sureties, without being sued, paid to the plaintiff, within 90 days after the first of March, 1867, the full amount of their bond, and took a receipt therefor in terms such as the following:

"State National Bank, Boston, received of

the amount due from them as sureties on the bond of Charles H. Smith, late cashier of said bank, by reason of the defalcation of said Smith, resulting from an unauthorized draft made by the said Smith upon the Manhattan Company, New York, for the sum of one hundred and twenty-five thousand dollars, ($125,000,) which was applied to his own use. If the said Smith shall hereafter pay to the State National Bank the said sum of one hundred and twenty-five thousand dollars, the bank will return to the sureties the amounts by them severally paid,, or if he shall pay so much thereof that the bank shall be in the receipt, including the payments made by the sureties, of a surplus beyond one hundred and twenty-five thousand dollars, the bank will return and distribute such surplus to the sureties in proportion to the sums by them severally paid. But this receipt is not to be construed or understood as an admission or recognition of any obligation on the part of the bank to take any measures to make up said defalcation, nor as the assertion of any claim by the said bank upon any funds, property, or means whereby the said defalcation, or any part thereof, can be made good, nor as any admission by the said bank that any such funds, property, or means are in existence."

Mr. Justice HARLAN, after stating the facts in the foregoing language, delivered the opinion of the court:

The present case differs materially from U. S. v. State Bank, 96 U. S. 33. Our judgment there proceeded upon the ground that the gold certificates deposited in the sub-treasury by Smith, the cashier of the State National Bank of Boston, were known by Hartwell at the time he received them to be the property of that bank, and not of Mellen, Ward & Co. The deposit was made by Smith in the presence of Carter; and, although the receipt for the certificates was made out to Mellen, Ward & Co. or order, it was immediately indorsed by Carter, in the name of his firm, to Smith, as cashier. The cancellation of the certificates, and their transmission to the treasurer of the United States at Washington, was, therefore, in derogation of the rights of the bank. It was adjudged that money or property of an innocent person, which had gotten into the coffers of the nation by means of fraud, to which its agent was a party, could not be held by the government against the claim of the wronged and injured party.

There is no room in the present case for the application of that principle. Apart from his responsibility for the crime committed in using the money of the United States, Carter, representing Mellen, Ward & Co., was under a legal obligation to replace the amount abstracted from the sub-treasury. Of his purpose to do so, Hartwell was informed. But he had no reason to believe that Carter would bring him money or securities which belonged to some one else, and which he could not rightfully deliver in discharge of his indebtedness to the government. When the draft of $125,000 was delivered by Carter to Hartwell, the latter was unaware of the means by which the former had obtained it from Smith, the cashier of appellant. It was, on its face, the property of Mellen, Ward & Co. Upon its receipt by Hartwell for the United States, the government acquired the same rights, in reference to it, that any private citizen, receiving it in the course of business, would have acquired. That the bank, by its cashier, made and delivered the draft to Carter upon the faith of his promise to give immediately, in return, Mellen, Ward & Co.'s draft on New York for the same amount, with $100,000 in United States gold certificates attached, or else the receipt of the Adams Express Company for that amount in gold, is a circumstance that does not affect the legal rights of the United States, to whom the draft was passed without knowledge, by its agent, of the condition upon which Mellen, Ward & Co. had received it from

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the bank's cashier. Nor do we deem of any significance the fact that Hartwell promised to return to Carter the money which the latter should place in the sub-treasury for the purpose of concealing from the officer supervising the examination of its books the criminal transactions in question. Carter knew that that promise could not be kept without subjecting both himself and Hartwell to criminal prosecution, and it was no violation of his legal rights for the agents of the government, after receiving from him the draft for $125,000, without any knowledge of the circumstances under which he had obtained it, to dispose of it, and place the proceeds in the sub-treasury. After these proceeds reached the sub-treasury, they could not be used or withdrawn except in the mode prescribed by law. The essential difference, therefore, between U. S. v. State Bank, ubi supra, and this case is that in the former the agents of the government appropriated to its use the property of an innocent person, knowing at the time that it belonged to that person, and not to the government, while in the present case they received, in the discharge of a debt due the government, a draft belonging to the debtor, without any knowledge or notice that the debtor had obtained it upon conditions which had not been complied with, or by means of fraudulent representations. We perceive no ground to question the correctness of the judgment below, and it is affirmed.

(114 U. S. 381)

AURRECOECHEA v. Bangs, Adm'r, etc.

(April 13, 1885.)

LAND LAWS-CALIFORNIA SCHOOL LANDS-MEXICAN GRANT-ACT OF CONGRESS, 1866. The act of congress of 1866, confirmatory of the invalid selection of school lands by the state of California, (see Huff v. Doyle, 93 U. S. 558,) in express language gives the holder of the invalid state selection the same rights as those of a pre-emption settler on unsurveyed lands, and no more.

In Error to the Supreme Court of the State of California.

E. J. Pringle and H. F. Crane, for plaintiffs in error. A. Chester and Mich. Mullany, for defendants in error.

*MILLER, J. This is a writ of error to the supreme court of California. The case relates to the title to lands in that state, and was decided on a demurrer, which was sustained, to a petition of plaintiff in error. This petition was in the nature of a bill in chancery, seeking to hold the defendant, who had the legal title to the land, by a patent from the United States, to be a trustee for the plaintiff, on the ground that in a contest between the two, before the land department, the officer of that department had, by the decis ion in favor of the defendant, deprived plaintiff of his superior right by a misconstruction of the law. The land in controversy was within the exterior limits of a claim under a Mexican grant. The validity of this grant was established by proceedings under the act of congress on that subject. But when the survey was made, and finally confirmed, which ascertained the locality of this grant, it was found that the land in suit was not within it. This fact was established on June 6, 1871, by the confirmation of the final survey of that grant. On July 1, 1871, the map of the congressional survey of the township, which included the land, and which was completed by subdivision into sections and quarter sections, was filed in the local land-office of the district of San Francisco. Bangs, the defendant, who had been residing on the land for some time, made and filed with the register and roceiver his declaratory statement, asserting an intention to pre-empt the land June 26, 1871. Under this claim, the defendant, having complied with the requirements of law, received the patent of which plaintiff claims the benefit. Plaintiff's superior equity, as he sets out in his petition, arises under the

act of congress of March 3, 1853, granting to the state of California every sixteenth and thirty-sixth section of the public lands for school purposes. 10 St. 244. As none of the public lands in California had been surveyed, it could not then be known where these school sections would be located; and, in view of the fact that many settlements would be made on those sections before they could be ascertained by survey, the seventh section of the act, while validating the claims of such settlers, authorized the state to select other lands in lieu of them, and in lieu of such as were reserved for public use or taken for private claims. The history of the attempt of the state to make these surveys for herself, and to exercise the right of selection under this seventh section of the act of 1853, is given in the opinion of this court in the case of Huff v. Doyle, 93 U. S. 558, and reference is here made to that history for an understanding of the present case. Indeed the land in that case, as in this, was a part of the Mexican claim Las Pocitas, and the principles announced in that case are decisive of this. It appears from the history there detailed that the land department of the United States, refusing to recognize the surveys made by state authority, and the selection made by the state and sold and certified to its purchasers, congress, on July 23, 1866, (14 St. 218,) passed an act for the relief of such persons and to remedy the evils of this un-, authorized action on the part of the state of California, as far as possible. The first section of this act is as follows: "That in all cases where the state. of California has heretofore made selections of any portion of the public domain, in part satisfaction of any grant to the state by any act of congress, and has disposed of the same to purchasers, in good faith, under her laws, the lands so selected shall be and hereby are confirmed to said state." A proviso making several exceptions to this confirmation, excludes from it, among others, "any land held or claimed under any valid Mexican or Spanish grant." The second section makes it the duty of the authorities of the state, when the selections named in section 1 have been made upon land which has been surveyed by the authorities of the United States, to notify the register of the land-office of such selection, and if, upon inquiry by the local officers, such selection is found to be in accordance with section 1, the commissioner of the general land-office shall certify the land to the state in the usual manner. This second section of the statute had reference to cases where the selections had been made of lands which had been surveyed at the date of the passage of the act. The third section made provision for selections made of lands which had not been surveyed by the United States at the date of the statute, which is the case before us. This section says that the selection so made shall have, when the lands are afterwards surveyed, the same force and effect as the pre-emption rights of a settler on the unsurveyed public lands, and the claimant shall be allowed the same time after the surveys have been made to prove up his purchase as is allowed under the pre-emption laws.

The bill alleges that in the year 1863, the state, by its agent, selected this land, and sold to a purchaser for a valuable consideration, from whom plaintiff purchased it. It then alleges that, some time in the year 1866, this selection was made known to the register and receiver of the land-office, and a note of it made on their books. Complainant further says that, within three months after the completion of the surveys by the United States, he appeared before these officers and asserted his claim under that selection, and proved it, upon the contest with Bangs before the department.

There would seem to be no objection to the case made by plaintiff, but for the fact that the land in controversy was, at the time of this selection by the state, part of a claim under a Mexican grant. The grant itself was confirmed as valid by judicial proceeding, though, upon final survey, this piece of land did not fall within it. But the exclusion of the proviso of the first section of the act of 1866 is of land held or claimed under a valid Mexican grant. This land was claimed under a Mexican grant, which proved to be valid, though,

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as located, it did not include all the land claimed. In the case of Huff v. Doyle, already cited, we held that land embraced in this Mexican claim, though not included in the final survey, was within the excepting clause of the proviso of the act of 1866. When this selection was made by the state in 1866, the land was not subject to such selection. The act of making such a selection was a nullity. It conferred no right to the state or its vendee, and when the United States made its remedial and confirmatory statute, it refused to confirm selections within the bounds of Mexican claims, and did not confirm this. But in the case of Huff v. Doyle, we held that after the grant was surveyed and the surplus thus restored to the public domain, and the congressional survey completed, the party might then present his claim under the selection, and if no superior right existed, he would be entitled to the land. We said, referring to this legislation: "In all this we see the purpose of congress to refer the exercise of the right of the state to select indemnity for school lands to the condition of the lands for which indemnity is claimed, as well as those out of which it is sought at the time the official surveys are made and filed in the proper office, or as soon thereafter as the right is asserted." In that case the claimant under the state made and proved up his claim as soon as the survey was made, and the land was accordingly certified to the state. His opponent, who had also made his declaration as pre-emptor while the land was still claimed under the Mexican grant, which claim was, for that reason, also void, and before the public survey or the survey of that grant was made, renewed his claim after that of plaintiff, and was rejected. To both parties the condition of the land, as liable to either claim at the time the claim was rightfully asserted, governed the case.

In the case before us, the pre-emptor was the first, after the land ceased to be a part of the Mexican claim and was restored to the public domain, to make application to the land-office and assert his right to appropriate it as public land. The officers of the department recognized his claim, as we think they were bound to do, for the land had only a few days before this become public land, and thus liable to pre-emption, or to the valid selection of the state. The invalid selection made at a time when the land was not subject to selection was not made good by the act of 1866 which expressly excluded it, and while we held that, after the land became public land and liable to selection the former selection might be made good, its validity could only relate to the time of its assertion in the land-office after it became so liable. But, if before this latter proceeding was had, or notice to the land-office of an intention to rely on the old selection was given, other rights had intervened, the state right of selection could not be made to the prejudice of those rights.

On this principle, we think all the benefit which could possibly be derived from the confirmatory act of 1866 in regard to such cases as this is had, while the just rights of others are preserved. The statute, in express language, gives the holder of the invalid state selection the same right as a pre-emption settler on unsurveyed lands, and no more. Here Bangs had asserted his right as soon as the land was released from the Mexican claim, and a few days before the congressional survey became fixed. The least that can be said of Bangs' claim is that it was of equal force when the maps of these surveys were filed, and, by his superior diligence in a lawful manner, he obtained the patent, and plaintiff has no superior equity which should take it from him.

As to the allegation in the bill that Bangs made a forcible intrusion on the possession of complainant in September, 1870, before the land became public land, that was a question to be considered by land officers in the contest between the parties, and is not a fraud or mistake for which the patent can be held to inure to plaintiff's benefit. Nor does the plaintiff rely on it as sufficient. His claim to the benefit of defendant's title rests upon the selection

288.

made under state authority. That is the question of federal law which this court must decide, and, as we have seen, that was well decided against him by the state court. Its decree is accordingly affirmed.

(114 U. S. 387)

AURRECOECHEA v. SINCLAIR and others.
(April 13, 1885.)

This case is submitted on the same facts and principles and the same briefs as the foregoing case, (ante, 892,) and the same judgment necessarily follows. The judgment of the supreme court of California is accordingly affirmed.

(114 U. S. 387)

AURRECO ECHEA V. BANGs and others.

SAME v. GERK and others.

SAME v. CLARK and others.

SAME. FRENCH and others.

(April 13, 1885.)

In accordance with stipulations by the parties on file in this court, that the abovementioned cases should abide the result of the judgment in the case of the plaintiff against Amos Bangs, (ante, 892,) the judgments in the cases are affirmed.

(114 U. S. 387)

AMY, and another, Partners, etc., and others v. TAXING District of SHELBY CO. and others.

(April 13, 1885.)

1. DEBTOR And Creditor-COMPROMISE-SET-OFF.

The legal and equitable right, in a general way, of a debtor to procure the obligations of his creditor, and use them as a set-off against his own debt, cannot be denied when the law of the state authorizes it, and such a law can be liable to no impeachment as divesting vested rights, or impairing the obligation of contracts. 2. SAME REPEAL OF THE CHARTER OF THE CITY OF MEMPHIS.

Act of the legislature of Tennessee, repealing the charter of the city of Memphis, and providing measures for receiving its back taxes and paying its debts, considered by the court.

In Error to the Supreme Court of the State of Tennessee.

Wm. M. Randolph, for plaintiffs in error. Minor Merriwether and 8. P. Walker, for defendants in error.

*MILLER, J. This is a writ of error to the supreme court of Tennessee. By an act of the legislature of the state of Tennessee, approved January 29, 1879, the charter of the city of Memphis was repealed; and by another act, approved the same day, the territory which had constituted the city was created a taxing district, and the property of the city, and all debts due to it, and all uncollected taxes were vested in the state.

On March 13th, of the same year, another statute, familiarly called "Chapter 92," directed the appointment of an officer for each of the corporations, whose charter was repealed by the earlier statute, to be called the "Receiver of Back Taxes," who was to be under the control of a court of chancery in the collection and paying out of the taxes so collected by him. Section 2 of this act directs that "he shall distinguish in making such payments the respective sources from which the moneys paid in are derived, showing what is collected from taxes for general purposes, and what for taxes for special purposes, designating the particular or special purpose, so that the same may be kept separate in the state treasury, in order that the treasurer may pay the same ac