U.S. Supreme Court
Hanauer v. Woodruff, 82 U.S. 15 Wall. 439 439 (1872)
Hanauer v. Woodruff
82 U.S. (15 Wall.) 439
1. Bonds issued by authority of the convention of Arkansas, which attempted to carry that state out of the Union, for the purpose of supporting the war levied by the insurrectionary bodies then controlling that state against the federal government, do not constitute a valid consideration for a promissory note, although bonds of that character were used as a circulating medium in Arkansas and about Memphis in the common and ordinary business transactions of the people.
2. The case of Thorington v. Smith, 8 Wall. 1, approved but distinguished from the present case.
Hanauer sued Woodruff in the court below upon a promissory note executed by the latter at Memphis, Tennessee, on the 22d of December, 1861, for $3,099, payable twelve chanroblesvirtualawlibrary
months after date, if not before, with interest after maturity at the rate of 8 percent per annum. The case was tried in the District of Arkansas by the circuit court without the intervention of a jury by stipulation of the parties. And the court found specifically that the only consideration of the note was certain bonds issued by authority of the convention which attempted to carry the State of Arkansas out of the federal Union by an ordinance of secession; that these bonds were issued for the purpose of supporting the war levied by the insurrectionary bodies then controlling that state against the federal government, and were styled "war bonds" on their face, and that the purpose of their issue was well known to both the plaintiff and defendant. The court further found that at the time of the transaction between the parties -- that is, at the time the note was given -- these war bonds had at Memphis and in Arkansas a value 25 percent below their par value; that those received by the defendant were not used nor intended to be used by him in direct support of the war, but were received by him to be used in the ordinary course of his business; and that bonds of this character were at that time used as a circulating medium in Arkansas and about Memphis in the common and ordinary business transactions of the people.
Upon the facts thus found, the following questions of law arose upon which the judges of the circuit court were divided in opinion:
1st. Was the consideration of the note void on the ground of public policy, so that no action could be sustained upon it in the federal courts?
2d. Was the consideration of the note illegal under the principles of public law, the Constitution of the United States, and the laws of Congress, and the proclamations of the President relating to the rebellion, which existed and was pending when the note was made?
3d. If the bonds were a sufficient consideration to sustain the action, what was the measure of damages?
These three questions were now sent up to this Court for answers. chanroblesvirtualawlibrary