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alternate section of land, designated by odd numbers, for 10 sections in width on each side of the road, to the point of intersection. The grant was accompanied, however, with this qualification: that in case it should appear that the United States had, when the line or route of the road was "definitely fixed," sold any section or part thereof thus granted, or that the right of preemption or homestead settlement had attached to the same, or that it had been reserved by the United States for any purpose whatever, then it should be the duty of the secretary of the interior to cause an equal quantity of other lands to be selected from the odd sections nearest to those designated, in lieu of the lands thus appropriated. The main question here, as in the case mentioned, is, when was the route of the road to be considered as "definitely fixed," so that the grant attached to the adjoining sections? In the case mentioned we held that the route must be considered as "definitely fixed" when it had ceased to be the subject of change at the volition of the company; that until the map designating the route of the road was filed with the secretary of the interior, the company was at liberty to adopt such a route as it might deem best, after an examination of the ground had disclosed the advantages of different routes. But it was held that when the route was adopted by the company, and a map designating it was filed with the secretary of the interior, and accepted by that officer, the route was established. In the language of the act it was "definitely fixed," and could not be the subject of further change so as to affect the grant except by legislative consent; and that no further action was required on the part of the company to establish the route. It then became the duty of the secretary to withdraw the lands granted from market, and the court said: "If he should neglect this duty, the neglect would not impair the rights of the company, however prejudicial it might prove to others. Its rights are not made dependent upon the issue of the secretary's order, or upon notice of the withdrawal being given to the local land officers. Congress, which possesses the absolute power of alienation of the public lands, has prescribed the period at which other parties than the grantee named shall have the privilege of acquiring a right to portions of the lands specified, and neither the secretary, nor any other officer of the land department, can extend the period by requiring something to be done subsequently, and until done continuing the right of parties to settle on the lands as previously." 106 U. S. 366; S. C. 1 SUP. CT. REP. 336. Since the decision of that case, the court, in Railway Co. v. Dunmeyer, 113 U. S. -; S. C. ante, 566, has reconsidered the question and come to the same conclusion, the receipt of the map in the land-office without objection being considered as equivalent to its acceptance.
It appears from the agreed statement of facts that previous to the twentyfirst of March, 1870, the engineers of the railway company surveyed and staked out upon the ground the proposed line of the road, made a topographical map of the country through which the line ran, showing the government surveys and the proposed route with reference to the section lines, and the towns, counties, and rivers; that such map was on that day approved by the board of directors, and on the twenty-fifth of the same month was filed, together with a certificate of the approval indorsed thereon, with the secretary of the interior, who approved the same, and on the twenty-eighth of the same month transmitted it to the commissioner of the general land-office, with directions to instruct the proper local land officers to withdraw from sale or other disposal all the odd-numbered sections falling within the limits of 20 miles on each side of the line of the route. On the eighth of April following the commissioner transmitted by mail a copy of the map to the register and receiver of the local land-office at Beatrice, in Nebraska, but it was not received by them until the fifteenth of that month. On the eighth of April, 1870, one Clark Irvin entered the lands in question at the land-office in Beatrice, and on the first of November, 1871, a patent was issued to him. At
the time of his purchase no instructions had been received from the land de partment of the government that the lands were withdrawn from market, and he made his purchase without any actual knowledge of the filing of the company's map with the secretary, or of his order to withdraw the lands from market. Subsequently the company applied to the land department for a patent of the lands, and tendered the necessary fees and charges. The application was refused on the ground that Irvin's right of entry had attached to the lands, and a patent for them had been issued to him. The plaintiff deraigned title from the railroad company, and the defendant deraigned title from Irvin, by deed, for which he paid a valuable consideration, without notice of the claim of the plaintiff. It thus appears that the defendant made his entry, and therefore acquired whatever rights he possesses after the map of the company designating its route had been filed with the secretary of the interior, March 25, 1870, and the route had thereby become definitely established. The title of the company to the adjoining odd sections was then fixed. No rights could be initiated subsequently which could affect that title. The entry of the defendant being on the eighth of April afterwards created no interest in him, and the patent issued upon that entry passed none.
All other questions presented in this case are fully considered in Van Wyck v. Knevals, and we see no ground to change the conclusions then reached. For the reasons there stated the decree of the court below must, therefore, be affirmed.
(114 U. S. 376)
PENN NAT. BANK . FURNESS and another, Adm'rs, etc., and others.
(April 13, 1885.)
PARTNERSHIP-RETIRING MEMBER - SUBSEQUENT INSOLVENOY OF FIRM-LIABILITY FOR
Unless upon proof of fraud, the retiring member of a partnership that subsequently became insolvent cannot be held liable for any firm debts contracted after his retirement.
Appeal from the Circuit Court of the United States for the Eastern District of Pennsylvania.
N. H. Sharpless, for appellant. Charles Hart and Samuel Dickson, for appellees.
*FIELD, J. This is a suit by the Penn National Bank to charge the firm of Furness, Brinley & Co., of Philadelphia, with moneys obtained from the bank by the firm of Furness, Ash & Co., of that city, in a discount of its paper, and used in payment of the debts of the first firm, and also to charge the defendant Edward L. Brinley with the moneys thus obtained by Furness, Ash & Co. which were used to pay its debt to him.
It appears from the record that for many years preceding January 1, 1878, the firm of Furness, Brinley & Co. was engaged in business as auctioneers in the city of Philadelphia, and was in good standing and credit. It consisted, up to October 1, 1878, of James T. Furness, Edward L. Brinley, Joshua P. Ash, William H. Ash, Henry Day, and Dawes E. Furness. At that time Henry Day and Dawes E. Furness retired from the firm. Soon afterwards Edward L. Brinley expressed a desire also to retire from it. An agreement was accordingly entered into between him and James T. Furness and Joshua P. Ash to the effect that he should retire, his retirement to take place as of the first of July, 1877, but not to be announced until the first of January, 1878, and that he was to withdraw as his capital in the firm, $25,000, to be paid in monthly payments of $5,000, commencing on the first of December, 1877. For the payment of this amount, James T. Furness and Joshua P. Ash made themselves individually liable. On the first of January, 1878, Brinley's reirement was accordingly announced, and a new firm was then formed, under
the name of Furness, Ash & Co., consisting of James T. Furness, Joshua P. Ash, and William H. Ash, to continue the same business at the same stand. as successors of Furness, Brinley & Co. This new firm existed only till the fifteenth of March following, when it failed. During its continuance it obtained large discounts of its paper at the Penn National Bank, and from other parties, and the money derived from them was used by it, among other purposes, to pay the installments of $5,000 each month to Edward L. Brinley, the retired partner. Of the amount agreed upon, $20,000 were thus paid. On the retirement of Edward L. Brinley from the old firm and the formation of the new firm, the insolvent condition of the old firm was unknown to its members; but upon an examination of their books after the failure of the new firm, it appeared that the old firm was in fact insolvent on the first of July, 1877, and on the first day of January, 1878. The bill in the present case charges that this agreement for the retirement of Brinley, and the payment to him of $25,000, was made with knowledge of the insolvency of the old firm and upon a corrupt conspiracy between the parties to enable Brinley to fraudulently withdraw his capital from the firm, and escape liability for its debts. It also charges that the discounts of the paper of the new firm were promoted by false statements, on the part of Edward L. Brinley, to influence parties who discounted the paper, and that they were made to carry out the corrupt scheme mentioned. All the allegations of fraud and conspiracy are explicitly and emphatically denied in the answers of the defendants, and they are wholly unsustained by the proofs. Although the business of the old firm for the last years of its existence was loosely conducted, there is not the slightest evidence that any of its members, except perhaps James G. Furness, had a suspicion of its insolvent condition. He may have suspected its condition, but, if so, he kept his suspicions to himself, in no way intimating them to the other members of the firm. He kept the accounts of the partnership, and it does not appear that any other member knew anything of them. It is clear that they believed the firm was financially sound, and not only capable of paying all its debts, but that there was a large surplus. It also appears that the plaintiff bank at the time it discounted the paper of Furness, Ash & Co. knew who composed that firm and relied entirely upon its solvency to meet its obligations.
The case, then, stands thus: Certain members of the co-partnership agreed to pay another member a fixed amount as his capital on his withdrawal from the concern, all parties believing at the time in the firm's solvent condition. The member accordingly withdraws, and a new partnership is thereupon formed between the remaining members. The new firm on its own responsibility borrows money on its notes from different parties, among others from the plaintiff, who were acquainted with its members, and pays part of the capital as agreed upon to the retiring member, and also some of the debts of the old firm. Soon afterwards the new firm fails, and the plaintiff bank now seeks to charge the old firm with the moneys thus loaned, which were used to pay its debts, and the retiring member for the amount due to him. We are clear that this cannot be done. The discount was a transaction entirely between the new firm and the plaintiff. No credit was given to the old firm or to the retired partner. It was not a matter between the bank and either of them. It is simply a common instance of credit given to an insolvent firm without knowledge by the lender of its insolvency; and in the course of business the loss is to be ascribed to overconfidence in the firm's responsibility, while in ignorance of its true condition. The old firm remains liable for its debts contracted while it was in existence and unpaid, and the retired member as a partner in that firm is liable with the other partners; and it seems from the record, that since the failure of the new firm he has himself discharged outstanding liabilities of the old firm amounting to over $37,000, exceeding by about $17,000 the sums paid to him by the new
firm. The new firm is alone liable for the debts of its own contracting. They cannot be transferred to others with whom the plaintiff never dealt.
The case is different from those where a retiring partner draws out a portion of the capital of the concern with an agreement that the other members will pay the debts, and it turns out that the firm was at the time insolvent. There the retiring party will be held to restore the capital, so far as may be necessary to pay the debts of the concern existing at the time, and this, too, whether there was any fraud designed in the transaction or not. He cannot be permitted to remove any portion of the capital of the insolvent concern beyond the reach of its existing creditors, if necessary to satisfy their demands, nor, if there be any scheme of future fraud in the removal, beyond the reach of its future creditors. Here the defendant Brinley has paid, as already mentioned in the discharge of the debts of the old firm, several thousand do. lars more than he received as his capital in that concern from the new firm. There has been no attempt at any time on his part to avoid the liabilities falling upon him as one of the partners in that firm.
The case of Anderson v. Maltby, 2 Ves. Jr. 244, to which counsel of appellant refers as a beacon light for nearly a hundred years in this branch of the law, differs from the one at bar in essential particulars. There, upon the retirement of a partner in the firm of Maltby & Sons, a fictitious account was made up, showing an indebtedness to him of several thousand pounds, which was entered upon the books of the firm. This was done without any examination of the books at the time, or valuation of the property of the firm, or calculation of its debts, and no public notice was given of the retirement of the partner, except by changing the title of the firm in the books of the Bank of England, and other books, from Maltby & Sons to Maltby & Son. The other members continued the partnership and failed. On a bill filed by its assignee, an account was decreed in favor of the new partnership against the retiring partner for the moneys thus received, owing to the circumstances of fraud attending the transaction. In deciding the case the chancellor, after observing that, when partners make up an account of profits which do not exist, it is colorable, said: "If at the close of the former partnership he (the retiring partner) was bona fide entitled, all the payments were just and reasonable. If he was not bona fide entitled to any demand, but that, to the knowledge and conviction of all three, was mere color, and not a real but a nominal transaction, all the payments were made not merely without consideration, but upon a bad consideration, and such as a court of equity, and, I think, a court of law equally ought to condemn." This is nothing more than declaring that a suit will lie by the assignee of a bankrupt concern to compel a retired partner to account for moneys paid to him by the firm upon a fraudulent claim.
In the case at bar there was no fraudulent claim advanced. The amount to be paid Brinley was for the capital put by him into the firm of Furness, Brinley & Co., all the partners, except perhaps one of them, supposing at the time of his retirement that the firm was not only solvent, but in possession of a large surplus; and the plaintiff is neither the new company nor its assignee, but the bank, which lent money to that company upon its supposed soivency, and now seeks to charge the parties to whom the company paid it in discharge of its obligations. Equity does not follow money thus lent into the hands of persons to whom it has been paid in discharge of obligations to them, and with whom the lender had no relations.
(111 T. S. 270)
POINDEXTER v. GREENHOw, Treasurer, etc.1
(April 20, 1885.)
CONSTITUTIONAL LAW-VIRGINIA BONDS-TENDER OF COUPONS IN PAYMENT OF TAXESVIRGINIA FUNDING ACT OF MARCH 30, 1871-OBLIGATION OF CONTRACT-SUIT AGAINST STATE OFFICERS-ACTS OF JANUARY 26, 1882, AND MARCH 13, 1884, Held VOID.
In an action of detinue for personal property, distrained by the defendant for delinquent taxes, in payment of which the plaintiff had duly tendered coupons cut from bonds issued by the state of Virginia under the funding act of March 30, 1871, held:
(1) That by the terms of that act, and the issue of bonds and coupons in virtue of the same, a contract was made between every coupon-holder and the state that such coupons should "be receivable at and after maturity for all taxes, debts, dues, and demands due the state;" the right of the coupon-holder, under which, was to have his coupons received for taxes when offered, and that any act of the state which forbids the receipt of these coupons for taxes is a violation of the contract, and void as against coupon-holders.
(2) The faculty of being receivable in payment of taxes was of the essence of the right. It constituted a self-executing remedy in the hands of a tax-payer, and it became thereby the legal duty of every tax collector to receive such coupons, in payment of taxes, upon an equal footing and with equal effect, as though they were money; after a tender of such coupons, duly made for that purpose, the situation and rights of the tax-payer and coupon-holder were precisely what they would have been if he had made a like tender in money.
(3) It is well settled by many decisions of this court that, for the purpose of affecting proceedings to enforce the payment of taxes, a lawful tender of payment is equivalent to actual payment, either being sufficient to deprive the collecting officer of all authority for further action, and making every subsequent step illegal and void.
(4) The coupons in question are not "bills of credit," in the sense of the constitution, which forbids the states to "emit bills of credit;" because, although issued by the state of Virginia on its credit, and made receivable in payment of taxes, and negotiable, so as to pass from hand to hand by delivery merely, they were not intended to circulate as money between individuals, and between government and individuals, for the ordinary purposes of society.
(5) An action or suit brought by a tax-payer, who has duly tendered such coupons in payment of his taxes, against the person who, under color of office as tax collector, and acting in the enforcement of a void law, passed by the legislature of the state, having refused such tender of coupons, proceeds by seizure and sale of the property of the plaintiff, to enforce the collection of such taxes, is an action or suit against him personally as a wrong-doer, and not against the state, within the meaning of the eleventh amendment to the constitution of the United States.
(6) Such a defendant, sued as a wrong-doer, who seeks to substitute the state in his place, or to justify by the authority of the state, or to defend on the ground that the state has adopted his act and exonerated him, cannot rest on the bare assertion of his defense, but is bound to establish it; and, as the state is a political corporate body, which can act only through agents, and command only by laws, in order to complete his defense, he must produce a valid law of the state, which constitutes his commission as its agent, and a warrant for his act.
(7) The act of the general assembly of Virginia of January 26, 1882, "to provide for the more efficient collection of the revenue to support government, maintain the public schools, and to pay interest on the public debt," requiring tax collectors to receive in discharge of the taxes, license taxes, and other dues, gold, silver, United States treasury notes, national bank currency, and nothing else, and thereby forbidding the receipt of coupons issued under the act of March 30, 1871, in payment therefor, although it is a legislative act of the government of Virginia, is not a law of the state of Virginia, because it impairs the obligation of its contract, and is annulled by the constitution of the United States.
(8) The state has passed no such law, for it cannot; and what it cannot do, in contemplation of law, it has not done. The constitution of the United States, and its own contract, both irrepealable by any act on its part, are the law of Virginia, and that law made it the duty of the defendant to receive the coupons tendered in
See dissenting opinion, post, 962.