It is entirely plain that there was no fraud in this case, and
therefore this ground for the complainant's relief cannot be
sustained.
A district attorney of the United States has no power to agree
upon a compromise of a claim of the United States in suit, except
under circumstances not presented in this case.
An attorney, by virtue of his general retainer only, has no
power to compromise his client's claim, and a judgment entered on a
compromise made under such circumstances is subject to be set aside
on the ground of the lack of authority in the attorney to make the
compromise on which the judgment rests.
Generally speaking, the laches of officers of the government
cannot be set up as a defense to a claim made by the
government.
When an agent has acted without authority, and it is claimed
that the principal has thereafter ratified his act, such
ratification can only be based upon a full knowledge of all the
facts upon which the unauthorized action was taken.
On the tenth day of March, 1890, the United States brought suit
in the Circuit Court of the United States for the Middle District
of Alabama against Eugene Beebe and the heirs at law of one Ferris
Henshaw, deceased, praying that two separate judgments in favor of
the United States (one against Beebe and the other against the
administrator of Henshaw) should be set aside and vacated; for the
removal of the administration of the estate of Henshaw into that
court; for an accounting by Beebe and the other defendants by
reason of the liability of Beebe and Henshaw on the bond of Francis
Widmer, late Collector of Internal Revenue in the Second District
of Alabama, and that the amount found due on the accounting should
be made a prior lien on the land described in the bill, and for
other relief.
The defendants demurred to the bill, and the court sustained the
same, after which the bill was amended and again demurred
Page 180 U. S. 344
to. The defendant Beebe died August 24, 1894, and the
complainant revived the suit against his heirs at law, and
subsequently the court sustained the demurrers to the amended bill,
and the judgment dismissing the bill was, upon appeal, affirmed by
the Circuit Court of Appeals for the Fifth Circuit, and from that
judgment of affirmance the United States has appealed to this
Court.
The following facts were set forth in the bill: sometime in
1873, one Francis Widmer was appointed Collector of Internal
Revenue for the Second District of Alabama, and Eugene Beebe and
Ferris Henshaw became sureties on his bond in the sum of $50,000.
Widmer defaulted and failed to account for and pay over to the
government the sum of $28,158.56 public moneys that had come into
his hands as collector, which sum was due the United States, with
interest thereon from January 1, 1874. Beebe and Henshaw had for
many years been partners in business, and were joint owners in fee
of certain real estate described in the bill and situated in the
County of Montgomery and State of Alabama. Henshaw died there,
intestate, April 19, 1879, leaving certain of the defendants named
in the suit as his heirs at law. The administrator of the estate of
Henshaw reported to the court that his estate was insolvent, and in
accordance with that report, the estate was on July 2, 1880,
declared to be insolvent, and no settlement of the estate has since
been had. Beebe before and since July 2, 1880, was and has been
insolvent, without sufficient property to pay his debts. Ferris
Henshaw was also insolvent at the time of his death. By reason of
the insolvency of Eugene Beebe and Ferris Henshaw and the
insolvency of the latter's estate, the United States became and was
entitled to priority of payment over any and all other creditors of
Beebe and Henshaw out of their property and estate, of the full
amount collected, withheld, and appropriated by Widmer, the
collector, and due to the United States. It is averred that the
land above described is liable for such debt, and also that the
complainant has a prior lien upon it therefor.
On June 3, 1880, separate actions in the Circuit Court of the
United States for the Middle District of Alabama were commenced,
one against Beebe and the other against the administrator
Page 180 U. S. 345
of the estate of Henshaw, for the recovery of the sums for which
Widmer, collector, was in default, and amounting, as stated, to
over $28,000, with interest, and those suits were continued from
time to time at the request of the defendants, until February 6,
1885, when judgments were severally entered in that court against
Beebe and also against Hatchett, as administrator of Henshaw, for
$100 and costs, and Beebe on July 1, 1886, paid into the Treasury
of the United States the sum of $109.85 as the amount of the
judgment and costs rendered against him, but the judgment against
Hatchett, as administrator, remained unsatisfied to the date of the
filing of the bill in this suit.
The bill then proceeds as follows:
"That said judgments were entered under the following
circumstances: that said defendants came into court and stated and
represented in open court, and they caused to be stated and
represented for them, that said Beebe and said Ferris Henshaw were
poor men, and that said Beebe and the estate of said Ferris Henshaw
were without property out of which the said judgments could be paid
and collected; that no part of said judgments could be collected by
due process of law; that nothing could be made out of them, or
either of them or their estates by execution, but that, if the
court would allow a jury and verdict to be entered against them for
one hundred dollars, they and each of them would pay said judgments
and costs; that no evidence or proof was or had been introduced in
said causes or either of them, the indebtedness of said Beebe and
Henshaw to the United States then being twenty-eight thousand one
hundred and fifty-eight dollars and fifty-six cents ($28, 158.56),
and interest, or other large sum, and the statements and
representations aforesaid only were before the said circuit court
at the time of the entry of said judgments, and no hearing or
determination upon the law or the facts involved in said cases was
ever had in said court; whereupon the court remarked that, unless
the district attorney of the United States objected, the causes
might be disposed of as suggested aforesaid. Said district attorney
did not object, and said judgments for $100 and costs were entered
in each of said causes. . . . [And orator
Page 180 U. S. 346
avers and charges] that said statements and representations made
as aforesaid by and on behalf of, and for, said Beebe and said
Ferris Henshaw, and the estate of said Ferris Henshaw, were wholly
untrue, and were made to deceive said court and United States
attorney and for the purpose and with the intent to defraud the
United States. [Orator further avers and charges] that said court
and United States attorney had no authority in law to accept said
statements and representations, which were not made under oath nor
in the course of any judicial proceeding and were not supported nor
verified by evidence or proofs, and that said acts of said court
and United States attorney amounted in law and in fact to, and was,
and was intended to be, a mere naked compromise of the claim and
demand of the United States against said Eugene Beebe and Ferris
Henshaw, and the estate of said Ferris Henshaw, which said court
and the United States attorney had no authority, but were inhibited
by law, to make, entertain, and consummate. That said court was
without jurisdiction and power to determine said causes in the
manner aforesaid, and that said alleged judgments for $100 and
costs are null and void
ab initio, and of no effect, and
should be vacated and held for naught in this Court of equity."
The bill then asks for the appointment of an administrator
ad litem of the Henshaw estate to represent it in the
proceeding. It alleges that several of the defendants, naming them,
assert some claim against the property described in the bill, which
claims are alleged to be subordinate to the rights of the United
States to condemn and subject the land already mentioned to the
satisfaction of the indebtedness of Beebe and Henshaw as sureties
on the bond of Widmer, as collector, by reason of the default of
the latter, and it is alleged that if any conveyance of the land
has been made by Beebe of Henshaw or the heirs of the latter, that
such conveyances were void and ought to be vacated and set aside.
It is further stated that the facts and circumstances set out in
the bill as the basis of the relief asked for only recently came to
the knowledge of the complainant, to-wit, on or about March 5,
1890. The bill also set forth that, on March 22, 1877, Beebe
conveyed by deed to Ferris
Page 180 U. S. 347
Henshaw, then his partner in business, all his interest and
estate in the property described in the bill for certain purposes
therein set forth, and this deed complainant alleges was without
consideration and fraudulently made to hinder, delay, and defraud
the existing creditors of Beebe, and was void, and all the property
described in the bill was bound, even in the hands of the heirs at
law of Henshaw, for the payment of the debts due the United States
from Beebe. The complainant prayed that the judgments might be set
aside and vacated, and the property sold and the proceeds thereof
applied to the payment of the debts above mentioned.
The defendants severally demurred to the bill on various grounds
(1) for want of equity, (2) that the bill showed that the matters
complained of against Beebe and Henshaw, by reason of their being
sureties for Widmer, the collector, had been adjudicated in the
Circuit Court of the United States for the Middle District of
Alabama, in a suit commenced by the complainant against them, and
that no sufficient ground was shown for vacating and setting aside
the judgments therein rendered, (3) that it appeared from the
allegations in the bill that the judgment against Beebe had been
paid by him, and had been received and accepted by the complainant,
the United States, and the bill contained no offer to refund the
money, and it does not show that the same had ever been tendered to
Beebe. Other grounds were stated in the demurrers.
Upon the hearing, the court sustained the demurrers and granted
leave to amend the bill. On January 5, 1891, the complainant
amended its bill, the amendment alleging that Beebe had executed
another official bond as surety for one Dustan, deputy postmaster
at Demopolis, Alabama; that a default had occurred and judgment
been recovered against Beebe for $579.45 in 1878, and the judgment
was still due and unpaid, and execution thereon having been issued
was duly returned "no property."
The amended bill also contains an averment that there was in
fact no jury drawn in the cases in which the two judgments were
obtained and no verdicts rendered therein, although the records of
these judgments show a jury trial and a verdict in each case.
Page 180 U. S. 348
To this bill as amended the defendants demurred, setting up the
same grounds of demurrer as to the original bill, and also the
additional grounds, (1) that the bill made a new case; (2) that the
matters stated in the amendment were not germane to the purposes
and object of the original bill, and stated new matter; (3) that
the bill as amended was multifarious.
The demurrers to the amended bill were sustained, and the bill
was finally dismissed.
MR. JUSTICE PECKHAM, after making the above statement of facts,
delivered the opinion of the Court.
The principal claim against the defendants is based upon the
manner in which the two separate judgments were obtained against
the defendant Beebe, and the administrator of Henshaw, in the
circuit court of Alabama on February 6, 1885. The amount due on one
of those judgments (that against Beebe) was paid into the United
States Treasury on July 1, 1886, and this suit was commenced in
March, 1890.
The grounds upon which the court is asked to set aside the
judgments so entered are (1) fraud in procuring them, and (2) the
absence of power on the part of the district attorney to make the
compromise, and the consequent invalidity of the judgments entered
thereon.
The only ground upon which the allegation of fraud in relation
to the judgments is based consists in the averment in the bill that
the defendants came into court and represented that they were poor
men; that Beebe and the estate of Henshaw were without property out
of which any judgment could be collected or paid; that no part of
any judgment could be collected by due process of law; that nothing
could be made out of them or
Page 180 U. S. 349
either of them or their estates by execution, but that, if the
court would allow a jury and a verdict to be entered against them
for $100 they and each of them would pay said judgments and costs.
Accordingly, judgments were so taken without any evidence given or
hearing had upon the merits of the claim.
It is manifest that these allegations would furnish no defense
to the cause of action on the part of the United States against the
defendants as sureties on the bond of Widmer. The statements had no
tendency to prevent full preparation for trial on the part of
complainant, nor did they tend in any way to obstruct the full
presentation of the cause of action against the defendants on the
trial. It is plain, therefore, that the representations, assuming
them to have been false, could not constitute such a fraud as upon
well settled principles a court of equity will relieve against by
setting aside a judgment in a case where such representations were
made.
United States v. Throckmorton, 98 U. S.
61;
Ward v. Southfield, 102 N.Y. 287, 292. The
first case has also been cited with approval in
Moffat v.
United States, 112 U. S. 24,
112 U. S. 32,
although a distinction is therein made taking it out from the rule
recognized in
Throckmorton's case.
But, in fact, there was no deception in the case. The bill
itself avers that the estate of Henshaw had been declared insolvent
upon a report of the administrator in 1880, and there is no
allegation that the estate was not insolvent at that time. There
is, on the contrary, a distinct allegation that the defendant
Beebe, at, before, and since July 2, 1880, had been insolvent and
without sufficient property to pay his debts, including his
indebtedness to the United States, and also that Ferris Henshaw, at
the time of his death, was insolvent and without sufficient
property to pay his debts, and that, by reason of the insolvency of
Beebe and Henshaw and the estate of Henshaw, the government was
entitled to priority of payment. Section 3466, Revised Statutes of
the United States.
The insolvency of Beebe and the estate of Henshaw was thus made
a material averment of the bill in order to base the demand upon
the part of the United States for priority of payment of its debt
of more than $28,000, which would exist, as
Page 180 U. S. 350
was alleged, upon the setting aside of these judgments. It is
obviously impossible to found an allegation of fraud upon a
representation made by and for the defendants in open court, which
simply states as a fact that which the bill of the complainant
itself distinctly avers was a fact. It is true the defendants, as
the bill alleges, based their application for reduced judgments
upon this fact of insolvency, but whether the application were or
were not meritorious is quite immaterial upon the issue of fraud so
long as the statements upon which it was made were neither
fraudulent nor even false.
It is entirely plain there was no fraud in the case, and
therefore this ground for complainant's relief cannot be
sustained.
But a very different question arises from the alleged absence of
power on the part of the district attorney to make the compromise
and the consequent invalidity of the judgment entered thereon.
By demurring to the amended bill, it is admitted that, in former
suits commenced by complainant against the defendants Beebe and the
administrator of the estate of Henshaw, upon a claim to recover
some $28,000 with interest for a number of years based upon the
liability of the defendants upon a bond to the United States
executed by them as sureties, two separate judgments were entered
in favor of the United States at a term of the United States
Circuit Court for the Diddle District of Alabama, each judgment
being for the sum of only $100 and costs, and that, although the
judgment records showed a regular trial before a jury and a verdict
in each case, yet in truth there had been no jury, no witnesses, no
evidence, and no verdict, and that the judgments were simply the
result of a compromise of the claim in each of the two suits as
agreed upon by the district attorney, on the one side, and the
defendants, upon the other. Upon these facts, the appellant claims
that the judgments were wholly void for want of jurisdiction in the
court to authorize them.
The appellants also claim that, if not void, the judgments were
at least irregular and, upon the facts averred in the bill, ought
to be set aside.
We do not think that they were void as if rendered by a
Page 180 U. S. 351
court having no jurisdiction of the person or of the subject
matter, as confessedly the court had jurisdiction over both; but
the facts just stated and which are admitted by the demurrers are
enough in our opinion to call for the setting aside of those
judgments. It is enough, without alleging fraud in their entry,
that they simply carry out and represent a compromise made by the
district attorney which he had no power to enter into, and which
rendered the judgments so far unauthorized as to permit a suit to
set them aside.
We think there can be no serious question that a district
attorney of the United States has no power to agree upon a
compromise of a claim in suit except under circumstances not
present in this case. There is no statute of the United States, and
no regulation has been called to our attention, giving a district
attorney any such power, but, on the contrary, it is provided in
paragraph 7 of the regulations established by the Solicitor of the
Treasury and approved by the Attorney General pursuant to ยง 377 of
the Revised Statutes of the United States, that no district
attorney shall agree to take a judgment or decree for a less amount
than is claimed by the United States, without express instructions
from the Solicitor of the Treasury, unless circumstances exist
which do not obtain in this case. The power to compromise a suit in
which the United States is a party does not exist with the district
attorney any more than a power to compromise a private suit between
individuals rests with the attorney of either party, and that such
an attorney has no power to compromise a claim in suit has been
frequently decided.
Holker v.
Parker, 7 Cranch 436. In that case, it was remarked
by Marshall, Chief Justice, that --
"Although an attorney at law, merely as such, has, strictly
speaking, no right to make a compromise, yet a court would be
disinclined to disturb one which was not so unreasonable in itself
as to be exclaimed against by all, and to create an impression that
the judgment of the attorney has been imposed on or not fairly
exercised in the case. But where the sacrifice is such as to leave
it scarcely possible that, with a full knowledge of every
circumstance, such a compromise could be fairly made, there can be
no hesitation in saying that the compromise, being unauthorized
Page 180 U. S. 352
and being therefore, in itself, void, ought not to bind the
injured party."
The same has been held in Massachusetts in
Lewis v.
Gamage, 1 Pick. 347, and in New York in
Barrett v. Third
Avenue Railroad Company, 45 N.Y. 628, 635, and
Mandeville
v. Reynolds, 68 N.Y. 528, 540.
And see Kilmer v.
Gallaher, Supreme Court of Iowa, December 22, 1900, 52
Cent.L.J. 150, and note;
Bigler v. Toy, 68 Ia. 688.
Indeed, the utter want of power of an attorney, by virtue of his
general retainer only, to compromise his client's claim cannot, we
think, be successfully disputed.
A judgment entered upon such a compromise is subject to be set
aside on the ground of the lack of authority in the attorney to
make the compromise upon which the judgment rests.
Prima
facie, the act of the attorney in making such compromise and
entering or permitting to be entered such judgment is valid because
it is assumed the attorney acted with special authority, but when
it is proved he had none, the judgment will be vacated on that
ground. Such judgment will be set aside upon application in the
cause itself, if made in due time or by a resort to a court of
equity where relief may be properly granted.
In
Robb v. Vos, 155 U. S. 13, it
was held that, although the judgment was on its face valid and
regular, yet, inasmuch as the attorney who appeared on behalf of
one of the defendants did so without the consent of his principal,
the remedy of the principal, when the facts came to his knowledge,
was in equity, where the judgment might be set aside as to him. So,
if the judgment be in fact entered upon a compromise made by the
attorney who had no authority to make it, the judgment may be
attacked and set aside in an equitable action upon proof of the
necessary facts. Although the judgment is not void for want of
jurisdiction in the court, it will yet be set aside upon
affirmative proof that the attorney had no right to consent to its
entry.
It is said that, the judgment being valid on its face, evidence
to contradict its recitals is not admissible unless in case of such
a fraud as will be relieved against in a court of equity. Fraud
under certain circumstances is a ground upon which a judgment may
and will be set aside, but, in addition to such ground,
Page 180 U. S. 353
where, as in this case, the judgment is entered upon a
compromise made by an attorney, entirely unauthorized, and without
any trial, we have no doubt that such fact may be proved in order
to lay the foundation for an application to a court of equity to
set the judgment aside, although the proof contradicts the record
of the judgment itself and shows that in fact there was no jury, no
trial, and no verdict.
It is, however, urged that the government has lost its right to
assail these judgments because of the lapse of time and because one
of the judgments was paid before the commencement of this suit. The
bill shows that they were entered on February 6, 1885, and that, on
July 1, 1886, Beebe paid the amount of the judgment against him
into the Treasury of the United States. The bill was not filed
until March 10, 1890, and it is therefore said that the government
has ratified the action of the district attorney by a failure to
proceed to set the judgments aside at an earlier date than it
did.
It is not averred in the bill to whom Beebe paid the amount of
the judgment, but there is simply a statement that it was paid into
the Treasury of the United States. We must probably assume from
such averment that the payment was made to an officer who had the
right to receive the money, but it is not charged that such officer
received it with knowledge of the facts preceding the entry of the
judgment and by virtue of which such judgment was entered. There
would be nothing in the record of the judgment itself which would
show anything other than a regular trial of the case and a verdict
of a jury upon which the judgment was entered; consequently there
would be nothing in the record which would charge the officer with
knowledge that the judgment was only the result of and represented
a compromise made by the district attorney which he had no power to
make.
In addition to this want of notice, there is an averment in the
bill that the facts and circumstances set out therein as the basis
of the relief asked for by the bill had only come to the knowledge
of the complainant on or about March 5, 1890. From 1885, when the
judgments were entered, no one having authority to act in the
premises for the government had any knowledge of these facts until
March, 1890, and this the demurrers
Page 180 U. S. 354
admit. Generally speaking, the laches of officers of the
government cannot be set up as a defense to a claim made by the
government.
United States v.
Kirkpatrick, 9 Wheat. 720,
22 U. S. 735;
United States v.
Vanzandt, 11 Wheat. 184;
Dox v.
Postmaster General, 1 Pet. 318,
26 U. S. 325;
Hart v. United States, 95 U. S. 316;
Gaussen v. United States, 97 U. S.
584.
But we fail to see wherein the officers of the government have
been guilty of laches. There has been no ratification of any
unauthorized act of the district attorney by reason of any delay on
the part of the government after knowledge of the facts, and,
without that knowledge, there can be no ratification, and, in this
case, no laches.
Where an agent has acted without authority and it is claimed
that the principal has thereafter ratified his act, such
ratification can only be based upon a full knowledge of all the
facts upon which the unauthorized action was taken. This is as true
in the case of the government as in that of an individual.
Knowledge is necessary in any event. Story on Agency, 9th ed., sec.
239, notes 1, 2. If there be want of it, though such want arises
from the neglect of the principal, no ratification can be based
upon any act of his. Knowledge of the facts is the essential
element of ratification, and must be shown or such facts proved
that its existence is a necessary inference from them. Here it is
denied by an express averment in the bill to that effect, and must
be taken as a fact. There being no knowledge of the facts on the
part of the government until March, 1890, we think there were no
laches on its part which would bar the maintenance of this suit. We
think it cannot be said that a failure to earlier obtain knowledge
was evidence of neglect upon the part of the officers of the
government, even though neglect would affect the government in its
right to maintain this suit.
Nor do we think the omission to make in the bill an offer to
repay the hundred dollars and costs paid into the Treasury of the
United States constituted a fatal defect in the pleading. It was a
payment of money only, and the amount might be properly credited to
the representatives of Beebe upon the trial of the action, and
constitute by that amount a reduction of the claim of the
government; or if, upon the trial, the compromise
Page 180 U. S. 355
being set aside and the cause tried on its merits, it should
appear there was nothing due to the government on its claim, the
amount paid by Beebe into the Treasury, together with interest
thereon, might be the subject of judgment against the government.
At any rate, no payment has been made upon the judgment against
Henshaw's estate, and the payment made by Beebe did not operate as
a payment of the judgment against that estate, because, by the
terms of the agreement as set forth in the bill, the compromise
consisted in a promise to pay by each the amount of each judgment
of a hundred dollars and costs. The amended bill is not, therefore,
defective so as to be demurrable as not containing facts sufficient
to constitute a cause of action. And we do not think it is
multifarious. The amendment but added another claim to those
already made which were averred to be prior liens upon the lands in
the hands of the Henshaw heirs at law. If the lands described in
the bill, or any portion of them, have been conveyed to
bona
fide grantees for value, nothing in this opinion can be taken
as in any way passing upon the question of their right to insist
that they took the lands free and clear of any lien in favor of the
government, other than the $100 judgments.
To conclude, we are of opinion that the district attorney had no
authority to compromise the claim of the government by consenting
to the entry of the judgments in question, and, as that
unauthorized act on his part has never been ratified by the
government with knowledge of the facts, and no laches are in
reality attributable in this case to the government, which
proceeded at the earliest moment after the discovery of the facts
to file this bill, we are of opinion that a cause of action was set
forth in the amended bill, and that the demurrers to such amended
bill should be overruled.
The judgments of the United States Circuit Court of Appeals for
the Fifth Circuit and of the Circuit Court of the United States for
the Middle District of Alabama are therefore reversed, and the case
remitted to the latter court with directions to overrule the
demurrers, with leave to the defendants to answer, and for such
further proceedings as are consistent with this opinion.
So ordered.
