Smith v. United States (170 U.S. 372)

This action is brought against Frederick W. Smith and the sureties on his official bond as receiver of public moneys in the Tucson land district, in the territory of Arizona. The bond was dated March 7, 1888, and the condition therein was that 'if the said Frederick W. Smith shall, at all times during his holding and remaining in said office, carefully discharge the duties thereof, and faithfully disburse all public moneys, and honestly account, without fraud or delay, for the same, and for all public funds and property which shall or may come into his hands, then the above obligation to be void and of no effect; otherwise, to remain in full force and virtue.'

Smith was appointed receiver on the 28th of February, 1887, and remained such receiver until the latter part of November, 1889, when he was removed, and Charles R. Drake was appointed his successor, who assumed the duties of the office, and took charge of the books and papers on December 3, 1889. The government claimed that the condition of the bond had been violated by the failure of Smith to faithfully disburse all public moneys, and to honestly account for the same, and that he was indebted to the government by reason thereof in various sums, amounting to over $19,000. During the time of Smith's incumbency, there was either no register of the land office in the Tucson district, or the person occupying that position was in such ill health as to be unable to attend to the duties of the office. Smith was himself also in ill health during 1889. Owing to these facts, the business of the office ran largely behind, and there were so many persons presenting their proofs and making their payments to Receiver Smith before he was ready to pass upon the sufficiency of such proofs, and before the register had acted upon any of them, that a large sum of money thereby accumulated in the hands of the receiver, amounting at the time he was removed from office to about the sum of $40,000. Prior to the time when the receiver was removed from office, in November, 1889, no final action had been taken by him or the register in regard to any of the applications involved in this record.

Before his removal, it had been the custom of the land department not to permit the giving of any receipt by a receiver, for money paid him by an applicant for entry, until such application had been finally acted upon by the receiver and the register; and then, if favorably decided, the custom was for the receiver to charge himself in his account with the government with the amu nt of the money which had already been paid him by the applicant. If the application were not favorably acted upon, it was then the custom of a receiver of return the money to the applicant. This was authorized by the government.

An agent of the government came to Tucson after the receiver's removal, and, on examining his books, stated that the receiver did not owe the government anything. One of the sureties on the receiver's bond had heard of the receipt of these moneys by Smith, and had obtained from him $25,000, being part of the moneys which Smith had received as above mentioned. While in possession of this money, the surety saw the agent of the government, and inquired if there were nay charges against the receiver, his principal, and that he wanted to know, so that he might use the money Smith had paid him to repay the government any amount that might be found due on an accounting; and he was told by the agent that Smith's accounts were all right, and that he did not owe the government a dollar. It is claimed that thereafter the $25,000 were refunded to the entrymen who had made payments to Smith, until the amount was exhausted.

In April, 1890, there was still a very large accumulation of cases in the Tucson office where proofs had been made and filed with Smith, and moneys had been paid to him, while receiver, as the purchase price of the lands desired, and no final receipts had been given by him or his successor. In this condition of affairs, the commissioner of the general land office wrote the following letter.

'(Letter M.)

'Department of the Interior, General Land Office,

'Washington, D. C., April 30, 1890.

'Register and Receiver, Tucson, Arizona-Sir: I inclose herewith a statement as taken from the records of your office, showing the final proofs now in your office awaiting examination on which the money in payment for the same was paid to Fred. W. Smith, the late receiver, and was by him appropriated to his own use, and never accounted for to the United States. You are instructed to examine all the final proofs now in your office, as shown by the accompanying list; and, if the same is found sufficient, you will request the parties in interest to furnish an affidavit, properly attested, showing that they did pay the money to Fred. W. Smith, and whether the same was paid by draft or check. If the parties can furnish certified copies of these drafts or checks from the cashier of the bank showing the same, you will obtain these copies, and allow the entries as of date when proof and payment were made. You will refer on the entry papers, and upon your records to this letter by initial and date as your authority therefor. The receiver will enter upon the books of his office, under the account of Fred. W. Smith, late receiver, the amount of purchase money received for each class of entry. You will give to said entries a half number corresponding to the time when said proof was accepted, and prepare supplemental abstracts of the same, noting thereon, 'Allowed by letter 'M' of April 30,' and purchase money is to be charged to Fred. W. Smith, the late receiver. You will then prepare an account current, Form 4-105, thereof, and certify therein that the transaction reported appears from the records of your office. The receiver will send a duplicate receipt to the entrymen in accordance with the instructions herein contained, noting on the receipt, as his authority, this letter by initial and date, and, after you have carefully examined all of these papers as instructed in this letter, you will forward them to this office for future consideration.

'The decision of this office heretofore has been against the allowance of an entry where the money be payable to the receiver of public moneys if the moneys were not properly accounted for or deposited to the credit of the treasurer of the United States; but, as a matter of equity, in view of the general circular of this office, which provides that proof without payment must in no caseb e accepted or received by register and receiver, and in view of the fact that entrymen had made their payments in accord with this circular issued by this office, it is the opinion of this office that the entries should be allowed. I am aware that the views herein expressed are in conflict with the practice above referred to, but my understandign of the law and convictions of equity are so strong and clear that, reluctant as I am to change the former practices, I feel myself compelled to do so in this case. I therefore hold that the moneys paid by entrymen to Frederick W. Smith, receiver, and received by him in his official capacity as such, were public moneys, within the meaning and intent of the law, and the payment to him was a payment to the government. The recourse of the United States is under the official bond of Mr. Smith, and, as suit has already been instituted for the recovery of the amount received by him, the entries should be allowed without further delay.

'Very respectfully,

William Stone,

'Assistant Commissioner.'

Pursuant to the directions contained in the above letter, the receiver, Mr. Drake, issued, in all cases where the proofs were satisfactory, final receipts to the various entrymen who had made applications for entry, and paid their money to Smith while he was receiver, and the payments to Smith in such cases were recognized as payments to the government.

Upon the trial of the action in the Arizona court, judgment for nearly $6,000 was given for the United States for the amount found to be due by the jury in cases where payments had been made to Smith, and the final proofs had been favorably decided upon by his successor. That judgment was affirmed by the supreme court of the territory, and the defendants brought the case here for review.

Wm. H. Barnes and L. E. Payson, for plaintiffs in error.

Sol. Gen. Richards and Felix Brannigan, for the United States.

Mr. Justice PECKHAM, after stating the facts, delivered the opinion of the court.