Minturn v. United States/Opinion of the Court

On August 2, 1865, the firm of Grinnell, Minturn & Co., being the owners of 580 packages of sugar, imported from abroad, entered them at the custom-house in New York by a warehouse entry, and thereupon the members of that firm, as principals, and one Clark, as surety, executed under their hands and seals and delivered to the collector a warehouse bond, conditioned that the bond should be void if the principals, 'or either of them, their or either of their heirs, executors, administrators, or assigns,' should, 'on or before the expiration of one year from the date of the importation' of the said goods, withdraw them, 'in the mode prescribed by law, from the public store or bonded warehouse' where they might be deposited at the port of New York, and pay to the collector for that port $23,787.99, 'or the true amount, when ascertained, of the duties imposed,' by laws then existing, or thereafter to be enacted, upon the said goods, etc. On the giving of the bond the sugars were placed in the public store and in the custody of the collector, as provided by the warehousing statutes. On August 8, 1865, the owners sold to Gibson, Early & Co. all the sugars, the same being still in warehouse, and held by the collector for duties, under said statutes. By the terms of the sale the goods were sold expressly subject to the payment of all duties thereon by Gibson, Early & Co., who assumed the payment of the duties as part of the agreed price of the goods on the sale, the price, less the duties so assumed, being paid in cash on delivery. The sellers made delivery of the goods in bond, subject to the duties, by writing and signing, on August 9, 1865, at the foot of the warehouse entry, the following consent: 'We hereby authorize Gibson, Early & Co. to withdraw the sugars described in this entry. GRINNELL, MINTURN & CO.'

It was not the custom to give any formal notice to the collector or any other officer of the customs of such sales in bond, nor was any such notice given in this case. The authority to withdraw, in the form above stated, would be and was presented to the collector in due course before the withdrawal could be made by the purchaser. The total weight of the sugars, as returned by the government weighers, was 755,621 pounds, upon which the proper duty, at three cents per pound, was liquidated at $22,668.63. On August 11, 1865, Gibson, Early & Co. withdrew for transportation to Cincinnati, under the said authority from Grinnell, Minturn & Co., 325,011 pounds of the sugar, and paid $9,750.33 duties thereon. On August 29, 1865, they withdrew for consumption, in like manner, 48,618 pounds, and paid $2,058.42 duties thereon.

Afterwards, and before September 4, 1865, they sold to one Camp the residue of the sugars, the same being then in warehouse, and being, by the terms of the sale, sold in bond, expressly subject to the payment of all duties thereon by Camp, who assumed the payment of said duties as part of the agreed price of the goods on the sale. A firm of custom-house brokers, Wylie & Wade, was employed by Camp to withdraw the sugars and to pay the duties thereon, and for that purpose was furnished by Camp with the amount of the duties, $10,859.88, in gold. On September 4, 1865, Gibson, Early & Co. made delivery to Camp of the residue of the sugars in bond, by writing and signing at the foot of the withdrawal entry made thereof by his said brokers, the following consent: 'We authorize Wylie & Wade to withdraw the goods described in this entry. GIBSON, EARLY & Co.'

No formal notice of this sale to Camp was given to the collector or any other officer of the customs. This last authority to withdraw was presented in due course by said brokers when they desired to withdraw the goods. This was done on September 4, 1865, when they made a withdrawal entry of the residue of the sugars, the weight of which was 361,996 pounds. The duty at three cents per pound was $10,859.88. But the collector demanded as duties only $9,352.89, being at the rate of three cents per pound on 311,763 pounds, leaving due as duties, $1,506.99. The goods were delivered to the brokers, and were of greater value than the duties chargeable on them. This was done without the knowledge or consent of Grinnell, Minturn & Co. The first knowledge or notice they had of the withdrawal without the payment of full duties was a notice from the collector, December 6, 1867, as to the amount so remaining unpaid. Before that time the brokers had become insolvent, and Gibson, Early & Co. became insolvent before the trial of this suit. The United States having brought suit on the bond against the obligors in it, to recover the $1,506.99, with interest, a jury was duly waived, and the court, having found the foregoing facts, found the following conclusions of law:

(1) That the facts constituted no bar to a recovery; (2) that     if the defendants were to be regarded as sureties, after the      transfer of the title to the property in bond, instead of      principals, they stood in no better position; (3) that the      laches of the custom-house officers, in delivering the goods      without collecting the whole of the duties, could not affect      the plaintiffs, as the United States were never bound by the      laches of their agents, nor could the defendants set up such      laches as a discharge of their obligation; (4) that the      plaintiffs were entitled to judgment.

The defendants excepted to each of said conclusions of law, a judgment was rendered for the plaintiffs for $3,096.11, and the defendants brought this writ of error.

The court belowalso found, as facts,--

'That it was the established and uniform usage of trade in     New York, at the times of said sales and deliveries and long      before, for importers to make sales of imported goods, which      were in warehouse, in bond, the purchaser on such sales      assuming the payment of the duties thereon, and being allowed      and credited by the seller with the amount of the duties so      assumed, as so much paid on account of or deducted from what      would otherwise have been the purchase price, and for the      seller to make delivery of said goods in bond, by signing a      written consent to the withdrawal of said goods by the      purchaser, and it was also in accordance with such usage and      custom for successive sales and deliveries of goods in bond      to be made, on similar terms and in the same manner, so long      as any of such goods remained in warehouse, the last      purchaser withdrawing the goods under the written consent so      received by him upon and as the delivery thereof, and paying the duties thereon on such withdrawal; that the said custom      and usage were, at the times aforesaid, well known and      understood, and the established and settled practice at the      custom-house in New York was to treat the party holding such      consent, for withdrawal, and him only, as the person entitled      to withdraw and receive the goods on payment of the duties,      and, upon the payment by him of the duties remaining due      thereon, and not otherwise, to issue a written permit for the      actual delivery to him of said goods out of warehouse; and      that, during the period covered by the transactions      hereinbefore set forth, the following regulations of the      treasury department were in force, to-wit: 'Article 442. The     entry for withdrawal of merchandise from warehouse for      consumption, at port of original importation, shall be made      by the party in whose name the merchandise was warehoused, or      by some person duly authorized for the purpose pose by him,      and in either case shall be signed by the party making the      withdrawal. This entry shall exhibit the marks and numbers of     the packages, the description and quality of the goods, and      the dutiable value of the same. On presentation to the proper     officer in the collector's office, it shall be compared with      the record, on the warehouse books, of the original warehouse      entry, and, if found correct, be properly entered therein,      the warehouse bond number indorsed thereon, and the amount of      duties payable estimated. From the collector's office it     shall then be taken by the importer to the naval office,      where a similar comparison shall be made with the warehouse      records of that office, and the estimate of duties verified      and indorsed upon the duplicate entry. The amount of duties     thus ascertained having been paid, a permit will be issued      for the delivery of the goods. Article 443. Merchandise in     bulk, liquors, sugars, molasses, cocoa, pepper, and other      articles bought and sold by weight, when withdrawn for export      or transportation, must be entered for such destination at      the actual quantities on which duties were estimated at the      time of arrival in the United States, and, to secure this,      weighers, measurers, and gaugers will be required to mark on      each package its contents, as determined by them on its entry      for warehouse. On these quantities the duties on export and     transportation entries will be estimated. Goods withdrawn for consumption may be taken at average valuations, care being     had that on the last withdrawal the entire balance of duty be      collected. Article 444. Should the final withdrawal entry be     for export or transportation, and there be any difference      between the actual duty and the amount to close the sum due      on the warehouse entry, the excess, if any, shall be refunded      on the last withdrawal for consumption, and the deficiency,      if any, collected on amendment to said entry."

The contention for the plaintiffs in error is that by the substitution for a credit system, in the payment of duties, of a deposit of the goods in warehouse, subject to a withdrawal for consumption only on the payment of duties, involving the holding by the United States of possession of the goods in the mean time, such possession became the primary security for the duties, and the obligors in the bond were thereafter merely sureties, and were wholly released because the officers of the United States parted with the possession of the goods without exacting payment of the duties.

The warehouse act of August 6, 1846, (9 St. at Large, p. 53, § 1,) amendatory of section 12 of the act of August 30, 1842, (5 St. at Large, 561,) provides that, on an entry of goods for warehousing, the goods shall be taken possession of by the collector, and deposited in the public stores, there to be kept subject at all times to the order of the owner, importer, consignee, or agent, 'upon payment of the proper duties and expenses, to be ascertained on due entry thereof for warehousing, and to be secured by a bond of the owner, importer, or consignee, with surety or sureties to the satisfaction of the collector, in double the amount of said duties, and in such form as the secretary of the treasury shall prescribe.' It is contended by the plaintiffs in error that a private creditor, standing in the same relation to them and to the goods which the United States occupied under the warehousing system as provided for by the statute and as practically administered, could not have voluntarily surrendered the goods which had been placed in his hands as security for the payment of the debt, and which were available for that purpose, without requiring payment of the debt, otherwise than with the consent of the plaintiffs in error, without discharging them from their liability; that the United States are entitled to no other or higher right than a private creditor would be entitled to in the same case; and that the consent of the importers to the withdrawal of the goods by Gibson, Early & Co. was not a consent unconditionally to their delivery, or to their delivery without the payment of duties, but only to their withdrawal from warehouse in the manner and upon the terms and conditions prescribed by law and by the treasury regulations and by usage, namely, after all duties thereon had been first paid, and not otherwise.

The warehousing statute, above cited, provides that warehoused goods shall be subject to the order of their owner on payment of the duties. Therefore, no order of the plaintiffs in error could become operative to affect any rights of the United States, unless the duties on the goods to be affected by the order were paid. Moreover, the provision as to the deposit of the goods, and their retention till the duties on them are paid, is coupled with the provision for the securing of the duties by the bond. Evidently, the intention of the statute was to superadd to the security of the holding of the goods the security of the bond, so that, in case of a delivery of the goods by fraud, or mistake, or negligence in the officers of the government, the security of the bond should remain. The form of the bond taken was such, that while, in connection with the regulations and the usage, commerce was favored by the privilege of dealing in warehoused goods, it was clearly intended to hold the obligors responsible if any purchaser from the importers should obtain the goods on their order without paying full duties. The condition is, that the bond shall be void if they or their 'assigns' shall withdraw the goods and pay the 'true amount' of duties. The bond is not to become void on any other condition, and it is not to become void, unless in addition to the withdrawal of the goods, the true amount of duties is paid. This view shows that the parties have contracted to be and remain principal debtors to the United States until the true amount of duties is paid, whatever fraud or negligence there may be in parting with the possession of the goods without the payment of the true amount of duties. There was no power in any officer of the government to alter the terms or effect of this contract, and destroy the obligation of the bond, by giving up the goods without the payment of the duties. The same statute required the holding of the goods and the taking of the bond. The cases in which it has been held that the United States had parted with rights, by reason of acts done to the prejudice of persons who had contracted with them, have all been cases where there was authority of law to do such acts.

In U.S. v. Adm'rs of Hillegas, 3 Wash. C. C. 75, it was held, by Mr. Justice WASHINGTON, that acts of the United States acting within their proper spheres, and to be imputed to the United States and considered as the acts of the United States, in extending the time for the payment of the debt due from a principal in a bond, discharged the sureties in the same bond, they not having known of or consented to the extension. The same principle was applied by Mr. Justice THOMPSON, in U.S. v. Tillotson, 1 Paine, 306, to the case of the alteration of a contract by the United States without the consent of the sureties for its performance. But, in the present case, the giving up of the goods without the payment of the duties was an act not only not unauthorized, but forbidden by the statute.

The question presented by this case is not a new one in the court. In Hart v. U.S. 95 U.S. 316, in a suit brought by the United States against the principal and sureties on a distiller's bond, to recover taxes on spirits distilled by the principal, the sureties pleaded that the taxes were a lien on the spirits, and that the collector, without the knowledge or assent of the sureties, and without first requiring the payment of the taxes thereon, permitted the principal to remove from the distillery warehouse distilled spirits more than sufficient in value to pay the demand. This court held that, as under the statute, no distilled spirits could be removed from the warehouse before payment of the tax, and no officer of the United States had authority to dispense with the requirement of the law, the United States were not bound by the acts of the collector; and the prior cases of U.S. v. Kirkpatrick, 9 Wheat. 720; U.S. v. Van Zandt, 11 Wheat. 184; U.S. v. Nicholl, 12 Wheat. 505; Gibbons v. U.S. 8 Wall. 269; and Jones v. U.S. 18 Wall. 662, were cited as establishing that the government is not responsible for the laches or the wrongful acts of its officers; and it was said by the chief justice delivering the opinion of the court:

'Here the surety was aware of the lien which the law gave as     security for the payment of the tax. He also knew that, in     order to retain this lien, the government must rely upon the      diligence and honesty of its agents. If they performed their     duties and preserved the security it inured to his benefit as      well as that of the government; but if, by neglect or      misconduct, they lost it, the government did not come under      obligations to make good the loss to him, or, what is the      same thing, release him pro tanto from the obligation of his      bond. As between himself and the government he took the risk     of the effect of official negligence upon the security which      the law provided for his protection against loss by reason of      the liability he assumed.'

These views are conclusive to show that the importers as well as their surety are liable on the bond in this case. If the importers could be regarded as having always been, or as having at any time become, sureties only in respect of the duties, with the goods as the primary security, (a position shown to be wholly untenable,) it is well settled by the decisions of this court that the negligence of the officers of the government does not affect the liability of a surety in a bond any more than it does that of his principal. U.S. v. Kirkpatrick, 9 Wheat. 720; U.S. v. Van Zandt, 11 Wheat. 184; Dox v. P. M. General, 1 Pet. 318.

The judgment of the circuit court is affirmed.