ON certificate of division in opinion between the judges of the Circuit Court for the Eastern District of Arkansas; the case being thus:
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 $3099, payable twelve [82 U.S. 439, 440] months after date, if not before, with interest after maturity at the rate of 8 per cent. 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 per cent. 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. [82 U.S. 439, 441] Mr. A. H. Garland, for the plaintiff, Hanauer:
1. While it is true the bonds for which the note in suit was given were issued to be used in carrying on the war against the United States, yet as the particular bonds obtained by the defendant of the plaintiff were not used or intended to be used in support of that war, the contract is not void, but stands upon a good and valid consideration. The issuing of the bonds by the State of Arkansas can have no bearing on the matter now in question, unless both the parties to the note participated, in making their contract, in the intention with which the bonds were issued. The contract must grow out, of, immediately, or be connected with, the immoral or illegal act to vitiate it; and if the promise be entirely disconnected from the illegal consideration or act, and is founded on a new consideration, it is good; and this though the party to whom the promise is made is the contriver and the conductor of the illegal act. This is the view taken by this court in Armstrong v. Toler,1 Kennett v. Chambers,2 and by other courts in numberless cases.
The defendant got the bonds and used them legitimately, and they were worth to him not much less than the sum expressed on their face. He did not use them for the war, nor did he intend to do so. To him they were as money. He should not be heard to say they were not money. 3
Recovery was denied in Hanauer v. Doane,4 because the notes sued on were given for goods sold in aid of the rebellion, both buyer and seller having knowledge of the use intended to be made of the goods.
2. But the finding by the court, that the bonds were used as a circulating medium among the people within the Confederate lines at and about Memphis, and had there much value, brings the case directly within Thorington v. Smith. 5 The doctrine of that case leaves nothing to discuss here. Indeed, without Thorington v. Smith, upon general principles, [82 U.S. 439, 442] this court has fully recognized as law all that is asked for Hanauer, and places that recognition upon the very cases already cited in this argument.