cates attached was a circumstance sufficient to put the banks upon inquiry as to the title of the holder. 357*] The statement made of *the character and form of the instruments, would seem to furnish an answer to these questions. The agreement, respecting the scrip preferred stock, is entirely independent of the pecuniary obligation contained in the instrument. The latter recites an indebtedness in a specific sum, and promises its unconditional payment to bearer at a specified time. It leaves nothing optional with the company. Standing by itself, it has all the elements and essential qualities of a negotiable instrument. The special agreement as to the scrip preferred stock in no degree changes the duty of the company with respect either to the principal or interest stipulated. It confers a privilege upon the holder of the bond, upon its surrender and the surrender of the certificate attached, of obtaining full preferred stock. His interest in and right to the full discharge of the money obligation is in no way dependent upon the possession or exercise of this privilege. Whether the privilege was of any value at the time the bonds were received by the defendants we are not informed, nor, in determining the negotiability of the bonds, is the value of the privilege a circumstance of any importance. Its value can in no way affect the negotiable character of the instrument. An agreement confessedly worthless, providing that upon the surrender of the bonds the holder should receive, instead of full paid up stock in the railway company, stock in other companies of doubtful solvency, would have had the same effect upon the character of the instrument. tion. warrants In Hodges v. Shuler, 22 N. Y., 114, which was decided by the Court of Appeals of New York, we have an adjudication upon a similar quesThere the action was brought upon a promissory note of the Rutland and Burlington Railway Company, by which the company promised, four years after date, to pay certain parties in Boston $1,000, with interest thereon semi-annually, as per interest 358*] *attached, as the same became due; "Or, upon the surrender of this note, together with the interest warrants not due, to the treasurer, at any time until six months of its maturity, he shall issue to the holders thereof ten shares in the capital stock in said company in exchange therefor, in which case interest shall be paid to the date to which a dividend of profits shall have been previously declared, the holder not being entitled to both interest and accruing profits during the same period." It was contended that the instrument was not. in terms or legal effect, a negotiable promissory note, but a mere agreement, and that the indorsement of it operated only as a mere transfer, and not as an engagement to fulfil the contract of the company in case of its default. But the Court of Appeals held otherwise. "The possibility seems to have been contemplated," says the court, "that the owner of the note might, before its maturity, surrender it in exchange for stock, thus canceling it and its money promise, but that promise was, nevertheless, absolute and unconditional, and was as lasting as the note itself. In no event could the holder require money and stock. It 21 WALL. U. S. Book 22. was only upon a surrender of the note that he was to receive stock, and the money payment did not mature until six months after the holder's right to exchange the note for stock had expired. We are of opinion that the instrument wants none of the essential requirements of a negotiable promissory note. It was an absolute and unconditional engagement to pay money on a fixed day, and although an election was given to the promisees, upon a surrender of the instrument six months before its maturity, to exchange it for stock, this did not alter its character or make the promise in the alternative in the sense in which that word is used in respect to promises to pay." In Welch v. Sage, 47 N. Y., 143, the effect of the certificate attached to the bonds issued by the Milwaukee and St. Paul Railway Company, identical with those in this case, was considered *by the same Court of Appeals, and the [*359 court there held that the certificate constituted no part of the bond; that the latter was entire and perfect without it, and that the admission of the debt and the promise to pay were in no degree qualified by it. The absence of the certificates, at the time the bonds were received by the defendants, was not of itself a circumstance sufficient to put the defendants upon inquiry as to the title of the holder. There is no evidence in the case, as already observed, that the privilege which the certificates conferred was of any value; and if it had value, no obligation rested upon the holder to preserve the certificates. He was at liberty to abandon the privilege they conferred and rely solely upon the absolute obligation of the company to pay the amount stipulated. The absence of the certificates when the bonds were offered to the defendants amounted to little if anything more in legal effect than a statement by the holder that in his judgment they added nothing to the value of the bonds. In the case of Welch v. Sage. already cited, it was held that the absence of the certificate from the bond, when taken by the purchaser, would not of itself establish the fact that the purchaser was guilty of fraud or bad faith, although it would be a circumstance of some weight in connection with other evidence. The law is well settled that a party who takes negotiable paper before due for a valuable consideration, without knowledge of any defect of title. in good faith, can hold it against all the world. A suspicion that there is a defect of title in the holder, or a knowledge of circumstances that might excite such suspicion in the mind of a cautious person, or even gross negligence at the time, will not defeat the title of the purchaser. That result can be produced only by bad faith, which implies guilty knowledge or willful ignorance, and the burden of proof lies on the assailant of the title. It was so expressly held by this court in Murray v. Lardner, 2 Wall., 110, 17 L. ed., 857, where Mr. Justice Swayne examined the leading *authori- [*360 ties on the subject and gave the conclusion we have stated. See, also, Goodman v. Simonds, 20 How., 343, 15 L. ed., 934. In the present case it is not pretended that the defendants, when they took the bonds in controversy, had notice of any circunstances 41 649 outside of the instruments themselves, and the, absence of the certificates referred to in them, to throw doubt upon the title of the holder. We see no error in the rulings of the court below, and its judgment is, therefore, affirmed. STATE OF TEXAS, Compt., บ. JOHN CHILES. (See S. C., 21 Wall., 488-492.) Parties as witnesses-order for subpœna. 1. The purpose of the Act of Congress, section 858 of the Revised Statutes, making parties in actions competent witnesses, was, except as to those named in the proviso, to put them upon a footing of equality with other witnesses, all to be admissible to testify for themselves and compellable to testify for the others. 2. An order may be made that a subpoena issue for defendant in an equity case, in order that his deposition may be taken in behalf of complainant. [No. 6, Original.] Ev., § 361; Eckford v. De Kay, 6 Paige, 565; Ashton v. Parker, 14 Sim., 632; 2 Dan. Ch. Pr., Perkins ed., 1865, p. 885, n. A bill of discovery was a dilatory and expensive measure. 2 Story, Eq., secs. 1483, 1489. It was also less effectual than the examination of the defendant as a witness. 1 In trials at law the system of exclusion was more rigid. The general rule of the common law was that no party to *the record [*490 could be a witness for or against himself, or for or against any other party to the suit. Greenl. Ev., §§ 329, 330. This doctrine was attacked by Bentham in his work on evidence, published in 1828, with great force of reasoning. He maintained that "In the character of competency no objections ought to be allowed." Vol. I., p. 3. His views produced a deep impression in England, and became the subject of earnest discussion there. Subsequently they bore fruit. In "the County Courts Act," passed by Parliament in 1846, it was declared that "On the hearing or trial of any action, or on Argued Feb. 15, 1875. Decided Apr. 5, 1875. any other proceeding under this Act, the par BILL in equity stated by the court. ties thereto, their wives and all other persons may be examined, either on behalf of the plaintiff or defendant upon oath or solemn affirma Messrs. R. T. Merrick and T. J. Du- tion." This was a great alteration in the law rant, for complainant. Mr. Albert Pike, for respondent. Mr. Justice Swayne delivered the opinion of the court: from what it was before. After it had been tested for six years in the county courts and its wisdom approved, the rule was, in 1851, by a measure known as "Lord Brougham's Act," with a few exceptions not necessary to be stated, made applicable in all legal proceedings elsewhere. An able writer says: "Every eminent lawyer in Westminster Hall will readily admit that it has been productive of highly beneficial results." He adds: "In courts of law it has not only enabled very many honest persons to establish just claims which, under the old system of exclusion, could never have been brought to trial with any hope of success, but it has deterred at least an equal number of dishonest men from attempting on the one hand to enforce a dishonest demand, and on the other to set up a fictitious defense." The common law commissioners, in their report upon the subject, said: This is an application for an order that a subpœna issued for John Chiles, the defendant 489*] *in order that his deposition may be taken on behalf of the complainant. The proper disposition of the motion depends upon the solution of the question whether he can be required to testify by the other party. The provision of the Act of Congress upon the subject is as follows: "Sec. 858. In the courts of the United States, no witness shall be excluded in any action on account of color, or in any civil action because he is a party to or interested in the issue tried: Provided, That, in actions by or against executors, administrators or guardians, in which judgment may be rendered for or against them, neither party shall be allowed to testify against the other as to any transaction with or statement by the testator, intestate or ward, unless called to testify thereto by the op-istration of justice." 2 Taylor, Ev., § 1218. posite party, or required to testify thereto by the court. In all other respects, the laws of the State in which the court is held shall be the rules of decision as to the competency of witnesses in the courts of the United States, in trials at common law and in equity and admiralty." Rev. Stat. U. S., 162. It was a rule in equity of long standing that the complainant could examine the defendant as a witness, upon interrogatories, and that one defendant might examine another, but they could not examine the complainant without his consent, and the right to examine a defendant was attended with serious restrictions and em barrassment. 1 Smith, Ch. Pr., 343; 1 Greenl. "According to the concurrent testimony of the Bench, the profession and the public, the new law is found to work admirably, and to contribute in an eminent degree to the admin The innovation, it is believed, has been adopted in some form in most if not in all the States 1 Greenl. [*491 and Territories of our *Union. Ev., sec. 329. It is eminently remedial, and the language in which it is couched should be construed accordingly. A doubt has been suggested whether the enactment before us does not give merely a privilege to each party which may be availed of or not as a matter of choice, without conferring the right upon either to compel the other to testify. This view is too narrow and cannot be main tained. The first sentence forbids, in the courts of the United States, exclusion in any case on account of color, and in civil actions on account of interest or being a party. If either party see notes, 17 L. ed. U. S. 168; 5 C. C. A. 602; 21 being a party, there is certainly a clear infrac offers to testify and is excluded by reason of NOTE.-Competency of witnesses in U. S. courts in civil cases, how far governed by state laws A. 278. N ERROR to the Circuit Court of the United York. The case is fully stated by the court. We assign for error, the failure of the court below to decide that the fund was liable to the tax levied, if not as capital, yet as deposits. tion of the statute, both as to its language and States for the Southern District of New meaning. If either party calls the other, and the party called is excluded upon this ground, is not the infraction equally clear? The language applies as well to one case as to the other. Both are alike within its terms and meaning. We see no ground for a distinction. A doubt, the converse of the one suggested, might with equal propriety be insisted upon. Such a proposition would have the same foundation, and might be sustained by an argument, mutatis mutandis, in the same terms. The same doubt and the same reasoning would apply as to colored witnesses. All such doubts rest upon an assumption unwarranted by anything in the statute. The case is one where the language is so clear and comprehensive that there is no room for construction, and the duty of the court is simply to give it effect according to the plain import of the words. There should be no construction where there is nothing to construe. U. S. v. Wiltberger, 5 Wheat. 76. But if there were doubt on the subject, the statute being remedial in its character, the doubt should be resolved in a liberal spirit in order to obviate as far as possible the existing evils. To permit parties to testify, and to limit the statute to this, would deprive it of half its efficacy, and that much the most beneficial part. Where the testimony of one party is important 492*] to the other, there is, of course, *unwillingness to give it. The narrow construction suggested would leave to the party needing the evidence in such cases no choice but to forego it, or fall back upon a bill of discovery. It is hardly credible that Congress, departing from the long established restriction as to parties to the record, intended to stop short of giving the full measure of relief. We can see no reason for such a limitation. The purpose of the Act in making the parties competent was, except as to those named in the proviso, to put them upon a footing of equality with other witnesses-all to be admissible to testify for themselves and compellable to testify for the others. This conclusion is supported by all the considerations applicable to the subject. The order asked for will be made. JOSHUA F. BAILEY, Collector of Internal v. LUTHER C. CLARK et al. (See S. C., 21 Wall., 284-288.) Construction of term “capital” in Revenue Act. *The term "capital," employed by a banker in the business of banking in the 110th section of the Revenue Act of July 13, 1866, does not include moneys borrowed by him from time to time temporarily, in the ordinary course of his business. applies only to the property or moneys of the banker set apart from other uses and permanently invested in the business. [No. 539.] As the absence of assessment does not warrant the return of a tax, if properly collected; so, we submit, mere error in the form of assessment does not warrant the return of a tax which, when collected, was then and there due under a different appellation. Dollar Savings Bank v. U. S. ante, 80. 1. The fund was "deposits," within the meaning of the above Act. It was an amount of money placed with bankers, "represented by certificates of deposit or otherwise." Certificates of deposit have been held to be, in fact, equivalent to promissory notes. If they are payable at a future day certain, they are simply promissory notes, neither more nor less. Morse, Banking (1870), 53. 2. Again; we submit that the amount of money which a banker can employ at any particular time in his business is capital at such time. As definite calculations upon the extent of his business require for their certainty the average of such amount over a length of time, this was required in the statute before us, and was followed in the assessment. It is none the less capital because borrowed. "Borrowed capital" is a phrase well understood and, indeed constitutes perhaps the greater part of active capital. It is none the less capital because temporarily borrowed. That difference is met by the provision for average amounts. Mr. John E. Burrill, for defendants in error: An amendment to the 110th section was also made by the amendatory Act of July 13, 1866. That section in the Act of June 30, 1864, provided that the tax should be paid when the average amount of the capital of any bank, or person engaged in the business of banking, was beyond the amount invested in United States bonds. In the amendatory Act, the word "average," where it was found before the word "capital" in the original Act, was stricken out, and the same word was inserted before the words "amount in United States bonds;" so that, by the amendatory Act, the tax, whether upon individuals or corporations, was assessed upon their capital, and not upon their average capital, from which the average amount invested in United States bonds was to be deducted. Attention is also called to the 37th section of the Act of June 6, 1872, 17 Stat. at L., 256, which contains an express provision that the words "capital employed," as used in the 110th section of the Acts of 1864 and 1866, shall not include money borrowed or received from day Argued Mar. 30, 1875. Decided Apr. 12, 1875. to day in the usual course of business from any Headnote by Mr. Justice FIELD. NOTE.-Definition of "captial stock" as used in revenue acts-see note, 58 L. R. A. 514. person not a partner of, or interested in, said bank, association or firm. At the time of the passage of this last mentioned Act, the government and the class of 1 bankers among whom the plaintiffs below were, Internal Revenue *in the district and, as [*286 included, were directly at issue in regard to the such officer, enforced the payment of the taxes very questions now involved in this controver- thus assessed, amounting to over $6,000. The sy; and the claim made by the government and plaintiffs protested at the time against the lewhich is sought to be sustained here was pre-gality of the assessment, and appealed from the sented to Congress, and the amendatory Act of 1872 was passed, with full knowledge on the part of Congress of the nature of such claim. It is fair, therefore, under the circumstances, to regard this Act of 1872, as a declaration on the part of Congress of the construction and meaning of the original Act. Doubtless it is possible to say that such statutes may have changed the law, but bearing in mind how easy and appropriate, had that been the intention, it would have been for Congress to declare that thereafter money so borrowed should not be liable to the tax, it seems to us that, considering the omission of such words, and the peculiar language of the statute itself, and the circumstances under which it was passed, a more fair and reasonable construction to be given to the law would be, to regard it as an Act declaratory of the meaning and construction of the original Act. Mr. Justice Field delivered the opinion of the court: decision of the assessor to the Commissioner of Internal Revenue. Failing to obtain any rescission of the assessment or restitution of the moneys paid, they brought the present action for their recovery. The action was tried by the courts without the intervention of a jury, by stipulation of the parties under the recent Act of Congress. The court found the facts we have stated, but with greater fullness of detail, and held that the money thus temporarily borrowed by the plaintiffs in the ordinary course of their business, was not capital of the company employed in the business of banking and was not, therefore, liable to assessment as part of such capital; and that the assessment and collection of the tax was, therefore, illegal and unauthorized. The court accordingly gave judgment for the plaintiffs. To review that judgment the case is brought here on writ of error. As appears from this statement of the case the only question for determination relates to the meaning to be given to the term "capital" The 110th section of the Revenue Act of the in the 110th section of the Revenue Act. The United States as amended on the 13th of July, term is not there used in any technical sense, 1866, 14 Stat. at L., 136, enacts "That there but in its natural and ordinary signification. shall be levied, collected and paid a tax of one And it is capital, not merely of individuals but twenty-fourth of one per centum each month of corporations anu associations, which is subupon the capital of any bank, asso- ject to the tax in question. When used with ciation, company or corporation, and on the respect to the property of a corporation or ascapital employed by any person in the busi-sociation, the term has a settled meaning; it apness of banking, beyond the average amount in- plies only to the property or means contributed vested in United States bonds." And the 79th by the stockholders as the fund or basis for the section of the same Act as amended declares business or enterprise for which the *cor- [*287 "That every incorporated or other bank, and poration or association was formed. As to them every person, firm or company having a place the term does not embrace temporary loans, of business where credits are opened by the de- though the moneys borrowed be directly approposit or collection of money or currency subject priated in their business or undertakings. And to be paid or remitted upon draft, check or when used with respect to the property of indiorder; or where money is advanced or loaned viduals in any particular business, the term has on stocks, bonds, bullion, bills of exchange or substantially the same import; it then means promissory notes; or where stocks, bonds, bul- the property taken from other investments or lion. bills of exchange or promissory notes are uses and set apart for and invested in the spereceived for discount or for sale, shall be reard- cial business, and in the increase, proceeds or ed as a bank or as a banker. 14 Stat. at L. 115. earnings of which property, beyond expendiDuring the years 1869 and 1870 the plaintiff's tures incurred in its use, consist the profits were bankers within the meaning of this stat- made in the business. It does not, any more ute, doing business in the City of New York than when used with respect to corporations, under the name of Clark, Dodge & Company; embrace temporary loans made in the regular and at various times between the first of April, course of business. As very justly observed by 1869, and the first of February, 1870, they made the circuit judge, "It would not satisfy the dereturns as required by law to the Assessor of mands of common honesty, if a man engaged in Internal Revenue for the district, of the amount business of any kind, being asked the amount of of their fixed capital. employed in banking, and canital employed in his business, should inof the amount of moneys deposited with them clude in his reply all the sums which, in the by their customers. The assessor required conduct of his business, he had borrowed and more than this: he insisted, against the objec had not yet repaid." tion of the plaintiffs, that all moneys borrowed by them from time to time, and temporarily in the ordinary course of their business, formed a part of their capital employed in the business of banking and were subject to the tax imposed upon capital under the section cited. He accordingly assessed a tax upon the several amounts thus borrowed, within the dates mentioned, as part of the capital of the company. The defendant was at the time Collector of There is no difference in the business of banking as conducted by individuals from the business as conducted by corporations, which would warrant any different meaning to be given to the term "capital" in the two cases. Nor can any good reason be stated why a distinction should be made between banking corporations and individual bankers in this respect. Independently of these considerations, there would be great practical difficulty in adminis tering the law, upon the theory that moneys 1. This court is not required to re-examine the Amendment of 1866. We are satisfied that the term as used in 288*] the statute was intended to embrace only the fixed capital employed in the business of banking, as distinguished from deposits and temporary loans made in the regular course of business, and that no distinction is to be made in this respect between the capital of individual bankers and that of banking corporations. It is undoubtedly true, as stated by the Attorney-General, that capital used in the business of banking is none the less so because it is borrowed. The mere fact that the money, permanently invested in the business, is borrowed does not alter its character as capital. The question here is, whether money not thus permanently invested, but borrowed temporarily in the ordinary course of business to meet an emergency, is capital; and we are clear that the term does not, either in common acceptation or within the meaning of the statute, embrace loans of that character. [No. 185.] Argued Feb. 10, 1875. Decided Apr. 19, 1875. J. N ERROR to the Supreme Court of the The case is stated by the court. Messrs. T. W. Bartley and Geo. F. Ed- Mr. Chief Justice Waite delivered the opinion of the court: The indictment in this case charged Moore in five counts with selling lottery tickets, and in two with keeping a gaming table. He pleaded in bar to the whole indictment, "That, in issuing the ticket or certificate mentioned and specified in the indictment, he was acting as the agent of the Mississippi Agricultural, Educational and Manufacturing Aid Society, a body politic and corporate, which was duly incorporated by an Act of the Legislature of the State of Mississippi, approved Feb. 16, 1867; and that, After controversies had arisen as to the in- prior to the adoption of the present Constitution terpretation to be given to the statute, upon of the State, said Mississippi Agricultural, Edthe question at issue in this case, between bank-ucational and Manufacturing Aid Society fully ers and the government, Congress passed the complied with all the provisions of said Act of Act of 1872, defining the meaning of the terms incorporation." "capital employed," in the 110th section, and enacted that they "Shall not include money borrowed or received from day to day in the usual course of business from any person not a partner of, or interested in the said bank, association or firm." 17 Stat. at L., 256. is enactment was evidently intended to remove any doubt previously existing as to the meaning of the statute and declare its true construction and meaning. Had it been intended to apply only to cases subsequently arising, it would undoubtedly have so provided in terms. Judgment affirmed. The charge of issuing tickets or certificates was made only in five out of the seven counts in the indictment. The State demurred to this plea, because, 1. It showed no valid bar to the prosecution; and, 2. It amounted to the general issue and nothing more. The court sustained the demurrer. Moore then pleaded not guilty and went to trial. The jury returned a verdict of guilty generally, and the proper judgment was entered thereon. No bill of exceptions was taken at the trial, and no error is specifically stated in the record. The case was taken to the Supreme Court of the State, by writ of error, and the judgment of the court below was there affirmed. The record proper does not show what errors were assigned in the Supreme Court. The present writ of error is prosecuted to obtain a re-examination of the case. The only error relied upon in the argument here relates to the action of the Circuit Court of the State in sustaining the demurrer to the plea. We are not required to re-examine the judgment of a state court simply because a federal be NOTE. HOW and when questions must raised and decided in the state court-see note, 63 L. R. A. 33. The record for the purpose of showing jurisdiction in the U. S. Supreme Court-see note, 63 I R. A. 329. What the record must show respecting the presentation and decision of a Federal question-see note, 63 L. R. A. 471. |