United States v. Howland

17 U.S. 108

• Court: Supreme Court of the United States
• Decided: February 15, 1819
• Status: Published

Opinion

Mr. Chief Justice Marshall

delivered the opinion of the Court. The bill in this case was filed by the United States in the Circuit Court for the district of Massachusetts, to recover from the defendants a sum of money in their hands, alleged to be the money of Jacob Shoemaker and Charles R. Travers, merchants and partners, who are stated to be insolvents, and to be indebted to the United States for duties.

It appears, that Shoemaker and Travers, on the 6th day of December, 1806, executed an indenture, in which, reciting that they are justly indebted to divers persons, whose names are expressed in a list thereto annexed, and are uriable at present to pay the said debts, they assign to trustees therein-mentioned, all and singular the estate and effects contained in a schedule' annexed, in trust, to pay the debt due . to the enumerated creditors, and first that due to the United States. The schedule contains many items of property, and among others the proceeds of the cargo of the Deborah, then at sea. The Deborah was the property of Howland and Allen ; and on her coming into port, her, captain délivered to her owners a sum or money which he had received m Guadaloupe for Shoemaker and Travers, and which 'is in the schedule annexed to the deed of assignment already - mentioned. At the hearing the Circuit Court dismissed the bill,' in the opinion that it was not sustainable. From this decree the . United States have appealed to this Court, and now insist,

1. That it is a case in which a Court of Equity has jurisdiction. -

2. That the United States are entitled to priority, this being a case within the provisions of the act of Congress. , .

On the first point no difficulty would be found, liadt the proper parties been before the Court. A trust ' r r * ■ . exists, and an account would be proper, to ascertain 7 a 1 / • the sum. due from Howland and Aliento Shoemaker /and Travers. The case, even independent of these circumstances, would be proper for a Court of Chan-eery, but for the act of Massachusetts, which, allows a . - - / .■ creditor to sue the debtor of his debtor. Still the re- '■ , ' medy in Chancery, where all parties may.be before the Court, is more complete and- adequate, as the sum actually due may be there, in such cases, ascertained with more certainty and facility ; and as the-Courtsof the Union have a Chancery jurisdic- . . ■ ■ e ; tion m every state, and the judiciary act confers tne same Chancery powers on all, and gives, the same rule of decision, its jurisdicción in Massachusetts must be the same as in other States...

This being a case of which a Court of Chancery 111 a7 ta^e jurisdiction, we are next to inquire, whether it is one in which the United States are entitled ... ' *0 priority. .

This depends on the fact whether the deed cf assignment executed by Shoemaker and Travers was a conveyance of all their property. The words of the deed, after reciting the„motives which led to it, and the consideration, are “ have granted, &c., and by these presents, do grant,” &c., “ all and singular / ' 1 ■ ’ b . ’ . ,. , , the estate and effects which is contained m the schedUle hereunto annexed, marked A.” The caption. of the schedule is,. “ schedule of property assigned by Shoemaker and Travers, and Jacob Shoemaker, to the creditors of Shoemaker and Travers.”

The deed then conveys only the property contained in the schedule, and the schedule does not purport to contain all the property of the parties ,who made it. In such a case,' the presumption must be, that there is property nottcoutained in the deed, unless the contrary appears. The onus probandi is thrown on the United States.

It is contended for the United States, that the clause which gives the power to sell, by using the words “ all the property of them, the said Shoemaker and Travers, and Jacob Shoemaker,” indicate clearly that this deed does convey all fheir property. But these words are explained and limited by those which follow, so as to show that the word “ all” is used in reference to the schedule, and means all the property in the schedule. The depositions do not aid the . deed. The question, whether the whole property is assigned, is still left to conjecture, and this being the fact on which the preference of the, United States is founded, ought to be proved. Not being proved, the Court is of opinion, that this„is not a case in which it can be claimed,

i But the United States are the creditors of Shoe-, maker and Travers, and have a right as° creditors to proceed against their property in the hands of How-land and Allen. They have a right to so much of that property as remains after, the debt due to How-land and Allen shall be satisfied. But to ascertain this amount, an account between Howland and Allen and the debtors to the United States should be taken, and the persons against whom the account is to be taken should be parties to the suit. Although, if they cannot be found within the district of Massachusetts, the process of the Court cannot reach them, still they may appear without coercion. At any rate, an account ought to be taken, since the matter controverted between the parties, is more proper to be stated by a master than to be decided in Court without such report.

The decree is to be reversed, and the cause remanded, with directions to allow the plaintiffs to amend the bill and make new parties. The United States will, of course, be at liberty to take testimony, showing the assignment to be of all the property of the parties who made it.

a

Decree. This cause came on to be heard on. the transcript of the record of the Circuit Court for the district of Massachusetts, and was argued by counsel. On consideration whereof, this Court is of opinion, that the Circuit Court erred in dismissing the bill of the plaintiffs, and that their decree ought to be reversed, and .it is hereby reversed and annulled : And it is further ordered, that the said cause be remanded to the said, Circuit Court, with directions to allow the plaintiffs to amend their bill and make new parties.a

Mr. Justice Story did not sit in the Court below in this cause.

The act of March 3, 1797, c. 368. entitled, “ an actto provide more effectually for the settlement of accounts between the United States and receivers of public money,” declares, (s. 5.) “That where any revenue officer or other person, hereafter becoming indebted to the United States, by bond or otherwise; shall become insolvent, or where the estate of any deceased debtor, in the hands of executors or administrators, shall be insufficient to pay all the debts due from the deceased, the debt due to the United States shall be first satisfied ; and the priority hereby established shall be deemed to extend, as well to cases in which a debtor, not having, sufficient property to pay all his debts, shall make a voluntary assignment thereof,, or in which the estate and effects of an absconding, concealed, or absent debtor, shall be attached by process of. law, as to cases in which an act of legal bankruptcy shall be committed.”

' T-he collection act of March 2, 1799, c. 128¡ s. 65. “provides, that “ in all cases of insolvency, or where any estate in the hands of executors, administrators, or assignees, shall be insufficient to pay all the debts due from the deceased, the debt or debts due to the United States, on any such bond or bonds, shall b'e first satisfied ;' and. any executor, administrator, or assignee, or other person, who shall pay any debt due by the person or estate from whom, or for which, they are acting, previous to the debt or debts dire to the United. States from such person or estate, being first duly satisfied and paid, shall become answerable, in their own person or estate, for the debt or debts so due to the United States, or so. much thereof as «may remain due and unpaid, in the proper Court having cognisance thereof:” And, “ That if the principaj in 'any bond which shall be. given to the United States for duties on goods, wares . or merchandize imported, or other penalty, either by himself, his factor, agent, or other person, for him, shall be insolvent, or if such principal being deceased, his or her estate and effects, which shall come to the hands of his or her executors, administrators, or assignees, shall be insufficient for the payment of his or her* debts, and if in either of the said cases, any surety on the said bond or bonds, or the executors, administrators or assignees of such surety, shall pay to the United States the money due upon such bond or bonds, such surety, his or her executors, administrators, or assignees, shall have and enjoy the like advanlage, priority, or preference,-for the recovery and receipt of said moneys, out of the estate and effects -of such insolvent, or deceased principal, as are reserved and secured to the United Stales ; and shall and may bring and maintain a suit or suits, .upon the said bond or bonds, in law or equity, in his, her, or their own name, or names, for the recovery of all moneys paid thereon. And the cases of insolvency mentioned in this section' shall be deemed to extend, as well to cases in- which a debtor, not.having sufficient property to pay all his or her debts, shall have made a voluntary assignment thereof for the benefit of his or-her creditors, or in which the estate and effects of an absconding, concealed,' or absent debtor, shall have been attachéd by process of law, as- to cases in which a legal act of bankruptcy shall have ■ been committed.” •

Under these acts the followingpoinls have been determined : I. That the preference given to the United States by the act of 1797, c. 368. s. 5. is not confined to revenue officers, and persons accountable for public money, but extends to debtors of the United States generally. United States v. Fisher, 2 Cranch, 358. 391. 395. And that the collection act of 1799, c. 128. s. 65. does not repeal the 5th section of the act of 1797., c, 368. though the 65th section of the collection act applies only to bonds taken for those duties on imports and tonnage, which are the objects of the act. Ib. 394. The United States are entitled to their preference on a debt due to them by the insolvent as endorser of a bill of exchange, as well as on any other debt. The United States v. Fisher, 2 Cranch, 358.

2. The acts'do not create a lien, nor extend to a bona fide conveyance by the debtor to a third person in the ordinary course of business, or to a mortgage to secure a debt, or. to a case where the debtor’s property is seized under a fi. fa., before the right of preference has accrued to the United States. United States v. Fisher, 2 Cranch, 390. United States v. Hooe, 3 Cranch, 73. 90. Thelluson v. Smith, ante, vol. II.p. 396. 424. But the United States are not precluded from asserting their priority, by a voluntary assignment made by the debtor, under such circumstances as would be a fraud on the bankrupt laws. Harrison v. Sterry, 5 Crunch, 289. 301. A mortgage of part of his property made by a collecor of the customs to his surety in his official bond, to indemnify the surety thereon, and also to secure him from his existing and future endorsements for the mortgagor at the bank, is valid against the United States, although it turns out that the collector was unable to pay all his debts at the time the mortgage was given, and although the mortgagee knew at the time of taking the mortgage the mortgagor was indebted to the United States. United States v. Hooe, 3 Cranch, 73. The priority of the United States is not affected by an assignment under a commission of bankruptcy. United States v. Fisher, 2 Cranch, 358.

3. A mere state of insolvency or inability.in a. debtor the United States, to pay all his debts, gives no right of preference to the United States, unless it is accompanied by a voluntary assignment of his property for the benefit of his creditors ; or, unless his estate and effects shall be attached as those of an absent, concealed, or absconding debtor ; or, unless, he has committed some legal act of bankruptcy or insolvency. United States v. Fisher, 2 Cranch, 358. United States v. Hooe, 3 Cranch, 73. Prince v. Bartlett, 8 Cranch, 431. Thelluson v. Smith, ante, vol. II. p. 396. 424. The priority is limited to some one of these particular cases when the debtor is living j but it takes effect generally, if he is dead. United States v. Fisher, 2 Cranch, 390. In this last cited case, Mr. Chief Justiqe Marshall intimated his own opinion, that it did not create a devastavit in the administration of effects, and would require notice in order to bind the executor, or administrator, or assignee. Ib. 391. note a.

4. The assignment must be of all the debtor’s property. United States v. Hooe, 3 Cranch, 73. 91. If, however, a trivial portion of an estate should be left out for the purpose of evading the act, it would be considered as a fraud upon the law, and the parties would not be allowed to avail themselves of such a contrivance. But where a bona Jide conveyance of part is made, not to avoid the law, but to secure a fair creditor, the case is not within the acts. Ib. 91.

6. The priority attaches at the time of the insolvency manifested in, any of the. modes specified in the acts, whether a suit has been commenced by the United States or .not. United States v. Fisher, 2 Cranch, 395.

6. In the distribution of a bankrupt’s effects in this country, the United States are entitled to a preference, although the debt was contracted by a foreigner in a foreign country, and although the United States had proved their debt under a commission of bankruptcy in this country, and had voted for an assignee. The law of the place, where the contract is made, is, generally speaking, the law of the contract;. i. e. it is the law by which the contract is to be expounded. ■ But the right of priority forms no part of the contract itself. It is extrinsic, aiid is rather a personal privilege dependent on the law of the place whe're the property lies, and where the court sits which is jo decide the cause. Harrison v. Sterry, 5 Cranch, 289. 298.

7. Though a judgment gives to a judgment creditor a lien on the debtor’s lands, and a preference over all subsequent judgment creditors, yet the acts defeat this preference in-favour of the United.States in the cases specified. Thelluson v. Smith, ante, vol, II. p. 396. 423.