United States v. Mott

1 Paine 188 | U.S. Circuit Court for the District of Southern New York | 1822

LIVINGSTON, Circuit Justice.

Whether the United States are entitled to the priority, which it is the object of their bill to establish, and which is the first question arising out of the pleadings, is one of no difficulty, considering the decisions which have already been made on the fifth section of the act, to provide more effectually, for the settlement of accounts between the United States and re-eeivers of public money, passed the 3d March, 1797. The words of this section, as far as they bear on the present case, are, that “where any revenue officer, or other person, hereafter becoming indebted to the United States, by bond or otherwise, shall become insolvent, the debt due the United States shall be first satisfied; and the priority hereby established shall be deemed to extend, as well to cases in which a debtor, not having sufficient property to pay all his debts, shall make a voluntary assignment thereof, as to cases in which an act of legal bankruptcy shall be committed.” The debt of Blanche to the United States being admitted, as also the execution by him of the deed, bearing date the 20th of May, 1816, it remains only to examine the character of this instrument, and the situation of the grantor at the time of its execution. If he had not then sufficient property to pay all his debts, and if it were a voluntary assignment of his property—which has been decided to mean all the debtor’s property—the right of preference in the United States must necessarily follow. It was argued by all parties as if it were necessary, that the assignment should appear to be for the benefit of all the creditors of the insolvent. This would be necessary if these bonds were for the payment of duties, in which ease the assignment must not only be voluntary, but for the benefit of creditors, which words are not found in the act which governs the present case—But if the counsel are right and the court be mistaken in this respect, and the assignment, to give rise to the priority here claimed, ought to be for the benefit of creditors or of all the creditors, there well be no difficulty in fixing on it this characteristic also. That the assignment, although for a valuable consideration, was voluntary within the meaning of the act of congress, that is, made freely and without any legal compulsion, is not denied. There is some controversy whether it included all the property of the debtor, without which, under the decision in the case of the United States against Hoe and others, a priority would not attach, unless indeed it should appear, that for the purpose of evading the provisions of the law, a trifling part of the estate had been omitted. If the court had nothing for its guide but the assignment itself, it would not be a very forced construction of the instrument, taken altogether to regard it as a conveyance of all the debtor’s property. It is professedly so of all his personal estate, without any exception, and it also comprises, as appears by the recitals, all his real estate in New-Jersey and New-York. This taken in connexion with the object of the assignment, would leave but little room to suppose that there might be lands elsewhere than in the states of New-York and New-Jersey, which were not included in this deed.

But whatever doubt might otherwise rest on this part of the case, it is dispelled by the following testimony produced by the United States, who have very properly taken on themselves the burthen of proving the fact; the deed not being as explicit as it might have b.een. Besides other witnesses who were well acquainted with the situation of Blanche, and who establish the fact, in a manner which ought to be satisfactory, the debtor himself has been examined as a witness,—and settles beyond controversy, that the deed did cover the whole of his property.

It is objected that Blanche is interested: but whatever feeling he may have, it must in point of interest be unimportant to him whether the United States succeed in this suit, and if they do, whether they are paid out of the estate assigned to Mott, Vanderbilt, and Coulter, or out of the private property of the latter. If the United States fail in this action, he continues their debtor—if they be paid out of the assigned property, his debt to Mott and Williams will be revived pro tanto; and if the plaintiffs are paid out of the assets in the hands of Coulter’s executors, he will become a debtor to the amount of such payment to his estate. It is equally clear, if that be necessary to be proved, from the testimony of Blanche, and the terms of the assignment, that when he made it. he had not sufficient property to pay all his debts.

All the allegations of the complainants being thus admitted or proved, which were necessary to bring their ease within the meaning of the act of the 3d of March, 1797—nothing would remain but for the court to make a decree pursuant to the prayer of their bill. But it is supposed by the counsel of the administrator of John Mott, and of his surviving partner Williams, that, instead of making them account immediately for the trust property of Blanche, a decree should be made in favour of the United States, in the first instance against the estate of Coulter, and leave the executors of his will to their remedy for reimbursement, if they have any, against Mott and Williams; or that if a decree be made against Mott and Williams in favour of the complainants, one should at the same time pass in their favour and for their indemnity against the estate of Coulter. It has been argued that the United States should have their remedy in the first place against the estate of Coulter, because he is a party to the deed of assignment, and thereby consented to postpone the debt for which he was surety, to that of Mott and Williams. It is also said in favour of such a decree, that there being two funds, out of which the United States can be paid, and but one from which Mott and Williams can have satisfaction, they have a right to compel the complainants to resort in the first instance to, and exhaust the one on which they can have no claim.

A defendant who asks of a court of chancery not to touch the only fund to which he can resort, while there is another one out of ■ which the complainant can obtain satisfaction, ought to show not only that he has a clear and indisputable title, which will be respected in equity, to the fund which he desires may be held sacred for his use, but that there are in reality two funds, of which an election can be made; and that by such election no injustice will be done to any of the other parties before the court. Thus where one person has two mortgages on different estates, and another has a mortgage only on one of them, nothing is more reasonable than to force him who holds the two mortgages to proceed first against that estate on which the other has no security—and to leave the other untouched in case the first estate be sufficient to satisfy him. There were not only two funds, but they were both before the court, and the title of neither party was liable to any doubt, nor could the mortgagor have any objection to such a decree. It would, therefore, have been most manifestly unjust to have acted otherwise.

The first answer then, to this course of proceeding on the present occasion is, that the two funds here spoken of, that is, the property mentioned in the deed of assignment or its proceeds, and the estate of Coulter, admitting it sufficient to pay the debt, are not both before the court, so as to justify any decree against the latter. Although it may be collected from the proceedings that Coulter was a co-debtor with Blanche to the United States, and that he may have property enough to pay the debt, nothing would be more unjust or improper than to make a decree against his estate, under the present bill, which, notwithstanding its general prayer, most manifestly confines any relief that may be afforded, to such as the United States may be entitled to out of the estate of Blanche, in consequence of the execution of the assignment by him before-mentioned. Coulter’s representatives, therefore, have not been called upon, nor have they had an opportunity of contesting the right of the complainants to a decree against his estate. Nor have they been put on their guard by any intimation or allegation in the bill to dispute the grounds on which two of their co-defendants have placed the propriety of such a decree. If the United States had sought by their bill a decree against the estate of Coulter, on any other ground than as one of the trustees in the deed of assignment, a demurrer might have been interposed, their remedy on the judgment confessed by the executors, being clearly a remedy at law, unless for the purpose of discovery, they had thought proper to bring the executors into a court of chancery. It is not enough to put the executors of his will on their defence, that the suggestion has been made in a separate answer of one or more of the defendants.

Thus far the court has proceeded on the supposition, that there are two funds before it out of which satisfaction may be had. But non constat that Coulter has left any es-. tate at all;—nor, if he has, that any of it remains in the hands of the executors of his will; nor, that they are able, if they have inadvertently admitted assets by their plea in New Jersey, to pay so large a sum, or any part of it. It is believed that a court of chancery has in no ease prevented a party, who had a clear and undoubted right, from proceeding against a particular fund to which another might also claim a title, although a subordinate one, without presenting to it another equally certain, if not as productive. In the present case, therefore, it would be unjust to delay the United States by a decree which might prove illusory, against an estate which might not produce a cent; when they ask for and have a right to receive payment out of a fund to which as far as it extends, the law has given them a title.

But if the reasoning of the court thus far be incorrect, there are other obstacles in the way of such a decree as is sought for by Mott and Williams. If Coulter has agreed, by being a co-trustee with Mott and Vanderbilt in the deed of assignment, that this property should first be applied to the payment of the debt of Mott and Williams; if this distribution be deranged by operation of law, and the decree of a court—it does, not follow that he would be bound to find other property to satisfy Mott and Williams, or to indemnify them for what they might thus lose. Still less evident is it that the United States, or this court, are under an obligation to pursue any course, which should have for its object the securing to Mott and Williams indirectly the very benefit under this assignment which the law has taken from them—and the more especially as the instrument on its very face, avows the intention of -creating a preference in their fa-vour to the prejudice of the government, and against the policy and provision of all the laws which have been passed on this subject. Would not such a course of decision encourage rather than discountenance similar attempts? But there is another objection to such a decree, which if not conclusive of itself, is entirely satisfactory to my mind. It is admitted by all, that the debt due by Coulter is only as the surety of Blanche. Would not then a decree, operating in the first instance on the estate of the surety, if any such there were, and abstaining from the fund of the principal debtor, until the former were exhausted, be pregnant with injustice, and at variance with the whole course of chancery proceeding?

It is no answer to this difficulty to say, that the surety by his own act has justified this mode of proceeding. Such assent, may have been given on a belief that the property assigned would pay both debts, not meaning, however, to guaranty the payment of Mott and Williams, if the United States should think fit, notwithstanding .this arrangement, to assert their priority. At any rate, before such conclusion be drawn, if it ever can be, the executors of Coulter’s will should have an opportunity of controverting in a suit with Mott and Williams, matters which they have not been called upon in this suit to take any notice of; and which, for any thing that yet appears, may defeat their right to any relief against him. But as it is intended to leave these parties to litigate either here or elsewhere, as they may be advised, it is not intended to express an opinion on any claim that Mott and Williams may set up against the estate of Coulter, to make good their loss by this suit, or on any defence which his executors may interpose to such claim. I only mean to say, that in the present suit, they are entitled to no relief against the estate of Coulter; and this being my view of the subject, I shall make the following decree.

This cause came on to be heard on the bill, answers; replication, and depositions, and was argued by the district attorney for the United States, by Hoffman and Wheaton for the defendants Mott and Williams, and by David B. Ogden, Grillen, and Haight for the defendants Casparus Prior and Josiah Hornblower, executors of the last will and testament of William Coulter, deceased. Whereupon this court doth order, adjudge, and decree, that the monies brought into court by the defendants, Uriah R. Scribner and John Hitchcock, be paid to the complainants, in part satisfaction of their demand against the defendant, Noel Blanche. And it is further ordered, adjudged, and decreed, that it be referred to William Ironside to ascertain and report what sum will remain due to the complainants, on the several bonds mentioned in their bill, as being executed by the defendant, Noel Blanche, by the said William Coulter, and by Jeremiah Vanderbilt, after crediting thereon, the sum which has been brought into court as aforesaid, and which is, by this decretal order, directed to be paid to the complainants. And it is further ordered, adjudged, and decreed, that the said William Ironside do also ascertain and report what property was conveyed by the deed of assignment in the pleadings mentioned, bearing date the 20th day of May, in the year of our Lord 1816, that is to say:— All the particulars, whether real or personal, of which the same consisted, and what part or parts thereof have been sold by the trustees therein named, or by either of them, and to whom, and for what prices, and what sums of money have been received by the said trustees, or by either of them, under and in virtue of the said deed of assignment, and how the same have been applied, and what part of the estate, real or personal, granted by the said deed, remains unsold, or in the hands of the said trustees, or either of them, and what is the value thereof. And also, that the said William Ironside report, whether there were any and what encumbrances, and of what kind and nature, and to what extent, on any part of the real estate mentioned in the said deed of assignment; and whether any and what part of such estate has been sold in virtue thereof. And it is further ordered, that in taking the said account, the said William Ironside may examine on oath, the district attorney for the Southern district of New-York, or any of either of the defendants, as well as any other person or persons. And any further direction or decree is reserved until the coming in of the said report.