[Beaston v. The Farmers' Bank of Delaware.]

more, of the time and place of holding the election of directors annually: and it was furthermore, by a supplement to the said charter, required that the election for directors should take place on the fourth Monday of May. If it were conceded to the legislature, that they possessed power to wind up the concerns of this particular institution by such an act; it must be admitted, that the leading provisions of the act, calculated to apprize all interested of the fundamental changes about to be operated in its government, that they might have an opportunity of protecting their interests by their presence, should have been complied with in order to give legal efficacy to the acts done under it. So far, however, from this, we are informed by the statements that no notice was given; and that two persons were elected by a majority of the stockholders, on a different day from the day of the annual election of directors, as the trustees, who never accepted. So that the law was in truth never executed, but the proceedings held under it were undoubtedly inoperative and void, and could therefore not in any manner have operated as a general divestment of property, within the contemplation of the acts of congress, as upon this ground to have given the United States a preference; but, on the contrary, the charter still thereafter continued to exist, and its affairs were, or ought to have been rightfully managed and controlled by its then directors, who would continue in office for its government, and the exercise of its corporate functions, until such election should take place. Although no priority may exist on the part of the United States, it has been argued that the appointment of receivers, by the circuit court of the United States, to take charge of the property and effects of the Elkton Bank of Maryland, placed the debt due from the defendant so under the control of that court, as a court of equity, that it could be reached legally by no process of execution or attachment. It is true that money and effects in the hands of the assignee of a bankrupt, or the trustee of an insolvent debtor, cannot be attached; not only because such property stands assigned by operation of law: but because the allowance of such attachments would utterly defeat the whole policy of the bankrupt or insolvent laws; nor can money taken by a sheriff in execution, or money paid into court. Serg. on Attach. 99. But we apprehend that the appointment and bonding of receivers, does not work such disability. The property, by the order, is not taken under the protection of the court; and, until taken in charge by the receivers, its summary jurisdiction could not be interposed to

[Beaston v. The Farmers' Bank of Delaware.]

punish such as might cover it, or portions of it, by execution or attachment. The period when it might and ought legally to be considered as under the mantle of legal protection, should be the time when a court of chancery would interpose by attachment, for disturbing or interfering with the possession of the receiver.

"Innocent third persons might be previously affected by extending this doctrine further. It has been argued, and we think with much force, that there is and ought to be an analogy in this respect between the law applicable to receivers and sequestrators; as regards the latter, the court of king's bench have decided, that, when a sequestration is awarded to collect money to pay a demand in equity, if it is not executed, that is, if the sequestrators do not take possession, and a judgment creditor takes out execution, notwithstanding the sequestration awarded, there may be a levy under the execution. East's Rep. 9 vol. 335.

"So here, the receivers never obtained possession of the credits of the Elkton Bank of Maryland, its books and papers, or its evidences of debt: on the contrary, so far as we are enabled to collect the fact in this respect from the record, they were held adversely; the circuit court of the United States giving their aid and assistance to the receivers, to enable them to obtain the possession; with what effect we know not; except that we are left to infer, from the fact of the attachment subsequently issued against the defendant by the United States, that they never did obtain possession. We are not informed by the record, that the receivers ever took any steps whatever to assume control over the debt which the defendant owed the Elkton Bank: on the contrary, they take out an attachment in the name of the United States, and serve it on the defendant as garnishee, long after the attachment issued, and served by the plaintiff in this case; and indeed the statement admits that they never attempted to exercise a control over this debt. Lastly, it is urged that the judgment of condemnation obtained against Beaston, by the United States, should operate as a bar against the recovery by the plaintiff in this case. It is undoubtedly a hardship on the defendant to be compelled twice to pay the same debt, but it must be recollected that the plaintiff had a prior attachment, which operated as a lien: and it would be a still greater hardship that such plaintiff should lose his lien, thus legally acquired, by the judgment of a court in a cause to which he was no party, and of which we have no evidence that he had in any manner any notice. If the defendant failed to take the proper

[Beaston v. The Farmers' Bank of Delaware.]

steps, in the predicament in which he was placed, to defend and protect his interests, it is but fair that he should suffer the consequences. Had notice been given of this attachment by the United States, the plaintiff might have vindicated his rights, and had an opportunity of asserting his anterior lien; and of obtaining the decision of the appellate court, had it become necessary. Nor is it prescribed why it would not have been competent for the defendant, in this conflict of claims against him, to have brought the conflicting parties into chancery, where the rights and priority of each might have been adjudicated without prejudice to him. But, last of all, would the defendant be entitled to avail himself of the judgment of the United States recovered against him, since, from the examination of the record of that suit, it appears that his defence was taken solely on the plea of nulla bona; a defence which could certainly have been of no avail, when it appeared, by the answers filed in the interrogatories of the United States, that he was indebted to the Elkton Bank of Maryland: although, in the answers, he adverts to the attachment issued against him by the Farmers' Bank of Delaware, he has not plead such prior attachment as pending against him, whereby he could obtain the opinion of the court in relation to its priority. In every aspect, therefore, in which we can view the decision below, we are brought to the conclusion that it cannot be sustained.

"Judgment reversed, and judgment on the case stated for appel

lant."

The case was argued at the bar, by Mr. Martin and Mr. Butler, attorney general, for the plaintiff in error: and by a printed argument for defendants in error by Mr. John C. Groome. Mr. Butler also submitted a printed argument in reply.

For the plaintiff in error the following points were presented to the Court.

1st. That, according to a just construction of the acts of congress giving priority to the United States, in cases where their debtors are insolvent, the government was entitled to be paid the debt due to it from the Bank of Elkton, out of the effects of that institution, in preference to any other creditor; and the plaintiff in error having paid to the United States the amount of money in which he was indebted to the Bank of Elkton, he was, therefore, acquitted from the operation of the attachment sued out against im by the Farners' Bank of Delaware.

[Beaston v. The Farmers' Bank of Delaware.]

2d. That judgment of condemnation having been obtained by the United States against the plaintiff in error, on an attachment in the circuit court for the district of Maryland, for the money in which he stood indebted to the Bank of Elkton; and he having paid that amount to the United States under the authority of said judgment, it operates as a bar to the recovery sought against him by the defendant in error.

3d. That the appointment of receivers, by the circuit court, to take possession of the property and effects of the Bank of Elkton, as disclosed by the record, placed the debt due from the plaintiff in error to that bank, in the custody and under the control of the circuit court, as a court of equity; and that it could not be legally reached by the process of attachment issued in this case by the Farmers' Bank of Delaware.

Mr. Martin, for the plaintiff's, stated that this case has been brought up to this Court, to settle principles by which, hereafter, future cases may be regulated; and thus, although the amount in controversy is small, the importance of the principles involved, will commend it to the consideration of the Court. After stating the case, he proceeded to say, that the first point is the question of the right of priority of the United States, under the act of congress, under the circumstances which are presented by the record. According to the received construction of the act of congress of 3d March, 1791, a body politic or corporate is within the meaning of the act.

2d. The Bank of Elkton having become insolvent, the priority of the United States attached; and the proceedings of the Farmers' Bank of Delaware could not operate against the rights of the United States, nor affect the debt due to the Elkton Bank in the hands of George Beaston.

The priority of the United States is fully settled in the case of The United States v. Fisher, 2 Cranch, 358. In that case it was decided, that the right of the United States to priority of payment of debts due to her, extends to all cases where any one is indebted to the government. The same principle will be found in Field v. The United States, 9 Peters, 182. Where there has been an open act of insolvency, the priority attaches; whether suit is, or is not instituted by the United States. 1 Paine's C. C. R. 628. This priority may be enforced by an action of assumpsit; by a bill in equity; or by any other legal proceedings.

[Beaston v. The Farmers' Bank of Delaware.]

It has been said in this case, in the courts of Maryland, that corporations are not within the provisions of the act of congress; because the persons who compose the corporation are merged in it. But this is denied, and it is maintained, that a corporation is a person within the law; and that a corporation is fully within the meaning and purpose of the law. Corporations are persons; they are so treated in all the laws and proceedings relative to taxation. Coke's Institutes, 697, 718. In the exposition of the Statute of Henry 5, Lord Coke says: Every corporation is included in the term "inhabitant;" although the corporation is not named. In Cowper's Rep. 79, the court of king's bench decided, that a corporation comes in under the term "inhabitant." So also, in the case of The Bank of the United States v. Deveaux, 6 Cranch, 51; it was held, that a corporation composed of citizens of one state, may sue a citizen of another state, in the courts of the United States. The same principle will be found in the opinion of Mr. Justice Thompson, when in the supreme court of New York; in the case of The People v. The Utica Ins. Company, 15 John. Rep. 351.

A corporation being within the act of congress, if before the attachment of the Bank of Delaware, the Elkton Bank had become insolvent, the priority of the United States had attached: what was the situation of the Elkton Bank; what are the evidences of its insolvency?

This is shown by the return of nulla bona, to the attachment against the bank; by the inability of the bank to discharge its debts. In fact, there was no banking operations by the bank after 1829; no meeting of the stockholders: and all its operations as a bank were arrested, because of its entire and absolute inability to pay its debts.

In 1829, the corporation was at Annapolis, asking for a special act of insolvency; and on this application of the bank, the legislature passed an act which authorized the appointment of trustees, who were to take possession of the whole property and effects of the bank, and wind up its whole concerns. Maryland Laws of 1829, chap. 170, Harris's Compilation. These acts combined, demonstrate, fully and unquestionably, the insolvency of the bank.

It is contended, 1st. That if there was no legal transfer of the effects of the bank to trustees, in consequence of the irregularity of the proceedings of the stockholders, or from any other cause this Court will pronounce the bank to have been insolvent; because of its situation, and from its various acts, and the circumstances of the case. VOL. XII.-P