Cromwell v. County of Sac County of Sac
ERROR to the Circuit Court of the United States for the District of Iowa.
This action was brought by Cromwell upon four bonds of the County of Sac, in the State of Iowa, each for $1,000, and four interest coupons attached to them, each for $100. The bonds were issued on the 1st of October, 1860, and made payable to bearer on the 1st of May, in the years 1868, 1869, 1870, and 1871, respectively, at the Metropolitan Bank, in the city of New York, with annual interest at the rate of ten per cent a year. The coupons in suit matured after the 1st of May, 1868. They were, at the option of the holder, payable at that bank, or receivable for county taxes at the office of the treasurer of Sac County.
As a defence, the county relied upon the estoppel of a judgment rendered in its favor in a prior action, brought by one Samuel C. Smith upon certain earlier maturing coupons upon the same bonds, accompanied with proof that Cromwell was, at the time, the owner of those coupons, and that the action was prosecuted for his benefit. It appears, from the findings in that action, that the County of Sac authorized, by a vote of its people, the issue of bonds to the amount of $10,000, for the erection of a court-house; that they were issued by the county judge, and delivered to one Meserey, with whom he had made a contract for the erection of the court-house; that immediately thereafter the contractor gave one of the bonds as a gratuity to the county judge; that a court-house was never constructed by the contractor or any other person pursuant to the contract; and that the plaintiff became the holder before maturity of the coupons in controversy, but it does not appear that he gave any value for them. Upon these findings the court below decided that the bonds were void as against the county, and accordingly gave judgment in its favor upon the coupons, holding that any infirmity of the bonds, by reason of illegality or fraud in their issue, necessarily affected the coupons attached to them. When that case was brought here on a writ of error, this court held that the facts disclosed by the findings were sufficient evidence of fraud and illegality in the inception of the bonds to call upon the holder to show, not only that he had received the coupons before maturity, but that he had given value for them; and, not having done so, the judgment was affirmed. Smith v. Sac County, 11 Wall. 139.
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, and the cause remanded for a new trial. Cromwell v. County of Sac, 94 U.S. 351.
Upon the second trial, the plaintiff proved that he had received, before their maturity, the bonds payable in 1870 and 1871, with coupons attached, and given value for them, without notice of any defence to them on the part of the county.
As to the bonds payable in 1868 and 1869, and coupons annexed, it appears that the plaintiff purchased them from one Clark on the 1st of April, 1873, after their maturity, for the consideration of a precedent debt due to him from Clark, amounting to $1,500; that they had previously been held by one Robinson, who had pledged them to a bank in Brooklyn as collateral security for a loan of money; that Clark purchased them of Robinson on the 20th of May, 1863, by paying this loan to the bank, then amounting to $1,192, and applying the excess of the amount of the bonds over the amount thus paid, in satisfaction of a precedent debt due to him by Robinson. To each of these bonds there were attached, at the time of Clark's purchase, the coupon due May 1, 1863, and all the unmatured coupons. Robinson stated to Clark 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. Clark had 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. There was a special verdict referring to the judgment in Smith v. Sac County, and showing the facts above stated as to the purchase of the bonds and coupons.
The law of New York allows interest at the rate of seven per cent a year, and any agreement for a greater rate avoids the whole contract. The law of Iowa provides that the rate of interest shall be six per cent a year on money due by express contract, where a different rate is not stipulated, and on judgments and decrees for the payment of money; but that parties may agree in writing for the payment of interest not exceeding ten per cent a year, and that in such case any judgment or decree thereon shall draw interest at the rate expressed in the contract.
The main questions determined in the court below-such, at least, 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.
The judges of the Circuit Court were divided in opinion on these questions. Conformably to the opinion of the presiding judge, who held that the bonds which matured in 1868 and 1869, and the coupons thereto attached, were, when purchased by Clark, dishonored paper, judgment, bearing six per cent interest per annum, was entered in favor of Cromwell, only for the amount mentioned in the bonds which matured in 1870 and 1871, and the coupons annexed, with interest on them at seven per cent a year after maturity. This judgment is now brought here for review, each party having sued out a writ of error.
Mr. John N. Rogers for Cromwell.
A purchaser for value of an unmatured negotiable bond, with an overdue coupon attached thereto, does not take it as dishonored paper, subject to all defences good against the original holder. Bass v. Kewitt, 20 Wis. 260; National Bank of North America v. Kirby, 108 Mass. 497; Brooks v. Mitchell, 9 Mee. & W. 15; Goodman v. Simonds, 20 How. 343; Murray v. Lardner, 2 Wall. 110; Goodman v. Harvey, 4 Ad. & E. 870; Burnham v. Brown, 23 Me. 400; Oridge v. Sherborne, 11 Mee. & W. 374; Grafton Bank v. Doe, 19 Vt. 463; Ferry v. Ferry, 2 Cush. (Mass.) 92; United States v. Union Pacific Railroad Co., 91 U.S. 72; Miller v. Race, 1 Burr. 452; S.C.. 1 Sm. L. C. 597 and notes.
If the rate of interest where the contract is made differs from that at the place of payment, the agreement of the parties for either rate is valid. Miller v. Tiffany, 1 Wall. 298; Depau v. Humphreys, 8 Mart. (La.) 1; Chapman v. Robertson and Others, 6 Paige (N. Y.), 627; Peck v. Mayo, 14 Vt. 33; Butters v. Olds et al., 11 Iowa, 1.
Under the Iowa statute which governs this case, the bonds after maturity bear interest at ten per cent per annum. Hand v. Armstrong, 18 Iowa, 324; Lucas, Thompson, & Co. v. Pickel, 20 id. 490. In the States where a similar statute prevails, the decisions are to the same effect. Brannon v. Hursell, 112 Mass. 63; Marietta Iron Works v. Lottimer, 25 Ohio St. 621; Mouett 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 v. Smith, 2 Cal. 597; McLane v. Abrams, 2 Nev. 199; Hopkins v. Crittenden, 10 Tex. 189 Miller v. Burroughs, 4 Johns. (N. Y.) Ch. 436; Van Buren v. Van Gaasbeck, 4 Cow. (N. Y.) 496.
The judgment and the bonds bear the same rate of interest. Marietta Iron Works v. Lottimer, supra; McLane v. Abrams, supra; Henry v. Ward, 4 Ark. 150. But if it be otherwise, then the rate of six per cent applies only to so much of the judgment as was rendered on the coupons.
Cromwell, as the purchaser before their maturity of the bonds falling due in 1870 and 1871, and without notice of any defences which might impair their validity, and as the purchaser from a bona fide holder of the remaining bonds, who, before they matured, bought them without notice of any infirmity, is not limited to recovering the sum he paid therefor, but is entitled to the full amount due thereon, according to their tenor and effect. Lay v. Wissman, 36 Iowa, 305; National Bank of Michigan v. Green, 33 id. 140; 140; Park Bank v. Watson, 42 N. Y. 490; Fowler v. Strickland, 107 Mass. 552.
Mr. Galusha Parsons for the county.
Negotiable paper is dishonored by any breach of the engagement which it imports. McClure v. Township of Oxford, 94 U.S. 429; Vinton v. King, 4 Allen (Mass.), 562; Newell v. Gregg, 51 Barb. (N. Y.) 263; First National Bank of St. Paul v. County Commissioners, 14 Minn. 77; Arents v. Commonwealth, 18 Gratt. (Va.) 750.
The past-due coupons attached to the bonds maturing in 1868 and 1869 were notice to Clark, the purchaser, that the paper 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 v. Gilbert, 94 U.S. 753; Shirts v. Overjoh, 60 Mo. 305; Davis v. Bartlett & St. John, 12 Ohio St. 534.
The plaintiff, if entitled to recover, is limited to the amount paid by him, with interest. Moore v. Ryder, 65 N. Y. 441; Cardwell v. Hicks, 37 Barb. (N. Y.) 458; Story, Prom. Notes, sect. 191; Daniel, Neg. Ins., sect. 758; Chitty, Bills, 677; Huff v. Wagner, 63 Barb. (N. Y.) 229; Todd v. Shelbourne, 8 Hun (N. Y.), 510; Campbell v. Nicholls, 4 Vroom (N. J.), 81.
Interest on the bonds and coupons, after maturity and before judgment, was computed at an improper rate. Brewster v. Walkefield, 22 How. 118; Young v. Godbe, 15 Wall. 562; Goddard v. Foster, 17 id. 123; Ward v. Morrison, Car. & M. 367. The judgment bears interest at the true rate. Hamer v. Kirkwood, 25 Miss. 95; Rogers v. Lee County, 1 Dill. 529.
MR. JUSTICE FIELD, after stating the case, delivered the opinion of the court.