APPEAL from the Circuit Court of the United States for the Eastern District of Pennsylvania
The opinion of the court was delivered by: Mr. Justice Swayne delivered the opinion of the court.
Mr. William M. Evarts, Mr. R. L. Ashhurst, and Mr. W. P. Clough, for the appellant.
Mr. Attorney-General Pierrepont and Mr. R. C. McMurtrie, contra.
This case turns upon legal propositions. There is no controversy about the facts. Jay Cooke, McCulloch, & Co., bankers, of London, were appointed by the United States disbursing agents for the Navy Department. On the 19th of October, 1873, they were indebted to the department for the balance of moneys placed in their hands for disbursement, in the sum of 131,610 9s. 8d. On or about the 20th of September, 1873, when the amount due to the department was considerably larger than that mentioned, the company placed in the hands of the United States or their agents a large amount of collaterals for the security of the debt. The United States claim the right to apply the proceeds of these collaterals to the payment of another and later debt arising in the same way. Irrespective of the collaterals, the amount first mentioned, with interest, is still due and unpaid.
The firm of Jay Cooke, McCulloch, & Co. consisted of Hugh McCulloch, J. H. Puleston, and Frank H. Evans, residents of Great Britain, and of Jay Cooke, William G. Moorehead, H. C. Fahnestock, H. D. Cooke, Pitt Cooke, George C. Thomas, and Jay Cooke, Jr., residents of the United States. For a long period previous to the time first mentioned there was a banking-house in Philadelphia under the name of Jay Cooke & Co. The members of that firm were the seven American partners in the house of Jay Cooke, McCulloch, & Co., and James A. Garland. On the 26th of November, 1873, all the persons composing the firm of Jay Cooke & Co. were adjudicated bankrupts; and this adjudication remains in full force. This included the seven American members in the house of Jay Cooke, McCulloch, & Co. The other three partners of this latter firm are not bankrupt. Under the proceedings in bankruptcy, the defendant, Lewis, has been appointed trustee of the estates of the bankrupts of the firm of Jay Cooke & Co., and as such received and holds their several separate individual estates and assets, and the estates and assets of the firm as well. The estates of these bankrupts are insufficient to pay all their indebtedness. The United States, under the statutes in such case provided, claim priority of payment of their debt before mentioned out of the separate estates of such members of the firm of Jay Cooke & Co. as were also members of the debtor firm of Jay Cooke, McCulloch, & Co. The trustee denies the validity of this demand. The United States have instituted this proceeding to enforce it.
On the 10th of April, 1875, there was already accumulated in the hands of the trustee of the funds so claimed by the United States the sum of $267,844.80.
The Bankrupt Act of March 2, 1867, declares, that, in the order for a dividend, 'the following claims shall be entitled to priority or preference, and to be first paid in full in the following order:––
'First, Fees, costs, and expenses of suits and of the serveral proceedings undet this act, and for the custody of property, as herein provided.
'Second, All debts due to the United States, and all taxes and assessment under the laws thereof.'
The fifth section of the act of March 3, 1797 (1 Stat. 515), enacts,––
'That where any revenue officer or other person hereafter becoming indebted to the United States, by bond or otherwise, shall become insolvent, or where the estate of any deceased debtor in the hands of executors or administrators shall be insufficient to pay all the debts due from the deceased, the debt due to the United States shall be first satisfied, and the priority hereby established shall be deemed to extend as well to cases in which a debtor, not having sufficient property to pay all his debts, shall make a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor shall be attached by process of law, as to the cases in which a legal act of bankruptcy shall be committed.'
It may be well to pause here and carefully analyze this section, and consider the particulars of the category it defines, so far as its provisions apply to the case in hand.
Those affected are persons 'indebted to the United States.'
This language is general, and it is without ...