Texas v. Hardenberg

The CHIEF JUSTICE delivered the opinion of the court. It is asserted, in behalf of Hardenberg, that he can, in no event, upon the pleadings in this suit,"be held to account-for the proceeds of the bonds which came to his possession, because the bill prays only relief by injunction against receiving payment of'the-bonds or coupons, and by decree for delivery of them specifically to the State. It is not denied that the bill also prays for such bther and *86 further relief as to the court shall seem just and proper; but it is insisted that there is nothing in the frame of the bill which will support a claim for relief as to proceeds where payment of the bonds and coupons had been actually received before service of process. It is undoubtedly true that no relief can be granted under the general prayer except such as is agreeable to the case made by the bill. * And it is plain enough that the principal object of the bill in this case was to prevent the collection of the bonds by the defendants, and to compel the surrender of them to the State of Texas. But there are averments and interrogatories which look to the proceeds as well as to the bonds themselves. For example, it is charged that the bonds were placed in the hands of the defendants holding them, for the purpose of collecting the proceeds from the United States; and again, that the defendants designio collect the proceeds and apply the same to their own use, in disregard of the just rights, and to the great loss and injury of the complainant. And one of the interrogatories requires from each defendant, except White and Chiles, to whom somewhat different interrogatories aré addressed, a statement whether any other person is interested in any, and, if any, in which of the bonds, or the proceeds thereof. It may be admitted that these allegations and interrogatories do not assert the right of the complainant to the proceeds with absolute directness and distinctness. The bill might have been better drawn. But we think it wmuld savor of extreme technicality to refuse to see in .the bill enough in relation to the proceeds of the bonds to warrant relief in this respect under the general prayer. It is proper to observe here that this objection to relief, in respect to the proceeds of the bonds, was not taken on the former hearing, and that the decree heretofore made distinctly finds that the State of Texas is entitled to restitution .of such of the bonds, and coupons, and proceeds as haye *87 come into the possession or control of the defendants— among whom Hardenberg is expressly named — with notice of the equity of the State. It might well be held, therefore, that this question is concluded by the former decree • but willing to allow this defendant the benefit of any defence consistent with the rules which govern proceedings in equity, we have looked into the question as if it were still open. Having thus looked into it, we'find no sufficient-ground for altering the conclusion embodied in the decree. We come then to the real question upon which further hearing was allowed, namely, what was the nature and effect of the payment received by Hardenberg from the Secretary of the Treasury, before service óf process in this suit? The -bill was filed on the 15th of February, 1867, in pursuance of leave granted by the court. On the same day a-motion for injunction was made, and it-was ordered that this motion be ser down for heariug on the 2d of May, 1867, and that copies of the order he served on the defendants at least ten days previously. Process was ordered, and' subpoenas were issued on the same day, and copies of the subpoena and of the motion for injunction were served on Hardenberg on the 27th of February. The answer of Hardenberg was filed May 15th, and- on’ the following day the motion for injunction was allowed, with- leave, to defendants to move for its dissolution at the next-term. In the interval .between the filing of the bill and- the service of process, as Hardenberg avers in his ansiver, the Secretary of the Treasury ordered the payment to him of all his bonds and coupons deposited for redemption, being the same bonds and coupons alleged in the bill to be the property of the State of Texas, and they were paid accordingly on that day. - What was this payment? On the 17th of December, 1866, Hardenberg had been advised by Controller Tayler that payment was delayed for information from Texas.- .On the 8th of February he was further advised by the same official that the bonds and coupons had been reported to the Sec *88 retary of the Treasury for payment, but that payment had been postponed in consequence of a personal action in the name of the State of Texas against the secretary for their detention. It is clear .that Hardenberg was now informed that the bonds and coupons, deposited by him for redemption, were claimed by the State of Texas. Subsequently, on the 16th of February, thirty-eight thousand two hundred and fifty dollars, being the amount of the bonds and coupons, was paid to the agent of Hardenberg in a-coin check, and at the same time treasury 7-30 notes to the amount of fifty-five thousand dollars were deposited with Controller Tayler, according to his statement, made in a letter to the agent, dated February 19th, “ as indemnity for Mr. McCulloch” (the Secretary of the Treasury) “against any personal damage,.loss, and expense in which he might be involved by reason of the paymeut of the bonds.” This payment was made on the day after the bill of the State was filed in this court and subpoenas issued. That the institution of the suit, thus begun, was known to the secretary'at the time is apparent from the letter.of Mr. Tayler to the Chief Justice, dated January 22d, 1868, in which he says: “ In form the bonds were paid; in fact the proceeds have been withheld from Mr. Hardenberg because of the legal proceedings, which the secretary did not desire to defeat.” And all this is still further apparent from a memorandum statement made by Mr. Tayler on the 24th,-and handed, to-one of the counsel in the cause. These statements Mr. Tayler in his deposition reaffirms; but for additional particulars refers to his lette'r to the agent, already quoted, and to a letter addressed by him on the same day to the cashier of the.First National Bank. From these letters, this memorandum, and the deposition of Mr. Tayler, we do not think it difficult to collect the substantial facts of the transaction. Hardenberg was naturally solicitous to collect the amount of his bonds and coupons, which had ceased to bear interest; or, at any fate, to make *89 some arrangement by which the' loss of interest pending the liquidation might be avoided. The controller seems to have thought that he was entitled.to payment, and the secretary was willing to order payment.to be made, but not willing to incur auy risk of consequential loss or inj ury. It was his duty, in any arrangement that might be made, to protect the government, and. through the government the parties' really.entitled to the.bonds, as well.as himself. And the statements of-Mr. Tayler, taken together,-satisfy us fully that it was the intention of .the secretary, and his own, that these objects should be accomplished. . With these views it was arranged that Hardenberg should deposit with the controller the 7-80 treasury notes, and receive the amount of' the bonds and coupons in. coin, as already mentioned. And further, that on the. deposit with the controller of fifty-thousand dollars in registered 5-20 bonds upon the same trust, the 7-80 bonds should be delivered to him or his agent. That this arrangement was carried into effect appears from Mr. Tayler’s letter of March 2d, 1867, addressed to Hardenberg’s agent at New York. The letter concludes .with these words: “The bonds are registered in my name as trustee, and carryinterest from January 1,1867.” Trustee for whom ? Equity looks through forms to substance.; and the substance of this transaction clearly was the substitution of one set of securities in the hands of the Controller of the Treasury for another, for the benefit of the parties really entitled. In no other way could the object of the trust, namely, the security of the government and the secretary against loss, be attained. 'At the 'beginning, he held bonds or coupons of the-United- States issued as indemnity to Texas. At the end, he held registered bonds of the United States in their place.- And he held both for Hardenberg, subject to the same equities. The net result of the transaction to Hardenberg was the putting of the debt in a shape to bear interest. If the coin received for the indemnity bonds exceeded the amount invested in the 5-20 bonds deposited in their stead, he may have also-gained that excess. *90 In this view of the ease, it is not important to inquire whether the delivery of the coin check to Hardenberg took place before or after the service of process. That transaction was correctly described as “ a payment in form,” the proceeds having been, in fact, withheld. It was not designed, on the part of the Secretary of the Treasury, to defeat the legal proceedings already commenced by filing the bill and issuing the subpoenas in the cause. "We will not presume that, any one else entertained such a design. Certainly no such effect, if designed, can be accomplished through the aid of a court of equity. We are-obliged, therefore, to say that the delivery of the coin check to the agent of Hardenberg was not payment. There was, indeed, no real payment at all. There was a transaction beginning with the delivery of the coin check, and ending with the substitution of the 5-20 bonds in place of the indemnity bonds, which was to be perfected into actual payment by the delivery to Hardenberg of the substituted, bonds whenever this could be safely done. During the progress of .this transaction, process in this suit was served on Hardenberg. No real payment, therefore, was made before service of process. Our conclusion on this part of the case is, that the so-called payment oil the 16th of February, 1867, did not affect the equities of the complainant, except by transferring them from the indemnity bonds to the 5-20 bonds substituted in their place, so far as may be necessary to satisfy to the complainant the amount then due upon the former. This conclusion leaves but one question for consideration, namely, whether Hardenberg, at the time he-purchased the bonds, had notice of the equity of the State of Texas ? This question was not concluded by the decree, but it was fully considered by the court upon the former argument, and our conclusion was stated in the opinion then delivered, that Hardenberg, as well as the other purchaser’s of indemnity-bonds about the same time, was affected by such notice. We will not restate what we then said. It is only necessary *91 to say that we have reconsidered the grounds of that decision, and are still satisfied with it. It follows that, upon the whole case, our decree must be for the complainant as to the bonds claimed by Hardenberg.' STRONG and BRADLEY, JJ., had not yet taken their seats when this case was adjudged.. Footnotes [*] Story’s Equity Pleading, § 40; English v. Foxall, 2 Peters, 595.