through receivers appointed by a court of equity, is not insolvency in this sense.1 But this must depend on whether the corporation is in fact insolvent. When the debtor has lost the control of his own affairs, whether by death or otherwise, the case has arisen in which the fact of insolvency may be inquired into. § 234. Attachments. In accordance with this general course of decision, an "attachment" upon the property of a debtor, though he be absent or absconding, is held not to be within the act, unless it is made under some quasi insolvent law, such as existed in several of the States when the statute was originally passed, by which attachments in these cases would lead to a distribution among creditors generally; and further, that an attachment, assignment, or act of insolvency withdrawn or never consummated is as if it had never been.2 § 235. National Banks. - National banks are exempted from this general law by virtue of the statute, which prescribes the mode in which their assets shall be distributed, and thus by implication excludes the United States from priority over other creditors.3 § 236. Appropriation by Debtor. The debtor who finds himself insolvent may, of course, pay the United States without being guilty of a preference, and he may lawfully appropriate the payments in a way to exonerate his sureties.1 § 237. Priority under Bankrupt Laws. The late bankrupt law declared that, in making a dividend, all debts due the United States, and all taxes and assessments under the laws thereof, should be paid next after the costs and expenses connected with the bankruptcy; 5 similar provisions are found in Bank of United States, 8 Rob. (La.) 262. In the case cited next below the Supreme Court of Massachusetts refused to follow the decision in 12 Peters, but it is undoubtedly the law. 12 Pet. 102; Cabot v. Haskins, 3 Pick. 83. 8 Cook County Bank v. United States, 107 U. S. 445. 4 United States v. Cochran, 2 Brock. 1 Comm. v. Phoenix Bank, 11 Met. 274, Fed. Cas. No. 14,821. 129. 2 Watkins v. Otis, 2 Pick. 88; Smith v. Tinker, 2 Day, 236; McLean v. Rankin, 3 Johns. 369; Beaston v. Farmers' Bank, 7 Gill & J. 421, and 5 Act of 1867, § 28; 14 Stat. 530; R. S. § 5701. [The act of 1898 provides that taxes due the United States, State, etc., shall be paid first. § 64 a, infra, § 527.] many of the State laws. Under these laws the remedy is cumulative, and the United States may either prove the debt and exercise the right to examine the bankrupt and the other rights of creditors, or they may require payment from the assignees without formal proof, and enforce the demand by suit, and it is no defence that the assignees have distributed the assets, if they had notice or knowledge of the claim.1 In whatever mode the remedy is sought, the assignees are not bound to account for and pay money which they have not received; and the right of the government is subordinate to all proper costs and charges of settling the estate, and to all mortgages, liens, and incumbrances lawfully existing at the date of the bankruptcy,2 to the allowance made for a widow out of the estate of her insolvent husband, and, by parity of reasoning, to any allowance lawfully made to the bankrupt himself. In Thelusson v. Smith a general lien by judgment was held to be overreached by the priority of the United States; but this part of the case was overruled in Conard v. Atlantic Insurance Company and other cases cited in the note. A few cases in the State courts which followed the former decision are overruled with it. 1 Compare Re Webb, 2 N. B. R. 614, Fed. Cas. No. 17,313; Re Rosey, 6 Ben. 507, Fed. Cas. No. 12,066; Re Chamberlin, 17 N. B. R. 49, Fed. Cas. No. 2580; Re Bousfield Mfg. Co., 17 N. B. R. 153, Fed. Cas. No. 1704; Comm. v. Phoenix Bank, 11 Met. 129, in which the debt was proved, with the following cases, in which an action was maintained: United States v. Hunter, 5 Mason, 62, Fed. Cas. No. 15,426, and 5 Pet. 173; Lewis v. United States, 92 U. S. 618; Bayne v. United States, 93 U. S. 642; United States v. Backus, 6 McLean, 443, Fed. Cas. No. 14,491; United States v. Barnes, 31 Fed. Rep. 705. 2 United States v. Fisher, 2 Cranch, 358; United States v. Hooe, Cranch, 73; Conard v. Atlantic Ins. Co., 1 Pet. 386; Conard v. Nicoll, 4 Pet. 291; Conard v. Pac. Ins. Co., 6 Pet. 262; Brent v. Bank of Wash., 10 Pet. 596; United States v. Hunter, 5 Mason, 229, 8 Postmaster Gen. v. Robbins, 1 5 1 Pet. 386. See United States v. Duncan, 4 McLean, 607, Fed. Cas. No. 15,003. • Willing v. Bleeker, 2 S. & R. 221; Wilcocks v. Waln, 10 S. & R. 380. § 238. United States not bound by Rules of Distribution. The United States are not bound by the rules of distribution in bankruptcy; therefore, if they hold a joint debt against partners, they are to be paid out of the separate, as well as the joint assets;1 but they may be required to exhaust the joint assets first.2 If they have securities, or have had money in their hands from which they might have paid themselves, they need not make the application before demanding payment.1 If the debt is due from a partner individually, the government are not to take precedence over the joint creditors in the distribution of joint assets, because the partners, and, when they are bankrupt, their joint creditors, have a lien upon those assets for the payment of joint debts; and the share of one partner is, in all courts and as against all creditors, only his proportion of the net assets.3 § 239. Personal Liability of Assignees. If the assignees distribute the fund to other creditors without notice or knowledge of the claims of the United States, they will not be personally responsible, for the statute which declares them to be so is to be taken with this necessary qualification; and while no formal notice is necessary, any conduct by the United States which is inconsistent with an enforcement of their priority, and which misleads the assignees, is a waiver. But a simple order of distribution by the court will not save them, unless the United States were a party litigant so as to make the matter res judicata. It was once held that the proof of a debt by the government was not a waiver of their right of action against the assignees; but that was under a statute which declared that nothing contained therein should affect the rights of the 1 Lewis v. United States, 92 U. S. 618; Bayne v. United States, 93 U. S. 642; Re Vetterlein, 20 Fed. Rep. 109. 2 United States v. Shelton, 1 Brock. 517, Fed. Cas. No. 16,272. a United States v. Hack, 8 Pet. 271; United States v. Astley, 3 Wash. C. C. 508, Fed. Cas. No. 14,472; United States v. Evans, Crabbe, 60, Fed. Cas. No. 15,062; Re Webb, 2 N. B. R. 614, Fed. Cas. No. 17,313; United States v. 4 United States v. Primrose, Gilpin, 58, Fed. Cas. No. 16,091; United States v. Murphy, 15 Fed. Rep. 589. 5 United States v. Clark, 1 Paine, 629, Fed. Cas. No. 14,807. 6 United States v. Murphy, 11 Biss. 415. 7 Field v. United States, 9 Pet. 182. Harrison v. Sterry, 5 Cranch, 289. United States. Marshall, C. J., said the proof would probably have been a waiver but for that clause. § 240. Executor of Assignee, etc. - The executor or administrator of an assignee should not be sued, because the true course is to have a new assignee appointed; so of the assignee of an assignee;2 though if the executor or assignee undertook to deal with the assets of the bankrupt estate, he might be held de son tort; and if the assignee had become personally liable to the United States, an action may be maintained against his executor.3 § 241. Surety subrogated. The last section upon this subject gives subrogation to any surety upon a bond to the United States, or the executor, administrator, or assignee of such surety, who pays the money due on the bond to the United States, with the right to enforce the priority in his own name.* The law of subrogation is liberally construed for sureties, and they are permitted to recover interest and costs, whether the payment is made before or after the insolvency of the principal; and to sue the assignee of the principal, instead of proving their debt, though this point has rather been taken for granted than decided. And though the surety may proceed in his own name, an action by the United States for his benefit has been sustained. The statute applies only to a bankrupt principal; and if the owner of the goods has not given the bond, the surety cannot have a privilege against his estate under the statute.8 The law is only declaratory of the doctrine of courts of equity; and subrogation has been decreed to sureties and other persons who have paid debts of the bank 1 Hall v. Cushing, 8 Mass. 521. 2 Pollock v. Pratt, 2 Wash. C. C. 490, Fed. Cas. No. 11,256. That action was by a surety, but the intimation that the United States might have had a better title than the surety is unsound, as we shall presently see. United States v. Dewey, 39 Fed. Rep. 251. 4 Rev. Sts. § 3468. Mott v. Maris, 2 Wash. C. C. 196, Fed. Cas. No. 9880; West r. Creditors, 3 La. An. 529; United States v. Hunter, 5 Mason, 62, Fed. Cas. No. 15,426; affirmed, 5 Pet. 173; Ex parte Mar. shall, Re Garway, 1 Atk. 261. 6 Oliver v. Smith, 5 Mass. 183. 7 Meredith v. United States, 13 Pet. 486. 8 Childs v. Shoemaker, 1 Wash. C. C. Champneys v. Lyle, 1 Binney, 327; 494, Fed. Cas. No. 2681. rupt to the United States, which confessedly did not fall within the statute; as when one had given bond as principal for an owner of goods, at his request, and the owner was bankrupt, or had bought goods in bond duty free, and the bankrupt had failed to pay the duties. And so of sureties simpliciter.2 It was once held that a surety had no priority against the assets of his co-surety for his share of the debt, but the soundness of this decision is doubted.* The surety is not subrogated to the right to hold the debt good against a discharged bankrupt; he must pay the government, and establish his right against the assets.5 1 Enders v. Brune, 4 Randolph, 438; Re Kirkland, 14 N. B. R. 139, Fed. Cas. No. 7843; affirmed, 14 N. B. R. 157, Fed. Cas. No. 7844. 2 Anon., Savile, 30, pl. 72; Rex v. Bennett, Wightw. 1. 8 Bank v. Adger, 2 Hill (Ch.), 262. 4 See Judge Hare's remarks in 1 Lead. Cas. Eq., 4th Am. ed., 91, who says that the decision was based on Copis v. Middleton, Turn. & Russ. 224, which is not followed in America. See The Tangier, 2 Lowell, 7, Fed. Cas. No. 13,744. Judge Hare cites Schoolfield v. Rudd, 9 B. Mon. 291. 5 Westcott v. Hodges, 5 B. & A. 12; Rex v. Bingham, 2 Cr. & J. 130, and 1 C. & M. 862; Reed v. Emory, 1 S. & R. 339; Aikin v. Dunlap, 16 Johns. 77. |