Bramwell v. United States Fidelity Guaranty Co

Decision Date11 January 1926
Docket NumberNo. 192,192
Citation46 S.Ct. 176,70 L.Ed. 368,269 U.S. 483
PartiesBRAMWELL, Superintendent of Banks of Oregon, v. UNITED STATES FIDELITY & GUARANTY CO
CourtU.S. Supreme Court

Messrs. J. P. Kavanaugh and William M. Cake, both of Portland, Or., for appellant.

[Argument of Counsel from page 484 intentionally omitted] Messrs. Roscoe C. Nelson, of Portland, Or., and C. B. Ames, of Oklahoma City, Okl., for appellee.

Mr. Justice BUTLER delivered the opinion of the Court.

January 28, 1922, the superintendent of the Klamath Indian Reservation had on deposit with the First State & Savings Bank of Klamath Falls, Or., $96,000, Indian moneys, individual and tribal. The bank had given a bond to the United States, with appellee as surety, to secure the payment of the deposit. It was insolvent and, on that day, suspended payment. Because of its condition, the board of directors passed a resolution giving full control of its affairs to appellant. Pursuant to the laws of the state, he took possession and control of its property and business for the purpose of liquidation. Appellee paid the amount of the deposit to the superintendent of the reservation, and received from the United States an assignment of its claim against the bank; and appellee has the priority, if any, that belonged to the United States. R. S. § 3468 (Comp. St. § 6374). It claimed that, under R. S. § 3466 (Comp. St. § 6372), it should be paid in full out of the bank's assets prior to any payment on account of unsecured or unpreferred claims. Appellant denied priority, but allowed the claim as one not preferred. Appellee brought this suit in the District Court of Oregon to enforce priority. The decree went in its favor (295 F. 331), and was affirmed by the Circuit Court of Appeals (299 F. 705). The case is here on appeal. Section 241, Judicial Code (Comp. St. § 1218).

Section 3466 provides:

'Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.'

Section 3467 (Comp. St. § 6373) provides:

'Every executor, administrator, or assignee, or other person, who pays any debt due by the person or estate from whom or for which he acts, before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate for the debts so due to the United States, or for so much thereof as may remain due and unpaid.'

It was admitted that the total value of the bank's assets was less than its debts, and that it was insolvent. Section 6221, Oregon Laws; National Bankruptcy Act of July 1, 1898, c. 541, § 1, 30 Stat. 544 (Comp. St. § 9585). The lower courts rightly held that the amount owed by the bank on account of the deposit in question was a debt due to the United States.

Appellee is entitled to priority if, within the meaning of section 3466, the bank made a voluntary assignment of its property or committed an act of bankruptcy.

That section is to be liberally construed. In Beaston v. Farmers' Bank, 12 Pet. 102, at page 134 (9 L. Ed. 1017) Mr. Justice McKinley, speaking for the court, said: 'All debtors to the United States, whatever their character, and by whatever mode bound, may be fairly included within the language used * * * And it is manifest, that congress intended to give priority of payment to the United States over all other creditors, in the cases stated therein. It therefore lies upon those who claim exemption from the operation of the statute, to show that they are not within its provisions. * * * As this statute has reference to the public good, it ought to be liberally construed. United States v. State Bank of North Carolina, 6 Pet. 29 (8 L. Ed. 308). As this question has been fully decided by this Court, other authorities need not be cited.' The Bankruptcy Act (Comp. St. §§ 9586-9656) does not give the United States priority as to debts, but that act does not apply to banks, and there has been no act of Congress indicating any change of purpose as to debts due from them to the United States. Cf. Davis v. Pringle, 268 U. S. 315, 317, 318, 45 S. Ct. 549, 69 L. Ed. 974; Sloan Shipyards v. United States Fleet Corporation, 258 U. S. 549, 574, 42 S. Ct. 386, 66 L. Ed. 762; Guarantee Co. v. Title Guaranty Co., 224 U. S. 152, 158, 32 S. Ct. 457, 56 L. Ed. 706. There exist now the same reasons for a liberal construction of the priority act as when the rule was laid down.

The act applies to all debts due from deceased debtors whenever their estates are insufficient to pay all cred- itors, and extends to all debts due from insolvent living debtors when their insolvency is shown in any of the ways stated in section 3466. The decisions of this court show that no lien is created by the statute; that priority does not attach while the debtor continues the owner and in possession of the property; that no evidence can be received of the insolvency of the debtor until he has been divested of his property in one of the modes stated; and that, 'whenever he is thus divested of his property, the person who becomes invested with the title, is thereby made a trustee for the United States, and is bound to pay their debt first out of the proceeds of the debtor's property.' Beaston v. Farmers' Bank, supra, 133, and cases cited; United States v. Oklahoma, 261 U. S. 253, 259, 46 S. Ct. 295, 67 L. Ed. 638.

Appellant, emphasizing the view that the priority act does not apply unless insolvency is manifested in one of the modes there indicated, contends that the resolution of the board of directors was not a voluntary assignment and did not divest the bank of the title; that, as the Bankruptcy Act does not apply to banks, there was no act of bankruptcy committed; that, under the state law, title remains in the bank after the superintendent takes possession and until he disposes of the property in the course of liquidation. And to support the last contention, he cites United States F. & G. Co. v. Bramwell, 108 Or. 261, 287, 217 P. 332, 32 A. L. R. 829. The question in that case was whether the state, as depositor in an insolvent bank taken over by the superintendent of banks, was entitled to priority as a sovereign right. The court held that it was; that its right was not defeated by the taking of the property by an administrative officer of the state before the state asserted its claim for priority; and that the bank's title was not divested until the assets were sold in the course of liquidation.

The specified ways in which insolvency may be manifested include all cases in which an insolvent debtor makes an assignment of his property; there is no exception, and no regard is had to the purpose or manner of the assignment; and they include all cases in which an act of bankruptcy is committed under the laws of a state or under a national bankruptcy law. Conard v. Nicoll, 4 Pet. 291, 307, 308, 7 L. Ed. 862; United States v. Oklahoma, supra, 262 (43 S. Ct. 295). The priority act does not expressly require that the insolvent debtor should be 'divested' or that the person on whom is imposed the duty to pay the United States first shall become 'invested' with the title. Appellant, arguing that such transfer of title is necessary, stresses general statements to that effect from opinions of this court. See United States v. Hooe, 3 Cranch, 73, 91, 2 L. Ed. 370; Conard v. Atlantic Insurance Co., 1 Pet. 386, 439, 7 L. Ed. 189; Beaston v. Farmers' Bank, supra, 133, 136; United States v. Oklahoma, supra, 259 (43 S. Ct. 295). None involved the legal effect of acts similar to those presented here. It is a rule of universal application that general expressions used in a court's opinion are to be taken in connection with the case under consideration. Cohens v. Virginia, 6 Wheat, 264, 399, 5 L. Ed. 257. The language on which appellant relies was properly used in...

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