OSGOOD'S ADM'nS V. ARTT.
575
cess of the amount ordered by him, and deducting from the total thus ascertained 10 per centum commissions allowed by law. It follows, if the answer is true, that the sum tendered by Mansfield is the sum due, and for which the United States is entitled to judgment. If, therefore, the district attorney stands upon the demurrer to the answer to t?e second amended petition, there will be judgment accordingly agamst the defendant Mansfield. We do not at present pass upon the defense of the sureties on the bond, as it may not be necessary to do so. If the plaintiff accepts the sum tendered and the defendant Mansfield pays it at once, no question as to the rights of the sureties can arise. If this is not done, the court will, upon being so advised, consider and determine the questions raised on behalf of the sureties.
OSGOOD'S ADM'RS V. ARTT.
(Circuit Court, N. D. Illinois. 1. NEGOTIABLE PAPETI-TRANSFER WITHOUT
1883.)
By the rules of the law-merchant, the purchaser of negotiable paper, payable to ortIcr, uniess it be indorscd by the payee, suLJject to any detense which the payor has against the payee. He iJecomes, in snch case, only the equitable owner of the deht or claim evidenced by the security. ON SECURITY.
2.
As a general rule the legal tit'e to negotiahle paper, payable to order, passes only by the payee's indorsement on the security itself, or on a piece of paper so attached to the orrginal instrument as, in effect, to become a part of it, or incorporated into it. nY WORDS IN SEPARATE
3.
'Yords of assignment and transfer, contained in a separate instrument, executed for a wholly ditlerent and distinct purp,)se, arc not equivalent to an indorsement, within the se, tied rules of the law-merchant. OF DEFENSE.
4.
A snbsequent indorsement made after notice of the payor's defense, although the paper was without notice of defense, will not relate back to the time of purchase, su as to cut off the equities of the payor against the payee.
At Law. TV. H. Slcift, for plaintiffs. Edsnll, Hall'ley ,t' Edsall, for defendant. Justice. On the fourteenth day of jlay, 1856, the defendant, Artt, executed and deliwred to the Racine & Rail· road Company his note, whereby, ior yalue receiyed, he promiserl to pay to that company or order, at the expiration of frye years from 10, 1856, the sum of $2,300, together with interest at the rate of 10 per cent. per annum, payable annually on the tenth day of jlay of each year,-principal and interest payable at the office of the com-
576
FEDERAL REPORTER,
pany in the city of Racine, Wisconsin. At the same time, Artt, to Jecure the payment of the note, executed to the company his mortgage upon certain real estate in Carroll county, in this state. Sub· sequently, the company made its bond, under date of June 10, 1806, acknowledging its indebtedness to and promising to pay Charles Osgood, or bearer, $2,500 on tho tenth of :May, 1861, at its office in the city of New York, together with interest from and nfter the tenth day of May, at the rate of 10 per cent. per annum, payable semi-annually on each tenth day of November and May, upon the presentation and surrender of the interest coupons at the said office. That bond contained these clauses: "To the payment whereof the said company hereLy bind themselves firmly hy these presents; and, for the better security of such payments Leing made to the holder thereof. the said company hare assigned and transfen'ed, and by these presents do assi.qn and transfer, to the said holder of this bond a certain note for the sum of 82,500, executell by Hobert Artt, of Carroll county, together with a mortgage gi ven collateral to and for the purpose of securing the payment of the same, dated on the fonrteenth day of May. 1856, payable in five years from the tenth day of .May, IS:>G, with interest at the rate of 10 per cent. per annum, which said note and mortgage are hereto appended, and are transferable in connection with this bond, and not otherwise, to any parties or purchasers whomsoevep. And the said company do hereby ;tuthol'ize and empower the holder of this Lond at any time, in case said company shall fail to perform any of the foregoing stipulations by neglecting to pay either principal or interest on this bond when the same shall Lecome due, to proceed and foreclose the said mortgage, or such other legal remedy on said note and mortgage against said mortgagor. or against this company on this present bond, or on Loth, as shall seem proper allll expel1ipnt to said holder hereof."
Some time in the summer of 1857 the railroad company sold the bond, delivering therewith the note and mortgages to plaintiffs' intestate,-the bond, note, and mortgage being attached firmly together with eyelets in the order in which they are named, the bond on the top, next the note, and then the mortgage. The Land, note, and mortgage each bears the number 1,964 written thereon in ink. At the time of such purchase and delivery Osgood had no notice of any defense to the note, nor of any of the matters alleged in defendant's third plea. 'l'hat plea states facts which are conceded to show a good defense as between Artt and the railroad company, viz., an entire failure of consideration, and also fraud, upon the part of the company, in procuring the execution of the note and mortgage. The note, Land, and mortgage, after their delivery to deceased, remained attached in the manner just stated. Upon the back of the note are the words "Racine & Mississippi Railroad Company, by H. S. Durand, President," which is the indorsement of the railroad company, placed thereon by its authority. It had not, however, been placed there when Osgood purchased and received the note, bond, and mortgage, but was made at some date subsequent to June, 1859. Before the indorsement was, in fact, made on the note, but after the purchase by 9sgood, he had notice as well of the fraud practiced by the rail-.
OSGOOD'S
V. AR'lT.
577
road on Artt, of the failure of consideration in the note, as set out in the defendant's third plea. These facts have been specially found by a jury, and the sale question for determination is whether, upon this finding, the plaintiffs are entitled to judgment. The only issue of fact made on the third plea is whether Osgood, prior to the indorsement of the note, had notice of the alleged fraud and failure of consideration. 1. It is a settled doctrine of the law-merchant that the bona fide purchaser for value df negotiable paper, payable to order, if it be indorsed by the payee, takes the legal title unaffected by any equities which the payor may have as against the payee. 2. But it is equally well settled that the purchaser, if the paper be delivered to him without indorsement, takes, by the law-merchant, only the rights whi0h the payee has, and therefore takes subject to any defense the payor may rightfully assert as against the payee. The purchaser in such case becomes only the equitable owner of the claim or debt evidenced by the negotiable security, and, in the absence of defense by the payor, may demand and receive the amount due, and, if not paid, sue for its recovery, in the name of the payee, or in his own name, when so authorized by the local law. 3. As a general rule the legal title to negotiable paper, payable +,0 order, passes, according to the law-merchant, only by the payee's indorsement on the security itself. The only established exception to this rule is where the indorsement is made on a piece of paper, so attached to the original instrument as, in effect, to become part thereof, or be incorporated into it. This addition is called, in the adjudged cases and elementary treatises, an allonge. That device had its origin in cases where the back of the instrument had been covered with indorsements, or \\Titing, leaving no room for further indorsements thereon. But, perhaps, an indorsement upon a piece of paper, attached in the manner indicated, would now be deemed sufficient to pass the legal title, although there may have been, in hct, room for it on the original instrument. 4. But neither the general doctrines of commercial law, nor any established exception thereto, make words of mere assignment and transfer of such paper-contained in a separate instrument, executed for a wholly different and distinct purpose-equivalent to an indorsement within the rule, which admits the payor to urge, as against the holder of an unindorsed negotiable security, payable to order. any valid defense which he has against the original payee. 5. The transfer of the note in suit, by words of assignment in the body of the railroad company's bond, did not, in the judgment of the court, amount to an indorsement of the note, although bond, note, and mortgage were orginally fastened together by eyelets. The facts set out in the third plea, and sustained by the special finding, tute, therefore, a complete defense to the action, unless, as contended v.17,no.7-37
578
by plaintiffs, the' subsequent indorsement, in form, by the railroad company, after Osgood was informed of Artt's defense, has relation back to the time when the former, without notice of such defeme, pur:lhased the note for value then paid. If, at the time of Osgood's purchase, it had been agreed that the company should indorse the note, but the indorsement was omitted by accident or mistake or fraud upon the part of the company, a different question would have been presented. In such case, the company might, perhaps, have been compelled to make an indorsement which would have been deemed effectual as of the time when, according to the intention of the parties, it should have been made. But no such case is presented by the special finding. It is entirely consistent with the facts found that the indorsement by the company was an afterthought, induced by notice of Artt's defense, and was not within the contemplation or contract of the parties when Osgood purchased th'S. bond. Moreover, and :;j.S a circumstance significant of an intention to restrict, in some degree, the assignability of the note and mortgage, it is expressly stipulated, in the company's bond, that they are transferable in connection with the bond, and not otherwise. I am of opinion that the facts which came to Osgood's knowledge prior to the indorsement, and which, in sub3bnce, constitute the defense set out in the third plea, furnished notice that the company had, by reason of fraud and failure of considel'utlOn, lost its right to demand payment of the note from Artt. By the indorsement, after such notice, Osgood could not acquire any greater rights than the company possessed. He did not become the holder of the note by indm'sement, as required by the law-merchant, until after he had notice that the company could not rightfully pass the legal title, so as to defeat Artt's defense. While the adjudged cases are not in harmony upon some of propositions, the conclusions indicated are, in the opinion of the court, consistent with sound reason, and are sustained by the great weight of authority.l The facts specially found do not authorize a judgment for the plaintiffs. 1 Chief .Jmtice in Hop!.:iTk v. 1'a.'IP,2 Brock 41; Stllrgd ),ms v . .lJft. Not. B(mk, 49 III. 231; JIelend!l v. Keen, E9 111. 404; HaRke!! v. Brmrn, G.5 Ill. 37: Lancaster Bank v. Tal/lor, 100 24; BaNII' Y. Cohea, 12 8metles &; 522; Grand Gll(( IJmk v. lI'uod, Id. 482; Cl'li'k Y. lV/til'fl:a, [iLl K. H. 474; Ha,ktll v . .llitrhell, 53 4G8; Franklin v. Ttco:/ood, IS Io'.\"a, 515; French v. Tlirner,15 Ind. 59; Folger v. 18 Pick. G3; lI'hi"tler ,'. For,.-er, 14 C. B. 24G, (lOS E. C. L. 248;) Harrop Y. Fisher, 10 C. B. (X. S.) HI{j; GII,-, II' v. JJinet, 1 H. BL So p. 606 :
Story, Xotes, § 120; Story, Bills, § 201; Chitty, Bills, Amer. fram 9th Lond.) 2.52; 2 Pars. K otes &; Bills, 1, 17, IS; 1 Daniel, X er;. In"t. (3d Ed.) §§ G64[/, 6S\)'1, 741. and 7!Sa.
UNITED STATES V. BARNHART.
57!)
(Circuit Court, D. Oregon.
August 24,1883.)
1.
BOND OF INDIAN AGE:"T-CO:"DITION OF.
13. was appointed agent for the Indians in Washington territory, and as such gave a bond conditioned. to faithfully account for all money and property that might come into his hands, and was thereupon assigned to duty on the Umatilla reservation, in Oreg-on, where he acted as agent to the Indians settled thereon, under the treaty of June 9, 1855, (12 tit. 945,) some of whum had previously resided in Waohington territory. Held, (1) the condition of the bond di(l not include or apply to money or property not reeeived by the obligor as agent of the 'nclians in 'Vashington territory; and (2) that he was not liable on said bond for money receIved by him while he was acting as agent to the Indians on the Umatilla re,enation. ? IN AnnEST .JUDG)IENT.
In the consideration of a motion in aITes! of judglr.ent the emIr! cnnnot look be\ onel the record, and therefore will not take nutice 01 a ,tipu.atlUn made <iu'ring the trial, admitting the existence of certain tad" in the cnse,
S.·'IOTION FOR XEW TUL\L, A motion for a new trial, on the ground that the verdict is contrary to evidence will not be allowerl where the amount in eontro,"er,', is tril1111g; but when 'the verdict is probably the result of an erroneous or direction of the judge, the motion will be allowed. however small the amuunt.
At Law. SCI/CCCI
Action on official bonel.
,hl1nes F. TV(ftsolt, for the United States.
Smith, for defendant. DE.\DY,.J. This action was commenced on July 2G, 1881, to recoyer from the defendant the sum of $115.75 for money receiyed by him as Indian agent behveen November 19, 18G1, and September 30, lSG5, and not duly accounted for. It appears from the complaint that the defendant ,,'as appointed "agent for the Indians in 'Yashington tenitory," and 'is such gave a bond, with sureties, in the penal sum of $10,000, conditioned as follows: "Now, if the said Barnhart shall and doth at all times henceforth, and during his holding and remaining in said office, carefully discharge the duties thereof, and faithfully expend all public moneys and honestly account for the same, and for all public property which shall or may come into his hands without fraud or delay, then the above obligation to be void, otherwise to remain in full force and virtue;" and that, as such agent, he recei,ed from the plaintiff, under said bond, behyoen the dates aforesaid, a large sum of monoy, of which he failed to account for $115.75, according to the condition thereof. The action is brought upon this bond against the defendant alone for this sum, with interest since September 30, 1865. The answer of the defendant is in effect a denial that he ever receiYed any money from the plaintiff as "agent for the Indians in 'Yashington territory" under said bonel, or failed to account for the same, The cause was tried with a jury, who, on December 13, 1882, g:n'e a wnlict for the plaintiff for the sum of $10:75. The defendant mowd in arrest of judgment, and for a new