LECTURE XII

OF JUDICIAL CONSTRUCTIONS OF THE POWERS OF CONGRESS.

I PROCEED to consider the cases in which the powers of congress have been made the subject of judicial investigation. (a) (1.) Congress have declared by law that the United Priority of U. States as States were entitled to priority of payment over pria creditor. vate creditors in cases of insolvency, and in the distribution of the estates of deceased debtors. The act of congress of 31st July, 1789, sec. 21, confined the priority to custom-house bonds. The act of 4th August, 1790, c. 35, sec. 45, limited the priority in the same manner. The act of 2d May, 1792, placed the surety in a custom-house bond, who paid the debt, on the same footing, in respect to priority, as the United States; and it confined the cases of insolvency mentioned in the former law to those of a voluntary assignment, and of attachments against

(a) Mr. Justice Story, in his Commentaries on the Constitution of the United States, vol. i. pp. 382-442, has given a very rational view of the rules of interpretation applicable to the constitution. I have confined myself in this lecture to those authoritative expositions which have been given to it by the courts of the United States; and I agree entirely with that learned commentator, that we are to look to the instrument itself, "as a constitution of government ordained and established by the people of the United States." The instrument furnishes essentially the means of its own interpretation; and to resort to it was the practice of the late Chief Justice Marshall, in those clear and admirable judicial views of the constitution, which, so far as they go, leave us nothing more perfect to expect or desire. It is, at the same time, just and true, that "the most unexceptionable source of collateral interpretation is from the practical exposition of the government itself, in its various departments, upon particular questions discussed, and settled upon their own intrinsic merits. These approach the nearest in their own nature to judicial expositions, and have the same general recommendation that belongs to the latter. They are decided upon solemn argument, pro re nata, upon a doubt raised, upon a lis mota, upon a deep sense of their importance and difficulty, in the face of the nation, with a view to present action, in the midst of jealous interests, and by men capable of urging or repelling the grounds of argument, from their exquisite genius, their comprehensive learning, or their deep meditation upon the absorbing topic." Story's Comm. vol. i. p. 392. See, also, infra, p. 313, to S. P.

absconding, concealed or absent debtors. The act of 3d March, 1797, c. 74, sec. 5, went further, and gave the United States a preference in all cases whatsoever, whoever might be the debtor, or however he might be indebted, in case the debtor became insolvent, or the assets in the hands of his representatives, after his death, were insufficient to pay his debts. This priority was declared to extend to cases in which the insolvent debtor had made a voluntary assignment of all his property, or in which his effects had been attached as an absconding, concealed or absent debtor, or in which an act of legal bankruptcy had been committed. This act applies and gives the preference as against deceased debtors, whether the debt was contracted before or after the passage of the act, provided there be only general creditors, without any specific lien created. (a) The act of March 2d, 1799, c. 128, sec. 65, provided, that in like

cases of insolvency, or where any estate in the hands *244 of executors, administrators, or assignees, should be insuf

ficient, debts due to the United States, on bonds taken under the collection act, should have preference; and sureties in such bonds, on paying the same, had the same preference as was reserved to the United States. (b)

These were the legislative provisions, giving preference to debts due to the United States; and in Fisher v. Blight, (c) the authority of congress to pass such laws was drawn in question. The point discussed in that case was, whether the United States, as holders of a protested bill of exchange, negotiated in the ordinary course of trade, were to be preferred to the general creditors, when the debtor becomes bankrupt. The Supreme

(a) Commonwealth v. Lewis, 6 Binney, 266.

(b) Hunter v. United States, 5 Peters's R. 173. In the case of the United States v. Couch, C. C. U. S. New York, April term, 1841, it was declared to have been the unvaried construction of the 65th section of the act of March 2d, 1799, that the priority therein given to the United States, to be paid out of the estate of an insolvent debtor, takes effect only when the insolvency is established by an assignment of all his property, either by his own act or by act of law, and when such assignment is carried into execution by the assignees. Hunt's Merchant's Magazine, New York, August, 1841, p. 168. U. S. v. Wood & Ives, ibid. p. 170, S. P. (1)

(c) 2 Cranch, 358.

'S. P. United States v. Howland, 4 Wheat. 108.

Court decided that the acts of congress, giving that general priority to the United States, were constitutional. It was a power founded on the authority to make all laws which should be necessary and proper to carry into effect the powers vested by the constitution in the government of the United States. Where the end within the lawful powers of the govern ment, congress possessed the choice of the means, and were empowered to use any means watch were in fact conducive to the exercise of the powers granted. The government is to pay

debts of the Union, and must be authorized to use the means most eligible to effect that object. It has a right to make remittances, by bills otherwise, and to take those precautions which will render the transaction safe. If this claim of priority interferes with the right of the tate sovereignties, respecting the dignity of debts, and defeats the measures which they would otherwise have a right to adopt to secure themselves, it is a necessary consequence of the supremacy of the laws of the Union, on all subjects to which the legislative power of congress

extends.

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The principle was here settled, that the United States * 245 are entitled to secure to themselves the exclusive privilege of being preferred as creditors to private citizens, and even to the state authorities, in all cases of the insolvency or bankruptcy of their debtor. But the court observed, that no lien was created by the statutes giving the preference. No bona fide transfer of property in the ordinary course of business was overreached. It was only a priority of payment, which, under different modifications, was a regulation in common use; and a bona fide alienation of property, before the right of priority attached, was admitted to be good.

The next case that brought into discussion this question of priority, was that of the United States v. Hooe. (a) It was there held, that the priority to which the United States were entitled, did not partake of the character of a lien on the property of public debtors. The United States, in the mere character of creditor, have no lien on the real estate of their debtor. If the priority existed from the time the debt was contracted, and the

(a) 3 Cranch, 73.

debtor should continue to transact business with the world, the inconvenience would be immense. The priority only applied to cases where the debtor had become actually and notoriously insolvent, and, being unable to pay his debts, had made a voluntary assignment of all his property, or having absconded or absented himself, his property had been attached by process of law. A bona fide conveyance of part of the property of the debtor, not for the fraudulent purpose of evading the law, but to secure a fair creditor, is not a case within the act of congress giving priority. (a) In this case of the United States v. Hooe, a collector of the revenue had mortgaged part of his property to his surety in his official bond, tondemnify him *246 from his responsibility as surety, and to secure him from his existing and future indorsements for the mortgagor at bank; and the mortgage was held valid against the claim of the United States, although the collector was, in point of fact, unable to pay all his debts at the time the mortgage was given; and although the mortgagee knew, when he took the mortgage, that the mortgagor was largely indebted to the United States.

Afterwards, in Harrison v. Sterry, (b) it was held, that in the distribution of a bankrupt's effects, the United States were entitled to their preference, although the debt was contracted by a foreigner in a foreign country, and the United States had proved their debt under a commission of bankruptcy. Though the law of the place where the contract is made be, generally speaking, the law of the contract, yet the right of priority forms no part of the contract. The insolvency which was to entitle the United States to a preference, was declared, in Prince v. Bartlett, (c) to mean a legal and known insolvency, manifested

(a) U. S. v. Hooe, sup. United States v. Clark, 1 Paine's Rep. 629. United States v. Monroe, 5 Mason's Rep. 572. United States v. Hawkins, 16 Martin's Louisiana Rep. 317. In England a provisional assignment in bankruptcy will defeat the king's extent, if it precedes the test of the writ. King v. Crump, Parker's Rep. 126. Lord Eldon, 14 Vesey's Rep. 88. In the case of the United States v. McLellan, 3 Sumner R. 345, it was held that a conveyance by a known insolvent debtor, of all his property to one or more creditors, in discharge of their debts, not exceeding the amount due, and not for the benefit of any other creditors, was not a voluntary assignment within the act of 1799, so as to be affected by the priority of the United States. (b) 5 Cranch, 289.

(c) 8 Cranch, 431, S. P. U. S. v. Canal Bank, 3 Story's R. 79.

by some notorious act of the debtor, pursuant to law. This was giving to the world some reasonable and definite test by which to ascertain the existence of the latent and dangerous preference given by law to the United States. In this last case, the effects of an insolvent debtor, duly attached in June, were considered not to be liable to the claim of the United States, on a custom-house bond given prior to the attachment, and put in suit in August following. The private creditor had acquired a lien by his attachment, which could not be divested by process on the part of the United States subsequently issued. Nor will the lien of a judgment creditor, duly perfected, be displaced by the mere priority of the United States. (') The word insolvency, in the acts of congress of 1790, 1797, and 1799, means a legal insolvency; and a mere state of insolvency, or in* 247 ability in a debtor to pay all his debts, gives no right of preference to the United States, unless it be accompanied by a voluntary assignment of all the property, for the benefit of creditors, or by some legal act of insolvency. If, before the right of preference has accrued, the debtor has made a bona fide conveyance of his estate to a third person, or has mortgaged the same to secure a debt, or if the property has been seized under an execution, the property is divested from the debtor, and cannot be made liable to the United States. (a)

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(a) Thelusson v. Smith, 2 Wheaton, 399. Conard v. The Atlantic Insurance Company, 1 Peters's U. S. Rep. 386. Brent v. Bank of Washington, 10 Peters, 596. The priority of the U. S. does not affect any lien, general or specific, existing when the event took place, which gave the United States a claim of priority, nor prevent the transmission of the property to assignees, executors, and administrators subject to the lien.-Ib.2 In England, in the case of Giles v. Grover, before the House of Lords, (9 Bing. Rep. 128,) it was decided, after a most elaborate discussion, in conformity with the opinions of a majority of the twelve judges, that the goods of a debtor, already seized under a fi. fa. at the suit of a subject, but not sold, might be taken under a writ of extent for a debt of the crown, and which writ of extent was tested after the seizure under the fi. fa. The seizure under the fi. fa. was considered as not divesting the debtor of his general property in the goods seized, or in any manner altering the property, and that no property was thereby acquired therein by the execution creditor, or by the sheriff. The claims of the crown and the subject on the goods were held to stand in equal degree, and the two executions to be in effect concurrent; and in such cases the king's prerogative had the preference. Quando jus

1 United States v. Canal Bank, 3 Story's R. 79.

2 See United States v. Duncan, 4 McLean, 607; s. c. 12 Ill. 523.