daughters to whom Jones conveyed the property in 1882, Mrs. Gilmer had the title to the property, subject to certain charges, the real question we have to determine is whether or not the complainant here, the building and loan association, could have ascertained this fact by the exercise of proper diligence on its part. No question whatever was made that Mrs. Gilmer lived on the property in controversy. There is some difference as to the character of her occupancy of the property. She was getting old, and had surrendered the active management of the house to her daughters; but she had a room, and occupied it continuously until her death, subsequent to the execution of the mortgage. A tax sale was made and a tax certificate was issued in 1882, and yet Jones, who became the holder of the tax certificate, took no deed to the property from the probate judge until 1890. The amount paid for the property, as set out in the tax deed, was $175; and yet the property was valuable enough to enable the parties to whom Jones conveyed it to obtain a loan on it for $5,000 within a year after the deed from Jones to the ladies was made. This, it seems to us, should have been sufficient to have caused special inquiry on the part of any one about to take a conveyance of the property. The deed from Jones to the ladies, as therein recited, was for $10 and love and affection.

Charles Wilkinson, who was examining the title on behalf of the building and loan association in June, 1891, wrote to the general counsel of that association in Atlanta as follows:

"Enclosed find abstract of Gilmer, Jones property. The tax sale has been critically examined and found perfect. The parties have been holding under the State since 1882. Although the tax deed was made in 1890, the [they] had the certificate. Mrs. Gilmer did not care for it was bought by her son-in-law, deeded by him to his sisters-in-law, the children of Mrs. Gilmer."

This letter shows two things: In the first place, that Wilkinson had the abstract of title and the facts connected therewith, showing how Jones obtained the property, and how it was conveyed by Jones to his wife and her sisters. It also shows that Wilkinson understood that the natural inquiry would be, on the part of any one examining the title, does Mrs. Gilmer still claim to be interested in the property, and what does she say about this loan? The evidence in the case shows conclusively, we think, that, if Mrs. Gilmer had been consulted, it would have ben ascertained that she objected most strenuously to the execution of the mortgage on this property, and that she claimed then, as she did in the suit brought soon thereafter, that she still had the legal title. Wilkinson, in his testimony, says that:

"At the time of the loan secured by Jones and others in this case from the complainant, the Atlanta National Building & Loan Association, I was the local representative, adviser, and also secretary and treasurer-id est, Poobah-of said complainant in the city of Montgomery. I had general supervision and advisory powers in reference to any loan, advancement, or the general policy of their business in this territory."

There can be no question, therefore, that whatever knowledge Wilkinson had, and what he might have ascertained by reasonable

inquiry, must be charged to the building and loan association. He stood in such relationship to it in Montgomery as that it is certainly bound by what he knew or could have known.

The law in Alabama applicable to this case (and it is not materially different, as we understand it, from the law elsewhere) is stated by the Supreme Court of that state in Wilson v. Wall, 34 Ala. 288-305, as follows:

"It is well settled that, if the purchaser be put in possession of such facts concerning the title which the vendor offers to sell as would cause a prudent man to inquire further before he would proceed with the purchase, he cannot claim the protection which is accorded to an innocent purchaser without notice. Center v. P. & M. Bank, 22 Ala. 755; McGehee v. Gindrat, 20 Ala. 101. Information which makes it the duty of a party to make inquiry, and shows where it may be effectually made, is notice of all facts to which such inquiry, if conducted with ordinary diligence and prudence, would have led. Carr v. Hilton, 1 Curt. 390 [Fed. Cas. No. 2,437]; [Williamson v. Brown] 1 Smith (N. Y.) 354; Ringgold v. Bryan, 3 Md. Ch. 488; Wilson v. McCullough, 23 Pa. 440 [62 Am. Dec. 347]; Kennedy v. Green, 3 Md. & K. 699. A purchaser has notice of what appears upon the face of every title deed which constitutes a necessary link in his chain of title, and will not be allowed to deny notice by asserting that he had not read the deed. Johnson v. Thweatt, 18 Ala. 747; Wailes v. Cooper, 24 Miss. 208; Tiernan v. Thurman, 14 B. Mon, 277.”

See, also, Hodges Bros. v. Coleman & Carroll, 76 Ala. 103–113. To the same effect is the decision in Lockwood v. Tate, 96 Ala. 353-356, 11 South. 406. In the opinon in this last case it is said:

"Information which makes it the duty of a party to make inquiry, and shows where it may be effectually made, is notice of all facts to which such inquiry, if conducted with ordinary diligence and prudence, would have led. Hodges v. Coleman, 76 Ala. 113; 2 Brick. Dig. p. 520, § 183. Good faith is an essential element of a valid claim to protection as a purchaser without notice, and lack of good faith is to be imputed to one who, having such information as would put a prudent man on inquiry, failed to pursue the inquiry, which, if diligently followed up, would have led him to a knowledge of the superior right of another. Taylor v. Agricultural & M. Ass'n, 68 Ala. 229; Whelan v. McCreary, 64 Ala. 319; Craft v. Russell, 67 Ala. 9; Barton v. Barton, 75 Ala. 400."

The property in controversy in this case at the time of this transaction must, from the evidence in the record, have been worth something like $10,000—at least that much. Counsel for complainant admits, as stated by Judge Shelby in his opinion, that it was worth last year $20,000; and, as the loan was made on it for $5,000, we may reasonably admit, in view of the margin usually required in loans of this character, that it was worth considerably more than the amount of the loan. The title which the complainant accepted was a tax deed made to the son-in-law of the owner eight years after the tax sale was made, in consideration of $175, and the subsequent conveyance to the daughters for $10 and love and affection. We are unable to understand how any one in the exercise of reasonable diligence in examining the title to this property before making a loan on it would not have most carefully questioned Mrs. Gilmer as to her interest. We think the facts were sufficient to put Wilkinson, as the representative and attorney of the building and loan association, on inquiry of Mrs. Gilmer. If Wilkinson had made this inquiry, it would have elicted facts and information from

Mrs. Gilmer which would undoubtedly have caused him to decline the loan for the building and loan association, if he properly regarded its interests.

Mr. Wilkinson was a witness in behalf of the complainant in this case, and at one point in his testimony he says this:

"It was never brought to my notice, incidentally, inferentially, or otherwise, that Susan W. Gilmer or any other person whatsoever had any claim, right, interest, equity, legal or otherwise, in and to said property, conveyed by said mortgage, other than said mortgagors mentioned. My best recollection is that at the time of the execution of said mortgage said Susan W. Gilmer was living with said mortgagors."

Afterwards in his testimony he makes this statement:

"I do not state positively that I ever had any exclusive or personal conversation with Mrs. Gilmer, although I remember distinctly going to the residence and seeing the parties generally in reference to this loan. I went down there myself. While it is true that I do not remember (it being several years anterior to the present) of a personal conversation with Mrs. Gilmer, still, as a basis of my recollection on the letter that I have just read, I must and will state that I do not believe that I would have written the letter of date 8th April, 1891 (Exhibit E) unless I had had a conversation with Mrs. Gilmer upon which to predicate said letter; and, as refreshed by said letter, I am of opinion that such conversation, the concrete of which is included in said letter, was had between me and the said Susan W. Gilmer."

In view of what this record shows Mrs. Gilmer's attitude to have been all along as to the transaction in question here, we do not think this evidence sufficient to show that Mrs. Gilmer was informed of the purpose of her daughters to mortgage the property, or had any notice of it when it was done.

While the agreed statement of facts concedes that the tax deed from the city of Montgomery was recorded in the office of the probate judge, it is not set out in the abstract of title furnished by Wilkinson to the building and loan association, and could not have been relied upon by the association in making the loan. Even if it had been so set out and relied upon, it would not have materially strengthened the complainant's case, as we regard it.

We put our decision in this case upon two grounds: First, that the legal title to the property in question at the time the mortgage to complainant was executed was, as between Mrs. Gilmer and the mortgagors, in Mrs. Gilmer, as determined by the Supreme Court of Alabama; second, that the facts shown in the record were such as to have made it incumbent on the representative of the building and loan association to have made inquiry of Mrs. Gilmer as to her interest in the property in question, and that any reasonable inquiry would have informed him of the real situation as it was afterward determined in the state court.

The decree of the Circuit Court must be reversed, and the case remanded, with directions to dismiss the bill, with costs against the complainant.

DIECKERHOFF et al. v. UNITED STATES.

(Circuit Court of Appeals, Second Circuit. February, 1905.)

No. 22.

CUSTOMS DUTIES-BOND FOR RETURN OF UNEXAMINED MERCHANDISE-DAMAGES FOR BREACH-NECESSITY OF PROOF.

Certain importers failed to return, on demand of the collector of customs, merchandise delivered to them without examination; this failure constituting a breach of the conditions of a bond given by them, under section 2899, Rev. St. [U. S. Comp. St. 1901, p. 1921], in double the estimated value of such merchandise. The collector, without proof of any damage suffered, sought to recover such double value. Held, that the penalty of the bond is not to be considered as liquidated damages; that the object of the bond is to protect the government in the assessment, valuation, and collection of duties, and to make good, within the limit named in the penalty, any damages incurred in case of breach; and that without proof of actual damages there could be no recovery.

Wallace, Circuit Judge, dissenting.

In Error to the Circuit Court of the United States for the Southern District of New York.

This cause comes here upon writ of error to review a judgment of the Circuit Court, Southern District of New York, in favor of the United States, for $369.12 on a customs bond. Note United States v. Dieckerhoff (C. C.) 103 Fed. 789.

W. Wickham Smith, for plaintiff in error.

Chas. D. Baker, for the United States.

Before WALLACE and LACOMBE, Circuit Judges, and HOLT, District Judge.

LACOMBE, Circuit Judge. On or about January 13, 1897, the plaintiffs' firm imported seven cases of goods. The collector sent one of these packages, case 418, to the public stores, and delivered the remaining cases to the importers. Prior to this importation a bond for the delivery of unexamined packages, commonly known as a "six months' bond," had been executed by these importers, with sureties. On or about January 18, 1897, the collector, having received a report from the appraiser, called upon the defendants to send case No. 420 to the public stores, which request was not complied with. Subsequently suit was brought on the bond for $3,044, being double the estimated value of the importation. It was conceded on the trial that there was no proof that the United States suffered any damage by reason of the failure of the importers to return said package No. 420, and that there could be no proof. A clerk from the custom house testified, against objection and exception, that he had made an estimate of the value of package 420 from the invoice, and that the value thereof was $184.56. The court directed a verdict for double that amount.

Imported merchandise is examined by the customs officers, so that it may be properly appraised and classified. In order to facilitate such examination, the collector, under authority of statute, usually directs that one package out of every ten in each entry be

136 F.-35

examined. If the result is satisfactory, the others are not opened; or the collector may, for any cause, within 10 days after the result of the examination of the package or packages first selected is reported to him, order another or as many other packages as he pleases to be also examined. If all the packages comprising each importation were kept in the custody of the government during this period, greater warehouse capacity would be required, and as far back as 1830 provision was made for a delivery of part of his importation to the importer. That statute is now section 2899, Rev. St. U. S. [U. S. Comp. St. 1901, p. 1921], and reads as follows:

"No merchandise liable to be inspected or appraised shall be delivered from the custody of the officers of the customs, until the same has been inspected or appraised, or until the packages sent to be inspected or appraised shall be found correctly and fairly invoiced and put up, and so reported to the collector. The collector may, however, at the request of the owner, importer, consignee, or agent, take bonds with approved security, in double the esti mated value of such merchandise, conditioned that it shall be delivered to the order of the collector, at any time within ten days after the package sent to the public stores has been appraised and reported to the collector. If in the meantime any package shall be opened, without the consent of the collector or surveyor given in writing, and then in the presence of one of the inspectors of the customs, or if the package is not delivered to the order of the collector, according to the condition of the bond, the bond shall, in either case, be forfeited."

This statute contemplated a separate special bond for each importation. In practice it has been found convenient to take a general bond running for six months, which is based upon a scheme by which this general bond, by a system of indorsements, authorized to be made and made by the collector, of the estimated value of each importation, is transferred into a series of separate bonds, with penalties in double the estimated value of each importation, and the statutory conditions stated applicable to each separate entry. Such general six months' bond is authorized by treasury regulations, and the propriety of exacting it in place of separate special bonds is not disputed. The bond sued upon is in the amount of $50,000, and provides:

"The condition of this obligation is such, that if each and every package or packages of each and every importation made by the said principals at any time within six months from and after the date of these presents, and delivered from the custody of the officers of the customs, in pursuance of section 2899, Revised Statutes of the United States, shall, within ten days after the package or packages designated by the collector and sent to the public store to be opened and examined have been appraised and reported to him, be returned to the order of the collector without having been opened, except with the consent of the collector or surveyor, given in writing, and then in the presence of one of the officers of the customs, or if the abovebounden obligors shall, in lieu of such return, pay to the proper collecting officer of said port double the estimated value of the package or packages of merchandise not so returned, then this obligation is to be void; otherwise, to remain in full force and virtue. And the above-bounden obligors do, for themselves, their heirs, executors, administrators, and assigns, jointly and severally covenant and agree with the United States that the collector of customs aforesaid shall indorse on this bond the estimated value of each importation as made, and the date thereof, and that the penalty of this bond shall be held to be double the value of each importation as made and indorsed as aforesaid, and that the value of the importation, where there is no