20 First Comptroller's Office^ Treasury Department.
Ccise, 1 Lawrence, Coinpt. Dee., 2d ed., 263, 285 5 Elink's Case, Id, 247,
260.
If the claiinants could now assert a right against Francis Baring &
Company in a court of equity, they would be met with the objection of
stale claim. Thus it is said:
"A defence, peculiar to courts of equity, is founded upon the mere
lapse of time, and the staleness of the claim, in cases where no statute
of limitations directly governs the case." {2 Story, Eq. Jur., 12th ed.,
§ 1620, citing English authorities; Smith v. Clay, Ambler, 645; Bond r.
Hopkins, 1 fc^ch. & Lefr., 428; Hovenden v. Lord Annesle}', 2 Jd., 6:^0;
Stackhouse r. Barnston, 10 Ves., 467; Ex parte l>ewdney, 15 Id.y 496;
Beckford and others v. Wade, 17 Id.j 90; Cholmondeley t?. Clinton, 2
Jac. & Walk., 138; Portlock v. Gardner, 1 Hare, 694; Vigers v. Pike,
8 CI. & Fin., 650.)
"Courts of equity refuse to interfere after a considerable lapse of
time, from considerations of public policy', from the diflBculty of doing
entire justice, when !lie original transactions have become obscure by
lime, and the evidence maybe lost, and from the consciousness that
the repose of titles and the security of property are mainly promoted
by a full enforcement of the maxim, vigilantibus, non dormientibus, jura
suhveniunt.^ (I Story, Eq, Jur., § 529; 1 Fonbl., Eq., B. 1, ch. 4, Sec.
27 ; Jeremy, Eq. Jurisdiction, B. 3, Pt. 2, ch. 5, p. 519; 1 Madd., Pr., ch. 79.)
The case of Combs v. Hodge et al, (21 How., 397) will illustrate the
danger of treating a blank indorsement as prima facie evidence of a
right, especially after such lapse of time as would lose the evidence to
rebut the claim of such a right.
The claimants in this case are not entitled to payment, because there
is no such evidence as is required to support any equitable right in them.
If it be said, such right should be presumed from their undisputed pos-
session during such a lapse of time, it is a sufficient answer to say, that
there is no evidence to show how long the claimants have been in x)os-
session of the papers, and that, if there was, the lapse of time would
raise a presumption of payment.
There is no evidence that Charles Wall, who seems to have executed
the blank assignment and power on behalf of Francis Baring & Com-
pany, was a partner in that firm, unless the ex parte statement of the
notary, before whom his acknowledgment purports to have been taken,
is to be so regarded. The assignment itself does not show any such
fact. And if so, there is no evidence of a sealed authority, by which
one partner could make such assignment so as to give a right at law.
The claimants are not entitled to payment.
Treasury Department,
First Comptroller's Office^ January 13, 1883.
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CUUm ofFirm^ a Member of ichich is Bankrupt — Winchesters Cme, 21
IN THE MATTER OF THE ALLOWANCE OF A CLAIM AGAINST THE UNITED
STATES IN FAVOR OF A FIRM, ONE MEMBER OF WHICH IS A DULY
ADJUDICATED BANKRUPT.— WINCHESTER'S CASE.
1. The bankrupt act of March 2, 1667 (14 Stat., 517), adopts the commou-law rule,
that, in the distribution by legal proceedings of the assets of a partnership, its
creditors are generally entitled to priority over the creditors of the individual
members of the firm, and that, in the distribution of the separate estates of the
Individual partners, their respective creditors are entitled to priority.
2. The general rule at common law is, that, when one partner^ dies, Xhe survivor, or
survivors, settle up the partnership business, and account to the legal represent-
atives of the deceased partner for the proper share of the surplus assets, if any,
after discharging liabilities.
3. By the common law, if a creditor of one partner levy an attachment or execution
on the interest of such partner in the firm assets, the partners retain possession
thereof, settle the partnership business, and account to such creditor after sat-
isfying partnership creditors.
4. The common law remains in force until alteied by some written law. And stat-
utes are not to be construed as altering or repealing the common law further tlian
their language and purpose reasonably require.
5. In case of the bankruptcy of one member of a partnership, the firm, or^he remain-
ing solvent members, are entitled to collect all claims of the partnership, pay its
liabilities, and account to the assignee of the bankrupt, if required by him to
do ao, for the proper share of the surplus, if any.
December 27, 1882, the Commissioner of Internal Eevenue addressed
a letter to the First Comptroller, saying:
" This office has nnder consideration a claim presented by C. and G.
O. "Winchester, copartners, for an allowance of drawback of internal-
revenae tax on articles exported under the provisions of section 17 L of
the act of June 30, 1864 [13 Stat, 302; Rev. Stat. 34411, and • • •
it now appears that one of the partners, George C. Winchester, became
bankrupt subsequent to such exportation. As a question has arisen
whether the allowance • • • should be made to the firm of C. and G.
C. Winchester, or jointly to C. Winchester and the assignee of G. C.
Winchester, • • •j this question is respectfully submitted for your
opinion thereon."
It is not expressly stated, but may be assumed, that only one member
of the firm is in bankruptcy.
Opinion by William Lawrence, First Comptroller.
The question presented involves a construction of certain provisions
of the bankrupt act of March 2, 1867 (14 Stat., 517, sec. 19, Rev. Stat.,
5067-^072; sec. 27, Rev. Stat, 5091, 5092; sec. 28, Rev. Stat., 5101;
sec. 32, Rev. Stat, 5114, 5115; sec. 33, Rev. Stat., 5117, 5118; sec. 34,
Kev. Stat, 5119, 5120; sec. 36, Rev. Stat, 5121). The bankrupt act
recognizes and adoi)ts tbe common-law rule, that, in the distribution by
legal proceedings of the assets of a partnership, its creditors are geu-
Digitized by VjOOQIC
122 Fir$t Camptroller^g Office^ Treasury Department.
erally entitled to priority of payment over the creditors of the individual
members of the Ann, and that, in the distribation of the separate estates
of the individual partners, their respective creditors are entitled to pri-
ority. (1 Parsons, Contracts, 6th Am. ed., 204 [224] ; MvLrrill etal. v. Neill
et ahy 8 How., 414.) Thus, it provides, that " the net proceeds of the
joint stock shall be appropriated to pay the creditors of the copartner-
ship, and the net proceeds of the separate estate of each partner shall
be appropriated to pay his separate creditors.'' (Rev. Stat., 5121.)
The general rule at common law is, that, when one partner dies, the
survivor, or survivors, settle up the partnership business, and account
to the legal representatives of the deceased partner for the proper share
of the surplus of assets, if any, after discharging liabilities. (1 Will-
iams, Exrs., 6th Am. ed., 722 [653], note; 3 Jd., 1842 [1740], note; Bump,
Law and Practice of Bankruptcy, 499; In re Stevens, 5 Bankrupt Reg-
ister, 112; s. c, 1 Pacific Law Reporter, 46).
If a creditor of one partner levy an attachment or execution on the
interest of such partner in the firm assets, the partners retain posses-
sion thereof, settle the partnership business, and account to such creditor
after satisfying partnership creditors. (1 Parsons, Contracts, 6th Am.
ed., ch. xii, sec. xv, 204 [224], 207 [227], 3 !<«., 468, 484.) The bank-
rupt act recognizes these principles. It does not repeal them. They
therefore remain in force, as all common-law principles do, until re-
pealed. Statutes are not to be construed as altering the common law
further than their language and purpose reasonably require. (Sedg-
wick, Construction Stat, and Const. L., 2d ed., 267, note; Bacon, Abr.,
Stat., G. ; Potter's DWarris, Stats., 74.) It follows from these principles,
that, in case of tlie bankruptcy of one member of a partnership, the
legal title to the partnership property remains in the firm, with a right
in the firm, or the remaining solvent partners, to settle up the partner-
ship business, and account for the proper share of surplus, if any, to
the assignee of the bankrupt. Thus, it is said :
^^It is a universal rule, that the assignee represents the insolvent, so
far as to be subject to all the equities against him which attach to any
efl'ects in the assignee's hands.'' (3 Parsons, Contracts, 468 [419]; Ex
parte Newhall, 2 Story, 360; £x parte Hanson, 12 Ves., 346.)
And again it is said :
"If a member of a partnership became insolvent, his interest in the
pn>|ierty of the firm would pass to his assignee, subject to the rights of
other partners, much as it would bv attachment or levy." {3 Parsons,
Contracts, 483 [435],)
The bankruptcy of one partner does not affect the rights of creditors
of the firm, including their right of priority in payment. The rights of
creditors are worked out through the partners. (Sigler and Richey r.
Knox County Bank, 8 Ohio St., 511).
The result stated is supported by opinions in bankrupt cases. Thus,
where one member of a firm applied for a ct^rtificate of discharge, the
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Claim of Fimiy a Mmnber of which is Bankrupt — Winehester^s Case. 23
remaining members being bankrupts, the court approved the report of
the register, declaring it necessary to bring into court '^all of his co-
partners," and saying :
"In no other way could the court get jurisdiction of the partnership
projierty so as to administer upon it. • • • If • • • ^he
other partners are solvent and have committed no act of bankruptcy, it
is clear that they cannot be brought in, for they cannot be a(^udged
bankrupts. • • • ' The assignee in that case becomes a tenant in
common of the solvent partners, and after the partnership creditors are
paid from the partnership property or their claims are otherwise dis-
poned of, the assignee of the bankrupt pcurtner may have an account-
ing with the other members of the copartnership, and -obtain from them
and bring into the bankruptcy court for distribution among the indi-
vidual creditors, whatever interest the bankrupt may have remaining
in the copartnership property."
And further saying :
" The proceedings • • • f were not] of any avail to convey the'
interest of the members of the hrm • • •" to any assignee in bank-
ruptcy." (In the matter of Greenfield, 42 Howard, Pr., 469 et seq.;
In re Beal, 2 Bankrupt Eegister, 178 ; s. 0., 2 Law Times Bankrupt Be-
ports, 95.)
^^ The provisions of the [bankrupt] act in regard to the marshaling
of assets only apply in a case where the partnership is brought into
bankruptcy, and does not apply to a case where only one of the part-
ners is in bankruptcy." (Bump, Law and Practice of Bankruptcy, 198;
In re Melick, 4 Bankrupt Register, 26 ; In the matter of William Down-
ing, bankrupt, 1 Dillon, 39.)
When only one member of a firm becomes bankrupt, his assignee has
no right to the custody of the partnership effects. Thus, it is said of the
assignees of one bankrupt member of a Urm :
"They do not become partners in his stead, because the dilectusper-
sonammj and other principles of the law of partnership, prevent this.
But they become tenants in common, with the partners, and have the
rights and obligations of tenants in common, with some qualifications,
and, perhaps, some additions, which arise from the peculiar origin of the
tenancy. Thus, the assignees may claim an account, and require a
prompt and complete settlement of the concern. They cannot take the
property and business into their own hands, and, settle it themselves,
because the solvent partners, at least in equity, hold, in somewhat the
same way that surviving partners do, all the effects and property, and
for the same purpose, that of winding up the concern."
(Parsons, Partnership, 2d ed. ; [472], 488; Billiard, Bankruptcy and
Insolvenc}', 60, Murray v. Murray, 5 Johns., ch., 78 ; Wilson v. Green-
wood, 1 Swanst., 482 ; Marquand v. N. Y. Man. Co., 17 Johns., 525 ;
Richardson v. Tobey & another, 3 Allen, 81 ; Crawshay v. Collins, 16
Ves., 218; Hubbard v. Guild, I Duer, 662; Freeland v. Stansfield, 13
Eng. L. & Eq.,^36 ; Brown v. De Tastet, Jac, 284.)
The assignee of the bankrupt partner should not be named in the
allowance of the claim'.
Tbeasttby Department,
First Comptroller's Office^ January 16, 1883.
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24 First Comptroller's Office, Treasury Department
IN THE MATTER OF THE RIGHT OF A SUBCONTRACTOR FOR CARRYING
MAILS TO RECEIVE PAYMENT THEREFOR FROM THE UNITED STATES.-
ANDREWS'S APPEAL CASE.
1. The rights of subcontractors for carrying mails are subjfect to, and controlled by.
the statutes regulating the mail service, as fully as if these statutes were in-
corporated in their subcontracts*
2. The laws in force at the date when a contract becomes operative are generally
applicable in giving it construction and efi'ect.
3. The act of May 4. 1882 (22 Stat., 53), does not in terms, or by any reasonable im-
plication, or in its purpose, affect the rights of subcontractors for carrying
mails, as prescribed by the act of May 17, 1878 (20 Stat., 62).
4. Section 626 of "The Postal Lawsand Regulations " issued July 1, 1879, by authority
of the Postmaster-General, was a valid regulation.
5. This section of the regulations was superseded by the circular regulation on the
same subject of October 15, I860.
6. A regulation which revises the whole subject of a former one, and has the same
objects, supersedes the former, without any express words of repeal.
7. The sole authority to prescribe regnlatious '* for the Government of" the Post-Office
Department, **the conduct of its officers and clerks, the distribution and per-
formance of its business, and the custody, use, and preservation of the records,
papers, and property appertaining to it," is in the Posmaster-General.
8. He cannot delegate such authority to any other officer or person.
9. The act of May 17, 1878 (20 Stat., 62), does not prescribe any time when, or within
which, subcontracts for carrying mails shall be filed in the office of the Second
Assistant Postmaster-General. The effect of the statute and the regulation of
the Post-Office Department on the subject is, that a subcontractor is entitled to
the authorized payment for the service of any quarter, when his contract is
filed, and notice given to the proper Auditor, before a balance is certified there-
for in favor of the original contractor.
10. Whether a subcontractor is entitled to payment, when his contract is filed, and
notice given to the proper Auditor, after a balance is certified therefor in favor
of the original contractor, but before warrant issues, or actual payment— ^uorre.
11. The act of May 17, 1878 (20 Stat., 62), in efi'ect requires subcontracts for carrying
mails to be in writing. This requirement is mandatory, not directory. Hence,
a subcontract cannot provide for compensation to a subcontractor before its
execution, nor can it be made so to operate by being antedated.
12. Performance by a subcontractor of tbe conditions of his subcontract is essential
to give him a right to compensation.
13. A subcontract for carrying mails, which in terms gives to the subcontractor the
whole original contract price, is fraudulent and void as against the United
States, if there be an agreement that the subcontractor shall pay a portion of
such price to tbe original contractor, and if such original contractor be other-
wise indebted to the United States.
Albert E. Boone entered into a contract with tbe United States, by
which he agreed to transport the mail in the "star rooite" service on
route No, 30107, from Pearl River, Loiiisiaua, to Halloo and ba^^k, once
a week, by a schedule satisfactory to the Post-Office Department, at
$89 per year, for and daring the term beginning: July 1, 1882, and ending
June 30, 1886, said sum to be paid by the Unitecl States quarterly in
Digitized by VjOOQIC
Rights of Mail Subcontractor — Andretca^s Appeal Case. 25
November, February, May, and A^ugust. The caption of the contract
reads thas:
This article of contract made the 4th day of March, 1882, between the
United Stateqof America (acting in this behalf by the Postmaster-Gen-
eral) and Albert E. Boone, contractor, Robert E. Boston • • • and
Mills Dean • • • as his sureties.
The contract then contained the usual provisions, and concludes as
follows:
In witness whereof, the said Postmaster-General has caused the seal
of the Post-Office Department to be hereto affixed, and has attested the
same by his signature, and the said contractor and his sureties have
hereunto set their hands and seals the day aiid year set opposite their
names respectively.
Signed this 20th day of May, 1882.
T. O. HOWE,
Postmaster- Genera I.
Signed, sealed, and delivered by the Postmaster-General in the pres-
ence of —
John B. Brownlow.
And by the other parties hereto in the presence of—
D. W. Bowles,
Geo. C. Kowan,
Witnesses.
Signed this 7th day of March, 1882.
A, E. BOONE, [SEAL.]
Contractor^
Signed this 9th day of May, 1882.
ROBT. E. BOSTON, [seal.]
Signeil this 9th day of May, 1882.
MILLS DEAN, [SEAL.|
Sureties.
May 22, 1882, the Postmaster-General made an order thus:
*' Permit contractor to sublet service."
June 21, 1882, the service was increased to three times a week from
July 1, 1882, with an allowance of $178 per annum, additional pay.
September 15, 1882, Boone made a subcontract with Chase Andrews,
by which the latter agreed to transport the mail on said route, from
Pearl River to Halloo and back, three times a week, from July 1, 1882?
to June 30, 1886, for the annual pay of $2(57, the whole of the original
contract price; and it was provided that all iflnes and deductions made
by the Post-Office Department shall be deducted from each quarterly
settlement under this subcontract.
December 19, 1882, this subcontract was filed in the office of the
Second Assistant Postmaster-General, and the (Sixth) Auditor of the
Treasury for the Post-Office Department was notified 'Hhat the sub-
contractor of Chase Andrews • • • for service on this route, at
$267 per annum, subject to fines and deductions unless otherwise nd vised,
from July 1, 1882, to June 30, 1886, ha« been filed in this office. • • *
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26 FirH ComptroUer*% Office^ Treasury Department
Subcontractor to be paid any extra pay allowed as indemnity for ad-
vice dispensed with.''
The account for service on this route not having been settled, the
subcontractor applied to the Auditor of the Treasury for jthe Post-OfiBice
Department to certify a balance due him for service for the ^< quarter
ended September 30, 1882." (Rev. Stat, 277, 3959; Postal Laws and
Begnlations, 1879, Sees. 612, 1142.)
December 22, 1882, the Auditor, by letter to the subcontractor, said :
Your subcontract was not filed in season to enable you to receive
payment. • • • Mr. Boone was reported to this office September
27, 1882, as a failiog contractor on routes Nos. 3265 and 3266, and at
other dates on other routes. The bonds on the two routes named
amount to $19,000, and the actual damage is much greater. * * .*
The amounts due to him on this and other routes is held to satisfy his
liability to the Government as a failing contractor. This leaves noth-
ing due to Mr. Boone. • • • A sabcontractor who places his sub-
contract on file in accordance with regulation, section 626, may be paid
from the beginning of the quarter in which it is filed, but cannot go
further back and take money held under the provision of the law for
the satisfaction of damages incurred previous to the filing of the sub-
contract.
And he referred to the last proviso of section 1 of the act of May 4, 1882,
(22 Stat., 54), in support of his ruling.
December 22, 1882, the subcontractor appealed from the action of the
Auditor to the First Comptroller.
The Postmaster-General, under the act of May 17, 1878 (20 Stat., 62),
made '* regulations," taken from a circular Ko. 2043, as found in ^Hhe
Postal Laws and Eegulations" of 1879, 147, sec. 626. A circular of the
same number, 2043, and on the same subject, has been in the use and fur-
nished to contractors ^ince October 15, 1880. . This latter circular was
issued and signed by the Second Assistant Postmaster-General, who
certified January 15, 1883, that it <^ repealed the circular of 1879 relative
to the period of time within which subcontracts should be filed.^
The second and third sections of the act of May 17, 1878 (20 Stat.,
62), and the two circular regulations above referred to are as follow :
Seo. 2. Hereafter no subletting or transfer of any mail contracts shall
be permitted without the consent in writing of the Postmaster-General ;
and whenever it shall come to the knowledge of the Postmaster- General
that any contractor has sublet or transferred his contract, except with
the consent of the Postmaster-General as aforesaid, the same shall be
considered as violated and the service may be again advertised as
herein provided for ; and the contractor and his securities shall be liable
on their bond to the United States for any damage resulting to the
United States in the premises.
Sec. 3. Hereafter, when any person or persons, being under contract
with the Government of the United States for carrying the mails, shall
lawfully sublet any such contract, or lawfully employ any other person or
persons to perform the service by such contractor agreed to be per-
rormed, or any part thereof, he or they shall file in the office of the Second
Assistant Fostmaster- General a copy of his or their contract ; and there-
Digitized by VjOOQIC
Rights of Mail Suhoontra/otor — Andrews^s Appeal Cage.
.27
tfpoii it shall be the datyof the Second Assistant Postmaster-General
U) notify the Auditor of the Treasury for the Post-Office Department of
the fact of the tiling in his office of such contract. Said notice shall em-
brace the name or names of the original contractor or contractors, the
number of the route or routes, the name or names of the subcontractor
or subcontractors, and the amount agreed to be paid to the subcontractor
or subcontractors. And upon the receipt of said notice by the AvMtor of
the Treasury for the Post Office Department^ it shall be his duty to retain^
out of ihe amount due the original contractor or contractors, the amount
stated in said notice as agreed to be paid to the.snbcontractor or subcon-
tractors, and shall pay sa^ amount j upon the certificate of the Second As-
sistant Postmaster-General, to the subcontractor or subcontractors, un-
der the same rules and regulations now governing the payments maae to
original contractors : Provided^ That upon saitisfactory evidence that the
original contractor or contractors have paid off and discharged the amount
due under his or tJieir contract to the subcontractor or subcontractors, it
shall be the duty of the Second Assistant Postmaster-General to certify
such fact to the Auditor of the Treasury for the Post-Offlce Department 5
and thereupon said Auditor shall settle with the original contractor or
contractors, under the same rules as are now provided by law for such
settlements.
Regulations under ichich stibcmitracts may be made.
[Section 626, Regulationt} of 1879, from
circular No. 2043, of April 15, 1879.]
Contractors must in all cases se-
cure the permission of the Post-
master-General before making a
subcontract on any route. The
application to sublet must be made
separately for each route, specify-
ing the number and terminal points
thereof.
A subcontract must not embrace
more than one route, and should
specify the amount to be paid under
it in case the service shall be
changed, and whether fines and
deductions are to be deducted from
pay of contractor or subcontractor.
The evidence of payment of a
subcontractor by a contractor, pro-
vided for in the preceding section,
must be the receipt of the subcon-
tractor, attested by a postmaster
at a terminus of the route sublet,
on a form furnished by the Second
Assistant Postmaster-General.
A subcontractor, in order to avail ^
himself of the benefits of the pre-
ceding section and receive payment
from the Post-Office Department
direct, must file a copy of his sub-
contract in the office of the Second
[Circular regulationa of October 15, 1880,
from circular No. 2043.]
Subcontracts made prior to the
passage of this law will be held to