Morgenthau v. Fidelity & Deposit Co. of Maryland

• Decision Date: 13 December 1937
• Docket Number: No. 7032.,7032.
• Citation: 68 App. DC 163,94 F.2d 632
• Parties: MORGENTHAU et al. v. FIDELITY & DEPOSIT CO. OF MARYLAND.
• Court: U.S. Court of Appeals — District of Columbia Circuit

68 App. DC 163, 94 F.2d 632 (1937)

MORGENTHAU et al. v. FIDELITY & DEPOSIT CO. OF MARYLAND.

No. 7032.

United States Court of Appeals for the District of Columbia.

Argued November 11, 1937.

Decided December 13, 1937.

Leslie C. Garnett, U. S. Atty., and Allen J. Krouse, Asst. U. S. Atty., both of Washington, D. C., for appellants.

Bynum E. Hinton and Alexander M. Heron, both of Washington, D. C., for appellee.

Before GRONER, STEPHENS, and MILLER, Associate Justices.

GRONER, J.

Durso, a resident of Massachusetts, entered into a contract with the United States for the construction of a government building in Vermont. Fidelity & Deposit Company executed the surety bond,¹ section 270, U.S.C.A., T. 40. Durso simultaneously entered into an agreement with the surety by which he assigned all retained percentages and all sums which might become due under the contract as collateral to secure the surety against liability on the bond. Durso was financially unable to complete his contract, and the surety advanced the necessary funds, as the result of which the contract was completed. In addition to more than $10,000 advanced by the surety to Durso and still due, the former paid to laborers and materialmen more than $5,000 to satisfy all unpaid claims for labor and material supplied in the work. As a result of these payments, nothing now remains due for labor and materials in the completion of the contract. After acceptance of the work, the United States ascertained that the retained percentage due the contractor was $5,343.29, and accordingly audited the claim and drew a voucher for that amount. The surety filed its bill against the Secretary of the Treasury and the Treasurer to enjoin them from paying to Durso the amount determined to be due him and asked that a receiver be appointed to collect the sum and to hold the same for the protection of the surety either by virtue of the assignment it held or by virtue of its equitable right through subrogation. There was an order of publication and personal service on Durso in Massachusetts by the United States marshal there.

The United States say that their sole interest in the case is to secure a valid acquittance in making payment of the claim, but they also say, first, that the appointment of the receiver is void because the District Court did not have jurisdiction of the defendant Durso and the proceedings are, therefore, in no wise binding on him for the reason that there is no res in the District of Columbia belonging to Durso which would form the basis for constructive service of process; and, second, that the surety has no lien or equitable interest in the fund by reason of subrogation or otherwise, and even if it has R.S. § 3477, as amended, 31 U.S.C.A. § 203, defeats its claim. We think the United States are wrong in all these respects.

First. Section 105 of the District of Columbia Code, 1924, D.C.Code 1929, T. 24, § 378, provides that publication or personal service of process outside the District of Columbia may be had against a nonresident in any suit involving a claim or demand to or against any real or personal property within the jurisdiction of the court. Here we have a case in which the United States hold a fund evidenced by a treasury check which, except that there is a lien against the fund, is payable to the contractor; and here also we have a case in which admittedly the contractor is indebted to his surety to the amount of the entire sum and more and has assigned as collateral security all his right, claim, and title to the fund. The check is in the hands of the disbursing officer of the United States in the city of Washington, and the United States are ready to deliver it to whoever is entitled to receive it. In such a case the federal courts in the District of Columbia have jurisdiction to appoint a receiver and through the receiver to distribute the sum to the person or persons entitled thereto. The check and the fund represented by the check are not claimed by the United States, and the officials of the government are charged with a ministerial duty to make payment on demand to the person to whom it is properly payable; and from this it follows as a necessary consequence that one who has an equitable right in the fund as against the payee may have relief against the officials of the Treasury through a mandatory writ of injunction or a receivership, so as to bind the payee and afford a proper acquittance to the government. As much as this was said in Houston v. Ormes, 252 U.S. 469, 40 S.Ct. 369, 64 L.Ed. 667.

Neither the doctrine announced nor the procedure pursued here is novel. The rule has been applied and the jurisdiction sustained time and again by this court. Jones v. Rutherford, 26 App.D.C. 114, was such a case as this. It involved a check drawn by the Treasurer of the United States in settlement of a claim against the government. An attorney had a lien upon the fund for services rendered in connection with its allowance. His widow and executrix brought suit in the District of Columbia against the payee of the check and the Treasurer of the United States. As the payee of the check was a nonresident of the District, resort was had to an order of publication against him. He appeared specially and moved to vacate the order on the ground that the court was without jurisdiction because of his nonresidence. We held that the check was personal property within the meaning of section 105 of the District of Columbia Code 1924 and that under that provision substituted service by publication was proper in a suit to enforce a lien against the property within the District of Columbia. It was insisted there, as it is here, that a claim against the United States has no locality in the District of Columbia even when recognized by an appropriation for payment, and since it is not property within the District of Columbia the person entitled to it cannot be summoned by constructive service. Answering this contention, we said:

"But the contention of the appellant is that a claim against the United States has no locality, and the debt, if it exists, is not property of the creditor within the District of Columbia; and, in support of this contention, he relies upon various decisions of the Supreme Court of the United States, which are supposed to establish it. We are of opinion that the proposition put forward by the appellant has no application to the present case, and that the decisions in question have no reference to such a condition as exists here. There is no question here of any claim against the United States by anyone, or of any indebtedness due by the United States to anyone. The claim and the indebtedness have been fully settled. The United States have drawn their draft for the payment of the indebtedness, which is the usual mode of payment, and they are ready to deliver that draft. It is not a question whether a claim against the United States, or an indebtedness by the United States, is property here or elsewhere. The question is as to the right to the manual possession of a draft drawn by the United States, and ready to be delivered to the person lawfully entitled to its possession. The question is whether that draft is property within the District of Columbia as between two rival claimants for the possession of it. The possession of this draft is the matter in controversy between the parties, and we are of opinion that it is property in this District. It certainly has no other situs, and if it is property at all it is property in the District of Columbia."

In Doerschuck et al. v. Mellon, 60 App. D.C. 383, 55 F.2d 741, 744, we restated and approved the doctrine in Jones v. Rutherford. There the suit was against the Secretary of the Treasury and a nonresident corporation to determine the right to a special fund deposited in the federal treasury to which the government made no claim. We sustained the jurisdiction of the District Court, saying:

"We are also of opinion that the court below was correct in overruling the plea to the jurisdiction...