Vermilye & Company v. Adams Express Company
APPEAL from the Circuit Court for the Southern District of New York; the case being thus:
Vermilye & Co., bankers of New York, having presented to the Treasury of the United States for payment some time after their maturity eight treasury notes issued under the authority of the act of March 5th, 1865, were informed that the Adams Express Company asserted an ownership of the notes, and that they could not be paid until the question of the rightful ownership was settled.
The matter resulted in a bill of interpleader, filed by the United States in the Circuit Court for the Southern District of New York, against both the express company and Vermilye & Co., to which they filed their respective answers, the notes being deposited with the clerk of the court of abide the event of the suit.
The notes in controversy, to wit, five of $1000 each, and three of $100 each, came to the possession of the express company to be forwarded for conversion into bonds of the United States, and were started on their way from Louisville in custody of their messenger on the 22d of May, 1868. Shortly after leaving Louisville the car on which were the messenger and the notes, was stopped and entered by robbers, who, after knocking the messenger down, and leaving him for dead, carried off the safe containing these notes, which was found the next day broken open and without the notes in it. The express company, as soon as it could obtain the numbers and other description of the stolen notes, advertised extensively the loss in the newspapers, gave notice at the Treasury Department, and entered there a caveat against their payment or conversion into bonds to any one else, and gave notice to the principal bankers and brokers of the city of New York of the loss and their claim on the notes. On the 29th of May and the 5th of June, respectively, the express company delivered notices to persons behind the counter of Vermilye & Co., at their place of business, which notice sufficiently described the lost notes, cautioned all persons from receiving or negotiating them, and asserted the claim of the express company to the notes. The company paid the owner of the notes, who had delivered them to the company for transportation, and appeared to have done all that could be done to assert their rights in the premises.
On the 9th and 12th days of April, 1869, Vermilye & Co. purchased these notes over their counter, at fair prices, in the regular course of business, and forwarded them to the Treasury Department for redemption, where they were met by the caveat of the express company.
As already stated, these notes were issued under the act of March 3d, 1865.  That statute authorized the Secretary of the Treasury to borrow on the credit of the United States any sums of money not exceeding six hundred millions of dollars, for which he should issue bonds or treasury notes in such form as he might prescribe. It also authorized him to make the notes convertible into bonds, and payable or redeemable at such periods as he might think best. Under this statute the notes in controversy were issued, payable to the holder three years after date, and dated July 15th, 1865, bearing interest payable semi-annually, for which coupons were attached, except for the interest of the last six months. That was to be paid with the principal when the notes were presented. On the back of the note was a statement, thus:
'At maturity, convertible at the option of the holder into bonds, redeemable at the pleasure of the government, at any time after five years, and payable twenty years from June 15th, 1868, with interest at six per cent. per annum, payable semiannually, in coin.'
At the time of the purchase of the notes by Vermilye & Co. more than three years had elapsed from the date of their issue, and the Secretary of the Treasury had given notice that the notes would be paid or converted into bonds at the option of the holder on presentation to the department, and that they had ceased to bear interest.
On the hearing, Vermilye & Co. brought several witnesses, bankers and brokers, to show that notes of the sort here under consideration continued to be bought and sold after they had become due and interest had ceased thereon; that it was not customary for dealers in government securities to keep records or lists of the numbers or description of bonds alleged to have been lost, stolen, or altered, or to refer to such lists before purchasing such securities; that, in their judgment, it would be impracticable to carry on the business of dealing in government securities, if it were necessary to resort to such lists and make such examination previous to purchase; and that the purchase of the notes in controversy by Vermilye & Co. was made in the ordinary and usual mode in which such transactions are conducted.
Some testimony was given on the part of the express company to show an indorsement by the owner on certain of the notes, existing when they were stolen-'Pay to the order of the Secretary of the Treasury for conversion;' but this indorsement, if then existing, was not now visible on ordinary inspection. And on their face the notes remained payable 'to bearer.'
The court below held—
1st. That there was nothing in the evidence about indorsement, which could restrict the negotiability.
2d. That the notes were on their face overdue, and that the ordinary rule applicable to such notes-viz., that the person taking them took them with all the infirmities belonging to them applied, though the notes were securities issued by the United States; this point being, as the court considered, settled in Texas v. White  and Texas v. Hardenberg. 
3d. That a sufficient title to sue existed in the express company.
Decree being accordingly given for the express company, Vermilye & Co. took this appeal.
Mr. J. E. Burrill, for the appellant, contended, among other things—
1st. That the evidence showed that the particular class of securities under consideration, obligations of the government, did not lose their negotiability when they had matured, but that they were bought and sold, dealt in, and circulated in the market afterwards as before; that accordingly the reason of the rule ordinarily applicable-that 'a person who takes a bill which appears on its face to be dishonored, takes it with all the infirmities belonging to it'-ceased to exist; that there was no such evidence about the rule governing the market as to this class of securities introduced into the cases of Texas v. White and in Texas v. Hardenberg, relied on by the court below, and that the ruling of the court below on this point was therefore wrong.
2d. That these notes were not past due in the sense in which that term is used to express a dishonored note-a note which had been presented and had not been paid, and was the evidence of a broken promise; that by the law under which the notes were issued, and by the indorsement on the notes, they were, after the expiration of three years, either payable in currency or convertible into five-twenty bonds, bearing interest at six per cent. per annum, from and after July 15th, 1868; that when the three years had expired, these bonds had not matured as notes would have done, because the holder had the option to take his money or to convert it into a bond; that the option was not the option of the government, but the option of the holder, and that he was not obliged to exercise his option at the very moment the note matured; that the contract was not determined because the holder had not exercised his option; that while it was true, that if the holders, in the exercise of the option, chose to demand a redemption of the note in money, the note ceased to draw interest after its maturity, yet that this would be merely because the debtor was ready to pay when due, and stood in the position of having tendered the money. But that the man who chose to convert the note into a bond did not lose his interest, nor indeed lose anything by the delay in presenting his note for conversion; that he was still entitled to convert into a bond, payable twenty years from July 15th, 1868, with interest from that time; that whenever he chose to call for his bond he was entitled to have it, and to have it as he would have been entitled to have it on the day mentioned in the note. His bond, if asked for conversion, was therefore to be dated July 15th, 1868, which was the maturity of the note, and the interest was to run from that time and to be paid semiannually therefor.
3d. That the case failed to show any right or title of the express company to the notes; since (1st) the company did not allege any assignment to it of the notes, or of the moneys due thereon, or of any interest therein; and since (2d) it did not place its right to the notes upon the fact that it was a trustee of them and had a special property in them, but upon the fact that it had paid the owners of the notes the amount of them, in discharge of its liability as carrier; thus assuming, wrongly, that the notes were negotiable and so passed to the company.
Messrs. Clarence A. Seward and T. P. Chapman, contra.
Mr. Justice MILLER delivered the opinion of the court.
^1 13 Stat. at Large, 468.
^2 7 Wallace, 735.
^3 10 Id. 90.