Meredith v. United States

IN error from the Circuit Court of the United States for the district of Maryland.

The United States instituted an action of assumpsit against Jonathan Meredith and Thomas Ellicott, to recover from them, as the assignees of Samuel Smith, James A. Buchanan, and Thomas A. Buchanan, formerly trading as merchants under the firm of S. Smith and Buchanan, a certain amount due to the United States for duties; the United States claiming a right of priority of payment against the estate in the hands of the trustees. The deed of trust to the plaintiffs in error was executed by S. Smith and Buchanan, on the 9th of November, 1820.

In July, 1818, there was imported into Baltimore, by S. Smith and Buchanan, and by Hollins and M'Blair a quantity of merchandise from Canton on board the brig Unicorn, and in February, 1819, the same persons imported from Calcutta a quantity of merchandise on board of the ship Brazilian. In the importation by the Unicorn, S. Smith and Buchanan had an interest of two-thirds, and of five-ninths in the cargo of the Brazilian; the remaining interest in both importations belonging to Hollins and M'Blair.

Entries of the merchandise of both cargoes were made by John Smith Hollins, one of the joint importers, and a partner in the firm of Hollins and M'Blair; who, with James A. Buchanan, also one of the joint importers, and a partner in the firm of S. Smith and Buchanan, and a certain Lemuel Taylor, executed to the United States their joint and several bonds for the payment of the duties.

Upon these bonds, the United States afterwards instituted actions against each of the obligors, and recovered judgments in the Circuit Court for the district of Maryland. These judgments have been twice revived by scire facias; and are now in full force and unreversed.

S. Smith and Buchanan afterwards became insolvent, as also did Lemuel Taylor. A large sum of money was awarded under the treaty with France to Lemuel Taylor, which was claimed by Mr. Colt, his assignee: but the United States withheld a part thereof, being the amount of the bonds given for the duties on the importations by the brig Unicorn and ship Brazilian, for which Lemuel Taylor was surety. A large sum of money was also awarded to Smith and Buchanan, under the treaty with France, which was paid to Messrs. Meredith and Ellicott, their assignees. The sum so received by the assignees was sufficient to pay the amount claimed by the United States for the duties on the portions of cargoes of the Unicorn and Brazilian, which had been imported by S. Smith and Buchanan, but not enough to pay their partnership debts. The United States had not adverted to the alleged liability of S. Smith and Buchanan; for the duties unpaid on their importations, when the awards under the French treaty were paid to their assignees.

The case was tried before the Circuit Court of Maryland, and a verdict rendered in favour of the United States. The defendants prosecuted this writ of error.

In the progress of the trial, the defendants, now plaintiffs in error, offered evidence to prove, that at the time of Lemuel Taylor's application for the benefit of the insolvent laws of Maryland, he was indebted, and still remains indebted to the estate of S. Smith and Buchanan, in a sum more than sufficient to pay the whole amount due upon the several bonds for duties before-mentioned; but the admissibility of this evidence was objected to by the counsel for the United States, and the Court sustained the objection.

The case was argued by Mr. Johnson and Mr. Meredith for the plaintiffs in error; and by Mr. Nelson for the United States.

For the plaintiffs in error it was contended:--

That the evidence ought to have been admitted.

And upon the main questions in the case it was further contended—I. That the debt to the United States for the duties on the two joint importations by the Unicorn and Brazilian, arose exclusively upon the bonds given therefor; and that the United States had never any other cause of action for said duties.

II. That if S. Smith and Buchanan were liable to the United States for said duties, before the execution and delivery of the bonds, then the same, having been given and accepted, operated in law as an extinguishment of such previous liability.

III. That the United States have been fully paid and satisfied the amount due for duties on the said joint importations out of the moneys received on account of the awards in favour of the trustees of Lemuel Taylor, under the French treaty.

Mr. Meredith and Mr. Johnson for the plaintiffs in error, contended that the set-off of the debts due by Lemuel Taylor to S. Smith and Buchanan should have been allowed. The real parties in the cause were the assignees of S. Smith and Buchanan, and the assignee of Lemuel Taylor. The United States had no interest in the controversy. The suit was brought in the name of the United States, and its effect, if successful, would be to relieve from the hen of the United States the funds retained by them from the French indemnity, and to enable the assignees of Lemuel Taylor to receive the amount from the treasury of the United States. The case therefore, stood, in fact, as a controversy between the estates of the insolvents represented by assigness. The United States have expressly disclaimed, by the law officer, all interest in the cause. Under such circumstances, the law of set-off fully applies. Cited, 1 Term Rep. 621. 1 Washington C. C. R. 427. 3 East's Rep. 257. 10 Wendall's Rep. 504.

The bonds operated as an extinguishment of the debt for the duties which were due by the importers, and which were a lien on the goods, until the bonds were given. On the execution of the bonds, which were received by the collector as the substitute for the responsibility of the importers, and the lien on the goods, the claim of the United States was upon the bonds only.

The only case which interfers with this position, is that of the United States vs. Lyman, 1 Mason's C. C. R. 582. This is the only case in which an action for debt has been brought for duties claimed by the United States. It stands alone among the decisions of the Courts of the United States; for although Mr. Justice Washington, in 2 Washington's Circuit Court Reports, 508, affirms the law as stated in the case of the United States vs. Lyman, yet it was not the question before him.

In the case of The United States vs. The Assignees of Inskeep and Bradford, 3 Wash. C. C. Rep. 508, it was decided by Mr. Justice Washington, that the assignees of Bradford and Inskeep, the assignors having become insolvent, were not liable out of the estate assigned for duties on merchandise imported by Bradford and Inskeep, for which Bradford had given a bond to the United States. The bond was an extinguishment of the original debt. Cited also, 9 Bingham, 341. 23 Serg. and Lowber's English Com. Law Rep. 300. 10 Ibid. 55. 1 Mass. 53.

There is nothing in the act of Congress which looks to any other obligation for the duties but the bond. In that act, the bonds are called bonds for the payment of the duties, and bonds for the duties.

Mr. Nelson, for the defendants in error, insisted:

1. That S. Smith and Buchanan, by virtue of the importations of 1818 and 1819, in the Unicorn and Brazilian, became personally liable to pay to the United States two-thirds of the duties accruing upon the first, and five-ninths of the duties accruing upon the last importation.

2. That being so personally liable, they were debtors to the United States to the extent of that liability, on the 9th of November, 1820.

3. That the deed of conveyance from S. Smith and Buchanan to the plaintiffs in error, of the 9th of November, 1820, was such as to entitle the United States to a priority in the distribution of the funds received under said deed, &c.

4. That having shown the sum of sixty thousand dollars in the hands of the plaintiffs in error, received under the said conveyance, the Circuit Court did not err in giving the instructions asked for by the defendants in error, at the trial below.

In support of the first proposition, Mr. Nelson referred to the acts of Congress of the 27th of April, 1816, section 7; and of the 3d March, 1799, sections 30. 36. 49. 53. 56. 62.

To show that the duties accrued upon the importation, he referred to Attorney General vs. Strangforth, Bunbury, 97. Hargrave's Law Tracts, 212, 213. The Schooner Boston, 1 Gallison's Reports, 240. The Mary, ibid. 206. United States vs. Arnold, ibid. 348. (S.C..) 9 Cranch, 104. United States vs. Prince, 2 Gallison, 204. United States vs. Vowell, 5 Cranch, 368. United States vs. Lyman, 1 Mason's Reports, 499.

And that the obligation for the payment of the duties thus accruing, attached to the importers personally and immediately, he maintained by a reference to Salter vs. Malapere, 1 Rolle's Reps. 382. Comyn's Digest, title Debt, (A. 9.) 2 Anstruther's Reports, 558. Parker's Reports, 279. United States vs. Lyman, 1 Mason, 499. United States vs. Aborn and others, 3 Mason, 130.

The third and fourth propositions, Mr. Nelson stated, were clear upon the terms of the conveyance, which was for all the property of the grantors. 1 Kent's Commentaries, 229-233. Gordon's Digest, 62, and notes.

Having thus shown a once subsisting claim against S. Smith and Buchanan, whose assignees the plaintiffs in error were, Mr. Nelson proceeded to inquire whether there was any thing in the case made by the evidence offered by the plaintiffs in error at the trial below, to impair or discharge that claim: and he argued that there was not.

1. Because the bonds exhibited in the record operated no extinguishment of the demand for duties.

2. Because the judgments and the proceedings thereon, offered in evidence by the defendants below, could produce no such effect: and,

3. Because the record showed no payment or satisfaction of the claim in law or in fact.

The bonds, Mr. Nelson argued, did not extinguish the claim for duties arising upon the importations; since, if even taken in pursuance of the acts of Congress, they were mere securities, and collateral to the original liability.

That the provisions of the acts of Congress must be regarded as incorporated in the bonds, and as evidencing the terms upon which they were taken at the customhouse.

That those provisions showed that it never was the design of their enactment, that the bonds should be taken in satisfaction; but, on the contrary, were looked to as mere securities. And in support of this view, Mr. Nelson referred and commented upon the acts of Congress, of the 4th of July, 1789, of 1799, ch. 128, sec. 36. 49. 62. 1 Mason's Rep. 482. 3 Mason, 130. Knox vs. Divers, 5 Mason, 395. Tom vs. Goderich, 2 Johnson's Reports, 213. Sherby vs. Champlin, 4 Johns. Reps. 465. United States vs. Astley and others, 3 Washington's C. C. Reps. 508.

But he insisted that the bonds in question were not statutory instruments: that they were voluntary and therefore collateral; and consequently operated no extinguishment.

That no one but the owner or owners, importer or importers, consignee or consignees, were authorised to demand a credit for duties, and to give bonds. Act of 1799 ch. 127, sec. 62. Harris vs. Dennie, 3 Peters' Supreme Court Reports, 304.

That in this case, the importers were Hollins and M'Blair, and S. Smith and Buchanan. That the bonds were not executed by them, but by John S. Hollins, as principal, and James A. Buchanan and Lemuel Taylor as sureties. That they were, therefore, the bonds of others than the importers, owners, and consignees; of a third person, or mere stranger, which could not operate an extinguishment of the simple contract debt, they being voluntary.

That John S. Hollins was one of the firm of Hollins and M'Blair, Mr. Nelson argued could make no difference, since the acts of Congress provide for no such case; and although it might be true, as between individuals, that the bond or other specialty of one partner would extinguish a simple contract debt due from the partnership, the law presuming, in the absence of proof to the contrary, that the creditor in accepting such bond or specialty, receives it in payment; yet under the acts of Congress, bonds of like character could have no such effect: precisely because no such presumption could exist in relation to an officer purely ministerial, the collector having no authority to assent to any bond other than such as conform to the requirements of the statute.

That such an interpretation of the act of Congress was repugnant to the obvious policy of its framers, since it would be calculated to defeat the priority claim of the government against partnership effects, which it was their manifest design effectually to protect.

But Mr. Nelson denied that these were bonds given by a partner for a partnership debt; maintaining that the evidence and verdict stated in the record showed that S. Smith and Buchanan were separate importers for their proportions of the cargoes upon which the duties accrued; and that the bonds being given by John S. Hollins, who was not a member of their firm, were clearly the bonds of a stranger, which could not extinguish the simple contract liability.

That the judgments and the proceedings thereon did not extinguish the claim of duties, he maintained, since the bonds being collateral, and the obligation created by them coexisting with the original liability, it was competent to the United States to pursue all proper remedies upon the securities, without discharging the original responsibility of the importers; and he referred in support of this position to Drake vs. Mitchell, 3 East's Rep. 251.

To show that there had been no payment in law, he referred to the provisions of the treaty with the King of the French, of the 4th of July, 1831, and to the act of Congress of the 13th of July, 1832; to The United States vs. Aborn and others, 3 Mason's Reports, 130; and Martin vs. Mechanics Bank of Baltimore, 6 Harr. and Johns. 235; 2 Espinasse's Cases, 668.

That there had been no payment in fact, he showed, by a reference to the correspondence contained in the record.

Upon the first exception Mr. Nelson contended there was no error, because Lemuel Taylor was no party to the suit; the United States were the plaintiffs, not only nominally but substantially and really; and that their right of recovery could be in nowise affected by the state of the accounts between S. Smith and Buchanan, and Lemuel Taylor.

Mr. Justice STORY delivered the opinion of the Court.