Majority — Marshall C.J.
p. 182Seaman Field and others, plaintiffs in error v. The United States.
Syllabus
Louisiana. L. E. Brown, a debtor to the United States on bond, became insolvent, and under the insolvent laws of Louisiana, made an assignment of his property for the benefit of his creditors; and syndics were appointed, who toolc possession of his estate, real and personal, and sold the same, part for cash, and part on credit, of one, two and three years. The United States instituted suits on" the bonds against L. E B., and obtained judgments in the district court of the United States for the district of Louisiana. The effects of the insolvent were administered by the syndics, according-to the laws of Louisiana. The United States took no partin these proceedings, buta notice of the debts due by B. to the United States, was given to the syndics before any distribution was made of any of the proceeds of tire estate in their hands; and a suit for the amount of the debts of B. to the United States, under the law giving a right to priority of payment, was commenced against them before the tableau of distribution of the first instalment of the insolvent’s estate, was confirmed.by the parish court of New Orleans. The whole proceeds of the estate exceeded 40,000 dollars; the mortgages were about 97,000 dollars; and when all the notes taken by the syndics were paid, there would be sufficient to discharge.these mortgages, and all the debts due to the United States; a large amount of the proceeds were not to be received until after the judgments were obtained in favour of the United States; one moiety of the amount of sales being payable after the suit against the syndics was commenced, and the other after the judgment against them was rendered.The court held : that the syndics were not liable to the United States for the debts due to them, unless funds had actúally come into their hands. The notes for the sales may all be good; yet as one moiety of them was not paid at the time of the judgment of the United States against them, it does not
■ judicially appear that, .even at that time, they had funds on which the United States were entitled to judgment. If the remaining moiety of the notes has sin re been paid, the United States will then have a legal claim thereon for their debts.
The United States were not parties to the proceedings in the parish court, nor were they bound to appear and become parties therein. The local laws of the state, could and did not bind them in their rights. They could not create a priority in favour of other creditors in cases of insolvency, which should supersede that of the United States.
As the cause was not tried by a jury, the exception to the admission of evidence was not properly the subject of a bill of exceptions.
The priority of the United States attached, by the laws of the .United'States, in virtue of the assignment and notice to the syndics; and it was the duty of the syndics to have made known these debts in their tableau of distribution, as having had priority. The mortgages upon particular estates sold, must be first paid out of the sales of those estates. But if there be any deficiency in the .proceda of any particular estate, to pay the mortgages
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thereon, tho mortgagees thereof cannot come in upon the funds and proceeds of the sales of the other estatds, except as general creditors.
' The bill of exceptions stated, that during the trial of the cause in the district court, tlie counsel'for the marshal stated, that he had made a seizure or given notice that he seized in the hands of the defendants, the syndics, any funds in their hands, to a sufficient amount to'satisfy the judgment obtained in tho case of the United States v. John Brown, Sen. and Lewis E. Brown. This testimony was objected to as being contrary lo.the statement of facts in the case, in which it was stated, that a return of nulla bona had been made by the marshal; and because the act was dope in a case to which the- defendants were not parties, and because the best evidenee was the notice or true and proved • copies of it. The return of the marshal in the case of the United Stales v. John Brown, Sen. and Lewis E. Brown was also offered, and was objected to. By the Court: The evidence was properly .admitted as notice to the syndics of the debts due to the United States.
IN error to the district court of.the United States for the eastern district of Louisiana.
In the district court of the United States, on the 30th of March 1831, the attorney of the district filed a petition of complaint, on behalf of the United States, against Seaman Field, Samuel J. Peters, and Thomas Toby, residing in the city of New Orleans, Syndics of L. E. Brown ; stating that one Lewis E. Brown, of .the city of New Orleans, on the 27th of October 1829, executed a certain bond to the United States in the sum of 1366 dollars 20 cents; and suit having been ■brought in the said bond, judgment in favour of the United .States was obtained on it on the 22d of December 1830, for the amount thereof, to be satisfied with the payment of 632 dollars 10 cents with interest, &c. That the said Lewis Brown failed and became insolvent, and made a voluntary assignment of all his property to his creditors, on or.about the 30th of April 1830, under the laws pf-Louisiana. That Seaman Field, Samuel J. Peters, and Thomas Toby, were appointed syndics, or assignees of his creditors; and in that capacity have received and Taken possession of all the property, real and personal of the insolvent, and have sold, and disposed of the same, to ,an amount far exceeding the debts due by him the United States. That at the time of their receiving and taking possession of the said property as aforesaid, they well knew of the existence of the debts due to the United States by-Lewis E. Brown; and that, an amicable demand had been made' them by the United States, for .the amount of the said judgT
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ment and of the costs, but they have neglected or refused to pay the same, or any part thereof.'
The petition prays a citation to the defendants, to answer the same; and that after due proceeding they be condemned, jointly and severally, to pay the amount due .to the United States.
Citations issued to the several defendants, who appeared, respectively, and on the 17th of May 1831, filed separate answers to the petition.
The answers admitted that the respondents had, in the capacity of syndics, taken possession of the property of L. E. Brown,by him assigned for thebenefit of and distribution among his creditors ; and that they acted in the said capacity, in virtue of certain judicial proceedings in the parish court for the parish and city of New Orleans, to which proceedings the answers referred ; and an exemplification of which proceedings would in due time be .exhibited,, apd which were to be considered as part of the said answer.
That'in virtue of said proceedings, under the local laws of Louisiana, the said property so assigned was sold by said syn-dics on a credit of one, two and three years ; that out of the procéeds of sale, when the same shall be received, are to b,e paid certain privileged and mortgaged creditors, who are preferred to the United States.
The answers further state that the respondents have no funds in their hands belonging to the .estate of L. E. Brown; the property having been so sold, on a credit for promissory notes not yet due or paid. They deny all other allegations in the petition, or that the respondents, as syndics, have done any thing to render them responsible uhder-the laws of the United States, or liable-in any manner to the claim stated in the petition of the "United States, and pray a trial by july.
Thé answers, further state that the- said syndics sold the household furniture a-id other movables of the said L. E. Brown at a- credit of six months; out of the proceeds of which they have paid law charges, house rent, and other privileged charges upon the estate preferred to the United States; of which a particular account is annexed to one of the separate ‘answers filed in the case.
On the same 30th of March 1831, the district attorney filed
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a petition in similar terms, stating that on a bond given, by the said L. E. Blown to the United States, for ,1394 dollars, on the 3d of December 1829, a suit had been brought on the 3d'of December 1830, and orí tiré 22d of the same month, a judgment had been obtained for the amount, to be satisfied by the payment of 697 dollars, with, interest, &c., with lh$ same allegations of responsibilities on the pait of the defendants.
Another petition was filed at- the same time, staling that,on a bond given by the said L. E. Brown, on the 28th of October 1829, for the sum of 1264 dollars, a judgment had been obtained on the 22d of December 1830, for the said sum, to be satisfied by the payment of 632 dollars, with interest, &c.', and also stating, a claim on the defendants.
Another petition was-filed at the same lime, stating that on the 22d December 1830, another judgment, on, a bond given to the United States by L. E. Brown, was obtained for the sum of 1060 dollars and-90 cents, to be satisfied by the payment of 530 dollars and 45 cents, with interest, &c.; and on the same day, another petition was filed, stating that another judgment had been obtained against L. E. Brown, on the 22d of December 1830, on a bond givén by him, for the sum of 1396 dollars, to be satisfied by the payment of 698 dollars, with interest, &c.: both petitions alleging the liabilities of the defendants. Other petitions were filed upon other' judgments, on bonds of the same nature, and for different amounts.
The whole amount of judgments stated in these several petitions, was 11,264 dollars and 10 cents; and théreal debt,, claimed to be due to the United States on the same, amounted to 5647 dollars and 55 cents, with interest, &c.
' On the 2d of June 1831, in pursuance of an order of thedis-trict judge, a detailed statement of all the property received by the syndics or assignees of Lewis E. Brown, and the sales and dispositions they had made thereof, was filed in court.
The sales of the real estate and slaves. were made, the former at oné, two and three years, and the latter at-twelve months credit; for which notes were given, which would .become.due at different periods, amounting to 39,000 dollars and 63 cents. The tableau of distribution of the fust instalment of the estate, established by the parish court, in relation to the
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estáte .of Lewis E. Brown, referred to in the answers, dated on the 3d of December 1831, was also filed; and'showed that the balance of cash in the hands of the syndics, amounting lo 9536.dollars and 70 cents, had been paid as a dividend on 27,055 dollars to. the mortgage creditors of Lewis E. Brown.
The amount of the moneys received and disbursed by the syndics, showing the balance, of 9536 dollars for this distribution, was also filed.
On the 9th of March 1832, on motion of the district attorney, it was ordered that all these suits be consolidated; and, by consent of parties trial by- jury being waved, the cause was submitted to the court, on a statement of facts ore-pared by the parties.
“ Statement of facts by the counsel of the United States and the defendants.
“.Lewis E. Brown, at the time of failure and insolvency, to wit, the 26th of May 1830, was surety on certain bonds given to secure duties to the United States byt John Brown, Senior, viz.
“A bond dated 27th of October 1829, due 26th of August 1830, amount of duties 632 dollars; a bond dated 27th of October 1829, due 26th of June 1830, amount of duties 632 dollars and 10 cents ; a bond.dated 27th of October 1829, due 26th of October 1830, amount of duties 632 dollars ; a bond dated 3d of December 1829, due 2d of October 1830, amount of duties 698 dollars; a bond dated 3d of December-1829, due 3d of December 1830, amount of duties 698 dollars ; a bond dated 3d of December 1829, due 2d of August 1830, amount of dirties 698 dollars; a bond dated 11th January 1830, due 9th of September 1830, amount of duties 530 dollars and 45 cents ; a bond dated 11th of January 1830, due 9th of November 1830, amount of duties 531 dollars ; a bond dated 11th of January 1830, due 9th of January 1831, amount of duties 531 dollars.
“ On all of which, with the exception of the last mentioned, judgment was rendered against L. E. Brown, on the 22d of December 1830, for the aforesaid amounts, with L .crest at six per cent, from the falling due of the bonds until paid, with costs
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of suit; and'in the last mentioned bond a like judgment was rendered.on the 22d of February 1831. • On these judgments writs of fieri facias have issued against all the'parties, on which ' the marshal has returned nulla bona, and nothing has-been paid by any of the parties on account of the same. John Brown, Senior, failed and became insolvent, and applied for the benefit of the insolvent law of Louisiana, on the 10th day of June 1830. The sale of Lewis E. Brown’s property was made by order of the syndics, at public auction, on the 30th of July 1830. The defendants, as. syndics, in addition to the su.ms stated by.them to have been received in the account hereunto iannexed, have received from the sale of the property of said Brown indorsed promissory note's, secured by mortgage on the property sold, amounting to 24,898 dollars and 60 cents ; one half of which fell due on the 31st of July 1832, and the other half on the 31st of July 1833. ' The note stated in the account of moneys received and disbursed by the syndics of Lewis E'. Brown to have been paid to the United States, was indorsed by Charles Armstrong, and was paid at the Bank of the United States, where it was deposited for collection by Martin Gordon, ■and paid by the syndics.- The United States have never, in any manner, appeared in the proceedings ha'd in the parish court in relation to the insolvency of Lewis E. Brown. •
“ Lewis E. Brown failed and became insolvent on the 29th of May Í830. On the 15th of July 1829, he mortgaged houses.. and lots in Canal street to J. H. Field &Co., to secure the payment of 5359 dollars and 76 cents, with ten per cent per an-num interest from that date till paid.
“ On the 12th of February 1829, Brown executed another mortgage to J. H. Field & Co., for 5000 dollars on the same property, with same interest as above. On the 18th of March 1830, L. E. Brown gave another mortgage to said Field & Co., for 745 dollars and 16- cents, same property and same rate of interest. The first mortgage was recorded in the recorder of mortgages’ office on the 16th of July 1829 ; the second was recorded on the 13th of February 1829 ; and the third on the 20th of March 1830.
“On the 10th of'March 1830, Lewis E. Brown mortgaged-said property, and the rest of his real estate to R. Ball & Co.‘,
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for 1000 dollars, which was recorded on- the 17th of March 1830.
“On the '4th of February 1830,.Brown mortgaged the houses and lots in Canal street, and lots Nos. 3 arid 4 in suburb St Mary, to Ogier and Williams, for 3300 dollars, which was recorded on the 8th of February'1830.
“ On the 2d of March 1830, Brown mortgaged the houses and lots between Burgundy and Rampart streets, and the lots in Canal-street, between Dauphine and Rampart, to Peters and Millard, for 7000 dollars, with ■ ten per centum per annum interest from date till paid; recorded on the 4lh of March 1830.
“On the 19th of February 1830, this last property was mortgaged to Thompson arid Grant for 3000 dollars, as all the lots in Canal, between Burgundy and Dauphine streets, and recorded on the 20th of February 1830. There existed on the property of said Brown the following sums cine -"'i original purchase money, and price of the property, surrendered by him to his creditors, and for which said property was mortgaged, and other mortgages were duly recorded, being prior to his insolvency,, to wit, the amount of a note in favour of the heirs of Jones, for the price of the lot between Burgundy and Rampart streets, in Canal street, including protests and interest, 1055 dollars and 97 cents; ditto-to William M’Cawly, price of lots in Canal street, between Dauphine and Burgundy streets, 650 dollars, dated in 1829; a note due lo the United States for 333 dollars and 33 cents, dated 1829, for a lot on New Levee street. Besides this, the syndics have paid other debts due by the estate of said Brown, as detailed in annexed record making part of this statement. On the 15th of December 1831, the tableau of distribution, including the list of sums paid as aforesaid, was finally confirmed by the parish court for the parish and'city of New Orleans, after due proceedings having been previously had thereon.”
On the 3d of December- .1830, the marshal, acting under writs of.fieri fapias, issued .-on the several judgments against Lewis E. Brown, seized the funds and property in the possession of the syndics, or assignees of Lewis E. Brown ; and gave notice to them, personally, of the seizure of said funds in amount sufficient to satisfy the three several judgments.
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Job Wilson, the syndic of John Brown, Sen., had under his control notes and other assets to an amount exceeding the debt due by John Brown, Sen. to the United States. Those notes were not yet due, but were considered good, and would be applicable, when paid, to the satisfaction of the judgments rendered against the said Brown. These notes were deposited with the district attorney, who was also acting as the attorney of the said syndics, but had no authority to dispose of them to satisfy the United States.
On the 9th of January and 21st of February 1833, the causes came before the court, and were finally disposed of on the latter day. The counsel for the defendants, on the trial, tendered the following bill of exceptions, which was signed by the district judge.
“ Be it remembered that, during the trial of this cause, the counsel for the plaintiffs offered to prove, by the marshal, that he had made a seizure, or given notice that he seized in. the hands of the defendants any funds in their hands, to a sufficient amount to satisfy the judgment obtained in the case of the United S- ates v. John Brown, Sen. and Lewis E. Brown. The counsel the defendants objected to this testimony as being contrary' to the statement of facts'made in this case, where it is stated that a return of nulla bona had been made in said case, and because the act was done in a case to which the defendants were not parties, and because the best evidence w7as notice itself, or true .and proved copy tliereof; because, if any such seizure or notice was made or given¿ that it should appear from the official return of the marshal.
“ The counsel for the plaintiffs then offered the return of the marshal in the said case of the United States v. John Brown Sen. and L. E. Brown- This the'defendants’counsel objected to, fcceáusc the writ vfhfth issued in that case was ex parte, and these defendants were not parties, directly or indirectly, to the said case of the United States v. John Brown, Sen. and L. E. Brown, and that th.e same was.otherwise illegal.
“ These objections were overruled by the court, because the testimony was considered pertinent and legal; and also, because, previous to the introduction by the district attorney of the testimony heretofore referred to, the defendants had been
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permitted to amend the statement of facts by pjroóf of matters not stated therein.”
The court gave the following judgment foi thé'United States.
“Thecourthaving maturely considered these cases, doth now adjudge, order and decree, that judgment be entered up in fa-vour of the United States against Samuel J. Peters, Seaman Field and Thomas Toby, jointly and. severally, for the sum of 5661 dollars' and 55 cents, with interest thereon at the rate of six per centum per annum, from the following dates, to wit: on 632 dollars and 10 cents from the 26th of June 1830, until paid; on 797 dollars from the 2d of August 1830, until paid ; on 632 dollars from the 26th of August 1830, until paid ; on 530 dollars from the 9th of September 1830, until paid; on 698 dollars from the 2d of October 1830, until paid ; on 632 dollars from the 26th of October 1830, until paid; on 531 dollars from the 9th of November 1830, until paid ; on 698 dollars from the 3d of December 1830, until paid ; on 531 dollars from the 9th of January 1831,. until paid; together with all the costs which have accrued both before and since their consolidation.
The following is the material portion of the opinion of the district judge, read at the. time of the rendition of the above final decree, and filed in the clerk’s office of the eastern district of Louisiana.
“ United States V. The Syndics of L. E. Brown.
“Orí the 30th of March 1831, th’e attorney of the United States instituted nine separate'suits against S.-Field, S. J. Peters and Thomas Toby, the syndics of L. E. Brown, founded on fourteen judgments previously obtained against John-Brown, and his securities, of whom Lewis E. Brown was one, on custom-house bonds for duties. The suits against the syndics are constituted under the provisions of the sixty-fifth section of the duty act of 1799. ' Tlie object of these actions is to make them personally liable out of their own funds to the United States for the debt' due to the latter by the insolvent, L. E. Brown, for having, as is alleged, improperly paid to others moneys out of the estate of said Brown, which ought to.havé been paid to the United States, as a debt having priority.
“ On the 17th of May 1831, the defendants, by their counsel,
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filed separate answers of the syndics to each of the petitions of the United States, all :in substance the saíne, by which they admit that they are the syndics of L. E. Brown, and in that capacity have taken possession of his estate. .The answers then state that' the defendants sold, as they had a right to do under the laws of Louisiana, the property of the insolvent on a creditof one, two and three years, which, when due, they allege they have a right to pay to certain privileged and mortgaged creditors, as being preferred to the United States. They then say they have no funds belonging to the estate of L. E. Brown; all the. property ceded by him having been sold on a credit, and for which the notes taken are not due. They then admit that they have sold the household furniture; and. certain other movables of the estate of said Brown, for an amount not stated, which ‘has been received and paid over in law charges, house rent, and other charges privileged upon said estate, and preferred to the United States, as stated in an account annexed. The remainder of the answers is a general denial of the allegations of the plaintiffs’ petition, and of their personal liability to them.
“ All these suits were consolidated on the 9th of March 1833, and in that shape submitted to me for adjudication; which, therefore, I shall treat as one action. The following facts have been stated and agreed upon by the parties. That.judgments were obtained against L. E. Brown, on the custom-house bonds, on the 22d of December 1830,, with interest thereon, at the rate of six per centum per annum from the date of their falling due ; that writs of fieri facias were issued agai.nst all the parties, on which the marshal ha’s returned nulla bona, and nothing has been paid by any of the parties ;' that John Brown, the principal in these bonds, became insolvent, and applied for the benefit of the insolvent law of Louisiana on the 10th of June 1830 ; that the sale of Lewis E. Brown’s property was made by order of the Syndics, these defendants, on the 30th of July 1830; that the defendants, as syndics, in addition to the sums stated by them to have been received in the account current annexed, have received, from the sale of the property of said Brown, indorsed promissory notes, secured by mortgage on the property sold, amounting to 24,898 dollars and 6t) cents, one half of which was due on the 31st of July
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. 1832, and the other half will be due on the 31st of July 1833; that the United States have never in any manner appeared in £he proceedings had in the parish court t.n relation to the insolvency of L. E. Brown ; that L. E. Brown became insolvent on the 29th of May 1830. On the 15th of July 1829, he mortgaged bouses and lots in Canal street to J. H. Field & Co. to secure the- payment of the sum of 5359 cíollars and 76 cents; on the 12th of February 1829 he executed another mortgage to J. H. Field & Co. for 5000- dollars on the same property, with interest on both at the rate of ten per centum per annum ; on the 15th.of March 1830, he gave another mortgage to said Field for 745 dollars and 16 cents, on the same property, with the same rate of interest; on the 10th of March 1830, he mortgaged said properly and tire rest of his real estate to R. Ball & .Co. for 1000 dollars ; on the 4th of February 1830, he mortgaged the houses and lots in Canal street, and lots Nos. 3 and 4, in Suburb St Mary, to Ogier and Williams for 3300 dollars ; on the 2d of March 1830, lie mortgaged the houses and lots between Burgundy, and Rampart, and the lots in Canal, between Dauphine and Rampart streets, to Pelers and Millard.for 7000 dollars ; on the 19th of February 1830, the last property was mortgaged to Thompson and Grant for 3000 dollars. There existed on the property of said Brown surrendered to his creditors, as the original purchase money and price of the property, and due to individuals, about the sum of 2000 dollars, for which his property had been mortgaged long before his insolvency.
“On the 15th December 1831, the tableau of distribution was finally confirmed by the parish court..
“At the opening of this cause the court permitted the defendants to add to the statement of facts, that the attorney of 'the United States, as counsel for the syndics of John Brown, has • now in his possession good notes sufficient to pay-the debt of the United States; and the court also permitted the district attorney to prove by the marshal that these defendants had due notice of the debt due to the- United States by L. E. Brown before making any payments to his creditors. The tableau of distribútion exhibited shows that the syndics did not consider the United States as creditors of L. E. Brown, in as much as they are not put down as such upon it.
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“ With these facts before me, I am called upon to adjudge whether or not the defendants are personally liable.to pay the debt due to the United States.- Both parties have chiefly relied upon the authority of the case of Conard v. The Atlantic Insurance Company, decided by the supreme court of the United States, and reported in 1 Peters 386 . That case, however, differs' materially from this. There, the dispute was, whether the property seized upon' by the marshal belonged to the United States or to the Insurance Company. Hers there is no contest about the estate of Brown having passed to the syndics, and .that it was his estate when so passed; but whether his syndics have so managed the trust confided to them as to lay themselves individually liable to the United States. The case, however, cited establishes some doctrines applicable to this, and especially one that is not denied by the attorney of the United States, that .bona fide mortgages of property executed before the insolvency of a debtor to the United States, divests the mortgagor of his property, and, as it has been decided that the United States must seek their pay out of the estáte of their debtor, such property cannot be reached by them. According to this principle, there is apparently on the face of these proceedings a sum of about 27,000 dollars secured to mortgagees, and beyond' the reach of the United States.
“ But the district attorney contends that, as all these are special.and not general mortgages, it was incumbent on the defendants to have shown how much each property mortgaged sold for, in order-to ascertain whether any thing remained over and above for the United States. - That the defendants have no right to add the amount of mortgaged debt together, and then say the aggregate exceeds the debt due to the government : as,,for instance, one man has a mortgage for 15,000 dollars, and the property mortgaged sold for only 10,000 dollars ; another has a mortgage for 10,000 dollars, and the .property sold for 15,000dollars: on this supposition the aggregate of mortgages would be 25,000 dollars, and the total amount of sales would also be 25,000 dollars.' In such a case it would appear that, as the whole of the sales of property was covered by privileged claims, nothing would remain for the United States. But he insists that the fallacy consists in this, that, in the first case, the mortgagee must submit to a loss of 5000
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dollars, his mortgage not reaching any other property.; and, the latter case, the mortgagee having his claim satisfied by payment of 10,000 dollars, the remaining'sum of 5000 dollars must go the United States, in preference to those holding special mortgages on-other property. .This position I take to impregnable. But were it otherwise, how stand the facts this case 1
“ It appears from the exhibits that the defendants have sold property to the amount of upwards of 40,000 dollars belonging to the estate of L. E. Brown, and the mortgaged debts they have paid only amount to about 27,000 dollars, leaving a balance of 13,000 dollars, which is more than double the sum duo to the United States, which they have paid to other creditors on'the ground that these creditors had a privilege on the common fund in virtue of the laws of this state, and as the decisions go to show that the United States had no lien for their debts under the sixty-fifth section of the duty .act, their prioiity of payment therein mentioned must yield to the privileges .given by the laws of the state. .It will not, I think, be denied that acts of congress passed in pursuance of the constitution, when in conflict with state laws, must prevail. It has never been doubted that the law under consideration is constitutional. Now it says, ‘in all cases of insolvency, or when any estate in the hands of the executors, administrators, or assignees; shall be insufficient to pay all the debts due from the deceased .or insolvent, as the case may be, the debt or debts due to the United States, or any such'bond or bonds, shall be first satisfied, and any executor, administrator, or assignee, or other person who shall pay any debt due by the person or estate for whom or for which, they are acting, previous to the debt or debts due to the United States from such person or estate being, first duly satisfied and paid, shall become answerable in their person and estate for the debt or debts due to the United- States, &c.’ Now, here we have the case of an insolvent who is unable to pay all of his debts, whose estate has gone into the hands of assignees, and who have not paid the debt due to the United States, but have paid others in preference.
“If'the liens established- by the laws of Louisiana to attach after insolvency, are to have a preference over the debts due to
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the United States,, then the state legislature has deprived the general government' of nearly all the privileges secured to it by the act of 1799, and may by future legislation deprive it of all of them; and all that may be done by a state which was not a member of the union until thirteen years after congress so legislated.
“ The doctrine of privilege in Louisiana may be very well as between her own citizens and other individuals who may choose to come into her-tribunals : so far her legislation is valid, but she cannot content the general government, or compel it to submit to the decisions of her courts in a case like th¡3, in which congress has specified the rights of the United States. The hardship of the case was much and. ably insisted on in argument, but I do not view it in that light. Every citizen is bound to know the law of the land, and if .state legislatures-will pass laws which cannot be enforced as against the United States, and thereby entrap the citizen,-lie has himself and them to blame, but cannot censure -the general government which-had previously told both them and him that the interests of the whole are paramount to those of the individual,. and: especially in the collection'of the very money which is.Indispensable to the existence, of the general government.
“It was insisted, also, that if the charges inciden't-toihe surrender of an insolvent’s estate have not a first privilege, the officers of the courts would not render their services. Whatever necessary court charges are incurred in such cases ought to be' paid first; and the United States must be. postponed to such creditors, on the same principle that, out of the proceeds of a vessel forfeited to the United States'must first be paid seamen’s wages and supplies furnished, because, without such aids, nothing probably would be saved to the government. But after an estate has passed into the hands of assignees, any debts they may pay, other than court charges and privileges existing antecedently to the failure, to the prejudice of the United States, are payments made in their own "wrong. ' According to this view of the subject, a number of items charged as paid to individuals, in the tableau of distribution, have been wrongfully paid ; and, for the reasons ■ assigned in a former part of this opinion, the application of the general fund to the payment, of special mortgages was illegal: but. it is sufficient,
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to e'ntitle the United States to recover in this action, to show that the syndics have, to the prejudice of the government, paid one dollar wrongfully; for, by the statute, if such persons pay any debt improperly, they, ipso facto, lay themselves liable to the United States for so much.
“ If this case had been tried on the issue made by the answer of the defendants, it would have been incumbent on the United States to have shown how much the syndics had wrongfully paid previous to the institution of this suit, to enable them to recover, that much, for they could not have been made liable in this fiction for any thing done by them after its inception— that would have been the subject of another suit; but the defendants, by-their admission of facts, and by the documents they have voluntarily produced and made part of the pleadings or evidence, have put their whole proceedings, first and last, in issue, and the case is now prosecuted as if all the payments they have made had been made before suit brought.
“ Now, a bare inspection of the list of debts paid by them is conclusive against them aided by all the force of the laws of Louisiana, for they have paid claims, to the exclüsion of the United States, not recognized as liens or privileged by these laws; and they admit in their answer that, previous to filing it, they had paid to creditors, other than mortgaged creditors, money out of the estate, but do not say how much.
“ The defendants have, in no manner, acknowledged the debt of the United States as due from the estate of the insolvent.
“ Knowing of its existence, as it is presumed they did, they . ought at least to have put them on their tableau, even if they had afterwards disputed their right to priority of payment; but the fact is, as that document shows, they have claims individually adverse to the United States, and therefore it was no part of their policy to admit the rights of the latter in any shape.
“ In the course of this opinion whatever obiter dicta I may . have expressed arguendo, I wish to be explicitly understood as affirming the law to be that, whatever legal liens may have attached to the property of the debtor of the United States prior to his insolvency, whether they arise from mortgages, judgments, or from the operation of state laws (if properly set forth
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and pleaded), so far divests the. debtor of. his property pro tanto, as to exempt it from the claim of the United States.
“ It-is to the unincumbered estate of the insolvent, divested of any pre-existing lien, that they must look for priority of payment, for, having no lien themselves on their debtor’s property while it is under his own control, they cannot reach it in the hands of others, who have an implied right to it in case of the non payment of the debt for which it is security, as in the case of mortgage, the mortgagee having the jus in re.
“But all liens incidentally attaching to an insolvent’s estate after his insolvency and surrender of it for the benefit of his creditors, except court charges, or the expenses necessary to put it into the hands of assignees, must be postponed to the claim of the United States ; for, whatever property exists unin-cumbered by liens at the time of insolvency, constitutes the estate of the insolvent, and is that “ common fund” spoken of by the supreme court in Conard v. The Atlantic Insurance Company, out of which all the creditors are to be paid, the United States having priority.. If it should be thought that I might have deduced this doctrine with less' prolixity of expression, my answer is, that I have been thus tedious on this part of the case for two reasons: first, because I have never seen any judicial discussion and decision on the main points involved in this case; and, secondly, cases of this kind are likely hereafter lo arise, and on that account it is proper that my construction of the 65th section of the collection act should be known, and the reasons for it.
“ The defendants’ counsel seemed to attach much importance to the fact that the district attorney has in his possession good notes arising from the sale of John Brown’s estate, (the principal in the custom-house bonds) more than sufficient to pay the debt due to the United States. The answers to this are, I. That because the government may have another recourse for payment, it is no reason why she should relinquish any security she may have for her debt; and 2. If, through the diligence and vigilance of the district attorney, acting in his private capacity as the attorney of the syndics of John Brown, he has succeeded in wresting from a. fraudulent grasp the only means by which these defendants may be ultimately reimbursed the amount of this judgment against them, they
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surely bave no right to complain; so that, under present circumstances, the question is virtually one of costs; for as to. their liability to pay the debt sued for., little or no doubt can exist, and so deeply impressed with that idea was the defendants’ counsel-of record, that he laboured to convince the court-that, although costs usually follow a judgment, yet in this case they might not be taxed against his clients. His complaint is, that the attorney of the United States has unnecessarily multiplied costs, by bringing nine suits when he ought to have brought but one; and on that point he relies upon the third section of the act of congress of the 22d of July 1813, which prohibits attorneys from unnecessarily and vexatiously. increasing costs, on pain of being made liable themselves for any excess. It is true, if the district attorney could have fore- . seen the defence which has been set up in these cases, it would have been his duty to-have included all in one action; but these suits were brought on separate judgments, eaph of which might have admitted, of a distinct defence. To one, want of proper service of process on the original debtors might have been pleaded. Tb another, that the judgment was-erroneously entered on the record. To a third, that, under the rules of court, it had been prematurely signed, and therefore no judgment. To a fourth, nul tiel record. And to the rest, other pleas, such as might have suggested themselves to the minds' of ingenious counsel, might have been put in.
“ If it had beén the wish of the defendants’ counsel to diminish the costs, he ought to have applied to the court to consolidate the suits before he added to the costs so much himself, by filing twenty-seven answers instead of one, and even when the suits were consolidated, the record shows that it was done on motion of the district attorney; no doubt for the sake of more conveniently trying together a number of cases in which the issue in all was the same,, and the language of the answers the-same, verbatim et literatim, with the exception of the names of the defendants.
“ On the whole, I can perceive no reason why judgment should not be given against the defendants for both debt and costs, and I shall accordingly direct judgment to be so entered.”
The defendants prosecuted a writ of error to this court.
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The cáse was argued by Mr Key, for the plaintiffs m error; and by Mr Butler, attorney-general, for the United States.
delivered the opinion of the Court.
This is a writ of error from a judgment óf the district court of the United States for the district of Louisiana, rendered on the- petition of the United States against Seaman Field and others, the plaintiffs in error, as syndics or assignees of Lewis E‘. Brown, an insolvent debtor. . The petition states, that Lewis E. Brown, being indebted to the United States on a certain bond, on which judgment had been obtained for a sum staled in the .petition, became insolvent on or about the 20th of April 1830, and made a voluntary assignment of all his property to his creditors, under the laws of Louisiana; and that the original defendants were'appointed syndics or assignees of the creditors; and had received and taken possession of all the property' of Brown, and sold and disposed of the same to an amount far exceeding the debt due to the United States; that tiie defendants, at the time of their receiving :and taking possession of the property-aforesaid, well knew of the' existence o.f the debt due to the United States ; and though the same had been demanded of them, refused to pay it. Several other suits, of a similar nature, were brought for other debts, upon bonds due to the United States by Lewis E. Brown, which were afterwards consolidated with the present sujt. Answers were duly put in' by the defendants, which admitted the assignment, but denied that the syndics then had funds applicable to the .debt. The cause, was finally submitted to t.he court upon a statement of facts (which is in'lhe case) prepared by the parties ; the trial by jury being waived by their consent..
From this statement of facts it appears, that Lewis E. Brown, at the'time of his failure and insolvency, on the 26th of May 1830, was surety for one John Brown, on certain custom house bonds, for duties, due at various times between the 26th of August 1830 and the 9th of January 1831; upon all of which , bonds judgments were rendered in favour of the United States, before the coipmencement of the present suit, which was in March 1831. On these judgments writs of fieri facias issued against all the parties,. which were returned by the
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marshal-nulla bona ; and none of them have as yet been paid. John Brown failed and became insolvent; and applied for the benefit of the insolvent' act of Louisiana, on tire 10th of June 1830.
The defendants made sale of Lewis E. Brown’s property, on a-credit of one, two and three years ; and received promissory notes therefor. A part of these notes were paid before the 3d of December l'S31; and the residue was secured by mortgage on the property, and amounted to 24,898 dollars and 60 cents, one half of which fell due on.the 31st of July 1S32, and the other .half on the 31st of July 1833. The United States never, in any manner, appeared in the proceedings had in the parish court, under the laws of Louisiana; in relation to the insolvency of Lewis E. Brown. At the time. of his failure, there were certain mortgages and privileged debts on his estate. A part of these, as well .as some other debts, had been paid by the assignees, and were stated in the tableau of distribution; which was rendered to and confirmed by the parish court, on the 15th of December 1831, upon due proceedings had thereon. On the 30th of December 1830, the marshal, acting under the writs of fieri facias on several of the judgments against Lewis E. Brown, seized the funds in the possession of the defendants as syndics, and gave notice to them of the seizure thereof to satisfy these judgments respectively. At the hearing, of the cause, the court admitted certain evidence to prove that the marshal made a seizure, and gave notice to the. defendants that he had seized any funds in their hands to satisfy the judgment on which the present petition was founded; and an exception, by a bill of exceptions, was taken to such admission. And upon the final hearing, in February 1833, the court gave judgment for the United States, for the amount of all the bonds and the interest due thereon and costs.
The claim of the United States to the- payment of the debts due to them out of the funds in the hands of the syndics, is founded upon the priority given them by the sixty-fifth section of the duty collection act of 1799, cli. 128; which, in cases of a general insolvency and assignment, like the present, provides that the debts of the United States shall be first satisfied out of the funds in the hands of the assignees.
The first objection now taken by the plaintiffs in error, is,
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that'the order of the parish court, confirming the tableau of distribution, was the judgment of a court of competent jurisdiction, in favour of each creditor whose debt was therein stated; and that the syndics were obliged to. pay the proceeds of the sale to such creditors'; and the United States, not' being named as creditors therein, can have no right to the fund against the other creditors. If at the time of the confirmation of this tableau of distribution,’ no debts due to the United States had been known to the syndics, and they had, in ignorance thereof, made a distribution of the wholefunds among theother creditors; thatmight have raised a very different question. But in point of fact, it has not been denied that the syndics, long before that period, had ■notice of the existence of the debts due to the United States; and the present suit was commenced against.them in the preceding March. The United States were, it is true, not parties to the proceedings in the parish court, nor were/they bound to appear and become parties therein. The local laws of the state could not, and did not bind them in their rights. They could not create a priority in favour of other creditors- in cases of insol- ■ vency, which should supersede that of the United States. The priority of the latter attached by the laws of the United States, in virtue of the assignment and notice to the syndics of their debts. And it was .the duty of the syndics to have made known those debts in their tableau of distribution, as having such priority. There is no doubt that the mortgages upon particular estates sold, must be first paid out of the proceeds of the sales of those estates. But if there be any deficiency of the proceeds of any particular estate, to pay the' mortgages thereon; the mortgagees thereof cannot come in upon the funds and proceeds of the sales of the other estates, except as general creditors. The district judge was perfectly correct iii the views taken by him in his opinion on this subject.
It appears from the papers in the record that the whole amount of the proceeds of all the sales exceeds 40,000 dollars, and that the mortgages are about 27,000 dollars; and making allowance for other- privileged claims, if any, there will remain a balance in the hands of the syndics (when all the notes for the sales are paid) more than sufficient to pay all the debts due to the United States. But the difficulty is, that the notes for a large'amount of their proceeds, viz. 24,898
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dollars 60 cents, did not become due until July 1832, and July 1833 (a moiety in each year); the first being after the present suit was commenced, and the latter after the present judgment was rendered. Now the syndics are certainly not liable to the United States for the debts due to' them, unless funds have actually come to their hands. The notes for the sales may all be good, but as one moiety thereof was not paid at the time of the judgment, it does not judicially appear that, even at that time, they had funds out of which the United States were entitled, to judgments. If the remaining moiety of . the notes has been since paid, the United States will then have a legal claim thereon for their debts. For this reason, the judgment of the district court must be reversed; and the cause sent back for further proceedings.
In regard to the bill of exceptions, as the cause was by consent not tried by a jury, the exception to the.admission Of evidence was not properly the'subject of a bill of exceptions. But if the district court improperly admitted ihé evidence, the only effect would-bé, that this court would reject that evidence,
. and proceed to decide the cause, as if it were not in. the record-It would not, however, of itself, constitute any- ground for a reversal. of the judgment. But we are of opinion that the evidence was properly admissible as proof positive to the syn-dics of the debts due to. the United States; and if the fact was material-to enable the court to render suitable judgment'on the statement, of the parties, it is not easy to perceive why it should, have been objectionable. . Without -this evidence, there seems to.be enough in the.record to shew that the syndics had full notice of the debts~'due to the United States. • They do not even set.up in'their.answers any want of notice, as a defence. • But in the present state of the case, this matter is the less important because they ndw have the most ample notice of the debts due to the United States; and these will, at all events, be payable out of the residue of the sale? when it is received.
With the question of costs this court has nothing to do; and as the judgment is reversed for another pause, it becomes immaterial to be considered.
This cause came on to be heard on the transcript of the re
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cord fiom the district court of the United States for the eastern district of Louisiana, and was argued by counsel; on consideration whereof, it is ordered and adjudged by this court, that the judgment of the said district court in this cause be, and the same is hereby reversed, and that this cause be,, and the •same is hereby remanded to the said district court for further proceedings-to be had therein, according'to law and justice, and in conformity to the opinion of this court.
[This case wás decided on the 2lst of February 1834.]