U.S. Supreme Court
Orchard v. Hughes, 68 U.S. 1 Wall. 73 73 (1863)
Orchard v. Hughes
68 U.S. (1 Wall.) 73
1. It is no defense to a suit for debt that the debt arose from the receipt of the bills of a bank that was chartered illegally and for fraudulent purposes and that the bills were void in law, and finally proved worthless in fact, the bills themselves having been actually current at the time the defendant received them, and they not having proved worthless in his hands, nor he being bound to take them back from persons to whom he had paid them away. chanrobles.com-red
2. When a bond is given for appeal in a bill of foreclosure of mortgage, the condition of the bond being simply that the appellant shall pay costs and damages, it does not operate to stay a sale of mortgaged premises already decreed.
3. Independently of a rule of court, execution cannot issue in a decree for foreclosure of a mortgage in chancery for the balance left due after a sale of the mortgaged premises (Noonan v. Lee, 2 Black 499, recognized), and this (by opinion, however, of but a majority of the Court), applies to the Territorial Court of Nebraska as much as to the courts of states organized under the Judiciary Act of 1789.
These were in form two causes, though in fact two branches of one case, which were heard and disposed of together, both of them coming here on appeal from the Supreme Court of the Territory of Nebraska, to which tribunal they had been taken by appeal from the district court for the same territory.
A suit had been brought by Hughes, the appellee in this Court, against Orchard, the appellant, to foreclose a mortgage. Orchard set up by way of answer that a part of the consideration of the mortgage consisted of the bills of the Bank of Tekama, of the Territory of Nebraska; that this bank, though chartered by the legislature of that territory, had never been approved of by Congress as was necessary that it should be in order to be legally chartered; that the bank was never organized; that it was a device to deceive the public; that its notes were fraudulently issued and put in circulation without authority of law, and were of no validity or value whatever. But the answer showed that the bills were current and in circulation at the time they were received by him, and did not state in any sufficient way that they had proved worthless in Orchard's hands or that they had ever been tendered back either to or by him. On the contrary, it set forth that many of them had been paid away to his creditors, some to a certain Davis, and that they had turned out to be worthless in his hands. To this answer there was a demurrer, upon which the district court gave judgment for the complainant, so deciding that the defense set up was insufficient. A sale of the premises was accordingly decreed. After this decree, Orchard gave bond for an appeal to the supreme chanrobles.com-red
court -- the condition of the bond being that "he shall diligently prosecute said appeal and shall pay all costs and damages that may be awarded against him." The sale went on under a master's direction, and on the coming in of his report, Orchard filed several exceptions to it. Most of these were on matters which were the subject of discretion with the court below, as that the sale had not taken place at the exact hour advertised, but an hour or more afterwards. The supreme court considered none of the exceptions of force, and confirmed the proceedings. Among the proceedings confirmed was the master's report, which showed that the mortgaged premises sold for $519.23 less than the mortgage debt; and the decree of the district court, which ordered that execution should issue for this amount and interest.
On appeals here, the following other points were raised:
1. How far the illegal character of the bank, and the final worthlessness of its notes, were a defense to the bill of foreclosure.
2. Whether the sale was properly proceeded with in the district court after Orchard had given a bond for appeal.
3. Whether an order for execution for the balance ($519.23) due on the mortgage was rightly made, and whether the fact that the Supreme Court of Nebraska Territory, which made it, was so organized under the organic law by the legislature of the territory, and not by the Judiciary Act of 1789, that a precedent binding courts established by the act, did not apply to one like the supreme court of the territory aforesaid.