United States v. Comm'r of Banks

• Decision Date: 15 December 1925
• Parties: UNITED STATES v. COMMISSIONER OF BANKS et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

254 Mass. 173

149 N.E. 883

UNITED STATES

v.COMMISSIONER OF BANKS et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Dec. 15, 1925.

Case reserved from Supreme Judicial Court, Suffolk County.

Suit in equity by the United States against the Commissioner of Banks, Roy A. Hovey, in possession of the Cosmopolitan Trust Company, and another, to establish a claim in favor of complainant against the property of the trust company. On reservation, complainant permitted to present claim as of named date, but claim of priority is disallowed and decree entered accordingly.

G. R. Farnum, of Boston, for the United States.

H. O. Cushman, of Boston, for defendants.

PIERCE, J.

This is a suit in equity to establish a claim in favor of the United States against the property of the Cosmopolitan Trust Company, in possession of the commissioner of banks for liquidation under the provisions of St. 1910, c. 399, as amended, now G. L. c. 167, and when allowed to be decreed to stand as a priority claim under section 3466 of the Revised Statutes of the United States. The case was heard upon the bill and answer, and was reserved by a single justice of this court for determination by the full court.

The relevant facts deducible from the pleadings are as follows: March 9, 1920, the Hub Rain Coal Company drew a check upon the Cosmopolitan Trust Company, payable to the order of the Treasurer of the United States. This check on March 11, 1920, was duly certified by the trust company ‘Good for $2,357.76 when properly indorsed.’ The check was indorsed by the Treasurer of the United States: ‘This check is in payment of an obligation to the United States and must be paid at par. Frank White, Treasurer.’

The commissioner of banks took possession of the property and business of the Cosmopolitan Trust Company on September 25, 1920, and the defendant Cushman was appointed liquidating agent on October 18, 1920. The commissioner filed a petition in the Supreme Judicial Court on August 3, 1922, seeking an order to limit the time for the presentation of claims. An order of notice to show cause why the petition should not be granted was duly published in three newspapers in the city of Boston. On the return day of the notice, August 15, 1922, no one appearing in opposition, a decree was entered barring proof of claims and institution of suits thereon beyond October 16, 1922. Notice of the last-named decree was duly published in public newspapers on September 11 and 18, and October 2, 1922.

On September 25, 1920, and at all times since the United States was the holder and owner of the check above described. The United States was never notified of the decretal limitation upon the time for the prosecution and litigation of claims against the trust company, otherwise than by the newspaper publication. Prior to October 16, 1922, no claim was filed by the plaintiff against the assets of the trust company in the possession of the commissioner of banks. The commissioner of banks was notified by letter dated August 29, 1923, of the claim of the United States, and on September 7, 1923, acknowledged receipt of the letter with an enclosed blank proof of claim. September 14, 1923, the plaintiff sent a proof of claim to the commissioner with an accompanying letter. October 1, 1923, the liquidating agent, Cushman, returned the check and refused to allow the claim on the ground that the time for presentation of claims had expired.

The bill in substance charges, and the answer admits, that dividends in the aggregate amount of twenty-six per cent. have been paid creditors in the general or commercial departments, whose claims were duly proved and allowed prior to October 16, 1922; and that the commissioners and liquidating agent have refused to allow the claim of the plaintiff or to pay dividends thereon unless by order of the court; that the assets of the trust company in the hands of the commissioner of banks are insufficient to pay the creditors of either the savings or commercial department of the said trust company whose claims have been duly proved, allowed and filed; and also admits as charged in substance in the bill that ‘the assets in the hands of the * * * commissioner of banks, the property of said trust company, have at all times since October 16, 1922, been sufficient to pay the petitioner the amount of its claim if same is not barred by force and reason of said decree of limitation in point of time.’

[1][2] By the certification of the check which the plaintiff seeks to prove, the Cosmopolitan Trust Company appropriated of the money of the drawer the sum of $2,357.76, and held such money on deposit payable ‘when properly indorsed’ to the holder on demand. G. L. c. 107, §§ 210, 212; 5 Uniform Laws Annotated, pp. 507, 517. The certification, on indorsement, created a new contract between the trust company and the United States holding the check in its governmental capacity. Meuer v. Phenix National Bank, 94 App. Div. 331, 88 N. Y. S. 83, affirmed in 183 N. Y. 511, 76 N. E. 1100. Speaking for the court in United States v. Nashville, Chattanooga & St. Louis Railway, 118 U. S. 120, 125, 6 S. Ct. 1006, 30 L. Ed. 81, Mr. Justice Gray said:

‘It is settled beyond doubt or controversy-upon the foundation of the great principle of public policy, applicable to all governments alike, which forbids that the public interests should be prejudiced by the negligence of the officers or agents to whose care they are confided-that the United States, asserting rights vested in them as a sovereign government, are not bound by any statute of limitations, unless Congress has clearly manifested its intention that they should be so bound.’

Referring to the words last quoted Mr. Justice Clark in United States v. Whited & Wheless, 246 U. S. 552, at page 561, 38 S. Ct. 367, 368, 62 L. Ed. 879, said:

‘* * * This principle has been accepted by this court as requiring not a liberal, but a restrictive, a strict, construction of such statutes when it has been urged to apply them to bar the rights of the government.’

[3] It is settled with equal definiteness that the United States is not barred by a state statute of limitations when the United States sues in a state court. Chesapeake & Delaware Canal Co. v. United States, 250 U. S. 123, 125, 39 S. Ct. 407, 63 L. Ed. 889;Dupont De Nemours & Co. v. Davis, 264 U. S. 456, 462, 44 S. Ct. 364, 68 L. Ed. 788;Missouri ex rel. Burnes National Bank of St. Joseph v. Duncan, 265 U. S. 17, 44 S. Ct. 427, 68 L. Ed. 881;Davis v. Corona Coal Co., 265 U. S. 219, 222, 223, 44 S. Ct. 552, 68 L. Ed. 987.

[4] The doctrine of laches is not applicable to the government. United States v. Kirkpatrick, 9 Wheat. 720, 6 L. Ed. 199;Utah Power & Light Co. v. United States, 243 U. S. 389, 409, 37 S. Ct. 387, 61 L. Ed. 791.

‘* * * And this maxim is founded, not in the notion of extraordinary prerogative, but upon a great public policy.’ United States v. Kirkpatrick, supra, 735.

‘No laches can be imputed to the government, and against it no time runs so as to bar its rights.’ Parsons, Chief Justice, in Stoughton v. Baker, 4 Mass. 522, at page 528 (3 Am. Dec. 236).

[5] Giving force to these principles, it is plain that the United States would not have been barred from proof of its claim had the limitation been expressed in the liquidation statute. G. L. c. 167, s. 28. See cases cited supra. The fact that the Legislature has conferred by necessary implication authority upon this court to establish a limitation of time after which new litigation must cease (Suffolk Knitting Mills v. Cosmopolitan Trust Co., 252 Mass. 394, 147 N. E. 830) does not import a legislative purpose to include within the field of its operation the United States or the commonwealth (United States v. Whited & Wheless, supra). We find nothing in the contention of the defendant that the principle invoked by the plaintiff is not as applicable to proceedings in rem as to actions in personam or in real actions.

[6] If the claim should have been...