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ERROR to the Circuit Court of the District of Columbia and county of Washington. The United States, on the 25th of June 1838, instituted an action of assumpsit against the President and Directors of the Bank of the Metropolis, for the recovery of $27,881.50, for sundry matters properly chargeable in an account, as by an account annexed to the declaration appeared. The declaration contained the usual counts in an action of assumpsit.
The account referred to contained numerous items of deposits made in the Bank of the Metropolis, from the post-office department, leaving a balance due to the United States of the sum stated in the declaration. The defendants pleaded the general issue.
The defence to the claim of the United States, was founded on credits which amounted to $23,000, exclusive of interest, which had been presented to the accounting officers of the treasury, and which had been refused allowance. They were for acceptances of the post-office department of drafts drawn upon the post-office department, and an over-draft by E. F. Brown, an agent of the post-office department. The jury found a verdict for the defendant, and certified that there was due from the United States to the bank, $3371.94, with interest from March 6th, 1838.
The plaintiffs, on the trial, asked the court to give certain instructions to the jury, which was refused, to which the plaintiffs excepted. These are stated in the opinion of the court. The United States prosecuted this writ of error to the judgment of the circuit court, entered on the verdict. The case is fully stated in the arguments of the counsel, and in the opinion of the court.
The case was argued by Gilpin, Attorney-General, for the United States; and by Coxe, for the defendant.
Gilpin, Attorney-General, for the United States.–In the year 1836, the Bank of the Metropolis was a depositary of public moneys, which were in the treasury of the United States. On the 2d July, an act of congress (5 U. S. Stat. 80) was passed, ordering that all the public revenue derived from postages should be deposited, when collected, 'in the treasury of the United States,' as the rest of the revenue was; and that it should be there held by the treasurer, to pay such appropriations as might be directed by congress 'for the service of the post-office department.' On the 16th July, deposits were made, under this act, in the Bank of the Metropolis; and when they were so made, written instructions were given by the postmaster-general, and acceded to by the bank, that the post-office revenue, as deposited, was to be kept in the name of the 'treasurer of the United States for the service of the post-office department;' to be paid on his warrants, to be reported monthly, and settled quarterly, with him; and that 'there was to be no credit, deduction or set-off admitted, except for moneys drawn out on the treasurer's warrant.' At the monthly return of 1st October 1837, there was a balance of revenue deposited to the credit of the treasurer of the United States of $42,171.88. During that month, the deposit was increased by the sum of $1317.57, and warrants of the treasurer, amounting to $16,132.88, were paid; thus leaving a balance to the treasurer of $27,356.57. Instead of reporting this balance on the 1st November 1837, the bank admitted a balance only of $1031.97, having deducted therefrom the amount, with interest, of a draft for $10,000, drawn on the 14th April 1835, at ninety days, by Edwin Porter, on Richard C. Mason, treasurer of the post-office department,' and accepted by him, as 'treasurer;' and also of four drafts for $13,000, drawn in October 1835, at ninety days, by James Reeside, on Amos Kendall, postmaster-general, and accepted by him 'on condition that his contract be complied with.' All these drafts had been discounted by the bank, before they became due; but had not been paid by the acceptors. The bank also deducted $611.52, which sum was overdrawn, in the year 1835, by E. F. Brown, the agent for disbursing the contingent fund of the post-office department. These credits were claimed at the treasury and disallowed.
At June term 1838, a suit was brought by the United States to recover the whole balance of $27,356.57. On the trial, the bank proved the facts above stated, and claimed the credits which had been disallowed. The district-attorney of the United States requested the court to charge the jury on three points; which were, substantially, as follows: 1. That if they believed there was nothing due to Porter and Reeside, at the time of the acceptance of their drafts, or at the time they became due, the bank was not authorized by law to set off such draft against the deposit of 'the treasurer of the United States.' 2. That if the accounts of Porter and Reeside were not finally settled at the department, it was the duty of the postmaster-general to have them settled; and in such settlement, he ought not to allow credits for illegal extra allowances, where such allowances had been merely entered in the journal, but never brought into the ledger. 3. That the over-draft of the agent for disbursing the contingent fund could not, by law, be set off against the deposit of 'the treasurer of the United States.' These instructions the court refused to give; and it is submitted, that they erred in so doing.
I. When Porter's draft became due, was it a just claim against the United States? would the acceptor have been justified, by law in paying it to the drawer? He accepted the draft as a public officer–as 'treasurer of the post-office department.' He was to pay it out of the public money in his hands, appropriated by law to pay the drawer, when it became due. It was an arrangement between the department and a contractor, for the benefit of the latter. It was an acknowledgment in advance. When the day of payment arrived, the money had not been earned; no debt was due from the United States to Porter; there is, consequently, no appropriation by law to pay him. If paid, he receives, from the public treasury, money not appropriated to him. Could the acceptance of a public officer, made under a misapprehension of the facts, authorize this? If it be a principle not doubted, that the neglect of a public officer cannot deprive the United States of their right to recover money from their debtors; is it not a principle equally well founded, that they cannot be made to pay money twice, by his error or indiscretion? Can the treasurer of the post-office department, or any other officer, promise to pay a sum of public money, ninety days hence, and then draw it from the public treasury, whether justly due or not? Under the instruction, as asked, the question whether the money was owing or not to Porter, on the day when the draft became due, does not arise; for it was requested, in the event of the jury believing that nothing was owing; but the evidence shows, that when that day arrived, everything to which he was entitled had already been absorbed by forfeitures and drafts previously drawn and accepted. A payment made to him, then, would not have been made, because he was entitled to the money, but only because the treasurer of the post-office department had accepted his draft. The constitution, art. I. § 9, par. 6, forbids the payment of any money from the treasury, but in pursuance of appropriations made by law. The appropriation for the benefit of Porter was exhausted. He had received from it all that he was entitled to. To pay him more would be to pay that for which there was no appropriation. United States v. Barney, 3 Hall's Law Jour. 130; United States v. Nicoll, 1 Paine 649.
If, then, it be established, that the United States would not have been bound to pay Porter himself, notwithstanding his possession of the acceptance, were they bound to pay the bank to whom he transferred it? An illegal payment is not authorized, by the constitution or law, to be made to a transferee, any more than to the claimant himself. Every principle which forbids double payment to one, forbids it to the two. It is not requisite to controvert the general rule of commercial law, discussed before this court in the case of Townsley v. Sumrall, 2 Pet. 183, 185, as to the liability of an acceptor, whether he has funds or not, for an unconditional acceptance; nor is it necessary to examine how far the ordinary responsibility, which attaches to parties to negotiable paper, can be imposed, by the acts of their officers, on the United States; nor how far such rules can be applied to them, in a case where they have the effect to draw money from the treasury, without an appropriation (12 Wheat. 561; 4 W. C. C. 464); because, in this instance, the aceptance was clearly of such a nature as to put the acceptor on his guard. If it was not strictly conditional, in terms, it was so in substance. The bank knew, when it received the draft, that it was payable out of a public fund; and that the payment could not be made, unless there was money, appropriated by law for that purpose, in the hands of the acceptor. They knew the acceptance was given by the acceptor 'as treasurer;' and that the law of the land gave public notice that the treastreasurer;' could not bind the United States, beyond the funds appropriated for the use of the drawer. Suppose, an agent accepts as agent, will it be pretended, that the principal is bound beyond the extent of his agency? The holder must inquire into that extent; must see the acceptor's authority; must know how far the acceptance binds the principal. 1 Pet. 283, 290. There is no hardship or injustice in this; the bank, like any other holder, had ample opportunity, before it discounted the draft, to ascertain the exact extent of the obligation assumed by the acceptor. This principle, which is just in every case, is peculiarly proper in that of the United States. How can they guard themselves against acts of their agents, either intentionally or accidentally wrong, except by their laws? These are notice to every person dealing with their officers. These make their acceptances, special acceptances, whether so declared in terms or not. Not only, however, did the bank know the special and conditional character of the acceptance; but they knew also that it was payable on a contingency, and out of a particular fund; that if that fund was previously exhausted, the acceptor could not pay it. On settled principles of commercial law, therefore, the bank was not entitled to payment, any more than the drawer himself, if the fund was exhausted. If they advanced their money imprudently, it was yet done advisedly; they could have easily guarded against the loss; they can now only repair it, so far as the United States are concerned through the action of the legislature.
II. These principles apply more strongly to the acceptances of Reeside's drafts, because they were conditional in express terms. They were only to be paid 'on condition that his contracts were complied with.' The bank need not have discounted a conditional acceptance, but having done so, it assumed the burden of showing that the condition has been performed, before it can charge the acceptor. 4 Maule & Selw. 466; 2 W. C. C. 514. Has it done so? The only evidence adduced by them is, that Reeside performed, in the year 1835, the mail services for which he contracted. That a 'compliance' with all the terms of his contracts has been shown, will scarcely be pretended. If it were, evidence, adduced by the bank itself, sufficiently refutes it. It is proved, that stipulations were expressly made by him, not only to perform mail services, but to 'pay all forfeitures,' and to 'repay all advances.' Was his contract complied with, if forfeitures were unpaid, and advances not refunded? Had such a contract existed between man and man, and such an acceptance been given and received, could the holder, in the face of such proof, recover from the acceptor? How, them, can it be sufficient, when that acceptor is a public officer, to make him twice pay the money from the public treasury?
III. As if aware of the force of these objections, it has been strenously argued, that there were, in fact, moneys due, which were sufficient to pay all these acceptances. If this were so, it is immaterial as to the error in the charge of the court, because, in the instruction prayed, that was left as a matter of fact for the jury. But how is it attempted to be shown that it was so? It is not by proving that the foreitures were not incurred, or that the advances were returned; but it is said, that allowances, sufficient to cover them, were made by the former postmaster-general. It is true, that such allowances are found to be entered in the journal; bnt they were never finally credited in the settlement of the accounts. It may be admitted, as has been argued, that when the head of an executive department has finally acted upon a matter within the scope of his authority, his decision cannot be reversed by his successor, to the disadvantage of a third person, without the disclosure of material error, otherwise than by resorting to judicial proceedings. But such is not the case here. These were merely journal memorandums, such as must necessarily be made in the course of proceedings between a mail contractor and the post-office department; they were left to be finally settled, when the account was adjusted. Would it be contended, if the contractor had, in his own journal, charged himself with a payment he had not received, or a forfeiture he not incurred, that the error could not be corrected in the final settlement? In the case of Ex parte Randolph, 9 Pet. 15, which is relied on, the account had been entirely settled; it had passed through all the forms of the treasury; it reposed in the register's office as a final and conclusive adjustment. The ground taken, therefore, does not sustain the assertion that the money was due; and the court below should have instructed the jury to that effect. They should have instructed them, that the mere fact of there having been allowance made in the journal, and while the account was unsettled, which allowance are alleged to be illegal and contrary to the contract, and were rescinded as such, before the account was closed, cannot of itself authorize the admission of a credit for their amount.
But it is said, that even if these forfeitures and advances might be lawfully recharged, yet that the condition of the acceptances had no reference to them; that it was not retrospective, but had relation merely to the performance of future duties under the contract. Such a distinction, between the several duties to be performed under the contract, is not warranted by the language of the condition, which is general. The condition was inserted for the safety of the acceptor; the acceptance was for the benefit of the contractor; in conferring that benefit, the protection of the acceptor was to be provided for; the bank knew this to be the case; the advance of money by it was a voluntary act, for its own advantage, and in making it, there was no pretext for overlooking the safety of the acceptor; this depended no less on the repayment of past advances, than on the performance of future services. Why should the acceptor, in seeking to protect himself, guard less against one than the other? The condition referred to the contract, the whole contract; that condition was submitted to the bank, before its money was advanced; the whole contract, therefore, was, or might and ought to have been, known; and it would be a great injustice to the acceptor, when he states his condition in terms so broad as clearly to secure for himself the performance of every stipulation of the contract, were the party that obtains his guarantee for the payment, to be permitted to diminish that security in regard to some of the most essential of those stipulations. It is not possible, in an acceptance, to state all the particulars of a contract; it is sufficient to embrace it entirely, by general and comprehensive words, not susceptible of being misunderstood. When this is done, no one has a right to allege ignorance of any part of that which he might easily have known. How could the acceptor apprise every one, into whose hands the draft might pass, of every stipulation of the contract? It was sufficient, that he apprised him, before he incurred any responsibility, that a contract existed between the drawer and the acceptor, which might be ascertained, and must be performed in all its parts, before the latter either intended or engaged to be responsible.
IV. The claim to be repaid the over-draft of E. F. Brown, cannot be sustained. He deposited in the bank, on the 30th of April 1835, the sum of $7070.24; he drew checks on this till the 2d December 1835, when he had received thereon $7671.76; that is, $611.24 more than he had deposited. There is no proof, nor even an allegation, that this latter sum was applied to the use of the United States. The sole grounds of claim are, that, from June 1835, the checks of Brown were countersigned by the accountant of the department; and that, after the contingent fund was exhausted, and previous to the passage of the annual appropriation act, some ordinary bills, certified by the accountant, were paid by the bank. In what manner do these acts recognize the over-draft? In itself, it was wrong. It was a transaction known only to the bank and Brown. It might have been prevented by the former. It is excused by no proof that such agents as he was, were usually, or ever, permitted to make over-drafts. The counter-signature by the accountant, and the payment of bills, at the express request of the postmaster-general, are proofs that any deviation from the usual mode was only to be made by express authority. None such is exhibited for this over-draft. It was therefore, an act voluntarily done by the bank, not for the benefit of the United States, and with which it has no right to charge them.
V. But suppose, all these sums are legal credits, can they be set off or deducted from moneys deposited in the bank, after the 2d of July 1836, to the credit of 'the treasurer of the United States, for the service of the post-office department?' That was public money in the treasury. It could be drawn out in no way but by a warrant, under an appropriation made by act of congress. It was not under the control of the postmaster-general. It was not money which he had received in order to disburse; nor was it under the control of the treasurer himself, except to pay it on such a warrant. He could have no other voucher to discharge himself, if the money was not in the treasury. 1 Story's Laws 46. These provisions of law were known to the bank, when it received the deposit from the treasurer. They cannot charge against it a claim which, if the treasurer himself had paid, he would not be credited with.
The debts do not arise in the same right, nor are they of the same nature. It is true, that the United States are, eventually, the parties; but the public funds, distributed for different objects, are separate funds in the transactions between a claimant and the various officers of the government. Such a distinction is indispensable. The relations between a bank and the treasurer as a public depositary, are totally distinct from those between a bank and the head of an executive department, in relation to contracts existing between them. The settlement of its account with one, would have no reference to that with the other. They are, therefore, in fact, debts that do not arise between the same parties, or in the same right. In every case of set-off recognised by this court, it has been for moneys properly payable out of the same fund which the United States sought to recover.
An agent intrusted with money cannot pay off his principal's debts, and then set off the payment. This is here attempted, for it is the payment of a debt to Porter and Reeside, with funds with which the agent is intrusted for a different purpose. 1 Rawle 330. Nor can an agent convert to one purpose, funds deposited with him for another. Nor can he avail himself of the advantages of his agency, to do, for his own benefit, that which injures or affects his principal. 1 Johns. Ch. 394; 6 Pick. 204.
The inability, thus established, to sustain, upon general principles of law, such a right of set-off as is now contended for, is confirmed by the peculiar facts of this case. The whole claim of the bank was ascertained and liquidated in January 1836. This deduction is made out of money placed in its hands subsequent to that time, under a promise, both express and implied, that it would not be appropriated to the payment of that claim. Before so depositing the money, the postmaster-general, in his letter of 16th July 1836, stipulated, that it should 'be paid out only on the checks of the treasurer,' and that, in accounting for the sums thus deposited, 'no other credit, set-off or deduction would be admitted.' On this condition, and on this alone, did the bank receive the money; and that, at a time when both parties knew that there was this actual pending claim to a credit, set-off and deduction, existing and disputed between them. Even if the bank had not agreed to this express stipulation, when it received the money, would not their consent to transfer the fund they then had to a new account, their silent acquiescence, their settlement of repeated monthly and quarterly accounts, without an allusion to a claim a right to make this deduction, have proved, ...