United States v. Howland Allen

• Decision Date: 17 February 1819
• Parties: UNITED STATES v. HOWLAND and ALLEN
• Court: U.S. Supreme Court

17 U.S. 108

4 Wheat. 108

4 L.Ed. 526

UNITED STATES v. HOWLAND and ALLEN.

February 17, 1819

APPEAL from the Circuit Court of Massachusetts.

This was a bill in equity, filed in the name of the United States, in the court below, stating, that several judgments had been obtained by the United States on duty bonds, against Shoemaker & Travers, and Jacob Shoemaker, and their sure, ties, amounting to the sum of $5292; which judgments were obtained in the district court of Pennsylvania, at the February term of 1808, and upon which executions had issued, which remained in the marshal's hands unsatisfied; that after the execution of the duty bonds, but before they were payable, to wit, on the 6th of December 1806, Shoemaker & Travers became insolvent, within the true intent and meaning of the act 'to regulate the collection of duties on imports and tonnage:' that on the first of February 1808, goods, effects, money and credits of Shoemaker & Travers, to the amount of $6000, had come to the hands of Howland & Allen, which, the bill alleged, they refused to subject to the executions of the United States; it prayed, that they might be compelled to account for, and deliver up, these goods, &c., in satisfaction of the claim of the United States, and for an injunction in the meantime to restrain them from disposing of, paying away, or in any manner applying the goods, &c., aforesaid, to any other object. The injunction was, accordingly, awarded.

An amendment to the bill stated, that after the debts to the United States accrued by bond as aforesaid, and after Shoemaker & Travers had become insolvent, to wit, on the 6th day of December 1806, they made a voluntary assignment by deed, of all their property, for the bedefit of their creditors, within the true intent and meaning of the act of congress aforesaid, and an exemplified copy of the deed of assignment was annexed to the amended bill. The deed recited, that the parties being justly indebted to divers persons, whose names are mentioned in a list thereto annexed, and unable at present to pay the said debts, they assign to trustees therein mentioned all and singular, the estate and effects contained in a schedule annexed, in trust, to pay the debts due the enumerated creditors, and first, that due to the United States. The schedule was entitled 'Schedule of property assigned by Shoemaker & Travers, and Jacob Shoemaker, to the creditors of Shoemaker & Travers,' and contained many items of property, and among others, the proceeds of the cargo of the brig Deborah, which vessel was then at sea, and belonging to Howland & Allen, but had been chartered by Shoemaker & Travers.

Howland & Allen, by their answer, admitted the receipt, on the 1st of January 1807, of 4000 Spanish dollars, the property of Shoemaker & Travers, and which the master of the Deborah had received in Guadaloupe, for Shoemaker & Travers; but insisted on their right to apply it to an unliquidated debt of greater amount (composed of freight, demurrage, damages, &c., the particulars of which were detailed by the answer), due, as alleged, from Shoemaker & Travers to them, and applied, by an entry in their books, to the credit of Shoemaker & Travers, at the time of the receipt of the money aforesaid. They insisted, therefore, on the right of retaining it. To this answer, there was a general replication, and the depositions of several witnesses were taken.

The court below decreed, that the said Shoemaker & Travers were, and are, indebted to the United States, and that they became insolvent, and made an assignment as alleged in the bill, and that there was an outstanding unsettled demand existing in their favor, at the time of their insolvency, against the defendants, arising from the voyage of the brigantine Deborah, and which is still unsettled and unpaid, but the court is not satisfied that the defendants, being merely debtors to said insolvents, are by law liable to this process, and thereupon, decree, that the said bill be dismissed. From this decree, the present appeal was taken.

February 4th.

The Attorney-General, for the appellants, argued, 1. That the prior right of the United States attached to all the property of Shoemaker & Travers, on the 6th of December 1806, the time of their insolvency, and the date of the deed of assignment from them. It is immaterial, whether the priority of the United States, in any case, be asserted under the act of 1797, c. 368, § 5, or under that of 1799, c. 128, § 65. The decisions, as to this point, under the one statute, are applicable to the other. It is insisted, that this is one of the cases specified by congress, in which the debts due to the United States are to be first satisfied; a case in which the debtor, not having sufficient property to pay all his debts, has made a voluntary assignment thereof, for the benefit of his creditors. This is the allegation of the bill, and it is supported by the deed itself. Although the granting clause does not literally express it to include all the property of the debtors, yet the clause, which gives the power to sell, by using the words 'all the property of them, the said Shoemaker & Travers, and Jacob Shoemaker,' clearly shows, that the assignment was intended to convey all their property. The very object of the deed, as set forth in the recital aids this construction.

2. If, then, the priority of the United States has attached, a court of equity is the proper forum in which it should be asserted. A trust exists, and an account is to be taken. The court of chancery is the only tribunal that can enforce the trnst, and take the account, having also the power of calling all the parties before it. Nor are the chancery powers of the circuit court at all affected by the statute of Massachusetts of 1794, c. 64, giving a peculiar process, in the nature of a foreign attachment, by which the creditor may attach in the hands of the debtor of his debtor. The powers and practice of the circuit courts, in chancery cases, are not to be controlled by the local laws of the states where those courts sit. They are the same throughout the Union.

3. But even supposing that the United States have no priority in this case; they are, on the common footing of ordinary creditors, entitled to an account against Howland & Allen, and to the payment of any sum which, on a settlement of such account, may be found due from them to Shoemaker & Travers.

Jones, contra, insisted, 1. That the act of congress only extended to executors and administrators, or to assignees, but not to the debtors of the debtors of the United States. A court of equity cannot have power to settle an account in this way, without some statutory provision to authorize the proceeding. The act of congress gives no such authority. Shoemaker & Travers are not made parties to the bill, and a decree between the United States and the present defendants, would not bind, in a suit between the defendants and Shoemaker & Travers. Nor is it too late, in the appellate court, to take advantage of the want of parties. Russell v. Clarke's Executors, 7 Cranch 98.

4. The cases are uniform, that in order to enable the priority of the United States to attach upon this ground, the assignment must be of all the debtor's property. United States v. Fisher, 2 Cranch 358; United States v. Hooe, 3 Ibid. 73. There is here no evidence, either in the deed or in the depositions, that this assignment embraced all the property of Shoemaker & Travers. The power to sell all the property cannot be construed to enlarge the granting clause, which merely refers to the property mentioned in the schedule annexed to the deed. The defendants claim a balance from Shoemaker & Travers, and the right to apply the money received to the liquidation of that balance. They had acquired a special lien upon the money for the payment of this balance, long before the alleged act of insolvency. The court has repeatedly determined, that if, before the right of preference to the United States has accrued, the debtor has made a bon a fide conveyance of his estate, or has mortgaged it to secure a debt, the property is divested out of the debtor, and cannot be made liable to the claim of the United States. United States v. Fisher, 2 Cranch 390; United States v. Hooe, 3 Ibid. 90. The spirit of these decisions is, that any bon a fide lien will be protected, and not merely an actual mortgage or hypothecation. All specific liens are highly favored by the law; such as that of a factor, who has advanced his money on the credit of the goods, or a ship-owner who, having let out his ship for their transportation, has a right to the same security. It is true, that the court has said, that the lien of a judgment-creditor shall not be protected as against the prior right of the United States. But that is upon the ground that the judgment is a mere general lien, not affecting the jus disponendi of the owner of the property, nor vesting any specific interest in the creditor.

February 17th, 1819.

MARSHALL, Ch. J.; delivered the opinion of the court.

The bill in this case was filed by the United States in the circuit court of the district of Massachusetts, to recover from the defendants a sum of money in their hands, alleged to be the money of Jacob Shoemaker and Charles R. Travers, merchants and partners, who are stated to be insolvents, and to be indebted to the United States for duties.

It appears, that Shoemaker & Travers, on the 6th day of December 1806, executed an indenture, in which, reciting that they are justly indebted to divers persons, whose names are expressed in a list thereto annexed, and are unable at present to pay the said debts, they assign to trustees therein mentioned, all and singular the estate and effects contained in a schedule annexed, in trust, to pay the debt due to the enumerated creditors, and first that due to the United States. The schedule contains many items of property, and and among others the proceeds of the ...