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claimed established a trust, were used that the act might show on its face that the bounty of Congress was bestowed for a constitutional purpose.
It is apparent to the most superficial reader of the statutes, that the great object of Congress was to bestow advantages, and from time to time to increase gratuities, to a corporation which should undertake the completion of a railroad to the Pacific. Conditions, restraints, or trusts, were but little thought of. Thus by the act of 1862, § 3, there was granted to the Union Pacific Company five alternate sections per mile on each side of said railroad, and within the limits of ten miles on each side thereof, .equalling 6400 acres per mile. In 1864, by an act of Congress, this land grant was doubled in amount, and the enormous gift of 12,800 acres per mile was made to the road.
And again, by its charter of 1862, the government undertook to issue its own bonds to the corporation, payable in thirty years with interest, to the extent of $16,000 per mile, whenever forty miles of said road should be completed, which bonds were declared to be a first mortgage upon the road and its property. By the act of 1864, it was provided, first, that the corporation might issue its own bonds to the extent thus specified, and that the lien of the United States bonds should be subordinate to that of the company's bonds; and, secondly, that the corporate bonds might be issued as provided, whenever and as often as twenty miles of road should be completed, instead of forty, as first required. By section 11 of the first act, it was enacted that in certain localities the subsidy bonds of the government, thus to be issued, should be $32,000 per mile, and in still other localities that they should be $48,000 per mile. By the original act, fifteen per centum of the bonds to be delivered upon the completion of the section of the road between certain points, and twenty-five per centum between certain other points, were required to be reserved until the whole of the road should be completed, and, if there was a failure to complete, should be forfeited to the United States. By the act of 1864 this reservation was abolished, and the whole amount was authorized to be delivered to the corporation.
The United States have granted lands in many instances to corporations. The 14th volume of the Statutes at Large will be found to contain five such cases (pp. 210, 236, 289, 292, 339). These same general terms with reference to the purpose of the grants, and the use to be made of the road by the government, are contained in many of these acts.
In 1850, Congress granted land in aid of the construction of a railroad from Chi. cago to Mobile, in which it was enacted that the “railroad shall be and remain a public highway for the use of the government of the United States, free from toll or other charge upon the transportation of any property or troops of the United States," and that “the United States mails shall at all times be transported on the said railroad under the direction of the Post-office Department, at such price as the Congress may by law direct." (9 Stat. at Large, 467.) Nine similar cases, where the same language is used, are found in the two following volumes. (10 Stat. 9, 34, 156, 302; 11 ib. 9; ib. 15; ib. 16, 18, 19, 20, 22, 30.) I cannot think that the government intended to reserve to itself a visitorial power over these corporations, the right to examine into their affairs, and, when not satisfactorily administered, to summon them before the courts for their regulation, or that it has done so. This railroad is not a charitable corporation, nor were the grants for a charitable use. The grants of land and the issuing of bonds are to be considered as gifts, gratuities, voluntary contributions to aid in the construction of works which it was supposed would develop the resources of the country, advance its civilization and improvement, and upon which the mails and munitions of war could be transported. When given and accepted, the power of the donor is at an end, and the absolute ownership VOL. VIII.
is in the corporations. The position of the government is that of a donor, and not that of a creditor or a cestui que trust, except where such position is directly specified. Voluntary conveyance creates no presumption of a trust. (1 Hill on Trustees, 170, 171, 4th Am. ed.) The rights of the government are those which are expressly reserved, and do not arise from an implied trust.
No authority is cited to sustain the argument that such gifts or gratuities to a business corporation are in the nature of a trust, and I have found none. The disposition of the law is against implied or constructive trusts. In Cook v. Fountain (3 Swanston, 585), the law is thus laid down by Lord Nottingham: “There is one good, general, infallible rule that goes to both these kinds of trusts. It is such a general rule as never deceives, a general rule to which there is no exception, and it is this, – the law never implies, the court never presumes, a trust but in case of absolute necessity. The reason of this rule is sacred; for if the Court of Chancery do once take the liberty to construe a trust by implication of law, or to presume a trust unnecesarily, a way is opened to the Lord Chancellor to construe or presume any man in England out of his estate, and so at last every case in court will become causa pro amico.” (See, also, Sturges v. Knight, 31 Vt. 1.)
The cases in which trust by implication have been enforced are usually those in favor of third parties, the presumed objects of the donor's bounty, and not in favor of the donor himself. The presumption is much slighter in the latter case than in the former.
The complaint charges a series of fraudulent acts on the part of the directors and managers of the corporation, enormous in extent and gross in character. I should have preferred to have found a mode of redressing these wrongs in the present suit, rather than to have reached the conclusion that this complaint and this plaintiff cannot now and here obtain it. Thus, it is said, in the thirty-fifth paragraph, that the defendants, conspirators and managers of the Union Pacific Railroad Company, caused large amounts of money belonging to the corporation to be expended for unlawful purposes upon the objects not within the scope of the corporate powers of the company, to aid in procuring legislation from Congress for their benefit, and in improperly influencing public officers in the discharge of their duties, and in litigation to which said corporation was not a party, or in which it had no interest, and for the private interests of the defendants hereinbefore mentioned.
Other offences, equally or more heinous, are specified, which must meet the condemnation of every honest man.
I am of the opinion, however, that their redress must be sought through the corporation, unless they refuse to bring a suit, in which case the action must be by a shareholder of the corporation.
The suggestions already made embrace all the causes of action provided for in the act of 1873, except the last, viz., the action against persons who have wrongfully and unlawfully received from the United States bonds, moneys, or lands which ought to be accounted for and paid to the United States. When property has been wrongfully received from the United States which ought to be accounted for and paid to them, a cause of action exists in its favor for the recovery of such property. The allegation of the complaint, however, and the conceded facts do not cover this cause of action. The complaint contains no allegation that any person wrongfully holding them has received such bonds or money or property from the United States. In every instance referred to in the complaint, the property is stated to have been delivered by the United States to the corporation, and not to “ the persons" against whom the action is authorized.
This cause of action is not set up in the complaint, and needs no further consideration.
Judgment must be ordered for the defendants upon the demurrer.
THE HONORABLE Lyman TRUMBULL, and the Honorable James R. Doolittle, are senior lecturers on equity jurisprudence and practice, and international and constitutional law, in the Union Law College of the Chicago and North-western Universities at Chicago.
THE CELEBRATED CASE OF THE BOORns, cited by Professor Greenleaf in a note to section 214 of his first volume on Evidence, to show the necessity of great caution in receiving confessions of guilt, stands by no means alone. In The Annals of Iowa, Mr. E. W. Eastman relates a similar instance of a false confession of murder which he met with in his practice some twenty-five years ago. One Nisely, a somewhat underwitted man, had a quarrel with a son of a neighbor named John Hamlin. The next day the quarrel was renewed, and the following day Nisely was missing, while young Hamlin was seen wearing Nisely's hat and coat. Inquiries were made of the Hamlins as to Nisely's whereabouts, but no satisfactory answers were given. The reputation of the family was previously not good; and as day after day went by, and yet no tidings of the missing man, it did not improve. At last the feeling against young Hamlin ran so high that he was arrested and thrown into jail. Then the narrator says:
The excitement increased and spread to the adjoining counties, and people gathered in about the premises of the Hamlins, demanding, in language which could not be misunderstood by frontier people,“ Where is Nisely?” It meant, produce him, or speedy justice is right here. They could not evade the question nor quit the county; and knowing well that frontier people could not be trifled with, they made a clean breast of the whole matter, and confessed that they had murdered Nisely on the fatal Sunday night of his exit. John was thirty-five miles away, in jail. But in the mean time he was interviewed by night through the jail windows, and he also confessed the murder of Nisely, and, it was said, without knowing that the others had confessed.
Word was sent to the narrator to come and defend the Hamlins, who had discovered that they were not to get off with confessing the murder, but now were called upon to point out the body. This, as the sequel shows, was a hard task. But we will let Mr. Eastman go on with his story.
On arriving in Newton, I found the senior Hamlin nominally in the custody of one Josiah Dooly, high sheriff of Jasper county, but really in the custody — or rather disposal of the people there assembled from the adjoining counties. The first words of Mr. Hamlin to me were, “I am glad to see you. I will give you my 'claim' and all that I have if you will only save my life. I am willing to go to prison and work faithfully all my life, but I don't want to be hanged." Seeing he was a little nervous, I replied, “You are not in a condition now, Mr. Hamlin, to make a contract. I want first to talk about the case.” Several persons crowded up to hear. “Oh,” he said, “I am guilty as hell; but I don't want to be hanged." I presently got him aside from the people, and said to him, “ Where is Nisely now?" He replied, “I don't know; the boys put the body out of the way." Then turning his head a little, and pulling down his collar, he said, “ See my neck. They have been hanging me to make me tell where the body is, but I don't know." His neck was somewhat lacerated, and badly swollen, and his head somewhat canted to the left shoulder.
I inquired for the two young Hamlins, and then learned that the body of Nisely was still missing, – that the Hamlins, after making the confession of the murder, had given very different and contradictory accounts of the disposition made of the body. One account located it in one of Hamlin's stock wells, then out of use, with some rubbish over it; another, in a swampy marsh in Skunk Bottom; another account was that it had been burned on a large sand-bar in Skunk River, and the charted remains raked into the water. Parties were then out with the young Hamlins in search of the body.
The body not having been found in any of the places named, the rope and the lash were both brought in to assist in the search. Nathaniel had been hanged by his thumbs till both were pulled out of place, and the lash applied to his back till the hot blood coursed down over his heels to the ground. The old man had been strung up by the neck till he became willing to give me all he had to save him from a second introduction to the horrors of again using tight hemp for a neck-tie.
Mr. Eastman, however, soon succeeded in putting a different face on matters. He frightened the sheriff into a sense of his duty, and the wretched Hamlins were soon safe in jail, whence they were soon released on habeas corpus, and discharged for want of evidence of Nisely's death. It afterwards turned out that Nisely was alive all the time, but had thought it best, through some fear, to run away. The Hamlins knew not where he had gone, but thought it would be a pity if his clothing should lie unused. Our sympathy with them in their distress may be tempered by Mr. Eastman's closing statement, that they cheated him out of his fees.
KENTUCKY. PERSONAL LIABILITY OF BANK: DIRECTORS. — The Court of Appeals, in the cases of United Society of Shakers, appellant v. Underwood et al., appellees, and J. R. Davenport, appellant v. Same, appellees, has overruled a demurrer to petitions of special depositors setting forth the wrongful appropriation of their deposits by officers of a bank. In the course of the opinion, the court says :
These actions, however, are not based upon the contract of bailment to the bank, nor upon the implied contract of the appellees that they would not by gross negligence or tacit acquiescence permit the deposits to be converted to the bank's use. The appellants had the right to elect whether they would avail themselves of the remedies prescribed by law for the breach of contract, either upon the part of the bank or of these appellees, and they have elected to waive their right of action upon these contracts, and sue for the joint tort of the bank and the appellees, committed by the wrongful and unauthorized conversion of their deposits.
Treating the bank as the bailee, and the directors as its mere agents, it is perfectly clear that, if they permitted the subordinate officers to sell the special deposits,
and then, acting for the bank, assented to the money arising therefrom being used for the purposes of the bank, they are parties to the tort.
These appellants allege that their bonds were sold by the officers of the bank, and the proceeds paid out in the satisfaction of claims against it, and in the payment of dividends to its stockholders, and that of all this appellees had notice.
Having such notice, it was their duty (and they had full power in the premises) either to prevent the sale of the deposits, or to hold the proceeds for the benefit of their owners. Their failure to discharge this duty must be regarded as wilful, and the conclusion cannot be escaped that, by permitting the sales to be made and the proceeds to be paid out as alleged, they made themselves parties to the unauthorized acts constituting the conversion.
This conclusion is strengthened by the averment that they declared dividends when the condition of the bank did not justify it, and thus distributed to themselves portions of the moneys arising from the conversion of appellants' deposits. If such be the case, and they acted with notice of the wrongful sales, they not only participated in but derived profit from the tortious conduct of the subordinate officers of the bank.
It is objected that the allegation of notice is so far qualified as to destroy the sufficiency of the averment. It is alleged that the appellees, “and each of them, had, or could have had, by the most ordinary diligence and investigation, ample notice."
It is certainly the duty of bank directors to use ordinary diligence to acquaint themselves with the business of the corporation, and whatever information might be required by ordinary attention to their duties, they must in controversies with persons doing business with the bank to be presumed to have. Public policy demands that they shall not be heard to say that, by reason of their gross negligence and wilful inattention, they were not apprised of that which the ledgers, books, accounts, correspondence, reconcilements, and statements of the bank showed to be true. It is not necessary in actions like these to bring home to the directors actual knowledge of the fact that the special deposits held by the bank were being sold and converted to its use by the officers having them in custody. It must suffice to show that the evidences of the practice were such that it must have been brought to their knowledge unless they were grossly or wilfully careless in the performance of their duties.
The Supreme Court of Pennsylvania has given a similar decision in Spering's Appeal, which will appear in 71 Penn.
THE SUPREME Court of BALTIMORE. — In October last the Hon. George William Brown was elected for the term of fifteen years to the office of Chief Justice of the Supreme Court of Baltimore, which is the highest court there of original jurisdiction. Mr. Brown has for a long time been the senior member of the firm of Brown & Brune, one of the oldest and most respected law firms in Baltimore, and the selection of him for Chief Justice is in every way an excellent one. In these days of elected judges, one passage of his letter accepting the nomination is especially worthy of note, viz., “ The office of a judge is in no sense a political one, and should never be so administered as to serve party ends.' I have too much respect for the convention and myself not to be sure that they do not expect any such service from me, and not to know that I am incapable of rendering it.” So long as the practice of electing judges prevails, it would be better if the judge and constituents kept this in mind.