⚫740

or before the first day of September then next, certain notes of Daniels secured by a deed of trust of his homestead. The notes, when taken up, were to be held by Terry for three years from the date of the contract, if the “Eighthour Law" and "Twenty per Cent." cases were not paid before that time. If the cases were paid within the three years, the notes were to be given up to Daniels, but if not so paid, Terry was authorized to enforce their collection by a sale of the property covered by the deed of trust. Among the notes to be taken up by Terry under this contract was that given to John E. Carter, payable one year after date, and secured with the other two notes by the deed of trust to Dorsey E. W. Carter. In order to comply with the contract, Terry was under the necessity of borrowing $3,000 from C. C. Burr, to secure which he agreed to pledge the Carter note as collateral when he took it up.

On the sixth of May, 1874, John E. Carter left the Daniels note with the Farmers' & Mechanics' National Bank of Georgetown, for collection when it fell due. The note remained in that bank until August 29, 1874, when it was returned to Carter unpaid. Burr did not have the money on the first of September which he had agreed to loan Perry, but he expected to receive it soon. Perry, therefore, arranged with the Second National Bank of Washington to advance the $3,000 for a few days, and about the first of September he went to the store of Dorsey E. W. Carter, where John E. Carter then was, and, with money of his own, paid to John E. Carter all that was due on the note except $3,000. He told Carter if he would call at the Second National Bank in the course of the day, the bank would pay him that sum. Carter then gave Terry the note uncanceled and indorsed in blank. The note shows only one indorsement of payment, and that is as follows: "Interest on the within paid to September 29, 1874." Terry, after he got the note from Carter, took it to the Second National Bank and left it there, the bank agreeing to pay Carter the $3,000 when he called. Carter did call in the course of the day and got his money. A few days afterwards Burr went to the bank, paid the sum which had been advanced to Carter, and took the note away. No entries of the transaction were made on the books of the bank; but Terry paid the interest on the advance made by the bank from the time the money was given to Carter until it was repaid by Burr. Terry had not paid his debt to Burr when the decree below was rendered.

After the first note had got in this way into the possession of Burr, Dorsey E. W. Carter obtained from John E. Carter the second Daniels note under circumstances which, in the opinion of the court below, postponed his lien under the trust deed to that of Nathaniel Carusi, who had previously bought the third note from John E. Carter. The court, at special term, found that the note held by Mrs. Burr had been paid and canceled; and, after finding the amount due Dorsey E. W. Carter and Carusi, respectively, on the second and third notes, ordered a sale of the property under the trust deed, and an application of the proceeds-First, to the payment of the amount due Carusi; and, second, of that due to Dorsey E. W. Carter. From this decree Mrs. Burr appealed to the general term. Pending that appeal, the property was sold under the decree of the court in special term to Dorsey E. W. Carter for $8,990. This sale was confirmed in special term, with the consent of all the parties, on the twenty-sixth of November, 1878.

The appeal of Mrs. Burr came on for hearing at the general term, and on the twenty-third of December, 1880, a decree was entered reversing the decree of the special term so far as it ordered the payment of the proceeds of the sale to Dorsey E. W. Carter, after satisfying the amount due on the note held by Nathaniel Carusi, in preference to Mrs. Burr; and directing that Mrs. Burr be "admitted to participate to the amount of $2,748.47 in the fund" arising from the sale to Dorsey E. W. Carter. The court further found that after the decree at special term, the fund in court had been distributed, and that Dorsey E. W. Carter had received the money which of right belonged to Mrs.

Burr. It therefore ordered Carter to pay the amount belonging to Mrs. Burr, with interest from the date of the decree. From this decree in favor of Mrs. Burr, Carter took the present appeal. None of the parties to the suit are parties to the appeal except Mrs. Burr, as administratrix of the estate of her deceased husband, and Dorsey E. W. Carter.

As the case comes to us, the only question to be determined is whether what was done by John E. Carter and Terry, when Terry got possession of the note now held by Mrs. Burr, was a payment of the note by Daniels to Carter, through Terry, as the agent of Daniels, or a sale and transfer of the note by Carter to Terry. As to some of the facts connected with this transaction, there is a great conflict of testimony; but in respect to those which are to our minds controlling, there is but little, if any, dispute.

As between Terry and Daniels, it is clear the note was not paid. By the express terms of their agreement Terry was to "take up" the note from Carter and hold it until he was paid either by the "Eight-hour Law" and "Twenty per Cent." cases, or otherwise. If not paid in three years the security could be enforced. The real point of difference is as to the understanding which Carter had of the transaction. Did he take the money supposing the note was thereby paid and canceled, or did he transfer the note to Terry to be held by him until paid by Daniels? Upon full consideration of the evidence we think it was the intention of Carter to transfer the note. He got his money from or through Terry, and not from Daniels, the maker of the note. He had been pressing Daniels for payment, but without success. The note remained at the bank, where it had been deposited for collection, until within two days of the time when, under the arrangement between Terry and Daniels, it was to be taken up by Terry. Carter then went and got it into his own possession. When Terry came to take it up he had not money enough to pay for it in full. He paid what he had, which reduced the amount required to just the sum Burr had agreed to loan him. When this payment was made, Carter gave him the note indorsed in blank, without cancellation in whole or in part, on the understanding that if Carter called in a short time at the bank he would get the remaining $3,000. He did so call and got his money. Under these circumstances we do not doubt that Carter at the time fully understood the arrangement which had been made between Terry and Daniels, and took the money from Terry with the knowledge that Terry was to hold it until paid to him by Daniels. From the fact, too, that he gave the note to Terry, indorsed in blank, and uncanceled, before the $3,000 was paid, we are satisfied he must have known that Terry was expecting to raise the money upon the note itself in order to meet the balance which was due to him. The established facts on this branch of the case are entirely inconsistent with the idea that the note was understood by any of the parties to have been canceled by the payment which Terry made, or caused to be made, to Carter, and it nowhere appears from anything in the case that Carter either demanded or received any release or postponement of the lien which pertained to this note.

We do not understand that any question of distribution as between the appellant and appellees arises upon the record. The special term gave Carusi, the holder of the third note, a priority over Dorsey E. W. Carter on account of the peculiar circumstances under which Carusi bought his note from John E. Carter. That question is not brought up by this appeal, as neither Carusi nor his representatives have been made parties. As to the distribution between Dorsey E. W. Carter and Mrs. Burr, the counsel for the appellant admits in his brief that the pro rata rule was followed by the general term, and no preference given to Mrs. Burr as the holder of the note first falling due. This certainly is all that Carter can ask.

The decree at the general term is affirmed.

(113 U. S. 711)

UNITED STATES, Intervenor, v. INDIANAPOLIS & ST. L. R. Co.

(March 16, 1885.)

INTERNAL REVENUE TAX-RAILROAD BONDS-INTEREST COUPONS-ACT OF JULY 14, 1870. The law did not impose an internal revenue tax on interest coupons of the bonds of the Indianapolis & St. Louis Railroad Company, payable and paid on the first of January, 1872.

Appeal from the Circuit Court of the United States for the District of Indiana.

Sol. Gen. Phillips, for appellant. John T. Dye, for appellee.

HARLAN, J. This suit was brought to foreclose certain mortgages given to secure bonds issued by the Indianapolis & St. Louis Railroad Company. A final decree of foreclosure having been passed, the mortgaged property was sold, and the sale was confirmed by the court. The United States intervened by petition, and asked that certain sums, alleged to be due to the government on account of taxes, be first paid out of the proceeds.

It appeared that certain interest coupons of the bonds of the company were payable and were paid on the first days of September and November, 1870, and that certain other interest coupons of the same company were payable on the first day of January, 1872, and were then paid out of its earnings made prior to that date and during the year 1871. The court below held: (1) That the act of July 14, 1870, (16 St. 269, c. 255, § 15,) did not impose an internal revenue tax on interest coupons of the bonds of the railroad company payable and paid during the last five months of that year; (2) that the law did not impose an internal revenue tax on interest coupons of such bonds payable and paid on the first day of January, 1872. The United States acquiesces in the judgment in respect to the first of these claims, but contends that the act of July 14, 1870, imposed a tax upon interest coupons that were paid out of the corporation earnings for 1871, although such payment was not due nor made until January 1, 1872. This question depends upon the construction of section 15 of the act of 1870, which provides "that there shall be levied and collected, for and during the year 1871, a tax of two and one-half per centum on the amount of all interest or coupons paid on bonds or other evidence of debt issued and payable in one or more years after date, by any of the corporations in this section hereinafter enumerated, [railroad corporations being among the number,] and on the amount of all dividends of earnings, income, or gains hereafter declared, * *whenever and wherever the same shall be payable, ** and on all undivided profits of any such corporation which have accrued and been earned and added to any surplus, contingent, or other fund," etc.

*

*

In construing this section in Railroad Co. v. U. S. 101 U. S. 550, the court said: "The interest in this case was neither payable nor paid in 1871, and, as the tax is not leviable or collectible until the interest is payable, we see no way in which the company can be charged on this account. The tax is not on the interest as it accrues, but when it is paid. No provision is made for a pro rata distribution of the burden over the time the interest is accumulating; and as the tax can only be levied for and during the year 1871, we think, if the interest is in good faith not payable in that year, the tax is not demandable, either in whole or in part." This decision covers the present case. The claim of the United States is not for a tax on dividends or gains, but is distinctly for a tax on interest accruing on the bonds of the railroad company, and which was not payable nor paid until after the year 1871, for and during which the act directed it to be levied and collected. We do not perceive that the liability of the corporation for tax on this interest, as such, is affected by the circumstance that the interest was paid out of the earnings made in the previous year.

Judginent affirmed.

(113 U. S. 59)

HOLLISTER, Collector of Internal Revenue, v. BENEDICT & BURNHAM MANUF'G Co.1 (January 5, 1885.)

1. PATENT LAW-LOCKE REVENUE STAMP.

In the Locke revenue stamp, the first element, viz., "a part which is designed to be come a stub, when the stamp proper is separated therefrom, and displays a serial number;" and the second element, viz., "a constituent part of the stamp proper which is designed for permanent attachment to the barrel," are old beyond question.

2. SAME-STUB.

In the Locke revenue stamp, the feature of the third element, whereby a removable part of the stamp proper, the contents of which identify the stamp with the stub after the stamp has been attached, can be so removed as to retain its own integrity, but mutilates and thereby cancels the stamp by its removal, is not infringed by a stamp, on the adhesive back of which a piece of plain paper is fixed to prevent the adhesion of the part affected by it, in order to facilitate its being torn off to be preserved as a stub, while, at the same time, perfecting the necessary mutilation and cancellation.

3. SAME-USE OF PATENT BY UNITED STATES GOVERNMENT-EMINENT DOMAIN - COUET OF CLAIMS.

The use of the patent device of an individual by the United States government is made through its right of eminent domain, and the party aggrieved thereby should seek his remedy in the court of claims.

Appeal from the Circuit Court of the United States for the District of Connecticut.

*Asst. Atty. Gen. Maury, for appellant. 8. W. Kellogg and John S. Beach, for appellees.

MATTHEWS, J. This is a bill in equity to enjoin the alleged infringement of letters patent No. 93,391, issued to Edward A. Locke for certain improvements in identifying revenue marks or labels, dated August 3, 1869, the appellees being assignees of the patentee, and the appellant, the collector of internal revenue for the Second collection district of Connecticut.

The specification and claims, with the accompanying drawings, are as follows:

09.

.

"This invention is designed more especially for use in sealing liquor casks with identifying marks or labels for revenue purposes, and in such a manner that, while truly designating the contents of the cask, or giving such other indication as may be demanded, they cannot be fraudulently removed. Fig. 1 represents a printed paper revenue stamp, the circular portion at the right hand being the stamp proper, which is applied to the cask or box, and the portion at the left hand being the stub,' or that portion retained by the government official. Fig. 2 represents a separate strip, which is shown in Fig. 1 as attached at its left end to the stub of the paper stamp proper, in such manner that its coupons may be readily cut off and permanently affixed to the stamp proper when the latter is secured to the cask. Fig. 3 represents a metallic piece or strip, shown as detached, and before being applied to the stamp. The main body of the sheet of paper being printed substantially as shown, so as to designate by a letter of the alphabet, or otherwise, the appropriate series, and with blanks for the particular number of each series, and also with a number indicating numbers of gallons, etc., in tens, has also a series of numbers, from one to nine, inclusive, any one of which may be punched out by the proper official, in accordance with the actual number of gallons contained in the vessel. Thus, if 126 be the proper number of gallons, and 120 be the whole number printed upon the particular stamp, the officer, in order to indicate 126, would punch through the digital number 6, both upon the circular stamp and upon its stub' or counter-check.

"The piece shown in Fig. 3, I prefer to make of thin metal, because more readily embossed or impressed with permanent or ineffaceable characters, and because less destructible in handling and transmission, after it shall have been torn away from the stamp. This piece (also shown in part in Fig. 1) may be conveniently made of oblong, or any appropriate form, its conditions being merely, so far as concerns its shape, that it be of sufficient size to extend beyond the opening made in the paper for the exposure of the letters and figures made on it, and be capable of being retained in its place between the paper and another backing-piece of paper, the two pieces of paper being gummed together for this purpose. This backing-piece I prepare with dried gum on its outer face, that the stamp may be always ready by merely moistening the gum for instant application to the cask. The strip shown in Fig. 2, I secure in part to the left side of the paper by gumming its remaining portion, upon which are coupons for the units, being dry-gummed on its under side, so that, when the proper number of gallons has been determined, the officer, upon cutting off the coupon at the figure designating the unit or digital number required, may, by moistening it, instantly, and without cutting or injuring the stamp, apply it to the stamp, while the stub or remaining portion of the slip will correspondingly indicate thereon just what has been so detached and applied to the stamp. Thus, to indicate 126 gallons, 120 being the whole number of the stamp, the coupon slip is cut off between the numbers 6 and 7, and the piece so cut off is moistened on the back and permanently attached to the face of the stamp, the 6 being the significant figure of the coupon.

"The mode of applying a stamp so made to a cask may be, by way of greater protection against liability to damage or accident, as shown and described in my patent No. 58,847; that is, by boring a shallow depression in the wood of the cask or case, and after affixing the stamp by its gum to the bottom of this depression, then placing over it a ring having down-turned edges, and, by pressing the same, forcing its outer edge into the wood. Or the wood may have an annular groove cut therein to receive the edge of the ring when so forced home. Instead of making the removable piece out of metal, or of making it in a piece separate from the stamp, it may be made of the same piece of paper of which the stamp is composed by simply having its outline perforated after the manner of postage stamps, but ungummed at its back, so