Section 3466 of the Revised Statutes,
infra, p.
107 U. S. 447,
which, in certain cases therein mentioned, gives to the United
States priority of payment of debts due to it, does not apply to
its demands against an insolvent national hank.
This is an appeal from a decree of the circuit court overruling
a general demurrer to a bill filed by the United States against the
Cook County National Bank of Chicago, Ill., and Augustus H. Burley,
its receiver. The facts, as stated in the bill, are briefly as
follows:
Previously to 1872, the bank was formed under the acts of
Congress authorizing the organization of national banks, and was
designated as a depositary of moneys of the United States. In
January, 1875, it became insolvent, and suspended business. In
February following, Burley was appointed by the Comptroller of the
Currency its receiver, and he immediately entered upon the
discharge of his duties.
At the time of its suspension, the bank had on deposit "of
postal funds" $24,900, and of "money order funds" $14,634, which
are respectively designated on its books by those names. These
moneys had been deposited with the bank by John McArthur, a deputy
postmaster at Chicago.
The Treasury Department at the time held United States bonds,
placed with it by the bank, to the amount of $150,000 par value, as
security for all public moneys which might be deposited with the
bank. These bonds were afterwards sold for $174,544.52. Of the
proceeds, $155,305.47 were appropriated to pay the amount then on
deposit with the bank to the credit of the Treasurer of the United
States. Of the balance remaining, $11.803.98 were applied on the
"postal funds," and $7,435.07 on the "money order " funds, leaving
still due on account of those two funds $20,344.95.
In addition to these bonds, there were at the time in the
Treasury Department United States bonds to the amount of $100,000
par value, deposited by the bank to secure its notes issued for
circulation. When in 1875 the bank failed to pay these notes, the
Comptroller of the Currency declared the bonds
Page 107 U. S. 446
forfeited to the United States. A part of them have been sold,
and it is the intention of the Treasury Department to sell the
remainder, and apply the proceeds to pay the notes in circulation,
and reimburse the United States for sums already advanced for that
purpose. The proceeds of all the bonds, when sold, will be
sufficient to redeem the notes, reimburse the United States in full
for their advances, and leave a balance exceeding $30,000, more
than sufficient to pay the debts due by the bank to the United
States for postal funds and money order funds deposited by the
deputy postmaster at Chicago.
The Treasury Department, in addition to the bonds to secure the
circulation of the notes, has a sum exceeding $30,000 belonging to
the bank, collected from bills receivable and debts due to it; but
its liabilities notwithstanding greatly exceed its assets.
Upon these facts the question arose whether the claim of the
United States for moneys deposited by the deputy postmaster is a
preferred debt or not, and the officers of the United States are in
doubt as to their duty on the subject -- that is, whether they
should reserve from the funds in the Treasury Department belonging
to the bank a sufficient amount to pay the debt for postal funds
and money order funds due to the United States, or whether they
should distribute the said moneys
pro rata to all the
creditors of the bank, including the United States.
The bill prays that an account be taken of the amount due to the
United States by the bank for moneys so deposited with it by the
deputy postmaster, and that a decree be entered directing the
disposition of the funds belonging to the bank in the control of
the Treasury Department.
The defendants treated the bill as filed to obtain a decree
adjudging to the United States a priority in the payment of their
demand against the bank for the balance due on the postal and money
order funds, and interposed a general demurrer to it. The court,
taking a similar view of the bill, overruled the demurrer. The
defendants thereupon elected to stand by their demurrer, and as
they at the same time admitted that the bank had a sufficient
amount to pay the whole of the principal and interest due to the
United States for the funds deposited
Page 107 U. S. 447
by the deputy postmaster as postal funds, and as money order
funds, the court ordered that the amount thus due should be paid in
full out of the assets of the bank. From this decree the appeal was
taken.
MR. JUSTICE FIELD, after stating the facts, delivered the
opinion of the Court.
The Revised Statutes, in sec. 3466, provide that
"Whenever any person indebted to the United States is insolvent,
or whenever the estate of any deceased debtor, in the hands of the
executors or administrators, is insufficient to pay all the debts
due from the deceased, the debts due to the United States shall be
first satisfied, and the priority hereby established shall extend
as well to cases in which a debtor, not having sufficient property
to pay all his debts, makes a voluntary assignment thereof, or in
which the estate and effects of an absconding, concealed, or absent
debtor are attached by process of law, as to cases in which an act
of bankruptcy is committed."
This section is substantially a copy of sec. 5 of the Act of
March 3, 1797, entitled "An act to provide more effectually for the
settlement of accounts between the United States and receivers of
public money." Statutes passed before 1797 embodied similar
provisions, and also declared that parties who are sureties of
insolvents may pay to the United States any balance due to them,
and have the same priority in the payment of their demands out of
the estates of such insolvents as the United States would have if
no such payment were made.
The language of the section in the Revised Statutes is general
and comprehensive in its terms, and applies to demands of the
United States against any insolvent person living, or the estate of
any insolvent person dead, and also to demands against any person
who, not having sufficient property to pay all his debts, makes a
voluntary assignment thereof, and against any estate of an
absconding, concealed, or absent debtor whose effects have been
attached by process of law.
The question is whether, under this broad and general
language,
Page 107 U. S. 448
the United States, having demands against an insolvent national
bank, are entitled to priority of payment out of its assets over
other creditors. The appellants contend that the statute refers to
such insolvency as is determined by judicial decree, as under a
Bankrupt Act, or is manifested by the debtor's voluntary assignment
of his property, or by its attachment under process against him, as
an absconding, concealed, or absent debtor, and that within this
meaning the Cook County National Bank never became insolvent, and
that therefore the provisions giving priority of payment to demands
of the United States against insolvents do not apply.
From the view we take of the act authorizing the formation of
national banks, it is unnecessary to consider whether or not this
position is tenable. We consider that act as constituting by itself
a complete system for the establishment and government of national
banks, prescribing the manner in which they may be formed, the
amount of circulating notes they may issue, the security to be
furnished for the redemption of those in circulation, their
obligations as depositaries of public moneys, and as such to
furnish security for the deposits, and designating the consequences
of their failure to redeem their notes, their liability to be
placed in the hands of a receiver, and the manner, in such event,
in which their affairs shall be wound up, their circulating notes
redeemed, and other debts paid, or their property applied toward
such payment. Everything essential to the formation of the banks,
the issue, security, and redemption of their notes, the winding up
of the institutions, and the distribution of their effects, are
fully provided for, as in a separate code by itself, neither
limited nor enlarged by other statutory provisions with respect to
the settlement of demands against insolvents or their estates.
In the first place, the banks are required to deposit with the
treasurer bonds of the United States as security for any notes that
may be issued, the amount of which cannot in any case exceed ninety
percent of the par value of the bonds. Rev.Stat. sec. 5171. Should
the market or the cash value of the bonds become reduced at any
time below the amount of the notes issued, the Comptroller of the
Currency may require that the amount of the depreciation be
deposited with the
Page 107 U. S. 449
Treasurer in other United States bonds, or in money, so long as
such depreciation continues. Rev.Stat. sec. 5167. In case of the
refusal of a bank to pay its notes, the bonds may be sold at public
auction in the City of New York, and their proceeds applied to
reimburse the United States the amount expended by them in paying
the circulating notes, and for any deficiency which may remain, the
United States are entitled to a paramount lien upon all the assets
of the bank, which is to be paid in preference to all other claims,
except for costs and necessary expenses in administering the same.
Rev.Stat. sec. 5230.
In the second place, when the banks are made depositaries of
public moneys and employed as financial agents of the government,
it is the duty of the Secretary of the Treasury to require them to
give satisfactory security by the deposit of United States bonds,
or otherwise, for the safekeeping and prompt payment of the public
money deposited, and for the faithful performance of their duties
as financial agents. The amount of security which the secretary may
thus require has no limit but his own judgment as to its necessity.
Every officer of a bank which is not an authorized depositary, and
which has not therefore given the required security, who knowingly
receives any public money on deposit, is liable for embezzlement.
Rev.Stat. sec. 5497. The government can thus always have security,
limited in amount only by the judgment of the Secretary of the
Treasury, for public moneys deposited with any national bank.
With these provisions for security against possible loss for
moneys deposited, it would seem only equitable that the government
should call for such security, and, if it prove insufficient, take
the position of other creditors in the distribution of the assets
of the bank in case of its failure. The framers of the banking law
evidently so regarded the matter. After providing for the
appointment of a receiver by the Comptroller of the Currency upon
the suspension or failure of a bank, the law requires the receiver
to take possession of its books and records, and assets of every
description, and to collect all debts, dues, and claims belonging
to it, and authorizes him, upon an order of a court of competent
jurisdiction, to sell or compound bad or doubtful debts; to sell
the real or personal property of the
Page 107 U. S. 450
bank, and, if necessary, in order to pay his debts, to enforce
the individual liability of its stockholders, and it directs him to
pay over all moneys thus received to the Treasurer of the United
States, subject to the order of the Comptroller of the Currency. It
also required the Comptroller, upon appointing a receiver, to cause
notice to be published, calling upon all persons having claims
against the bank to present the same with legal proof thereof. It
then declares as follows, in sec. 5236:
"From time to time, after full provision has been first made for
refunding to the United States any deficiency in redeeming the
notes of such association, the comptroller shall make a ratable
dividend of the money so paid over to him by such receiver, on all
such claims as may have been proved to his satisfaction or
adjudicated in a court of competent jurisdiction, and, as the
proceeds of the assets of such association are paid over to him,
shall make further dividends on all claims previously proved or
adjudicated, and the remainder of the proceeds, if any, shall be
paid over to the shareholders of such association, or their legal
representatives, in proportion to the stock by them respectively
held."
This section provides for the distribution of the entire assets
of the bank, giving no preference to any claim except for moneys to
reimburse the United States for advances in redeeming the notes.
When this reimbursement is fully provided for, the balance of the
assets, as the proceeds are received, is subject to a ratable
dividend on all claims proved to the satisfaction of the receiver,
or adjudicated by a court of competent jurisdiction. Any sum
remaining after the payment of all these claims is to be handed
over to the stockholders in proportion to their respective shares.
These provisions could not be carried out if the United States were
entitled to priority in the payment of a demand not arising from
advances to redeem the circulating notes. The balance, after
reimbursement of the advances, could not be distributed, as
directed, by a ratable dividend to all holders of claims -- that
is, to all creditors.
These provisions must be deemed therefore to withdraw national
banks, which have failed, from the class of insolvent persons out
of whose estates demands of the United States are to be paid in
preference to the claims of other creditors. The
Page 107 U. S. 451
law of 1797, reenacted in the revised statutes, giving priority
to the demands of the United States against insolvents, cannot be
applied to demands against those institutions. The provisions of
that law and of the national banking law being, as applied to
demands against national banks, inconsistent and repugnant, the
former law must yield to the latter, and is, to the extent of the
repugnancy, superseded by it. The doctrine as to repugnant
provisions of different laws is well settled, and has often been
stated in decisions of this Court. A law embracing an entire
subject, dealing with it in all its phases, may thus withdraw the
subject from the operation of a general law as effectually as
though, as to such subject, the general law were in terms repealed.
The question is one respecting the intention of the legislature.
And although as a general rule the United States are not bound by
the provisions of a law in which they are not expressly mentioned,
yet if a particular statute is clearly designed to prescribe the
only rules which should govern the subject to which it relates, it
will repeal any former one as to that subject.
Daviess v.
Fairbairn, 3 How. 636;
United
States v. Tynen, 11 Wall. 88.
In addition to these conflicting provisions in the banking law,
necessarily superseding those of the law of 1797, as to the
priority of the United States in the payment of their demands out
of the estates of insolvents, there is the significant declaration
of the banking law that for any deficiency in the proceeds of the
bonds deposited as security for the circulating notes of the bank,
the United States shall have a paramount lien upon all its assets,
which shall be made good in preference to all other claims, except
for costs and expenses in administering the same. This declaration
was unnecessary and quite superfluous, if for such deficiency the
United States already possessed, under the act of 1797, the right
to be paid out of the assets of the bank in preference to the
claims of other creditors. The declaration, considered in
connection with the ratable distribution of the assets, prescribed
after such deficiency is provided for, is equivalent to a
declaration that no other priority in the distribution of the
proceeds of the assets is to be claimed.
This view of the banking law is not affected by the subsequent
enactment, in 1867, of the Bankrupt Act, giving priority
Page 107 U. S. 452
to the demands of the United States against the estates of
bankrupts. That enactment was dealing with the estates of persons
adjudged to be insolvent under that law, and covers only the
distribution of their estates. It has no further reach.
It remains only to consider whether the United States have the
right to claim the payment of this demand out of the surplus moneys
remaining in the Treasury of the proceeds of the bonds deposited as
security for the circulating notes of the bank. The surplus is
sufficient to pay the demand of the United States in full. Can the
United States set off their demand against these proceeds? We have
no hesitation in answering this question in the negative. The bonds
were received in trust as a pledge for the payment of the
circulating notes. The statute so declares in express terms,
Rev.Stat. secs. 5162 and 5167. They were to be returned to the bank
when the notes were paid, if not sold to reimburse the United
States for moneys advanced to redeem the notes. The bank could have
claimed their return at any time upon a surrender of the notes. The
surplus constituted the assets of the bank, and part of the fund
appropriated by the statute for its creditors. It was charged with
this liability, and was held subject to it after the purposes of
the original trust were accomplished, although remaining in the
Treasury. It was then subject to a new trust. A trustee cannot set
off against the funds held by him in that character his individual
demand against the grantor of the trust. Courts of equity and
courts of law will not allow such an application of the funds so
long as they are affected by any trust. It would open the door to
all sorts of chicanery and fraud. The fund must be relieved from
its trust character before it can be treated in any other
character.
This doctrine is well illustrated in the case of
Sawyer v.
Hoag, 17 Wall. 611,
84 U. S. 622.
There, a stockholder indebted to an insolvent corporation for
unpaid shares undertook to set off against the claim upon him a
debt due to him by the corporation. But it was held that this could
not be done. Said the Court, speaking by MR. JUSTICE MILLER:
"The debt which the appellant owed for his stock was a trust
fund devoted to the payment of all the creditors of the company. As
soon as the company became insolvent, and this fact became known to
the
Page 107 U. S. 453
appellant, the right of set-off for an ordinary debt to its full
amount ceased. It became a fund belonging equally in equity to all
the creditors, and could not be appropriated by the debtor to the
exclusive payment of his own claim."
Here, the surplus, being a fund for all the creditors, was
subject to be distributed to them immediately upon the
reimbursement of the advances of the United States, and the right
of the creditors to it was not affected by the fact that it was at
the time in the actual possession of the Treasury Department.
Nor is the relation of the United States to this fund changed by
the forfeiture of the bonds, which the Comptroller of the Currency
was authorized upon the failure of the bank to declare. The
forfeiture was not a confiscation of the bonds to the government.
It amounted only to an appropriation of them, against any other
claim, to the specific purposes for which they had been deposited,
authorizing their cancellation at market value when not above par,
or their sale, so far as necessary to redeem the circulation or
reimburse the United States for moneys advanced for that purpose.
When that purpose was accomplished, the bank had the right to any
surplus of their proceeds, equally as though that right had been in
express terms declared.
It follows from the views expressed that the decree of the court
below must be reversed and the cause be remanded, with directions
to sustain the demurrer and dismiss the bill. And it is
So ordered.