CHAPTER V

AGENTS IN ENEMY TERRITORY

CONN et al. v. PENN et al.

(Circuit Court of the United States, D. Pennsylvania, 1818. Pet. C. C. 496, Fed. Cas. No. 3,104.)

The plaintiffs filed their bill in equity to obtain conveyances from John and William Penn, of certain tracts which they were supposed to hold as tenants in common, as descendants of William Penn, the original proprietary of Pennsylvania, and to which the plaintiffs asserted an equitable title, based upon contracts of purchase from the proprietaries before the Revolution.

The bill prayed conveyance of the legal title, on the payment of so much money as was still due, on certain principles upon which they alleged their equitable title to have been acquired.

It was referred to commissioners to ascertain the amount of these sums. The plaintiffs insisted that interest should not run upon these sums; the defendants insisted that interest should be included.

*

WASHINGTON, Circuit Justice.1 ** The second claim is of an abatement of interest during the Revolutionary and late war. This question has never been decided, it is believed, in the Supreme Court of the United States. We know not what have been the decisions in the different Circuit Courts, and in the state courts, not having access to any of the ordinary means of information, except such as the Pennsylvania and Virginia Reports furnish. In those states, the law seems to be settled, that where the creditor was absent during the war, and had no known agent within the United States, interest, during the war, should be deducted. It would appear, from the justly celebrated answer of Mr. Jefferson to Mr. Hammond, that interest during the war had been disallowed in some of the state courts, and allowed in others. This court, finding itself unshackled by authorities, is left to form its opinion of this question upon general principles, and we feel no hesitation in deciding, that the mere circumstance of war existing between two nations, is not a sufficient reason, for abating interest upon the debts due by the subjects of the one belligerent to those of the other. It is admitted, that wars in their mildest form are productive of great national calamity to both belligerents, and especially to that one which happens to be invaded. If this were per se, a reason for abating interest, it would operate with equal force, whether the creditor were a fellow citizen of the debtor, an enemy, or the subject of a foreign friendly government.

1 Part of the opinion is omitted.

A prohibition of all intercourse with an enemy, during the war, and the legal consequence resulting therefrom, as it respects debtors on either side, furnish a sound, if not in all instances, a just reason for the abatement of interest, until the return of peace. As a general rule, it may safely be laid down, that wherever the law prohibits the payment of the principal, interest during the existence of the prohibition is not demandable; and no reason is perceived, why the rule should not be the same in courts of equity, as in courts of law. But, the rule can never apply in cases where the creditor, although a subject of the enemy, remains in the country of the debtor, or has a known agent there, authorised to receive the debt; because the payment to such creditor or his agent, could in no respect be construed into a violation of the duties imposed by a state of war, upon the debtor. The payment in such cases is not made to an enemy, and it is no objection, that the agent may possibly remit the money to his principal; if he should do so, the offence is imputable to him, and not to the person paying him the money. As the evidence upon the point to which the exception to the general rule applies, was not as full as it ought to have been, and possibly is susceptible of being made, the parties on each side will have an opportunity before the auditor, to produce evidence to show, whether during the Revolutionary and the late war, or for any and what part thereof, the proprietaries had in the United States, a known agent, or agents, authorised to receive the purchase money and quit rents, due to them from the complainants.

The court, in giving the above opinion, has taken no notice of the agreements of compromise, offered by the defendants to the complainants in 1804, because then, and even at the hearing of the cause, it was rejected.

*

* 2

2 Upon a reconsideration of this case, in 1824, in Conn et al. v. Penn. 4 Wash. C. C. 430, Fed. Cas. No. 3,105, Mr. Justice Washington thus restated his views in the matter of interest:

"As to abatement of interest on account of the inroads of the borderers claiming under Maryland, and the Revolutionary and late war with Great Britain, the court has nothing to add to the opinion formerly given on this point. In the former decree, the court referred it to the master to report, whether the defendants had, or had not a known agent in this country, authorised to receive the moneys due to them by the plaintiffs, or those under whom they claim, either for the whole, or any part of the period of the Revolutionary, or late war with Great Britain. The report made under this order is, that, during the whole period of five wars, the defendants had a known agent in the state of Pennsylvania, authorized to receive all moneys due to them by the complainants, and those under whom they claim, as well as by all other persons. In consequence of this report, the plaintiffs' counsel have declined arguing this point, and submitted it to the court. We are clearly of opinion that no abatement of interest ought to be allowed." The principal case is considered to be the first and the leading case on this subject, and has been both quoted and cited with approval by the Supreme Court of the United States in Ward v. Smith, 7 Wall. 447, 453, 19 L. Ed. 207 (1868); Brown v. Hiatts, 15 Wall. 177, 186, 21 L. Ed. 128 (1872); New York Life Ins. Co. v. Davis, 95 U. S. 425, 429, 24 L. Ed. 453 (1877).

See Buchanan v. Curry, 19 Johns. 137, 142, 10 Am. Dec. 200 (1821), and Monsseaux v. Urquhart, 19 La. Ann. 482, 486 (1867), citing and relying upon the principal case.

UNITED STATES v. GROSSMAYER.

(Supreme Court of the United States, 1869. 9 Wall. 72, 19 L. Ed. 627.)

Elias Einstein, a resident of Macon, Georgia, was indebted, when the late rebellion broke out, to Grossmayer, a resident of New York, for goods sold and money lent, and while the war was in progress a correspondence on the subject was maintained through the medium of a third person, who passed back and forth several times between Macon and New York. The communication between the parties resulted in Grossmayer requesting Einstein to remit the amount due him in money or sterling exchange, or, if that were not possible, to invest the sum in cotton and hold it for him until the close of the war.

In pursuance of this direction-and, as it is supposed, because money or sterling exchange could not be transmitted-Einstein purchased cotton for Grossmayer, and informed him of it; Grossmayer expressing himself satisfied with the arrangement. The cotton was afterwards shipped as Grossmayer's to one Abraham Einstein, at Savannah, who stored it there in his own name, in order to prevent its seizure by the rebel authorities. It remained in store in this manner until the capture of Savannah, in December, 1864, by the armies of the United States, when it was reported to our military forces as Grossmayer's cotton, and taken by them and sent to New York and sold.

Grossmayer now preferred a claim in the Court of Claims for the residue of the proceeds, asserting that he was within the protection of the Captured and Abandoned Property Act.

That court considering that the purchase by Elias Einstein for Grossmayer was not a violation of the war intercourse acts set forth in the preceding case, decided that he was so, and gave judgment in his favor. The United States appealed.

Mr. George Taylor, for Grossmayer, and in support of the judgment below:

The cotton, the proceeds of which are in question, was purchased during the rebellion, by an agent of the claimants, residing within the Confederacy, and therefore was not a violation of the Nonintercourse Act; it being a settled principle of public law that a citizen of a country at war with another may have an agent in the enemy's country, and may enforce the contracts or accept the beneficial acts of his agent after peace; and, in this respect, he may do by an agent what he could not do himself.3

Even if the messages from Grossmayer to his agent were illegal, and no authority were given to the agent, yet the agent had a right, voluntarily on his own motion, to purchase and appropriate this prop

3 Potts v. Bell, 8 Term, 548 (1800); Denniston v. Imbrie, 3 Wash. C. C. 396, Fed. Cas. No. 3802 (1818); Paul v. Christie, 4 Har. & McH. (Md.) 161 (1798); Buchanan v. Curry, 19 Johns. (N. Y.) 137, 10 Am. Dec. 200 (1821); Ward v. Smith, 7 Wall. 452, 19 L. Ed. 207 (1868).

erty to his creditor, and by the appropriation of it, and the shipment of it to Savannah for storage for him, the title passed, subject only to the ratification of Grossmayer.*

The case shows that the purchase was ratified by Grossmayer. Claiming the cotton, and instituting suit for it, is itself a ratification. This ratification reverts back, and is equivalent to a previous permission or command.

Mr. Hoar, Attorney General, and Mr. R. S. Hale, special counsel for the United States, contra.

Mr. Justice DAVIS delivered the opinion of the court.

Grossmayer insists that he is within the protection of the Captured and Abandoned Property Act, but it is hard to see on what ground he can base this claim for protection. It was natural that Grossmayer should desire to be paid, and creditable to Einstein to wish to discharge his obligation to him, but the same thing can be said of very many persons who were similarly situated during the war, and if all persons in this condition had been allowed to do what was done in this case, it is easy to see that it would have produced great embarrassment and obstructed very materially the operations of the army. It has been found necessary, as soon as war is commenced, that business intercourse should cease between the citizens of the respective parties engaged in it, and this necessity is so great that all writers on public law agree that it is unlawful, without any express declaration of the sovereign on the subject.

But Congress did not wish to leave any one in ignorance of the effect of war in this regard, for as early as the 13th of June, 1861, it passed a Nonintercourse Act, which prohibited all commercial intercourse between the states in insurrection and the rest of the United States. It is true the President could allow a restricted trade, if he thought proper; but in so far as he did allow it, it had to be conducted according to regulations prescribed by the Secretary of the Treasury.

There is no pretence, however, that this particular transaction was authorized by any one connected with the Treasury Department, and it was, therefore, not only inconsistent with the duties growing out of a state of war, but in open violation of a statute on the subject. A prohibition of all intercourse with an enemy during the war. affects debtors and creditors on either side, equally with those who do not bear that relation to each other. We are not disposed to deny the doctrine that a resident in the territory of one of the belligerents may have, in time of war, an agent residing in the territory of the other, to whom his debtor could pay his debt in money, or deliver to him property in discharge of it, but in such a case the agency must have been created before the war began, for there is no power to appoint an agent

4 Ogle v. Atkinson, 5 Taunt. 759 (1814); Mitchel v. Ede, 11 Adol. & E. 888 (1840); Fowler v. Down, 1 Bos. & P. 47 (1797); Wilkes v. Ferris, 5 Johns. (N. Y.) 335, 4 Am. Dec. 364 (1810); Coit v. Houston, 3 Johns. Cas. (N. Y.) 243 (1802) and remarks upon it in Hawley v. Foote, 19 Wend. (N. Y.) 517 (1838).

for any purpose after hostilities have actually commenced, and to this effect are all the authorities. The reason why this cannot be done is obvious, for while the war lasts nothing which depends on commercial intercourse is permitted. In this case, if Einstein is to be considered as the agent of Grossmayer to buy the cotton, the act appointing him was illegal, because it was done by means of a direct communication through a messenger who was in some manner not stated in the record able to pass, during the war, between Macon and New York. It was not necessary to make the act unlawful that Grossmayer should have communicated personally with Einstein. The business intercourse through a middle man, which resulted in establishing the agency, is 'equally within the condemnation of the law.

Besides, if, as is conceded, Grossmayer was prohibited from trading directly with the enemy, how can the purchase in question be treated as lawful when it was made for him by an agent appointed after his own disability to deal at all with the insurgents was created?

It is argued that the purchase by. Einstein was ratified by Grossmayer, and that being so the case is relieved of difficulty; but this is a mistaken view of the principle of ratification, for a transaction originally unlawful cannot be made any better by being ratified.

In any aspect of this case, whether the relation of debtor and creditor continued, or was changed to that of principal and agent, the claim

ant cannot recover.

As he was prohibited during the war from having any dealings with Einstein, it follows that nothing which both or either of them did in this case could have the effect to vest in him the title to the cotton in question.

Not being the owner of the property he has no claim against the United States.

The judgment of the Court of Claims is reversed, and the cause is remanded to that court with directions to enter an order dismissing the petition.5

5 See also Small's Adm'r v. Lumpkin's Ex'x, 28 Grat. 832, 835, decided by the Court of Appeals of Virginia in 1877.

After stating the effect of war upon intercourse, Burks, J., said: "Limited agencies in the enemy's country may lawfully continue, provided they can be and are exercised without intercourse or communication between the citizens or subjects of the contending powers-such as agencies to collect and preserve, but not to transmit money or property. Buchanan v. Curry. 19 Johns. (N. Y.) 137, 10 Am. Dec. 200 [1821]; Ward v. Smith, 7 Wall. 447, 19 L. Ed. 207 [1868]; Manhattan Life Ins. Co. v. Warwick, 20 Grat. 614, 3 Am. Rep. 218, [1871]; Hale v. Wall, 22 Grat. 424 [1872]: Mutual Benefit Life Ins. Co. v. Atwood's Adm'x, 24 Grat. 497, 18 Am. Rep. 652 [1874]; N. Y. Life Ins. Co. v. Hendren, 24 Grat. (Va.) 536 [1874].

"Such agencies, however, to be lawful, must, it seems, be created before the war begins, for there is no power it is said to appoint any agent for any purpose after hostilities have actually 'commenced, and that to this effect are all the authorities. United States v. Grossmayer, 9 Wall. 72, 19 L. Ed. 627 [1869]; United States v. Lapéne, 17 Wall. 601, 21 L. Ed. 693 [1873]."