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The act of 3d March, 1797, c. 74, sec. 5, went further, and gave the United States a preference in all cases whatsoever, whoever might be the debtor, or however he might be indebted, in case the debtor became insolvent, or the assets in the hands of his representatives, after his death, were insufficient to pay his debts. This priority was declared to extend to cases in which the insolvent debtor had made a voluntary assignment of all his property, or in which his effects had been attached as an absconding, concealed, or absent debtor, or in which an act of legal bankruptcy had been committed. This act applies and gives the preference as against deceased debtors, whether the debt was contracted before or after the passage of the act, provided there be only general creditors, without any specific lien created. (b) The

act of March 2d, 1799, c. 128, sec. 65, provided, that in * 244 like cases of insolvency, or where any estate in the hands of executors, administrators, or assignees should be insufficient, debts due to the United States, on bonds taken under the collection act, should have preference; and sureties in such bonds, on paying the same, had the same preference as was reserved to the United States. (a)

These were the legislative provisions, giving preference to debts due to the United States; and in Fisher v. Blight, (b) the authority of Congress to pass such laws was drawn in question. The point discussed in that case was, whether the United States, as holders of a protested bill of exchange, negotiated in the ordinary course of trade, were to be preferred to the general creditors, when the debtor becomes bankrupt. The Supreme Court decided that the acts of Congress, giving that general priority to the United States, were constitutional. It was a power founded on the authority to make all laws which should be necessary and proper to carry into effect the powers vested by the Constitution in the government of the United States. Where the end was (b) Commonwealth v. Lewis, 6 Binney, 266.

(a) Hunter v. United States, 5 Peters, 173. In the case of the United States v. Couch, C. C. U. S. New York, April Term, 1841, it was declared to have been the unvaried construction of the 65th section of the act of March 2d, 1799, that the priority therein given to the United States, to be paid out of the estate of an insolvent debtor, takes effect only when the insolvency is established by an assignment of all his property, either by his own act or by act of law, and when such assignment is carried into execution by the assignees. Hunt's Merchants' Magazine, New York, August, 1841, 168; U. S. v. Wood & Ives, ib. 170, s. p.

(b) 2 Cranch, 858.

within the lawful powers of the government, Congress possessed the choice of the means, and were empowered to use any means which were in fact conducive to the exercise of the powers granted. The government is to pay the debts of the Union, and must be authorized to use the means most eligible to effect that object. It has a right to make remittances, by bills or otherwise, and to take those precautions which will render the transaction safe. If this claim of priority interferes with the right of the state sovereignties, respecting the dignity of debts, and defeats the measures which they would otherwise have a right to adopt to secure themselves, it is a necessary consequence of the supremacy of the laws of the Union, on all subjects to which the legislative power of Congress extends.

The principle was here settled, that the United States are entitled to secure to themselves the exclusive privi- *245 lege of being preferred as creditors to private citizens, and even to the state authorities, in all cases of the insolvency or bankruptcy of their debtor. But the court observed, that no lien was created by the statutes giving the preference. No bona fide transfer of property, in the ordinary course of business, was overreached. It was only a priority of payment, which, under different modifications, was a regulation in common use; and a bona fide alienation of property, before the right of priority attached, was admitted to be good.

The next case that brought into discussion this question of priority, was that of the United States v. Hooe. (a) It was there held, that the priority to which the United States were entitled did not partake of the character of a lien on the property of public debtors. The United States, in the mere character of creditor, have no lien on the real estate of their debtor. If the priority existed from the time the debt was contracted, and the debtor should continue to transact business with the world, the inconvenience would be immense. The priority only applied to cases where the debtor had become actually and notoriously insolvent, and, being unable to pay his debts, had made a voluntary assignment of all his property, or having absconded or absented himself, his property had been attached by process of law. A bona fide conveyance of part of the property of the debtor, not for the fraudulent purpose of evading the law, but to

(a) 3 Cranch, 73.

secure a fair creditor, is not a case within the act of Congress giving priority. (b) In this case of the United States v. Hooe, a

collector of the revenue had mortgaged part of his prop*246 erty to his surety in his official bond, to indemnify him from his responsibility as surety, and to secure him from his existing and future indorsements for the mortgagor at bank ; and the mortgage was held valid against the claim of the United States, although the collector was, in point of fact, unable to pay all his debts at the time the mortgage was given; and although the mortgagee knew, when he took the mortgage, that the mortgagor was largely indebted to the United States.

Afterwards, in Harrison v. Sterry, (a) it was held that in the distribution of a bankrupt's effects, the United States were entitled to their preference, although the debt was contracted by a foreigner in a foreign country, and the United States had proved their debt under a commission of bankruptcy. Though the law of the place where the contract is made be, generally speaking, the law of the contract, yet the right of priority forms no part of the contract. The insolvency which was to entitle the United States to a preference was declared, in Prince v. Bartlett, (b) to mean a legal and known insolvency, manifested by some notorious act of the debtor, pursuant to law. This was giving to the world some reasonable and definite test by which to ascertain the existence of the latent and dangerous preference given by law to the United States. In this last case, the effects of an insolvent debtor, duly attached in June, were considered not to be liable to the claim of the United States, on a custom-house bond given prior to the attachment, and put in suit in August following. The private creditor had acquired a lien by his attachment, which could not be devested by process on the part of the United States subsequently issued. Nor will the lien of

(b) U. S. v. Hooe, sup.; United States v. Clark, 1 Paine, 629; United States v. Monroe, 5 Mason, 572; United States v. Hawkins, 16 Martin, (La.) 317. In England a provisional assignment in bankruptcy will defeat the king's extent, if it precedes the test of the writ. King v. Crump, Parker, 126; Lord Eldon, 14 Vesey, 88. In the case of the United States v. McLellan, 3 Sumner, 345, it was held that a conveyance, by a known insolvent debtor, of all his property to one or more creditors, in discharge of their debts, not exceeding the amount due, and not for the benefit of any other creditors, was not a voluntary assignment within the act of 1799, so as to be affected by the priority of the United States.

(a) 5 Cranch, 289.

(b) 8 Cranch, 431, s. P. United States v. Canal Bank, 3 Story, 79.

a judgment creditor, duly perfected, be displaced by the mere priority of the United States. The word insolvency, in the acts of Congress of 1790, 1797, and 1799, means a legal insolvency; and a mere state of insolvency, or inability in a debtor to pay all his * debts, gives no right of preference *247 to the United States, unless it be accompanied by a voluntary assignment of all the property, for the benefit of creditors, or by some legal act of insolvency. If before the right of preference has accrued, the debtor has made a bona fide conveyance of his estate to a third person, or has mortgaged the same to secure a debt, or if the property has been seized under an execution, the property is devested from the debtor, and cannot be made liable to the United States. (a)

(a) Thelusson v. Smith, 2 Wheaton, 399; Conard v. The Atlantic Insurance Company, 1 Peters, 386; Brent v. Bank of Washington, 10 Peters, 596. The priority of the United States does not affect any lien, general or specific, existing when the event took place, which gave the United States a claim of priority, nor prevent the transmission of the property to assignees, executors, and administrators subject to the lien. ib. In England, in the case of Giles v. Grover, before the House of Lords (9 Bing. 128), it was decided, after a most elaborate discussion, in conformity with the opinions of a majority of the twelve judges, that the goods of a debtor, already seized under a fi. fa. at the suit of a subject, but not sold, might be taken under a writ of extent for a debt of the crown, and which writ of extent was tested after the seizure under the fi. fa. The seizure under the fi. fa. was considered as not devesting the debtor of his general property in the goods seized, or in any manner altering the property, and that no property was thereby acquired therein by the execution creditor, or by the sheriff. The claims of the crown and the subject on the goods were held to stand in equal degree, and the two executions to be in effect concurrent; and in such cases the king's prerogative had the preference. Quando jus Domini Regis et subditi insimul concurrunt jus regis præferri debet. (9 Co. 129, b.) The sheriff had the legal custody of the goods, and a special property in them by virtue of the seizure, for the purpose of protection and sale; but until the sale, which was the dividing line as [to] the ownership of the goods, the absolute property of the debtor was not altered or devested. The priority of the government claims in this country is not carried to that extent, according to the opinion of Judge Washington, in Thelusson v. Smith; but it is to be observed, that the observation of Judge Washington was a mere dictum, and not a turning-point in the case. The same remark applies to what was said by the judge who delivered the opinion of the court in Conard v. The Atlantic Insurance Company; for the dictum was quoted in the course of the opinion incidentally, and without any criticism upon it, or particular attention to it. In Hoke v. Henderson, 3 Dev. (N. C.) 17, Judge Ruffin considered the prerogative of the sovereign as to priority equally applicable here as in England, and that it went to the extent claimed in the above case of Giles v. Grover. On the other hand, in Wilcocks v. Waln, 10 Serg. & Rawle, 380, and in United States v. Mechanics' Bank, Gilpin, 51, it was held, that the priority of the United States gave no lien on property seized under a fieri facias, when the lien accrued, for the debtor was devested of the property. A very contested question has been raised and discussed in the courts in this country,

The United States have, accordingly, a preference as creditors, to the extent above declared, in four cases, viz.: (1.) In the

on the conflicting claims of a judgment or attaching creditor under state laws, and the assignee under the bankrupt law of the United States. It was declared and adjudged by Mr. Justice Story, in the Circuit Court of the United States, in Massachusetts, and by Mr. Justice Ware, in the District Court of Maine, that an attachment under a state law was not an absolute lien, but a contingent one, dependent upon a subse quent judgment in the attaching suit; and that a bankrupt's discharge upon a petition in bankruptcy, filed after the attachment and during the process of such suit, would be a bar to the recovery of any judgment thereon, and that the lien created by the attachment must give way and becomes avoided, and the debt also, by the subsequent decree and discharge in bankruptcy. Ex parte Foster, 2 Story, 131; In the Matter of Cook, 2 Story, 376; In the Matter of Bellows and Peck, 3 Story, 428; Smith v. Gordon, 6 Law Reporter, 313; Everett v. Stone, 3 Story, 447. The courts of the United States, and several of the state courts, maintain a different doctrine. The doctrine is, that a creditor, by his suit in equity, commonly called a creditor's bill, on his unsatisfied judgment, thereby acquires an equitable lien, and which operates as an attachment of property, and creates a right to priority of payment as against the assignee of a bankrupt, under a petition in bankruptcy subsequently made. That such a lien was not devested by a decree in bankruptcy, upon a petition filed subsequent to the commencement of a chancery suit, or the levy of the attachment. That the assignee in such a case takes the debtor's property subject to the creditor's lien, even independent of the proviso in the bankrupt act, and upon general principles applicable to insolvency and bankruptcy in this country and in England. That the assignee of the bankrupt or insolvent takes only such rights, and subject to such equities as belonged to the bankrupt himself at the time of the bankruptcy. That the judgment creditor had also a lien, upon the true construction of the proviso in the 2d section of the bankrupt law, paramount to the claim of the assignee, and as strong upon this proviso as upon general principles of law, for the word securities reaches all mortgages and liens, and they may be enforced in the state courts. The attachment is a lien, and the creditor's bill a lien within the proviso, and the property of the bankrupt was not devested until the decree in bankruptcy. The decisions in the Circuit Courts of the United States in Vermont, New Jersey, and Pennsylvania, and of the District Courts of Vermont, of Northern New York, and of several of the state courts, are all cited in support of this doctrine, by the Ass't V.-Ch. of New York, in the case of Storm v. Waddell, 3 N. Y. Legal Observer, 367, s. c. 2 Sandf. Ch. 494, and which case is distinguished for its learning and ability, and its logical vindication of the doctrine. The two cases of Kittredge v. Warren and of Kittredge v. Emerson, decided in the Supreme Court of New Hampshire, in the year 1844, and in which the judgment of the court was delivered by Mr. Ch. Justice Parker, are equally worthy of special notice for their learned research, and powerful, if not irresistible, deductions.1 See,

1 14 N. H. 509; 15 N. H. 227. The doctrine of the New Hampshire courts was that finally established in the Supreme Court of the United States. Peck v. Jenness, 7 How. 612; Colby v. Ledden, ib. 626. But by the Bankrupt Law of March 2, 1867, § 14, the assignee takes the property of the bankrupt, although the

same is then attached on mesne process, and the assignment dissolves any such attachment made within four months next preceding the commencement of the proceedings. It may be further remarked here, that under the same law, § 28, the United States have a preference as cred. itors.

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