15 F. 589 | D. Ind. | 1883
The United States recovered judgment in this court, in 1871, against James Burgess, Stephen Major, Greenville Wilson, and William 0. Tarkington, as sureties upon the bond of 'Garland D. Bose, postmaster at Indianapolis. In the year following, Tark
To the complaint alleging these facts the defendant, in his special answer, avers that before Tarkington was adjudicated a bankrupt the marshal had levied an execution, which the plaintiff had caused to be issued, on the judgment against Burgess and others upon real estate belonging to Greenville Wilson, which was, and yet is, worth more than enough to satisfy such judgment; that the attorney of the United States, who was charged with the duty of collecting such judgment, and the proper officers of the United States, who were authorized to instruct such attorney in the premises, and who also knew of the adjudication of bankruptcy against Tarkington, and of all the subsequent proceedings thereunder, neither proved the claim of the United States as a creditor, nor obtained an order recognizing their supposed priority, or directing its payment, nor objected to any of such proceedings, including the final distribution of the fund; that before any of the fund had.been distributed among the creditors, and while the estate was yet in process of settlement, the marshal, who had levied on the lands of Wilson, and was maintaining such levy in force, under the direction of the plaintiff, informed the defendant that such levy was sufficient to satisfy the judgment, interest, and costs; that although Wilson had filed no contingent claim for contribution against the bankrupt’s estate, yet, inasmuch as it was believed the lands so levied on would sell for enough to pay the entire judgment, the defendant withheld from distribution, for Wilson, $2,419.20, the full contributive portion of the judgment due from the bankrupt, and distributed the balance of the fund, under the orders of the court, among the creditors who had proved their claims as required by the act; that since the commencement of this suit the sum so reserved for Wilson was paid to the United States on the demand of the proper officers, and thereafter, viz., on the twenty-first day of July, 1881, the attorney of the United States, by the authority of their proper officers, made a compromise with Greenville Wilson, with respect to his liability on such judgment, whereby he paid to the United States $1,000 in full satisfaction and discharge of such judg
“ Í hereby enter, by direction of the solicitor 01 tne treasury, satisfaction of this judgment as to (3r.eenville Wilson, (see letter of July 17, 1881, accepting $1,000 in compromise of Wilson’s liability,) without prejudice to the rights of the United States against his co-defendants herein, and provided, always, that all rights .óf the United States as to them, and each of them, are hereby expressly saved and reserved.
[Signed] ■ "Charles L. Holstein,
“U. S. Attorney.”
Section 3466, Rev. St., provides that whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient'to pay all the debts due from the deceased, the debts due to the United States shall be. first satisfied, and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in'whieh the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed. Section 3467 provides that every executor, administrator, or assignee, or other person who pays any debt due by the person or estate from whom or for which he acts, before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate for the debts so due to the United States, or for so much thereof as may remain due and unpaid.
It has been held' that a discharge in bankruptcy does not bar a debt due the government, (U. S. v. Herron, 20 Wall. 25;) also that the government is not bound to prove a claim in the bankruptcy court, (Lewis v. U. S. 92 U. S. 619.) But it does not follow that the government, knowing that the estate of its. debtor is being administered upon' in the bankruptcy court, may stand by, assert no claim to' the fund; suffer the settlement to proceed, and final distribution to be made under the terms of the act, without waiving its right of priority of, payment out of that fund. The assignee and trustee are' the mere instruments' of the court in administering upon the estate; they execute the trust committed to them, in obedience to the terms of the act, and under' the orders of the court, in the ease of a trustee, also under the' direction -of a committee of creditors. Only those creditors who ■ prove their claims, or in some proper form present
Section 5101, Eev. St., provides that, in the order of distribution,, the following claims shall be entitled to priority: First, costs; second, debts and taxes due the United States; third, debts and taxes due the state; fourth, wages due to operatives, etc.; and, fifth, debts due to persons subrogated to the government’s right of priority.
The government is hot bound to go into a bankruptcy court, nor is it bound by a certificate of discharge; but if it claims priority out of a fund upon which that court is administering under the act, it must assert that right, just as the state and operatives and persons subrogated to the rights of the government are required to do, to be entitled to share in the distribution of that fund. The government’s right of priority of payment out of a fund in the hands of the bankruptcy court must be worked out through the act.
It is true that the defendant settled the trust and distributed the fund with knowledge of the judgment against the bankrupt and others, but it is also true that the government knew Tarkington’s estate was in bankruptcy, and wholly omitted to assert any right of priority until after the fund had been distributed and the trust had been fully executed under the direction of the committee of creditors and the orders of the court. The government thus waived its right of priority, and assented to the distribution of the fund among the creditors who had established their right to it under the terms of its own law, and it would be unjust, if not oppressive, to now compel the trustee to pay the balance of the judgment out of his own means.
The government had levied upon real estate of Greenville Wilson, sufficient to pay the judgment, before Tarkington went into bankruptcy. This levy was kept alive during the entire time that the defendant as trustee was settling the estate. There can be no doubt that in good faith he executed the trust, and distributed the fund among the creditors who had proved their claims, believing that the government was relying upon the specific lien which it had acquired
Thus far I have considered the demurrer to the special answer without reference to the compromise between the government and Wilson. This occurred long after the defendant had distributed the fund and had been discharged from his trust, and after the bringing of this suit. An actual release of one joint obligor discharges all, though it is otherwise in a covenant not to sue. It has been decided in numerous cases that a release reserving the right to sue others is not a technical release, but only a covenant not to sue. It seems clear that both the government and Wilson understood that the latter was to be absolutely discharged from all liability on the judgment. The entry was not a covenant to release the levy or to suspend further proceedings on the judgment, but a perpetual “satisfaction” of it as to Wilson. No execution can issue on the judgment against him, and no action can be maintained on it against him. It would be a strained construction of the entry of satisfaction to hold that the government meant no more than a contract not to sue on an existing judgment. If the entry was only intended to have the effect of a covenant not to sue, then the government might maintain an action against Wilson on the judgment, and his only redress for the breach would be an appeal to congress for relief. The duty of paying the judgment rested alike upon all the defendants, and the absolute satisfaction of it as to one, discharged all. Cheatham v. Ward, 1 Bos. & P. 630; Ballam v. Price, 4 E. C. L. 418; Nicholson v. Revell, 31 E. C. L. 166; Kearsley v. Cole, 16 Mees. & W. 127; Jay v. Wurtz, 2 Wash. 266; Wiggins v. Tudor, 23 Pick. 444-5 ; 1 Lindley, Partn. 433.
Demurrer overruled.
Priority of Debts Due the United States. Section 3466, U. S. Eev. St., gives a priority to debts due the United States in all cases of insolvency, and section 3467, liev. St., renders personally liable any trustee of such an estate who pays any debt of the estate before he satisfies and pays the debt due the United States. Congress had power to pass the act.
In construing the statute the following principles may be laid down: (1) Ho lien is created by the statute; (2) the priority established can never attach while the debtor continues the owner and in the possession of the property, although he may he unable to pay his debts; (3) no evidence can be received of his insolvency until he has been divested of his property in one of the modes stated in the section; (4) whenever the debtor is thus divested of his property, the person who becomes invested with the title is thereby made a trustee for the United States, and is bound to pay the debt first out of the proceeds of the debtor’s property.
Release of Co-surety or Joint Debtor. “It seems now clearly established at' law that a release or discharge of one surety by the creditor will operate as a discharge of all the other sureties, even though it may be founded on a mere mistake of law. But it may be doubtful whether the same rule will be allowed universally to prevail in equity. Thus, if a creditor has accepted a composition from one surety and discharged him, it has been thought he might still recover against another surety his full proportion of the original . debt. In other words, such surety, notwithstanding such discharge, might be held liable in equity to pay his share of the original debt, treating each as liable for his equal pro rata.
Release of Principal. Even in the case of a discharge of a principal debtor, if the rights of the creditor against the surety are reserved in the release of the principal, tills is not tobo construed as extinguishing the remedy against the surety, but merely as a covenant not to sue the principal.
Contra to Views Supra. In Niaksonv. Revel
U. S. v. Whitesides, 93 U. S. 247; Mayor v. Eschbeck, 17 Md. 282.
Hart v. U. S. 95 U. S. 316; Jones v. U. S. 18 Wall. 662.
U. S. v. Kirkpatrick, 9 Wheat. 735.
McElrath v. U. S. 12 Ct. Claims, 201. Upon the same subject see, also, U. S. v. Vanzandt, 11 Wheat. 184; Hawkins v. U. S. 96 U.S. 691; Lee v. Munroe, 7 Cranch, 366; The Floyd Acceptances, 7 Wall. 366; Dox v. U. S. 1 Pet. 317; Smith v. U. S. 5 Pet. 292; Johnson v. U. S. 5 Mason, 423; Gibbons v. U. S. 8 Wall. 274.
U. S. v. Fisher, 2 Cranch, 202.
U. S. v. Fisher, 2 Cranch, 202; U. S. v. Hooe, 3 Cranch, 73; Thelusson v. Smith, 2 Wheat. 396; Conrad v. Ins Co. 1 Pet. 386; U. S. v. Griswold, 8 Fed. Rep. 496.
U. S. v. Hooe, 3 Cranch, 73; Prince v. Bartlett, 8 Cranch, 431; Thelusson v. Smith, 2 Wheat. 396; Beaston v. Farmers’ Bank, 12 Pet. 102.
Conard v. Ins. Co. 1 Pet. 386.
Conard v. Ins. Co. 1 Pet. 386.
Beaston v. Farmers’ Bank, 12 Pet. 102
Field v. U S. 9 Pet. 182.
Lewis v. U. S. 92 U. S. 618.
Story, Eq. Jur. §498a.
6 Vesey, 805.
2 Pars. Cont. 714.
Chit. Cont. (11th Amer. Ed.) 1155. See, also, Whart. Cont. § 832; Brandt, Suretyship, $ 383; Story, Cont. (5th Amer. Ed.) §§ 63, 67.
Thompson v Lack, 3 Man., G. & S. 540.
Solly v. Forbes, 2 Brod. & B. 46.
Bailey v. Berry, 8 Amer. Law Reg. (N. S.) 270; Shaw v. Pratt. 22 Pick. 305. See, also, the following cases in which it was held that a release to one of two joint-obligors would not release a coibligor against whom the creditor’s rights wore ••xpressly reserved by the terms of the release: Willis v. De Castro, 21 Law Rep. 376; Seymour v. Butler, 8 Clarke, (Iowa,) 305; Couch v. Mills. 21 Wend. 424; Crane v. Alling, 3 Green, (N. J.) 423; The Bank v. Osgood, 5 Barb. 455; Durrell v. Wendell, 8 N. H. 369; Lane v. Owings, 3 Bibb, 247; McAllister v. Sprague, 34 Me. 296; Burke v. Noble, 48 Pa. St. 168; Ainsworth v. Brown, 31 Ind. 270.
Whart. Cont. § 832; Kearsley v. Cole, 16 Mees. & W. 127; Clagett v. Salmon, 5 Gill & J. (Md.) 314; Somer v. Loring, 6 Cush. 537; Green v. Wynn, L. R. 4 Ch. App. 201; De Colyer, Guaranties, 403.
De Colyer, Guaranties, 406; Hill v. Morse, 61 Me 511; Clapp v. Rice, 15 Gray, 559.
Clagett v. Salmon, 5 Gill & J. (Md.) 314; Kearsley v. Cole, 15 Mees. & W. 127.
31 E. C. L. 166.
Eq. Jur. § 498a, note
23 Pick. 444.
23 Pick. 305.