United States v. Clark, 96 U.S. 37

e do not propose here to enter this field of inquiry further p. 40than this case requires. And we think it does require us not to weigh the evidence, nor to decide whether the court below was bound to note the exception prayed by counsel, or even to include in their findings the matters of evidence we have above stated. But we are of opinion that when that court has presented, as part of their findings, what they show to be all the testimony on which they base one of the essential, ultimate facts, which they have also found, and on which their judgment rests, we must, if that testimony is not competent evidence of that fact, reverse the judgment for that reason. For here is, in the very findings of the court, made to support its judgment, the evidence that in law that judgment is wrong. And this not on the weight or balance of testimony, nor on any partial view of whether a particular piece of testimony is admissible, but whether, upon the whole of the testimony as presented by the court itself, there is any evidence to support its verdict; that is, its finding of the ultimate fact in question.

Was the good character of the claimant, the regularity of his accounts, and the prompt report of the loss and its amount, competent evidence to establish that amount ? The only thing in all this which could have any tendency to prove the sum lost is the report of its loss. This is but the testimony of the party claimant, and testimony not under oath. If he is p. 41incompetent as a witness, this less direct mode of testifying must also be excluded. If he is competent, and had been introduced on the stand, this fact might be used as corroborative evidence. But while he is alive and competent, it must be excluded as primary or independent evidence; because there is better evidence in the sworn statement of the party himself, produced on the stand and subject to cross-examination.

But there is legislation by Congress, and it is doubtless to be attributed to this that Mr. Clark was not called to prove the contents of the lost package. Sect. 858 of the Revised Statutes, p. 42originally enacted July 2, 1864, declares that “in the courts of the United States no witness shall be excluded in any action on account of color, or in any civil action because he is a party to or interested in the issue tried.” This was a complete abolition of the rule of exclusion under the common law in all the courts of the United States, and under it the claimant would have been competent to prove not only the contents of a lost package, but every other fact necessary to establish his claim or title to the relief sought by the suit. Four years later, however, Congress became dissatisfied with this departure from the old rule of evidence as it applied to suits in the Court of Claims, and by the act of June 25,1868 (Rev. Stat., sect. 1079), intended to restore it. It is there enacted that “ no claimant, nor any person from or through whom any such claimant derives his title, claim, or right against the United States, nor any person interested in any such title, claim, or right, shall be a competent witness in the Court of Claims in supporting the same ; and no testimony given by such claimant or person shall be used, except as provided in the next section.” The next section provides for the examination of such parties at the instance of the government counsel.

It can hardly be supposed that Congress intended to do more in this last statute than to restore the common-law rule of exclusion as it stood before the passage of the act of 1864. There is nothing in the language of the act of 1868, nor in the purpose to be subserved, which required more ; and in this respect the later act was limited to the Court of Claims, leaving the more progressive rule of 1864 to its full operation in all other courts. The peculiar form of expression of the act of 1868, so far from militating against this view, rather tends to confirm it. The parties are excluded from being witnesses in support of the title, claim, or right asserted in the suit, and no testimony given by them, — that is, no testimony given elsewhere on those points, — shall be used. But it is not inconsistent with this view, that, if the title or right of the claimant to relief is established by other evidence, he may be competent to prove, as under the common-law rule, the contents of the package in regard to which his right, title, and claim to relief has already been established. We are of opinion, therefore, that for this purpose the claimant p. 43was a competent witness, and that his testimony was the best to be had, since the court finds that he kept no clerk or assistant who might know the necessary facts.

The plaintiff asks, and by the very terms of the statute under which the Court of Claims acts can obtain, no judgment for money against the United States, nor fix any liability on the government to pay him any thing. By a very curious provision, the Court of Claims is authorized to establish for him a defence to a claim, which claim the government can only establish judicially in some other court. If that court could entertain jurisdiction of this matter when offered as a defence, it is very clear that the Statute of Limitations would be no bar to such defence there. Why should it be here? We think it is a principle of general application, that so long as a party who has a cause of action delays to enforce it in a legal tribunal, so long will any legal defence to that action be protected from the bar of the lapse of time, provided it is not a cross-demand in the nature of an independent cause of action. But if we are mistaken in this, it is clear that, until the accounting officers of p. 44the treasury had refused to recognize the sum lost as a valid credit in the settlement of his accounts, there was no occasion to apply to the Court of Claims ; and the statute, if applicable to this class of cases at all, did not begin to run until then. In the language of the statute, the officer is not held responsible for this amount until the accounting officers reject it as a credit, and it is only when he has been or is so held that he is authorized to sue in the Court of Claims to establish his defence.

Sect. 2 provides “that whenever that court shall have ascertained the facts of any loss to have been without fault or neglect p. 46on the part of such officer, it shall make a decree setting forth the amount thereof, upon which the proper accounting officers of the treasury shall allow to such officer the amount so decreed as a credit in the settlement of his accounts.”

In that view I cannot concur. I think it cannot be sustained upon principle or authority. The will of Congress as to the conditions upon which it allows the citizen to sue the government has been expressed in plain and unambiguous language, which leaves no room for construction. It is obviously our duty to execute the statute without reference to our opinion as to its wisdom or policy. If, under the circumstances of particular cases, it seems harsh when construed according to its terms, the remedy is with another department of the government, and not with the judiciary. The act which furnishes the sole authority for the institution of this action describes the demand of a disbursing officer to be relieved from responsibility for government funds which have been lost, as a “ claim ” which the Court of Claims may hear and determine. Congress not only expressly provides that no plaintiff or claimant in that court shall be a competent witness in supporting any claim or right he may assert against the United States; but, as if ex industria to prevent all misapprehension, and remove all possible doubt as to its intention, declares that “no testimony given by such plaintiff, claimant, or person shall be used.” Nevertheless, this court holds that Clark may testify as to the extent of the credit he is entitled to receive, and that his testimony p. 47upon that point may be used against the United States. If at the time of framing the act of June 25, 1868, the draughtsman intended to employ such terms as should effectually and in every conceivable contingency exclude the testimony of claimants when offered in their own behalf in the Court of Claims, he could, in my opinion, have used no more appropriate language. It is so simple and clear, that it would seem impossible for the utmost ingenuity to suggest a mode of defeating what appears to have been the evident purpose of Congress. A “ claimant ” ora “plaintiff” in the Court of Claims is incompetent as a witness against the United States. Is not Clark a “ plaintiff,” and does he not in this suit set up a claim or right? If allowed to be a witness to prove the amount of his loss, will he not give testimony in support of a “ right ” to be credited therewith ? Is not the act explicit and imperative that no “ plaintiff ” shall be heard to support his claim or right in that court by his own testimony, and that his testimony shall not be used against the government? It seems to me that these questions must be answered in the affirmative. Under what rule, then, can Clark be a competent witness in his own behalf ? How can his testimony be received against the government, without utterly disregarding the plainly expressed will of that department, which has the power to declare the conditions upon which the United States may be sued by the citizen ?

It is said that the utmost which can be claimed for the act is that it prescribes the general common-law rule, that a party cannot testify in his own behalf, and that this case comes within one of the recognized exceptions to that rule. In support of that position, we are referred to sects. 348-350 of 1st Greenleaf’s Evidence. But neither they nor the authorities cited in the notes prove what is claimed for them. That eminent text-writer says that “the oath in litem is admitted in two classes of cases: first, when it has been already proved that the party against whom it is offered has been gui ty of some fraud or other tortious and unwarrantable act p. 48of intermeddling with the complainant’s goods, and no other evidence can be had of the amount of damage; and, secondly, where, on general grounds of policy, it is deemed essential to the purposes of justice.” An example of the first class is the case cited in East India Company v. Evans et al., 1 Vern. 306, where a man ran away with a casket of jewels. The injured party was allowed to testify in odium spoliatoris. * Another case, of the same class, is Herman v. Drinkwater, 1 Me. 27, where the plaintiff shipped a trunk and two boxes on a brig then in the port of London, of which the defendant was master. The latter undertook to transport them to New York. The plaintiff, desiring to accompany them, engaged passage for himself in the same vessel, and sent on board his clothes and other baggage necessary for his accommodation. The defendant sailed without him, and on the voyage to New York broke open the trunk and rifled it of its contents. The plaintiff, in an action against the master, was held to be a competent witness, in his own behalf, to prove the contents of the trunk. It will not be pretended that the case now before us is within the first class just stated. The United States was not guilty of any fraud or tortious act whereby Clark lost the funds intrusted to him.

Nor can this case, consistently with the authorities, be embraced in the second class, familiar examples of which are actions against innkeepers, stable-keepers, and common carriers. Such actions always proceed upon the theory that the defendant was guilty of some fraud or negligence or breach of trust, whereby the plaintiff lost his property. Upon grounds of public policy the latter was sometimes allowed, at common law, to prove by his own oath certain facts essential to a recovery, no other evidence being attainable. To this head may be referred, says Mr. Greenleaf, the admission of the party robbed, as a witness for himself, in an action against the hundred, upon the Statute of Winton. But that action was authorized upon the ground that the hundred was guilty of some wrong or negligence whereby the plaintiff had received the injury complained of. Nothing of that kind can be predicated of the government in a case like this. No element of wrong or fraud or negligence on its part can exist in any action p. 49instituted under the act of May 9,’ 1866. Paymaster Clark was intrusted with public funds for disbursement, and their loss was not caused by the neglect of any other government officer. By the law then in force, he was responsible for them, although they had been feloniously taken from him. United States v. Prescott et al., 3 How. 578. Congress, in 1866, influenced doubtless by the hardship of special cases, perhaps of this particular case, enabled disbursing officers to obtain a credit for government funds taken from them, without fault or negligence on their part. A subsequent statute, however, declares that notestimony given by a plaintiff in the Court of Claims against the United States shall be used. Whatever exceptions to the common-law rule public policy or necessity has established, the terms of the act of June 25, 1868, exclude all possibility of exceptions to the rule which it prescribes. In the Court of Claims no plaintiff can testify against the United States in support of his claim or right. So reads the statute; and it is, I submit, the duty of this court to obey it, leaving to Congress to make such changes in the rules of evidence as its views of public policy may suggest. It may be unfortunate for Clark if he be denied an opportunity to testify to the amount of his loss; but, as said by Lord Campbell, “ it is the duty of all courts of justice to take care, for the general good of the community, that hard cases do not make bad law.” Past India Company v. Paul, 7 Moo. P. C. C. 111.

When the present case was first tried, the court below, holding that the judgment in the Smith case was conclusive against Cromwell, excluded proof of his receipt of the bonds and coupons in this suit before maturity for value, and gave judgment for the county. But when the case was brought here at the last term, this court held that the court below erred in excluding this proof ; and that the point adjudged in the Smith case was only that the bonds were void as against the county in the hands of parties who had not thus acquired them before maturity and for value. The judgment was accordingly reversed, p. 53and the cause remanded for a new trial. Cromwell v. County of Sac, 94 U. S. 351.

The main questions determined in the court below — such, at p. 54least, as are deemed sufficiently important to be here noticed—were, in substance, these: 1st, Whether the judgment in Smith v. Sac County barred a recovery by Cromwell; 2d, whether as to the bonds maturing in 1868 and 1869, and the coupons annexed, he had the rights of a holder for value before dishonor, and without notice of any defence to them ; 3d, whether, if entitled to recover on the bonds and coupons, he should be allowed interest on them after maturity at the rate prescribed by the law of New York, or by that of Iowa ; and, 4th, whether the judgment should bear interest at the rate of ten, or only six, per cent a year.

pas^due coupons attached to the bonds maturing in 8 and 1869 were notice to Clark, the purchaser, that the p. 56paper was dishonored, and the plaintiff did not acquire the other bonds in the ordinary or usual course of business. Suidam v. Williamson et al., 20 How. 428 ; Vermilye $ Co. v. Adams Express Co., 21 Wall. 138; McClure v. Township of Oxford, supra; Collins n. Gilbert, 94 U. S. 753; Shirts v. Overjoh, 60 Mo. 305; Davis v. Bartlett St. John, 12 Ohio St. 534.

As to the other two bonds in suit, — those payable in 1868 and 1869, — and coupons annexed, it appears that when Clark purchased them, on the 20th of May, 1863, there were attached to each the coupon due on the first of that month and all subsequent unmatured coupons. His vendor stated to him that the coupons previously matured had been paid, and that those due on the first of the month would be paid in a few days. He p. 57had no notice at the time of any defence to the bonds, except such as may be imputed to him from the fact that one of the coupons attached to each of the bonds was then past due and unpaid. And the principal question for our determination is, whether, this fact existing, the plaintiff had, as to these bonds, the right of a holder for value before dishonor, without notice of any defences by the county ; or, as stated by counsel, whether this fact rendered the bonds themselves, and all subsequently maturing coupons, dishonored paper, and subjected them, in the hands of Clark and the plaintiff succeeding to his rights, to all defences good against the original holder. The judges of the Circuit Court were divided in opinion upon this question; and, as in such cases the opinion of the presiding judge prevails, the decision of the court was against the plaintiff, and he was held to have taken the bonds and subsequent coupons as dishonored paper, subject to all the infirmities which could be urged against them in the hands of the original holder. In this decision we think the court erred. The special verdict does not show that the coupons overdue had been presented to the Metropolitan Bank for payment, and their payment refused. Assuming that such was the fact, the case is not changed. The non-payment of an instalment of interest when due could not affect the negotiability of the bonds or of the subsequent coupons. Until their maturity, a purchaser for value, without notice of their invalidity as between antecedent parties, would take them discharged from all infirmities. The non-payment of the instalment of interest represented by the coupons due at the commencement of the month in which the purchase was made by Clark was a slight circumstance, and, taken in connection with the fact that previous coupons had been paid, was entirely insufficient to excite suspicion even of any illegality or irregularity in the issue of the bonds. Obligations of municipalities in t e form of those in suit here are placed, by numerous decisions of this court, on the footing of negotiable paper. They are transferable by delivery, and, when issued by competent authority, pass into the hands of a bona fide purchaser for value before maturity, freed from any infirmity in their origin. Whatever raud the officers authorized to issue them may have committed m disposing of them, or however entire may have been the p. 58failure of the consideration promised by parties receiving them, these circumstances will not affect the title of subsequent bona fide purchasers for value before maturity or the liability of the municipalities. As with other negotiable paper, mere suspicion that there may be a defect of title in its holder, or knowledge of circumstances which would excite suspicion as to his title in the mind of a prudent man, is not sufficient to impair the title of the purchaser. That result will only follow where there has been bad faith on his part. Such is the decision of this court, and substantially its language, in the case of Murray v. Lander, reported in the 2d of Wallace, where the leading authorities on the subject are considered.

497. To hold otherwise would throw discredit upon a large class of securities issued by municipal and private corporations, having years to run, with interest payable annually or semi-annually. Temporary financial pressure, the falling off of expected revenues or income, and many other causes having no connection with the original validity of such instruments, have heretofore, in many instances, prevented a punctual payment of every instalment of interest on them as it matured; and similar causes may be expected to prevent a punctual payment p. 59of interest in many instances hereafter. To hold that a failure to meet the interest as it matures renders them, though they may have years to run, and all subsequent coupons dishonored paper, subject to all defences good against the original holders, would greatly impair the currency and credit of such securities, and correspondingly diminish their value. We are of opinion, therefore, that Clark took the two bonds in suit and the subsequently maturing coupons as a bona fide purchaser, and as such was entitled to recover upon them, whatever may have been their original infirmity. The plaintiff, Cromwell, succeeded by his purchase from Clark to all Clark’s rights, and can enforce them to the same extent. Nor does it matter whether, in the previous action against the county by Smith, who represented him, he was informed of the invalidity of the bonds as against the county, and knew, when he purchased, the circumstances attending their issue, or whether he was made acquainted with them in any other way. The rule has been too long settled to be questioned now, that, whenever negotiable paper has passed into the hands of a party unaffected by previous infirmities, its character as an available security is established, and its holder can transfer it to others with the like immunity. His own title and right would be impaired if any restrictions were placed upon his power of disposition. This doctrine, as well as the one which protects the purchaser without notice, says Story, “ is indispensable to the security and circulation of negotiable instruments, and it is founded on the most comprehensive and liberal principles of public policy.” Story, Prom. Notes, sect. 191. The only exceptions to this doctrine are those where the paper is absolutely void, as when issued by parties having no authority to contract; or its circulation is forbidden by law from the illegality of its consideration, as when made upon a gambling or usurious transaction.

The plaintiff, therefore, holds the bonds and the subsequent coupons as his vendor held them, freed from all infirmities attending their original issue. Nor is he limited in his recovery upon them, or upon the other two bonds, as contended by counsel for the county, to the amount he paid his vendor. Clark lad given full value for those he purchased, and could have recovered their amount from the county, and his right passed to p. 60his vendee. But, independently of the fact of such full payment, we are of opinion that a purchaser of a negotiable security before maturity, in cases where he is not personally chargeable with fraud, is entitled to recover its full amount against its maker, though he may have paid less than its par value, whatever may have been its original infirmity. We are aware of numerous decisions in conflict with this view of the law; but we think the sounder rule, and the one in consonance with the common understanding and usage of commerce, is that the purchaser, at whatever price, takes the benefit of the entire obligation of the maker. Public securities, and those of private corporations, are constantly fluctuating in price in the market, one day being above par and the next below it, and often passing within short periods from one-half of their nominal to their full value. Indeed, all sales of such securities are made with reference to prices current in the market, and not with reference to their par value. It would introduce, therefore, inconceivable confusion if bona fide purchasers in the market were restricted in their claims upon such securities to the sums they had paid for them. This rule in no respect impinges upon the doctrine that one who makes only a loan upon such paper, or takes it as collateral security for a precedent debt, may be limited in his recovery to the amount advanced or secured. Stoddard v. Kimball, 6 Cush. (Mass.) 469; Allaire v. Hartshorne, 1 Zab. 665; Williams v. Smith, 2 Hill (N. Y.), 301; Chicopee Bank v. Chapin, 8 Met. (Mass.) 40 ; Lay v. Wissman, 36 Iowa, 305.

The bonds by their terms, as already stated, bear interest at p. 61the rate of ten per cent until maturity. The plaintiff claims that they should draw the same rate of interest after maturity, and that, under the statute of Iowa, the judgment should also bear ten per cent interest. The court below allowed only seven per cent on the bonds after maturity, that being the rate in New York, where the bonds were payable, and only six per cent on the judgment. In this ruling, we think the court erred. By the settled law of Iowa, as established by repeated decisions of her highest court, contracts drawing a specified rate of interest before maturity draw the same rate of interest afterwards. Hand v. Armstrong, 18 Iowa, 324; Lucas, Thompson, $ Co. v. Picket, 20 id. 490. A like decision has been made in several of the States upon similar statutes. Brannon v. Hursell, 112 Mass. 63 ; Marietta Iron Works v. Lottimer, 25 Ohio St. 621; Monett v. Sturges, id. 384; Kilgore v. Powers, 5 Blackf. (Ind.) 22; Phinney v. Baldwin, 16 Ill. 108; Etnyre v. McDaniel, 28 id. 201; Spencer v. Maxfield, 16 Wis. 178, 541; Pruyn v. The City of Milwaukee, 18 id. 367; Kohler n. Smith, 2 Cal. 597; McLane v. Abrams, 2 Nev. 199; Hopkins v. Crittenden, 10 Tex. 189. There are, however, conflicting decisions; but the preponderance of opinion is in favor of the doctrine that the stipulated rate of interest attends the contract until it is merged in the judgment. Pearce v. Hennessey, 10 R. I. 223; Lash v. Lambert, 15 Minn. 416; Searle and Others v. Adams, 3 Kan. 515; Kitchen et al. v. The Branch Bank at Mobile, 14 Ala. 233. The statutory rate of six per cent in Iowa only applies in the absence of a different stipulated rate. As the judgment in case of a stipulated interest in the contract must bear the same rate, it could not have been intended that a different rate should be allowed between the maturity of the contract and the entry of the judgment.

The case of Brewster v. Wakefield (22 How. 118) is cited against this view. That case came from a territorial court, and arose under a statute which allowed parties to agree upon any rate of interest, however exorbitant, and only prescribed seven per cent in the absence of such agreement. This court, bound y no adjudication of the territorial court, and looking with disfavor upon the devouring character of the interest stipulated in t at case, gave a strict construction to the contract of the parties. p. 62“ The law of Minnesota ” (then a Territory), said the court, “ has fixed seven per cent per annum as a reasonable and fair compensation for the use of money ; and when a party desires to extort, from the necessities of a borrower, more than three times as much as the legislature deems reasonable and just, be must take care that the contract is so written in plain and unambiguous terms ; for with such a claim he must stand on bis bond.” The statute of Iowa only allows the parties by their agreement to stipulate foi' interest up to ten per cent a year, — a rate which has not been deemed extravagant or unreasonable in any of the States lying west of the Mississippi. Be that as it may, the question is one of local law under a statute of a State, and the construction given by its tribunals should conclude us.

It follows, from the views expressed, that the plaintiff was entitled to judgment for the amount of the four bonds and the coupons in suit, with interest on the bonds after maturity until judgment at the rate of ten per cent a year, and with interest on the coupons after their maturity until judgment at the rate of six per cent a year; and that the judgment should draw p. 63interest at the rate of ten per cent a year upon the amount found due on the bonds, and at the rate of six per cent a year upon the amount found due on the coupons, including the costs of the action.