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time the rough material was shipped to the mills, the mills did not know to whom they would sell the finished product, or to what points it would be shipped, but did know that there was little market for the finished articles in the state of Arkansas, and expected that they would sell 95 per cent. of said finished articles and ship them to points outside the state of Arkansas.
"It was the intention of all the claimants herein, at the time they shipped the rough material into the milling points, to mill said rough material with the object of selling the said finished product and shipping it out as soon as practicable, and all of them knew and intended at the time they brought the rough material into the mill, on account of previous course of dealings in the business, that 95 per cent. of the finished product would be by them shipped to points outside the state of Arkansas.
"The claimants paid the usual property tax to the state of Arkansas on their stock of materials on hand at the milling point, whether said stock was in the rough or finished, the amount of the tax being arrived at according to the methods in use in the state of Arkansas by the use of an average basis."
Upon the facts as stated, it is our opinion that the District Court erred in treating the movement of the rough lumber from the woods to the milling point as interstate commerce. It is not merely that there was no continuous movement from the forest to the points without the state, but that when the rough material left the woods it was not intended that it should be transported out of the state, or elsewhere beyond the mill, until
it had been subjected to a manufacturing process that materially changed its character, utility, and value. The raw material came to rest at the mill, and after the product was manufactured it remained stored there for an indefinite period-manufacture and storage occupying five months on the average for the purpose of finding a market. Where it would eventually be sold no one knew. And the fact that previous experience indicated that 95 per cent. of it must be marketed outside of the state so that this entered into the purpose of the parties when shipping the rough material to the mill, did not alter the character of the latter movement. The question is too well settled by *previous decisions to require discussion. Coe v. Errol, 116 U. S. 517, 525, 6 Sup. Ct. 475, 29 L. Ed. 715; Bacon v. Illinois, 227 U. S. 504, 515-516, 33 Sup. Ct. 299, 57 L. Ed. 615; McCluskey v. Marysville & Northern Ry. Co., 243 U. S. 36, 37 Sup. Ct. 374, 61 L. Ed. 578.
The distinction between these cases and those cited to sustain the decision of the District Court (Swift & Co. v. United States, 196 U. S. 375, 398, 25 Sup. Ct. 276, 49 L. Ed. 518; Ohio R. R. Commission v. Worthington, 225 U. S. 101, 32 Sup. Ct. 653, 56 L. Ed. 1004; Texas & N. O. R. R. Co. v. Sabine Tram Co., 227 U. S. 111, 33 Sup. Ct. 229, 57 L. Ed. 442; Louisiana R. R. Commission v. Texas & Pa
cific Ry. Co., 229 U. S. 336, 33 Sup. Ct. 837, 57 L. Ed. 1215) is so evident that particular analysis may be dispensed with.
Court to the claims of the Arkadelphia MillThe exceptions sustained by the District ing Co. and Hasty & Sons having been found to be untenable, it results that these claims should be allowed as against the railway companies and their sureties, so far as they arose before the final decrees, and as against the railway companies only, so far as they arose after the final decrees.
Nos. 92 and 93, decree reversed; Nos. 94
and 95, decree modified and affirmed; and the cause remanded for further proceedings in conformity with this opinion.
Agreement for loan by bank held rightly canceled by bank, preventing it being a source of obligation against it, its conditions not being complied with, and forged collateral being fraudulently furnished.
3. BANKS AND BANKING 178 FRAUDULENT ENTRY OF DEPOSIT OF CHECK-LIABILITY OF OTHER BANK.
The making by C., cashier of the M. Bank, of a fraudulent and false deposit slip purporting to show deposit by W. of his check for $30,000 on the H. Bank, and payment by the M. Bank of check for $35,000 in favor of T. purporting to be drawn by W., all before the H. Bank, which had agreed to make a loan of $30,000 to W., afterwards rightly canceled for noncompliance with conditions, had received the collateral note or made any entries on its books concerning it, gave the M. Bank no right of action against the H. Bank.
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Messrs. Charles E. Hughes and Henry B. Wesselman, both of New York City, for plaintiff in error.
In Error to the United States Circuit Court and written on the letter head of the Mercanof Appeals for the Second Circuit. tile Bank, purporting to be from W. B. rubber stamp. By this letter its assumed Slaughter, whose signature was affixed by a writer, after referring to his ownership and control of the Silverton National, stated his purpose to buy out the interest of Thatcher in the First National Bank of Silverton and after doing so to consolidate the two banks, and requested a loan of $30,000 to enable him to accomplish the purpose. It was stated that it was proposed to evidence the loan by a note at 60 days, to be signed by the | writer, W. B. Slaughter, and by his son C. C. Slaughter, if the bank so desired, and to secure the note by the pledge of 500 shares of the Mercantile and 400 shares of the First *Mr. Chief Justice WHITE delivered the National of Silverton. The Harriman Bank opinion of the Court. received this letter on the 1st of February and at once telegraphed W. B. Slaughter, president of the Mercantile Bank at Pueblo,, *that, whenever desired, the Harriman would be willing to make the loan, as requested. On the same day the bank wrote a letter to W. B. Slaughter, president at Pueblo, but marked it personal, repeating and confirming the telegram, and inclosing a blank form of collateral note to be executed and sent to the bank with the collateral when the money was desired.
Messrs. Stuart G. Gibboney and William A. Barber, both of New York City, for defendant in error.
The telegram of the 1st of February announcing the willingness of the Harriman Bank to make the loan having come into the hands of C. C. Slaughter on the day it was sent, he ordered a seal to be made which he said was intended as the seal of the First National Bank of Silverton, and on the 5th of February bought from a printer blank forms of certificates of stock. On the next day, Saturday, the 6th, purporting to act as agent of W. B. Slaughter, C. C. Slaughter bought from Thatcher his interest in the First National of Silverton, and gave a check in the name of W. B. Slaughter and as his representative, on the Mercantile National, for $35,000 in part payment. On Sunday, February 7th, C. C. Slaughter caused a letter to be prepared falsely purporting to be written and signed by W. B. Slaughter, acknowledging the receipt of the telegram sent by the Harriman Bank on the 1st and asking that the loan be consummated. In this letter there was returned the collateral note which the bank had sent for execution, along with the promised collateral, that is, certificates for 400 shares of the First National of Silverton and 500 shares of the Mercantile at Pueblo. The signature of W. B. Slaughter to the note was forged and the collaterals were also forged, the first, the certificates of the Silverton Bank stock, because they were fabricated by the use of the printed certificates and seal which had been acquired a few days before and described shares which had no existence, and the second, the Mercantile Bank stock, because, although the certificates represented stock standing in the
Action by Harry H. Seldomridge, receiver of the Mercantile National Bank of Pueblo,
against the Harriman National Bank. Judgment for plaintiff was affirmed by the Circuit Court of Appeals (240 Fed. 111, 153 C. C. A. 147), and defendant brings error. Reversed and remanded, with instructions.
Following the failure in March, 1915, of the Mercantile National Bank of Pueblo, Colo., the receiver appointed by the comptroller commenced this suit to recover from the Harriman National Bank of New York City $30,000 alleged to be due to the Mercantile Bank. On issue joined before a jury, the court, after refusing a request of the Harriman National Bank for a peremptory instruction directing a verdict in its favor, granted a request of like character made by the receiver, and a judgment on the resulting verdict for the amount claimed was entered.
 The case is before us on error to the judgment of the court below affirming that of the trial court, our jurisdiction to review resulting because the case from its inception involved the enforcement of the National Banking Act, and therefore, was not dependent in the trial court solely upon diversity of citizenship. Auten v. *United States National Bank, 174 U. S. 125, 141, 19 Sup. Ct. 628, 43 L. Ed. 920; International Trust Co. v. Weeks, 203 U. S. 364, 366, 27 Sup. Ct. 69, 51 L. Ed. 224.
The case is this: W. B. Slaughter, through stock ownership, controlled the Mercantile National Bank of Pueblo, Colo. He was president and his son, C. C. Slaughter, was cashier. Prior to 1915, Slaughter, the president, removed his residence from Pueblo to Texas, engaging there in the cattle business and leaving his son, the cashier, in complete control of the Mercantile Bank and of all its affairs. W. B. Slaughter was also the president of the Silverton National Bank of Silverton, Colo., and controlled the affairs of that bank by the ownership of a majority of its stock. At Silverton there was another national bank carrying on business, the First National, the majority of whose stock was owned by one Thatcher.
The correspondent of the Mercantile Bank in New York City was the Harriman National, with which it had a checking account. On January 28, 1915, C. C. Slaughter, the cashier of the Mercantile, dictated a letter to the Harriman which was dated at Pueblo
name of W. B. Slaughter on the *books of that [ when, a few days later, the Harriman learned bank, the powers of attorney purporting to have been given by W. B. Slaughter to enable them to be transferred to the Harriman Bank were forged.
of the failure of the Mercantile, such entries were made as to cancel the loan without diminishing or changing the credits which otherwise existed in favor of the Mercantile.
To meet the check for $35,000 given on Saturday for the Thatcher purchase, on Monday morning, February 8th, C. C. Slaughter made out a deposit slip to show the deposit by W. B. Slaughter of a check on the Harriman National for $30,000, although no such check was in fact deposited; and on that day the check in favor of Thatcher for $35,000 was paid and debited by the Mercantile to W. B. Slaughter's account. The letter of the 7th sending the note to the Harriman reached that bank on the 10th, and, complying with the request it contained, a credit in favor of W. B. Slaughter for $30,000, the amount covered by the loan, was entered by the Harriman on its books.
On the 17th of February the Mercantile Bank overdrew its account in the Harriman to the extent of $8,000, which that bank honored. It, however, telegraphed the Mercantile, calling attention to the overdraft and asked whether a remittance to cover it had been made. The telegram, moreover, referred to the $30,000 credit in favor of W. B. Slaughter and asked whether possibly it was intended that the amount of the loan credit should be placed to the account of the bank. In reply, C. C. Slaughter dictated a telegram in the name of the Mercantile Bank instructing that the amount of the credit of W. B. Slaughter be transferred to the credit of the Mercantile. On the receipt of this telegram the Harriman made the necessary bookkeeping entries to transfer the credit of $30,000 from the account of W. B. Slaughter to that of the Mercantile National Bank. On the next day, the 18th, however, the Harriman wrote W. B. Slaughter, Mercantile National Bank, Pueblo, informing him of the instructions they had received from C. C. Slaughter and what they had done under them, and ask*ing the former's approval. This letter was replied to on February 22d by C. C. Slaughter confirming his previous telegram and saying that the original intention was that the money borrowed should go to the credit of the Mercantile Bank for the use of W. B. Slaughter.
Thus things stood until the 23d of March, when the Harriman received a telegram from W. B. Slaughter, president of the Mercantile Bank, telling them to cancel all authority of C. C. Slaughter to act as an officer of the Mercantile because he had resigned. The Harriman thereupon telegraphed and wrote W. B. Slaughter, informing him of what had transpired on the subject of the credit for the loan under the note and its transfer, and saying that, as he had given no personal instructions on the subject, they had made bookkeeping entries taking the $30,000 out of the account of the Mercantile so as to hold it for a full understanding of the situation; and
Subsequently W. B. Slaughter notified the Harriman that he had never applied for the loan in question, or signed the note which evidenced it, and denied all liability. The appointment of the receiver and the bringing of the suit which we have stated at the outset followed in due season.
 Passing the fact that both parties to the loan agreement, the Harriman Bank on the one side and W. B. Slaughter on the other, insist, although for different reasons, that the loan agreement has no existence, there nevertheless can be no room for dispute that such contract, by the failure to comply with its conditions and by the fraud and forgery committed concerning the collaterals as between the parties to it and those in privity, was rightly canceled and canbe the source of no obligation against the Harriman Bank. The right of the Mercantile Bank as here asserted, if it has any existence, must rest, therefore, not in the loan agreement, but on some condition or consideration extraneous to that contract creating as against the Harriman and in favor of the Mercantile the duty to pay the amount which both the courts below awarded.
[3, 4] No semblance of ground, however, supporting that view results from the undisputed facts which we have stated unless it can be sustained from two considerations: (1) The payment which was made by the Mercantile on February 8th of the check purporting to be drawn by W. B. Slaughter in favor of Thatcher and the making by C. C. Slaughter on the 8th of the fraudulent and false deposit slip purporting to show the deposit on that day by W. B. Slaughter of a check drawn by him on the Harriman for $30,000; and (2) the bookkeeping entries which were made by the Harriman on the 18th transferring the credit for the amount of the agreed loan from the account of W. B. Slaughter to that of the Mercantile Bank. But a moment's thought demonstrates that the circumstances referred to cannot possibly sustain the conclusions stated. This is true as to the first because both the payment of the check by the Mercantile and the making of the false deposit slip took place before the Harriman had even received the collateral note or made any entry on its books concerning the same; and the second because the mere bookkeeping entry made by the Harriman of credit to the Mercantile, in the very nature of things, was incapable alone of conferring rights on the Mercantile to which it was not otherwise entitled, especially in the absence of all consideration moving from the Mercantile to the Harriman and the nonexistence of any condition upon which to base even the pretext of estoppel in favor of
the Mercantile as against the Harriman re-15. ARMY AND NAVY 40-ESPIONAGE ACTsulting from action taken by the former upon INTENT AND TENDENCY OF CIRCULAR.
the faith of the book*keeping credit. Indeed, when the reasoning upon which the relief below was awarded is considered, and the arguments pressed at bar sustaining that result are weighed, they all at last come to the assumption that by some undisclosed process the Mercantile Bank was entitled to enforce as against the Harriman the contract for the loan agreement made with W. B. Slaughter, without the duty to comply with the obligations of that contract, and therefore became possessed of the power to enforce the contract against the Harriman despite the fraud and forgery practiced upon the Harriman in the attempt which was made to procure the benefits of the loan agreement.
It follows that the judgment of the Circuit Court of Appeals (240 Fed. 111, 153 C. C. A. 147) and that of the District Court must be and they are reversed, and the case be remanded to the District Court with instructions, that after setting aside its judgment, it take such further proceedings as may be in conformity with this opinion.
And it is so ordered.
(249 U. S. 47)
SCHENCK v. UNITED STATES.
"Recruiting," in Espionage Act June 15, 1917, tit. 1, § 3 (Comp. St. 1918, § 10212c), denouncing the offense of obstructing the "recruiting or enlistment service," is gaining fresh supplies for the forces, as well by draft as otherwise, and put as an alternative to enlistment or voluntary enrollment.
BAER v. SAME.
[Ed. Note.-For other definitions, see Words (Argued Jan. 9 and 10, 1919. Decided March and Phrases, First and Second Series, Enlist3, 1919.) Nos. 437, 438.
1. ARMY AND NAVY 40-ESPIONAGE ACTCONSPIRACY-EVIDENCE.
Evidence on prosecution for conspiracy to violate the Espionage Act, tit. 1, § 3 (Comp. St. 1918, § 10212c), by obstructing recruiting, held sufficient to show conspiracy to send the documents mailed.
2. CRIMINAL LAW 393(1)-RIGHTS OF AcCUSED-DOCUMENTS OBTAINED ON SEARCH
Documentary evidence is not inadmissible against defendants, because obtained on a search warrant, valid so far as appears.
3. CRIMINAL LAW 393(1)-RIGHT OF ACCUSED-DOCUMENTS OBTAINED ON SEARCH
Documents are not inadmissible against defendants, though obtained on a search warrant; the warrant having issued, not against them, but the Socialist headquarters, and the documents technically not even having been in defendants' possession.
A circular held such that the jury could find it was intended, and its tendency was, to influence persons subject to the draft to obstruct the carrying of it out.
6. ARMY AND NAVY
A circular, the tendency of which is to influence persons subject to the draft to obstruct the carrying of it out, is not protected by the First Amendment, against Espionage Act June 15, 1917, because unsuccessful; title 1, § 4 (Comp. St. 1918, § 10212d), punishing conspiracy, accompanied by act to effect its object, circumstances in which it is done, and the questhe character of every act depending on the tion of right of protection against abridging freedom of speech in every case being whether the words used are used in such circumstances and are of such a nature as to create a clear and present danger that they will bring about the substantive evils that Congress has a right to prevent, a question of proximity and degree.
4. CRIMINAL LAW NATING EVIDENCE.
Evidence even directly proceeding from defendants in a criminal proceeding is not excluded in all cases by the Fifth Amendment.
7. ARMY AND NAVY 40-ESPIONAGE ACT"RECRUITING"-"ENLISTMENT."
8. CRIMINAL LAW 14--EFFECT OF AMENDMENT OF ACT-PENDING INDICTMENT.
An indictment under Espionage Act June 15, 1917, tit. 1, §§ 3, 4 (Comp. St. 1918, §§
10212c, 10212d), for conspiracy to obstruct recruiting, held not affected by the fact that the act was enlarged by amending Act May 16, 1918.
In Error to the District Court of the United States for the Eastern District of Pennsylvania.
Charles T. Schenck and Elizabeth Baer were convicted of violation of the Espionage Act, denied a new trial (253 Fed. 212), and bring error. Affirmed.
*Messrs. Henry John Nelson and Henry Johns Gibbons, both of Philadelphia, Pa., for plaintiffs in error.
Mr. John Lord O'Brian, of Buffalo, N. Y., for the United States.
Mr. Justice HOLMES delivered the opinion of the Court.
This is an indictment in three counts. The first charges a conspiracy to violate the Espionage Act of June 15, 1917, c. 30, tit. 1, $ 3, 40 Stat. 217, 219 (Comp. St. 1918, § 10212c), by causing and attempt*ing to cause
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insubordination, &c., in the military and transactions were hers. The argument as naval forces of the United States, and to ob- to the sufficiency of the evidence that the struct the recruiting and enlistment service defendants conspired to send the documents of the United States, when the United States only impairs the seriousness of the real dewas at war with the German Empire, to-wit, fence. that the defendant wilfully conspired to have printed and circulated to men who had been called and accepted for military service under the Act of May 18, 1917, c. 15, 40 Stat. 76 (Comp. St. 1918, §§ 2044a-2044k), a document set forth and alleged to be calculated to cause such insubordination and obstruction. The count alleges overt acts in pursuance of the conspiracy, ending in the distribution of the document set forth. The second count alleges a conspiracy to commit an offense against the United States, to-wit, to use the mails for the transmission of matter declared to be non-mailable by title 12, § 2, of the Act of June 15, 1917 (Comp. St. 1918, § 10401b), to-wit, the above mentioned document, with an averment of the same overt acts. The third count charges an unlawful use of the mails for the transmission of the same matter and otherwise as above. The defendants were found guilty on all the counts. They set up the First Amendment to the Constitution forbidding Congress to make any law abridging the freedom of speech, or of the press, and bringing the case here on that ground have argued some other points also of which we must dispose.
[2-4] It is objected that the documentary evidence was not admissible because obtained upon a search warrant, valid so far as appears. The contrary is established. Adams v. New York, 192 U. S. 585, 24 Sup. Ct. 372, 48 L. Ed. 575; Weeks v. United States, 232 U. S. 383, 395, 396, 34 Sup. Ct. 341, 58 L. Ed. 652, L. R. A. 1915B, 834, Ann. Cas. 1915C, 1177. The search warrant did not issue against the defendant but against the Socialist headquarters at 1326 Arch street and it would seem that the documents technically were not even in the defendants' possession. See Johnson v. United States, 228 U. S. 457, 33 Sup. Ct. 572, 57 L. Ed. 919, 47 L. R. A. (N. S.) 263. Notwithstanding some protest in argument the notion that evidence even directly proceeding from the defendant in a criminal proceeding is excluded in all cases by the Fifth Amendment is plainly unsound. Holt v. United States, 218 U. S. 245, 252, 253, 31 Sup. Ct. 2, 54 L. Ed. 1021.
 The document in question upon its first printed side recited the first section of the Thirteenth Amendment, said that the idea embodied in it was violated by the conscription act and that a conscript is little  It is argued that the evidence, if admis- better than a *convict. In impassioned lansible, was not sufficient to prove that the de- guage it intimated that conscription was fendant Schenck was concerned in sending despotism in its worst form and a monstrous the documents. According to the testimony wrong against humanity in the interest of Schenck said he was general secretary of the Wall Street's chosen few. It said, "Do not Socialist party and had charge of the Social- submit to intimidation," but in form at least ist headquarters from which the documents confined itself to peaceful measures such as were sent. He identified a book found there a petition for the repeal of the act. The as the minutes of the Executive Committee of other and later printed side of the sheet was the party. The book showed a resolution of headed "Assert Your Rights." It stated reaAugust 13, 1917, that 15,000 leaflets should sons for alleging that any one violated the be printed on the other side of one of them Constitution when he refused to recognize in use, to be mailed to men who had passed "your right to assert your opposition to the exemption boards, and for distribution. draft," and went on, "If you do not assert Schenck personally attended to the printing. and support your rights, you are helping to On *August 20 the general secretary's report deny or disparage rights which it is the solsaid "Obtained new leaflets from printer and emn duty of all citizens and residents of the started work addressing envelopes" &c.; and United States to retain." It described the there was a resolve that Comrade Schenck arguments on the other side as coming from be allowed $125 for sending leaflets through cunning politicians and a mercenary capitalthe mail. He said that he had about fifteen ist press, and even silent consent to the conor sixteen thousand printed. There were files scription law as helping to support an infaof the circular in question in the inner office mous conspiracy. It denied the power to send which he said were printed on the other side our citizens away to foreign shores to shoot of the one sided circular and were there for up the people of other lands, and added that distribution. Other copies were proved to words could not express the condemnation have been sent through the mails to drafted such cold-blooded ruthlessness deserves, &c., men. Without going into confrmatory details &c., winding up, "You must do your share that were proved, no reasonable man could to maintain, support and uphold the rights doubt that the defendant Schenck was large- of the people of this country." Of course ly instrumental in sending the circulars the document would not have been sent unabout. As to the defendant Baer there was less it had been intended to have some effect, evidence that she was a member of the Exec- and we do not see what effect it could be utive Board and that the minutes of its expected to have upon persons subject to the