Bank of the United States v. Bank of Washington
31 U.S. 8 (1832)

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U.S. Supreme Court

Bank of the United States v. Bank of Washington, 31 U.S. 6 Pet. 8 8 (1832)

Bank of the United States v. Bank of Washington

31 U.S. (6 Pet.) 8

ERROR TO THE CIRCUIT COURT OF THE UNITED STATES OF

THE DISTRICT OF COLUMBIA FOR THE COUNTY OF WASHINGTON

Syllabus

The defendants in an execution paid to the agents of the plaintiff the amount of the debt and gave a verbal notice that it was their intention to sue out a writ of error to reverse the judgment. This was afterwards done, and the judgment was reversed. The agents of the plaintiff paid over to him forthwith the amount received, and the defendants instituted a suit against the agents to recover the sum paid to them. Held that they could not recover.

It is a settled rule of law that upon an erroneous judgment, if there be a regular execution, the party may justify under it until the judgment is reversed, for an erroneous judgment is the act of the court.

On the reversal of an erroneous judgment, the law raises an obligation in the party to the record who has received the benefit of the judgment to make restitution to the other party for what he has lost, and the mode of proceeding to effect this object, may be regulated according to circumstances. Sometimes it is done by a writ of restitution, without a scire facias, when the record shows the money has been paid, and there is a certainty as to what has been lost. In other cases, a scire facias may be necessary to ascertain what is to be restored. But as it respects third persons, whatever has been done under the judgment whilst it remained in fall force is valid and binding.

Where money is wrongfully and illegally exacted, it is received without any legal right or authority to receive it, and the law at the very time of payment creates the obligation to refund it. A notice to recover back the money does not even in such cases create the right to recover it back; that results from the illegal exaction of it, and the notice may serve to rebut the inference that it was a voluntary payment or made through mistake.

The action was assumpsit in the circuit court, and was instituted by the Bank of Washington against the Bank of the United States for money had and received, to recover the sum of $881.18, with interest. The case was submitted to that court on the following case agreed.

In this case, Triplett & Neale recovered a judgment at Alexandria court at April term, 1824, against the Bank of Washington, which was afterwards taken to the Supreme Court by writ of error and there reversed, as appears by the record of the same in the Supreme Court, and the proceedings in that court in the matter of the writ of error, Bank of Washington

Page 31 U. S. 9

v. Triplett & Neale, decided at January term, 1828 of the Supreme Court. 26 U. S. 1 Pet. 25.

The Bank of Washington, on 2 June, 1824, had petitioned for the allowance of a writ of error in the said case, and presented such petition to one of the judges of the Supreme Court, by whom it was refused, and afterwards the said petition was presented to the Chief Justice of the United States, by whom the writ was allowed on 15 March, 1825, and the same was accordingly issued as by the record; on 30 August, 1824, Triplett & Neale sued out execution on said judgment, and immediately sent the same enclosed in a letter to Richard Smith, cashier of the Office of Discount and Deposit of the Bank of the United States at Washington, with an endorsement thereon in writing, who wrote another endorsement thereon, as appears from the said execution and the endorsement thereon, in the words following:

"Triplett & Neale v. Bank of Washington"

"Use and benefit of the Office of Discount and Deposit of the United States, Washington City."

"CHARLES NEALE"

"Pay to Mr. Brooke Mackall Rd. SMITH, Cashier"

"Received $881.18."

"B. MACKALL"

Brooke Mackall, the runner in the said office, and the person mentioned in the last of said endorsements, presented the said execution, &c., to the Bank of Washington, and there, on 9 September, 1824, received the sum of $881.81, and signed the receipt thereon. And at the time of signing the same, William A. Bradley, then cashier of the Bank of Washington, verbally gave notice to said Mackall that it was the intention of said Bank of Washington to appeal to the Supreme Court, and that the said Office of Discount and Deposit would be expected, in case of a reversal of the judgment, to refund the amount. The said Mackall received the said sum as the amount of principal and interest accrued on said judgment, as appears by his receipts on the said execution, which sum he delivered to said Smith, who entered it to the credit of C. Neale, one of the firm of Triplett & Neale, on the proper books of the said office. Before the delivery of the said execution to the said Smith as aforesaid, C. Neale, one of the

Page 31 U. S. 10

said firm of Triplett & Neale, had promised said Smith to appropriate the money, expected to be recovered from the Bank of Washington in said suit, to reduce certain accommodation discounts which he, the said Neale, had running in said bank, upon notes drawn by him and endorsed by endorsers as sureties for the due payment thereof, which discounts were still running upon such notes at the time and times the said execution was so delivered, and when the money was paid as aforesaid. The said Smith received the said execution with the said Neale's said endorsement thereon, as he understood and considered, for collection, and when collected, he deposited the same in bank to said Neale's credit generally, and would have sent the same to him at Alexandria, if he had requested him to do so, or would have paid his check for the amount, and immediately on the receipt of said money as aforesaid, said Smith wrote a letter to the said Neale in the words following to-wit:

"OFFICE OF THE BANK OF THE UNITED STATES"

"Washington, September 9, 1824"

"CHRISTOPHER NEALE, Esq."

"Dear Sir: I have received the sum of eight hundred and $881.18 from the Bank of Washington, in payment of your judgment against it, and have placed the same to your credit. Be good enough to give me specific directions of the way in which you wish it applied."

"Rd. Smith, Cashier"

To which letter the said Neale returned the following answer:

Dear Sir: In reply to your esteemed favor, I have to request that you will apply the money received from the Bank of Washington to the reduction of the notes endorsed by John H. Ladd & Co. and John A. Stewart, equally, after paying Thomas Swann and Walter Jones $100 between them, or $50 each, as their fees.

"C. Neale"

"10 September 1824"

The said Smith applied the said money pursuant to the directions of the last mentioned letter. It was submitted to the court upon the foregoing case agreed whether the plaintiffs were entitled to recover of the defendants the money with interest so received and applied by said Smith as aforesaid; if the court decide in the affirmative, judgment to be entered for

Page 31 U. S. 11

the plaintiffs for the sum of $881.18, with interest from 9 September, 1824, till paid, and costs; otherwise for the defendants with costs, &c. (any objections to the competence of the evidence to be considered by the court).

The circuit court gave judgment for the plaintiffs, and the defendants prosecuted this writ of error.

Page 31 U. S. 15

MR. JUSTICE THOMPSON delivered the opinion of the Court.

This case comes up on a writ of error to the Circuit Court of the United States for the District of Columbia. The judgment in the court below was given upon a statement of facts agreed upon between the parties, substantially as follows.

Triplett & Neale, in April 1824, recovered a judgment against the Bank of Washington for $881.18. A writ of error was prosecuted by the Bank of Washington, and that judgment was reversed by this Court at the January term, 1828. But whilst that judgment was in full force and before the allowance of the writ of error, Triplett & Neale, on 30 August, 1824, sued out an execution against the Bank of Washington, and enclosed it to Richard Smith, Cashier of the Office of Discount and Deposit of the Bank of the United States at Washington, with the following endorsement:

"Triplett & Neale v. Bank of Washington"

"Use and benefit of the Office of Discount and Deposit U. States, Washington City."

"Chr. Neale. Pay to Mr. Brooke Mackall. Rd. Smith, cashier. Received 881.18."

"B. Mackall."

B. Mackall, who was the runner in the branch bank, presented the execution to the Bank of Washington and received the amount due thereon, on 9 September, 1824. At the time of receiving the same, William A. Bradley, cashier of the Bank of Washington, verbally gave notice to said Mackall, that it was the intention of the Bank of Washington to appeal to the Supreme Court, and that the said Office of Discount and Deposit would be expected, in case of reversal of the judgment, to refund the amount. Mackall paid the money over to Smith, who entered it to the credit of Neale, one of the plaintiffs in the execution. Before the execution was sent to Smith, Neale had promised him to appropriate the money, expected to be recovered from the Bank of Washington, to reduce certain accommodation discounts, which he had running in the Office of Discount and Deposit. Smith, when he received the execution with the endorsement thereon, understood and considered that it was for collection, and the money when received by him was deposited to Neale's credit generally, and he would have sent the money to him at Alexandria if he had requested

Page 31 U. S. 16

him so to do, or would have paid his check for the amount. Immediately on the receipt of the money, Smith wrote to Neale informing him thereof, and asking him for specific directions how to apply it, which letter Neale immediately answered, giving him directions, and the money was applied according to such directions.

Upon this statement of facts, the court below gave judgment for the plaintiffs, to reverse which the present writ of error has been brought.

That the Bank of Washington, on the reversal of the judgment of Triplett & Neale, is entitled to restitution in some form or manner is not denied. The question is whether recourse can be had to the Bank of the United States under the circumstances stated in the case agreed. When the money was paid by the Bank of Washington, the judgment was in full force, and no writ of error allowed or any measures whatever taken which could operate as a supersedeas or stay of the execution. Whatever, therefore, was done under the execution towards enforcing payment of the judgment was done under authority of law. Had the marshal, instead of the runner of the bank, gone with the execution and received the money or coerced payment, he would have been fully justified by authority of the execution, and no declaration or notice on the part of the Bank of Washington of an intention to appeal to the Supreme Court would have rendered his proceedings illegal or made him in any manner responsible to the defendants in the execution. Suppose it had become necessary for the marshal to sell some of the property of the bank to satisfy the execution, the purchaser would have acquired a good title under such sale, although the bank might have forbade the sale, accompanied by a declaration of an intention to bring a writ of error. This could not revoke the authority of the officer, and while that continued, whatever was done under the execution would be valid. It is a settled rule of law that upon an erroneous judgment, if there be a regular execution, the party may justify under it until the judgment is reversed, for an erroneous judgment is the act of the court. 1 Stra. 509. 1 Ver. 195.

If the marshal might have sold the property of the bank and given a good title to the purchaser, it is difficult to discover any good reason why a payment made by the bank should not

Page 31 U. S. 17

be equally valid, as it respects the rights of third persons. In neither case does the party against whom the erroneous judgment has been enforced lose his remedy against the party to the judgment. On the reversal of the judgment, the law raises an obligation in the party to the record, who has received the benefit of the erroneous judgment, to make restitution to the other party for what he has lost. And the mode of proceeding to effect this object must be regulated according to circumstances. Sometimes it is done by a writ of restitution, without a scire facias; when the record shows the money has been paid, and there is a certainty as to what has been lost. In other cases, a scire facias may be necessary to ascertain what is to be restored. 2 Salk. 587, 588. Tidd's Prac. 936, 1137, 1138. And no doubt circumstances may exist where an action may be sustained to recover back the money. 6 Cowen 297. But as it respects third persons, whatever has been done under the judgment, whilst it remained in full force, is valid and binding. A contrary doctrine would be extremely inconvenient, and in a great measure tie up proceedings under a judgment, during the whole time within which a writ of error may be brought. If the bare notice or declaration of an intention to bring a writ of error will invalidate what is afterwards done, should the judgment at any future day be reversed, it would virtually, in many cases, amount to a stay of proceedings on the execution. No such rule is necessary for the protection of the rights of parties. The writ of error may be so taken out as to operate as a supersedeas. Or, if a proper case can be made for the interference of a court of chancery, the execution may be stayed by injunction.

It has been argued, however, on the part of the defendants in error that the Bank of the United States stands in the character of assignees of the judgment, and is thereby subjected to the same responsibility as the original parties, Triplett & Neale.

Without entering into the inquiry whether this would vary the case, as to the responsibility of the plaintiff in error, the evidence does not warrant the conclusion that the Bank of the United States stands in the character of assignees of the judgment. There is neither the form nor the substance of an assignment of the judgment. No reference whatever, either

Page 31 U. S. 18

written or verbal, is made to it. The mere endorsement on the execution "use and benefit of the Office of Discount and Deposit of the United States, Washington City," cannot, in its utmost extent, be considered anything more than an authority to receive the money, and apply it to the use of the party receiving it. It is no more an assignment of the judgment than if the authority had been given by a power of attorney in any other manner, or by an order drawn on the Bank of Washington. The whole course of proceeding by the cashier of the Office of Discount and Deposit shows that he understood the endorsement on the execution merely as an authority to receive the money subject to the order of Neale with respect to the disposition to be made of it. He did not deal with it as an assignee, having full power and control over the money, but as an agent, subject to the order of his principal. He passed it to his credit on the proper books of the office, and wrote to him asking specific directions how the money should be applied. He received his directions, and applied it accordingly, and all this was done six months before the allowance of the writ of error.

It is said, however, that although Mr. Smith might have considered himself a mere agent to collect the money, the Bank of Washington had no reason so to consider him. There is nothing in the case showing that the Bank of Washington had any information on the subject except what was derived from the endorsement on the execution, and if that did not authorize such conclusion, the plaintiff in error is not to be prejudiced by such misapprehension. It was a construction given to a written instrument, and if that construction has been mistaken by the defendant in error, it is not the fault of the opposite party.

But again it is said the payment of the money was accompanied with notice of an intention to appeal to the Supreme Court, and that in case of reversal, it would be expected that the Office of Discount and Deposit would refund the money.

If the plaintiff in error could be made responsible by any such notice, given even in the most direct and explicit manner, that which was given could not reasonably draw after it any such consequence. It is vague in its terms, and does not assert that the Office of Discount and Deposit would be held responsible to refund the money, but only that it would be expected

Page 31 U. S. 19

that it would be done. This is not the language of one who was asserting a legal right, or laying the foundation for a legal remedy. And there is no evidence that even this was communicated to the office.

But the answer to the argument is that no notice whatever could change the rights of the parties, so as to make the Bank of the United States responsible to refund the money. When the money was paid, there was legal obligation on the part of the Bank of Washington to pay it, and a legal right on the part of Triplett & Neale to demand and receive it, or to enforce payment of it under the execution. And whatever was done under that execution whilst the judgment was in full force was valid and binding on the Bank of Washington so far as the rights of strangers on third persons are concerned. The reversal of the judgment cannot have a retrospective operation and make void that which was lawful when done. The reversal of the judgment gives a new right or cause of action against the parties to the judgment and creates a legal obligation on their part to restore what the other party has lost by reason of the erroneous judgment, and as between the parties to the judgment, there is all the privity necessary to sustain and enforce such right; but as to strangers there is no such privity, and if no legal right existed when the money was paid to recover it back, no such right could be created by notice of an intention so to do. Where money is wrongfully and illegally exacted, it is received without any legal right or authority to receive it, and the law, at the very time of payment, creates the obligation to refund it. A notice of intention to recover back the money does not, even in such cases, create the right to recover it back; that results from the illegal exaction of it, and the notice may serve to rebut the inference that it was a voluntary payment, or made through mistake.

The judgment must accordingly be reversed, and judgment entered for the defendant in the court below.

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