The Mayor v. Ray/Concurrence Hunt

by Ward Hunt

United States Supreme Court

86 U.S. 468

The Mayor  v.  Ray

I concur in the judgment of this court reversing the judgment at the circuit, and remanding the case for further proceedings. I do not, however, concur in some of the grounds upon which the reversal is placed in the opinion delivered by Mr. Justice Bradley, and as my concurrence is necessary to the rendering of the judgment, there is a manifest propriety in an expression of the grounds of my concurrence.

I am of the opinion that the judge erred in charging and deciding that if the checks 'are, upon their face, overdue at the time of such sale (that is their reissue and sale), they will be in law payable on demand, and are not to be deemed dishonored so as to let in defences between the company and a subsequent holder of the paper until after the lapse of a reasonable time after their reissue for the making of such demand.' All of the checks in question had been presented for payment. Payment was not made, but the time of presentation was noted in each instance, and interest was allowed upon the check from that date. The presentation and neglect to pay had been made in some instances nearly four months before such purchase, and the time of such presentation was noted upon the check by the city treasurer, and it bore interest from that date. A check requires no presentment for acceptance as distinguished from presentment for payment. If once presented and payment refused, it is dishonored. ^[1] To constitute a bon a fide holder of a note or check it is necessary-1. That it should have been received before maturity; 2. That a valuable consideration should have been paid for it; and 3. That it should have been taken without knowledge of the defences sought to be made.

Whatever defences could properly be made to these checks in the hands of the original holder could be made while they were in the plaintiff's hands. He was not a bon a fide holder.

Evidence to show fraud or corruption, or want of authority in their issue, should have been received at the circuit, and in excluding the offers made on that subject and in the charge in reference to the evidence given, I think there was error. Thus, the Sax check, it was alleged, had been issued without authority, hypothecated to secure a note of the city made without authority, and sold in violation of the terms of the hypothecation. It was open to this defence in the hands of the plaintiff.

In the case of another check it was offered to be proved that it was issued without authority and upon a corrupt contract, but the evidence was excluded.

The court in another place charged the jury that 'if it is the usage to reissue the securities by sale in the market, they will, when so sold, be obligatory upon the corporation.' I cannot think that it is lawful for a municipal corporation to issue its checks, pay them, reissue them, and repeat this operation as often as its convenience requires. This comes too near the character of a bank of issue and deposit.

In the particulars following, my views are different from those expressed in the opinion of Justice Bradley.

I hold it to be well established by the authorities that a municipal corporation may borrow money for the legitimate use of the corporation, and that it may issue its notes for the same unless expressly prohibited by its charter or by statute from so doing. The proposition that it cannot borrow money, unless by its charter expressly authorized to do so, is, in my opinion, unsustained by sound authority. ^[2]

That the securities thus issued by municipal corporations are subject to the rules of commercial law when held by a bon a fide holder has been repeatedly held by this court. Every recent volume of its reports contains authorities to this effect. The authorities of the State of Tennessee sustain these general views. ^[3]

Checks of the city were issued for the payment of particular debts, and when paid should, no doubt, under ordinary circumstances, have been cancelled. A reissue of a paid check is an extraordinary proceeding. If done by an officer without the authority of the common council, it is a gross violation of duty. If with the authority, it is a loose practice, liable to abuse. Whether such reissue would be an act of positive illegality, ultra vires merely, or a bad practice simply, it is not necessary to decide. In neither case can the city repudiate the transaction. It is upon this point chiefly that I desire to express my dissent from the opinion just delivered. As to all the checks in question, the record shows that they were paid over by the collector of city taxes to the treasurer of the board of education, that they were by him sold to McCrory, at eighty cents on the dollar, and that the proceeds of such sales were applied to the uses of the city by an immediate payment of the wages due to the teachers in the public schools of the city. The city received this money upon the reissue of its checks. So far as McCrory is concerned, or the plaintiff who succeeds to his rights, the city now has the money in its treasury.

It is a general rule, applicable to all persons and corporations, and is a dictate of plain honesty, that whoever, knowing the facts of the case, retains and uses money received by an agent for his account, cannot repudiate the contract on which it is received. ^[4] Putting this transaction most strongly against the plaintiff, by assuming that this reissue was not ultra vires merely, but was positively prohibited by law, the city is still responsible to the holder of the checks for the money it has received and still retains. Conceding the illegal contract to be void, as forbidden by the legislature, it is to be remembered that the prohibition is upon the city only, and not upon the person dealing with it; the illegality is on the part of the city, and not of the person receiving the checks. The contract may well be void as to the city, and its officers punishable for the offence of making it, and yet it may stand in favor of innocent persons not within the prohibition. Such was the decision in Tracy v. Talmage, ^[5] in Curtis v. Leavitt, ^[6] and in The Oneida Bank v. The Ontario Bank. ^[7] The latter case was briefly this: The general banking law of New York prohibited the issuance by a bank of a certificate of deposit payable on time. The cashier of the Ontario Bank received $5000 in cash from one Perry, and delivered to him a certificate of deposit post-dated about four weeks, for the purpose of raising funds for the bank. This draft Perry transferred to the Oneida Bank, who brought suit upon it. It was held, assuming this draft to be void, that the party making the contract could reject the security and recover the money or value which he advanced on receiving it. It was held further, that the right of action to recover this money passed to the Oneida Bank upon the transfer of the certificate to them. The plaintiff recovered the money advanced to the bank upon the illegal certificate. Both of these principles were held with equal distinctness in Tracy v. Talmage, supra.

They seem to me to be decisive of the right of the plaintiff to recover upon the checks, regarding them in their most unfavorable aspect, the amount of money advanced to and yet held by the city.

For the reasons thus presented, I concur in the reversal of the judgment.

VENIRE DE NOVO AWARDED.