1. An agreement made by a contractor about to furnish certain
manufactured articles to the government that advances to be made by
a bank to enable him to fulfill his contract shall be a lien on the
drafts to be drawn by him on the government for the proceeds of the
articles manufactured does not give a lien on a judgment against
the government for damages for violation of the contract, certain
drafts having been drawn and their proceeds received by the
bank.
Page 76 U. S. 374
2. A subsequent agreement that the debt due to the bank for such
advances and also for any future ones to be made for the purpose of
suing the government for nonfulfillment of its contract shall be
paid out of any receipts from the government gives no right where a
suit, though prosecuted, has resulted in an adverse judgment, even
though a second suit has resulted successfully, this latter suit
having been prosecuted under a new and special resolution of
Congress and by the aid of advances received from other parties,
the bank, on the adverse judgment in the first suit having refused
to advance anything to prosecute the second.
3. A paper "renewing and reviving" the debt now, at the date of
the paper, barred by the statute of limitations, for the balance of
all the advances made in such a matter, whether to fulfill the
contract or to prosecute the claim, does nothing more than keep
alive the personal obligation. It gives no lien.
NOTE -- In this case, the contractor, soon after the original
agreement to advance and when only a part of the advances were
made, assigned a patent right (for the delivery of products under
which to the government his contract with the government was made)
to the bank with power to sell it if the advances were not paid
when due. And the present case was a proceeding in equity to
enforce a lien on a judgment which the contractor had obtained
against the government for its breach of contract with him, the
bank having kept the patent right twenty-seven years, and not
offering by its bill to return it.
The trustees of the Bank of Washington filed in May, 1867, a
bill against Nock complaining that in 1840, he having received a
patent for a mail lock, made a contract with the Postmaster General
to furnish the government from time to time with the sort of
patented lock, at a price stipulated, for the use of the
government; that Nock, not having means at his command to
manufacture the locks, agreed with the bank, if they would advance
money for him, on
his drafts on the Postmaster, or
otherwise
on the proceeds to arise from his said contract,
to enable him to fulfill the same, that he would give them a
specific lien on and empower and authorize them to take out of
said drafts, when paid, or
proceeds, whenever
realized, sufficient to repay to them the advances made or to
be made. The bill averred that under this arrangement they did make
advances, and that Nock was so enabled to
Page 76 U. S. 375
fulfill his contract, but that for some reason but a small
amount of the said proceeds were ever realized by Nock until
lately; that he still owed the bank $8,078.82.
That sometime after the principal part of the advances were
made, Nock executed an agreement, on the 2d of December, 1852, with
the bank to make to him further advances to
prosecute his
claim for payment, and that they did make such further advances,
Nock agreeing that
"the debt due by him to the bank for former advances, as well as
the further advances then and thereafter to be made for the purpose
of
prosecuting his said claim should be first paid out of
any receipts realized by him from the government."
That Nock, on the 6th of January, 1865, by written obligation
which was in these words and signed by him:
"I hereby renew and revive my indebtedness and obligations to
the Bank of Washington arising out of certain advances made to me
for drafts on the Postmaster General of the United States in 1840,
and all the accruing interest thereupon, as well as for any other
advances which have been made to me, or which may be made to me, on
any account whatever, by the said Bank of Washington,"
did acknowledge all his said debt for the advances, and all the
interest accruing thereon, and formally renewed his obligation to
pay the same.
That after a long prosecution of his said claim, Nock had
recently been awarded by the Court of Claims the sum of $27,000 in
satisfaction of the contract to furnish locks, and the same was now
about to be paid, but that Nock, refusing to pay the bank its
advances or to recognize the specific lien which it had on the fund
or the validity of his contracts, especially that of the 2d
December, 1852, was about to and was seeking to receive the money,
and to appropriate it to his own exclusive use in contravention of
equity.
The answer and proofs, which, independently of the answer, were
few, showed the patent right and the contract with the postmaster
as alleged; that for the purpose of executing the contract, Nock
had got the advances; that he had drawn several drafts on the
Postmaster General in reduction
Page 76 U. S. 376
of them; that the drafts were all paid, and that the balance
asserted remained unpaid. They showed also that about four months
after the first sum of money advanced by the bank, Nock having now
received about $3,000 of advances, by an instrument dated June 6,
1840, reciting the advances to that date and reciting also his
desire to secure "by an assignment of the patent, in manner
hereinafter expressed," payment not only of those advances but of
all such further sums as might be thereafter advanced, transferred
the patent to the bank upon trust in case of his failure to pay the
bank the money advanced or to be advanced as it became due, to sell
the patent after sixty days' notice by advertisement, and reimburse
itself.
The answer, which was not disproved on these points, further set
forth that the government having annulled its contract with the
respondent, he, for the purpose of procuring the means necessary to
sue it in the Court of Claims, entered into the agreement of 1852,
but that that prosecution resulted, A.D. 1864, in a judgment
adverse to his claim. That desiring to begin a
new suit against the government and to get from the bank
money to carry it on, he signed the paper of 1865; but that the
bank had never advanced under that agreement but $100 (which the
respondent professed himself ready to pay back), declaring that
they had no confidence in his claim and would never advance another
cent; that the bank thus refusing to advance money to prosecute the
case anew, it then became necessary for the respondent to make
other arrangements to get money, and that by aid of these new
arrangements with other persons, he procured an act of Congress
referring his claim again to the Court of Claims, in which court,
without any assistance from the bank, he prosecuted his claim anew,
and after having laid out over $11,000 in doing so, got the award
of $27,000, upon which the bank sought to fix a lien.
The answer expressly denied that the drafts which Nock drew were
to be "any lien on the contract," though it admitted that they were
founded on it and made to enable the bank to receive pay for such
locks as should be delivered,
Page 76 U. S. 377
and the testimony of the officer of the bank with whom Nock made
his original arrangement said: "We made different advances at
different times on drafts. The understanding was that as soon as
the locks were delivered, we were to draw the money." The bank
prayed an injunction against Nock's drawing the amount of the
judgment from the Treasury until it was first paid its
advances.
The Supreme Court of the District at special term granted the
injunction and directed an account, but at general term dismissed
the bill, when the bank brought the case by appeal here.
Page 76 U. S. 378
MR. JUSTICE CLIFFORD delivered the opinion of the Court.
Advances were made by the complainants, as they allege, to
enable the respondent to fulfill a certain contract which he had
previously made with the Postmaster General to furnish to that
department a certain number of mail locks and keys for the Postal
Service of the United States.
Prior to the date of the contract, to-wit, on the sixteenth of
July, 1839, the respondent had obtained letters patent for the lock
to be furnished, as a new and useful improvement,
Page 76 U. S. 379
with the exclusive right to make, use, and vend the same for the
term of fourteen years, and on the first day of August following,
he received orders from the head of that department for two hundred
locks and six hundred keys, to be constructed in accordance with
his patent.
Before the respondent had filled that order, to-wit, on the
eighteenth of November of the same year, he received another
communication from the Postmaster General informing his that he was
authorized to make mail locks and keys for the Post Office
Department of certain specified descriptions and at certain
specified prices, and that orders would be given for the quantities
required from time to time as they were wanted, payment to be made
on the delivery of the articles as ordered for the use of the
government.
Wanting more means than he had at command to enable him to
perform his contract, the respondent applied to the bank for a
loan, and the complainants allege that he agreed, in consideration
that they would advance money for him on his drafts on the
Postmaster General, to give the bank a specific lien on the drafts
and their proceeds, whenever the same should be realized, to secure
and reimburse the corporation for the full amount of the advances
so made or to be made, with interest until the principal should be
repaid. Cash advances to the respondent were accordingly made by
the bank under and by virtue of that agreement, and the
complainants allege that the advances so made enabled the
respondent to fulfill his contract and to supply the locks and keys
for the Postal Service as ordered by the department.
Drafts were drawn on the Postmaster General for the contract
price of the locks delivered, but the complainants allege that, for
some reason unknown to them, they never received more than two
hundred dollars of the proceeds, and that there still remains due
and owing to them for the advances made by them, including
interest, the sum of eight thousand and seventy-eight dollars and
eighty-two cents; that on the second of December, 1852, the
respondent entered into a written agreement with the corporation
that if they would make him further advances to enable him to
Page 76 U. S. 380
prosecute his claim against the government, the debt due by him
to the bank, for the former advances as well as the further
advances to be made, should be first paid out of any sums he might
realize for his claim for the breach of the contract, and that the
whole amount of the debt due to the bank should be paid without any
discount if the amount he realized of his claim exceeded by
thirty-three and one-third percent the amount of his debt to the
bank.
They also allege that the respondent, on the eighth of January,
1865, by a written instrument of that date, under his hand and
seal, acknowledged all the advances so made to him and renewed and
revived his said indebtedness and obligations to the bank for the
said advances.
Moneys were subsequently advanced by the bank for the respondent
to the amount of one hundred dollars, and they allege that the
Court of Claims awarded in his favor the sum of twenty-seven
thousand dollars, in full satisfaction for the damages claimed by
the respondent for the acts of the department in annulling his
contract to furnish such locks and keys for the Postal Service, and
that he neglects and refuses to pay his indebtedness to the bank or
to recognize their specific lien on that fund, but that he is
seeking to appropriate the same to his own exclusive use, which, as
they allege, is contrary to equity and in fraud of their legal
rights. Wherefore they pray that the advances they made to the
respondent may be decreed to be a specific lien on the amount
recovered in that judgment, and they also pray for an account and
for an injunction to restrain the respondent from receiving this
amount from the Treasury of the United States.
Process having been issued and served, the respondent appeared
and admitted that he was the original and first inventor of the
lock in question; that he received letters patent for the same as a
new and useful improvement, and that the made a contract with the
Postmaster General to furnish the same to that department for the
Postal Service of the United States; that he received an order
under that contract for one thousand and forty locks and seven
hundred and fifty keys;
Page 76 U. S. 381
that he subsequently filled the order, and that the proceeds
thereof, except the sum of one hundred and fifty dollars, together
with the proceeds of other parcels of the same patented lock and
key, to the amount of fifteen hundred and ninety-three dollars and
thirty-five cents, were paid to the bank; that all locks and keys
manufactured and delivered under the contract were paid for by the
department except twelve hundred, which the Postmaster General
refused to accept and which the respondent delivered to the bank,
in whose possession they have ever since remained, unavailable to
the respondent.
Fearful that the proceeds of the drafts would not be sufficient
to satisfy the claim for the advances, the officers of the bank
demanded further security, and the respondent alleges that
thereupon he assigned to the corporation his whole interest in the
letters patent for the lock in question, and that the bank
continued to hold the same until the letters patent expired. He
admits that he executed the drafts and that they were drawn to
enable the bank to receive the proceeds of the locks and keys as
manufactured and delivered to the department, but he expressly
denies that there was any understanding or agreement that the
drafts were to be a lien on the contract, as alleged in the
argument of the appellants.
Separate defenses are also presented to the subsequent
agreements set up by the appellants, and in respect to that of the
second of December, 1852, he alleges that the advances were made to
pay for the services of an agent to procure an extension of the
patent and to prosecute his claim against the government for the
annulment of his contract; that they were not made a lien on the
contract, as supposed by the appellants, and that the application
for the extension of the patent was refused, and that the suit in
the Court of Claims to recover damages for a breach of the contract
resulted in an adverse judgment.
Apart from that defense, he also alleges that the bank employed
the same agent and agreed to give him one-third of whatever sum
they might receive towards their claim, in
Page 76 U. S. 382
case the agent was successful in procuring the extension of the
patent, or the allowance of the claim.
In his answer, the respondent also admits the execution of the
agreement of the sixth of January, 1865, but he alleges that he
never received under it more than one hundred dollars, and that
when he needed funds to enable him to prosecute his claim to a
successful result, the appellants refused to make him any advances
and informed him that they had no confidence in his claim and that
they would not advance him a dollar for that purpose.
By the order of the court, the cause was referred to an auditor,
and he reported that the several advances made to the respondent
amounted to eight thousand seven hundred dollars and thirty-three
cents, and the court, at a special term, on the fifth of August,
1867, entered a decree in favor of the complainants for that
amount. But the respondent appealed to the full court in general
term, where the decree was reversed and a decree entered dismissing
the bill of complaint. Whereupon the complainants appealed to this
Court, and still insist that their claim is a lien upon the
judgment recovered by the respondent against the United States in
the Court of Claims.
Liens existed at common law, and they usually arise by statute
or by contract, or by the usages of trade or commerce. [
Footnote 1] Such a contract, if
alleged, must be proved, and when proved, the rights of the parties
depend upon the terms of the contract. [
Footnote 2]
The complainants contend that their claim is a lien upon the
judgment recovered by the respondent, but he denies that
proposition and insists that he never entered into any such
contract. Before examining that question, however, in its general
aspect, it becomes necessary to inquire and determine whether by
the terms of the original arrangement it was agreed and understood
between the parties that the
Page 76 U. S. 383
advances made by the bank to the respondent were to be a lien
upon the contract made by the respondent to manufacture the locks
and keys and deliver the same to the Postmaster General, or whether
those advances were only to be a lien on the drafts to be drawn by
the respondent for the proceeds of the locks and keys so
manufactured and delivered, after the proceeds became due and
payable.
Evidently the views of the complainants cannot be sustained by
virtue of the original arrangement unless they had a lien upon the
contract between the government and the respondent, as the drafts
drawn for the proceeds have all been paid and adjusted to the
satisfaction of all concerned. Suffice it to say on this point that
the complainants do not allege in the bill of complaint that they
had any lien upon the contract, and if they had done so, the
allegation would not be of any avail, as the answer expressly
denies the existence of any such lien, and there is nothing in the
proofs to sustain any such theory.
What they do allege is that they had a specific lien upon the
drafts drawn for the proceeds of the locks and keys manufactured
and delivered, but it is not alleged that there were any such
drafts outstanding and unpaid by the government which were included
in the judgment recovered by the respondent. On the contrary, it is
alleged in the answer, and not denied by the complainants, that all
the drafts drawn for locks and keys manufactured and delivered to
the department were paid in full by the government.
Twelve hundred locks were manufactured, which were refused by
the Postmaster General, but the averment of the answer is that they
were delivered to the bank, and it does not appear that any draft
or drafts for the contract price of those articles were ever drawn,
presented, or refused. Such advances were made by the bank at
different times, and one of the appellants testifies that the
understanding was that they were to draw the money as soon as the
locks were delivered, and that the orders were given to enable them
to draw the money due for locks and keys furnished to the
department, and the respondent testifies that the whole amount
Page 76 U. S. 384
due for the locks furnished was paid by the government either to
him or to the bank.
Much of the respondent's indebtedness to the bank was contracted
prior to the sixth of June, 1840, and on that day he assigned his
whole interest in the letters patent to the bank, or to one of the
appellants for the benefit of the bank, as security for such
advances, with authority, in case he should fail to pay the same
when the advances became due, to sell and dispose of the patent at
public or private sale, first giving sixty days' public notice of
such sale, as provided in the instrument of assignment.
Dissatisfied with the arrangement, the department refused to
give further orders for the locks and keys, and on the sixth of
December, 1841, the department annulled the contract and entered
into a new contract with another party to supply the locks and keys
for the Postal Service of the United States.
All the drafts drawn by the respondent for the proceeds of locks
and keys furnished to the department had been paid, and he had no
claim upon the United States except for the breach of the
contract.
Suppose all these suggestions are correct, still the
complainants refer to the agreement of the second of December,
1852, and insist that they are entitled to a decree by virtue of
that instrument. Undoubtedly the effect of that instrument was to
renew and revive the original promise of the respondent to pay to
the bank any balance which he owed the corporation for those prior
advances, but it did not have the effect to renew or revive any
prior lien on the contract between the respondent and the
government, because no such prior lien ever had any existence. It
removed the bar of the statute of limitations, but its effect in
all other respects was only prospective.
Briefly stated, the terms of the instrument are that the bank
shall advance such sums of money as they may think proper for the
necessary costs and expenses in prosecuting the claim of the
respondent against the government, and that he, the respondent,
agrees in consideration thereof that
Page 76 U. S. 385
their debt against him, together with the sums so advanced,
shall first be paid out of any receipts realized from the
government. Certain advances were accordingly made for that
purpose, an agent was employed, a suit was instituted in the Court
of Claims, but nothing was recovered, and the result was an adverse
judgment against the claimant. Both the bank and the claimant
abandoned the prosecution of the claim, and nothing further was
done in that behalf for the period of twelve years. Nothing in fact
was ever done by the bank or the respondent under that agreement
after the suit was determined in favor of the United States.
Conditioned as the instrument was that the debts of the bank
were to be paid out of the receipts which they might collect from
the government, our conclusion is that the supposed lien never
attached to the claim of the respondent, as nothing was ever
collected. Beyond doubt he owes the debt as he received the
advances, but the question is whether the bank acquired any lien by
virtue of that instrument, and our conclusion is that no lien was
created by it, because nothing was collected from the
government.
Years elapsed before the respondent made any further attempt to
obtain damages for the refusal of the Postmaster General to fulfill
the contract. Some new powers had been conferred upon the Court of
Claims, and the respondent employed a new agent, who succeeded in
procuring the passage of a resolution by Congress referring the
matter again to the Court of Claims for their adjudication.
Encouraged by this resolution, he instituted a new suit in the
Court of Claims, and on the sixth of January, 1865, he gave the
bank another written agreement renewing and reviving his
indebtedness and obligations arising out of certain advances made
to him for drafts on the Postmaster General, and for all accruing
interest, as well as for any other advances which have been or may
be made by the said bank.
Reference is made by the plaintiffs to this instrument as
showing a lien on the judgment in question in behalf of the
complainants, but it is quite clear that the language of the
instrument will not admit of any such construction.
Unquestionably
Page 76 U. S. 386
it is a new promise, but it contains no language whatever to
support the theory that the parties intended that it should have
the effect to create a lien in favor of the bank upon the claim of
the respondent against the United States.
Special reference is made in the instrument to the advances made
for the drafts drawn on the Postmaster General, not as creating or
recognizing any lien on the original contract, but as descriptive
of the indebtedness and obligations which it was the purpose of the
respondent to renew and revive.
Two endorsements were made on the instrument -- to-wit one for
sixty dollars and the other for forty dollars, and it is true that
those endorsements contain the recital that those sums were
advanced in aid of the claim of the respondent and that the
appellants, as trustees of the bank, have an interest in the claim,
but it is not there stated, even if the endorsements are competent
evidence, what their interest is, nor that they have any other or
greater interest than other creditors. They do not pretend that
they advanced more than those two sums under the last agreement,
and they admit that the respondent several times applied to them
for money, and that they refused to supply his wants, which fully
supports the allegations of the answer.
His theory is that they agreed to advance what was necessary to
pay the expenses in the new prosecution of the claim, but the
complainants deny that proposition and insist that they let him
have all they agreed to furnish, and if that allegation is true, it
affords strong ground to conclude that the instrument under
consideration never was intended to create any such obligations as
is supposed by the appellants. But if it will admit of such a
construction then, it is clear that the complainants cannot
recover, as they never fulfilled the contract. They never advanced
but one hundred dollars, and it is past belief that either party
ever supposed that the expenses of prosecuting the claim to a
successful result would not exceed that sum.
Decree affirmed.
[
Footnote 1]
Addison on Contracts 1174; 3 Parsons on Contracts 238.
[
Footnote 2]
Randel v.
Brown, 2 How. 406;
Allen v. Ogden, 1
Washington C.C. 174.
