Opinion of the court.

dictment for piracy. The proof became necessary on account of the obscurity and unknown condition of this incipient state.

Another illustration will be found in a capture by a de facto government, which government is defined to be one in possession of the supreme or sovereign power, but without right—a government by usurpation, founded perhaps in crime, and in the violation of every principle of international or municipal law, and of right and justice; yet, while it is thus organized, and in the exercise and control of the sovereign authority, there can be no question between the insurer and the insured as to the lawfulness of the government under whose commission the capture has been made. If any presumption could properly be indulged as to the perils against which the insured would most desire to protect himself, it might well be captures by these violent and irregularly constructed nationalities. The court in the case of Nesbitt v. Lushington,* fitly described the character of the government contemplated in the clause respecting the restraints, &c., of kings, princes, or people, namely: "the rul ing power of the country," ""the supreme power," "the power of the country, whatever it might be,"—not necessarily a lawful power or government, or one that had been adopted into the family of natious.

Now, applying these principles to the case before us, it will be seen that the question is not whether this so-called Confederate government, under whose authority the capture was made, was a lawful government, but whether or not it was a government in fact, that is, one in the possession of the supreme power of the district of country over which its jurisdiction extended? We agree that all the proceedings of these eleven states, either severally or in conjunction, by means of which the existing governments were overthrown, and new governments erected in their stead, were wholly illegal and void, and that they remained after the attempted separation and change of government, in judgment of law,

* 4 Term, 768.

Opinion of the court.

as completely under all their constitutional obligations as before.

The Constitution of the United States, which is the fuudamental law of each and all of them, not only afforded no countenance or authority for these proceedings, but they were, in every part of them, in express disregard and violation of it. Still, it cannot be denied but that by the use of these unlawful and unconstitutional means, a government, in fact, was erected greater in territory than many of the old governments in Europe, complete in the organization of all its parts, containing within its limits more than eleven millions of people, and of sufficient resources, in men and money, to carry on a civil war of unexampled dimensions; and during all which time the exercise of many belligerent rights were either conceded to it, or were acquiesced in by the supreme government, such as the treatment of captives, both on land and sea, as prisoners of war; the exchange of prisoners; their vessels captured recognized as prizes of war, and dealt with accordingly; their property seized on land referred to the judicial tribunals for adjudication; their ports blockaded, and the blockade maintained by a suitable force, and duly notified to neutral powers the same as in open and public war.

We do not inquire whether these were rights conceded to the enemy by the laws of war among civilized nations, or were dictated by humanity to mitigate the vindictive passions growing out of a civil conflict. We refer to the conduct of the war as a matter of fact for the purpose of showing that the so-called Confederate States were in the possession of many of the highest attributes of government, sufficiently so to be regarded as the ruling or supreme power of the country, and hence captures under its commission were among those excepted out of the policy by the warranty of the insured.

We could greatly extend the opinion upon this branch of the case by considerations in support of the above view, but the question has undergone very learned and able examinations in several of the State courts, deservedly of the highest

Statement of the case.

eminence, and which have arrived at the same conclusion, and to which we refer as rendering further examination unnecessary.*

JUDGMENT AFfirmed.

Dissenting, the CHIEF JUSTICE and Mr. Justice SWAYNE.

NOTE. At the same time with the preceding were argued and adjudged four other cases by the same plaintiff against other insurance companies, all four being adjudged in the same way as the one above reported. In two of them the policies and warranty were in the same language as in that case. In two others there was a difference in the marginal warranty of the insured in this, that while he warranted free from loss or expense by capture, &c., "ordinary piracy" was excepted, so that if the loss was on account of a capture or seizure by pirates, the insured would have been entitled to recover. But NELSON, J., giving the judgment of the court, observed that as the court had arrived at the conclusion that the capture of the vessel was under the authority of a quasi government, or government in fact (the ruling power of the country at that time), it was to be held to be within the warranty or exception in the marginal clause. Dissenting, the CHIEF JUSTICE and SWAYNE, J.

HAIGHT V. RAILROAD COMPANY.

A provision in a defeasance clause in a mortgage given by a railroad company to secure its coupon bonds, that the mortgage shall be void if the mortgagor well and truly pays, &c., the debt and interest, "without any deduction, defalcation or abatement to be made of anything for or in respect of any taxes, charges or assessments whatsoever,"-does not oblige the company to pay the interest on its bonds clear of the duty of five per cent., which by the 122d section of the revenue act of 1864, such companies "are authorized to deduct and withhold from all payments on account of any interest or coupons due and payable." On the contrary, the company complies with its contract when it pays the interest less five per cent. and retains the tax for the government.

ERROR to the Circuit Court for the Western District of Pennsylvania; the case, as derived from the statement of it

* Dole v. New England Mutual Ins. Co., 6 Allen, 873; Fifield v. Ins. Co., 47 Pennsylvania State, 166; Dole v. Merchants' Marine Ins. Co., 51 Maine, 464

Statement of the case.

by the learned judge below (McCandless, J.), who sat for the Circuit Court, having been thus:

The 122d section of the internal revenue act of 1864, provides that "any railroad company indebted for any money for which bonds have been issued upon which interest is payable shall be subject to and pay a duty of five per cent. on the amount of all such interest whenever the same sball be payable, and said company are authorized to deduct and withhold from all payments on account of any interest or coupons due and payable as aforesaid, the duty of five per cent., and the payment of the amount of said duty, so deducted from the interest or coupons, shall discharge said company from that amount of the interest on the bonds held by any person whatever. Except where said company may have contracted otherwise."

With this act of Congress in force, Haight, a citizen of New York, was the holder of bonds to the amount of $100,000, issued by the Pittsburg, Fort Wayue and Chicago Railroad Company, and secured by a mortgage on real estate. The bonds were in the ordinary form of coupon bonds, and promised that the Company would pay $1000 to the obligee or bearer, on the 1st of January, 1887, with interest at the rate of seven per cent., payable half yearly, on the presentation of the interest warrants, &c. The defeasance clause of the mortgage was thus:

"Provided, always, that if the said railway company or their successors do well and truly pay to the said Haight, the said $100,000 on the days and times herein before mentioned, together with the interest payable thereon, without any deduction, defalcation or abatement to be made of anything for or in respect of any taxes, charges or assessments whatsoever, then," &c.

The railway company having retained five per cent. on the amount of the coupons, as they paid them, Haight brought suit against it, contending that it could not deduct the taxes. from the interest due him, because it had, in the language of the act of Congress, "contracted otherwise."

The argument in the court below, derived from a very

Opinion of the court.

critical examination of the different parts of the act of Congress in question, was that the tax of five per cent. laid in the 122d section, was a tax upon the coupon or interest, that is to say, a tax on the thing and not on Haight's income; and, therefore, that under the contract in the mortgage it was to be paid by the company from its own property and not from Haight's.

It was admitted that Haight paid no income tax at New York, his residence, on the interest received from these bonds.

The learned judge who heard the case, thought that the tax was on Haight's income, and gave his opinion to this effect:

What are the coupons, upon which this suit is instituted, but income, the annual profit upon money safely invested? There is no special contract to pay government taxes upon the interest. The measure of the company's liability is expressed in the bonds as being debt and interest only. It has nothing to do with the taxes which the government may impose upon the plaintiff for the interest payable to him. The clause in the mortgage cannot enlarge the duty which the mortgage was given to secure, that is, the payment of debt and interest. It is to be found in all mortgages. . . . The plaintiff, a citizen of New York, pays no internal revenue tax on these bonds at the place of his residence. It is therefore no case of double taxation. The tax should be paid somewhere, and it was to meet investments like this in banks, railroads, insurance and other companies, that the 122d section of the act of 1864 was passed.

...

Judgment was accordingly given for the company, and the case was brought by Haight on error to this court, where it was submitted on briefs.

Mr. Knox, for the plaintiff in error; Messrs. Lowrie and McKnight, contra.

Mr. Justice GRIER delivered the opinion of the court. The facts in this case are properly stated and the law correctly decided by the learned judge of the Circuit Court.