Meyer v. Richards

• Decision Date: 25 May 1896
• Docket Number: No. 39,39
• Parties: MEYER et al. v. RICHARDS
• Court: U.S. Supreme Court

163 U.S. 385

16 S.Ct. 1148

41 L.Ed. 199

MEYER et al.

v RICHARDS.

No. 39.

May 25, 1896.

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 13 bonds of the state of Louisiana, which 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 in so far 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 onsideration 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 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 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 (4 Stat. 244), the other in 1862 (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 agricul ural 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 60 cents on the dollar of new bonds for every dollar of fundable debt. The bonds thus provided to be issued were commonly called 'Consolidated Bonds,' were negotiable in form, and were all, without reference to the debt for which they were exchanged, of like tenor, except as to the serial numbers and amount of the bond, and contained on their face no indication whatever of the particular debt to retire which they were issued. The statement of facts recites 'that the holder or purchaser of such consolidated bonds who purchased the same in the market had no means of ascertaining for what prior obligation of the state said bonds had been given in exchange.' The execution of the act of 1874 was confided to a board called the 'Funding Board' or 'Board of Liquidation.' The funding law was ratified by a constitutional amendment, which hence made that law a part of the constitution of the state of Louisiana.

The board of liquidation, at the request of the proper state officers, issued consolidated bonds in exchange for the state bonds held by the state as above stated, in trust for the seminary and the agricultural and mechanical college funds. By this exchange, the sum of money received by the state from the proceeds of the land granted by congress for the two purposes aforesaid was curtailed 40 per cent., as the bonds issued to replace those previously held were in amount equal to only 60 per cent. of the retired bonds. The consolidated bonds which were thus issued to retire those theretofore held for account of the two trust funds went into the hands of the state treasurer for the benefit of the respective funds, and these bonds bore on their face no indication of the debt for which they were issued. Indeed, they were, in form, like any other of the bonds issued under the act of 1874.

By the terms of an ordinance adopted by a constitutional convention held in the state of Louisiana in 1879 (which ordinance was approved by the same popular vote which ratified the constitution), it was provided 'that the interest on the consolidated bonds of the state be reduced from seven per centum to two per centum per annum for five years, from the first of January, 1880, three per centum for fifteen years, and four per centum per annum thereafter, the ordinance moreover requiring that the bonds should be presented to the state treasurer or an authorized agent of the state in order to have stamped thereon interest reduced in accordance with the ordinance.' The holders of the consolidated bonds were, however, given the right, instead of accepting this reduction of applying to the state treasurer to obtain new bonds at the rate of 75 cents on the dollar.

An act of the legislature of the state of Louisiana, passed to execute this provision of the constitution, provided for the printing of the new bonds, and for their issue, upon request, in exchange for outstanding consolidated bonds at the reduced rate, and further provided for the cancellation of the consolidated bonds, when surrendered for exchange, by the following provision found in section 8 of the act in question: 'That the governor shall furnish to the...