It is not necessary that a
respondentia loan should be
made before the departure of the ship on the voyage, nor that the
money loaned should be employed in the outfit of the vessel or
invested in the goods on which the risk is run.
It matters not at what time the loan is made nor upon what goods
the risk is taken if the risk of the voyage be substantially and
really taken, if the transaction be not a device to cover usury,
gaming, or fraud, if the advance be in good faith for a maritime
premium, it is no objection to it that it was made after the voyage
was commenced, nor that the money was appropriated to purposes
wholly unconnected with the voyage.
The lender on
respondentia is not presumed to lend on
the faith of any particular appropriation of the money, and if it
were otherwise, his security could not be avoided by any
misapplication of the fund where the risk was
bona fide
run upon other goods and it was not a mere contract of wager and
hazard.
It seems that the common and usual form of a
respondentia bond is that which was used in this case.
What is the nature and effect of the priority of the United
States under the statute of 1799, chap. 128, sec. 65.
It is obvious that the latter clause of the 65th section of the
act of 1799 is merely an explanation of the term "insolvency" used
in the first clause, and embraces three classes of cases, all of
which relate to living debtors. The case of deceased debtors stands
wholly upon the alternative in the former part of the
enactment.
Insolvency in the sense of the statute relates to such a general
investment of property as would in fact be equivalent to insolvency
in its technical sense. It supposes that all the debtor's property
has passed from him. This was the language of the decision in the
case of
United States v.
Hooe, 3 Cranch 73, and it was consequently held
that an assignment of part of the debtor's property did not fall
within the provision of the, statute.
Mere inability of the debtor to pay all his debts is not in
insolvency within the statute, but, it must be manifested in one of
the three modes pointed out in the explanatory clause of the
section.
The priority, as limited and established in favor of the United
States, is not a right which supersedes and overrules the
assignment of the debtor, as to any property which the United
States may afterwards elect to take in execution so as to prevent
its passing by virtue of such assignment to the assignees, but it
is a mere right of prior payment out of the general funds of the
debtor in the hands of the assignees, and the assignees are
rendered personally liable, if they omit to discharge the debt due
to the United States.
It is true that in discussions in courts of equity, a mortgage
is sometimes called a lien for a debt, and so it certainly is, and
something more; it is a transfer of the property itself as security
for the debt. This must
be admitted to be true at law, and it
is equally true in equity, for in this respect equity follows the
law. The estate is considered as a trust, and
Page 26 U. S.
387
according to the intention of the parties as a qualified
estate and security. When the debt is discharged, there is a
resulting trust for the mortgagor. It is therefore only in a loose
and general sense that it is sometimes called a lien, and then only
by way of contrast to an estate absolute and indefeasible.
It has never yet been decided by this Court that the priority of
the United States will divest a specific lien attached to anything,
whether it be accompanied by possession or not.
The case of
Thelluson v.
Smith, 2 Wheat. 396, turned upon its own particular
circumstances, and did not establish any principles different from
those which are recognized in this case. And it establishes no such
proposition as that a specific and perfected lien can be displaced
by the mere priority of the United States.
It is not understood that a general lien by judgment on lands
constitutes
per se a property or right in the land itself.
It only confers a right to levy on the same to the exclusion of
other adverse interests subsequent to the judgment, and when the
levy is actually made on the same, the title of the creditor
relates back to the time of the judgment, so as to cut out
intermediate encumbrances. But subject to this, the debtor has full
power to sell or otherwise dispose of the land.
This was an action of trespass brought in the Circuit Court for
the District of Pennsylvania by the Atlantic Insurance Company of
New York against John Conard, the Marshal of the District of
Pennsylvania, for taking and carrying away certain teas imported
from Canton into the port of Philadelphia on board the ships
Addison and
Superior. Pleas the general issue and
a special justification under a
fi. fa. against the goods
as the property of Edward Thomson. The suit was instituted and
tried under an agreement, which is recited in the following
bond.
"Know all men by these presents that we, the Atlantic Insurance
Company of New York, are held and firmly bound unto the United
States of America in the sum of $42,000 lawful money of the United
States of America, to be paid to the said United States of America,
their certain attorneys, successors, or assigns, to which payment,
well and truly to be made and done, we bind ourselves and our
successors firmly by these presents, sealed with our seal of
incorporation and dated this 9 October in the year of our Lord
1826."
"Whereas the goods and merchandise described in an invoice, a
copy of which is annexed, imported in the ship
Addison
from Canton, safely arrived at the port of Philadelphia,
have
been levied on by the Marshal of the Eastern District of
Pennsylvania
by virtue of an execution on a judgment in favor
of the United States against Edward Thomson of Philadelphia
as the property of the said Edward Thomson, and whereas
the Atlantic Insurance Company of New York
claims to be the
owners in law or equity of the said goods and actually holds the
bills of lading and invoice thereof, under which the said
goods have been duly entered at the custom house and the duties
thereon secured to be paid according to law. And whereas it has
been agreed by and between the Secretary of the Treasury in behalf
of the United States and the said Atlantic Insurance Company that a
suit shall be instituted by the said named company against the said
marshal
in which the sole question to be tried and decided
shall be whether the United States or the said Atlantic Insurance
Company is entitled to said goods and the proceeds thereof,
and whereas it has been further agreed that the said goods shall be
delivered to the said Atlantic Insurance Company without prejudice
to the rights of the United States under the said execution
Page 26 U. S. 389
or otherwise, and that they shall sell and dispose of the same
in the best manner and for the best price they can obtain therefor
and for cash or upon credit as they may judge expedient, and that
the moneys arising from the sales thereof, deducting the duties and
all customary charges, and commissions on such sales, shall be
deposited by the said Atlantic Insurance Company as soon as
received from and after the sale in the Bank of the United States
to the credit of the president of said bank, in trust, to be
invested by the said president of the said bank in the stock of the
United States in the name of the said president in trust, so to
remain until it shall judicially and finally be decided to whom the
said goods or the proceeds thereof do in right and according to law
belong, and on the further trust that whenever such decision shall
be made, the said president of the said bank shall deliver the said
moneys, or transfer the said stock to the party in whose favor such
decision shall be made. And whereas, in pursuance of the said
agreement, the said goods have been this day delivered to the said
Atlantic Insurance Company of New York, it being understood and
agreed that such delivery of the goods shall not prejudice any
existing right of the said company."
"Now the condition of this obligation is such, if the said
Atlantic Insurance Company of New York shall comply with the said
arrangements and well and truly sell and dispose of the said goods,
and cause the moneys arising from the sales thereof, deducting
therefrom the duties, charges, and commissions as aforesaid, to be
deposited in the bank in trust according to the true intent and
meaning of the above recited agreement and for the purposes therein
set forth, this obligation to be void; otherwise to be and remain
in full force and virtue."
"[Signed] ARCH. GRACIE, Prest. [L.S.]"
"Attest, GEO. B. RAPELYE, Secretary of the Atlantic Insurance
Company of New York."
The facts as they appeared by the record were as follows:
On 21 June, 1825, the plaintiffs below lent to Edward Thomson
the sum of $21,000 upon
respondentia by the
Addison, for which the following bond was executed and
delivered to the company:
"Know all men by these presents, that we, Edward Thomson, of the
City of Philadelphia, Edward H. Nicoll, Francis H. Nicoll, and
Floyd S. Bailey, of the City of New York, are held and firmly bound
unto the Atlantic Insurance Company, of New York, in the sum of
$42,000, lawful money of the United States of America, to be paid
to the said
The Atlantic Insurance Company of New York,
their certain attorney, successors, or assigns, to which payment,
well and truly to be made we do bind ourselves and each of us, our
and each of our
Page 26 U. S. 390
heirs, executors, and administrators, jointly and severally,
firmly by these presents. Sealed with our seals, and dated this 21
June, 1825."
"Whereas the said the Atlantic Insurance Company of New York has
this day lent and advanced to the above named Edward Thomson,
Edward H. Nicoll, Francis H. Nicoll, and Floyd S. Bailey, the sum
of $21,000, lawful money of the United States of America, upon the
goods, wares, merchandise, and specie to that amount laden or to be
laden, on board the American ship called the
Addison, of
Philadelphia, whereof Hidelius is master, or which may be laden on
account of the said Edward Thomson, Edward H. Nicoll, Francis H.
Nicoll, and Floyd S. Bailey on board the said vessel at any time
during her intended voyage hereinafter mentioned."
"And whereas the said vessel is now bound on a voyage at and
from Philadelphia to Canton and at and from thence back to
Philadelphia, with the usual privileges for trade and
refreshments."
"And whereas the said the Atlantic Insurance Company of New York
is content to stand and bear the risks against which the said
company usually insure by their cargo policies on the said sum so
lent and advanced on the said goods, wares, merchandise, and specie
laden or to be laden on board of the said vessel as aforesaid
during the said voyage, so as the same do not exceed the term of
twelve calendar months, to be computed from the day of the date of
the bill of lading,
viz., 21 April, 1825."
"Now the condition of this obligation is such that if the said
ship laden with the said goods, wares, merchandise, and specie does
and shall, with all convenient speed, proceed and sail on the said
voyage from Philadelphia to Canton, and at and from thence back to
Philadelphia, and return and come to Philadelphia having on board
the above stipulated amount in value, in specie or merchandise, as
the case may be, on the respective passages, both outward and
homeward, to end her voyage there by or before the end or
expiration of twelve calendar months, to be computed from the date
aforesaid, and that without deviation (the dangers and casualties
of the seas excepted), and if the above bounden Edward Thomson,
Edward H. Nicoll, Francis H. Nicoll, and Floyd S. Bailey or either
of them or either of their heirs, executors, or administrators
shall and do well and truly pay or cause to be paid at the City of
New York to the above named the Atlantic Insurance Company of New
York, their attorney, successors, or assigns, the full sum of
$21,000 lawful money as aforesaid immediately upon the first and
next return and arrival of the said
Page 26 U. S. 391
ship at the port of Philadelphia or at and upon the end and
expiration of twelve calendar months, to be computed as aforesaid,
whichever shall first happen, together with the sum of $2,205,
lawful money as aforesaid, that being the stipulated marine
interest and premium, on the said loan; or if the said Edward
Thomson, Edward H. Nicoll, Francis H. Nicoll, and Floyd S. Bailey
or either of them, their or either of their heirs, executors, or
administrators, shall and do immediately upon the first and next
return and arrival of the said vessel, at the port of Philadelphia
as aforesaid, provided such return and arrival happen within the
space of twelve calendar months, to be computed as aforesaid, give
security satisfactory to the said the Atlantic Insurance Company of
New York to pay at the City of New York to the said the Atlantic
Insurance Company of New York, their successors or assigns, the
said sum of $21,000, together with the said sum of $2,205, within
three months from the time of such return and arrival, with lawful
interest thereupon, from the time of such return and arrival, and
shall and do well and truly pay the same accordingly at the
expiration of the said three months, or if in the said voyage and
before the end of the said twelve months, to be computed as
aforesaid, a total loss of the said goods, wares, merchandise, and
specie, by the risks against which said company usually insure by
their cargo policies shall unavoidably happen, and the said Edward
Thomson, Edward H. Nicoll, Francis H. Nicoll, and Floyd S. Bailey,
their heirs, executors, or administrators, shall, and do well and
sufficiently abandon, transfer, and assign, to the said the
Atlantic Insurance Company of New York, their successors or
assigns, all the said goods, wares, merchandise, and specie of the
said Edward Thomson, Edward H. Nicoll, Francis H. Nicoll, and Floyd
S. Bailey, so laden, and to be carried from the said port of
Philadelphia, on board the said ship, and all other goods, wares,
merchandise, and specie, which shall be acquired during the said
voyage by reason of or from the proceeds of the said last mentioned
goods, wares, merchandise, and specie, and the net proceeds
thereof, and well and truly do account for and pay, upon oath or
affirmation, within four calendar months, to be computed from the
time of such loss, to the said the Atlantic Insurance Company of
New York, or their successors, a just and proportionable average on
all the said specie, goods, wares, and merchandise, and proceeds,
if any salvage average or allowance shall be obtained by reason of
or upon the same notwithstanding such loss, then this obligation to
be void; otherwise to remain in full force and virtue."
"It being first declared to be the mutual understanding and
Page 26 U. S. 392
agreement of the parties to this contract that the lenders shall
not be liable for any charge, damage, or loss that may arise in
consequence of a seizure or detention for or on account of any
illicit or prohibited trade or any trade in articles contraband of
war, but that the lenders shall be liable to losses and averages,
and entitled to the benefit of salvage in the same manner, to all
intents and purposes, as underwriters on a policy of insurance,
according to the usages and practices in the City of New York, and
that in like manner the borrowers shall be subject to all the
duties imposed on the assured by the usual policies of insurance,
and the customs and practices of the said city."
"Sealed and delivered in the presence of us,"
"PETER MACKIE"
"CHARLES MACKIE"
"To the signature of Edward Thomson"
"J. H. CLINCH"
"H. W. NICOLL,"
"To the three last named"
"EDWARD THOMSON [L.S.]"
"EDW. H. NICOLL, per"
"ROBERT SMITH, att'y [L.S.]"
"FRANCIS H. NICOLL [L.S.]"
"FLOYD S. BAILEY [L.S.]"
At the same time the following memorandum, bill of lading, and
assignment thereon were also executed and delivered to the
company:
"Whereas it hath been agreed that the bills of lading for the
goods, specie, wares, and merchandise, mentioned in the within
obligation shall be endorsed to 'The Atlantic Insurance Company of
New York' as a collateral security for the loan within mentioned:
"
"And whereas it has been further agreed that the property to be
shipped homeward as aforesaid, being the proceeds of the said loan,
shall be for the account and risk of us the said borrowers, or some
of us; that the bills of lading therefore shall express the same,
and shall also express that the said property shall be deliverable
to the order of the shippers, and that the same shall be endorsed
in blank, and shall be placed in the hands of the said 'Atlantic
Insurance Company of New York' either before or on the arrival of
the said ship at Philadelphia, to be held by them as a continuation
of such collateral security, to the performance of which we do bind
ourselves: "
"Now by this instrument it is expressly declared that such
endorsement or consignment shall not be held to exonerate the
persons of the obligors, nor compel the said 'The Atlantic
Insurance Company of New York' to accept the goods and merchandise
which may arrive under such bill of lading and consignment
Page 26 U. S. 393
in discharge of such debt, but it shall be lawful for the said
'The Atlantic Insurance Company of New York' to receive and hold
the said goods, specie, wares, and merchandise, for the space of
ninety days after their arrival at the port of Philadelphia."
"And in case the principal, interest, and premium, in the within
obligation mentioned shall not be paid or satisfied within the said
time, to dispose of the same at public auction and to charge the
obligors with the balance that may remain due after deducting from
the amount of said sales the freight, duties, commissions, and all
other just and proper charges."
"Sealed and delivered in presence of us,"
"PETER MACKIE"
"CHARLES MACKIE"
"To the signature of Edward Thomson"
"J. H. CLINCH"
"H. W. NICOLL,"
"To the three last named"
"EDWARD THOMSON [L.S.]"
"EDW. H. NICOLL, per"
"ROBERT SMITH, att'y [L.S.]"
"FRANCIS H. NICOLL [L.S.]"
"FLOYD S. BAILEY [L.S.]"
"Shipped in good order and condition by Edward Thomson in and
upon the ship called the
Addison, whereof Hidelius is
master for this voyage, now lying in the port of Philadelphia and
bound for Canton, seven kegs containing three thousand Spanish
dollars for account and risk of the shipper, a native citizen of
the United States of America, being marked and numbered as in the
margin, and are to be delivered in the like good order and well
conditioned, at the aforesaid port of Canton (the danger of the
seas only excepted) unto John R. Thomson, Esq., or to his assigns,
he or they paying freight for the said goods, at the rate of
nothing, with primage and average accustomed. In witness whereof
the master or purser of the said ship hath affirmed to the three
bills of lading, all of this tenor and date, one of which being
accomplished, the other to stand void. Dated at Philadelphia 21
April, 1825."
"ANDREW HIDELIUS, JR."
"No. 5. [E. T.] 38 a 44, 7 kegs containing 3000 each."
An assignment endorsed thereon, dated the 21 June, 1825, as
follows:
"
(COPY)"
"For value received, I do hereby, assign and transfer to the
Atlantic Insurance Company of New York the within bill of lading
and the specie, goods, wares, and merchandise, to be procured
thereon, or thereby, and any return cargo to be obtained
Page 26 U. S. 394
by the within mentioned outward cargo and specie, or the
proceeds thereof, and all the return cargo to be taken on board the
within named ship by or for my account, as collateral security,
according to an agreement, duly executed and adjoined to a
respondentia bond given by myself, Edward H. Nicoll,
Francis H. Nicoll, and Floyd S. Bailey, dated this 21 June, 1825,
for the sum of $21,000. Witness my hand and seal, this 21 June,
1825."
"EDWD. THOMSON"
"PETER MACKIE"
"BARCLAY ARNY, Witnesses"
The
Addison sailed from Philadelphia for Canton on or
about 21 April, 1825.
On 14 July, 1825, the plaintiffs also lent to Edward Thomson the
sum of $13,960 upon
respondentia by the
Superior,
for which a similar bond, and memorandum, and a corresponding bill
of lading and assignment, were executed to the lenders. The
Superior sailed from Philadelphia for Canton on or about 6
June, 1825.
There was no difference between these two operations except
this, that the entire loan of $21,000 by the
Addison was
paid by the company to the agents of Thomson, whereas the loan by
the
Superior was applied, with his consent, to pay a
previous loan on
respondentia by another ship of Thomson
which had fallen due.
On 19 November, 1825, Edward Thomson, being very largely
indebted to the United States upon duty bonds and for duties on
teas not bonded, made a general assignment of all his estate and
effects to Richard Renshaw and Peter Mackie in trust for his
creditors, and on 13 March, 1826, he confessed a judgment to the
United States for half a million of dollars, upon which a
fi.
fa. was issued on the same day.
In the month of March, 1826, and a few days before the arrival
of the
Addison, the assignees of Thomson received, under a
blank envelop addressed to him, a duplicate bill of lading and
invoice of a shipment homeward by that vessel for the teas in
question in this suit, and delivered them to the agents of the
Insurance Company. They were respectively dated 22 November, 1825,
deliverable to the order of the shipper at Canton, R. Fisher,
attorney for John R. Thomson, and by him endorsed in blank. The
invoice stated the account and risk to be for Edward Thomson. That
the teas in this invoice were the returns of the outward specie in
the bill of lading assigned to the company was proved by means of
the words and figure No. 5 on the homeward invoice, and the same
number and figure on the outward bill of lading, which were the
means concerted
Page 26 U. S. 395
between Edward Thomson and his supercargo in Canton to fix the
identity. The original bill of lading and invoice were received by
the assignees on the arrival of the
Addison, and in like
manner delivered to the company. In the same month, Peter Meckie,
one of the assignees, received from Canton the homeward bill of
lading and invoice of a shipment of teas, &c., by the
Superior, dated 2 December, 1825, deliverable to his own
order, and Barclay Arny, a clerk in the service of Thomson,
received a bill of lading and invoice of another shipment by the
Superior, bearing the same date and deliverable to his
order. These returns, being, as was proved at the trial, purchased
with the specie in the outward bill of lading by the
Superior, assigned to the company, the consignees Mackie
and Arny, on 22 March, 1826, endorsed the papers to the plaintiffs;
the rest of the shipment of $13,960 was expended for ship's
disbursements in Canton.
Both shipments by the
Addison and
Superior
were levied upon by the Marshal under the
fi. fa. before
mentioned, on 15 March, 1826, while the ships were below in the
river, and taken into his custody, where they remained until the
arrangement recited in the bond of 9 October, 1826, in consequence
of which they were given up.
It further appeared upon the trial that the
Addison
brought with her, addressed to Thomson, a general bill of lading
for her entire cargo, deliverable to Edward Thomson or assigns but
not signed by the captain, and also a general invoice stating the
cargo to be for his account and risk and deliverable to his order.
The manifest which had been made out in Canton by the agent of
Thomson, stated the cargo to be consigned to Thomson and not to
order, and when the agent delivered it to the captain, he told him
that it was done to save him the necessity of overhauling his
papers at sea and that he might rely on it as being correct. The
captain however, on receiving a letter from the assignees, upon his
arriving on the American coast, examined his bills of lading, and
finding that they were deliverable to order, altered his manifest
in conformity. The object of these double papers, it was alleged,
was to enable Thomson, after settling with the lenders on
respondentia, as he had done upon former occasions, to
cancel the particular bills and invoices, and after procuring the
signature of the captain to the general bill of lading, to enter
the cargo as consigned to him.
The preceding statement is all that is necessary to introduce
the points of evidence and law that were raised upon the record,
and which came up for revision in this Court.
The plaintiff's counsel having offered at the trial to give
evidence of the
respondentia bond by the
Addison,
it was objected
Page 26 U. S. 396
to until they had proved that the company were duly incorporated
according to law. The plaintiff's counsel then gave notice to the
defendant's counsel, the district attorney of the United States, to
produce the bond of 9 October, 1826, and gave in evidence the
agreement of counsel for entering the action, wherein it was stated
that the question to be tried was whether the plaintiffs or the
United States were entitled to the goods mentioned in the
declaration or the proceeds thereof, and that the merits should be
determined without further form. The bond not being produced, the
plaintiffs' counsel called Austin L. Sands to prove the delivery of
that bond to the district attorney and also its contents, and began
by asking him if he was an agent of the Atlantic Insurance Company.
To this question the counsel for the defendant objected, and the
court overruled the objection. To this opinion of the court a bill
of exceptions was tendered and sealed.
The bond of 9 October, 1826 being then proved, the counsel for
the plaintiffs contended that they were authorized, without further
proof, to give evidence of the
respondentia bond, of which
opinion was the court, and to this opinion also the defendant's
council tendered an exception.
Mackie the subscribing witness to E. Thomson's signature to the
respondentia bond, memorandum, and assignment of the bill
of lading, proved the handwriting of Thomson, his own attestation,
and that of Charles Mackie, and also the handwriting of Clinch and
Nicoll, the other witnesses to the bond and memorandum, who resided
in New York and were not produced. The counsel for the plaintiffs
then offered to read that bond in evidence, to which the counsel
for the defendant objected, but the court suffered it to be read as
the several bond of Thomson, to which opinion an exception was also
tendered.
Upon the examination of A. Hidelius, the captain of the
Addison, a witness produced on behalf of the defendant,
the counsel proposed to ask him the following question -- did Mr.
Mackie and Mr. Nicoll make out a new manifest, altering the
destination of the
Addison, and ask you to enter it as a
true manifest at the Custom House? This question was objected to by
the plaintiffs' counsel and overruled by the court, to whose
opinion the defendant again excepted.
The defendant's counsel proposed then to ask the same witness
the following question -- did you see Mr. Mackie pay money to the
pilot for being first on board the
Addison? Which question
was objected to, overruled, and the rejection excepted to in like
manner.
The defendant's counsel having then produced an original letter
from Thomson to captain Hidelius, with a postscript by the assignee
giving the captain a caution in regard to his manifest,
Page 26 U. S. 397
proposed to ask Peter Mackie the following question -- was the
greater part of the letter now produced signed by Edward Thomson,
and countersigned by his assignees, drafted by the district
attorney? This question was in like manner objected to and
overruled, and an exception taken.
The same counsel proposed to ask of Barclay Arny, another
witness, the following question -- do you know how the money was
applied that was borrowed on the
Addison and
Superior of the plaintiff? This question was objected to
unless the application was with the plaintiffs' knowledge, and was
overruled. To this opinion a bill of exceptions was also tendered
by the defendant.
At the close of the argument to the court and jury on the law
and fact of the case, Mr. Justice Washington delivered that
following points in charge to the jury.
First. That the bonds given by Edward Thomson to the plaintiffs
for securing the loans of $21,000 on the cargo of the
Addison, and of $13,960 on that of the
Superior,
are not invalid as marine contracts for the reason alleged by the
counsel for the defendant -- that is to say because in respect to
the former, the loan was made after the
Addison had sailed
upon her voyage, and in respect to the latter, for the same reason,
and because the bond was given by the said Thomson for securing a
balance due by him to the plaintiffs, on account of preceding loans
made to him, and not for money lent at the time the said security
was given.
Second. That it is no objection to the validity of the bond
given for securing the loan on the cargo of the
Addison,
upon the ground of usury, that such cargo was known by the parties
at the time the said bond was given to have been in safety at and
upon the departure of the said vessel from Philadelphia, since the
real question for the jury to decide in relation to that subject
was whether, upon the whole of the evidence given in the cause, the
loan was bottomed upon a fair marine contract, the repayment of
which was to depend upon the perils which the plaintiffs assumed to
bear, or whether the contract was merely a device to cover an
usurious loan. If the risk be inconsiderable or for a part of the
voyage only and the marine interest be disproportioned thereto,
these circumstances may warrant the presumption of unfair conduct
sufficient to avoid the contract. But the mere circumstance of the
known safety of the cargo at any particular period of the voyage,
or of the assumed risk, is not
per se an objection to the
contract on the ground of usury. If Edward Thomson was to pay
interest
from a period antecedent to the loan, there can
be no question but that the contract was usurious, and it would be
so although
Page 26 U. S. 398
no more than the legal rate of interest was reserved. How that
fact is the jury must decide from the evidence before it.
Third. That the loan upon the cargo of the
Addison was
by the terms of the aforesaid bond given to secure it at the risk
of the plaintiffs during the whole voyage, notwithstanding the
omission of the words "lost or not lost" in the said bond, there
being other and equivalent expressions in the said instrument.
Fourth. That the above bond given for securing the loan made
upon the cargo of the
Addison, together with the
memorandum endorsed on it the bill of lading outward and the
endorsement thereon, are all to be considered as forming parts of
one entire contract, and as such they do, upon a fair and legal
construction of them, cover that part of the homeward cargo, which
was the investment of the outward cargo on which the loan was
secured, and that the same principles are applicable to the
contract in relation to the
Superior. That the above
instruments, taken and construed together as forming one contract,
vested in the plaintiffs an equitable title to the return cargoes
of those vessels if upon the evidence given in the cause the jury
should be of opinion that those return cargoes were in point of
fact the investment of the outward cargoes of the
Addison
and
Superior, respectively. And that nothing remained to
be done to vest in the plaintiffs the legal right to the said
property, respectively, but the delivery to them of the homeward
bills of lading of the
Addison's cargo, endorsed in blank,
and an assignment to the plaintiffs by Mackie and Arny of the
homeward bills of lading of the cargo of the
Superior.
Fifth. That the equitable title of the plaintiffs, so vested in
them on 19 November, 1825, when Edward Thomson made an assignment
of all his property for the benefit of his creditors, was not
defeated or affected by the right of preference which that act gave
to the United States to be first paid what was due to them by the
said Thomson, and that this equitable title was converted into a
legal one by the subsequent delivery to the plaintiffs of the bills
of lading endorsed in blank of the
Addison's homeward
cargo, and of the assignment by Mackie and Arny of those of the
cargo of the
Superior.
Sixth. That the actual possession of the above return cargoes by
the masters of the
Addison and
Superior until
they were levied upon under executions at the suit of the United
States against Thomson is not
per se in law a badge of
fraud which ought to invalidate or affect the title of the
plaintiff's to those cargoes.
Seventh. That as to the charge of fraud, which it is insisted by
the counsel for the defendant taints this transaction
throughout,
Page 26 U. S. 399
that is a subject exclusively for the consideration and
determination of the jury upon the evidence laid before it, in
deciding upon which it is to observe first that actual fraud must
be proved, and ought not to be presumed, and secondly that no fraud
which may have been practiced or attempted by Edward Thomson, his
captains or agents, ought to affect the validity of these contracts
unless it should be satisfied from the evidence that the plaintiffs
in some way or other participated in the same.
Lastly. That if the jury should be of opinion upon the whole of
the evidence that the transactions between the plaintiffs and E.
Thomson which constitute the basis of this action were fair so far
as the plaintiffs were concerned in them, and that they stand clear
of the imputation of usury on the ground that interest was reserved
from a period antecedent to the loan, and if further it is
satisfied that the homeward cargoes were the proceeds of the
outward cargoes on which the securities were given, then its
verdict ought to be for the plaintiff, otherwise not. It was
further stated by the judge that he had declined giving a
construction of the 62d section of the act imposing duties, or an
opinion on the question whether under that section, the consignee
of imported goods is liable for the duties on them, considering it
to be unnecessary from the view which he had taken of the case.
And in explanation of the charge, the following questions were
propounded by the counsel and answered by the court.
1. The defendant's counsel requested the court to charge the
jury that if the agreement of the plaintiffs with Edward Thomson
was made with the view to deprive the United States of its duties,
it was fraudulent, and the plaintiffs could not recover. To which
the judge answered that if the agreement was made with that view,
such would be the legal consequence, but that he had heard no
evidence to warrant that conclusion in point of fact; but that was
a subject exclusively for the jury.
2. The court was asked by the same counsel, to charge that if
the contract of Edward Thomson with the defendant, was to pay more
than lawful interest during a period when there was no marine risk,
the contract was usurious and void. To which the judge answered
that if the contract was a cover to charge more than lawful
interest when there was no marine risk, it was usurious and void.
That he did not himself understand the entries from the plaintiffs'
books which had been given in evidence, but that the fact upon
which the question is predicated was proper for the decision of the
jury.
3. The court was then asked by the plaintiffs' counsel to charge
that the parties were at liberty to agree for a marine interest
greater than the legal rate for the time that the money
Page 26 U. S. 400
was exposed to marine risks, or the loan was at hazard by the
marine risk of the goods, on which it was made. To which the judge
answered that they certainly were.
To all which the defendant's counsel excepted, and the judges
sealed a bill of exceptions.
Page 26 U. S. 434
MR. JUSTICE STORY delivered the opinion of the Court.
This is an action of trespass
de bonis asportatis,
brought in the Circuit Court for the District of Pennsylvania by
the Atlantic Insurance Company to recover against the defendant,
John Conard, the marshal of that district, the value of certain
teas shipped on board the ships
Addison and
Superior, and levied upon by him upon an execution in
favor of the United States against one Edward Thomson, as the
property of the latter. The real question in the cause is whether
the Insurance Company or the United States is entitled to the teas
or their proceeds.
The material facts disclosed at the trial in the circuit court
were as follows:
Edward Thomson was a merchant largely engaged in trade in the
City of Philadelphia in the year 1825, and on 21 June of that year
borrowed at
respondentia of the Insurance Company the sum
of $21,000 upon goods, &c., on board of the ship
Addison, of that port, on a voyage at and from
Philadelphia to Canton, and at and from thence back to
Philadelphia, beginning the risk on the 21st of the preceding
April, about which time the ship had sailed on the voyage. Edward
Thomson had shipped on board of the
Addison, for his own
account and risk, for the voyage, 21,000 Spanish dollars, consigned
to J.R. Thomson, his agent and his assigns, and deliverable to him
in Canton, and regular bills of lading were accordingly signed, one
of which, was retained by the shipper. At the time of the execution
of the
respondentia bond, a memorandum of agreement was
entered into by the parties and an assignment made on the back of
this bill of lading. The form and effect of these instruments will
be matter of more particular comment hereafter; at present, it is
only necessary to add that that loan purports on the face of the
bond to be a loan for the joint account of E. Thomson, E. H.
Nicoll, F. H. Nicoll, and F. S. Bailey, but in reality the
transaction was for the use and benefit of E. Thomson, and the
goods shipped in the
Addison were on his sole account.
On 14 July of the same year, a loan was made to Edward Thomson
of $13,960 on goods on board the ship
Superior, which had
sailed on a similar voyage on 6 June preceding.
Page 26 U. S. 435
A
respondentia bond was taken in the same form, from
the same parties on the like voyage, with a similar memorandum of
assignment of the bill of lading. The only difference between the
transactions was that this loan was applied in part payment of a
former loan, made by the Insurance Company on another ship of E.
Thomson's. On 19 November, E. Thomson, having become insolvent,
made a general assignment of all his property to Peter Mackie, and
Richard Renshaw, for the use of his creditors. At this time, he was
very largely indebted to the United States on duty bonds. The
Addison left Canton on her return to Philadelphia, having
among her papers a bill of lading of the proceeds of the $21,000,
consigned by the shipper (Mr. Fisher attorney for J.R. Thomson) to
order, in blank, and endorsed, in blank, by the shipper, and marked
No. 5. This mark was to identify them as the proceeds of the
$21,000. Mr. Fisher also gave the master a manifest stating the
cargo to be consigned to E. Thomson, and a general bill of lading
of the whole cargo consigning it to E. Thomson. The invoice and
bill of lading, were dated 22 November, 1825. The general bill of
lading was not signed. The
Superior left Canton, having
among her papers a bill of lading of certain articles, valued in
the invoice at $3,393, consigned to Peter Mackie, and also a bill
of lading of certain articles valued at $1,139.86, consigned to
Barclay Arny, and both dated 2 December, 1825. Before the arrival
of these ships in America, the United States had obtained judgments
against E. Thomson for large sums of money due upon his bonds at
the custom house. Both ships arrived in Delaware Bay almost at the
same time, and an execution issued on behalf of the United States
on one of the judgments against E. Thomson on 13 March, 1826, and
was levied on the ships and their cargoes on 15 March while they
were yet in the bay. It was under this levy that the goods in
controversy were seized by the marshal.
Two or three days before the ships came up to Philadelphia,
Peter Mackie, the assignee of E. Thomson, having received
duplicates of the invoice and bills of lading of the cargo of the
Addison, delivered them to the agents of the insurance
company at Philadelphia, and upon the arrival of the ship itself
handed over to the same agent the invoices and bills of ladings
brought by the master. On 22 March, 1826, Peter Mackie and Barclay
Arny endorsed to the insurance company the invoices and bills of
lading, which came to their order by the
Superior. These
papers came under cover to Edward Thomson, several being enclosed
in the same envelop, and Mackie allotted them to their respective
owners by means of the numbers endorsed upon them. These numbers
were
Page 26 U. S. 436
originally placed upon the outward and homeward bills of lading
and invoices for the purpose of designating the proceeds of each
particular shipment. It appeared that part of the $13,960 borrowed
of the insurance company on the goods in the
Superior was
expended in disbursements in Canton, and the two invoices of Mackie
and Arny were consigned to them contrary to instructions, and they
assigned them to the insurance company under the belief that they
were the proceeds of the outward shipment pledged for the loan. The
reason assigned for there being a manifest and general bill of
lading consigning the cargo to Edward Thomson was to enable him to
enter the cargo in his own name after he had settled with the
insurance company and paid the
respondentia loans. The
several particular invoices and bills of lading were then to be
cancelled, and the master was to sign the general bill of lading
and the cargo was to be entered at the custom house in the name of
E. Thomson. He was in the habit of taking up other large sums at
respondentia, and this was the usual course of his
arrangements in business.
Such is the general outline of the case. The loan on the
shipment in the
Superior, as has been already stated,
differs from the on the shipment in the
Addison only in
the circumstance that it was applied in discharge of a prior loan.
In our judgment, that makes no difference as to the legal rights of
the parties. The borrower had a right to apply the loan in any
manner he pleased, and the mode of its application, if it be
otherwise
bona fide and legal, does not change the posture
of the rights of the lender. We shall therefore dismiss at once all
further consideration of this point and treat both cases as if they
stood on a single shipment.
Several objections have been taken to these
respondentia bonds to impeach their original validity. It
is said that they ought to be treated as usurious or gaming
contracts; that they are not to be deemed
bona fide
transactions upon real risks, but transactions void in point of law
upon their face. So far as the questions of usury or gaming or
bona fides upon substantial risks are matters of fact,
they were left fully open, and have been passed upon by the jury,
which has found a verdict against them; so far as there are matters
of law apparent upon the record, proper to avoid the bonds, they
are still open for inquiry. Two grounds have been relied on for
this purpose: first that the loans were made after the sailing of
the ships on the voyage, and secondly that the money loaned was not
appropriated to the purchase of the goods put on board, and was not
the identical property on which the risk was run. In our judgment,
neither of these objections can be sustained. It is not necessary
that
Page 26 U. S. 437
a
respondentia loan should be made before the departure
of the ship on the voyage, nor that the money loaned should be
employed in the outfit of the vessel or invested in the goods on
which the risk is run. It matters not at what time the loan is
made, nor upon what goods the risk is taken. If the risk of the
voyage be substantially and really taken; if the transaction be not
a device to cover usury, gaming, or fraud; if the advance be in
good faith for a maritime premium, it is no objection to it that it
was made after the voyage was commenced, nor that the money was
appropriated to purposes wholly unconnected with the voyage. The
lender is not presumed to lend upon the faith of any particular
appropriation of the money, and if it were otherwise, his security
could not be avoided by any misapplication of the fund where the
risk was
bona fide run upon other goods and it was not a
mere contract of wager and hazard. What could be the effect if it
were a mere wagering contract it is unnecessary to consider,
because there is the clearest proof here that there was property on
board belonging to the borrower and sailing on the voyage at his
risk.
The form of the
respondentia bond in the present case
is, as far as we know, the common and usual from. The only
deviation from the actual facts is that it seems in some of its
provisions to contemplate the voyage as not then commenced. This
probably arose from using the common printed form, which is adapted
to that as the ordinary case. But it misled no one, and was
certainly perfectly understood by the parties. The risk was taken
for the whole voyage, precisely as if the ships had been then in
port, and if before the bonds were given the property had been
actually lost by any of the perils enumerated in it, it is clear
that the loss must have been borne by the lenders. They could not
have recovered it back, since the event was one within the scope
and contemplation of the contract. The safety, then, of the
property at that particular period does not vary the rights of the
parties, and from the very nature of the transaction it must have
been utterly unknown to both whether the ship was at the time in
safety or not. They entered into the contract upon the usual
footing of policies of insurance, lost or not lost. So far as this
deviation from the fact bore upon the point of the good faith and
reality of the contract as a genuine maritime loan, it was left to
the jury to draw such inferences as upon the whole circumstances it
was warranted to draw. The charge of the learned judge in the
circuit court was as favorable to the defense on this point as it
could be upon the principles of law.
The next question is in whom was the property in the shipment
vested at the time of the levy of the execution of the United
States. Was it so vested in the insurance company,
Page 26 U. S. 438
either in law or equity, that it is now entitled to maintain the
present suit, or in other words to recover the proceeds in the
marshal's hands? This depends upon the view taken of the objects,
intentions, and acts of the parties as disclosed in the bonds and
the accompanying papers. When these are once ascertained and
settled, it will not be difficult to arrive at the proper legal
conclusion.
It is contended on behalf of the United States that no title or
interest in the property shipped passed by the instruments, taken
collectively, to the insurance company; that Edward Thomson
remained the sole owner of the goods and their proceeds during the
whole voyage; that at most, the insurance company had but a lien
upon them for the security of its debt, which was displaced by the
priority of the United States; and finally that if the insurance
company had any title or interest in the property, it was not
absolute, but by way of mortgage, and even this, coming in
competition with the priority of the United States by operation of
law, yields to its superior privilege.
Before proceeding to the discussion of the right of the
insurance company over the property in question, it may be well to
consider what is the nature and effect of the priority of the
United States under the statute of 1799, ch. 128. Although that
subject has been several times before this Court, the observations
which have fallen from the bar show, that the opinions of the Court
have sometimes not been understood according to their true import.
The 65th section of the act declares that
"In all cases of insolvency or where any estate in the hands of
executors, administrators, and assignees shall be insufficient to
pay all the debts due from the deceased, the debt or debts due to
the United States, &c., shall be first satisfied, and any
executor, administrator, or assignees or other person who shall pay
any debt due by the person or estate from 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 own person and estate for the debt
or debts so due to the United States, or so much thereof as may
remain due and unpaid, and actions or suits at law may be commenced
against them for the recovery of the said debt or debts or so much
thereof as may remain due and unpaid in the proper court having
cognizance thereof."
A subsequent clause of the same section declares that
"The cases of insolvency mentioned in this section shall be
deemed to extend as well to cases in which a debtor, not having
sufficient property to pay all his or her debts, shall have made a
voluntary assignment thereof for the benefit of his or her
creditors or in which the
Page 26 U. S. 439
estate and effects of an absconding, concealed, or absent debtor
shall have been attached by process of law as to cases in which an
act of legal bankruptcy shall have been committed."
It is obvious that this latter clause is merely an explanation
of the term "insolvency" used in the first clause, and embraces
three classes of cases, all of which relate to living debtors. The
case of deceased debtors stands wholly upon the alternative in the
former part of the enactment. Insolvency then, in the sense of the
statute, relates to such a general divestment of property as would
in fact be equivalent to insolvency in its technical sense. It
supposes that all the debtor's property has passed from him. This
was the language of the decision in the case of
United
States v. Hooe, 3 Cranch 73, and it was
consequently held that an assignment of part of the debtor's
property did not fall within the provision of the statute. So too,
a mere inability of the debtor to pay all his debts is not an
insolvency within the statute, but it must be manifested in one of
the three modes pointed out in the explanatory clause already
referred to. That was the point on which the case of
Prince v.
Bartlett, 8 Cranch 431, turned.
What then is the nature of the priority thus limited and
established in favor of the United States? Is it a right which
supersedes and overrules the assignment of the debtor as to any
property which the United States may afterwards elect to take in
execution, so as to prevent such property from passing by virtue of
such assignment of the assignees? Or is it a mere right of prior
payment out of the general funds of the debtor in the hands of the
assignees? We are of opinion that it clearly falls within the
latter description. The language employed is that which naturally
would be employed to express such an intent, and it must be
strained from its ordinary import to speak any other.
Assuming that the words "in all cases of insolvency" indicate an
entire class of cases, and that the other member of the sentence
"or when any estate," &c., is to be read distributively, as has
been contended for on behalf of the United States, it does not in
the slightest degree vary the construction of the statute. It will
then read that "in all cases of insolvency, the debt or debts due
to the United States, &c., shall be first satisfied."
But how are they to be satisfied? Plainly, as the succeeding
clause demonstrates, by the assignees, who are rendered personally
liable if they omit to discharge such debt or debts. To enable the
assignees to pay the United States, it is indispensable that the
fund should pass to them, and if the mere priority of the United
States intercepted it or gave a right to defeat it, the object of
the statute would not be accomplished.
Page 26 U. S. 440
If the legislature had intended to defeat the passing of the
property to the assignees as against debts due to the United
States, the natural language in which such an intention would be
clothed would be to declare that so far such assignments should be
void. Then again the very enumeration of the cases of insolvency,
in all of which the assignment passes and is to pass the whole of
the debtor's property, confirms the interpretation already
asserted. They are the very cases where by law there is no
exception as to the extent or operation of the assignment to divest
the debtor's estate. One of these is the case of a legal
bankruptcy, and in the act on this subject passed in the next
session of Congress, there is an express provision in the 62d
section that "nothing contained in this law shall in any manner
affect the right or preference to prior satisfaction of debts due
to the United States" as secured or provided by any law heretofore
passed. Yet the bankrupt act contains no exception as to the
property to be passed to the assignees in favor of any person. In
the case of
United States v.
Fisher, 2 Cranch 358, which was decided upon great
deliberation, this Court held, in the construction of a similar
clause in the Act of 3 March, 1797, ch. 74, that
"No lien is created by this law; no
bona fide transfer
of property in the ordinary course of business is overruled. It is
only a priority in payment, which under different modifications is
a regulation in common use, and this priority is limited to a
particular state of things when the debtor is living, though it
takes effect generally if he be dead."
And this doctrine was again recognized in
United
States v. Hooe, 3 Cranch 73,
7 U. S. 90.
If, then, the property of the debtor passes to the assignees; if
debts due to the United States constitute no lien on such property;
if the preference or privilege of the United States be no more than
a priority of satisfaction or payment out of a common fund, it
would seem to follow as a necessary consequence that even if the
teas in controversy were the property of Edward Thomson, they
passed by his general assignment in November, 1825, which is not
denied to have been a
bona fide and valid transaction, to
his assignees and become their property for distribution among his
creditors, and were not liable to the levy under the execution of
the United States.
That, however, would be a question merely between the United
States and the assignees, and would in no shape help the Atlantic
Insurance Company to maintain its present suit.
Then again it is contended on behalf of the United States that
the priority thus created by law if it be not of itself
Page 26 U. S. 441
a lien, is still superior to any lien and even to an actual
mortgage on the personal property of the debtor.
It is admitted that where any absolute conveyance is made, the
property passes so as to defeat the priority, but it is said that a
lien has been decided to have no such effect, and that in the eye
of a court of equity a mortgage is but a lien for a debt.
Thelluson v.
Smith, 2 Wheat. 396, has been mainly relied on in
support of this doctrine. That case has been greatly misunderstood
at the bar, and will require a particular explanation. But the
language of the learned judge who delivered the opinion of the
Court in that case is conclusive on the point of a mortgage. "The
United States," said he,
"is to be first satisfied, but then it must be
out of the
debtor's estate. If, therefore, before the right of preference
has accrued to the United States, 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 his property has
been seized under a
fieri facias, the property is divested
out of the debtor and cannot be made liable to the United
States."
The same doctrine may be deduced from the case of
United States v.
Fisher, 2 Cranch 358, where the Court declared that
"no
bona fide transfer of property in the ordinary course
of business is overreached by the statutes," and "that a mortgage
is a conveyance of property, and passes it conditionally to the
mortgagee." If so plain a proposition required any authority to
support it, it is clearly maintained in
United
States v. Hooe, 3 Cranch 73.
It is true that in discussions in courts of equity, a mortgage
is sometimes called a lien for a debt. And so it certainly is, and
something more; it is a transfer of the property itself as security
for the debt. This must be admitted to be true at law, and it is
equally true in equity, for in this respect equity follows the law.
It does not consider the estate of the mortgagee as defeated and
reduced to a mere lien, but it treats it as a trust estate, and
according to the intention of the parties, as a qualified estate
and security. When the debt is discharged, there is a resulting
trust for the mortgagor. It is therefore only in a loose and
general sense that it is sometimes called a lien, and then only by
way of contrast to an estate absolute and indefeasible. But it has
never yet been decided by this Court that the priority of the
United States will divest a specific lien attached to a thing,
whether it be accompanied by possession or not. Cases of lien
accompanied by possession are among others the lien of a ship's
owner to detain goods for freight; the lien of a factor on the
goods of his principal for balances due him; the lien of an artisan
for work and services upon the specific thing. On the other hand
there are liens
Page 26 U. S. 442
where the right is perfect, independent of possession, as the
lien of a seaman for wages and the lien of a bottomry holder on the
ship for the sum loaned. In none of these cases has it ever been
decided that in a conflict of satisfaction out of the thing itself,
the priority of the United States cut out the lien of the
particular creditor. And before such decision is made it will
deserve very grave deliberation and a marked attention to what fell
from the court in
Nathan v. Giles, 5 Taunt. 558, 574. At
present it is wholly unnecessary to decide it, for reasons which
will hereafter appear.
The case of
Thelluson v.
Smith, 2 Wheat. 396, is not understood to justify
any such conclusion. That case turned upon its own particular
circumstances. A judgment
nisi was obtained against
Crammond on 20 May, 1805, in favor of Thelluson and others. On the
22d of the same month he executed a general assignment of all his
estate to trustees for the payment of his debts. At that time he
was indebted to the United States on several duty bonds which
became due at subsequent periods. Suits were instituted on these
bonds as they severally became due, and judgments were obtained and
executions issued against Crammond under which a landed estate
called Sedgely was levied upon and sold by the marshal, and the
action was brought by Thelluson and others against the marshal to
recover the proceeds of this sale in his hands. No execution had
ever issued upon the judgment of
Thelluson v. Crammond,
and of course there had been no levy under that judgment on the
Sedgely estate before or after the levy in favor of the United
States. It was admitted that in Pennsylvania, a judgment
constitutes a lien on the real estate of the judgment debtor, and
it was assumed by this Court in the argument of the cause that the
judgment of Thelluson and others bound the estate from 20 May, when
it was entered
nisi, although in fact it was not finally
entered until nearly a year afterwards. The posture of the case
then was that of a judgment creditor seeking to recover the
proceeds of a sale of land sold under an adverse execution out of
the hands of the marshal upon the ground of his having a mere
general lien by his judgment on all the lands of his debtor, that
judgment never having been consummated by any levy on the land
itself. The court decided that the action was not maintainable. The
reasons for that opinion are not owing to accidental circumstances,
as fully given as they are usually given in this Court. But the
arguments of the counsel point out grounds upon which it may have
proceeded, without touching the general question of lien. The
plaintiffs were entitled to recover only upon the ground that they
could establish in themselves a rightful title to the proceeds.
Whether the land
Page 26 U. S. 443
itself was rightfully sold under the execution of the United
States, or any title to it passed by the sale, as against the
assignees of Crammond, was not matter of inquiry in that case.
However tortious or invalid it might be, still if the plaintiffs
had no title to the proceeds, they must fail in their action. Under
the general assignment of the debtor, the priority of the United
States attached, and if the assignees were willing to acquiesce in
the sale, the right of the United States to hold the proceeds could
not be disturbed by third persons. Now it is not understood that a
general lien by judgment on land, constitutes,
per se, a
property, or right, in the land itself. It only confers a right to
levy on the same to the exclusion of other adverse interests,
subsequent to the judgment, and when the levy is actually made on
the same, the title of the creditor for this purpose relates back
to the time of his judgment, so as to cut out intermediate
encumbrances. But subject to this, the debtor has full power to
sell or otherwise dispose of the land. His title to it is not
divested or transferred by the judgment to the judgment creditor.
It may be levied upon by any other creditor who is entitled to hold
it against every other person except such judgment creditor, and
even against him unless he consummates his title by a levy on the
land under his judgment. In that event, the prior levy is, as to
him, void, and the creditor loses all right under it. The case
stands in this respect precisely upon the same ground as any other
defective levy, or sale. The title to the land does not pass under
it. In short, a judgment creditor has no
jus in re, but a
mere power to make his general lien effectual by following up the
steps of the law and consummating his judgment by an execution and
levy on the land. If the debtor should sell the estate, he has no
right to follow the proceeds of the sale into the hands of vendor
or vendee or to claim the purchase money in the hands of the
latter. It is not like the case where the goods of a person have
been tortiously taken and sold, and he can trace the proceeds, and,
waiving the tort, chooses to claim the latter. The only remedy of
the judgment creditor is against the thing itself by making that a
specific title which was before a general lien. He can only claim
the proceeds of the sale of the land when it has been sold on his
own execution and ought to be applied to its satisfaction. To this
state of things the language of the Court in
Thelluson v.
Smith is to be applied when it is said that if the debtor's
property is seized under a
fi. fa., it is divested out of
the debtor and cannot be liable to the United States. Applying
these principles to the facts of that case, it is clear that the
Sedgely estate had not been divested out of the debtor by any
execution on the judgment of Thelluson and others; that it either
remained in
Page 26 U. S. 444
the debtor, and was liable to the execution of any other of his
creditors who choose to levy upon it, subject, of course, to have
his title overruled by their subsequent levy, when perfected; or
that, subject in like manner, it passed by the assignment (if that
was
bona fide) to the assignees, and in their hands, the
United States would have a priority of payment out of it as general
funds in their hands. The judgment creditors, as such, had no title
to any fund in the hands of the assignees until the priority of the
United States was satisfied, for that priority does not yield to
any class of creditors, however high might be the dignity of their
debts.
The fact that a judgment creditor has a lien does not place him
in a better situation as a creditor over the general funds of the
debtor in the hands of the assignees. If he possess such a lien, he
must enforce it in the manner prescribed by law, and if he does,
that may so far affect the interest of the assignees actually
subjected to such lien. But it gives him no rights to the fund
until he has perfected his lien according to the course of the law.
Until that period, he has merely a power over the property, and not
an actual interest in it. This ground is alluded to in that part of
the opinion of the court, where speaking of the priority of the
United States, it is said
"the law makes no exception in favor of prior judgment
creditors, &c. Exceptions there must necessarily be as to the
funds out of which the United States are to be satisfied,
but there can be none in relation to the debts due from a debtor of
the United States to individuals. The United States is to be first
satisfied, but then it must be out of the debtor's estate."
The real ground of the decision was that the judgment creditor
had never perfected his title by any execution and levy on the
Sedgely estate, that he had acquired no title to the proceeds as
his property, and that if the proceeds were to be deemed general
funds of the debtor, the priority of the United States to payment
had attached against all other creditors, and that a mere potential
lien on land did not carry a legal title to the proceeds of a sale,
made under an adverse execution. This is the manner in which this
case has been understood by the judges who concurred in the
decision, and it is obvious that it established no such proposition
as that a specific and perfected lien can be displaced by the mere
priority of the United States, since that priority is not of itself
equivalent to a lien.
We may then dismiss any further consideration of this topic
unless it shall appear that the right of the
respondentia
holders in the present case is reduced to a mere general lien, and
as to them, at least, however it may be as to the assignees, no
legal right exists to maintain an action for the proceeds.
Page 26 U. S. 445
The attention of the court will then be at once addressed to the
question what was the nature and extent of the interest of the
insurance company in the shipments in question. It is unnecessary
to discuss what would have been the rights of the parties if the
respondentia bonds had stood alone, for that is not the
posture of this case. The whole instruments must be taken together,
and construed as one entire agreement.
We must then examine the memorandum, the outward bill of lading
and assignments thereon, in connection with the bond. The bill of
lading purports on its face to be a shipment by Edward Thomson of
seven kegs containing $21,000, for account and risk of the shipper,
to be delivered at Canton to John R. Thomson or his assigns. By the
well settled principles of commercial law, the consignee is thus
constituted the authorized agent of the owner, whoever he may be,
to receive the goods, and by his endorsements of the bill of
lading, to a
bona fide purchaser, for a valuable
consideration, without notice of any adverse interests, the latter
becomes as against all the world the owner of the goods. This is
the result of the principle that bills of lading are transferable
by endorsement, and thus may pass the property. It matters not
whether the consignee in such case be the buyer of the goods or the
factor or agent of the owner. His transfer in such a case is
equally capable of divesting the property of the owner and vesting
it in the endorsee of the bill of lading. And strictly speaking, no
person but such consignee can by an endorsement of the bill of
lading, pass the legal title to the goods. But if the shipper be
the owner, and the shipment be on his own account, and risk,
although he may not pass the title by virtue of a mere endorsement
of the bill of lading, unless he be the consignee, or what is the
same thing, it be deliverable to his order; yet by any assignment,
either on the bill of lading, or by a separate instrument, he can
pass the legal title to the same; and it will be good against all
persons, except such a purchaser for a valuable consideration, by
an endorsement of the bill of lading itself. Such an assignment not
only passes the legal title as against his agents and factors, but
also against his creditors in favor of the assignee. It is
unnecessary to cite particular authorities on these points; they
will be found supported by the authorities cited at the argument,
and by the elementary treatises of Mr. Abbott, Mr. Holt, and Mr.
Chitty on this subject, and particularly by
Nathan v.
Giles, 5 Taunt. 558. In the present case, Edward Thomson was
the owner of the goods, and the consignee was merely his factor. He
therefore had full power, notwithstanding the consignment, to pass
the title to the property in the bill of lading by a suitable
instrument of assignment and sale against any body, but a
purchaser
Page 26 U. S. 446
without notice from his consignee, without any actual delivery
of the goods themselves, if they were then at sea and incapable of
manual tradition.
The question, then, is whether the endorsement upon this bill of
lading constitutes such an instrument. We are of opinion that it
does. It purports to be a transfer
in praesenti, and uses
the appropriate phrases of grant. The words are
"For value received, I hereby assign and transfer to the
Atlantic Insurance Company of New York the within bill of lading,
and the specie, goods, &c., to be procured thereon and thereby,
and any return cargo, to be obtained, &c., by the proceeds
thereof, and all the return cargo to be taken on board the within
named ship, by or on my account, as collateral security, according
to an agreement duly executed and adjoined to a
respondentia bond &c. [referring to the memorandum
hereinafter stated]."
This is not a mere assignment of the bill of lading itself,
operating as an equitable grant of the interest of the owner in
that instrument, but it is of the goods contained in it, and the
bill of lading is referred to by way of description of the subject
matter of the grant. There was a valuable consideration for it, and
as Edward Thomson was the legal owner of the goods, the words
"assign and transfer" are sufficient words of grant to pass his
legal title to the same unless the operation of those words is
controlled by some of the other parts of the instrument. The
argument admits this, but it supposes that the accompanying
memorandum shows that such was not the intention of the parties,
and therefore the words are to be construed according to that
intention, which was to create a mere lien or equity on the part of
the insurance company on the goods. Let us then examine the nature
and scope of that memorandum. It begins by a recital that it hath
been agreed that the bill of lading for the goods, &c.,
mentioned in the
respondentia bond shall be endorsed to
the insurance company as a collateral security for the loan. This
is carried into effect by the assignment above mentioned. It then
goes on to recite that it has been further agreed that the property
to be shipped homeward as aforesaid, being the proceeds of the loan
(thus considering the specie on board as a substituted loan) shall
be for the account and risk of the borrowers; that the bills of
lading therefore shall express the same and shall also express that
the said property shall be delivered to the order of the shippers,
and that the same shall be endorsed in blank and shall be placed in
the hands of the insurance company either before or on the arrival
of the said ship at Philadelphia as a continuation of such
collateral security.
Now supposing the transaction
bona fide, what is there
here that controls, even by way of recital, the operation of the
words
Page 26 U. S. 447
of transfer? If the case were one of absolute transfer, there
might be some room for doubt. But here the transfer was as
collateral security. It was therefore a mortgage of the goods and
the returns. The shipment out and home was, as in each case it must
be, at the risk and for the account of the shipper, subject however
to the rights of the mortgagee, and the very provision that the
bills of lading should be delivered to the order of the shipper and
endorsed in blank and placed in the hands of the insurance company
establishes the fact that it was the intention of the parties that
the property of the return cargo should rest by such endorsement in
them. The memorandum then proceeds to state that it is expressly
declared that the endorsement or consignment shall not be held to
exonerate the persons of the borrowers, nor compel the insurance
company to accept the goods, &c., which may arrive under such
bill of lading and consignment in discharge of such debt, but that
it shall be lawful for the company to receive and hold the goods,
&c., for ninety days after their arrival at Philadelphia, and
if the debt was not then paid, to sell the same at auction and
charge the borrowers with the balance.
The plain effect of this stipulation is to avow an explicit
understanding that the assignment of the goods should not put them
at the risk of the company, but that they should be deemed
collateral security only, and be sold after the limited time to
discharge the debt
pro tanto. So far from the intention's
being indicated that no property at all was to pass to the company,
the solicitude of the parties seems most carefully employed to
repel the notion that the transfer was absolute and not by way of
mortgage as collateral security. The memorandum therefore confirms,
and does not impugn in any degree, the natural construction of the
language of the assignment endorsed on the bill of lading as
importing a present transfer. Indeed, we may go further and assert
that the obvious intention of the parties was to give a specific
interest in the goods shipped, so as to make them secure against
the claims of creditors, and that to construe the instruments to
create no more than a lien, liable to be defeated by the acts of
either party or to be overreached by any privileged creditors,
would be not to follow, but to frustrate, their intention. Of what
use could this great apparatus of instruments so anxiously prepared
by the parties be if it conveyed no
jus in re, and left
the title of the insurance company to the goods at the mercy of the
creditors of Thomson, to be intercepted at any time before it
reached their hands on its arrival.
We are therefore of opinion that the assignment in this case was
sufficient to pass a legal title to the shipment and the proceeds
thereof against Thomson and his assignees and creditors. If,
indeed, the assignment had been of the outward shipment of
Page 26 U. S. 448
goods only, it would have carried the return cargo, purchased
with the proceeds, because the product or substitute for the
original thing by sale or otherwise follows the nature of the thing
itself, so long as it can be ascertained as such, and becomes the
property of him who was the owner in the same quality as he held
the thing. This is the general principle of law, and has been even
extended to cases where there has been a fraudulent or tortious
misapplication of property. The case of
Taylor v. Plumer,
3 Maul & Selw. 562, is directly in point, and contains a large
collection of the authorities in the elaborate opinion of the court
pronounced by Lord Ellenborough. In this view of the matter, the
only value of the homeward bill of lading would be as a designation
of the proceeds, so as to enable the company to trace and identify
them. But the assignment, in terms, transfers the proceeds and
returns and cuts off all possibility of question upon this head. If
indeed the title to the proceeds had originally been only an
equitable title, and not strictly legal, yet as soon as the company
had perfected that equity by endorsement in blank and possession of
the homeward bills of lading, their right would have been
consummated at law, so as to entitle them to maintain a suit
therefor. The case of
Haille v. Smith, 1 Bos. & Pull.
563, was not so strong as the present, and there the court held
that the property passed clothed with a trust for the payment of
the debt.
If this, then, be the result of the general principles of law in
cases of this nature, what is there to prevent their application to
the present case? First it is said that this debt upon a
respondentia bond is of too contingent a nature to uphold
a mortgage as collateral security for the payment of it. We know of
no principle or decision that justifies such a conclusion.
Mortgages may as well be given to secure future advances and
contingent debts as those which already exist and are certain and
due. The only question that properly arises in such cases is the
bona fides of the transaction. Then again, it is said that
the papers here disclose a transaction fraudulent in its own
nature. But we are of opinion that there is no necessary
implication of law on the face of these papers which stamps it
fraudulent; for ought that appears, the agreement may have been
entered into with the most sincere and scrupulous good faith, and
whether fraudulent or not in fact was a question for the jury upon
the whole evidence which was properly left to their consideration,
and they have by their verdict negatived the fraud.
The circumstance that the goods were to be at the risk of the
shipper and on their account does not, of itself, affect either the
validity or
bona fides of the transfer. That must
ordinarily occur where the transfer is made as collateral security,
and it
Page 26 U. S. 449
was one of the leading facts in
Haille v. Smith,
already cited. 1 Bos. & Pull. 563.
But the main objection relied on, and which indeed constitutes
one of the exceptions to the opinion of the circuit court, is that
possession of the return shipment was not obtained until after the
levy by the United States, and it is contended that the want of
such possession is
per se a badge of fraud. The circuit
court on this point decided
"that the actual possession of the above return cargoes by the
masters of the
Superior and
Addison until levied
upon by execution at the suit of the United States against Thomson
is not
per se in law a badge of fraud which ought to
invalidate or affect the title of the plaintiffs to these
cargoes."
It appears to us that this decision is entirely correct in point
of law under the circumstances of the case.
Without undertaking to suggest whether in any case the want of
possession of the thing sold constitutes
per se a badge of
fraud or is only
prima facie a presumption of fraud, a
question, upon which much diversity of judgment has been expressed,
it is sufficient to say that in case even of an absolute sale of
personal property, the want of such possession is not presumptive
of fraud if possession cannot from the circumstances of the
property be within the power of the parties.
A familiar example of this doctrine is in the case of a sale of
a ship or goods at sea, where possession is dispensed with upon the
plain ground of its impossibility, and it is sufficient if the
vendee takes possession of the property within a reasonable time
after its return home. But in cases where the sale is not absolute,
but conditional, the want of possession, if consistent with the
stipulations of the parties, and,
a fortiori if flowing
directly from them, has never been held,
per se, a badge
of fraud. The books are full of cases on this subject. The case of
Bucknal v. Royston, Prec. in Chan. 285, runs almost upon
all fours with the present. The case of
Sturtevent v.
Ballard, 9 John. 338, and
Bissell v. Hopkins, 3 Cowen
166, contains strong illustrations of the principle, and being
decisions in the very state by whose laws the validity of the
present agreement is to be tried, are of high authority. They
sustain the doctrine asserted by the circuit court in the most
ample manner, and there is a learned note by the reporter to the
latter case which embodies in an exact manner the principal
authorities, English as well as American, on this subject. Now in
the case at bar, the goods at the time of the transfer were at sea
on a voyage in which they were to be sold or exchanged by the
consignee and the proceeds sent back in the same ships. It was
therefore properly in the contemplation of the parties, and indeed
a necessary result of their stipulations that the
Page 26 U. S. 450
goods should not be intercepted or taken possession of by the
company until the close of the voyage, and that the return
shipments should conform to this arrangement.
There is no pretense to say that the plaintiffs did not seek
possession of the goods within a reasonable time after the arrival
of the goods home. Their power to accomplish it was dislodged by
the execution of the United States, and they obtained as early as
practicable possession of the bills of lading and vouchers of their
rights. But so far as the want of possession was matter of evidence
presumptive of fraud, it was left open to the consideration of the
jury, and the grievance now is not that it was so left, but that
the court ought to have instructed the jury as matter of law that
the want of possession under the circumstances of the case was
per se a badge of fraud.
We have already expressed an opinion that the court was right in
the instructions actually given.
Upon the whole we are of opinion that the directions of the
court upon the merits of the cause at the trial were correct in
point of law, and that consequently there is no error in that part
of the judgment.
It remains to consider very briefly certain exceptions taken to
the testimony in the progress of the trial.
The first exception is that the corporate capacity of the
plaintiffs was not regularly proved before the introduction of the
respondentia bond. It is to be considered that this was a
trial upon the merits, and by pleading to the merits the defendants
necessarily admitted the capacity of the plaintiffs to sue. If he
intended to take the exception, it should have been done by a plea
in abatement, and his omission so to do was a barrier of this
objection. But independently of this special ground, the very
agreement in the case upon which the trial was had, as well as the
admissions of the bond given to the United States as security to
refund the amount if judgment should pass against the plaintiffs,
was certainly
prima facie evidence of an admission on the
part of the United States of the corporate capacity of the
plaintiffs and to throw the burden of proof on the other side.
The second exception was to the question put to Austin L. Sands
whether he was agent of the company.
We see no objection to this question. It was put in a form most
unexceptionable, and it was a matter of subsequent inquiry in what
manner his agency was created, and it does not appear from the
nature of the question whether it might not have been sufficient to
establish that he was an agent
de facto to receive the
bond. It was indeed but an exception to the order of proofs, where
several things are to be established to lead to a result, and in
what order the inquiry is to be had is
Page 26 U. S. 451
matter of discretion in the court itself, and not of absolute
right in the party.
The next exception is to the allowance of the bond to go to the
jury upon proof of its execution by Thomson only.
It was a joint and several bond, and if executed by Thomson
alone, it might be material to the plaintiffs' case. It was not
introduced as general evidence as to all the parties who were named
in it, but only as to Thomson, and was connected with the title
derived under him. Proof of the signature of Thomson was, under the
circumstances,
prima facie evidence of his execution of
the instrument.
The fourth, fifth, sixth, and seventh exceptions turned
altogether upon the question whether acts and proceedings of third
persons not in privity with the insurance company nor known to them
were evidence against them. Most clearly, they were not.
The eighth exception involves the point whether the plaintiffs
were bound to look to the application of the loan made by them. If
not, the question asked was properly rejected. And we are of
opinion that the plaintiffs had nothing to do with the application
of the money, and that when received by Thomson, he had a right to
dispose of it in any manner he pleased.
Upon the whole, the judgment of the circuit court is to be
Affirmed with costs.
MR. JUSTICE JOHNSON.
I concur in the opinion delivered in this cause, and the rather
because I think it overturns the report of the decision in the case
of
Thelluson v. Smith. It would be vain to endeavor to
reconcile this decision with that which is imputed to the case
referred to.
This was nothing in its origin but a mortgage to the Atlantic
Insurance Company, and a mortgage of a mere right, a metaphysical,
transitory thing, over which the act of the party could not operate
more immediately or more forcibly than a judgment upon land under
the laws of Pennsylvania.
But I avail myself of this occasion, and I have long wished for
an opportunity to put on record some remarks upon the report of the
case of
Thelluson v. Smith. I have never acknowledged its
authority in my circuit on the point supposed to be decided by it
-- to-wit,
the precedence of the debt of the United States, as
to a previous judgment, in the case of a general assignment,
and I propose now to show what I think anyone may see by a close
inspection of the facts, even as stated in the report, to-wit that
the question there supposed to be decided really never was raised
by the special verdict. It is true it was argued, and no other
question, judging from the report,
Page 26 U. S. 452
was argued. But when the court came to inspect the record, it
must have seen that the special verdict did not raise the question
as between the parties to that suit. And, moreover, I find that the
reporter has omitted one very material fact found in the special
verdict, which was that the United States had no interest in the
issue, since its judgment had been voluntarily paid off by the
assignees of Crammond, the bankrupt. I copy the special verdict
entered from the original roll, which I have inspected at the
present term.
The jury found
"That on 22 May, 1805, William Crammond, of Philadelphia,
merchant, stood indebted to the United States in several bonds for
duties, as follows: [describing the bonds all of which were due
after the date of the assignment]. On the respective bonds suits
were brought, judgments entered, executions issued, and a sale made
of a certain real estate called Sedgely, the property of William
Crammond, and the proceeds thence arising came to the hands of the
defendant John Smith, Marshal of Pennsylvania District, from whom
it is claimed by the plaintiffs [who are] creditors of the said
William Crammond on the following grounds: a suit was instituted by
the plaintiffs in the Circuit Court of the United States for the
District of Pennsylvania against the said William Crammond as of
October Sessions 1802, and a judgment in the said suit in favor of
the plaintiffs and against the said Crammond was obtained for
$32,253 on 20 May, 1805. On 22 May, 1805, the said William Crammond
was insolvent, and had not sufficient property to pay all his
debts. But his insolvency was not a matter of general notoriety. On
the 22d day of the said month, the said William Crammond executed a
general assignment of his estate and effects, bearing date the same
day and year, and delivered it to the assignees therein named
(
prout assignment), being on the said 22 May, unable to
satisfy all his debts. The moneys in the hands of the defendants
are claimed by the assignees under the said assignment,
who
have satisfied the United States the amount of the debts due the
United States. If upon the whole matter, . . ."
in the usual alternative form of a special verdict.
Judgment below was rendered for defendant, and it is impossible
it could have been otherwise, but not, as I conceive, upon the
ground stated, since it is one which the verdict does not raise. It
is true, the question was argued, but adjudications are not to have
their effect from the questions argued, and the views taken by
counsel in their points or briefs. There is a sensible rule laid
down on this subject in a book of grave authority, and the truth of
which this Court has had occasion to verify not unfrequently, the
purport of which is that counsel ought not to
"move anything in arrest of judgment
Page 26 U. S. 453
except the roll wherein the judgment is entered, or the
postea, be in court, 22 Cas.B.B., and the reason assigned
is that the court may be satisfied that the matter moved in arrest
of judgment is truly recited from the record, for the court will
not rely upon the allegation of counsel at the bar."
It often happens after the most protracted discussions that the
court differs from counsel in its views of the questions actually
raised on the record and on grounds which have not been argued.
In the case of
Thelluson v. Smith, I hold it to be
incontrovertible that the question of priority could not have been
adjudicated upon on the verdict as set out in the record.
The special verdict does not give the date of the levy and sale
by the marshal under the judgment by the United States, but as all
Crammond's bonds to the United States fell due after the date of
the assignment, it follows that the judgment, and necessarily all
proceedings under it, were subsequent to the execution of that
deed. The land levied on therefore had passed out of Crammond
before the judgment of the United States was obtained, and of
consequence the levy and sale under their execution was a mere
nullity. Could this furnish the ground of an action for money had
and received by the Thellusons, in right of a judgment prior to the
consignment, against Smith the marshal? It obviously could not. For
as against the Thellusons' rights, whatever they were, nothing had
passed. The purchaser of the lands at marshal's sale, who had
received nothing for the money, might have brought such an action
against the marshal, and the assignees might have sued for and
recovered the land, in which case it would have been held by them,
as before, subject to Thelluson's judgment. But as between
Thelluson and the marshal, there was no privity of action. And this
was the true ground for rendering the judgment of this Court in the
suit against the marshal.
It is true the special verdict introduces the assignees into the
cause, as claiming the money raised by the marshal, on the
supposition that after satisfying the United States, they succeeded
to the priority of the United States. But suppose this recovery had
been had against Smith, what was there to prevent the assignees
from going on at law to recover the land of the vendee? They were
no parties to the record, and there is nothing in the pleadings or
the verdict to show that they had intervened or had a right to
intervene in the name of the United States. They could not maintain
a right to succeed to the United States under the provisions of the
65th section of the Act of 1799, 3 vol. 197, because that right is
extended only to sureties upon the bond. If they had acquired any
right as against the Thellusons, it was a mere general equity,
which
Page 26 U. S. 454
could only have been asserted in a court of equity. At law, in
this indirect mode, it could not have been asserted if it could
have availed them at all.
I at least would have it understood that I concurred in the
judgment in the case of
Thelluson v. Smith on no other
ground than the want of privity between the parties. Nor can I
acknowledge it as authority to any other point, since the United
States was satisfied, and the assignees could not be regarded in
any view, at law, as succeeding to the priority of the United
States if the United States had priority, and since that priority
could not come in question in a case in which the sale of the land
was a mere nullity, as is distinctly affirmed in the present
decision, because the assignment divested all the interest of the
insolvent, so as to place it beyond the action of the
fieri
facias, issuing on the judgment of the United States.
