Thelusson v. Smith - 15 U.S. 396 (1817)
U.S. Supreme Court
Thelusson v. Smith, 15 U.S. 2 Wheat. 396 396 (1817)
Thelusson v. Smith
15 U.S. (2 Wheat.) 396
T. brought a suit against C. in the Circuit Court of Pennsylvania, which was referred to arbitrators; an award was made in favor of T., and a judgment nisi entered on 20 May 1805; exceptions were filed, overruled, and judgment finally entered on 15 May 1806. On 22 May 1805, C. executed a conveyance of all his estate to trustees for the payment of his debts, at which time he was indebted to the United States on several duty bonds which became due at different periods subsequent to 22 May 1805. Suits were brought on the bonds as they severally became due, and judgments obtained and executions issued under which a landed estate belonging to C. was levied upon and sold. T. brought an action against S. (the marshal of the district), who levied the executions to recover so much of the funds in his hands as would be sufficient to satisfy T.'s judgment. In this suit the jury found a special verdict that C. was insolvent on 20 May 1805, but that it was not notoriously known, and the parties agreed that on 22 May 1805, he was unable to satisfy all his debts, and that this fact should be considered part of the special verdict.
Held that the word "insolvency," mentioned in the Duty Act of 1790, ch. 35, sec. 45, and repeated in the Act of 1797, ch. 74, sec. 5, and of 1799, ch. 128, sec. 65, means a legal insolvency, which, whenever it occurs, the right of preference arises to the United States, as well as in the other specified cases to which the acts of 1797 and 1799 have extended the cases of insolvency.
But if 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 it to secure a debt, or if his property has been seized under an execution, the property is divested out of the debtor, and cannot be made liable to the United States.
A judgment gives the judgment creditor a lien on the debtor's lands and a preference over all subsequent judgment creditors. But the law defeats the preference in favor of the United States in the cases specified in the Act of 1799, ch. 128, sec. 65.
The plaintiffs in error instituted a suit in the Circuit Court for the District of Pennsylvania against William Crammond, which, by the agreement of the parties and the order of the court, was referred to arbitrators. An award was made in favor of the plaintiffs, and a judgment nisi was entered on 20 May, 1805. Exceptions were filed and overruled, and a judgment was finally entered on 15 May, 1806. On 22 May, 1805, Crammond executed a conveyance of all his estate to trustees for the payment of his debts, at which time he was indebted to the United States on several duty bonds, which became due at different periods subsequent to 22 May, 1805. Suits were instituted on these bonds as they severally became due, and judgments were obtained and executions issued, under which a landed estate belonging to Crammond, called Sedgely, was levied upon and sold.
The plaintiffs, considering this property as being bound by their prior judgment of 20 May, 1805, and that they were entitled to be first satisfied out of the money in the hands of the defendant (the marshal of the court), which he had raised under the above executions, issued in the name of the United States, they brought this action to recover so much of those funds as would be sufficient to satisfy their judgment.
Upon the trial of the cause in the circuit court, the jury found that Crammond was insolvent on
20 May, 1805, but that it was not notoriously known, subject to the opinion of the court upon a state of facts agreed between the parties whether the plaintiffs were entitled to recover. The parties further agreed in writing that on 22 May, 1805, Mr. Crammond was unable to satisfy all his debts, and that this fact should be considered as part of the special verdict. The other facts referred to by the jury are in substance, those which have been mentioned. The circuit court gave judgment against the plaintiffs below, and the cause was brought by writ of error to this Court.