Joshua Norton's Losses, 1854–1856
Details of the 1854 rice fallout suggest that Norton already was overextended and carrying heavy debt before the rice fiasco; that he was overinvested — and highly leveraged — in real estate; and that, in general, his wealth was much more fragile and precarious than often is supposed.
In October 1854, the California Supreme Court upheld a lower-court ruling against Joshua Norton & Co. in the case of Ruiz v. Norton (see pp. 355–361 here).
It was the Ruiz brothers — José Maria, Francisco and Manuel — who were the consignors of 200,000 lbs. of rice for which Joshua and his Scottish partner, William Sim (the “Co.”), on 22 December 1852 had contracted to pay $25,000. After making a down payment of $2,000 and taking delivery on the full cargo, Joshua refused to pay the $23,000 balance, contending that the rice was of lower quality than had been promised. At which point, the Ruiz brothers sued.
It appears that, at some point early in the proceedings, Sim deserted Joshua — and possibly also that, for judgment purposes, the law itself treated Joshua as the sole defendant, as he was the lead partner.
In filing suit, the Ruiz brothers sought to attach any judgment against Joshua not only to his bank account but also to his property.
And, when the hammer fell, it fell hard and fast.
The Supreme Court’s decision triggered a small avalanche of district court lawsuits related to Joshua’s various property holdings. In November 1854, just weeks after the high court ruling, “Sheriff’s Sale” notices began to appear in the Daily Alta California newspaper declaring that, in light of district court-mandated foreclosures and sales of Joshua’s property interests, those interests would — on the announced date — be sold to the highest bidder at the courthouse door.
The details of these notices, together with Joshua’s precipitous decline over the following two years — he was forced to declare bankruptcy in August 1856 — and further details included in public reports of the insolvency suggest a few things:
1) Joshua already was overextended and carrying heavy debt in the period leading up to the rice fiasco.
2) Much of Joshua’s supposed wealth was tied up in real estate.
3) Joshua’s real estate interests were highly leveraged. He often held these interests with partners, and — with or without partners — appears not to have had the controlling interest in any property that would have given him more flexibility to recover.
Perhaps Joshua had burned through lots of cash keeping his attorney, Hall McAllister, on retainer for most of 1853 and 1854. Still, if Joshua had been $250,000 liquid — to use a number that often is attached to his peak wealth — then he should have been able to absorb a business loss of $25,000 with relative ease.
But, if Joshua’s wealth was as fragile and his liquidity as low as it appears, then the oft-repeated biographical chestnut that he arrived in San Francisco with X amount of dollars and parlayed it into six times that might not have meant all that much.
The first Sheriff’s Sale notice first appeared on 30 November 1854 and concerned Joshua’s half-interest in six 50-vara lots in North Beach:
Sheriff’s Sale notice for Joshua Norton’s interest in six lots in North Beach, San Francisco, Daily Alta, 30 November 1854, p. 4. Source: California Digital Newspaper Collection
The second notice first appeared on 4 December 1854 and concerned a couple of water lots that Joshua had bought in partnership with Judge Lansing Mizner. (Although a Judge, Mizner was only in his late 20s when he and Joshua went into business together and 30 or so at the time of the foreclosure.)
Sheriff’s Sale notice for Joshua Norton’s interest in two water lots in North Beach, San Francisco, Daily Alta, 4 December 1854, p. 4. Source: California Digital Newspaper Collection
A third notice, relating to a large lot on Pacific Street, appeared on 16 January 1856. The fact that the plaintiff, George Wood, did not pounce in 1854, raises the possibility that he and Joshua were good friends.
Sheriff’s Sale notice for interest of “Joshua Norton and others” in a lot on Pacific Street, San Francisco, Daily Alta, 16 January 1856, p. 4. Source: California Digital Newspaper Collection
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JOSHUA NORTON had other properties, too, that got caught in the downspiral — most notably, his business properties at Sansome and Jackson Streets and his two water lots at Rincon Point, near the Pacific Mail Steamship Company. Also included might have been additional lots in North Beach.
According to Norton's biographer, William Drury, Joshua bought eight North Beach lots from Harry Meiggs, as part of Meiggs’s ill-fated development bonanza in the area now known as Fisherman’s Wharf — four lots on his own and four with Lansing Mizner.
In Drury's account, these North Beach lots were held by the German banking house of Godeffroy, Sillem & Co. It was Godeffroy & Sillem that tipped off Joshua to the potential rice deal and that acted as his agent in that deal.
When the rice deal went south, Drury writes, Godeffroy & Sillem sold the North Beach mortgages to St. Louis-based bank of Lucas, Turner & Co., which already held the mortgages on the Rincon water lots.
Lucas, Turner's San Francisco office was headed up by William Tecumseh Sherman.
In Drury’s telling, Sherman quickly foreclosed on all these properties when Joshua ceased to be able to make payments on the mortgages — selling the Rincon lots to the San Francisco Gas Lighting Company, a precursor to PG&E.
The fact that there are eight North Beach lots referenced in the Sheriff Sale notices above leads me to wonder: Are these the eight lots that Drury mentions? And: Did Drury miss, or leave out, a few details?
Assuming that Drury is right about the initial arrangement — four lots for Joshua, four lots shared 50/50 between Joshua and Lansing Mizner — one can imagine, for example, a scenario in which: (a) Joshua — possibly bowing to financial pressures — later took on a 50% partner for the four lots he originally bought on his own, and (b) Mizner sold his half-interest in two of the four lots, either to the same partner Joshua took on for the other four or to someone else, keeping his half-interest in the other two.
This would be consistent with the bloc of six North Beach lots mentioned in John McHenry's suit against Joshua and the bloc of two mentioned in Thomas Poulterer's suit against Joshua and Mizner. (See Sheriff’s Sale notices above. Interesting that McHenry's suit apparently did not name Joshua's partners.)
Elsewhere in his account, Drury mentions that the Sansome and Jackson properties "went at a loss." Drury doesn't specify whether those were bank foreclosures or Joshua was trying to unload them on an FSBO basis.
But, Drury mentions this loss in the same paragraph where he notes that — during this same period — Joshua in the 1854 city directory listed himself as a “real estate dealer” with an office at 120 Montgomery Street. Perhaps, the real estate on offer was his own.
Two years later, in an 1856 city directory, Joshua still was listing himself a “real estate dealer.” This suggests that financial pressures continued to worsen — possibly a reflection of the ongoing difficulty Joshua was having in getting his properties off his back at a time when San Francisco’s economy was hunkered down.
Joshua declared bankruptcy in late summer of that year.
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AN INTERESTING sidebar…
The decision that the California Supreme Court handed down in October 1854 emerged from the third and final of three trials in the rice case involving Joshua Norton & Co. and the Ruiz brothers.
The first two trials were heard in the Fourth District Court in 1853. In the original trail, the Ruiz brothers sued for — and were awarded — the full balance of $23,000, to be paid by Norton & Co. In the second trial, Joshua appealed that decision and won.
In the California Supreme Court, the Ruiz brothers appealed the lower-court decision and won.
But, in issuing the amount of the award in May 1855, the Court reduced the award from $23,000 to $20,000.
Item reporting the final award in the case of Ruiz v. Norton, Daily Placer Times and Transcript, 11 May 1855, p. 2. (Note: The name of José Maria Ruiz is misspelled “Reivy.”) Source: GenealogyBank
Presumably, Joshua was not making any payments on the Ruiz claim while the case still was pending. Which leads me to wonder…
Did the California Supreme Court justices agree with the jury’s finding in favor of the Ruiz brothers but not believe the verdict was so clear-cut as to warrant an award of the full claim of $23,000?
Were the justices seeking to soften the blow just a little — understanding that Joshua could no more pay $20,000 than he could $23,000?
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THE INSOLVENCY CALENDAR FOR 1856, published in various local papers at end of the year, showed that Joshua Norton had applied for the benefit of the insolvency law on 30 August 1856, and that the Twelfth District Court Judge — yes, named Edward Norton — had discharged Joshua’s case on November 1st.
Joshua was reported with liabilities of $55,811 and assets valued at $15,000.
Detail from Insolvency Calendar for 1856 showing Joshua Norton’s liabilities and assets at the time of his insolvency, Daily Alta California, 31 December 1856, p. 2. Source: California Digital Newspaper Collection
It would be fascinating to see an itemized breakdown of Joshua’s liabilities and assets.
Did the liabilities of $55,811 reflect his having paid off his $23,000 rice bill. Presumably, at least some of this balance had been paid down through the sale of his foreclosed property interests.
Had Joshua drained his bank account paying legal bills in 1853 and 1854? Or, had Hall McAllister provided his legal services pro bono, as a favor to a friend?
Certainly, the fact that Joshua’s liabilities-to-assets ratio still was so high in late 1856 — and that his liabilities still were 223% of the $25,000 he originally contracted to pay for the rice — tells us that Joshua already was overextended and carrying heavy debt before the storm of December 1852.
In publishing the Insolvency Calendar, the Daily Alta appended this withering editorial note:
The excess of liabilities over the amount of assets is really frightful, and exhibits a very loose manner, certainly of conducting business.
Then again: One could argue that one key to Joshua Norton’s greatness — reflected both in his pivot to declaring himself Emperor and specifically in how he carried out that role for 20-plus years — was the fact that he had cultivated an appetite for calculated risk.
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