U.S. Supreme Court United States v. Howland & Allen, 17 U.S. 4 Wheat. 108 108 (1819)
United States v. Howland & Allen
17 U.S. (4 Wheat.) 108
APPEAL FROM THE CIRCUIT
COURT OF MASSACHUSETTS
The circuit court has jurisdiction, on a bill in equity filed by the United States against the debtor of their debtor, they claiming a priority under the Act of 1799, c. 128, s. 65, notwithstanding the local law of the state where the suit is brought allows a creditor to proceed against the debtor of his debtor by a peculiar process at law. The circuit courts of the union have chancery jurisdiction in every state; they have the same chancery powers, and the same rules of decision in all the states.
The United States is not entitled to priority over other creditors under the Act of 1799, c. 128, s. 65, upon the ground of the debtor having made an assignment for the benefit of creditors unless it is proved that the debtor has made an assignment of all his property.
Where the deed of assignment conveys only the property mentioned in the schedule annexed and the schedule does not purport to contain all the property of the party who made it, the onus probandi is thrown on the United States to show that the assignment embraced all the property of the debtor.
Upon a bill filed by the United States, proceeding as ordinary creditors against the debtor of their debtor for an account, &c.;, the original debtor to the United States ought to be made a party and the account taken between him and his debtor.
This was a bill in equity filed in the name of the United States in the court below, stating that several judgments had been obtained by the United States on duty bonds against Shoemaker & Travers, and Jacob Shoemaker, and their sureties, amounting to the sum of $5,292, which judgments were obtained in the District Court of Pennsylvania at the February term of 1808, and upon which executions
had issued which remained in the marshal's hands unsatisfied; that after the execution of the duty bonds, but before they were payable, to-wit, on 6 December, 1806, Shoemaker & Travers became insolvent within the true intent and meaning of the act "to regulate the collection of duties on imports and tonnage;" that on 1 February, 1808, goods, effects, money and credits of Shoemaker & Travers to the amount of $6,000 had come to the hands of Howland & Allen which, the bill alleged, they refused to subject to the executions of the United States; it prayed that they might be compelled to account for and deliver up these goods, &c.;, in satisfaction of the claim of the United States, and for an injunction in the meantime to restrain them from disposing of, paying away, or in any manner applying the goods, &c.;, aforesaid, to any other object. The injunction was accordingly, awarded.
An amendment to the bill stated that after the debts to the United States accrued by bond as aforesaid, and after Shoemaker & Travers had become insolvent, to-wit, on 6 December, 1806, they made a voluntary assignment by deed of all their property for the benefit of their creditors within the true intent and meaning of the act of Congress aforesaid, and an exemplified copy of the deed of assignment was annexed to the amended bill. The deed recited that the parties being justly indebted to divers persons, whose names are mentioned in a list thereto annexed, and unable at present to pay the said debts, they assign to trustees therein mentioned
all and singular the estate and effects contained in a schedule annexed, in trust to pay the debts due the enumerated creditors, and first that due to the United States. The schedule was entitled "Schedule of property assigned by Shoemaker & Travers, and Jacob Shoemaker, to the creditors of Shoemaker & Travers," and contained many items of property, and among others, the proceeds of the cargo of the brig Deborah, which vessel was then at sea and belonging to Howland & Allen but had been chartered by Shoemaker & Travers.
Howland & Allen by their answer admitted the receipt, on 1 January, 1807, of 4,000 Spanish dollars, the property of Shoemaker & Travers, and which the master of the Deborah had received in Guadeloupe for Shoemaker & Travers, but insisted on their right to apply it to an unliquidated debt of greater amount (composed of freight, demurrage, damages, &c.;, the particulars of which were detailed by the answer), due, as alleged, from Shoemaker & Travers to them, and applied, by an entry in their books, to the credit of Shoemaker & Travers at the time of the receipt of the money aforesaid. They insisted, therefore, on the right of retaining it. To this answer there was a general replication, and the depositions of several witnesses were taken.
The court below decreed that the said Shoemaker & Travers were and are indebted to the United States, and that they became insolvent and made an assignment as alleged in the bill, and that there was an outstanding unsettled demand existing in their favor at the time of their insolvency against the
defendants arising from the voyage of the brigantine Deborah, and which is still unsettled and unpaid, but the court was not satisfied that the defendants, being merely debtors to said insolvents, are by law liable to this process, and thereupon decreed that the said bill be dismissed. From this decree the present appeal was taken.
MR. CHIEF JUSTICE MARSHALL delivered the opinion of the Court.
The bill in this case was filed by the United States in the Circuit Court of the District of Massachusetts to recover from the defendants a sum of money in their hands alleged to be the money of Jacob Shoemaker and Charles R. Travers, merchants and partners, who are stated to be insolvents and to be indebted to the United States for duties.
It appears that Shoemaker & Travers, on 6 December, 1806, executed an indenture in which, reciting that they are justly indebted to divers persons whose names are expressed in a list thereto annexed and are unable at present to pay the said debts, they assign to trustees therein mentioned all and singular the estate and effects contained in a schedule annexed, in trust to pay the debt due to the enumerated creditors, and first that due to the United States. The schedule contains many items of property, and among others the proceeds of the
cargo of the Deborah, then at sea. The Deborah was the property of Howland & Allen, and on her coming into port, her master delivered to her owners a sum of money which he had received at Guadeloupe for Shoemaker & Travers, and which is in the schedule annexed to the deed of assignment already mentioned. At the hearing, the circuit court dismissed the bill on the opinion that it was not sustainable. From this decree, the United States has appealed to this Court, and now insists 1. that it is a case in which a court of equity has jurisdiction; 2. that the United States is entitled to priority, this being a case within the provisions of the act of Congress.
On the first point, no difficulty would be found had the proper parties been before the court. A trust exists, and an account would be proper to ascertain the sum due from Howland & Allen to Shoemaker & Travers. The case, even independent of these circumstances, would be proper for a court of chancery but for the act of Massachusetts which allows a creditor to sue the debtor of his debtor. Still the remedy in chancery, where all parties may be brought before the court, is more complete and adequate, as the sum actually due may be, there in such cases ascertained with more certainty and facility, and as the courts of the Union have a chancery jurisdiction in every state, and the Judiciary Act confers the same chancery powers on all and gives the same rule of decision, its jurisdiction in Massachusetts must be the same as in other states.
This being a case of which a court of chancery may take jurisdiction, we are next to inquire whether it is one in which the United States is entitled to priority. This depends on the fact whether the deed of assignment executed by Shoemaker & Travers was a conveyance of all their property. The words of the deed, after reciting the motives which led to it and the consideration, are "have granted, &c.;, and by these presents, do grant," "all and singular the estate and effects which is contained in the schedule hereunto annexed, marked A." The caption of the schedule is, "Schedule of property assigned by Shoemaker & Travers, and Jacob Shoemaker to the creditors of Shoemaker & Travers." The deed, then, conveys only the property contained in the schedule, and the schedule does not purport to contain all the property of the parties who made it. In such a case, the presumption must be that there is property not contained in the deed, unless the contrary appears. The onus probandi is thrown on the United States.
It is contended for the United States that the clause which gives the power to sell, by using the words "all the property of them, the said Shoemaker & Travers, and Jacob Shoemaker," indicates clearly that this deed does convey all their property. But these words are explained and limited by those which follow so as to show that the word "all" is used in reference to the schedule, and means all the property in the schedule. The depositions do not aid the deed. The question whether the whole
property is assigned is still left to conjecture, and this, being the fact on which the preference of the United States is founded, ought to be proved. Not being proved, the Court is of opinion this is not a case in which it can be claimed.
But the United States is the creditor of Shoemaker & Travers, and has a right, as creditor, to proceed against their property in the hands of Howland & Allen. It has a right to so much of that property as remains after the debt due to Howland & Allen shall be satisfied. But to ascertain this amount, an account between Holland & Allen and the debtors to the United States should be taken, and the persons against whom the account is to be taken should be parties to the suit. Although if they cannot be found within the district of Massachusetts, the process of the court cannot reach them, still they may appear without coercion. At any rate, an account ought to be taken, since the matter controverted between the parties is more proper to be stated by a master than to be decided in court without such report.
The decree is to be reversed and the cause remanded with directions to allow the plaintiffs to amend the bill and make new parties. The United States, will, of course, be at liberty to take testimony showing the assignment to be of all the property of the parties who made it.
DECREE. This cause came on to be heard on the transcript of the record of the Circuit Court for the District of Massachusetts, and was argued by counsel,
on consideration whereof this Court is of opinion that the circuit court erred in dismissing the bill of the plaintiffs and that its decree ought to be reversed, and it is hereby reversed and annulled, and it is further ordered that the said cause be remanded to the said circuit court with directions to allow the plaintiffs to amend their bill and make new parties.