Thelusson v. Smith

CourtUnited States Supreme Court
Citation2 Wheat. 396,4 L.Ed. 271,15 U.S. 396
PartiesTHELUSSON et al. v. SMITH
Decision Date18 March 1817

15 U.S. 396
2 Wheat. 396
4 L.Ed. 271
March 18, 1817

Page 397

ERROR to the circuit court for the district of Pennsylvania.

The plaintiffs in error instituted a suit in the circuit court for the district of Pennsylvania against William Crammond, which, by the agreement of the parties, and the order of the court, was referred to arbitrators. An award was made in favour of the plaintiffs, and a judgment nisi was entered on the 20th of May, 1805. Exceptions were filed and overruled; and a judgment was finally entered on the 15th of May, 1806. On the 22d of May, 1805, Crammond executed a conveyance of all his estate to trustees, for the payment of his debts, at which time he was indebted to the United States, on several duty bonds, which became due at different periods subsequent to the 22d of May, 1805. Suits were instituted on these bonds as they severally became due, and judgments were obtained and executions issued, under which a landed estate belonging to Crammond, called Sedgely, was levied upon and sold.

The plaintiffs, considering this property as being bound by their prior judgment of the 20th of May, 1805, and that they were entitled to be first satisfied out of the money in the hands of the defendant, (the marshal of the court,) which he had raised under the above executions, issued in the name of the United States, they brought this action to recover so much of those funds as would be sufficient to satisfy their judgment.

Upon the trial of the cause in the circuit court, the jury found that Crammond was insolvent on the

Page 398

20th of May, 1805, but that it was not notoriously known; subject to the opinion of the court upon a state of facts agreed between the parties, whether the plaintiffs were entitled to recover. The parties further agreed, in writing, that, on the 22d of May, 1805, Mr. Crammond was unable to satisfy all his debts, and that this fact should be considered as part of the special verdict. The other facts referred to by the jury are, in substance, those which have been mentioned. The circuit court gave judgment against the plaintiffs below, and the cause was brought by writ of error to this court.

Mr. Hopkinson, for the plaintiffs in error. 1. It is now settled that the insolvency of a debtor which is to give a preference to the United States over the other creditors, must be, not a mere inability to pay debts, but a legal insolvency, testified by some act of notoriety. The question is, whether the United States were entitled to a priority of payment, out of this real estate, over a judgment rendered previous to the act of insolvency, with which, and by virtue of which, the right of priority originated and attached. Whatever may be the nature and effect of the priority given by the acts of congress to the United States, it has been distinctly decided, that it is not a lien;a and, therefore, it is said, that a conveyance shall not be defeated by it, which would be to give it the effect of a lien. It is clear, the legislature did not consider the preference given to the

Page 399

United States to have the force of a lien on the real estate of the debtor, because the act of 1798, ch. 88. sec. 15., expressly gives to the United States a lien on the real estate of supervisors and other revenue officers, from the time of the commencement of the suit against them. Certainly it cannot be imagined the United States intended to have a less security against the delinquency of their revenue officers than in the case of ordinary debtors; on the contrary, it is unquestionable, that by the law of 1798 they intended to increase their security against their revenue officers; and yet, if the mere right of priority has the force and effect now contended for, the law of 1798 was not only unnecessary, but has really diminished the security for the payment of moneys collected by and due from these officers. That law limits the responsibility of the real estate to the commencement of the suit; whereas, the responsibility now claimed under the privilege of preference, has no limit. Should it be answered to this, that under the law of 1798, the United States are made secure even against conveyances and mortgages subsequent to the commencement of their suit, still it shows that the legislature considered a lien on the real estate of the debtor as something of a nature and effect higher and better than the mere priority they before enjoyed; and if it be so, it must hold the same rank in the hands of a citizen, and be considered superior to the priority of the United States: especially, when that priority attached after the lien was in full force and operation on the real estate of the debtor. If any argument may be drawn from the reasoning of

Page 400

the counsel of the United States in other cases, where the same doctrine was agitated, it will be found, that in the case of the United States v. Fisher and others,b it was expressly declared, that this priority was not claimed with the creation of the debt; nor while the debtor remained master of his own property: and such is now the admitted law. It follows, then, that in the present case, the right of the United States did not come into being until the execution of the assignment on the 22d of May; and unless, therefore, it has a retrospective force and operation, it cannot destroy or disturb a judgment entered on the 20th of May, vesting an important and recorded right in the plaintiffs. Supposing, then, that a mere right of priority of payment could, in any case, overreach a bona fide judgment, in relation to the real estate of the debtor, bound by that judgment, when the priority constitutes no lien upon it; still, the question remains, whether a subsequent right acquired by the United States can have a retrospective operation so as to overreach and defeat a prior right vested fully and fairly in a citizen. To permit this, is so contrary to all practice and equity, and to the general policy of the law, that the court will not sanction it, unless bound by the most clear and imperious authority. What, then, is the provision of the act of congress, under which this high and extraordinary privilege is claimed? After the decisions that have taken place on this subject, we are warranted in saying, that nothing is given but a priority or preference

Page 401

of payment to the United States, in case of the insolvency of their debtor; but no lien, general or specific, on any part of his property; nothing which interferes with his control over that property; which prevents his selling it altogether; or pledging it for a debt; or exercising, bona fide, any of the usual acts of ownership in relation to it. A man may be a debtor to the United States, and lawfully do all these things to the moment of his legal insolvency; he may do them when he is actually insolvent; that is, unable to pay all his debts. In the United States v. Fisher,c this priority is declared not to affect a purchaser. In Wall. Rep. 22. a particular assignee is protected. In the United States v. Hooe,d a mortgagee in trust, as well as a mortgagee generally. Then, on what principle of law, of justice, or equity, should not a judgment receive the same favour and protection? 2. In Pennsylvania a judgment has always been considered a higher and better security than a mortgage, inasmuch as it has been supposed to give the same fixed, immovable lien, on all the real estate of the debtor, which a mortgage, which is also but a security for the payment of a debt, gives on a specified part of it. There is no event on which, and no means by which, the mortgagee can turn this conditional into an absolute conveyance. If the money is not paid, he must proceed to obtain a judgment on his mortgage; to take the mortgaged premises in execution; to sell them by the process and officer of the court; from whom he must receive

Page 402

his debt, interest, and costs, and the surplus belongs to the debtor, as in the sale of any other property taken in execution for the satisfaction of a judgment. On what principle can it be maintained that every act of a debtor over his real estate in favour of a purchaser, or creditor, shall be available against this preference of the United States, except the most solemn of all acts, a public recorded judgment? That this priority is not a lien on the property of the debtor has been expressly decided; and, for this reason, it is not permitted to disturb a purchaser or mortgagee; it is, therefore, something less, in the estimation of the law, than a lien: how, then, can it overthrow the firmest of all liens, a judgment duly rendered? If a debtor, by a particular assignment, should appropriate his real estate to pay a debt, or a number of debts. the United States could not defeat the appropriation by their claim to a preference; and yet when he makes the same appropriation by a judgment, or, what is perhaps stronger, the law does it for him, and he certainly also intends to do it, the appropriation is invalid and ineffectual against the claim of the United States, resting on a priority arising, perhaps, years after the appropriation was thus solemnly made, and on the faith of which the innocent creditor may have trusted his all. Another strange consequence and incongruity grows out of this doctrine, so pregnant with inconvenience and injustice. A judgment has unquestionable preference over a subsequent conveyance, assignment, or mortgage. The priority, then, of the Unite States,

Page 403

shall not affect the conveyance, an assignment, or a mortgage, but it shall destroy that which is greater than them all. It overthrows the stronger security, while it cannot avail against the weaker. Farther; when a debtor has secured the debt by a judgment, is it not a sound principle that he cannot impair the security of his creditor by any subsequent act of his own, by any contract or conveyance he may afterwards make? How, then, can he do so by...

To continue reading

Request your trial
79 cases
  • WT JONES AND COMPANY v. Foodco Realty, Inc.
    • United States
    • U.S. District Court — Western District of Virginia
    • June 15, 1962 prior liens or merely over debts which otherwise would stand on a parity with the debt due the United States. In Thelusson v. Smith, 2 Wheat., p. 396, 4 L.Ed. 271 the court "The United States is to be first satisfied; but then it must be out of the debtor's estate. If, therefore, before ......
  • In re Berretta's Estate
    • United States
    • Pennsylvania Supreme Court
    • March 13, 1981
    ...held that without such security the judgment entered on the note does not come within the "specific lien" exception afforded by Thelusson v. Smith, supra, to the general priority of claims established by the Federal Insolvency Statute, 31 U.S.C. § 191. However, in the December 11, 1978 adju......
  • U.S. v. Romani
    • United States
    • U.S. Supreme Court
    • April 29, 1998 its petition for certiorari, the Government submitted that the decision is inconsistent with our holding in Thelusson v. Smith, 2 Wheat. 396, 4 L.Ed. 271 (1817), and with the admonition that ""[o]nly the plainest inconsistency would warrant our finding an implied exception to the operati......
  • Commonwealth of Massachusetts v. United States
    • United States
    • U.S. Supreme Court
    • April 19, 1948
    ...funds or property affected, being covered by mortgage, belonged in fact to third persons, not to the insolvent debtor. Thelusson v. Smith, 2 Wheat. 396, 426, 4 L.Ed. 271; Conard v. Atlantic Ins. Co. of New York, 1 Pet. 386, 7 L.Ed. 189; Brent v. Bank of Washington, 10 Pet. 596, 611, 9 L.Ed.......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT