United States v. Cochran , 2 Brock. 274 ( 1825 )

MARSHALL, Circuit Justice.

In this case Robert Cochran, collector at the port of Wilmington, being very largely indebted to the United States, made a deed of his property for their benefit. Previous to the execution of this deed, he deposited $10,000, the amount of the bond executed to the United States, for the faithful performance of his duty, in a trunk which was placed in the bank, and absconded. From Baltimore he addressed a letter to his sureties, requesting the trunk to be taken out of the bank, and the money to be applied to their exoneration. The money was received at the treasury and the bond given up. It being afterwards discovered that this was the money of the collector and not of the securities, this suit is brought to compel the securities to pay the amount of the bond, considering the money received as constituting no equitable discharge to them.

It is contended on the part of the United States, that the insolvency of Cochran, vested all his property, including this $10,000, in the United States, and that this sum being theirs could not be applied in. exoneration of his securities. The act of congress declares, that where any revenue officer, &c., indebted to the United States, shall become insolvent, the debt due to the United States shall be first satisfied, and that this priority shall extend to cases where a debtor not having sufficient property to pay all his debts, shall make a voluntary assignment thereof. Act March 3, 1797, § 5. See 1 Story's Laws, 463 [1 Stat. 515]. This act does not transfer the property itself to the United States, but subjects it to their debt inthe first instance. The assignee holds it as the debtor would hold it, liable to the claim of the United States, and if he converts it to his own use, or puts it out of reach of the United States, he is undoubtedly responsible for its value. But the property thus liable to the United States, is liable for the whole debt; for one part of it as much as for the other. It is as applicable to the bond in which the sureties are bound, as to that part of the debt for which the principal alone is responsible. No person will doubt the legal capacity of the United States to apply any sum of $10,000, to the discharge of the bond-debt, leaving the residue unpaid. Such an application of a payment would undoubtedly never be presumed from any equivocal act; but a plain and positive appropriation of a payment to the bond, could not after-wards be set aside. But the power of the debtor to apply his payments, is co-extensive with that of the creditor, and is to be exercised in the first instance. This principle has, it is believed, never been denied. If it be correct, then the power of Mr. Cochran to apply this sum of mouey in discharge of the bond, and in exoneration of the sureties to it, is co-extensive with that of the United States to make the same application of it. If, then, Mr. Cochran had. without any assignment of his property, paid this money into the treasury, with a direction that it should be applied to the bond, he would have exercised a right which the law gives to every debtor. If the money should be received under this direction, no doubt can be entertained of the obligation to apply the payment as directed. If it should be rejected, it might be tendered in due form, and to suits brought on the bond, and on the open account a tender might be pleaded to the suit on the bond, unless some distinction can be taken between this bond, and the common case of a bond given for part of a debt. The court has reflected on this distinction, and cannot perceive any legal difference between the cases.

Does the transfer of this money to the sureties change the law of the case? We think not. The sureties have paid it into the treasury in discharge of their bond, which has been delivered up. Had this transaction taken place, with the full knowledge of the treasury department that the money had been received by the sureties from Mr. Cochran, no question could have arisen respecting it. Is the payment the less valid because it was made without communicating this eircumstauce? If the United States hare sustained any injury by the concealment, equity will relieve against that injury, and place them in the situation in which they stood before the payment was made. If, with full knowledge of the circumstance, the money might still have been legally applied in discharge of the bond, then, the fact that it was not communicated cannot change the law.

It has been very properly argued, that the act of congress gives to the debt due to the United State priority over debts due to individuals, but not to one part of the debt due to the United States over any other part- of it; nor does it vest the property absolutely in the United States, though it gives them a rignt to pursue it for the purpose of appropriating it in payment. It would seem to follow, that the right to apply payments while the money is in the hands of the debtors^ is not affected by the act of congress, but remains as it would stand, independent of that act. If, then, the sureties had declared to the tveasury department that the money was received from Mr. Cochran, to be paid in discharge of their bond, and had tendered it in payment thereof, we think the tender would have been valid, and might have been pleaded to a suit on the bond.

We are of opinion, therefore, that this suit must be dismissed as against the sureties.