United States v. Alexander, 110 U.S. 325
Case details
Citation
110 U.S. 325
Full caption
UNITED STATES r. ALEXANDER & Others.
Country
United States
Jurisdiction
Federal
Court
Supreme Court of the United States
UNITED STATES r. ALEXANDER & Others.
IN ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR
THE MIDDLE DISTRICT OF TENNESSEE.
Argued January 22d, 1884.—Decided February 4th, 1884.
Internal Revenue.
The Secretary of the Treasury, under authority derived from the act of May 27th, 1872, 17 Stat. 162, abated taxes on spirit in a bonded warehouse destroyed by fire. The commissioner of internal revenue notified the principal and sureties of the distillery warehouse bond of this decision: Held, That this was a virtual cancellation of the bond.
This was an action at law brought on a distillery warehouse bond against William S. Alexander and James H. Reynolds, principals, and Edward S. Allen and Mahlon 0. Atkinson, their sureties.
The defendants pleaded that the taxes, to recover which the suit was brought, had been abated by the Secretary of the Treasury, pursuant to law, by an order of which the following is a copy:
“ Trea sur y Depa rtment ,
“Washingt on , D. C., Aug. 5, 1875.
Under authority conferred by act of Congress approved May J 1872, 1 hereby abate the taxes accruing on 8,252 gallons of
spirits, amounting to $5,776.46, which were destroyed by fire on t e 6th or 7th day of March, 1875, while in the bonded warehouse p. 326of Messrs. Alexander and Reynolds, distillers in the 4th collection district of Tennessee.
“ C. F. Burnam ,
“ Acting Secretary.
“ To the Commissioner of Internal Revenue.”
And that the same was delivered to the defendants by the commissioner of internal revenue, and the Secretary of the Treasury did thereby release and free the defendants from their liability in the premises.
To this plea the plaintiffs replied that on October 13th, 1875, the Secretary of the Treasury did withdraw the said order of abatement and remission dated August 5th, 1875, as pleaded.
Upon this issue the case was tried. It appears from the bill of exceptions that the defendants, to sustain their defence, introduced proof tending to show the abatement of the taxes for which the warehouse bond sued on was given, as set out in their plea; that notice of the abatement was given to the commissioner of internal revenue, who gave notice thereof to one Bryant, the collector of internal revenue, with directions to take credit therefor on his bonded account as such collector, which he did ; and that he gave notice of the remission of the taxes to Alexander & Reynolds, the principals on the bond; and that they had accepted the abatement and release, and had sent to their sureties on the bond copies of the order of abatement.
Thereupon the plaintiffs introduced Evidence tending to show that on October 13th, 1875, the Secretary of the Treasury withdrew the abatement of the taxes by the following order:
“Trea sur y Depa rtment ,
“Wash ington , D. C., October 23, 1875.
“ Sir : In the matter of Alexander & Reynolds, for abatement of taxes accruing on 8,252 gallons of spirits, amounting to $5,- 776.46, which were destroyed by fire on the 6th or 7th of March, 1875, while in the bonded warehouse of said firm, in the 4th collection district of Tennessee, in view of the papers now on file in the case, the order for abatement of said taxes, dated August 5, p. 3271875, is hereby withdrawn until a further consideration of said claim can be had.
“Very respectfully,
“B. H. Bris tow , Secretary.
“ Hon. D. D. Pratt ,
“ Commissioner of Internal Revenue.”
There is no proof in the record that this order withdrawing the abatement of the taxes ever came to the knowledge of the obligors upon the bond until it was produced on the trial.
Upon this evidence the court charged the jury as follows:
“If you believe from the evidence that on the 5th day of August, 1875, the Secretary of the Treasury abated said taxes, and notified the commissioner of internal revenue thereof, and he notified the collector, and he notified the defendants, the action of the acting Secretary of the Treasury so taken was final, and any attempted suspension or withdrawal thereof would be invalid, and it would be your duty to find for the defendants.”
To this charge the plaintiffs excepted. The jury returned a verdict for defendants, and a writ of error sued out by the plaintiffs brought up the case for review.
Air. Assistamt Attorney-General Afaury for plaintiff in error.
No appearance for defendants in error.
Mr . Jus tice Woo ds delivered the opinion of the court.
The act of May 27th, 1872, 17 Stat. 162, under authority of which the abatement of taxes pleaded by defendants was made, provides as follows:
“That the Secretary of the Treasury be, and he is hereby, authorized, upon the production of satisfactory proof to him of the actual destruction by accidental fire or other casualty, and without any fraud, collusion, or negligence of the owner thereof, of any distilled spirits on which the tax, at the time of the destruction of said spirits, had not been paid, and while the same remained in the custody of any officer of internal revenue, in any distillery, warehouse, or bonded warehouse of the United States, to abate p. 328the amount of internal revenue taxes accruing thereon, and to cancel any warehouse bond, or enter satisfaction thereon in whole or in part, as the case may be.”
We are of opinion that the action of the Secretary of the Treasury shown by the bill of exceptions was a virtual cancellation of the bond sued on in this case.
It is clear that after the Secretary had abated the taxes, and had given notice thereof to the collector of internal revenue, with directions to take credit therefor in his accounts, which he had done, and official notice of the abatement had been given to the principals upon the warehouse distillers’ bond, and they had given notice to their sureties, no suit could be maintained upon the bond. Its obligation was gone, and both the principals and sureties were discharged.
The question is, therefore, whether the obligation of the bond could be restored by an order of the Secretary of the Treasury, not communicated to the makers, revoking the abatement. It may be conceded, and we think that the Secretary of the Treasury might, on new evidence or further consideration, reimpose the taxes. But his reassessment would only subject the spirits and the distiller to a liability for their payment ; it could not restore the obligation of the distillers’ bond.
If we yield to the contention of the appellants in this case, we must hold that the Secretary of the Treasury may, at his discretion and at any time, subject the obligors, both principals and sureties, upon a bond which had once been discharged, to a new liability, by an order of which they had no notice. It may be fairly presumed that sureties take indemnity from their principals. We cannot hold that , after they have had notice of the discharge of the bond on which they were sureties, and when their relations to their principals may have entirely changed, and their indemnity been surrendered, it is within the power of the Secretary of the Treasury, without notice to them, to revive the bond and reimpose its obligation upon them. W e do not think that the statute which authorizes the abatement of taxes and the cancellation of the bond gives authority to the p. 329Secretary of the Treasury to retry the question of abatement so as to keep alive the liability of the obligors upon the bond after the taxes have once been abated and they have received notice thereof.
The only ground upon which the liability of the defendants in error can be maintained is that the abatement of the taxes and the cancellation of the bond were conditional and subject to the power of the Secretary to retry the question whether the spirits had been destroyed without the fraud, collusion, or negligence of the owner. We find no warrant in its language for such a construction of the statute. If the power had been given some terms or limit of time would have been imposed on its exercise. If it exists no restraint is imposed upon it. It may be exercised at any time, no matter how remote, without notice to the makers of the bond, and at the discretion or caprice of the Secretary for the time being. We do not think that any such unlimited power is conferred by the statute. The Secretary, having once decided the question of abatement, his authority was exhausted, so far as it concerned 'the tax secured by the bond.
In the case of The Floyd Acceptances, 7 Wall. 666, it was held by this court that, under our system of government, the powers and duties of all its officers are limited and defined either by statutory or constitutional law. Applying this rule to the present case, we are unable to find in the statute any authority for the action of the Secretary of the Treasury in revoking the abatement of taxes once made by him, and must conclude that the authority does not exist. He might re-assess the tax, but the bond given for the tax which had been abated would not be security for the re-assessed tax. As this view was substantially embodied in the charge to the jury of the Circuit Court, which is assigned .for error, we are of opinion that the charge was right, and that
Tice judgment must be affirmed.
TAYLOR & Another v. DAVIS’ ADMINISTRATRIX.
IN ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF ILLINOIS.
Argued January 21st, 22d, 1884.—Decided February 4th, 1884.
Contract.
Real estate and personal property were held in trust by two trustees. One trustee at the request of the other and of a third person resigned his trust, without requiring previous payment of his demands against the trust estate, and the third person was appointed trustee in his place. The two trustees then executed a written agreement with the outgoing trustee, undertaking to apply to the payment of his said claims “ all the moneys which shall come into our hands as trustees as aforesaid after first paying therefrom all taxes and current expenses of said property and trust: ” Held, That this was a contract to be enforced at law, against the parties individually, and not a trust to be enforced in a court of equity ; and that the current expenses of the trust did not include the construction of fire-proof buildings and unusual expenditures for protecting the property.
The defendant in error, administratrix, devisee, and legatee of Charles Davis, deceased, was plaintiff in the court below. The declaration alleged that on October 4th, 1861, the defendants, S. Staats Taylor and Edwin Parsons, trustees of the Cairo City property, executed and delivered to Charles Davis, then in life but since deceased, a contract in writing, of which the following is a copy:
“ Whereas Charles Davis, late one of the trustees of the Cairo City property, has agreed to transfer to the present trustees of said property, S. Staats Taylor and Edwin Parsons, at their request, all of said property remaining in his hands, without requiring previous payment of his demands against said property: Now, in consideration of the premises, and of one dollar to us in hand paid, we, S. Staats Taylor and Edwin Parsons, trustees of the Cairo City property, hereby promise and agree to and with the said Charles Davis, his executors, administrators, or assigns, that we will apply, from time to time, to the payment of all the just claims and demands of said Charles Davis against said Cairo City property, including the sum of $7,382.60, audited October 1st, 1860, until the same shall be fully paid, all the moneys which p. 331shall come and remain in our hands as trustees as aforesaid, after first paying therefrom all taxes and current expenses of said property and trust actually imposed or incurred. But said claims and demands of said Davis, his executors or administrators, shall not be preferred to like claims of his co-trustee, John H. Wright.
“October 4th, 1861. “S. Staats Tay lor ,
“Edwin Pars ons ,
“ Trustees of the Cairo City Property. ”
The declaration further alleged that at the date of the execution and delivery of the contract there was due to Davis on just claims and demands against the Cairo City property, which had been audited and allowed, the sum of $7,382.60; that on March 1st, 1867, Davis departed this life, leaving a last will and testament, which was afterwards duly proven, whereby he devised and bequeathed all his estate to the plaintiff; that afterwards, on September 30th, 1867, the defendants, in consideration of the premises, executed and delivered to the plaintiff another contract, whereby they renewed and confirmed the contract of October 4th, 1861, between them and Davis, and agreed to pay the plaintiff, as his administratrix, the amounts due his estate in the same manner and form as in the instrument of October 4th, 1861, is particularly set forth; and that although large sums of money had come into the hands of the defendants as such trustees, over and above the amounts necessary to pay all the taxes and current expenses of the property and trust actually imposed or incurred, they had neglected and refused to pay said sum of money or any part of it.
The defendants pleaded non-assumpsit. The parties waived a trial by jury and submitted the issues of fact as well as of law to the court, which made a special finding of facts upon which it rendered judgment against the defendants in the sum of $12,957.57, that being the principal sum due Davis from the Cairo City property on October 4th, 1861, with interest from that date.
To reverse that judgment a writ of error was sued out.
Wager Swayne for plaintiff in error.
J. Hubley Ashton for defendant in error.
Mr . Jus tice Woo ds delivered the opinion of the court.
The findings of the Circuit Court show the following facts: The contracts of October 4th, 1861, and of September 30th, 1867, were executed and delivered by the plaintiffs in error, as averred in the declaration; the said Charles Davis and one Thomas S. Taylor had, previous to the execution of the first-mentioned instrument, been trustees of the Cairo City property under and by virtue of a declaration of trust dated September 29th, 1846. That instrument, after reciting the conveyance to Taylor and Davis of about nine thousand acres of land situate in the State of Illinois at and near the confluence of the Mississippi and Ohio Rivers, declared that the property was held in trust by them to, for, and upon the terms, conditions, uses, interests, and purposes therein pointed out. The fourth section of the instrument defined the powers of the trustees as follows:
“ The said Taylor and Davis and their successors shall have the general management and control of all the property aforesaid, and of the proceeds thereof, pay the taxes thereon when in funds, and all the expenses incident to the creation and execution of the trust hereby declared. They may make such contracts, execute such instruments and obligations, employ such agents and laborers, make such erections and improvements on said lands, and such purchases and sales of real and personal estate, leases, donations, and investments as may be necessary and expedient to promote the interests of the shareholders,” &c.
The principal object of the co-owners of the land described in the declaration of trust was to build a city thereon. In the exercise of their powers the trustees caused—
“ The erection of levees of sufficient size and height to protect the city, to be commenced ; the old hotel was repaired ; river bank protected from abrasion ; roads were cut through the timber ; part of the land cleared ; a new hotel built at an expense to the trust of about twenty thousand dollars, and grounds were laid out for a cemetery; a steamboat was bought and run on the business of this trust ; a quarry operated, also a ferry ; newspapers were established ; the city and additions were platted; p. 333lots were donated as compensation to persons who assisted in protecting the property from adverse legislation ; wharves were constructed and improved ; all these expenses were paid out of the trust fund.”
About September 1st, 1860, the plaintiffs in error were, by regular conveyances, made the successors of Taylor and Davis as trustees. By virtue of the powers expressed in the fourth clause of the declaration of trust they executed the agreement of October 4th, 1861, in order to obtain from Davis a transfer of the trust estate.
In order to carry out the purposes of the trust, the plaintiffs in error, on October 1st, 1863, borrowed $75,000, and on October 1st, 1867, $50,000, to secure which they executed mortgages on all the real estate of the trust, which were afterwards foreclosed and the property sold, and the proceeds of the sale were insufficient to pay the amount due on the mortgage by $47,- 572.27.
During the trusteeship of the plaintiffs in error they faithfully applied all the moneys, received by them to the purposes of the trust and in discharging what in their opinion were the current expenses of the trust and in the exercise of a fair and reasonable judgment therein. Between September 1st, 1860, and the year 1874, the plaintiffs in error expended in improvements on the trust property, including the fire-proof office mentioned in the 8th finding, the sum of $298,226.91, and during the same period the additional sum of $343,226.94 in building levees on the Ohio and Mississippi Rivers, and in protecting the Mississippi River bank, and, as appears from the accounts made part of the findings, much the greater part of these sums were expended after October 4th, 1881. On September 30th, 1867, the time of the execution of the obligation to the defendant in error and at the commencement of this suit, they had no money of the trust fund in their hands, but the fund was indebted to them in a sum exceeding $8,000.
This eighth finding established the following facts:
About the winter of 1863 and spring of 1864 the plaintiffs in error, as trustees, erected, at a cost of about $35,000, a fire- p. 334proof office, which they deemed to be absolutely necessary for the safe keeping of the valuable papers and the transaction of the business of the trust. But the court was of the opinion that said expenditure was not the current expenses of the trust.
The court further found that the plaintiffs in error “ at divers days and dates in the years 1863, 1864, 1865, 1866, 1873, and 1874 had in their hands moneys belonging to said trust fund sufficient to pay the amount due the plaintiff, after paying therefrom all taxes on said trust property and the ordinary expenses of said trust, as appears from the accounts herein contained ; and that the plaintiff on divers occasions prior to the bringing of this suit, and prior to January 1st, 1868, demanded of the defendants payment of the amount due on said contract, which was not paid.”
Upon these facts the plaintiffs in error contend that the instruments sued on, construed in connection with the declaration of trust and the administration of the trust estate by them, create between the parties the relation of trustees and cestui que trust, and that a court of law .could not entertain jurisdiction of the suit against a trustee in his trust capacity, and that the Circuit Court erred in rendering judgment against the plaintiffs in error in their individual capacity.
In our opinion, the relation of trustees and cestui que trust did not arise between the plaintiffs in error and Davis upon the contract of October 4th, 1861^ It is true the plaintiffs in error are trustees of the Cairo City property, but they are not trustees for Davis or the administratrix of his estate. This is, in substance, the case of trustees promising to Tepay money which they had borrowed of a stranger for the benefit of the trust estate. Their undertaking was subsequent to the time when they assumed the duties of the trust. The declaration of trust expressed fully the powers and duties of the trustees, and the contract sued on did not and could not modify it. The defendant in error did not sue as a cestui que trust, or base her claim on any trust, express or implied, undertaken by the plaintiffs in error for her benefit.
A trustee is not an agent. An agent represents and acts for p. 335his principal, who may be either a natural or artificial person. A trustee may be defined generally as a person in whom some estate, interest, or power in or affecting property is vested for the benefit of another. When an agent contracts in the name of his principal, the principal contracts and is bound, but the agent is not. When a trustee contracts as such, unless he is bound no one is bound, for he has no principal. The trust estate cannot promise; the contract is therefore the personal undertaking of the trustee. As a trustee holds the estate, although only with the power and for the purpose of managing it, he is personally bound by the contracts he makes as trustee, even when designating himself as such. The mere use by the promisor of the name of trustee or any other name of office or employment will not discharge him. Of course when a trustee acts in good faith for the benefit of the trust, he is entitled to indemnify himself for his engagements out of the estate in his hands, and for this purpose a credit for his expenditures will be allowed in his accounts by the court having jurisdiction thereof.
If a trustee contracting for the benefit of a trust wants to protect himself from individual liability on the contract, he must stipulate that he is not to be personally responsible, but that the other party is to look solely to the trust estate. There are, no doubt, cases where persons occupy the position of quasi trustees, under the appointment of a court, such as receivers charged with the performance of active duties, in which it would involve much hardship to make them personally liable. But in such cases, as the parties have the right to prove their claims against the common fund, and have them allowed by the court, the officer may have the protection of the court by which he is appointed, restraining parties from bringing suits against him, except where leave is given for the purpose of fixing the amount due. Barton v. Barbour, 104 U. S. 126. •
In this case the contract is the personal contract of the plaintiffs in error. Before it was made the trust estate and the plaintiffs in error, in their capacity of trustees, were already bound for the debt due to Davis, and he had the right to keep possession of the trust estate until he was paid. It is clear, p. 336from the contract and the circumstances under which it was made, that Davis consented to yield possession of the trust property on condition that he received some security for his payment other than the mere liability of the trust estate. He therefore took the contract in suit, and yielded the possession of the trust estate without exacting payment of his demands.
The designation of the plaintiffs in error as trustees in the contract and in the pleadings was merely descriptive of their persons. The contract was their personal undertaking. It is true it was their promise to pay the claim of Davis out of the trust funds. But this was simply a limitation upon the contract; it was none the less their personal obligation. They personally undertook to pay a conceded balance due to Davis, whenever there should be a certain surplus of trust funds in their hands sufficient for that purpose, and they are personally liable for the breach of their undertaking.
The case of Duvall v. Craig, 2 Wheat. 45, supports these views. The suit was an action at law upon the covenants of warranty in a deed. The deed was executed by John Craig and by Robert Johnson and Elijah Craig as his trustees. The trustees described themselves as trustees of John Craig in the granting clause of the deed and in the covenants of warranty, and subscribed their names as such. The Circuit Court sustained a demurrer to the declaration. In this court it was contended for the defendant in error that, Johnson and Elijah Craig having covenanted as trustees, a court of equity was the only forum in which they could be sued, and that no individual judgment could be rendered against them.
But the court, speaking by Mr. Justice Story, said:
“ If a trustee chooses to bind himself by a personal covenant, he is liable at law for a breach thereof in the same manner as any other person, although he describes himself as covenanting as trustee, for in such case the covenant binds him personally, and the addition of the words ‘ as trustee ’ is but matter of description to show the character in which he acts for his own protection, and in no degree affects the rights or remedies of the other party.” The court added : “ The reasoning upon this point disposes also of the second, that the covenant being made by Johnson and Elijah p. 337Craig as trustees, no individual judgment can be rendered against them. It is plain . . there could have been no other judgment rendered against them, for at law a judgment against a trustee in such special capacity is utterly unknown.”
The same learned judge, in his work on Promissory Notes, declares:
“As to trustees, guardians, executors, and administrators, and other persons acting en autre droit, they are by our law generally held personally liable on promissory notes, because they have no authority to bind ex directo the persons for whom, or for whose benefit, or for whose estate, they act, and hence, to give any validity to the note, they must be deemed personally bound as makers.” § 83.
See also Thacher v. Dinsmore, 5 Mass. 299; Forster v. Fuller, 6 id. 58; Hills v. Bannister, 8 Cowen, 31; Eaton v. Bell, 5 P. & Aid. 34.
The cases cited show that whether the obligation of a trustee is under seal or not is an immaterial fact, so far as it concerns his personal liability thereon.
We are of opinion, therefore, that the plaintiffs in error, having assumed a personal liability, the suit was well brought against them in a court of law, and that the court did not err in rendering judgment against them in their individual capacity.
The next assignment of error is that the facts found by the court do not sustain the judgment. The contention is that the findings do not show that there was any surplus fund remaining in the hands of the trustees “ after paying therefrom all taxes and current expenses.”
The findings of the court expressly state that in the years 1863,1864, 1865, 1866, 1873, and 1874 the plaintiffs in error had in their hands moneys belonging to the trust fund sufficient to pay the amount due the defendant in error, after paying therefrom all taxes on the trust property and the ordinary expenses of the trust. These findings are fully sustained by the accounts therein referred to, unless there should be included in the current expenses of the trust the large sums expended by
VOL. ex—22 p. 338the trustees in the erection of the fire-proof office and other improvements, and in building and protecting the levees. We are of opinion that these and like expenditures are not current expenses of the trust, within the meaning of the contract of October 4th, 1861. By that contract even the payment of taxes is not classed as among current expenses. If the expenditures referred to can be called expenses at all, they are extraordinary expenses. In our view they are investments of the capital of the Cairo City property, as much so as the purchase of land or the construction of water works, gas works, or a system of sewerage. It could scarcely have been the purpose of Davis, when he exacted from the plaintiffs in error the contract of October 4th, 1861, in consideration of his yielding possession of the trust property, on which he had a lien, and from which he could have enforced immediate satisfaction of his debt, to postpone its payment for an indefinite period, and until the large sums which the plaintiffs in error expended in substantial and permanent improvements on the trust property had been paid. We think the correct interpretation of the phrase “ current expenses ” was that given it by the Circuit Court, namely, ordinary expenses. The contract of the plaintiffs in error being thus construed, their liability to the defendant in error upon the facts found is clear. We are of opinion that there is no error in the record. The judgment of the Circuit Court is, therefore,
Affirmed.