ernment," approved March 3, 1865, (13 St. 468, c. 77,) provided: "That the secretary of the treasury be, and he is hereby, authorized to borrow from time to time, on the credit of the United States, in addition to the amounts heretofore authorized, any sums not exceeding in the aggregate six hundred millions of dollars, and to issue therefor bonds or treasury notes of the United States in such form as he may prescribe; and so much thereof as may be issued in bonds shall be of denominations not less than fifty dollars, and may be made payable at any period not more than 40 years from date of issue, or may be made redeemable, at the pleasure of the government, at or after any period not less than five years nor more than forty years from date, or may be made re-→ deemable and payable as aforesaid, as may be expressed upon their face," etc. The bonds issued under this act were called the consolidated debt or consols of 1865, because, in addition to the loan of six hundred millions of dollars authorized by it, the secretary of the treasury was empowered to permit the conversion, into any description of bonds authorized by it, of any treasury notes or other obligations, bearing interest, issued under any act of congress. The bonds themselves, differing only in numbers and denomination, were in the following form:

[165,120.

"165,120.] "[Consolidated debt. Issued under act of congress approved March 3, 1865. Redeemable after five and payable twenty years from date.]

"1,000.]

[1,000.

"It is hereby certified that the United States of America are indebted unto the bearer in the sum of one thousand dollars, redeemable at the pleasure of the United States after the first day of July, 1870, and payable on the first day of July, 1885, with interest from the first day of July, 1865, inclusive, at six per cent. per annum, payable on the first day of January and July in each year, on the presentation of the proper coupon hereunto annexed. This debt is authorized by act of congress approved March 3, 1865. "Washington, July 1, 1865.

J. LOWERY,

"For Register of the Treasury.

"Six months' interest due July 1, 1885, payable with this bond. "(Thirteen coupons attached from and including coupon for interest due January 1, 1879, to and including coupon for interest due January 1, 1885.)"

"

They were accordingly known as "five-twenty bonds," being redeemable after five years, but not payable until twenty years after July 1, 1865. The act of July 14, 1870, "to authorize the refunding of the national debt,' (16 St. 272,) authorized the issue of three classes of bonds, according as they bore interest at the rates of 5 per cent., 4 per cent., and 4 per cent. per annum, amounting in the aggregate to $1,500,000,000, which the secretary of the treasury was, by the second section of the act, authorized to sell and dispose of, at not less than their par value in coin, and "to apply the proceeds thereof to the redemption of any of the bonds of the United States outstanding, and known as five-twenty bonds, at their par value;" or, the act continues, "he may exchange the same for such five-twenty bonds, par for par.” By the fourth section of this act it was provided: “That the secretary of the treasury is hereby authorized, with any coin of the treasury of the United States which he may lawfully apply to such purpose, or which may be derived from the sale of any of the bonds, the issue of which is provided for in this act, to pay at par and cancel any six per cent. bonds of the United States of the kind known as five-twenty bonds which have become, or shall hereafter become, redeemable by the terms of their issue. But the particular bonds so to be paid and canceled shall in all cases be indicated and specified by class, date, and number, in the order of their numbers and issue, begin

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*481

ning with the first numbered and issued, in public notice to be given by the secretary of the treasury, and in three months after the date of such public notice the interest on the bonds so selected and advertised to be paid shall cease."

By an act passed January 20, 1871, (16 St. 399,) the foregoing act was amended so as to authorize the issue of 500,000,000 of 5 per cent. bonds instead of 200,000,000, as limited by the act of July 14, 1870, but not so as to permit an increase of the aggregate of bonds of all classes thereby authorized. During the period from July, 1874, to January, 1879, the secretary of the treasury made various contracts, in writing, for the negotiation of 5, 42, and 4 per cent. bonds issued under the refunding act of 1870, in Europe and this country, with associations of bankers and banking institutions in London and New York, which became known as syndicates. The claimants, J. S. Morgan & Co., were members of such a syndicate, between which and the secretary of the treasury a contract was entered into on the twenty-first of January, 1879. The members of that syndicate were Messrs. August Belmont & Co., of New York, on behalf of Messrs. N. M. Rothschild & Sons, of London, England, and associates, and themselves; Messrs. Drexel, Morgan & Co., of New York, on behalf of Messrs. J. S. Morgan & Co., of London, and themselves; Messrs. J. & W. Seligman & Co., of New York, on behalf of Messrs. Seligman Brothers, of London, and themselves; and Messrs. Morton, Bliss & Co., of New York, on behalf of Messrs. Morton, Rose & Co., of London, and themselves. The subscription was for ten millions of dollars of 4 per cent. bonds of that date, and five millions additional each month until June 30, 1879, when the contract terminated, the proceeds to be applied to the refunding of the public debt, the secretary of the treasury agreeing, on receiving each subscription under the contract for not less than five millions of dollars, to issue a call for the redemption of United States 6 per centum five-twenty bonds equal to or exceeding said sum. The syndicate agreed to pay to the treasury at Washington, within the running of such call, the amount of 4 per cent. bonds subscribed for, at par and accrued interest to the date of subscription, in United States gold coin, United States matured coin coupons, coin certificates of deposit issued under the act of March 3, 1863, or United States 6 per centum five-twenty bonds called for redemption not later than the date of the subscription to which the payment was to apply. It was also agreed that the United States should maintain an agency at London for the purpose of making deliveries of the bonds subscribed for to the parties as they should desire; and the agent appointed for that purpose was authorized by the secretary of the treasury to receive the stipulated payment therefor, including the five-twenty bonds offered in exchange.

On October 27, 1878, the Manhattan Savings Institution, a savings bank in New York, was the owner in possession of the 36 United States five-twenty coupon bonds which are the subject of these suits,-16 for $500 each, and 20 for $1,000 each; and on that day, the building in which was its bankinghouse was entered by burglars, and these bonds, among others, amounting in all to about two and a half million dollars, were stolen from the safe, without any negligence or want of proper care in their safe-keeping on the part of the officers and servants of the institution. On July 30, 1878, the secretary of the treasury issued a call for the redemption of $5,000,000 of fivetwenty bonds, designated by numbers, in which it was stated as follows: "By virtue of the authority given by the act of congress approved July 14, 1870, entitled 'An act to authorize the refunding of the national debt,' I hereby give notice that the principal and accrued interest of the bonds herein below designated, known as five-twenty bonds,' of the act of March 3, 1865, will be paid at the treasury of the United States, in the city of Washington, on and after the thirtieth day of October, 1878, and that the interest on said bonds will cease on that day." Successive notices of other like calls were

2

issued thereafter from time to time, according to which the dates on which the interest would cease on the bonds designated were from October 30, 1878, to and including March 18, 1879, which calls embraced all the bonds involved in these suits.

The 20 bonds claimed by J. S. Morgan & Co., and the 16 claimed by L. Von Hoffman & Co., were bought by them, respectively, at different times, during the year 1879, in London, from well-known and responsible parties, the latter purchasing from R. Raphael & Sons, bankers of high respectability in London, dealing largely in United States government securities; but all the bonds when bought, as well by R. Raphael & Sons as by the claimants, had been called for redemption by the secretary of the treasury, and designated in one of the notices to that effect, and the call in each case had matured, and the bonds were bought by them, respectively, with knowledge in each case of that fact; but they bought them, in the due course of their business ✰ as bankers, and paid the full market price for them, to-wit, par and accrued interest, in good faith, without suspecting, or having any reason whatever to suspect, that the bonds, or any of them, had been stolen by or from any person, or that there was any defect in the titles of the persons from whom the purchases were made, or that the numbers of any of the bonds had been changed, or that the numbers of any of the bonds were not the original and genuine numbers as issued by the treasury department of the United States. In point of fact great publicity was given through the newspapers to the fact of the robbery, and some kind of a circular was issued by the Manhattan Savings Institution in regard to it, but it did not appear what its terms were, nor where nor to whom it was sent. It was also shown that the serial numbers of four of the bonds purchased by J. S. Morgan & Co., and five of those purchased by L. Von Hoffman & Co., had been, in fact, subsequently to the robbery, wrongfully altered, but when, where, or by whom could not be ascertained, and there was nothing in the appearance of the altered bonds or the numbers, when purchased, calculated to excite the suspicion or notice of a prudent and careful man; the alterations having been so skillfully effected that they were only discoverable with the aid of a magnifying glass.

The 20 bonds claimed by J. S. Morgan & Co. were purchased by them for the purpose of making payment to the United States for 4 per cent. bonds subscribed for under the contract entered into with them and their associates by the secretary of the treasury on January 21, 1879, for the negotiation of 4 per cent. bonds, and to avoid the transmission of gold to settle their accounts with the treasury department. They were delivered by the claimants at different times soon after their purchase to the officer in charge of the agency of the United States for the refunding of the national debt in London, who received them in payment for 4 per cent. bonds of the United States then delivered by him to the claimants, and were by him transmitted, to the treasury department at Washington for redemption. The secretary of the treasury, in consequence of notice of the adverse claim of the Manhattan Savings Institution, having withheld payment of these bonds, the claimants, J. S. Morgan & Co., in a letter to the secretary of September 1, 1879, stated the grounds of their claim as follows:

"We would submit that this course is in entire contradiction to the practice of the department hitherto, and in violation of the agreement upon the face of the bonds to pay them to bearer. The government has hitherto always paid its bearer obligations, as every other state, company, or individual does, to any innocent holders who had paid full value for them. This we have done for all these bonds, having purchased them in the regular way of business in the market, and even paying a small premium for them to avoid the transmission of gold to settle our accounts with the treasury in America. They had no fixed maturity; they were arbitrarily drawn by the government

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for payment at the present time; they carried no notice on their face that they were not payable in accordance with their tenor, and the only penalty for not presenting them was the cessation of interest. The analogy drawn from the equities attaching to an overdue note, as carrying notice on the face of non-payment, has consequently no bearing on the case. These bonds are scattered all over Europe, and the notice that they are due, frequently does not reach the holder for months, and sometimes years. We buy them in the regular course of our business, nor could we do otherwise. If the government were to decide not to pay bonds to bearer of which the ownership is disputed, except after decision of courts, they would do what neither they nor any other government has ever done before. It would prevent dealing in their securities, be a distinct injury to their negotiability, and a loss to the public credit."

The 16 bonds claimed by L. Von Hoffman & Co. were transmitted by them directly to the treasury department at Washington for redemption. It was from letters from the department, written in answer to their letters of transmittal, that they received first the information that the bonds had been stolen and some of them altered, and learned of the claim of the Manhattan Savings Institution, as owners, to await the decision of which the bonds were retained by the secretary in the custody of the treasury department.

In addition to the foregoing facts, found by the court of claims, it also found that "during the period of the refunding transactions under the act of July 14, 1870, many five-twenty bonds of every call were not sent in promptly for redemption, but were held, in this country and Europe, through want of information, or otherwise, until long after the maturity of the call," and that "during the period of the refunding transactions of the government under the act of July 14, 1870, large numbers of the European holders of the five-twenty bonds, of the act of March 3, 1865, called for redemption, from want of facility for sending their bonds to the United States, or to avoid the risk and expense of transmission, or various other reasons, were obliged to and did sell and dispose of their bonds, in the market, in London, to moneychangers, bankers, and merchants, as the only means of obtaining the money for them. Many millions of the said called bonds were thus sold and disposed of in the London market, and dealt in by money-dealers during that period, long after the maturity of the various calls;" and also that, "according to the custom and practice in London, the said called bonds of the United States were commonly dealt in by buying and selling after the time fixed for their redemption, in the same way and just as freely as the bonds not called for redemption."

J. Hubley Ashton, for Morgan & Co. and Von Hoffman & Co. H. C. Cady, for Manhattan Savings Institution. No brief filed for United States.

*MATTHEWS, J. The conclusions of law reached by the court of claims, on which its judgments are founded, and which are stated and supported in its opinion by the late learned chief justice of that court, are comprised in these propositions: That if the claimants, J. S. Morgan & Co. and L. Von Hoffman & Co., or any other party from whom they are shown to have bought, had purchased the bonds in good faith for value before maturity, their title would prevail against that of the Manhattan Savings Institution, from whom they had been stolen; that, on the face of these bonds, the United States, while fixing a day of ultimate payment, after which they would certainly be overdue, had also reserved the right of redemption, at an earlier time, at its pleasure after five years from date; that, as this option could be exercised only by the United States, and not by any officer or department of the government of its mere motion, it could be declared only by law, as was done in the act of congress of July 14, 1870; that this right of redemption being expressly reserved on the face of the bonds, was part of the contract, of which every holder had notice by its terms, and, as it could be exercised only by a public

law, every holder subsequent to the passage of such a law must be held to know that it might be and when it had been exercised; that, consequently, the contract is to be read, after the passage of the act of July 14, 1870, as though the time of redemption fixed and declared in pursuance of it by the call of the secretary of the treasury had been originally written in it as the final day of payment; and, that by way of conclusion, it must therefore be adjudged that the claimants, against whom the judgment was passed, were purchasers of overdue paper, and not entitled to the protection of the rule which otherwise would shield their title against impeachment. And it is insisted in argument that this conclusion is anticipated and required by the decisions of this court in the cases of Texas v. White, 7 Wall. 700, and Vermilye v. Adams Exp. Co. 21 Wall. 142. It becomes necessary, therefore, at the outset, to examine those cases with particularity.

The bonds in controversy in the first of them were United States coupon bonds, dated January 1, 1851, payable, by their terms, to the state of Texas or bearer, with interest at 5 per cent., payable semi-annually, and “redeemable after the thirty-first day of December, 1864." Each bond contained a statement on its face that the debt was authorized by act of congress, and was "transferable on delivery," and to each were attached six-month coupons, extending to December 31, 1864. White and Chiles acquired their title on March 15, 1865.

The rules established in Murray v. Lardner, 2 Wall. 118-"that the purchaser of coupon bonds, before due, without notice and in good faith, is unaffected by want of title in the seller, and that the burden of proof in respect to notice and want of good faith is on the claimant of the bonds as against the purchaser"-were repeated and reaffirmed; but it was added: "These rules have never been applied to matured obligations. Purchasers of notes or bonds past due take nothing but the actual right and title of the vendors. The bonds in question were dated January 1, 1851, and were redeemable after the thirty-first of December, 1864. In strictness, it is true, they were not payable on the day when they became redeemable, but the known usage of the United States to pay all bonds as soon as "the right of payment accrues, except when a distinction between redeemability and payability is made by law and shown on the face of the bonds, requires the application of the rule respecting overdue obligations to bonds of the United States, which have become redeemable, and in respect to which no such distinction has been made." It appeared in the case that the bonds were the property of the state of Texas on January 11, 1862, having come into her possession and ownership so the court declares "through public acts of the general government and of the state, which gave notice to all the world of the transaction consummated by them;" and the state, while thus their owner, in 1851, passed a legislative act declaring that the bonds should be disposed of "as may be provided by law," but that no bond should be "available in the hands of any holder until the same shall have been indorsed, in the city of Austin, by the governor of the state of Texas." It was in reference to this legislation that the court said: "And we think it clear that if a state, by a public act of her legislature, imposes restrictions upon the alienation of her property, that every person who takes a transfer of such property must be held affected by notice of them. Alienation in disregard of such restrictions can convey no title to the alienee." In 1862 the legislature of Texas repealed this act of 1851, but the repealing act was held to be void, as an act of the state government established in hostility to the constitution of the United States, and "intended to aid rebellion by facilitating the transfer of these bonds."

It further appeared that all the bonds which had been put in circulation with the indorsement of the governor had been paid in coin on presentation at the treasury department; "while, on the contrary, applications for the payment of bonds without the required indorsement, and of coupons detached v.5s--38