163 U.S. 385 (1896), 39, Meyer v. Richards

Docket Nº:No. 39
Citation:163 U.S. 385, 16 S.Ct. 1148, 41 L.Ed. 199
Party Name:Meyer v. Richards
Case Date:May 25, 1896
Court:United States Supreme Court

Page 385

163 U.S. 385 (1896)

16 S.Ct. 1148, 41 L.Ed. 199




No. 39

United States Supreme Court

May 25, 1896

Submitted October 25, 1894




A. an alien, sold to B. in New Orleans thirteen bonds of the State of Louisiana, delivered them to him, and received from him payment for them in full. Both parties contemplated the purchase and delivery of valid and

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lawful obligations of the state, and both regarded the bonds so delivered as such valid and lawful obligations. It turned out that the bonds were absolutely void, having never been lawfully put into circulation. B. thereupon sued A. in the Circuit Court of the United States for the Eastern District of Louisiana to recover the purchase money paid for



(1) That as the sale was a Louisiana contract, the rights and obligations of the parties must be determined by the laws of that state.

(2) That by the civil law, which prevails in Louisiana, warranty, whilst not of the essence, is yet of the nature of the contract of sale, and is implied in every such contract unless there be a stipulation to the contrary.

(3) That by the rule of the common law both in England and in the United States, the doctrine is universally recognized that where commercial paper is sold without endorsement or without express assumption of liability on the paper itself, the contract of sale and the obligations which arise from it, as between vendor and vendee are governed by the common law relating to the sale of goods and chattels, and that the undoubted rule is that in such a sale, the obligation of the vendor is not restricted to the mere question of forgery vel non, but depends upon whether he has delivered that which he contracted to sell, this rule being designated, in England, as a condition of the principal contract as to the essence and substance of the thing agreed to be sold, and in this country being generally termed an implied warranty of identity of the thing sold.

(4) That whilst the civil law enforces in the contract of sale generally the broadest obligation of warranty, it has so narrowed it, when dealing with credits and incorporeal rights, as to confine it to the title of the seller and to the existence of the credit sold, and, e converso, the common law, which restricts warranty within a narrow compass, virtually imposes the same duty by broadening the warranty as regards personal property so as to impose the obligation on the vendor to deliver the thing sold as a condition of the principal contract or by implication of warranty as to the identity of the thing sold, and thus, by these processes of reason, the two great systems, whilst apparently divergent in principle, practically work substantially to the same salutary conclusions.

(5) That B. is entitled to recover the sum so paid by him, with interest from the time of judicial demand.

[16 S.Ct. 1149] Plaintiffs below (plaintiffs in error here) commenced their action to recover the sum of $8,383.75, with interest from judicial demand, the facts averred in the petition being substantially as follows: in February, 1889, the defendant sold to plaintiffs thirteen bonds of the State of Louisiana, which

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were described in and annexed to the petition; that the price paid for these bonds was the amount sought to be recovered, and the bonds were (we quote from the petition)

sold and delivered to your petitioners as good, valid, and legal bonds of the State of Louisiana. . . . Petitioners aver that the said Richards delivered to them the above-described bonds . . . as good and legal bonds of the State of Louisiana, and represented them to be such; that petitioners received them as such, and paid for them the market price for valid bonds, and held them for several months without any knowledge or suspicion that the bonds were not such as they were represented to be.

The petition then avers that after the sale and delivery of the bonds, in September, 1889, it was discovered that they were not valid, that they had never been lawfully issued by the state, and were at time of the sale declared by the Constitution of the State of Louisiana to be null and void, and that the state, through its officials, treated them as wholly invalid. The prayer was, as already stated, for a judgment for the amount which had been paid as the purchase price of the bonds.

The answer of the defendant denied all the material allegations contained in the petition except insofar as the same were admitted or confessed. It averred that on the day of the sale, the 27th of February, 1889, the defendant was the owner of the bonds described in the petition; that they were payable to bearer, and were, on the face thereof, bonds and obligations of the State of Louisiana, and purporting to be issued under valid acts of the legislature, sanctioned by the Constitution of the State of Louisiana; that when sold to the plaintiff, the bonds were not mature according to their terms, and were so drawn that the title thereof passed by delivery. The answer, moreover, averred that the defendant acquired the bonds long prior to the date of the sale to the plaintiffs,

by purchase in open market, for a full and valuable consideration in money, before the maturity thereof, in full and exact good faith, and with no knowledge, suspicion, or belief of any defect in the title or obligation of said bonds, or any outstanding equity relating thereto, to change, modify, or

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destroy the obligation as written and contained in said bonds severally.

After admitting the sale, as alleged in the petition, for the price therein stated, the answer declared

that it is true that at the time of the delivering of said bonds to the plaintiffs as aforesaid, this defendant did represent the same to be good and legal obligations and bonds of the State of Louisiana, and believed then, and still believes, that the same are in all things valid and legal obligations of the state in the hands of all good faith holders thereof, and that it is true, as stated in said petition, that the plaintiffs received said bonds, believing the same valid, and paid therefor the full market value thereof, in open market of that day.

After making the admission "that, if the plaintiffs are entitled to recover anything from this defendant, the amount of such is correctly stated in the prayer of petition herein," the answer concluded by the following:

But, as to all other matters and obligations set forth and contained in said petition, this defendant specially denies and traverses the same, and avers that the said several bonds so by him sold and delivered to the said plaintiffs are, each and all of them, in the hands of said plaintiffs, good, valid, complete, and existing obligations of the State of Louisiana to pay to the said plaintiffs the sums of money named in said bonds at the time and on the terms and conditions written in the bonds, and that there is and has been no breach of warranty of the title thereof by this defendant.

The cause was submitted to the court without the intervention of a jury, the parties having previously entered into a stipulation in writing, commencing with the following recital: "That the following shall be taken as the statement of facts in this cause, and shall stand and be taken as a special verdict in the cause." The facts embraced in the stipulation relate, on the one hand, to the sale and the title held by the defendant (the vendor) to the bonds at the time of the sale, and the representations made when the sale took place, and, on the other hand, to the nature and validity of the bonds sold. As to the first of these questions, the stipulation declares:

1. The defendant, prior to the sale of the bonds to the plaintiffs, as averred in the petition, was the bona fide holder

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of each and all of the bonds described in said petition, having acquired each and all of said bonds in open public market for full market value, with no notice whatsoever of any alleged vice or alleged illegality of the bonds, and the statements in that respect, as set forth in defendant's answer herein, are true.

2. The defendant so acquired said bonds long before he or the public knew that it was charged by any person that said bonds were illegally issued, and the impress of the seal of the state and the signatures of the several officers of the state, whose names appeared on said bonds, are each and all of them genuine and true, and in no manner forgeries.

The facts stated in the stipulation, with reference to the authority under which the bonds were issued, and their validity, we summarize as follows:

Under two acts of Congress, the one passed in 1827, c. 97, 4 Stat. 244, the other in 1862, c. 130, 12 Stat. 503, the State of Louisiana received from the United States public lands, to be applied, as directed in the act first mentioned, to the use of such seminary of learning as the legislature of the state might direct, and in the other to the establishment and support of an agricultural and mechanical college. From the sale of the lands thus received by the state, sums of money came under its control. These sums to the credit of the two educational purposes -- that is, the seminary and the agricultural and mechanical college -- were invested in bonds of the State of Louisiana, which bonds were held in trust by the state as the property of the two funds in question.

In 1874, the State of Louisiana, by act No. 3 of the session of 1874, adopted a general funding plan for all its outstanding bonds and for certain designated warrants. The law in question provided for the issue of new bonds for the said bonds and debts at the rate of sixty...

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