United States v. Grady

• Decision Date: 01 October 1874
• Citation: 89 U.S. 641,22 L.Ed. 772,22 Wall. 641
• Parties: UNITED STATES v. O'GRADY
• Court: U.S. Supreme Court

89 U.S. 641

22 L.Ed. 772

22 Wall. 641

UNITED STATES v. O'GRADY.

October Term, 1874

APPEAL from the Court of Claims; the case being thus:

By the act organizing the Court of Claims, A.D. 1855, power was given to it to hear and determine all claims against the United States founded upon any law of Congress, or upon any regulation of an executive department, or upon any contract, express or implied, with the government of the United States.¹

Doubts, however, were suggested immediately upon the act going into practical operation and on suits being brought against the United States, whether the act meant to allow the United States to file set-offs in such suits, and to give jurisdiction to the court to hear and determine them in the way usually practiced in suits between private parties. If the act did thus mean, its meaning was not clearly expressed. Congress accordingly, by an act passed March 3d, 1863,² enacted that——

'In addition to the jurisdiction now conferred by law, the court shall also have jurisdiction of all set-offs, counterclaims, claims for damages, whether liquidated or unliquidated, or other demands whatsoever, on the part of the government, against any person making claim against the government in said court; and upon the trial it shall hear and determine such claim and demand, both for and against the government and the claimant; and if upon the whole case it finds the claimant is indebted to the government it shall render judgment to that effect, and such judgment shall be final, with the right of appeal, as in other cases,' &c.

A still subsequent act—one passed June 25th, 1868³—enacted:

'That the said Court of Claims, at any time while may suit or claim is pending before or on appeal from said court, or within two years next after the final disposition of any suit or claim, may on motion of the United States grant a new trial in any such suit or claim, and stay the payment of any judgment therein, upon such evidence as shall reasonably satisfy said court that any fraud, wrong, or injustice has been done to the United States.'

These two acts being in force, one O'Grady sued the United States in the said Court of Claims, to recover the proceeds of certain cotton, confessedly his, which had been seized and sold under the Captured and Abandoned Property Act, and which proceeds were now in the treasury of the United States. That act, provides⁴ that the owner of such property shall be entitled to receive the residue of the proceeds thereof, 'after the deduction of any purchase-money which may have been paid, together with the expense of transportation and sale of said property, and any other lawful expenses attending the disposition thereof.'

The United States appeared, pleaded various pleas, but no plea in the nature of set-off, nor did it make any claim for or allusion to any sum as due for a 'tax' on the cotton under any act of the United States, approved June 30th, 1864, or any other act, or as due otherwise for any tax.

The Court of Claims having heard the case and allowed to the United States a deduction from the gross proceeds for its outlay of purchase-money, expense of transportation, sale, and other lawful expenses as claimed, decreed in favor of O'Grady for $72,450.

On O'Grady's presenting his claim as thus fixed for payment at the treasury, the secretary refused to pay it without the deduction of $4181, which sum he alleged that the had a right to retain as a tax under acts of Congress, in force at the time of the capture of this cotton, one of which did confessedly assume to impose a tax of two cents a pound upon all cotton produced or sold and removed for consumption, and upon which no duty had been levied, paid, and collected; the tax being made by the act, until paid, a lien upon the cotton in the possession of any person whomsoever,⁵ and another of which⁶ enacted that 'whenever any cotton, &c., shall arrive from any State in insurrection against the government, the assessor shall immediately assess the taxes due thereon.'

This deduction was submitted to under protest, and an agreement was entered into 'that the rights of the several parties in respect to this tax are reserved, and remain subject to the decision of the Supreme Court.'

To bring the question to this court under this agreement, a petition was filed—the petition in the present case—praying judgment for $4181.40, the amount of the tax claimed. The government pleaded that the government 'is not indebted to the claimant in the said sum of money or in any part thereof.'- Judgment was given for the claimant, and the government now brought the case here.

The sole question thus was whether the secretary was justified in withholding the amount for the reason stated by him, to wit, the debt of the claimant to the government for the tax of two cents per pound on cotton.

Mr. C. H. Hill, Assistant Attorney-General, for the United States, appellant:

The cotton itself, on the sale of which the tax was claimed, was confessedly liable to that tax; the question, much agitated some time since, about the constitutionality of the cotton tax, not being here raised.

Why, then, could not the secretary deduct it?

It has been decided that the government held this sort of property as trustee for the owners.⁷ This being so, it is but a reasonable construction of the language of the statute to hold that the payment of an excise tax due upon the property, and made a lien thereon, was a lawful expense attending the trust, which the secretary was justified in deducting. The deduction of the tax may be assumed to be made at the time of the payment of the proceeds of the sale of the cotton into the treasury, and as the statute makes the amount due certain no technical assessment of the tax was necessary.⁸

Besides, it is not to be presumed that the statute intended that the owner should be paid the amount of the proceeds of the cotton and the government lose its lien for the tax. The sale of the cotton by the government would entirely destroy the lien unless one subsisted on the proceeds in the treasury; and construing the act imposing the tax and the Captured and Abandoned Property Act together, full effect can be given to both by holding that the lien for the tax remains upon the proceeds in the treasury, and the tax is to be deducted before payment thereof to the owner.

Messrs. P. Phillips and T. J. Fuller, contra:

We raise no question in this case about the constitutionality of the cotton tax, since the judgment below can be fully sustained, conceding the tax to be constitutional.

The institution of the Court Of Claims was to remove the anomaly of permitting a party to contracts, express or implied, from an arbitrary decision in his own cause.

Claims against the government were therefore submitted to the judicial determination of officers, whose tenure of office under the Constitution was regarded as a guarantee of independence. Thenceforward, claimants under contracts, express or implied, had a standing in court to enforce them. But under the organizing act the court only had jurisdiction...