Beaston v. Farmers' Bank of Delaware/Opinion of the Court

This is a writ of error to the judgment of the court of appeals, for the eastern shore of Maryland, reversing the judgment of the Cecil county court.

The defendant in error sued out and prosecuted a writ of attachment fieri facias against the plaintiff in error, in said county court, upon a judgment, previously obtained, against the Elkton Bank of Maryland; upon which the sheriff returned that he had attached goods and chattels, rights and credits, of the president and directors of said Elkton Bank, in the hands of the plaintiff in error, the sum of five hundred dollars.

Upon the trial of the cause, the following agreed case was submitted by the parties to the court for its judgment: 'It is agreed in this case, that in 1828, the United States instituted a suit against the Elkton Bank, in the circuit court of the United States, at the December term, 1829; a verdict and judgment were rendered in said suit, in favour of the United States, for twenty-one thousand two hundred dollars; on which judgment a fieri facias was issued at April term, 1830, and returned nulla bona: but it is admitted, that at the time, the said president and directors of the Elkton Bank had a large landed estate, which has been since sold, and applied to satisfy, in part, the said judgment; which landed estate, together with all other effects or property belonging to the bank, would not enable the bank to pay its debts, and that the same property and effects are not sufficient to pay the said debt due to the United States; and it is admitted, that the bank was then unable to pay its debts. An appeal was prosecuted, but no appeal bond given; and the judgment was affirmed in the Supreme Court, at the January term, 1832. At the April term, 1830, of the circuit court, a bill in equity was filed against the said bank, at the suit of the United States; and Nathaniel Williams and John Glenn were appointed, by an order of court, receivers, with authority to take possession of the property of said bank, to dispose of the same, and to collect all debts due to it, as appears by the record marked exhibit A; which receivers gave bond, on the 14th day of June, 1830, and proceeded to execute their trust. The records marked exhibit A and exhibit B, herewith filed, are to be considered as part of this case stated. At December session, 1829, application was made to the legislature of Maryland, by the several persons who were the acting president and directors of the said bank, for the act which was passed at that session, ch. 170; which, with all other acts relating to said bank, are to be considered as part of this statement. A meeting of the stockholders, convened on the 17th day of May, 1830, which was the third Monday of said month, but without the notice mentioned and required by the act incorporating the bank, and its supplements; and at the said meeting, a majority of the stockholders appointed two trustees, in conformity with the provisions of said act, who declined accepting; and no trustees have ever since been appointed, nor has there since been an annual, or other meeting of the stockholders, or an election of directors; nor have there been any banking operations carried on by any persons professing to be the corporation of the Elkton Bank, since March, 1829.

'At September term, 1828, the Elkton Bank obtained a judgment against George Beaston for the sum which is attached in this suit; which, at the time of issuing and service of this attachment, had not been paid by Beaston. At April term, 1830, the Farmers' Bank of Delaware obtained, in Cecil county court, a judgment against the president and directors of the Elkton Bank for five thousand dollars, with interest from 9th December, 1825, till paid, and costs; and before the appointment and bonding of the receivers, as aforesaid, and on the 24th September, 1830, upon that judgment issued this attachment, and attached, in the hands of said Beaston, the sum of five hundred dollars; and after this attachment was issued and served, and after the affirmation of the judgment of the circuit court by the Supreme Court, attachment was issued by the United States, and the other proceedings had, as appears from the record marked B: and Beaston has actually paid and satisfied to the United States the amount for which judgment of condemnation was rendered against him in the circuit court. It is admitted, that up to the time of the decision in the Supreme Court, the said receivers had never collected or received, or by any process of law attempted to collect or receive, the said debt, attached in this case. The question for the opinion of the court is, whether the plaintiff can sustain the present attachment?' Whereupon the court rendered judgment in favour of the defendant; and, upon an appeal taken by the plaintiff, the court of appeals reversed the judgment of the county court.

In the argument here, the counsel for the plaintiff in error made the following points: First, the Elkton Bank of Maryland, is a person, within the meaning of the act of congress of the 3d of March, 1797, giving priority of payment to the United States: secondly, by a proper construction of that act, the plaintiff in error having paid to the United States the amount which he owed to the Elkton Bank, is not liable to the defendant in error: thirdly, the appointment of receivers by the circuit court, with power to take possession of the property of the bank, and to sell and dispose of the same, and to collect all debts due to it, was such an assignment of its property as to give the right of priority to the United States: fourthly, the election of trustees, by the stockholders of the bank, under the act of the Maryland legislature, was also such an assignment of the property of the bank as to give the right of priority to the United States: and for these reasons, they contended, the judgment of the court of appeals ought to be reversed.

The counsel for the defendant in error resisted all the grounds assumed by the counsel for the plaintiff in error; and insisted that, by a fair construction of the fifth section of the act, and the former adjudications of this Court, the priority therein provided for, did not attach to the fund belonging to the Elkton Bank, in the hands of the plaintiff in error.

The section referred to is in these words: 'That when any revenue officer, or other person hereafter becoming indebted to the United States, by bond or otherwise, shall become insolvent, or where the estate of any deceased person, in the hands of executors or administrators, shall be insufficient to pay all the debts due from the deceased, the debt due to 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, or in which the effects of an absconding, concealed or absent debtor, shall be attached by process of law, as to cases in which an act of legal bankruptcy shall be committed.'

From the language employed in this section, and the construction given to it, from time to time, by this Court, these rules are clearly established: first, that no lien is created by the statute: secondly, the priority established can never attach while the debtor continues the owner and in the possession of the property, although he may be unable to pay all his debts: thirdly, no evidence can be received of the insolvency of the debtor, until he has been divested of his property in one of the modes stated in the section: and, fourthly, whenever he 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 their debt first out of the proceeds of the debtor's property. The United States v. Fisher, 2 Cranch, 358; The United States v. Hooe et al. 3 Cranch, 73; Prince v. Bartlett, 8 Cranch, 431; Conard v. The Atlantic Insurance Company, 1 Peters' Rep. 439; Conard v. Nicholl, 4 Peters' Rep. 308; Brent v. The Bank of Washington, 10 Peters' Rep. 596.

If the Elkton Bank of Maryland is not a person, within the meaning of the act, no law of congress was drawn in question in the court below; and consequently, the question of priority did not arise. That court having decided upon the legal effect of the several acts done by the circuit court of the United States; and, also, upon the legal effect of the election of trustees by the stockholders of the bank, under the act of Maryland: which several acts were relied upon, by the plaintiff in error, as being an assignment of all the property of the bank, or as constituting an act equivalent to such an assignment; the question, whether the bank is a person, within the meaning of the act of congress, was necessarily decided. It lies at the foundation of the whole proceeding; and if we now decide, that the bank is not a person, within the meaning of the act, under the 25th section of the judiciary act of 1789, it will be our duty to dismiss the writ of error for want of jurisdiction. Inglis v. Coolidge, 2 Wheat. 363; Miller v. Nicholls, 4 Wheat. 311; Crowell v. Randell, and Shoemaker v. Randell, 10 Peters' Rep. 368: M'Kinney et al. v. Carroll, decided at the present term of this Court. We must, therefore, inquire whether the bank is a person, within the meaning of the act of congress.

All debtors to the United States, whatever their character, and by whatever mode bound, may be fairly included within the language used in the fifth section of the act of congress. And it is manifest, that congress intended to give priority of payment to the United States over all other creditors, in the cases stated therein. It therefore lies upon those who claim exemption from the operation of the statute, to show that they are not within its provisions. No authority has been adduced to show, that a corporation may not, in the construction of statutes, be regarded as a natural person: while, on the contrary, authorities have been cited which show, that corporations are to be deemed and considered as persons, when the circumstances in which they are placed, are identical with those of natural persons, expressly included in such statutes. As this statute has reference to the public good, it ought to be liberally construed. United States v. The State Bank of North Carolina, 6 Peters' Rep. 29. As this question has been fully decided by this Court, other authorities need not be cited.

In the case of the United States v. Amedy, 11 Wheat. 392, which was a prosecution for destroying a vessel at sea with intent to prejudice the underwriters, The Boston Insurance Company; the section of the statute under which he was prosecuted, subjected to the penalty of death any person, being owner, or part owner, who should burn, destroy &c., any ship or vessel, with intent to prejudice any person or persons, that had underwritten, or should underwrite any policy of insurance, &c. The Court, in delivering the opinion, says: 'Another question, not raised in the court below, has been raised here, and upon which, as it is vital to the prosecution, we feel ourselves called upon to express an opinion. It is, that a corporation is not a person within the meaning of the act of congress. If there had been any settled course of decisions on this subject, in criminal cases, we should certainly, in a prosecution of this nature, yield to such a construction of the act. But there is no such course of decision. The mischief, intended to be reached by the statute, is the same whether it respects private or corporate persons.' After citing 2 Inst. 736, and some other authorities, the opinion proceeds thus: 'Finding, therefore, no authority at common law which overthrows the doctrine of Lord Coke, we do not think that we are entitled to engraft any such constructive exception upon the text of the statute.' This case, we think, is decisive of the question. And the fact, that the Elkton Bank cannot be brought within all the predicaments stated in the statute, proves nothing; if it can be brought within any one or more of them.

The record in this case abundantly proves, that a bank may become largely indebted to the United States, and not have property sufficient to pay all its debts. If to these facts were superadded the fact of a voluntary assignment by the bank, of all its property, in any mode authorized by law; the right of the United States to priority would be clearly established.

This brings us to the consideration of the second point raised by the plaintiff in error. The agreed case shows that the attachment fieri facias, upon the judgment of the defendant in error, against the Elkton Bank, issued on the 24th day of September, 1830; and attached in the hands of the plaintiff in error the sum in controversy. The attachment in favour of the United States did not issue until the 8th day of July, 1831. And the plaintiff in error, in answering the interrogatories propounded to him in that proceeding, stated, that in October, in the year 1830, an attachment, at the suit of the Farmers' Bank of Delaware, against him, as garnishee of the Elkton Bank of Maryland, was served on him, returnable to Cecil county court, where said attachment was still depending. The money thus attached in the hands of the plaintiff in error, by legal process, before the issuing of the attachment in behalf of the United States, was bound for the debt for which it was legally attached, by a writ, which is in the nature of an execution; and the right of a private creditor, thus acquired, could not be defeated by the process subsequently issued on the part of the United States. Prince v. Bartlett, 8 Cranch, 431.

We are next to inquire into the legal effect of the appointment of receivers by the circuit court. Without deciding whether a circuit court of the United States has authority, in a case like this, to appoint receivers, with power to take possession of all the property of a debtor of the United States; it is sufficient to say, in this case, that it does not appear that the power conferred on the receivers was ever executed: and if it had been, it would not have been a transfer and possession of the property of the Elkton Bank, within the meaning of the act of congress: and, therefore, the priority could not have attached to the funds in their hands.

The only remaining question is, whether the election of trustees, by the stockholders of the Elkton Bank, under the statute of Maryland was such an assignment of all the property of the bank, as would entitle the United States to priority of payment out of its funds. In the investigation of this branch of the subject, it is not necessary to inquire into the regularity of the election of the trustees. Suppose it to have been perfectly regular, in all respects, did it so operate as to divest the Elkton Bank of its property? No one can be divested of his property, by any mode of conveyance, statutory or otherwise, unless at the same time, and by the same conveyance, the grantee becomes invested with the title. As the trustees refused to accept the trust, none was created; and the election thereby became inoperative and void, and the property remained in the bank. Brent v. The Bank of Washington, 10 Peters' R. 611; Hunter v. The United States, 5 Peters' R. 173.

The moment the transfer of property takes place, under the statute, the person taking it, whether by voluntary assignment of by operation of law, becomes bound to the United States for the faithful performance of the trust. Conard v. The Atlantic Insurance Company, 1 Peters' R. 439. As the title to the property of the bank did not pass to the trustees by virtue of the election, there was no fund to which the priority of the United States could attach; there was no one authorized or bound to execute a trust under the statute: therefore, no legal bar was opposed to the right of recovery and satisfaction of the debt due by the Elkton Bank to the defendant in error.

Upon the whole, it is the opinion of the Court, there is no error in the judgment of the court of appeals.