SUPREME COURT OF THE UNITED STATES
74 U.S. 700
Texas v. White
ON ORIGINAL BILL
Argued: --- Decided:
1. The word "State" describes sometimes a people or community of individuals united more or less closely in political relations, inhabiting temporarily or permanently the same country; often it denotes only the country, or territorial region, inhabited by such a community; not unfrequently, it is applied to the government under which the people live; at other times, it represents the combined idea of people, territory, and government.
2. In the Constitution, the term "State" most frequently expresses the combined idea, just noticed, of people, territory, and government. A State, in the ordinary sense of the Constitution, is a political community of free citizens, occupying a territory of defined boundaries and organised under a government sanctioned and limited by a written constitution, and established by the consent of the governed.
3. But the term is also used to express the idea of a people or political community, as distinguished from the government. In this sense, it is used in the clause which provides that the United States shall guarantee to every State in the Union a republican form of government, and shall protect each of them against invasion.
4. The Union of the States never was a purely artificial and arbitrary relation. It began among the Colonies, and grew out of common origin, mutual sympathies, kindred principles, similar interests, and geographical relations. It was confirmed and strengthened by the necessities of war, and received definite form and character and sanction from the Articles of Confederation. By these, the Union was solemnly declared to "be perpetual." And, when these Articles were found to be inadequate to the exigencies of the country, the Constitution was ordained "to form a more perfect Union."
5. But the perpetuity and indissolubility of the Union by no means implies the loss of distinct and individual existence, or of the right of self-government by the States. On the contrary, it may be not unreasonably said that the preservation of the States and the maintenance of their governments are as much within the design and care of the Constitution as the preservation of the Union and the maintenance of the National government. The Constitution, in all its provisions, looks to an indestructible Union composed of indestructible States.
6. When Texas became one of the United States, she entered into an indissoluble relation. The union between Texas and the other States was as complete, as perpetual, and as indissoluble as the union between the original States. There was no place for reconsideration or revocation, except through revolution or through consent of the States.
7. Considered as transactions under the Constitution, the ordinance of secession, adopted by the convention, and ratified by a majority of the citizens of Texas, and all the acts of her legislature intended to give [p701] effect to that ordinance, were absolutely null. They were utterly without operation in law. The State did not cease to be a State, nor her citizens to be citizens of the Union.
8. But in order to the exercise, by a State, of the right to sue in this court, there needs to be a State government, competent to represent the State in its relations with the National government, so far at least as the institution and prosecution of a suit is concerned.
9. While Texas was controlled by a government hostile to the United States, and in affiliation with a hostile confederation, waging war upon the United States, no suit instituted in her name could be maintained in this court. It was necessary that the government and the people of the State should be restored to peaceful relations to the United States, under the constitution before such a suit could be prosecuted.
10. Authority to suppress rebellion is found in the power to suppress insurrection and carry on war, and authority to provide for the restoration of State governments, under the Constitution, when subverted and overthrown, is derived from the obligation of the United States to guarantee to every State in the Union a republican form of government. The latter, indeed, in the case of a rebellion which involves the government of a State, and, for the time, excludes the National authority from its limits, seems to be a necessary complement to the other.
11. When slavery was abolished, the new freemen necessarily became part of the people, and the people still constituted the State, for States, like individuals, retain their identity, though changed, to some extent, in their constituent elements. And it was the State, thus constituted, which was now entitled to the benefit of the constitutional guaranty.
12. In the exercise of the power conferred by the guaranty clause, as in the exercise of every other constitutional power, a discretion in the choice of means is necessarily allowed. It is essential only that the means must be necessary and proper for carrying into execution the power conferred, through the restoration of the State to its constitutional relations, under a republican form of government, and that no acts be done, and no authority exerted, which is either prohibited or unsanctioned by the Constitution.
13. So long as the war continued, it cannot be denied that the President might institute temporary government within insurgent districts, occupied by the National forces, or take provisional measures, in any State, for the restoration of State government faithful to the Union, employing, however, in such efforts, only such means and agents as were authorized by constitutional laws. But the power to carry into effect the clause of guaranty is primarily a legislative power, and resides in Congress, though necessarily limited to cases where the rightful government is subverted by revolutionary violence, or in imminent danger of being overthrown by an opposing government, set up by force within the State.
14. The several executives of Texas, partially, at least, reorganized under [p702] the authority of the President and of Congress, having sanctioned this suit, the necessary conclusion is that it was instituted and is prosecuted by competent authority.
15. Public property of a State, alienated during rebellion by an usurping State government for the purpose of carrying on war against the United States, may be reclaimed by a restored State government, organized in allegiance to the Union, for the benefit of the State.
16. Exact definitions, within which the acts of a State government, organized in hostility to the Constitution and government of the United States, must be treated as valid or invalid need not be attempted. It may be said, however, that acts necessary to peace and good order among citizens, such, for example, as acts sanctioning and protecting marriage and the domestic relations, governing the course of descents regulating the conveyance and transfer of property, real and personal, and providing remedies for injuries to person and estate, and other similar acts, which would be valid if emanating from a lawful government, must be regarded in general as valid when proceeding from an actual, though unlawful, government, and that acts in furtherance or support of rebellion against the United States, or intended to defeat the just rights of citizens, and other acts of like nature, must, in general, be regarded as invalid and void.
17. Purchasers of United States bonds issued payable to the State of Texas or bearer, alienated during rebellion by the insurgent government, and acquired after the date at which the bonds became redeemable, are affected with notice of defect of title in the seller.
The Constitution ordains that the judicial power of the United States shall extend to certain cases, and among them
to controversies between a State and citizens of another State; . . . and between a State, or the citizens thereof, and foreign States, citizens or subjects.
It ordains further, that in cases in which "a State" shall be a party, the Supreme Court shall have original jurisdiction.
With these provisions in force as fundamental law, Texas, entitling herself "the State of Texas, one of the United States of America," filed, on the 15th of February, 1867, an original bill against different persons; White and Chiles, one Hardenberg, a certain firm, Birch, Murray & Co., and some others, [n1] citizens of New York and other States; praying [p703] an injunction against their asking or receiving payment from the United States of certain bonds of the Federal government, known as Texan indemnity bonds; and that the bonds might be delivered up to the complainant, and for other and further relief.
The case was this:
In 1851, the United States issued its bonds -- five thousand bonds for $1,000 each, and numbered successively from No. 1 to No. 5,000, and thus making the sum of $5,000,000 -- to the State of Texas, in arrangement of certain boundary claims made by that State. The bonds, which were dated January 1st, 1851, were coupon bonds, payable, by their terms, to the State of Texas or bearer, with interest at 5 percent semi-annually, and "redeemable after the 31st 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. [n2]
In pursuance of an act of the legislature of Texas, the controller of public accounts of the State was authorized to go to Washington, and to receive there the bonds; the statute making it his duty to deposit them, when received, in the treasury of the State of Texas, to be disposed of "as may be provided by law;" and enacting further, that no bond, issued as aforesaid and payable to bearer, 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."
Most of the bonds were indorsed and sold according to law, and paid on presentation by the United States prior to 1860. A part of them, however, -- appropriated by act of legislature as a school fund -- were still in the treasury of Texas, in January, 1861, when the late Southern rebellion broke out.
The part which Texas took in that event, and the position [p704] in which the close of it left her, are necessary to be here adverted to.
At the time of that outbreak, Texas was confessedly one of the United States of America, having a State constitution in accordance with that of the United States and represented by senators and representatives in the Congress at Washington. In January, 1861, a call for a convention of the people of the State was issued, signed by sixty-one individuals. The call was without authority, and revolutionary. Under it, delegates were elected from some sections of the State, whilst in others no vote was taken. These delegates assembled in State convention, and, on the 1st of February, 1861, the convention adopted an ordinance
to dissolve the union between the State of Texas and the other States, united under the compact styled "the Constitution of the United States of America."
The ordinance contained a provision requiring it to be submitted to the people of Texas, for ratification or rejection by the qualified voters thereof, on the 23d of February, 1861. The legislature of the State, convened in extra session, on the 22d of January, 1861, passed an act ratifying the election of the delegates, chosen in the irregular manner above mentioned, to the convention. The ordinance of secession submitted to the people was adopted by a vote of 34,794 against 11,235. The convention, which had adjourned immediately on passing the ordinance, reassembled. On the 4th of March, 1861, it declared that the ordinance of secession had been ratified by the people, and that Texas had withdrawn from the union of the States under the Federal Constitution. It also passed a resolution requiring the officers of the State government to take an oath to support the provisional government of the Confederate States, and providing, that if
any officer refused to take such oath, in the manner and within the time prescribed, his office should be deemed vacant, and the same filled as though he were dead.
On the 16th of March, the convention passed an ordinance declaring that, whereas the governor and the secretary of state had refused or omitted to take the oath prescribed, their offices were vacant; that [p705] the lieutenant-governor should exercise the authority and perform the duties appertaining to the office of governor, and that the deposed officers should deliver to their successors in office the great seal of the State, and all papers, archives, and property in their possession belonging or appertaining to the State. The convention further assumed to exercise and administer the political power and authority of the State.
Thus was established the rebel government of Texas.
The senators and representatives of the State in Congress now withdrew from that body at Washington. Delegates were sent to the Congress of the so-called Confederate States at Montgomery, Alabama, and electors for a president and vice-president of these States appointed. War having become necessary to complete the purposed destruction by the South of the Federal government, Texas joined the other Southern States, and made war upon the United States, whose authority was now recognized in no manner within her borders. The oath of allegiance of all persons exercising public functions was to both the State of Texas, and to the Confederate States of America, and no officer of any kind representing the United States was within the limits of the State except military officers, who had been made prisoners. Such was and had been for several months the condition of things in the beginning of 1862.
On the 11th of January, of that year, the legislature of the usurping government of Texas passed an act -- "to provide arms and ammunition, and for the manufacture of arms and ordnance for the military defences of the State." And by it created a "military board," to carry out the purpose indicated in the title. Under the authority of this act, military forces were organized.
On the same day, the legislature passed a further act, entitled "An act to provide funds for military purposes," and therein directed the board, which it had previously organized,
to dispose of any bonds and coupons which may be in the treasury on any account, and use such funds or their proceeds for the defence of the State;
and passed an additional act repealing the act [p706] which made an indorsement of the bonds by the governor of Texas necessary to make them available in the hands of the holder.
Under these acts, the military board, on the 12th January, 1865, a date at which the success of the Federal arms seemed probable, agreed to sell to White & Chiles one hundred and thirty-five of these bonds, then in the treasury of Texas, and seventy-six others deposited with certain bankers in England, in payment for which White & Chiles were to deliver to the board a large quantity of cotton cards and medicines. The former bonds were delivered to White & Chiles on the 15th March following, none of them being indorsed by any governor of Texas.
It appeared that, in February, 1862, after the rebellion had broken out, it was made known to the Secretary of the Treasury of the United States, in writing, by the Hon. G. W. Paschal, of Texas, who had remained constant to the Union, that an effort would be made by the rebel authorities of Texas to use the bonds remaining in the treasury in aid of the rebellion, and that they could be identified, because all that had been circulated before the war were indorsed by different governors of Texas. The Secretary of the Treasury acted on this information, and refused in general to pay bonds that had not been indorsed. On the 4th of October, 1865, Mr. Paschal, as agent of the State of Texas, caused to appear in the money report and editorial of the New York Herald, a notice of the transaction between the rebel government of Texas and White & Chiles, and a statement that the treasury of the United States would not pay the bonds transferred to them by such usurping government. On the 10th October, 1865, the provisional governor of the State published in the New York Tribune, a "Caution to the Public," in which he recited that the rebel government of Texas had, under a pretended contract, transferred to White & Chiles "one hundred and thirty-five United States Texan indemnity bonds, issued January 1, 1851, payable in fourteen years, of the denomination of $1,000 each, and coupons attached thereto to the amount of $1,287.50, amounting in the aggregate, bonds and coupons, to the sum of $156,287.50." [p707] His caution did not specify, however, any particular bonds by number. The caution went on to say that the transfer was a conspiracy between the rebel governor and White & Chiles to rob the State treasury, that White & Chiles had never paid the State one farthing, that they had fled the State, and that these facts had been made known to the Secretary of the Treasury of the United States. And
a protest was filed with him by Mr. Paschal, agent of the State of Texas, against the payment of the said bonds and coupons unless presented for payment by proper authority.
The substance of this notice, it was testified, was published in money articles of many of the various newspapers of about that date, and that financial men in New York and other places spoke to Mr. Paschal, who had caused it to be inserted in the Tribune, about it. It was testified also, that after the commencement of the suit, White & Chiles said that they had seen it.
The rebel forces being disbanded on the 25th May, 1865, and the civil officers of the usurping government of Texas having fled from the country, the President, on the 17th June, 1865, issued his proclamation appointing Mr. A. J. Hamilton, provisional governor of the State; and directing the formation by the people of a State government in Texas.
Under the provisional government thus established, the people proceeded to make a constitution, and reconstruct their State government.
But much question arose as to what was thus done, and the State was not acknowledged by the Congress of the United States as being reconstructed. On the contrary, Congress passed, in March, 1867, three certain acts known as the Reconstruction Acts. By the first of these, reciting that no legal State governments or adequate protection for life or property then existed in the rebel States of Texas, and nine other States named, and that it was necessary that peace and good order should be enforced in them until loyal and republican State governments could be legally established, Congress divided the States named into five military districts (Texas with Louisiana being the fifth), and made it the duty [p708] of the President to assign to each an officer of the army, and to detail a sufficient military force to enable him to perform his duties and enforce authority within his district. The act made it the duty of this officer to protect all persons in their rights, to suppress insurrection, disorder, violence, and to punish, or cause to be punished, all disturbers of the public peace and criminals, either through the local civil tribunals or through military commissions, which the act authorized. It provided, further, that when the people of any one of these States had formed a constitution in conformity with that of the United States, framed in a way which the statute went on to specify, and when the State had adopted a certain article of amendment named, to the Constitution of the United States, and when such article should have become a part of the Constitution of the United States, then that the States respectively should be declared entitled to representation in Congress, and the preceding part of the act become inoperative, and that, until they were so admitted, any civil governments which might exist in them should be deemed provisional only, and subject to the paramount authority of the United States, at any time to abolish, modify, control, or supersede them.
A State convention of 1866 passed an ordinance looking to the recovery of these bonds, and, by act of October of that year, the governor of Texas was authorized to take such steps as he might deem best for the interests of the State in the matter, either to recover the bonds or to compromise with holders. Under this act, the governor appointed an agent of the State to look after the matter.
It was in this state of things, with the State government organized in the manner and with the status above mentioned, that this present bill was directed by this agent to be filed.
The bill was filed by Mr. R. T. Merrick and others, solicitors in this court, on behalf of the State, without precedent written warrant of attorney. But a letter from J. W. Throckmorton, elected governor under the constitution of 1866, ratified their act, and authorized them to prosecute [p709] the suit. Mr. Paschal, who now appeared with the other counsel, in behalf of the State, had been appointed by Governor Hamilton to represent the State, and Mr. Pease, a subsequent governor, appointed by General Sheridan, commander under the reconstruction acts, renewed this appointment.
The bill set forth the issue and delivery of the bonds to the State, the fact that they were seized by a combination of persons in armed hostility to the government of the United States, sold by an organization styled the military board, to White & Chiles, for the purpose of aiding the overthrow of the Federal government; that White & Chiles had not performed what they agreed to do. It then set forth that they had transferred such and such numbers, specifying them, to Hardenberg, and such and such others to Birch, Murray & Co., &c.; that these transfers were not in good faith, but were with express notice on the part of the transferees of the manner in which the bonds had been obtained by White & Chiles; that the bonds were overdue at the time of the transfer; and that they had never been indorsed by any governor of Texas. The bill interrogated the defendants about all these particulars; requiring them to answer on oath, and, as already mentioned, it prayed an injunction against their asking, or receiving payment from the United States, that the bonds might be delivered to the State of Texas, and for other and further relief.
As respected White & Chiles, who had now largely parted with the bonds, the case rested much upon what precedes, and their own answers.
The answer of CHILES, declaring that he had none of the bonds in his possession, set forth:
1. That there was no sufficient authority shown to prosecute the suit in the name of Texas.
2. That Texas by her rebellious courses had so far changed her status, as one of the United States, as to be disqualified from suing in this court.
3. That whether the government of Texas, during the term in question, was one de jure or de facto, it had authorized the [p710] military board to act for it, and that the State was estopped from denying its acts.
4. That no indorsement of the bonds was necessary, they having been negotiable paper.
5. That the articles which White & Chiles had agreed to give the State, were destroyed in transitu by disbanded troops who infested Texas, and that the loss of the articles was unavoidable.
The answer of WHITE went over some of the same ground with that of Chiles. He admitted, however,
"that he was informed and believed that, in all cases where any of the bonds were disposed of by him, it was known to the parties purchasing for themselves, or as agents for others, that there was some embarrassment in obtaining payment of said bonds at the treasury of the United States, arising out of the title of this respondent and his co-defendant Chiles."
As respected HARDENBERG, the case seemed much thus:
In the beginning of November, 1866, after the date of the notices given through Mr. Paschal, one Hennessey, residing in New York, and carrying on an importing and commission business, then sold to Hardenberg thirty of these bonds, originally given to White and Chiles; and which thirty, a correspondent of his, long known to him, in Tennessee, had sent to him for sale. Hardenberg bought them "at the rate of 1.20 for the dollar on their face," and paid for them. Hennessey had
heard from somebody that there was some difficulty about the bonds' being paid at the treasury, but did not remember whether he heard that before or after the sale.
Hardenberg also bought others of these bonds near the same time, at 1.15 percent, under circumstances thus testified to by Mr. C. T. Lewis, a lawyer of New York:
In conversation with Mr. Hardenberg, I had learned that he was interested in the Texas indemnity bonds, and meditated purchasing same. I was informed in Wall Street that such bonds were offered for sale by Kimball & Co., at a certain price, which price I cannot now recollect. I informed Mr. Hardenberg of this fact, and he requested me to secure the bonds for him at [p711] that price. I went to C. H. Kimball & Co, and told them to send the bonds to Mr. Hardenberg's office and get a check for them, which I understand they did. I remember expressing to Mr. Hardenberg the opinion that these bonds, being on their face negotiable by delivery, and payable in gold, must, at no distant day, be redeemed according to their tenor, and were, therefore, a good purchase at the price at which they were offered.
My impression is that, before this negotiation, I had read a paragraph in some New York newspaper stating that the payment of the whole issue of the Texas indemnity bonds was suspended until the history of a certain portion of the issue, supposed to have been negotiated for the benefit of the rebel service, should be understood. I am not at all certain whether I read this publication before or after the date of the transaction. If the publication was made before this transaction, I had probably read the article before the purchase was made. My impression is that it was a paragraph in a money article, but I attributed no great importance to it. I acted in this matter simply as the friend of Mr. Hardenberg, and received no commission for my services. I am a lawyer by profession, and not a broker.
Kimball & Co. (the brokers thus above referred to by Mr. Lewis), testified that they had received the bonds thus sold, from a firm which they named, "in perfect good faith, and sold them in like good faith, as we would any other lot of bonds received from a reputable house." It appeared, however, that, in sending the bonds to Kimball & Co. for sale, the firm had requested that they might not be known in the transaction.
Hardenberg's own account of the matter, as declared by his answer, was thus:
That he was a merchant in the city of New York; that he purchased the bonds held by him in open market in said city; that the parties from whom he purchased the same were responsible persons, residing and doing business in said city; that he purchased of McKim, Brothers & Co., bankers in good standing in Wall Street, one bond at 1.15 percent, on the 6th of November, 1866, when gold was at the rate of $1.47 1/4, and declining; that when he purchased the same, he made no inquiries of [p712] McKim, Brothers & Co., but took the bonds on his own observation of their plain tenor and effect at what he conceived to be a good bargain; that afterwards, and before the payment of said bonds and coupons by the Secretary of the Treasury, and at the request of the Comptroller, Hon. R. W. Tayler, he made inquiry of said firm of McKim, Brothers & Co., and they informed him that said bonds and coupons had been sent to them to be sold by the First National Bank of Wilmington, North Carolina; that he purchased on the 8th of November, 1866, thirty of said bonds, amounting to the sum of $32,475, of J. S. Hennessey, 29 Warren Street, New York City, doing business as a commission merchant, who informed him that, in the way of business, they were sent him by Hugh Douglas, of Nashville, Tennessee; that he paid at the rate of 120 cents at a time, to-wit, the 8th of November, 1866, when gold was selling at 146 and declining; that the three other bonds were purchased by him on the 8th of November, 1866, of C. H. Kimball & Co., 30 Broad Street, brokers in good standing, who informed him, on inquiry afterwards, that said bonds were handed them to be sold by a banking house in New York of the highest respectability, who owned the same, but whose names were not given, as the said firm informed him they could "see no reason for divulging private transactions," and that he paid for last-mentioned bonds at the rate of 120 cents, on said 8th day of November, 1866, when gold was selling at 146 and declining.
Further answering, he saith that he had no knowledge at the time of said purchase that the bonds were obtained from the State of Texas, or were claimed by the said State; that he acted on information obtained from the public report of the Secretary of the Treasury, showing that a large portion of similar bonds had been redeemed, and upon his own judgment of the nature of the obligation expressed by the bonds themselves, and upon his own faith in the full redemption of said bonds, and he averred that he had no knowledge of the contract referred to in the bill of complaint, nor of the interest or relation of White & Chiles, nor of any connection which they had with said complainant, or said bonds, nor of the law of the State of Texas requiring indorsement.
The answer of White mentioned, in regard to Hardenberg's bonds, that they were sold by his (White's) broker; [p713] that he, White, had no knowledge of the name of the real purchaser, who, however, paid 115 percent for them;
that, at the time of the sale, his (White's) broker informed him that the purchaser, or the person acting for the purchaser, did not want any introduction to the respondent, and required no history of the bonds proposed to be sold; that he only desired that they should come to him through the hands of a loyal person who had never been identified with the rebellion.
Another matter, important possibly in reference to the relief asked by the bill, and to the exact decree [n3] made, should, perhaps, be mentioned about these bonds of Hardenberg.
The answer of Hardenberg stated, that,
on the 16th of February, 1867, the Secretary of the Treasury ordered the payment to the respondent of all said bonds and coupons, and the same were paid on that day.
This was literally true, and the books of the treasury showed these bonds as among the redeemed bonds, and showed nothing else. As a matter of fact, it appeared that the agents of Texas, on the one hand, urging the government not to pay the bonds, and the holders, on the other, pressing for payment -- it being insisted by these last that the United States had no right to withhold the money, and thus deprive the holder of the bonds of interest -- the Controller of the Treasury, Mr. Tayler, made a report, on the 29th of January, 1867, to the Secretary of the Treasury in which he mentioned that it seemed to be agreed by the agents of the State that her case depended on her ability to show a want of good faith on the part of the holders of bonds, and that he had stated to the agents that, as considerable delay had already been incurred, he would, unless during the succeeding week they took proper legal steps against the holders, feel it his duty to pay such bonds as were unimpeached in title in the holders' hands. He accordingly recommended to the secretary payment of Hardenberg's and of some others. The agents, on the same day that the controller made his report, [p714] and after he had written most of it, informed him that they would take legal proceedings on behalf of the State, and were informed in turn that the report would be made on that day, and would embrace Hardenberg's bonds. Two days afterwards, a personal action was commenced in the name of the State of Texas against Mr. McCulloch, the then Secretary of the Treasury, for the detention of the bonds of Hardenberg and others. This action was dismissed February 19th. On the 15th of the same February, the present bill was filed. On the 16th of the month, the personal suit against the secretary having at the time, as already above stated, been withdrawn, and no process under the present bill having then, nor until the 27th following, been served on Hardenberg, Mr. Tayler, Controller of the Treasury, and one Cox, the agent of Hardenberg, entered into an arrangement by which it was agreed that this agent should deposit with Mr. Tayler government notes known as "seven-thirties," equivalent in value to the bonds and coupons held by Hardenberg, to be held by Mr. Tayler
as indemnity for Mr. McCulloch, against any personal damage, loss, and expense in which he may be involved by reason of the payment of the bonds.
The seven-thirties were then delivered to Mr. Tayler, and a check in coin for the amount of the bonds and interest was delivered to Hardenberg's agent. The seven-thirties were subsequently converted into the bonds called "five-twenties," and these remained in the hands of Mr. Tayler, being registered in his name as trustee. The books of the treasury showed nothing in relation to this trust, nor, as already said, anything more or other than that the bonds were paid to Hardenberg or his agent.
Next, as respected the bonds of BIRCH, MURRAY & Co. It seemed in regard to these, that, prior to July, 1855, Chiles, wanting money, applied to this firm, who lent him $5,000 on a deposit of twelve of the bonds. The whole of the twelve were taken to the treasury department. The department at first declined to pay them, but finally did pay [p715] four of them (amounting with the coupons to $4,900) upon the ground urged by the firm that it had lent the $5,000 to Chiles on the hypothecation of the bonds and coupons without knowledge of the claim of the State of Texas, and because the firm was urged to be, and was apparently, a holder in good faith, and for value, the other bonds, eight in number, remaining in the treasury, and not paid to the firm, because of the alleged claim of the State of Texas, and of the allegation that the same had come into the possession of said White and Chiles improperly, and without consideration.
The difficulty now was less perhaps about the four bonds than about these eight, whose further history was thus presented by the answer of Birch, one of the firm, to the bill. He said in this answer, and after mentioning his getting with difficulty the payment of the four bonds:
That afterwards, and during the year 1866, Chiles called upon him with the printed report of the First Comptroller of the Treasury, Hon. R. W. Tayler, from which it appeared that the department would, in all reasonable probability, redeem all said bonds; and requested further advances on said eight remaining bonds, and that the firm thereupon advanced said Chiles, upon the said eight bonds, from time to time, the sum of $4,185.25, all of which was due and unpaid. That he made the said advances as well upon the representations of said Chiles that he was the bona fide holder of said bonds and coupons, as upon his own observation and knowledge of their legal tenor and effect; and of his faith in the redemption thereof by the government of the United States.
The answer said further, that:
At the time of the advances first made, the firm had no knowledge of the contract referred to in the bill, nor of the interest or connection of said White & Chiles with the complainant, nor of the law of the State of Texas referred to in the bill passed December 16, 1851; and that the bonds were taken in good faith.
It appeared further, in regard to the whole of these bonds, [p716] that, in June, 1865, Chiles, wanting to borrow money of one Barret, and he, Barret, knowing Mr. Hamilton, just then appointed provisional governor, but not yet installed into office, nor apparently as yet having the impressions which he afterwards, by his caution, made public, went to him, supposing him well acquainted with the nature of these bonds, and sought his opinion as to their value, and as to whether they would be paid. Barret's testimony proceeded:
He advised me to accept the proposition of Chiles, and gave it as his opinion that the government would have to pay the bonds. I afterwards had several conversations with him on the subject, in all of which he gave the same opinion. Afterwards (I cant't remember the exact time), Mr. Chiles applied to Birch, Murray & Co. for a loan of money, proposing to give some bonds as collateral security, and, at his request, I went to Birch, Murray & Co. and informed them of my conversations with Governor Hamilton, and of his opinion as expressed to me. They then seemed willing to make a loan on the security offered. In order to give them further assurance that I was not mistaken in my report of Governor Hamilton's opinion verbally expressed, I obtained from him a letter [letter produced]. It reads thus:
NEW YORK, June 25th, 1865.
HON. J. R. BARRET.
DEAR SIR: In reply to your question about Texas indemnity bonds issued by the U.S., I can assure you that they are perfectly good, and the gov't will certainly pay them to the holders.
A. J. HAMILTON
mentioned the conversations had with Governor Hamilton, and also spoke of the letter, and sometimes read it to various parties, some of whom were dealing in these bonds,
and, as he stated, had "reason to believe that Governor Hamilton's opinion in regard to the bonds became pretty generally known among dealers in such paper." The witness, however, did not know Mr. Hardenberg.
The questions, therefore, were:
1. A minor preliminary one: the question presented by Chiles's answer as to whether sufficient authority was shown [p717] for the prosecution of the suit in the name and in behalf of Texas.
2. A great and principal one: a question of jurisdiction, viz., whether Texas, at the time of the bill filed or now, was one of the United States of America, and so competent to file an original bill here.
3. Assuming that she was, a question whether the respective defendants, any, all, or who of them, were proper subjects for the injunction prayed, as holding the bonds without sufficient title, and herein -- and more particularly as respected Hardenberg, and Birch, Murray & Co. -- a question of negotiable paper, and the extent to which holders, asserting themselves holders bona fide and for value, of paper payable "to bearer," held it discharged of precedent equities.
4. A question as to the effect of the payments, at the treasury, of the bonds of Hardenberg and of the four bonds of Birch, Murray & Co.