San Francisco History

The Annals of San Francisco



JANUARY.—Some time before this date certain legal proceedings took place which much affected the pecuniary interests of the city. These subsequently involved it in great and expensive litigation, where millions’ worth of property were concerned. The whole subject forms one of the most important series of events in the history of the city, and has long excited the close attention of the citizens and the deepest regret in the minds of all honest men that such unfortunate circumstances should have occurred. Charges of official corruption and private jobbery have at different times been made openly, and oftener whispered, against prominent citizens for their connection with the matter, and improper, motives have been very freely imputed to them. Lawsuits have been long and vigorously carried on regarding the subject, the final decisions upon some of which have regulated the ownership and titles to a vast amount of property. We have selected the opening of this year for a short general statement of the case, although some of the particular events alluded to occur much later in point of time.

In the course of 1850, Dr. Peter Smith contracted with the city for the care of its indigent sick. For each patient he was allowed a sum of four dollars daily. This may now seem a high allowance, but at that period,—to say nothing of the usual jobbery in the matter,—the cost of house-rent, boarding, medicines and medical attendance, was very great. The city having little money in its exchequer at the time, generally paid Dr. Smith in the shape of scrip, which bore a monthly interest of three per cent. till redeemed by cash payments. The common council were meanwhile regularly auditing Smith’s accounts, at short intervals; while they continued to give that gentleman the necessary amounts of scrip to satisfy the different balances as they arose. Altogether, the amount of city indebtedness under Smith’s contract was $64,431.

The total amount of city scrip granted in 1850 and the beginning of 1851, was exceedingly great, and, as we have already mentioned, an act, after considerable discussion and delay, was finally passed by the Legislature, to fund the floating debt and convert the same into stock, bearing an annual interest of ten per cent. General creditors, however, as well as holders of scrip, were neither obliged to await the passage of this act, nor afterwards to accept the terms of conversion. To those who possessed the obligations of the city, or who held it bound as debtor in any actual or implied contract, the ordinary courts of law were open for ascertaining and making effectual the amounts of their claims. Accordingly, some creditors,—and chiefly Dr. Smith,—proceeded to take the necessary legal steps to procure judgments against the city, and to make executions and sales of its property. If all the then holders of scrip or of city indebtedness had acted in this fashion, there would only have resulted “confusion, worse confounded ;“ and neither Dr. Peter Smith nor any one of the city creditors would have profited by his hasty and preference-seeking proceedings. As it happened, the party named was almost the sole, as he was the chief creditor, who thought fit thus to secure his strictly legal rights.

On the 25th of February, 1851, Smith recovered judgment against the city for $19,239, being a portion of the total amount claimed by him; and on the 8th of July following, the sheriff proceeded to sell so much of the city property as, it was expected, would defray the sum named. At this sale the various wharves belonging to the corporation were sold, as also the old city hall lot, and the city hospital and buildings. By this time the act to fund the municipal floating debt had been passed, and its property conveyed to the commissioners there named. At first sight it appeared improper, and perhaps ridiculous, in the circumstances, for an individual to sue the city to extremities, and seek to gain a preference over the general body of creditors. The commissioners of the funded debt made both public and private statements in the strongest terms, to the effect that any sales which might take place under the Smith judgments would be held as illegal and of not the slightest value. This conduct on their part, as well as a vague general impression among the citizens, that such was, or certainly ought to be the true state of the case, had the effect of discouraging buyers from attending and bidding at the sales in question; and consequently the property was sold at merely nominal prices, perhaps at not a twentieth, or even a fiftieth part of its real value. The sum realized was therefore insufficient to satisfy Smith’s judgment. Accordingly an alias execution for the balance was issued on the 7th of August following, upon which the sheriff, on the 17th of September thereafter, sold forty one-hundred-vara lots, fifty-five fifty-vara lots and one water lot. But as the old impression remained that the whole proceedings were illegal, nominal prices were again only obtained for the great amount of property mentioned. On the 2d January, 1852, the sheriff further sold an immense amount of water lot property of the value, at least, of half a million of dollars, also at nominal prices. Still the original judgment was unsatisfied.

Meanwhile a second suit had been raised by Smith against the city, upon which judgment, on the 4th of March, 1851, was duly obtained, for $45,538. Upon this, the sheriff advertised to sell on 14th June following, one hundred and three water lots, twenty-seven blocks on South Beach, and seven one-hundred-vara lots. The commissioners, consequently, in order to save the city’s property from the threatened sacrifice, appealed to the proper legal tribunals for injunctions to stay the sheriff’s sale; but for reasons which may not here be named, their appeal was disregarded. Failing to obtain the necessary injunction, and still determined to protect the interests of the people, the commissioners attempted to compromise matters with Dr. Smith, to effect which object, Col. J. W. Geary and Judge P. A. Morse, on behalf of the Board, personally waited upon John McHenry, Esq., counsel for Peter Smith, and guaranteed to secure to Smith from their own private funds the whole amount of his judgment on condition that the sale should be arrested. This generous offer, which had it been accepted, would have saved millions of dollars to the city, from the pockets of a few greedy speculators who were instigating and abetting the proceedings of Smith, was not only rejected, but treated with contempt. The commissioners driven to their last resource, and acting under advice of their attorney, Solomon Heydenfeldt, Esq., who subsequently became and was a judge of the Supreme Court, when the decision against the action of the commissioners and confirming the “Peter Smith Titles” obtained from the sheriff was given, issued the following address:—


“A sale of a large number of city lots is advertised to take place this day, by virtue of an execution in the hands of the Sheriff, in favor of Peter Smith against the city of San Francisco. The public are hereby notified, that the city has no legal title to the said lots, nor had any title at the time of the rendition of the judgment. By virtue of an ordinance of Council the city conveyed the said lots in December last to the Commissioners of the Sinking Fund, in trust for the benefit of the creditors of the city; and by virtue of an act of the last Legislature, the Commissioners of the Sinking Fund conveyed said lots to the present Commissioners of the Funded Debt upon the same trusts. Some time since an injunction was obtained in the District Court to prevent this sale. The injunction was dissolved on the ground that the judgment creditor of the city bad the right to sell whatever interest the city may have left after the execution of the trust, and that such sale would not interfere with the trust. Every one will readily perceive that a purchase made at the Sheriff’s sale will convey no title, because the property of the city is insufficient to pay all of her debts, and under the acts above referred to, it will be the duty of the present Commissioners of the Funded Debt to sell said property in execution of the trusts confided to them, at which sales the purchasers will be enabled to obtain a complete and perfect title. The public are therefore cautioned to disregard the sale to be made by the Sheriff to-day, and the undersigned have given this notice so that no one can complain hereafter that they were purchasers without actual notice of the title held by the undersigned.

P. A. Morse,
D. J. Tallant,
Wm. Hooper,
Jno. W. Geary,
James King, of Wm.
Commissioners of Funded Debt.
Office Commissioner’s Funded Debt, June 14, 1851.”

This address, which was published in the daily papers, and even read to the people on the day it was issued, failed to produce the effect intended by the commissioners. While, perhaps, they never supposed it would deter the sheriff from proceeding with the sale, which took place according to advertisement; they, at least, and we must believe, honestly supposed that it would prevent citizens from purchasing property which the sheriff, according to their opinion, had no legal right to sell, and of paying money for titles which would never be confirmed, and therefore would be valueless. Their action in the matter, certainly prevented many persons from building or purchasing at the sale, and as before, the lots were disposed of at ridiculously low rates. For this, the commissioners have of late been the objects of much public censure and private calumny. Their conduct has been loudly condemned and their motives impugned. But it should be observed, that they acted by advice of learned counsel; though singularly enough, their adviser subsequently became a judge of the Supreme Court, where he held a seat at the very time the decision was given adverse to his former instructions, and legalizing the sales, by the sheriff of the city property, under the judgments of Smith.

But it is unnecessary, in this work, which does not profess to be a legal guide to the titles of real estate, to detail minutely the further judgments and sales. It is sufficient to say that Dr. Smith instituted other suits, procured new judgments, and made new executions and sales of the most valuable portions of the property still left to the city. The great sale of the 30th of January, 1852, may only be alluded to, at which about two thousand acres of land belonging to the city, and situated within the municipal bounds, were disposed of by the sheriff in the manner above mentioned. As in the beginning, so to the end of these sales, only nominal prices were obtained. The city was losing piece-meal the best part of its real estate, while what between principal, interest and legal costs, the old debt of Smith long remained nearly as great as ever. In the end it was wiped off, but at what an enormous sacrifice!

At first the general public were inclined to treat the whole proceedings as a farce, though a somewhat expensive one to the purchasers at the sheriff’s repeated sales. Farther consideration made people begin to think that, after all, the laugh and profit might really be on the side of those supposed foolish persons. The commissioners of the funded debt, in pursuance of their duties, attempted to sell various portions of the city property, but were baffled by repeated injunctions on the part of the holders of what were at this time and have since been commonly called the “Peter Smith Titles.” The boards of aldermen next meddled in the fray, and they likewise began to deal in injunctions and other legal annoyances. Matters looked bad, and soon the progress of serious lawsuits made them much worse. Opportunities were still given to cancel or remedy the worst parts of the original objectionable measures. The boards of aldermen and the mayor happened to be opposed in this as in many other matters of consequence, while the funded debt commissioners, were also not on the best terms with the common council, which last body again scarcely possessed the public confidence. Thus there was a general want of union and common action in most municipal matters; while especially in regard to the Smith sales, either nobody knew what to do, or every body pretended nothing could be done. At any rate, nothing effectual was done to save the city’s interests.

At the last moment allowed by law for the redemption of property sold under the sheriff’s authority, a large sum of money was procured through the liberality and public spirit of a distinguished and worthy firm, Messrs. Theodore Payne & Co., and tender was made of the sums, principal, interest and charges, contained in one of the judgments upon which the sale of the 30th January, 1852, had taken place. This redemption-money was refused by those who had purchased at the sale mentioned; and immediately new lawsuits were raised to try the question whether it had been offered timeously and by the proper parties, or whether indeed there could be any right of redemption whatever in the case. By and by the attorney-general instituted an action against the funded debt commissioners, in which was claimed the twenty-five per cent. due to the State of the supposed real value of the water lots that had been sold at nominal prices. That action was based on allegations of fraud, or culpable ignorance, or carelessness on the part of the commissioners. The pecuniary value of the whole property involved in these several sales was estimated, in 1852, at about two millions of dollars, although two years later its probable value might be nearer twice, or perhaps thrice that amount.

It was subsequently decided by the Supreme Court, that the sales of the wharves and certain other portions of the city property were legal. This swept away for ever one great portion of the corporation means. The next question was the validity of the redemption above mentioned. It was contended that the mayor and the funded debt commissioners (which parties had made the tender), were not entitled to redeem, especially without instruction from the council boards, that right being only in the city in its corporate capacity. Other legal points of nicety arose, in regard, particularly, to the alleged right of redemption itself. These were long matters of contention, and from the immense pecuniary interests at stake, the action was conducted on both sides with all the talent and chicanery that influence or money could persuade or buy. At length, and while we write (April, 1854), a decision has been given, that the redemption money alluded to was not offered by the parties who alone were entitled to make it, and that therefore the relative sales were legal. This judgment embraced other points of law upon which it was likewise founded, but it is unnecessary here to allude farther to them. These several decisions have had the effect of depriving the city of an enormous amount of property, the possession of which would have much relieved the inhabitants of a great and annually increasing taxation.

There is still, as there has long been, much bitter and angry feeling existing in the city respecting the “Peter Smith Titles.” San Francisco has somehow lost its best and most valuable property, and individual citizens have gained immense fortunes by the loss. Little or no money has really been paid by these lucky speculators in “the glorious uncertainty of the law.” So far as Smith is concerned, it was his undoubted right to make his claims against the city effectual, if he legally could. The same right was in the power of all its other creditors. That they did not exercise their privileges was not the doctor’s fault. At the same time it may just be mentioned as a fact, that public indignation was strongly excited against his independent and seek-my-own-good style of action. Still, whatever may be thought of that gentleman’s discretion or patriotism in the matter, or of the original nature of his claims, which (perhaps, without that close scrutiny that should have been given), having been sustained by legal judgments, became settled facts, he is not lightly to be blamed for the unfortunate events that afterwards occurred. The same may not be said of certain officials and private citizens who joined and acted with them. Every thing was certainly done to cry down the right of Smith to sell, and thereby was lowered the value of the municipal property. If this effect was foreseen and wilfully intended, as many have not scrupled to assert, in order to allow a clique of grand speculators to prey on the city means, their conduct cannot be too strongly condemned. If their proceedings arose simply from an error in judgment, the sad effects can only be deplored. The foregoing relation of facts seem clearly to show that the commissioners acted in good faith. They were men of reputed integrity, and had already “done the State some service.” The general public took the same view of the subject as did the commissioners. They believed the sales to be invalid, and that the titles obtained from them would be worthless. Hence the sheriff had only for bidders and buyers those daring speculators, who either knew the law better, or were determined to “chance it;“ and who, without competition, had the most valuable lots knocked down to them at the cost of an old song. Then, after all, is nobody to be blamed for the unfortunate issue? When millions have been lost in this way to the community, it is hard to convince the citizens that no underhand dealing has taken place; that no corruption, no wilful delay, false statements, gross personal interests and plotting have been at work. It may not be easy to discover and brand the guilty persons, and people may entertain different suspicions as to their names and special concern in the grand game of spoliation. Let every one therefore keep his own thoughts on the business. At this stage of the affair, it is perhaps impossible to get at “the truth—the whole truth—and nothing but the truth.” One thing only seems certain—the “manifest destiny” of San Francisco is to be plundered at all hands, and to yield easy and quickly won fortunes to her “most prominent citizens.”

Source: Frank Soulé, John H. Gihon, M.D., and James Nisbet. The Annals of San Francisco. 1855: San Francisco.

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