Supreme Court of United States.
*408 Messrs. J. Hubley Ashton and W.S. Cox, for Huntington, cashier of the bank.
Messrs. R.T. Merrick and T.J. Durant, for the State, contra.
*410 The CHIEF JUSTICE delivered the opinion of the court.
We have held in Texas v. White & Chiles,[] and Texas v. Hardenberg,[§]
1. That when a State by public statute requires the indorsement of its governor as a prerequisite to the valid transfer of bonds belonging to it, and payable to itself or *411 bearer, the holder of such bonds, without such indorsement, will have no title as against the State, unless he can show the consent of the State otherwise given to the transfer.
2. That an act repealing the statute requiring the indorsement of the governor, passed by the legislature when the State is in rebellion against the United States, is a nullity as to bonds issued without such indorsement, and for the purpose of aiding the rebellion.
3. That such bonds remain the property of the State and may be reclaimed, or the proceeds thereof recovered in a proper action by that State when the rebellion has ceased, against any one in possession of the same, with notice of the intent with which they were issued and used.
4. That the existence of the rebellion at the time of the repealing act, was a public fact with notice of which all persons were charged, and that when the bonds were purchased after they had become payable, the purchaser took them subject to all the equitable rights of the State when its relations to the Union had been restored.
But it must be observed that we have not held that such a repealing act was absolutely void, and that the title of the State could in no case be divested. On the contrary, it may be fairly inferred from what was said in Texas v. White, that if the bonds were issued and used for a lawful purpose, the title passed to the holder unaffected by any claim of the State. Title to the bonds issued to White & Chiles was held not to be divested out of the State, because of the unlawful purpose with which they were issued, and because the holders were, in our opinion, chargeable with notice of the invalidity of their issue and of their unlawful use.
If, in that case, there had been proof that a large portion of the bonds issued without the indorsement of the governor, were in fact issued for legitimate objects, and were applied to legitimate purposes, no presumption could have arisen from the absence of that indorsement that the particular bonds which were the subject of controversy in that case, had been issued without authority and for an unlawful purpose. If, for example, it had appeared that bonds to a *412 large amount had been issued unindorsed, and applied to the support of schools, or to the maintenance of asylums for the insane, for the deaf mute, or the blind, or to other purposes equally legitimate, the presumption, especially after payment by the United States, would have been in favor of the holders of bonds and not against them. We say especially after payment by the United States, for the United States were the obligors in the bonds, and it was against the United States that the rebellion had been waged, and it was primarily the duty of the government to ascertain and decide whether the bonds had or had not been issued and used in aid of rebellion, and had, therefore, presumptively passed into the hands of holders not entitled to payment as against the reconstituted State of Texas.
The action of the government in refusing payment, during the war, of the coupons of the unindorsed bonds, increased the significance of its action in paying not only the coupons, but the bonds themselves, after the war had terminated. The bonds and coupons could only have been paid on proof, satisfactory to the government, that the title of the State had been divested by its actual authorities for some legitimate purpose, or if otherwise, then to parties not chargeable with notice of the unlawful issue and use. Any other payment would have been a wrong to the reconstituted State.
There was no such proof in either of the cases formerly decided. Whether there was evidence in the present case establishing the fact of unlawful issue and use, and the further fact of notice to the defendants, within the principles heretofore laid down, as now explained and qualified, is for the jury.
We think it unnecessary to examine all the exceptions taken in this case. We shall confine ourselves to the tenth exception taken by the defendants, and to the one taken by the plaintiffs.
We think that the instruction, embodied in this tenth exception, was calculated to mislead the jury. Indeed it could hardly fail to do so. Whether the alienation of the bonds, *413 by the usurping government, divests the title of the State, depended, as we have said, upon other circumstances than the quality of the government. If the government was in actual control of the State, the validity of its alienation must depend on the object and purpose of it. If that was just in itself and laudable, the alienation was valid; if, on the contrary, the object and purpose were to break up the Union and to overthrow the constitutional government of the Union, the alienation was invalid. So the most that could be said of the absence of the indorsement of the governor, was that it raised a presumption against the validity of the alienation, not that no title to the bonds could be obtained without such indorsement. So, too, it cannot have been correct to say without qualification that the defendants took the bonds, if originally transferred by persons exercising authority in Texas, at war with the United States, subject to all the equities existing against the usurping government. That would depend upon the character and object of the original transfer. And the final proposition of the instruction must be qualified according to these principles, to make it conform to the law as we understand it.
But in our judgment, the instruction given upon the request of the defendants and excepted to by the plaintiff, was quite correct. We are entirely satisfied with it. We think it clear that no one other than a holder of the bonds, or one who, having held them, has received the proceeds, with notice of the illegal transfer for an illegal purpose, can be held liable to the claim of the reconstituted State. After presentment, recognition, and order of payment, any one, never having held or controlled the bonds, may receive the proceeds upon a proper order. In such a case the State must look to the United States, if bonds still belonging to her have been paid to third parties, after presentment and allowance, in favor of holders without good title.
But while we sustain this ruling, the judgment, for erroneous instructions in other respects, must be REVERSED, and the cause must be remanded for further proceeding
IN ACCORDANCE WITH THIS OPINION.
[] 7 Wallace, 700.
[§] 10 Id. 68.
