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MUNICIPAL BONDS AND THEIR INCIDENTS.

SUPREME COURT OF THE UNITED STATES, OCTOBER TERM, 1877.

CROMWELL, Plaintiff in Error, v. COUNTY OF SAC.

1. Where to a municipal bond which has several years to run, an overdue and unpaid coupon for interest is attached, that fact does not render the bond and the subsequently maturing coupons dishonored paper, so as to subject them, in the hands of a purchaser for value, to fenses good against the original holder. 2. A bona fide purchaser of negotiable paper for value, before maturity, takes it freed from all infirmities in its origin; the only exceptions being where the paper is absolutely void for want of power in the maker to issue it, or where the circulation is prohibited by law for the illegality of the consideration. Municipal bonds payable to bearer are negotiable instruments and subject to the same rules as other negotiable paper.

3. A purchaser of a municipal bond from a bona fide holder, who had obtained it for value before maturity, takes it equally freed as in the hands of such holder, though he may have had notice of infirmities in its origin. 4. A purchaser of a negotiable security before maturity, unless personally chargeable with fraud in the purchase, can recover the full amount of the security against the maker, though he may have paid less than its par value, whatever may have been its original infirmity.

5. When the rate of interest at the place of contract differs from the rate at the place of payment, the parties may contract for either rate, and the contract will govern. 6. Municipal bonds in Iowa, drawing ten per cent interest before maturity, draw the same interest, under the law of the State, after maturity, and coupons attached to such bonds draw six per cent after maturity. Judgments in that State entered upon such bonds and coupons draw interest for the amount due on the bonds at the rate of ten per cent a year, and upon the amount due upon the coupons at the rate of six per cent a year.

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This case was before us at the last term, and the judgment of the court below was then reversed and the cause remanded for a new trial. 94 U. S. Rep. 351. Upon the new trial a special verdict was found by the jury, and the questions presented for our determination now relate to the judgment which those findings authorize.

The action was brought upon four bonds of the county of Sac, in the State of Iowa, each for $1,000, and four coupons for interest attached to them, each for $100. The bonds were issued on the 1st of October, 1860, and were made payable to bearer on the 1st of May, in the years 1868, 1869, 1870, and 1871, respectively, at the Metropolitan Bank, in the city of New York, with annual interest at the rate of ten per cent a year. The coupons in suit matured after the first of May, 1868. They were, at the option of the holder, payable at the same bank in New York, or were receivable at the office of the treasurer of Sac county for county taxes.

As a defense to this action the county relied upon the estoppel of a judgment rendered in its favor in a prior action brought by one Samuel C. Smith upon certain earlier maturing coupons upon the same bonds, accompanied with proof that the present plaintiff, Cromwell, was at the time the owner of the coupons in controversy in that action, and that the action was prosecuted for his benefit. It appeared from the findings in that action that the county of Sac had authorized, by a vote of its people, the issue of bonds to the amount of $10,000 for the erection of a courthouse; that the bonds were issued by the county

judge, and delivered to one Meserey, with whom he had made a contract for the erection of the courthouse; that immediately thereafter the contractor gave one of the bonds as a gratuity to the county judge; and that a court-house was never constructed by the contractor or any other person pursuant to the contract. It also appeared that the plaintiff had become the holder before maturity of the coupons in controversy, but it did not appear that he had ever given any value for them. Upon these findings the court below held that the bonds were void as against the county, and accordingly gave judgment in its favor upon the coupons. Any infirmity of the bonds from illegality or fraud in their issue necessarily affected the coupons attached to them. When that case was brought here on writ of error this court held that the facts disclosed by the findings were sufficient evidence of fraud and illegality in the inception of the bonds to call upon the holder to show, not only that he had received the coupons before maturity, but that he had given value for them, and not having done so, the judgment was affirmed.

When the present case was first tried, the court below held that the judgment in the Smith case was conclusive against the plaintiff, and refused to permit him to prove that he had received the bonds and coupons in this suit before maturity for value, and gave judgment for the county. But when the case was brought here at the last term we held that the court below erred in refusing to admit this proof; and that the matters adjudged in the Smith case were only that the bonds were void as against the county in the hands of parties who had not thus acquired them before maturity and for value. The judgment was accordingly reversed.

Upon the second trial the plaintiff proved that he had received two of the bonds in suit- those payable in 1870 and 1871 - with coupons attached, before their maturity, and given value for them, without notice of any defense to them on the part of the county. Under our ruling there can be no doubt of his right to recover upon them. The only questions for our determination as respects them relate to the interest which they shall draw after maturity, and the interest which the judgment shall bear. These questions we shall hereafter consider.

As to the other two bonds in suit those payable in 1868 and 1869-and coupons annexed, it appears that the plaintiff purchased them from one Clark on the 1st of April, 1873, after their maturity, for the consideration of a precedent debt due to him from Clark, amounting to $1,500; that they had previously been held by one Robinson, who had pledged them to a bank in Brooklyn as collateral security for a loan of money; that Clark purchased them of Robinson on the 20th of May, 1863, by paying this loan to the bank, then amounting to $1,192, and applying the excess of the amount of the bonds over the amount thus paid, in satisfaction of a precedent debt due to him by Robinson. To each of these bonds there were attached at the time of Clark's purchase the coupon due on the first of the month and all subsequent unmatured coupons. Robinson stated to Clark that the coupons previously matured had been paid, and that those due on the first of the month would be paid in a few days. Clark had no notice at the time of any defense to the bonds, except such as may be imputed to him from the fact that one of the coupons attached to each of the bonds was then past due and unpaid. And the principal

question for our determination is whether, this fact existing, the plaintiff had, as to these bonds, the right of a holder for value before dishonor, without notice of any defenses by the county; or, as stated by counsel, whether this fact rendered the bonds themselves, and all subsequently maturing coupons dishonored paper, and subjected them in the hands of Clark, and the plaintiff succeeding to his rights, to all defenses good against the original holder. The judges of the Circuit Court were divided in opinion upon this question, and as in such cases the opinion of the presiding judge prevails, the decision of the court was against the plaintiff, and he was held to have taken the bonds and subsequent coupons as dishonored paper, subject to all the infirmities which could be urged against them in the hands of the original holder. In this decision we think the court erred. The special verdict does not show that the coupons overdue had been presented to the Metropolitan Bank for payment, and their payment refused. Assuming that such was the fact the case is not changed. The non-payment of an installment of interest when due could not affect the negotiability of the bonds, or of the subsequent coupons. Until their maturity, a purchaser for value, without notice of their invalidity as between antecedent parties, would take them discharged from all infirmities. The nonpayment of the installment of interest represented by the coupons due at the commencement of the month, in which the purchase was made by Clark, was a slight circumstance, and taken in connection with the fact that previous coupons had been paid, was entirely insufficient to excite suspicion even of any illegality or irregularity in the issue of the bonds. Obligations of municipalities in the form of those in suit here are placed by numerous decisions of this court on the footing of negotiable paper. They are transferable by delivery, and when issued by competent authority pass into the hands of a bona fide purchaser for value before maturity, freed from any infirmity in their origin. Whatever fraud the officers authorized to issue them may have committed in disposing of them, or however entire may have been the failure of the consideration promised by parties receiving them, these circumstances will not affect the title of subsequent bona fide purchasers for value before maturity, or affect the liability of the municipalities. As with other negotiable paper mere suspicion that there may be a defect of title in its holder, or knowledge of circumstances which would excite suspicion as to his title in the mind of a prudent man, is not sufficient to impair the title of the purchaser. That result will only follow where there has been bad faith on his part. Such is the decision of this court, and substantially its language in the case of Murray v. Lander, reported in the 2d of Wallace, where the leading authorities on the subject are considered.

The interest stipulated was a mere incident of the debt. The holder of the bond had his option to insist upon its payment when due or to allow it to run until the maturity of the bond, that is, until the principal was payable. Many causes may have existed for a failure to meet the interest as it matured, entirely independent of the question of the validity of the bonds in their inception. The payment of previous installments of interest would seem to suggest that only causes of a temporary nature had prevented their continued payment. If no installment had been paid,

and several were past due, there might have been greater reason for hesitation on the part of the purchaser to take the paper, and suspicions might have been excited that something was wrong in issuing it. All that we now decide is, that the simple fact that an installment of interest is overdue and unpaid, disconnected from other facts, is not sufficient to affect the position of one taking the bonds and subsequent coupons before their maturity for value as a bona fide purchaser. The National Bank of North America v. Kirby, 108 Mass. 497. To hold otherwise would throw discredit upon a large class of securities, issued by municipal and private corporations, having years to run, with interest payable annually or semi-annually. Temporary financial pressure, the falling off of expected revenues or income, and many other causes having no connection with the original validity of such instruments, have heretofore, in many instances, prevented a punctual payment of every installment of interest on them as it matured, and similar causes may be expected to prevent a punctual payment of interest in many instances hereafter. To hold that a failure to meet the interest as it matures renders them, though they may have years to run, and all subsequent coupons dishonored paper, subject to all defenses good against the original holders, would greatly impair the currency and credit of such securities and correspondingly diminish their value. We are of opinion, therefore, that Clark took the two bonds in suit and the subsequently maturing coupons as a bona fide purchaser, and as such was entitled to recover upon them, whatever may have been their original infirmity. The plaintiff, Cromwell, succeeded by his purchase from Clark to all Clark's rights, and can enforce them to the same extent. Nor does it matter whether, in the previous action against the county by Smith, who represented him, he was informed of the invalidity of the bonds as against the county, and knew, when he purchased, the circumstances attending their issue, or whether he was made acquainted with them in any other way. The rule has been too long settled to be questioned now, that whenever negotiable paper has passed into the hands of a party unaffected by previous infirmities, its character as an available security is established, and its holder can transfer it to others with the like immunity. His own title and right would be impaired if any restrictions were placed upon his power of disposition. This doctrine, as well as the one which protects the purchaser without notice, says Story, "is indispensable to the security and circulation of negotiable instruments, and it is founded on the most comprehensive and liberal principles of public policy." Story on Promissory Notes, § 191. The only exceptions to this doctrine are those where the paper is absolutely void, as when issued by parties having no authority to contract, or its circulation is forbidden by law from the illegality of its consideration, as when made upon a gambling or usurious transaction.

The plaintiff, therefore, holds the bonds and the subsequent coupons as his vendor held them, freed from all infirmities attending their original issue. Nor is he limited in his recovery upon them, or upon the other two bonds, as contended by counsel for the county, to the amount he paid his vendor. Clark had given full value for those he purchased and could have recovered their amount from the county, and his right passed to his vendee. But independently of the fact of such

full payment we are of opinion that a purchaser of a negotiable security before maturity, in cases where he is not personally chargeable with fraud, is entitled to recover its full amount against its maker, though he may have paid less than its par value, whatever may have been its original infirmity. We are aware of numerous decisions in conflict with this view of the law, but we think the sounder rule, and the one in consonance with the common understanding and usage of commerce, is that the purchaser, at whatever price, takes the benefit of the entire obligation of the maker. Public securities, and those of private corporations, are constantly fluctuating in price in the market, one day being above par and the next below it, and often passing within short periods from onehalf of their nominal to their full value. Indeed all sales of such securities are made with reference to prices current in the market and not with reference to their par value. It would introduce, therefore, inconceivable confusion if bona fide purchasers in the market were restricted in their claims upon such securities to the sums they had paid for them. This rule in no respect impinges upon the doctrine that one who makes only a loan upon such paper or takes it as collateral security for a precedent debt may be limited in his recovery to the amount advanced or secured. Stoddard v. Kimball, 6 Cush. 471; Allaire v. Hartshorne, 1 Zabr. 665; Williams v. Smith, 2 Hill, 301; Chicopee Bank v. Chapin, 8 Metc. 40; Lay v. Wiseman, 36 Iowa, 305.

The only questions remaining, which we deem of sufficient importance to require consideration, relate to the interest which the bonds and coupons in suit shall draw after their maturity, and the interest which the judgment shall bear. The statute of Iowa on this subject provides that the rate of interest shall be six per cent a year on money due by express contract, unless a different rate be stipulated, and on judgments and decrees for the payment of money in such cases; but that parties may agree in writing for any rate of interest not exceeding ten per cent a year, and that any judgment or decree thereon shall draw the rate of interest expressed in the contract.

The bonds by their terms, as already stated, bear interest at the rate of ten per cent until maturity. The plaintiff claims that they should draw the same rate of interest after maturity, and that under the statute of Iowa the judgment should also bear ten per cent interest. The court below allowed only seven per cent on the bonds after maturity, that being the rate in New York where the bonds were payable, and only six per cent on the judgment. In this ruling we think the court erred. By the settled law of Iowa, as established by repeated decisions of her highest court, contracts drawing a specified rate of interest before maturity draw the same rate of interest afterward. Hand v. Armstrong, 18 Iowa, 324; and Lucas v. Pickel, 20 id. 490. A like decision has been made under similar statutes in several of the States (Brannan v. Hursell, 112 Mass. 63; Marietta Iron Works v. Lottimer, 25 Ohio St. 621; Monnet v. Sturges, id. 384; Kilgore v. Powers, 5 Blackf. 22; Phinney v. Baldwin, 16 Ill. 108; Etnyre v. McDaniel, 28 id. 201; Spencer v. Maxfield, 16 Wis. 185; Pruyn v. Milwaukee, 18 id. 367; Kohler v. Smith, 2 Cal. 597; McLane v. Abrams, 2 Nev. 199; Hopkins v. Crittenden, 10 Tex. 189); and such appears to be the English rule. Keene v. Keene, 3 C. B. (N. S.) 144; Morgan v. Jones, (Exch.) 20 Eng. Law and Eq. 454; Pearce v. Hennessey, 10 R. I. 223; Lash v. Lam

bert, 15 Minn. 416; Searle v. Adams, 3 Kan. 515; Kitchen v. Branch Bank, 14 Ala. 233. There are conflicting decisions in some of the States, though the preponderance of opinion is in favor of the doctrine that the stipulated rate of interest attends the contract until it is merged in the judgment. The statutory rate of six per cent in Iowa only applies in the absence of a different stipulated rate. As the judgment in case of a stipulated interest in the contract must bear the same rate, it could not have been intended that a different rate should be allowed between the maturity of the contract and the entry of the judgment.

The case of Brewster v. Wakefield, 22 How. 118, in this court, is cited against this view. That case came from a territorial court, and arose under a statute which allowed parties to agree upon any rate of interest, however exorbitant, and only prescribed seven per cent in the absence of such agreement. This court, bound by no adjudication of the territorial court, and looking with disfavor upon the devouring character of the interest stipulated in that case, gave a strict construction to the contract of the parties. "The law of Minnesota," (then a territory), said the court, "has fixed seven per cent per annum as a reasonable and fair compensation for the use of money; and when a party desires to extort, from the necessities of a borrower, more than three times as much as the legislature decrees reasonable and just, he must take care that the contract is so written in plain and unambiguous terms, for with such a claim he must stand on his bond." The statute of Iowa only allows the parties by their agreement to stipulate for interest up to ten per cent a year, a rate which has not been deemed extravagant or unreasonable in any of the States lying west of the Mississippi. Be that as it may, the question is one of local law under a statute of a State, and the construction given by its tribunals should conclude

us.

The position of counsel, that because the rate of interest in New York, where the bonds were payable, is only seven per cent, the bonds can only draw that rate after maturity, is not tenable. When the rate of interest at the place of contract differs from the rate at the place of payment, the parties may contract for either rate, and the contract will govern. Miller v. Tiffany, 1 Wall. 298; Depeau ▾. Humphreys, 20 Mart. (La.)1; Chapman v. Robertson, 6 Paige, 627, 634; Peck v. Mayo, 14 Vt. 33; Butters v. Old, 11 Ia. 1. The bonds were made with reference to the law of Iowa, as to interest, and not to that of New York, where interest above seven per cent is deemed usurious and avoids the whole contract. The obligor is a municipal corporation of Iowa, the bonds were deliverable in that State, and proceedings to enforce their payment could only be had in courts sitting there.

With reference to interest on the coupons after their maturity, that can be allowed only at the rate of six per cent under the law of Iowa. See as to coupons drawing interest, Aurora City v. West, 7 Wall. 105.

It follows, from the views expressed, that the plaintiff was entitled to judgment for the amount of the four bonds and the coupons in suit, with interest on the bonds after maturity until judgment at the rate of ten per cent a year, and with interest on the coupons after their maturity until judgment at the rate of six per cent a year; and that the judgment should draw interest at the rate of ten per cent a year upon the amount found due on the bonds, and at the rate of six per cent

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HASKELL V. JONES.

A statute of Pennsylvania, which required that every note given for the right to make or sell a patented invention should contain the words "given for a patent right,' and made such note subject in the hands of any holder to the same defenses as if in the hands of the original holder, and provided a penalty for a violation of its requirements, beld not in conflict with the provisions of the U. S. Constitution (art. 1, 88) as to patent rights. But a note given for a patent right and not marked in accordance with the statute would be freed from the equities between the original parties in the hands of a bona fide holder for value and without notice.

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in on a note drawn

by defendant Jones to the order of one Baldwin, and by him indorsed to plaintiffs Haskell and others, who took it for value before maturity in good faith and without a knowledge of the consideration for which it was given. The defense was that the note was given for a patent right, and was in violation of the provisions of an act of Assembly of Pennsylvania, approved April 12, 1872, which reads as follows:

Whenever any promissory note or other negotiable instrument shall be given, the consideration for which shall consist in whole or in part of the right to make, use, or vend any patent invention, or inventions claimed to be patented, the words 'given for a patent right' shall be prominently and legibly written or printed on the face of such note or instrument, above the signature thereto, and such note or instrument in the hands of any purchaser or holder shall be subject to the same defenses as if in the hands of the original owner or holder.

"If any person shall take, sell or transfer any promissory note or other negotiable instrument, not having the words 'given for a patent right' written or printed legibly and prominently on the face of such note or instrument above the signature thereto, knowing the consideration of such note or instrument to consist, in whole or in part, of the right to make, use, or vend any patent invention, or inventions claimed to be patented, every such person or persons shall be deemed guilty of a misdemeanor, and, upon conviction thereof, shall be fined in any sum not exceeding five hundred dollars, or imprisoned in the county jail not exceeding sixty days, or both, in the discretion of the court."

The court below gave judgment for the defendant, and the plaintiffs took a writ of error.

Lewis Waln Smith, for plaintiffs in error, cited as to the constitutionality of the statute, Brown v. Maryland, 12 Wheat. 419; Willson v. Blackbird Creek Co., 2 Pet. 245; Gibbons v. Ogden, 9 Wheat. 1; New York v. Milne, 11 Pet. 102; Passenger cases, 7 How. 283; Cooley v. Board of Wardens, 12 How. 311; Gilman v. Philadelphia, 3 Wall. 713; State Taxes cases, 15 id.

232, 284, 300; Woolen v. Banker, 17 Alb. L. J. 72, 236; Ex parte Robinson (Ill.), 2 Bissell, 311; Helm v. First National Bank, 43 Ind. 167; Hollida v. Hunt, 70 III. 109; Cranston v. Smith (Mich.), 16 Alb. L. J. 330; Crittenden v. White (Minn.), 9 Chic. L. N. 112; Patterson v. Commonwealth, 11 Bush (Ky.), 311.

Edwin S. Dixon, for defendant in error.

SHARSWOOD, J. If the act entitled "An act to regulate the execution and transfer of notes given for patent rights," passed April 12, 1872 (Pamph. L. 60), makes absolutely void all such notes in which the words "given for a patent right are not prominently and legibly written or printed on the face of such note above the signature thereto, there would be great reason for the contention that the act is unconstitutional and void. No State can so interfere with the right of a patentee, secured to him by the act of Congress, to sell and assign his patent.

But such is not the operation of the act according to its letter and spirit. By the express provision of the statute the only effect of the insertion of such words is that such note or instrument in the hands of the purchaser or holder shall be subject to the same defenses as if in the hands of the original owner or holder." By necessary implication notes without such words inserted in them remain on the same footing as before the act. The sole object of the legislature was to secure, so far as could be done consistently with the rights of innocent third persons, that notice of the consideration should be given to all who should take the paper. Nothing is better settled than that between the original parties to a note given for a patent right, it is a good defense to show that the alleged patent is void-in other words, that it is no patent right at all, and that the consideration has therefore entirely failed. Bellas v. Hayes, 5 S. & R. 427; Geiger v. Cook, 3 W. & S. 266; Holliday v. Rheem, 6 Harris, 465. All who take with notice of the consideration, take necessarily subject to the same defense. There is nothing in all this which interferes with any just right of the holder of a valid patent under the acts of Congress, nor that the maker of the note shall be permitted to show against a holder with such notice that it was obtained by fraudulent misrepresentation. This very plainly distinguishes our act from the statutes of other States, which have been held unconstitutional.

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To secure the insertion of these words the second section of the act makes it a misdemeanor punishable by fine or imprisonment, or both, for any person "knowing the consideration of a note" to be the sale of a patent right, to take, sell, or transfer it without the words "given for a patent right" inserted, as provided by the act. It is too plain for argument, that this section in no way affects the right or title of the holder of such a note, who takes it not knowing that the consideration was the sale of a patent. He commits no illegal or indictable offense. The negotiability of a note in which the required words are not inserted, is in no way affected by the act. The innocent holder, who takes it before maturity for value without knowledge or notice of the consideration, takes it, as heretofore, clear of all equities between the original parties.

We think, therefore, that the court below were clearly wrong in entering judgment non obstante veredicto on the reserved point in favor of the defendant. Judgment reversed, and now judgment for the plaintiff upon the verdict.

sion and an affidavit of insolvency and danger, an
extent issues as of course. Id. 1,047. It may be re-
sorted to during the progress of a suit, brought in the
ordinary form, and when all liability is denied. Rex
v. Pearson, 3 Price, 288; Giles v. Grover, 9 Bing. 171.
By virtue of it the sheriff may break into the debtor's
house, if admission be refused, either to arrest him or
to seize his goods; a debtor taken under it cannot be
bailed, nor will his discharge under bankrupt or insol-
vent laws release him. 2 Tidd's Pr. 1,049. In 1832 it
was held by the House of Lords, in conformity to the

the 3rd of April, 1877, this court took possession opinion of a majority of the law judges, that the

ON the 3rd of April, 1877, en Bruusjok, apan insol

crown's right continues as long as its debtor retains
title, whether he retains possession of the property or
the law has taken custody of it; it will overreach a
prior execution and levy, but cannot reach property
either partially or wholly aliened by the debtor. Giles
v. Grover, 1 Cl. & Fin. 72; S. C., 9 Bing. 128. It was
also held in this case, that the crown's right must pre-
vail against a judgment-creditor whose judgment exe-
cution and levy were antecedent to an extent in favor
of the crown, because the seizure under the prior writ
did not change the title, but merely put the property in
custodia legis for the benefit of those to whom the law
would ultimately adjudge it, but it was unanimously
resolved that if the debtor's title was divested before the
teste of the extent, the crown's right against the prop-
erty was gone. Tindal, C. J., in his opinion, referred
to a case decided in the Court of Exchequer in 1686-
Attorney-General v. Capel, 2 Shaw, 481, in which it
was held that if an extent comes after the issuing of a
commission in bankruptcy but before an assignment
by the commissioners, it will take the property, but if
it does not come until after assignment, the debtor's
title being divested, it cannot reach the property. If
by the adoption of the common law New Jersey be-
came invested with this right, it holds it now in all its
original force, and may wield it to-day in all its iron
rigor. It has not been changed or mitigated by legis-
lation, indeed it is unknown in the legislation of the
State, and if it exists at all it is held as perfect and
complete as it existed in the hands of George III.
Statutes regulating private rights or ameliorating pri-
vate remedies, do not extend to the king. 1 Black.
Com. 261; nor to the State. O'Hanlon v. Vankleck,
Spen. 40; S. C. in error, 1 Zabr. 589. When a statute is
general, and thereby any prerogative right, title or
interest is divested, or taken from the king, in such
case the king shall not be bound, unless the statute is
made to extend to him by express words. Bac. Abr.,
tit. Prerogative (E. 5.) If the right exists here, it is
untouched by either constitutional or statutory regu-
lations. But my research has failed to discover a
single instance in which it has been recognized by the
courts of this State, and only one where it was assert-
ed as a State right. In Ely v. Jones, Coxe, 132, decided
in 1792, it was claimed by counsel that the official bond
given by a sheriff to the king was in the nature of
recognizance, and bound the obligor's land from the
time a breach of the condition occurred, and that a
subsequent conveyance, either by the obligor or his
heir, passed the land subject to the lien, but the court
did not deem it necessary to pass upon the question,
being able to decide the case upon another ground. It
certainly has never received judicial approval, and so
far as my knowledge extends, no law officer of the
State has ever attempted to enforce it. For over one
hundred years as an actual, practical prerogative of
government it has neither been exerted nor recog-

THE STATE AS A PREFERRED CREDITOR.

NEW JERSEY COURT OF CHANCERY.

BOARD OF CHOSEN FREEHOLDERS OF MIDDLESEX V.
STATE BANK AT NEW BRUNSWICK.

1. New Jersey does not possess the crown's common law prerogative to have its debts paid in preference to the debts of other creditors.

2. On the appointment of a receiver of an insolvent corporation its title to its property is directed by force of law.

vent corporation, and appointed a receiver to convert its assets into money, and distribute the same among its creditors according to law. In January, 1877, the State treasurer, pursuant to the requirements of the eleventh section of the act respecting the office of treasurer (Rev. 1215) deposited nearly $34,000 of the moneys of the State in this bank, which stood to his credit, as treasurer, when the bank suspended business. On the 7th of July, 1877, the treasurer filed a petition in this court, alleging that the State was a preferred creditor of the bank, and praying that the receiver be directed to pay the State's debt first in preference to the other creditors.

Mr. Attorney-General Stockton, for the State.
Mr. A. V. Schenck, for Receiver.

THE VICE-CHANCELLOR: The claim of the State rests upon a prerogative right of the crown of Great Britain, the contention being that the State succeeded to all royal rights in virtue of its sovereignty, when the crown was displaced here as the sovereign power. The right of the crown in this particular is clear. Anciently, the king might, by his writ of protection, prevent any subject from suing his debtor until his debt was paid. By statute 25 Edward III, chap. 19, its despotic rigor was so far mitigated as to allow the subject to obtain a judgment against the king's debtor, and upon paying the king's debt to have execution for both debts. But the prerogative has at all times been most loyally upheld by the English courts. It stands on a common law maxim: Quando pis domini Regis et subditi concurrent, pis Regis praeferri debet. Debts due the crown by record or upon speciality are entitled to preference over debts of the same class due to subjects, but simple contract debts due to the crown are not entitled over debts of record due to subjects. Com. Dig., tit. aden C, 2; Bac. Abr., tit. Exr. L. 2; 2 Williams on Exrs. 991; but where both are simple contract debts, that due to the crown must be preferred. Bac. Abr., tit. Exrs. L. 2; 2 Williams on Exrs. 993. The king is supposed to be so constantly engrossed with public business as to be unable to give proper attention to matters relating to his revenue, and therefore no time occurs to him and he is incapable of laches. Gilbert's Hist. Exchg. 90. The common method of enforcing this right is by writ of extant, by which the debtor's body may be taken and also his goods and lands. 2 Tidd's Pr. 1,044. Upon a debt of record or upon a speciality, it may issue without any previous suit or proceeding, except an affidavit that the debtor is insolvent and the debt is in danger of being lost. Id. 1,046. If the debt is upon simple contract it may be raised to a debt of record by simply issuing a commission to ascertain the amount due, which is uniformly executed without notice to the debtor, and on the return of the commis

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