United States v. State Bank

• Decision Date: 01 October 1877
• Parties: UNITED STATES v. STATE BANK
• Court: U.S. Supreme Court

96 U.S. 30

24 L.Ed. 647

UNITED STATES v. STATE BANK.

October Term, 1877

APPEAL from the Court of Claims.

This action and the following were brought, one by the State National Bank, of Boston, Mass., and the other by the Merchants' National Bank, of the same place, to recover from the United States $480,000 in gold coin, being the amount of certain gold certificates deposited, Feb. 28, 1867, in the subtreasury at Boston, and on the same day cancelled and forwarded to the Treasurer of the United States at Washington. The cause of action in each case grew out of the same transaction, and the findings of fact by the court below are the same. As they are substantially set forth in the opinion of the court, they are omitted here. The certificates of deposit referred to in the opinion are as follows: —

'UNITED STATES TREASURY, BOSTON.

'Deposited by Mellen, Ward, & Co., of Boston, on acc't of deposit of gold-c't'f's, amount four hundred & Twenty thousand dollars, the same to be exchanged for gold-c't'f's, or its equivalent, upon their order or demand.

'J. F. HARTWELL, Cr.

'Date, Feb. 28, 1867.

(Indorsed:) 'Pay only upon the order of C. H. Smith, cash.

'MELLEN, WARD, & Co

'BOSTON, Feb. 28, 1867.'-

'UNITED STATES TREASURY, BOSTON.

'Deposited by Mellen, Ward, & Co., of Boston, on acc't of gold certificates deposited. Amount one hundred & sixty thousand dollars, to be exchanged for gold-c'f'fs or its equivalent on demand.

'J. F. HARTWELL, Cr.

(Indorsed:) 'Pay only to the order of C. H. Smith, cash.

'MELLEN, WARD, & Co.

'BOSTON, Feb. 28, 1867.'

The Court of Claims rendered judgment in favor of the State Bank and against the Merchants' Bank. From the judgments rendered against them respectively the United States and the Merchants' Bank severally appealed to this court.

The Solicitor-General, for the United States.

The State Bank has merely the rights of the owner of a collateral security, and the specific recovery thereof against the United States, who is in possession, is the only relief to which it is entitled.

The Court of Claims has, in certain cases, cognizance of the legal rights of claimants against the United States; but it cannot enforce the moral obligations of the government or bestow its grace. Gibbons v. United States, 8 Wall. 269.

The charge that the certificates were received by the United States without consideration and in fraud of the rights of the State Bank is unwarranted, and in this proceeding, which is analogous to a petition of right, is inadmissible. The government is not, upon an implied assumpsit, liable for the torts of its officer committed while in its service and apparently for its benefit. Gibbons v. United States, supra; Clark v. Dupree, 2 Dev. (N. C.) L. 411; Mann v. Kendall, 2 Jones (N. C.) L. 192.

The receipts given to Mellen, Ward, & Co. by Hartwell, in the discharge of his official duty, define the claim. Smith, the cashier of the State Bank, having observed at the time that they were so given, they were thereupon indorsed by that firm to him as cashier. As the ordinary vouchers of such transactions, they measure the quality and degree of the obligation of the government, and obviously were to be surrendered whenever a successful demand was made for the fulfilment of the contract, whether at the sub-treasury or in a court. They were neither declared upon nor produced in the course of the trial. In this connection, it will be observed that the first receipt is perhaps negotiable, Miller v. Austen, 13 How. 218; and, therefore, like all other papers of its class, cannot in general be recovered upon, unless produced at the trial.

If, however, the former receipt be not negotiable, then both receipts express the contracts made by the United States in regard to the deposits, not only as to their substance but also as to the parties by whom they were to be enforced.

Mr. C. B. Goodrich, for the State Bank.

The doctrine of Bayne v. United States (93 U. S. 642), that public money obtained from a disbursing officer, without consideration, is money of the United States, applies where, as in this case, the United States, without consideration and by the fraud of its officer, receives the money of an individual. His right to it remains; and where, as in this instance, the government is liable to suit, may be judicially enforced. In such a case between private parties, assumpsit lies. Moses v. Macferlan, 2 Burr. 1005.

Where a party has acquired the legal right to property to which another has the better right, a court of equity will convert him into a trustee of the true owner, and compel him to convey the legal title. Stark v. Starrs, 6 Wall. 419; Meader v. Norton, 11 id. 458. See also United States v. Buford, 3 Pet. 12.

Mr. Sidney Bartlett, for the banks.

The legal title to the certificates was in the Merchants' Bank, and by the subsequent delivery of them was vested in the State Bank. Merchants' Bank v. State Bank, 6 Wall. 604.

The certificates were obtained by the cashier of the subtreasury at Boston, not by larceny nor by a fraudulent contract, in his individual right, but by a contract in the name of the United States, which he was by law fully authorized to make. The government is not, under such circumstances, a bona fide purchaser without notice, but is responsible for money derived under the contract and placed in its coffers. To hold otherwise, because the contract was part of a secret scheme of the cashier to appropriate to his own use the money after its receipt and to give a fraudulent voucher therefor, would be extraordinary indeed.

By cancelling the gold certificates, a person, had the contract thus cancelled been made with him, would be rendered liable for the sums due. In this case, the petition sets out all the facts; and if by law the liability of the government is founded either on its contract contained in the certificates, or on its treating them as money, the pleadings are sufficient to sustain a judgment therefor.

MR. JUSTICE SWAYNE delivered the opinion of the court.

Upon analyzing this case as it is presented in the record, the facts are found to be few and simple.

Hartwell was cashier of the sub-treasury in Boston. He embezzled a large amount of money belonging to the United States, by lending it to Mellen, Ward, & Co. As the time for the examination of the funds in the sub-treasury approached, Mellen, Ward, & Co. endeavored to tide Hartwell over the crisis, and to conceal his guilt and their own by the devices out of which this controversy has arisen. They had sold to the Merchants' National Bank, of Boston, a large amount of gold certificates, with the understanding that they might buy back the like amount by paying what the bank had paid, and interest at the rate of six per cent per annum. Carter, one of the firm, arranged with Smith, the cashier of the State National Bank, of Boston, to buy from the Merchants' National Bank, of Boston, gold certificates to the amount of $420,000, and to pay for them with the checks of Mellen, Ward, & Co., certified to be good by Smith as such cashier, and then to deposit the certificates in the sub-treasury, where they were to remain until the ensuing day. A receipt was to be taken from the proper sub-treasury officer. The certificates were bought, paid for, and deposited accordingly. Hartwell received them from Smith in the presence of Carter, and made out the receipt to Mellen, Ward, & Co., or order. Smith inquired why the receipt was to them. Carter thereupon indorsed it by the firm name to Smith as cashier, and Smith took it without further remark.

Subsequently, pursuant to a like arrangement between the same parties, Smith, as such cashier, made a further purchase of gold and gold certificates from the Merchants' Bank, and converted the gold into gold certificates. The aggregate of the certificates thus procured was $60,000. Thereafter Smith, as such cashier, at the instance of Carter, made a further purchase of...