#### ALLEN & STREET'S CASE. Eugene B. Allen et al., appellants, *v.*The United States, appellees.

(5 Court of Claims R., p. 339. Not yet reported in Wallace.)

*On the claimants'1 Appeal.*

*Russell, Majors 4" Waddell are indebted to the Government for Indian trust-bonds, , which they, through the collusion of certain officers, illegally procured and sold. R., M. ‡ W. being insolvent, assign their property in trust for their creditors. The assignees sell some of the assigned personal properly do the Government and receive the ttsual quartermaster' vouchers. Payment of the vouchers is refused, and the assignees bring their action. The Government’s claim against It., M. ■4' W. has never been prosecuted to judgment, and is still an unliquidated demand, disputed by R., M. 4" W. The Court of Claims decides that the Government is entitled to priority of payment out of the trust-funds; that the money in suit is not subjeet to any prior charge in the hands of the assignees ; and that Ute Government may set-off so much of the indebtedness of R., M. 4’ W. as will equal the amount claimed in this suit. Judgment for the defendants. The claimants appeal.*

I. Tiro Government is entitled to priority of payment where the debtor, not aving sufficient property to pay his dobts, makes an assignment for the benefit of creditors. Therefore, where the Government becomes a purchaser from the assignees of a portion of the assigned property, it need not pay the purchase-money, but may set-off against it a portion of its demand against the insolvent; and this when the demand has never been prosecuted to judgment, and is disputed and denied by the insolvent.

II. A demand in favor of the Government against an insolvent, although the amount thereof has not been determined by judicial proceedings, yet if it can be stated with certainty, and the interest be added by computation, will be a in’oper subject for set-off in a suit brought by the assignees against the Government for property, which they sold to the Govern- . ment after the assignment; or may at least be the subjeet of counterclaim under the *Amended Court of Claims Act.*

*The*Reporters’ statement of the case:

The following are the material facts found by the court below :

1. On the 1st day of November, 1801, the claimants, Streét & Allen, sold and delivered to Major L. 0. Easton, a quarter- • *91master in tbe United States Army, and for tbe use of tbe United States, 273 wagons, at'tbe price of $146.25 for each wagon; and also one thousand three hundred and twelve and a half yoke of oxen, at tbe price of $55 per yoke for such oxen, amounting, in the aggregate, to tbe sum of $112,113.75. And for this sum Major Easton issued to tbe claimants vouchers in due and proper form, being the vouchers appended to and forming part óf tbe petition. We also find that Major Easton bad full authority to make tbe purchase, and that the property was of tbe value agreed to bo paid for tbe same; and that it was used by the United States, and their title and possession to tbe same has not been in any way disputed or disturbed; and that tbe sum of $71,491.25 still remains unpaid upon tbe said vouchers, tbe balance having been paid by tbe United States to tbe claimants. .

2. We find further, that on tbe 25th and 28th days of January, A. D. 1881, Bussell, Majors *&*Waddell executed and delivered to tbe claimants two several deeds of assignment, in trust for their creditors, therein designated, which deeds of assignment are here referred tó and made part of this statement of facts, together with the schedules accompanying the said deeds of assignment respectively, the said Bussell, Majors & Waddell then and there being wholly insolvent. And we find that said deeds together convey all the property of Bussell, Majors *&*Waddell in trust for the benefit of their creditors.

3. We further find that the amount claimed in this suit is for the price' of so much of the property sold and delivered to the United States, as already stated, as had belonged to Bussell, Majors & Waddell, and was conveyed to the claimants in trust for creditors by the deeds of assignment already recited.

4. We find that at the date of assignments heretofore set forth by Bussell, Majors *&*Waddell to the claimants, in trust for creditors, the said Bussell, Majors *&*Waddell were indebted to the United States in the sum of $870,000, or thereabouts, for certain Indian trust-bonds belonging to the United States, which the said Bussell, Majors & Waddell, through the collusion and connivance of certain officers of the United States in charge and custody of said bonds, illegally procured, and negotiated and sold the same, and applied the proceeds 'thereof to their own use; and tbe amount thereof, with interest thereon from tbe 1st of October, 1880, is still due and owing from Bus-*92•sell, Majors & Waddell to the United States; but the United States liave never prosecuted such, indebtedness to judgment, and the same is still an unliquidated demand, disputed and denied by Bussell, Majors & Waddell.

5. That the claimants received, under the deeds of assignment recited, property of the assignors over and above that the price of which is claimed in this suit, amounting to $150,000. .The claimants -have not proved what disposition has been made of the same, nor have they shown what are or have been the expenses of the execution of the trust; nor have they shown that they have complied with the laws of Missouri relating to assignments made in trust for the benefit of creditors; nor that they have given good and sufficient security for the faithful execution and performance of the said trust.

And upon the facts so found the court ruled as matter of law—

1st. That the United States are entitled to priority of payment out of the proceeds of the property assigned to claimant by Bussell, Majors & Waddell under the trust-deed recited.

2d. That the money in suit, being the proceeds of such property, is not in law subject to any prior charge or lien in the hands of claimants. '

3d. That the United States may, under and by virtue of the *Act March*3,1803, section 5, entitled “An act to amend ‘An act to establish a court for the investigation of claims against the United States,’ approved February 21, 1855,” set-off so much of the indebtedness of Bussell, Majors *&*Waddell to them as shall be equal to the amount claimed and proved in this suit’ by Allen *&*Street, the claimants.

*Mr. James Hughes*for the claimants, appellants:

The right of the United States to priority of payment in certain cases of assignment,' as conferred by the acts of Congress and j udicially expounded by this court, does not apply in this case upon the facts as found by the Court of Claims. — Stat. L., p. 515, § 5, pp. 67C-7, § 65; *Conrad*v. *The Atlantic Insurance Company,*(1 Peters, 386-439;) *Brent*v. *The Banlc of Washington,*(10 Peters, 596;) *BeartonY. The Farmer*s’ *Banh of Delaware,*(12 Peters, 102;) *The United States*v. *Hunter,*(5 Mason, 229.)

These authorities clearly establish that the right of priority *93is limited to i>ayment out of tlie proceeds of the trust-fuDd after the trust has been properly executed, its expenses paid, &c., and does not confer a power to prevent the execution of the trust by seizing the property assigned or its proceeds after sale.

The right of set off in the Court of Claims, as conferred by the *Act March*3, 1863, § 3, does not apply in this case.

The findings of the Court of Claims show affirmatively that the claim which was set off agaihst the appellant’s vouchers was an unliquidated and disputed claim, which the Government had never established, nor prosecuted to judgment against Eussell, Majors & Waddell, the peculiar character of which was .such that it could not be paid and adjusted by the claimants, acting as trustees under the assignment.

It was .competent for the United States to waive its right of priority of payment under the deeds of assignment, and the voluntary purchase of the property and delivery of the formal vouchers sued upon constitute such waiver.

*The Attorney-General*and *Mr. Assistant Attorney-General McMichael*for the United States, appellees:

As against these assignees, who are here the appellants, the United States would have priority in the settlement of the insolvent state of Eussell, Majors & Waddell.— *United States*v. Fisher, (2 Cranch, 358;) *Harrison*v. *8terry,(5*Oranch, 289;) *United States*v. *State JBanlc of North Carolina,*(6 Peters, 29.)

The claimants, in the court below, endeavored to give their action the color of an individual suit; but the findings of fact of that court, before cited, show that the claimants were acting as the representatives of the insolvent estate, and identify the property for which payment is sought as having belonged to the insolvent firm.

The powers conferred on the Court of Claims cover the present case. We have seen that Eussell, Majors *&*Waddell were indebted to the United States at the time of their assignment in a sum exceeding the amount here in dispute; that the United States were entitled to priority of payment out of the proceeds of property conveyed by the assignment; aud that the property for which compensation was sought by the claimants in the court below was a part of the very property só assigned. The claim of the United States against the assignees of insol-*94rent debtors is a proper set-off in. a suit by those assignees to recover for the proceeds of the assigned *estate.*— Stewart v. *Anderson,*(6 Oranch, 203;) *Maries*v. Barlcer, (1 Wash. O. C., 178;) *Myers*v. *United States,*(1 McLean, 493;) *Bemis*v. *Smith,*(10 Met., 194;) *Sheldon*v. *Kendall,*(7 Cash., 217;) *Blalcesley*v. *Smallwood,*(89 Q. B., 538.)

The principle upon which courts have refused in the case of a suit by an executor to allow debts due by the deceased in his life-time to be set off against demands which have accrued *to*his executor since his death, is, that this would interfere with the regular course of distribution, and has no application to this case, because the Government is entitled to priority of *payment.*— Shipman *v.*Thompson, (Willes, 102;) *Watts*v. *Bees,.*(9 Excli,, 695,11 Exch., 410;) *Bale*v. *Goolce,*(4 Johns. Oh., 11.)

Mr. Justice Field

delivered the opinion of the court:

In January, 1861, Bussell, hjajors & Waddell, partners in business, being at the time wholly insolvent, executed and delivered to the claimants two deeds of assignment, conveying all their property in trust for the benefit of their creditors. In November following, the claimants sold to the United States a portion of the property thus conveyed, consisting of wagons and oxen, for a sum exceeding $112,000. Of this sum only a part was paid; leaving a balance amounting to $71,491, of which payment was refused.

It appears from the findings of the Court of Claims that at the date of the assignments, Bussell, Majors *&*Waddell were indebted to the United States in the sum of $870,000, or there- ■ abouts, for certain Indian trust-bonds belonging to the United States, which they had illegally procured and sold, and the proceeds of which they had applied to their own use. By reason of this indebtedness the payment to the claimants of the above balance was refused; and to recover that balance the present suit was brought.

The Court of Claims held that the United States were entitled to priority of payment out of the proceeds of the property assigned by Bussell, Majors *&*Waddell, under the trust deeds, and to set off so much of the indebtedness of that firm to them as would be equal to the amount claimed and proved; and accordingly dismissed the petition. Hence the present appeal.

Among the cases in which the United States are entitled, by *95*Act March*3,1797, to priority in the payment, of debts due to them over debts to other creditors, is the case where the debtor, not having sufficient property to pay his debts, makes a voluntary assignment of the property he has for their payment. Of the creditors of Russell, Majors & Waddell, the United States are therefore entitled to be preferred in the payment of their demand out of the proceeds of the property in the hands of the claimants, the property not being subject at the date of the assignments to any specific charge or lien. This preference the claimants cannot disregard in the distribution of the proceeds, without making themselves personally liable for the amount payable on the demand of the United *States.*— The *United States*v. *Clark,*(1 Paine, 629.) If they could recover the amount claimed in the present suit, they would be required immediately to pay it over to the United States on the debt of the assignors, after deducting the expenses of its collection. This is, therefore, a case in which the demand of the United States would be allowed as a set-off against the claim of the assignors, independent of the statute of March 3,1863, amending the act establishing the Court of Claims. The demand being for the proceeds of certain Indian trust-bonds unlawfully converted by Russell, Majors & Waddell to their own use, is. one arising upon an implied contract, or may be so treated by the waiver of the alleged fraud in the conversion of the bonds. Although the amount of the proceeds has not been determined by judicial proceedings, it can-be stated with certainty, and the interest can be added by computation. ' The demand is, therefore, the proper subject of set-off in a suit for the recovery by the claimants of the amount due upon a sale to the United States of property held by them under the deeds of assignment.

If the objection urged by counsel of the claimants to the allowance of the set-off, that the demand against Russell, Majors & Waddell is unliquidated, would have been entitled to consideration, supposing such to be the character of the demand independent of the statute mentioned, it is not entitled to any since the passage of that statute. The third section of the statute is broad enough to authorize the Court of Claims,.in suits against the United States, to hear and determine demands of the Government of every kind against the claimant, or those whom the claimant represents, whether liquidated or unliqui-dated, and to set off against the claim in suit the amount found *96in favor of tbe United States upon such hearing and determination.

There is nothing in the fact that the quartermaster who acted as agent of the United States in the purchase of the wagons and oxen from the claimants gave to them certificates of the correctness of thóir bills which constitutes in any respect a waiver on the part of the United States of their right of priority of payment, or even looks in that direction.

The decree is affirmed.