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The Confederate Note Case, 86 U.S. 19 Wall. 548 548 (1873)

The Confederate Note Case

86 U.S. (19 Wall.) 548


1. Notes issued by the Confederate government having become the currency in which contracts were made and business conducted in the insurrectionary states during the recent civil war, and such notes having been designated by general custom as notes for so many "dollars," parol evidence is admissible, where suit is brought to enforce a contract payable in "dollars" and made during the war, to prove the above condition of things being first shown-that the term "dollars," as used in the contract, meant in fact Confederate notes. In the absence of such evidence, the presumption of law would be that by the term "dollars" the lawful currency of the United States was intended. Thorington v. Smith, 8 Wall. 1, explained.

2. The ordinance of North Carolina of 1865 declared that all existing contracts solvable in money, whether under seal or not, made after the depreciation of Confederate currency, before the 1st day of May, 1865, and then unfulfilled (except official bonds, and penal bonds payable to the state), should "be deemed to have been made with the understanding that they were solvable in money of the value of the said currency;" but at the same time provided that it should be

"competent for either of the parties to show, by parol or other relevant testimony, what the understanding was in regard to the kind of currency in which the same were solvable,"

and that in such case "the true understanding" should regulate the value of the contract. Held, that the understanding of the parties might be shown from the nature of the transaction and the attendant circumstances as satisfactorily as from the language used, and particularly that it might be shown from the length of time during which the contracts had to run before maturing, and that accordingly when bonds of a railroad company were issued in May, 1861, payable at dates varying from seven to thirteen years afterwards, the inference was justified that the company intended at the time of issuing them that the bonds should be paid in lawful money instead of Confederate notes.

3. The interest payable on a bond issued as above-mentioned follows the character of the principal, and is payable in like currency.

4. Usury, as a defense, must be specially pleaded or set up in the answer to entitle it to consideration.

Page 86 U. S. 549

In May, 1862, the Atlantic, Tennessee & Ohio Railroad Company, a corporation chartered by the state of North Carolina, issued its coupon bonds, in sums of $500, to the amount of $151,000, payable at different periods from November, 1869, to November, 1875, with interest at the rate of six percent a year, payable semiannually. The bonds were endorsed and their payment guaranteed by the Charlotte & South Carolina Railroad Company, a corporation also chartered by the state of North Carolina, and they stated on their face that they might be converted into the stock of the company issuing them, at par, by the holder. The bonds were payable to the company last above mentioned or bearer, and were secured by a deed of trust of the railroad, buildings, and franchise of the company executed to Joseph Wilson and Anderson Mitchell. The deed stipulated that in case the company failed to pay the principal and interest on the bonds as they became due, the trustees should, upon request of the holders of the bonds or of their guarantor, proceed to sell the property, or so much thereof as might be necessary, and apply the proceeds of the sale to the payment of the bonds.

The Carolina National Bank, L. D. Childs, and C. H. Manson, having become the holders and owners of $25,000 of these bonds, and the railroad company having failed to pay either principal or interest, they requested the trustees to proceed and sell the property covered by the trust deed and to distribute the proceeds pursuant to its provisions. With this request the trustees declined to comply, alleging as a reason that the parties differed as to the amount to be paid. The above-named holders of the bonds accordingly filed a bill in the court below against the two railroad companies and the trustees, Wilson and Mitchell, to enforce the execution of the trusts of the deed.

In their answer, the railroad companies averred that they had at all times been and now were both able and ready to adjust their debt to the complainants upon a just basis of

Page 86 U. S. 550

the value of their bonds and of the coupons due in lawful money of the United States, as soon as their value could be ascertained; but that the complainants demanded payment in full of said bonds and all accrued interest in the said lawful money, with which demand the defendants had refused to comply.

The trustees in their answer admitted that they had received notice from the complainants of the default of the Atlantic, Tennessee & Ohio Railroad Company in paying its alleged debt to the complainants and that for the payment thereof they, the trustees, had been requested to take steps for the sale of the property conveyed to them by the deed of trust; but that they had been prevented from so doing on account of the conflict between the complainants and the officers of the said company as to the measure of value of the bonds; the complainants claiming payment in full in lawful money of the United States, and the former asserting that the bonds were solvable in Confederate currency, and, as such, were legally liable to be scaled to their true value in money of the United States.

By a convention assembled in North Carolina in October, 1865, an ordinance was on the 18th of that month adopted, bearing the title of "An ordinance declaring what laws and ordinances are in force, and for other purposes." The third section was as follows:

"It shall be the duty of the general assembly to provide a scale of depreciation of the Confederate currency from the time of its first issue to the end of the war, and all executory contracts solvable in money, whether under seal or not, made after the depreciation of said currency before the 1st day of May, 1865, and yet unfulfilled (except official bonds and penal bonds payable to the state) shall be deemed to have been made with the understanding, that they were solvable in money of the value of the said currency; it shall be competent for either of the parties to show by parol or other relevant testimony what the understanding was in regard to the kind of currency in which the same are solvable, and in such case the true understanding shall regulate the value of the contract, provided that in case

Page 86 U. S. 551

the plaintiff in any suit upon such contract will make an affidavit that it was solvable in other currency than that above referred to, then such presumption shall cease and it shall be presumed to be payable in such currency as shall be mentioned in the affidavit, subject to explanation by evidence as aforesaid."

The legislature, on the 12th of March in the ensuing year, passed two acts connected with the subject. The first was as follows:

"An Act relating to debts contracted during the late War"

"WHEREAS a great many debts, which were contracted during the war are yet unsettled, said debts having been incurred for property bought at irregular and extravagant prices or for currency of a depreciated value; and whereas the late state convention made it obligatory on this general assembly to provide a scale of depreciated currency for the settlement of these debts; and whereas this general assembly finds great difficulty in fixing a scale which will secure justice to citizens of all sections of the state. And whereas, in the opinion of this general assembly, no scale which will do justice to all sections of the state can be adopted, therefore."

"SECTION 1. Be it enacted that in all civil actions which may arise in courts of justice for debts contracted during the late war in which the nature of the obligation is not set forth nor the value of the property for which said debts were created is stated, it shall be admissible for either party to show on trial by affidavit or otherwise what was the consideration of the contract, and the jury in making up their verdict shall take the same into consideration and determine the value of said contract in present currency, in the particular locality in which it is to be performed, and render their verdict accordingly."

The second act, after reciting the terms of the ordinance, was entitled and enacted thus:

"An Act to establish a scale of depreciation of Confederate currency"

"Be it enacted &c. that the following scale of depreciation be and the same is hereby adopted and established as the measure of value of one gold dollar in Confederate currency for each month, and the fractional parts of the month of December,

Page 86 U. S. 552

1864, from the 1st day of November, 1861, to the 1st day of May, 1865, to-wit:"


In repeated instances after the issue of the bonds and up to July, 1863, the officers of the Atlantic, Tennessee & Ohio Railroad Company, in dealing in its bonds, spoke of them as having a superior value and as not being subject to the fluctuations of Confederate currency. The following was one instance of several.

The president, William Johnson, in March, 1863, upon a settlement as guardian of his ward, upon his coming of age, paid over to him thirteen of these bonds, and assured him at the time that they were worth more than their face in good money, and that he would put nothing of a Confederate value upon him; that they were so good that he would not let him have them unless he would also take $5000 of the stock of the company. The ward took the bonds and stock at their par value. This was less than one year from their date.

The treasurer, who countersigned these bonds, seemed never to have "understood" that they were to be charged as Confederate paper, and a subsequent treasurer stated that this view of the subject was never taken by the officers or

Page 86 U. S. 553

board of directors until May, 1870, when the president decided that the bonded debt was subject to the Confederate scale. Prior to that time, under the supervision of the president, he had submitted his printed exhibits of the condition of the company, stating their bonds as liabilities at their "face value." These exhibits were approved by the stockholders in convention assembled.

The circuit court, after declaring

"that the bonds and coupons issued by the Atlantic, Tennessee & Ohio Railroad Company, in the pleadings mentioned, were not issued as payable in the paper currency of the late Confederate states, and are not subject to any deduction on that account, but that the same are payable in good and lawful money of the United States, and should have been discharged in such money when payment was demanded of said railroad company,"

decreed a reference to the clerk to ascertain the amount due the complainants and others holding similar bonds of the company, and that upon default in payment of the amount found due for thirty days after report made and notification thereof, the property described in the trust deed be sold by the trustees, and that the proceeds upon confirmation of the sale be applied by them, after discharging the expenses of executing their trust, to the payment of the amount reported due. From this decree the defendants appealed to this Court.

Page 86 U. S. 555

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