within which those conversations between Carter and Hartwell occurred, Hartwell knew in a general way what the resources of Mellen, Ward & Co. were, and how they were using the money he had let Carter have.
VI. On the 28th of February, Carter returned to Hartwell all the money that Hartwell had let him have, except the sum of $157,000; which Carter promised to return to him the next morning. Among the funds so returned were United States gold certificates to the amount of $580,000.
VII. On the afternoon of the 28th of February, Hartwell made known to Whittle, the chief clerk, that he had been loaning the funds of the government to Carter, and that the money had all been returned, except about $150,000'; and told Whittle that the money had been paid out to Carter, from time to time, to assist in a stock speculation; that it was paid back again to tide over the monthly examination; that he had promised Carter that the money should be repaid to him the following day; and had told Carter that he would ask Whittle’s consent to allowing the money to go back to Carter again. Whittle told Hartwell that it was an impossibility to let the money go back to Carter; and that any deficiency must be paid in before ten o’clock the next morning.
Till. About nine o’clock a. m. of the 1st of March, Hartwell called on Carter at Mellen, Ward & Co.’s office, and asked him if he had that money. Carter told him he had it not then, but could give it to Mm before ten o’clock; and asked Hartwell if he could not take a draft on New York; stating to him that Mellen, Ward & Co. would have a very large amount of New York funds to dispose of so soon as Hartwell returned to them the gold certificates aforesaid. Hartwell then said he would take the New York funds; and the interview then ended. It does not appear that up to this time Carter had any knowledge or intimation that Hartwell had made to Whittle the disclosures set forth in the next preceding finding; nor does it appear that Carter told Hartwell anything in regard to how he intended or expected to get the draft on New York. At the close of this interview Hartwell returned from Mellen, Ward & Co.’s office to the sub-treasury.
IX. About half past nine o’clock a. m. on the 1st of March, Carter went to the banking house of the claimant, and obtained from Charles H. Smith, the cashier of the claimant, his draft, as cashier, on the Manhattan Company, New York, in favor of Mellen, Ward & Co., for $125,000, which'draft was in the words and figures following, to wit:
“The State National Bank op Boston,
“ Boston, M’eh 1, 1807.
“Pay to the order of Mellen, Ward & Co. one hundred and twenty-five thousand dollars.
“C. H. SMITH,
“Oashier.
“ No. 215.
“To the cashier of the Manhattan Company, New York.”
The facts and circumstances connected with his obtaining said draft were as follows: Carter asked Smith for the bank’s draft on New York for $125,000, and promised to give him immediately, in return, Mellen, Ward & Co.’s draft on New York for the same amount, with $100,000 in United States gold certificates attached, or else Adams Express Company’s receipt for that amount in gold. Upon the faith of this promise Smith drew and delivered to Carter the draft aforesaid. In this inter view between Carter and Smith nothing was said by Carter about there being any deficiency in the sub-treasury for which he was responsible; nor that he desired to use the draft to help make good a deficiency there; nor what his purpose was in obtaining it; nor does it appear that Smith had, at any time before or during this interview, any knowledge or intimation of the transactions between Carter and Hartwell hereinbefore referred to.
X. Within fifteen or twenty minutes after Carter received from' Smith the draft for $125,000, Carter, at the office of Mellen, Ward & Co., delivered it, together with $32,000 in currency, to Hartwell. Hartwell ‘ paid Carter nothing for the draft; it was passed to him by Carter to make good that deficiency; and Carter supposed it would not be wanted for that purpose over an hour.
XI. Neither before nor at the time that Hartwell received from Carter the said draft for $125,000 did Hartwell know anything of the means by which Carter obtained the same from Smith.
XII. Immediately after Hartwell received that draft and the $32,000 in currency from Carter, he took both to the sub-treasury, and delivered them to Chief Clerk Whittle. Whittle objected to receiving the draft, because the rules of the government required that the sub-treasury should receive nothing but gold, silver, legal-tender notes, or national-bank notes; and besides he had an impression on his mind, that, in some form or other, Smith, the claimant’s cashier, was involved in the stock speculation which Hartwell had, the day before, told him of Mellen, Ward & Co.’s being engaged in; for Hartwell had then, after Whittle’s refusal to let the money go out again, mentioned, among others, the name of Smith as one who was going to be hurt. ' Whittle then directed Hartwell to go out and procure the currency.
Hartwell then went out with the draft for $125,000, and tried at several banks to raise the currency on it, but could not find sufficient currency in any one bank; and he then went to the Eagle National Bank of Boston, and obtained from it, in exchange for that draft, three of its drafts on NeAV York, one for $75,000, and two for $2^,000 each, with the idea that currency might be obtained in smaller amounts at different banks; but the hour was so late then — it being about ten o’clock — that lie took the three drafts directly to Whittle, at the sub-treasury, saying to him that he had obtained them from the cashier of the Eagle National Bank, in exchange for the draft for $125,000, and that was the best he could do. The government examiners were at that time at work in the sub-treasury upon their monthly examination of the funds therein. Whittle then went out from the sub-treasury with the said three drafts of the Eagle National Bank in his possession, and sold them to the Second National Bank of Boston, and returned to the sub-treasury with the proceeds of the sale, $125,000 in currency, which he turned over, along with the $32,000 aforesaid, to the examiners; which two sums made up Hartwell’s deficiency, and balanced the cash account of the office. No part of the $157,000 which those two sums made up was ever returned to Hartwell, or Carter, or Melleu, Ward & Co., or the claimant.
XIII. Neither when the draft for $125,000 was taken by Hartwell to Whittle, nor when it was exchanged by Hartwell for the three drafts of the Eagle National Bank, did Whittle have any knowledge or notice of the consideration or means by which that draft had been obtained from the cashier of the claimant; but he had an impression that Carter had procured it.
XIV. About fifteen or twenty minutes after Smith delivered the draft for $125,000 to Carter, as stated in Finding IX, Smith went to Mellen, Ward & Co.’s office to inquire the reason why Carter had not brought to him the gold certificates, as he had agreed to. Carter was then absent from the office, and his partner Mellen told Smith that Carter was out about the matter at that time, and as soon as he should bring the certificates Mellen would take them to Smith. Immediately after this, Mellen, Ward & Co. sent to Smith their draft on New York for $125,000; but did not send with it any gold certificates, nor any receipt of the Adams Express Company. After waiting perhaps fifteen minutes after that visit to Mellen, Ward & Co.’s office, Smith went there again to know why the certificates or the receipt had not been brought to him, and then, for the first time, learned that Carter was at the sub-treasury, and in trouble.
XV. After all the foregoing transactions occurred, the claimant voluntarily paid to the Eagle National Bank the draft for $125,000 which Carter obtained, from Smith; and the three drafts of that bank were duly paid on presentation in New York. The aforesaid draft of Mellen, Ward & Go. for $125,000 was never paid, nor was it presented to the drawee ■ for payment.
XYI. At the time that Smith let Carter have the draft for $125,000, as aforesaid, Smith Avas, as cashier, under bond to the claimant, with sureties, in the sum of. $30,000 ; and after the claimant paid said draft the claimant made demand upon him and his sureties; and the sureties, without being sued, paid the claimant, within ninety days after the 1st of March, 1867, the full amount of their bond, and the claimant gave them a receipt therefor in terms such as the following:
“ State National Bank, Boston, received of-, the amount due from them as sureties on the bond of Charles H. Smith, late cashier of said bank, by reason of the defalcation of said Smith, resulting from an unauthorized draft made by the said Smith upon the Manhattan Go., New York, for the sum of one hundred and twenty-ñve thousand dollars ($125,000), which was applied to his own use.
“If the said Smith shall hereafter pay to the State National Bank the said sum of one hundred and tventy-five thousand dollars the bank will return to the sureties the amounts by them severally paid; or if he shall pay so much thereof that the bank shall be in the receipt, including the payments made by the sureties, of a surplus beyond one hundred and twentyfhe thousand dollars, the bank will return and distribute such surplus to the sureties, in proportion to the sums by them severally paid.
“ But this receipt is not to be construed or understood as an admission or recognition of any obligation on the part of the bank to take any measures to make up said defalcation; nor as the assertion of any claim by the said bank upon any funds, property, or means whereby the said defalcation, or any part thereof, can be made good; nor as any admission by the said bank that any such funds, property, or means are in existence.”
Mr. George O. Shattuclc and Mr. O. W. Holmes, jr., for the claimant:
In the case of a sale over the counter, understood to be for cash, if the goods are received and carried off but not paid for, the transaction does not create a debt; it is simply a con\ersion of the goods, because there is no sale. (Bishop v. Sldllito, 2 B. &. Aid., 329, note a; Bussey v. Barnett, 9 M. & W., 312; Tyler v. Freeman, 3 Cush., 261; Adams v. O' Connor, 100 Mass., 515 118.)
So in a case under tbe Factor’s Act, when money was advanced on tbe understanding that tbe lender was to immediately receive a warehouse receipt, it was held immaterial that the receipt was not turned over at tbe very moment tbe advance was made. (Cartwright v. Wilmerding, 24 N. Y., 521, at pp. 533, 534; approved in Winne v. McDonald, 39 N. Y., 233, 244; Of. Manufacturers’ Bank v. Farmers’ N. Bank, 2 Thompson & Cook (N. Y.), 395, 403.)
Tbe subsequent delivery of tbe check of the already bankrupt firm of Mellen, Ward & Co., without tbe security, was not tbe consideration; and if such a check was ever received, it was never accepted as such, nor presented for payment, nor paid.
It is fraud to make a purchase intending not to pay the price. (Donaldson v. Farwell, 93 TJ. S. B., 631; Stewart v. Fmerson, 52 N. H., 301; Dow v. Sanborn, 3 Allen, 181; Load v. Green, 15 M. & W., 216, 220.) A fortiori, it is fraud to do so knowing and concealing that one’s only means of payment is by the commission of a crime. The case is as much stronger as is known inability than unwillingness to do what the law will compel.
While the petitioner believes that it has made out a much stronger case than any of the similar ones which have been decided here, it equally brings itself within the principle of the decisions. The check was handed over on the same understanding and for the same purposes as the rest of the money.
The slight difference in the machinery employed is immaterial, because anything that would have given the United States a title to the check or its proceeds would equally have given it a title to the gold and other funds received the day before. (United States v. State Bank, 96 U. S. B., 30; Atlantic Bank v. Merchants’ Bank, 10 Gray, 532; Skinner v. Merchants’ Bank, 4 Allen, 290.)
Putting it at the very lowest, Whittle had notice that the State Bank check had been obtained by fraud, and of course knew that the Eagle Bank checks were the proceeds of the State Bank check. The petitioner goes further, and says, that, looking at the substance of the matter, the United States became possessed of this money by directions from Whittle to Hartwell, which, under the circumstances, amounted to a fraudulent scheme; that Hartwell was a party to it, and that Carter, the immediate instrument of the fraud, was himself made the agent of tbe United States to accomplish it, by the instructions which he received from Hartwell, and more remotely from Whittle. Thus the case is disposed of without encountering the questions which have been decided in the former cases before this court. ■
Mr. John 8. Blair (with whom was Mr. Assistant Attorney-General Simons) for the defendants:
The case differs essentially from that of Donaldson v. Far well (93 IJ. S. B., 631), cited by claimant. The purchase there was an ordinary transaction; there wasno express promise, simply a fraudulent concealment of the fact that the purchaser did not intend to pay. Here the transaction was extraordinary to the last degree; the draft; -was delivered, not on the faith arising from similar transactions in the past, but upon the specific promise of Carter to deliver in the future certain articles, which promise was accepted by claimant’s ag'ent. The promise was a good consideration for the draft, and would have been sufficient to sustain an action.
Claimant is inconsistent in bringing this action for money had and received by the United States to its use and then alleging that for Hartwell to return the very money sued for would have been a further embezzlement.”
If it was proper for Smith to issue a draft like the one in question, and to pass upon the consideration therefor, there was no fraud in Carter accepting it, when, as the evidence shows, he' expected to replace it in an hour. This expectation, although founded on what turns out to have been a misunderstanding between himself and Hartwell, fixes his good faith in the matter. (Dishonest intention is essential. Benjamin on Sales, § 429 ; 5 Oranch, 357.) If subsequent to Carter’s receipt of the draft a deception was perpetrated upon him by Hartwell, it is Carter that has been defrauded, not claimant.
If the court should be satisfied that a fraud was perpetrated on the claimant, the law is well settled that the contract is merely voidable, and that if the claimant once determined its election it remains determined forever. (Pence v. Lmgdon, 99 U. S. B., 582; Clough v. London and N. W. B. Co., 7 L. B. Ex., 34, 35.) We contend that claimants by settlement with the sureties have affirmed the transaction, and to the extent of $30,000 have derived a pecuniary benefit therefrom.. (.Bailey v. United States, 15 O. Cls. B,., 512,513; Stuyvesant v. Davis, 9 Page, 427; Jones v. Garter, 15 M. & W., 718; Doe v. Birch, 1 M. & W., 402; Dendy y. Nichols, 4 Common Bench, 386; Bigelow on Estoppel, 503; Herman on Estoppel, 468 ; Ncwhall v. Dunlap, 14 Me., 180.) Nor can be affirm in part and reject in part. (Farmers’ Loan and Trust Go. v. Walworth, 1 Cones, 433, pp. 446, 447.)
By accepting this money and giving the receipt they validated the draft for all purposes, and in any one’s hands to which it or its proceeds might come. (Fennimore v. United States, 3 Dallas, 357; Green’s Gase, Oro. Eliz., 3.) They thus gave to Smith a right of action against the United States, if there were a fraud, for the whole sum, and, if there were not a fraud, against Carter upon the promises made to Smith. .
The act of affirmance retrotra nitwr et aiquiparaturmandatum; , it vested in Smith, as of the 1st March, 1867, a good title to the proceeds of the draft, and this good title has, so far as the bank is concerned, vested in the United States. The contract, that is, the draft on the Manhattan Company, purported to be the act of the claimant; the proceeds having gone into the hands of one who is not a purchaser for value, claimant contends that, having been obtained by fraud, it was not binding upon the bank. But in dealing with Smith and his sureties, claimant has acted as if it were binding. It has adopted the contract which it now seeks to repudiate. (Campbell v. Fleming é Jones, 3 Neville & Manning, 834.)
The case differs from that of Atlantic Bank, v. Merchants’ Bank (4 Allen, 290), for here Hartwell hands the money over in payment of his debt, and Whittle, the agent of the United States, takes it for that purposes. The United States, therefore, is an innocent holder, and the evidence shows that securities of value were given for it, to wit, either certificates of deposit of the Newton Bank, or cashier’s checks on city banks. But if it be conceded that Hartwell was the receiving agent of the United States, it is not shown that he received the draft with the knowledge of any fraud, or auy just grounds for supposing that any had been perpetrated. On the contrary, Garter had assured him several days before that innocent banks should not suffer.
For the claimant in reply :
It will be noticed at the outset that this was a transaction between the bank and the sureties alone. It was therefore a pure matter of contract between the bank and a stranger to the United States, and the receipt given purports to be for money received in settlement of a contract liability. Accordingly such cases as Fennimore v. United States (3 Dallas, 357) have no application to the present, for two reasons — one drawn from the parties concerned,, the other from the nature and subject-matter of the transaction.
In Fennimore v. United States the dealing was between the party defrauded and the party guilty of the fraud. Here it was res inter alios. By the common law a man' cannot pay the debt or discharge the liability of a stranger, even if he tries to, except by an act which not only is expressly accepted as satisfaction by the creditor, but which purports to be done on behalf and in the name of the stranger, and which is subsequently ratified by him. (Kemp v. Balls, lOExch., 607; Simpson v. Fgg■ington, 10 Exch., 845; James v. Isaacs, 12 O. B., 791; Lucas v. WiUdnson, 1 H. & N., 420.) Still less can such a result be accomplished sub silentio and with no such intent. Here the transaction did not purport to affect the liability of the United States in any way. This was simply the case of a contract of indemnity up to a certain amount, and it is fundamental law that such a contract may be paid without affecting the liability of the parties primarily answerable for the loss. (Yates v. Whyte, 4 Bing. N. B.., 272.)
The only seeming exceptions to the generality of the foregoing principles are to be found in cases of principal and agent and of joint tort-feasors; and these are not exceptions at all. When there is an election to charge either principal or agent, the claim against either arises from the same act or contract, which, by reason of the fictitious identification of the two (as to acts within the scope of the agency), a third person may elect to consider the act of either of the individuals thus identified. By accepting satisfaction from either, his claim arising from the act, whosesoever act it may be, is satisfied.
So as to joint tort-feasors; in the language of Baron Parke, “there is a privity between the parties which constitutes an identity of person.” (Bain v. Cooper, 1 Dowl. Pract. Gas. N. S., II, 14.) Each stands to every other in the relation of principal and agent, and, for the reasons just given, satisfaction by one discharges the tort. But in this case, even if the money had been paid by Smith, it would not have been paid by a joint tort-feasor, for he was innocent.
The other reason why Fennimore v.' United States does not apply is found in the nature and subject-matter of the transaction.
There stock was parted with for a consideration in consequence of Fennimore’s fraud. As in the case of a sale brought about by fraud, the defrauded party had an election, viz, to affirm the transaction, and go for the consideration; or to rescind, which in the particular case would have destroyed the value of the thing conveyed (United States stock), and in ordinary cases would entitle to a return of the chattel, or to a recovery of its^alue as fixed by the jury. The election in such cases is an election merely between the contract price of the thing and the thing itself or the jury’s valuation of it. But where money is concerned no such election is possible. The title to any specific dollars, in this case, was g;one long ago by the dealings of the defendant. The claim, however it may be shaped, is a purely personal one, for a sum which no election can change, as it is fixed by the amount which the defendant received.
The election which the counsel for the government now try to fix upon the bank is a very different one from any suggested by Fennimore v. United States; an election not to hold the defendant liable at all, and to give it the full benefit of what it has gained by the fraud upon the claimant, without any equivalent. Such an election can only be manifested in one way, viz, by a discharge under seal to the party concerned. It cannot be brought about without the knowledge or intent of the claimant, without consideration from or privity of the government, by a dealing with a stranger to the whole transaction, which was entered into manifestl5 and on its face wholly alio intuitu.
The only act of the bank was to assert a claim against the sureties on their contract with it; and whether that claim was well or ill founded, based on a mistake of fact or of law, or on correct views of both, does not appear and is totally immaterial to the government. The bank could make as many contracts and as many claims on contracts with strangers, good or bad, as it chose, without affecting its position in this case. The payment was a payment upon such a claim under such a contract. If it were possible that the bank could by any transaction with Smith’s sureties make an election which should discharge the United States, which is most strenuously denied, especially in view of the fact of Smith’s innocence, such an election could only be binding when made with knowledge of the material facts. If Smith was guilty, there would have been a claim against him for the whole amount; if he was innocent, there might have been no claim at all. It appears that the settlement was made on the supposition that Smith was a party to the fraud, which the record shows that the bank entertained until after this suit was begun, and until long after the settlement; but later events and the evidence have proved that Smith was entirely innocent and was deceived. Without having the bond before it, the court cannot say whether the sureties were bound to pay under the circumstances, or whether the payment was made under a mistake of law or fact, or which, if either, of the latter. If the payment was made under a mistake of law, it gave them no claim of any kind. If under a mistake of fact, their only right was to recover it back; and that is' barred by the statute of limitations.
If they were bound to pay, it is clear that they would have no claim against the bank for any part of the proceeds of this suit until the bank was wholly indemnified; and, as has been said, the bank will in no event be anywhere nearly indemnified for its loss.

Opinion:
Drake, Oh. J.,
delivered the opinion of the court:
This case presents the third development of that most extraordinary scheme of conspiracy and fraud which was acted out in the city of Boston on the 28th of February and the 1st of March, 1867, between Edward Carter, a broker, the chief party, of the firm of Mellen, Ward & Co., and Julius F. Hartwell, the cashier in the office of the United States Assistant Treasurer in that city. Two other branches of that scheme have been before this court, in The State National Bank of BostoNs Case (10 . C. CJs. B., 519) and The First National Bank of NewtoNsOase (16 C. Cls. B., 54), each of which was connected with transactions that took place on the 28th of February. The present case involves the history of a single hour on the morning of the 1st of March, and discloses facts, not as complicated, but almost, if not quite, as remarkable as those detailed in those two cases. That bistory is set forth in minute detail in the finding of facts; but we give here a condensed statement of it.
Prior to February 28, 1807, Carter bad induced Hartwell to let him have out of the sub-treasury money of the United States to the amount, first and last, of a million to a million and a quarter dollars, to aid Carter in a stock speculation. In anticipation of the regular monthly examination, by government examiners, of the funds in the sub-treasury, which would take place on' the 1st of March, Hartwell insisted on Carter's paying back to him, before or on the 28th of February, the whole amount which Hartwell had let him have; promising Carter that as soon as the examination should be over he would let him have it again. On the 28th Carter put into Hartwell's hands all of that amount, except $157,000, which he promised to give him the' next morning. A few minutes after nine o'clock on that morning, Carter went to the claimant's banking-house, and asked Smith (the claimant's cashier) for the bank's draft on New York for $125,000, and promised to give him immediately, in return, Mellen, Ward & Co.'s draft on New York for the same amount, with $100,000 in United States gold certificates, or else Adams Express Company's receipt for that amount in gold. Upon the faith of this promise Smith drew and delivered to Carter his draft, as cashier, on the Manhattan Company, New York, for $125,000, payable to the order of Mellen, Ward & Co. This was all that then took place between Carter and Smith; but it is found that in that interview nothing was said by Carter about there being any deficiency in the sub-treasury for which he was responsible; nor about his desiring to use the draft to help make good a deficiency there; nor about his purpose in obtaining the draft; and there is nothing tending to show that Smith, at any tiipe before or during that interview,, had any knowledge or intimation of the preceding transactions between Carter and Hart-well. To every intent, Smith issued the draft simply and solely on the faith of Carter's promise.
Carter immediately delivered the draft, together wi th $32,000 in currency, to Hartwell, who was wholly ignorant of the means by which tile draft had been obtained from Smith; and Hart-well immediately delivered both draft and money to the chief clerk of the sub-treasury, George D. Whittle; to whom, the afternoon before, he had, without Carter's knowledge, divulged the whole matter of his transactions with Carter.
Whittle objected to receiving the draft, because the govern ment regulations required that the sub-treasury should receive nothing but gold, silver, legal-tender notes, or national-bank notes; and directed Hartwell tó go out and procure the needed amount in currency. This Hartwell endeavored to do, applying at several banks to obtain currency for the draft, but without success; and then, in the hope of getting currency for smaller drafts, he exchanged it for three drafts of the Eagle National Bank, one for $75,000 and two for $25,000 each; which he took and delivered to Whittle; who went out and sold the •drafts to the Second National Bank of Boston, obtaining therefor $125,000 in currency, which he placed in the hands of the examiners. It is found that Whittle had no knowledge or notice of the consideration or means by which the draft for $125,000 had been obtained from Smith.
Afterwards the claimant voluntarily paid to the Eagle National Bank the amount of that draft; and now sues the United •States to recover it back from them, as so much of its money received by them which ex cequo et bono they ought not to keep from it.
There is,'in our judgment, not the least ground upon which to base such a- claim. To sustain it would be to disregard the plainest principles of -law applicable to transactions between men in negotiable securities; principles which need not be arrayed here; for they enter into the most simple and elementary legal knowledge of courts and lawyers.
If it be claimed that Carter obtained the draft from Smith by fraud and without any consideration, the answer, assuming that to be so, is fourfold: 1. That that was a defense, if available at all, against the payment of the draft; and the draft is not in litigation here; 2. That when the claimant found the draft in the hands of the Eagle National Bank, it was bound then to set up whatever defense it could urge against the payment of it; 3. That having voluntarily paid the draft to that bank it abandoned every defense; and 4. That that defense would have availed nothing against a holder of the draft for value, without notice of its having been obtained by fraud and without consideration.
If it be urged that the government has received money of the claimants, the answer is that such is not the fact. The sum of $125,000, which went into the sub-treasury, was not received or derived from the claimant, but from the Second National Bank, and was tbe proceeds of a bona fide sale, not of the claimant's draft, but of the three drafts of the Eagle National Bank, which had in good faith been given for that draft.
The case, in its present shape, has no better foundation than it would have had if Carter had, by false and fraudulent representations, borrowed $125,000 in money from the claimant through its cashier, and paid the money to Hartwell, and Hart-well, without any knowledge of the fraud, had paid it into the sub-treasury. No court would for a moment entertain the proposition that the claimant could, under such circumstances, reclaim the money from the government.
But we need not press conclusions any further to show how devoid of merit is this claim.
Such being our view of it, it is needless to discuss the question as to the effect of the claimant's having received $30,000' from the securities of Smith.
The judgment of the court is that the petition be dismissed.
Nott, J., was not present at the hearing of this case, and took no part in its decision.