Opinion of the court.

stock, &c., and that the same might be sold for cash for an amount sufficient to pay said judgment by preference, right of special mortgage and vendor's lien and privilege, and before all other creditors. This was, therefore, nothing but the ordinary hypothecary action brought to enforce payment of a special mortgage. It is called a real action in the Code of Practice, because it seeks the sale of particular property liable to the plaintiff's mortgage. But this does not necessarily make it a proceeding in rem in the sense of which we have spoken. It is brought against the person in possession, as well as the property, and the creditor can only scize and sell such property, after having obtained judgment against the debtor in the usual form.*

The case is, therefore, clearly not a proceeding in rem properly so called.

Then was Rochereau a subsequent mortgagee to Dupasseur? Was the latter entitled to priority? If so, Rochereau would be bound by the judgment though not made a party. But he contends that his is the prior lien and not the subsequent one.

Now we can find nothing in the Code of Practice or in the judicial decisions of the State of Louisiana, which goes to show that Rochereau or any other person claiming a prior lieu to that of Dupasseur on the property in question would be concluded by this judgment and forever estopped from showing that truth. Unless there is something peculiar in the Louisiana laws which makes the effect of the judgment different from what it would be under other systems of jurisprudence, prior mortgagees, and those having elder titles not made parties to the suit, cannot be affected by the judgment.

Indeed the appellant's counsel does not contend that prior mortgagees, or those having prior liens or privileges, were affected, but he insists that subsequent mortgagees are af fected, and are entitled only to the surplus proceeds which have been paid into court, and that it was not necessary to

* Code of Practice, article 64.

Syllabus.

make them parties because of the pact de non alienando; and he insists that Rochereau was a subsequent mortgagee.

Now that is the very point in dispute. Rochereau insists that by the non-inscription of the Jacobs mortgage within ten years, it lost its rank, and became the subsequent and not the prior mortgage. Grant that Rochereau was the subsequent mortgagee, and all that the appellant claims would necessarily follow. But that point is not granted; on the contrary it is the very matter in dispute, and on this vital point we think that Rochereau was not concluded by the judgment of the Circuit Court, because he was not a party to it. Therefore, the State court, in not regarding the decision of the Circuit Court as decisive of that question, did not refuse to that decision its due and legal effect.

The sections of the Code of Practice which direct the mode of proceeding at sheriff's sales under mortgage or other liens do not affect the question. They simply require, in substance, that the sheriff shall possess himself of the recorder's certificate of the various incumbrances on the property, and shall sell subject to all liens and privileges prior to that under which the sale is made; and if the property is bid off for more than those prior liens and privileges, the purchaser only pays the balance and takes the property subject to them. This shows that prior liens are not to be affected or disturbed. If the sheriff by a mistake of law or fact regards a prior lien as a subsequent one, surely his mistake cannot destroy or postpone the lien which he thus fails to assign to its proper place.

JUDGMENT AFFIRMED.

VERMILYE & Co. v. ADAMS EXPRESS COMPANY.

1. The bonds and treasury notes of the United States payable to holder or bearer at a definite future time are negotiable commercial paper, and their transferability is subject to the commercial law of other paper of that character.

2. Where such paper is overdue a purchaser takes subject to the rights of

Statement of the case.

antecedent holders to the same extent as in other paper bought after its maturity.

8. No usage or custom among bankers and brokers dealing in such paper can be proved in contravention of this rule of law. They cannot in their own interest by violations of the law change it.

4. It is their duty when served with notice of the loss of such paper by the rightful owner after maturity to make memoranda or lists, or adopt some other reasonable mode of reference, where the notice identifies the paper, to enable them to recall the service of notice.

5. Hence treasury notes of the United States stolen from an express company and sold for value after due in the regular course of business may be recovered of the purchaser by the express company, which had succeeded to the right of the original owner.

APPEAL from the Circuit Court for the Southern District of New York; the case being thus:

Vermilye & Co., bankers of New York, having presented to the Treasury of the United States for payment some time after their maturity eight treasury notes issued under the authority of the act of March 5th, 1865, were informed that the Adams Express Company asserted an ownership of the notes, and that they could not be paid until the question of the rightful ownership was settled.

The matter resulted in a bill of interpleader, filed by the United States in the Circuit Court for the Southern District of New York,, against both the express company and Vermilye & Co., to which they filed their respective answers, the notes being deposited with the clerk of the court to abide the event of the suit.

The notes in controversy, to wit, five of $1000 each, and three of $100 each, came to the possession of the express company to be forwarded for conversion into bonds of the United States, and were started on their way from Louisville in custody of their messenger on the 22d of May, 1868. Shortly after leaving Louisville the car on which were the messenger and the notes, was stopped and entered by robbers, who, after knocking the messenger down, and leaving him for dead, carried off the safe containing these notes, which was found the next day broken open and without the notes in it. The express company, as soon as it could ob

Statement of the case.

tain the numbers and other description of the stolen notes, advertised extensively the loss in the newspapers, gave notice at the Treasury Department, and entered there a caveat against their payment or conversion into bonds to any one else, and gave notice to the principal bankers and brokers of the city of New York of the loss and their claim on the notes. On the 29th of May and the 5th of June, respectively, the express company delivered notices to persons behind the counter of Vermilye & Co., at their place of business, which notice sufficiently described the lost notes, cautioned all persons from receiving or negotiating them, and asserted the claim of the express company to the notes. The company paid the owner of the notes, who had delivered them to the company for transportation, and appeared to have done all that could be done to assert their rights in the premises.

On the 9th and 12th days of April, 1869, Vermilye & Co. purchased these notes over their counter, at fair prices, in the regular course of business, and forwarded them to the Treasury Department for redemption, where they were met by the caveat of the express company.

As already stated, these notes were issued under the act of March 3d, 1865.* That statute authorized the Secretary of the Treasury to borrow on the credit of the United States any sums of money not exceeding six hundred millions of dollars, for which he should issue bonds or treasury notes in such form as he might prescribe. It also authorized him to make the notes convertible into bonds, and payable or redeemable at such periods as he might think best. Under this statute the notes in controversy were issued, payable to the holder three years after date, and dated July 15th, 1865, bearing interest payable semi-annually, for which coupons were attached, except for the interest of the last six months. That was to be paid with the principal when the notes, were presented. On the back of the note was a statement, thus: "At maturity, convertible at the option of the holder into

*18 Stat. at Large, 468.

Statement of the case.

bonds, redeemable at the pleasure of the government, at any time after five years, and payable twenty years from June 15th, 1868, with interest at six per cent. per annum, payable semiannually, in coin."

At the time of the purchase of the notes by Vermilye & Co. more than three years had elapsed from the date of their issue, and the Secretary of the Treasury had given notice that the notes would be paid or converted into bonds at the option of the holder on presentation to the department, and that they had ceased to bear interest.

On the hearing, Vermilye & Co. brought several witnesses, bankers and brokers, to show that notes of the sort here under consideration continued to be bought and sold after they had become due and interest had ceased thereon; that it was not customary for dealers in government securities to keep records or lists of the numbers or description of bonds alleged to have been lost, stolen, or altered, or to refer to such lists before purchasing such securities; that, in their judgment, it would be impracticable to carry on the business of dealing in government securities, if it were necessary to resort to such lists and make such examination previous to purchase; and that the purchase of the notes in controversy by Vermilye & Co. was made in the ordinary and usual mode in which such transactions are conducted.

Some testimony was given on the part of the express company to show an indorsement by the owner on certain of the notes, existing when they were stolen-" Pay to the order of the Secretary of the Treasury for conversion;" but this indorsement, if then existing, was not now visible on ordinary inspection. And on their face the notes remained payable "to bearer."

The court below held

1st. That there was nothing in the evidence about indorsemeut, which could restrict the negotiability.

2d. That the notes were on their face overdue, and that the ordinary rule applicable to such notes-viz., that the person taking them took them with all the infirmities belonging to them-applied, though the notes were securities issued