
    HUNTINGTON W. JACKSON, RECEIVER, v. THE UNITED STATES.
    [No. 13307.
    Decided May 11, 1885.]
    
      On the Proofs.
    
    A national bank becomes insolvent and passes into the hands of a receiver in November, 1877. He makes no return for the tax of the current half year to the Treasurer, who in January, 1878, charges it against the five per cent, redemption fund, and in June, 1879, covers the sum so assessed into the Treasury. The Comptroller of the Currency then directs the receiver to bring this action.
    I. It is clearly the intention of the Jet 3d March, 1879 (20 Stat. L., p. 352), to relieve the customers of an insolvent national bank from the relations of taxpayers, but not to relieve the owners of the institution from their liabilities.
    "II. It is the intent of the Revised Statutes (§§ 5234, 5236) to throw the entire control of an insolvent bank into the hands of the Comptroller of the Treasury, for the purpose of facilitating the winding up of its affairs and the payment of its obligations.
    III. When an insolvent bank passes into the hands of the Comptroller of the Currency, the power and duty of the Treasurer to collect taxes become subject to this control. .
    -IV. In the case of an insolvent bank the Treasurer represents the United States as a creditor, while the Comptroller of the Currency is the embodiment of the visitorial power over corporations created by the government.
    V. The five per cent, redemption fund is in effect a trust fund held for one purpose — that of redeeming the bank’s circulating notes. The Treasurer has no power over the fund of an insolvent bank beyond redeeming its notes, and the fund passes to the custody of the Comptroller as an asset of the bank.
    VI. The obligations and penalties imposed upon national banks by the Revised Statutes ($5 5214,5215, 5216, 5217) relate to solvent banks, not to a bank which has passed into the hands of the Comptroller of the Currency.
    "VII. A tax due the government may be set up ordinarily by way of counterclaim ; but where the assets of an insolvent bank are in the hands of the Comptroller of the Currency, and the government must take pro rata with other creditors, the counter-claim will be dismissed without prejudice.
    
      
      The Reporters’ statement of tbe case:
    The following are the facts found by the court, so far as they relate to the questions determined:
    I. The Third National Bank of Chicago, III., was a corporation organized under the general banking laws of the United States, when, on the 24th day of November, 1877, the Comptroller of the Currency found the said bank to be insolvent, and thereupon appointed the claim in t to be receiver thereof, by an instrument of writing onder his hand and seal of office.
    II. No return having been made by the receiver for the half year ending December 31, 1877, the Treasurer of the United States assessed against said bank the duties or taxes alleged by him to be due under section 5215 of the Revised Statutes, in respect of said half year ending December 31,1877.
    On the 12th of January, 1878, without check, order, or authority from the Comptroller of the Currency or from the receiver of said bank, the Treasurer of the United States charged against the 5 per cent, redemption fund deposited with the Treasurer of the United States by the said bank the amount of the tax alleged to be due by the said bank, as is shown by the following certificate:
    “ I hereby certify that the amount of six thousand three hundred sixty-two dollars ($6,362.89) deposited in the Treasury January 12th, 1878, to the credit of the United States, on account of semi-annual duty levied by act approved June 3, 1864, as specified in certificate of deposit No. 9661, was taken from the fund known as the 5 per cent, redemption fund deposited in this office by the Third National Bank of Chicago, Illinois, in accordance with section three of the act approved June 20th, 1874.
    “A. U. Wyman,
    “ Treasurer U. S.
    
    ^‘Treasury oe the U. S.,
    
      “November 2d, 1883.”
    At the same time the following certificate or receipt was given:
    <( No. 9661.] . “ Treasury oe the United States,
    “ Washington, D. O., Jan’y 12,1878.
    111 certify that the Third National Bank of Chicago, Ills., has this day deposited to the credit of the United States six thousand three hundred sixty-two dollars, on account of semiannual duty levied by actapproved June3d, 1864, for six months preceding 1st January, 1878, for which I have signed triplicate receipts.
    “$6,362.89. • “A. U. Wyman,
    
      “Assistant Treasurer U.
    
    III. On the 17th of January, 1878, the Comptroller of the Currency addressed the following letter to the Secretary of the treasury:
    “ Treasury Department,
    “ Oeeice oe Comptroller oe the Currency,
    “ Washington, January 17th, 1878.
    “ Sir: I wrote you on the 17th ultimo that the Treasurer of theUnited States had withheld certain moneys belonging to the fiveper cent, fund of the Third National Bank and of the Central National Bank of Chicago to cover the semi-annual duty of these banks when assessed in violation of section 5234 of the Revised Statutes.
    “ During the conference of the Treasurer and myself with Hon. H. F. French, Assistant Secretary of the Treasury, it was understood that the funds withheld by the Treasurer were not to be covered into the Treasury until the questions at issue in reference to taxation of insolvent banks were determined; but by recent advices from the Treasurer I am informed that certificates have been transmitted to you for the purpose of cover- ' ing into the Treasury the funds of the banks referred to, and also funds belonging to the National Exchange Bank of Minneapolis.
    “ I desire further to state that there is to my credit in the office of the Treasurer of the United States about $43,000 in trust for the creditors of the National Bank of the State of Missouri, as appears from vouchers held by me in the form of receipts of the Treasurer of the United States, which receipts state that all of such funds have been placed to my credit, and are subject only to my cheek in my official capacity.
    
    “ I am advised, however, by a letter from the Treasurer of the 12th instant, that he has taken $11,569.87 from these funds, which are on deposit to my credit, as stated in his receipts, without my ‘check in my official capacity,’ and- has transmitted to you a certificate of deposit for that amount in payment of semi-annual duty.
    “ In the letter of the Treasurer of the United States addressed to you on the 21st ultimo he says, ‘It must be remembered that the balance to the credit of the Comptroller may at any day be withdrawn from the custody of the Treasurer and placed in that of any assistant treasurer.’
    “It is evident, therefore, both from the receipts of the Treasurer and his own admissions in official correspondence with you, that this amount has been arbitrarily and illegally withdrawn from funds standing to my credit in the Treasury and subject only to my check in my official capacity.
    “These various funds having been, as I have already stated, illegally withheld from the assets of the banks, or illegally withdrawn from moneys deposited by me to my credit, I have the honor to request that these various amounts be suspended, and not covered into the Treasury until the question of the payment of semi-annual duty by insolvent national banks shall be determined either by the courts or by legislation now pending in Congress.
    “Veryrespectfully, ‘.‘John Jay Knox,
    
      “Comptroller.
    
    “Hon. John Sherman,
    
      “Secretary of the Treasury.”
    On the 18th of January, 1878, the Secretary of the Treasury made the following reply:
    “Treasury Department, January 18th, 1878.
    “Hon. John Jay Knox,
    
      “Comptroller of the Currency:
    
    “ Sir: In compliance with the requestcontainedin your letter of the 17th instant, the deposits to the credit of the Treasurer of the United States on account of semi-annual duty below described will not for the present be covered into the Treasury by warrant:
    No. of O. D. Date of O. D. Deposited with.Deposited in the name of— Amount.
    $659.... Jan’y 12,1878 Treasnrer XT. S., "Wash., D O. National Exchange Bank, Minneapolis, Minn. $753 49
    National Bank State of Missouri, St. Louis, Mo. 11, 569 87
    . Third National Bank, Chicago. Ill. 6, 362 89
    9066.... «Xan’y 14,1878 -do . Central National Bank, Chicago, III. 1, 065 25
    “Very respectfully,
    “John Sherman,
    “ Secretary.”
    IV. On the 11th of March, 1879, the Comptroller of the Currency addressed the following letter to the Secretary of the Treasury:
    “ Treasury Department,
    “Oéeioe oe Comptroller oe the Currency,
    “ Washington, March 11th, 1879.
    “ Sir: The act to amend the laws relating to ‘ internal revenue,’ approved March 3d, 1879, contains the.following:
    
      “ ‘ That whenever and after any bank has ceased to do business by reason of insolvency or bankruptcy, no tax shall be ás-sessed or collected or paid into the Treasury of the United States, on account of such bank, which shall diminish the assets, .thereof: necessary forthefull payment of all its depositors, and such tax shall be abated from such national banks as are found by the Comptroller of the Currency to be insolvent; and the Commissioner of Internal Revenue, when the facts shall so appear to him, is authorized to remit so much of said tax against insolvent State and savings banks as shall be found to affect, the claims of their depositors.’
    “In accordance with this provision, 1 have the honor to inclose herewith a schedule of the several amounts taken from» the assets of the national banks named therein b,v the Treasurer of the United States, and by him transmitted to your office, aggregating $21,423.65, which has, ou my application, been retained by you and not paid into the Treasury; and I request, that the same may now be returned to him for deposit to my credit, in trust for the creditors of the insolvent national banks, named in the schedule.
    “ Yery respectfully,
    “John Jay Knox,
    “Hon. John Sherman, “Comptroller.
    
      “Secretary of the Treasury.”
    The sum of $21,423.65 referred to in said letter included the-sum of $6,362.89 referred to in the second finding.
    Y. On the 14th of June, 1879, the money in question, that is to say, the sum of $6,362.89, was covered into the Treasury, together with other sums, by a regular covering warrant in due form.
    YI. The Comptroller of the Currency made the following declaration and certificate:
    “ Treasury Department,
    “ OFEICE OR THE COMPTROLLER OE THE CURRENCY.
    “ This is to certify that the Third National Bank of Chicago,. Illinois, became insolvent, and ceased to do business because of insolvency, on the 24th day of November, 1877; that the said bank has never resumed business and is still insolvent; and that the tax alleged to be due from said bank for a portion of the half year ending January 1st, 1878, being $6,362.89, will if now paid, and would if paid at any time since said bank ceased to do business, diminish the assets of said bank necessary to-pay the stockholders of said bank in full.
    “ I further certify that I have directed Huntington W. Jackson, heretofore appointed the receiver of said bank and now the receiver thereof, to institute suit against the United States. in tbe Court of Claims for tlie recovery of the said sum of $6,362.89 erroneously paid into the Treasury, and there now held, after the law imposing said tax had been repealed in respect of said bank, and after the said tax had been abated.
    “Witness my hand and official seal this 16th day of September, A. D. 1882.
    “ [seal.] “ John Jav Knox,
    “ Comptroller of the Currency.”
    VIL The Comptroller of the Currency directed the claimant,, as receiver as aforesaid, to bring this action before the commencement thereof.
    
      Mr. Nathaniel Wilson for the claimant.
    
      Mr. John S. Blair (with whom was the Assistant Attorney-General) for the defendants.
   Davis, J.,

delivered the opinion of the court:

The Third National Bank of Chicago becoming insolvent,, the claimant was appointed receiver in November, 1877. When the taxes for the half year ending December 31,1877, became-due, the return required by section 5215 of the Revised Statutes, was not made, and thereupon the Treasurer of the United States, acting under sections 5216 and 5217, made an assessment against the bank, and on the 14th of June, 1879, covered the sum so assessed into the Treasury, against the protest of the- • Comptroller of the Currency. The funds so covered in were-taken by the Treasurer from moneys belonging to the 5 per cent.. redemption fund of the bank. Between December 31,1877, and the date when the money was actually covered in, but after the Treasurer had made the assessment, the act of March 3, 1879*. was passed (20 Stat. L., p. 352). This act contained the following provision:

“ That whenever and after any bank h¿is ceased to do business by reason of insolvency or bankruptcy, no tax shall be assessed, collected, or paid into the Treasury of the United States, on account of such bank, which shall diminish the assets, thereof necessary for the full payment of all its depositors, and. such tax shall be abated from such national banks as are found, by the Comptroller of the Currency to be insolvent.”

In Johnston’s Case (17 C. Cls. R., 157) this court, speaking by-Judge Richardson, held that the act of March 3, 1879, abated taxes assessed before the passage of the act but not paid when the act took effect.” This- point, therefore, need not be considered 5 but there remains a material distinction between the case •at bar and that of Johnston, in that in Johnston’s Case the ..amount covered in was necessary to pay the depositors in full, whereas in this case it would go to the stockholders. The defendant has set up a counter-claim for the sum assessed as taxes • due the United States. That this counter-claim is properly introduced has' been decided in Boughton v. The United States (13 C. Cla. R., 284).

The act of 1879, divested of words not necessary to the consideration of this case, provides that when a bank has stopped ¡business because of insolvency no tax shall be paid into the Treasury which shall diminish the assets “ necessary for the full payment of all its depositors,” and such tax shall be abated from insolvent banks. Uo ambiguity appears in the statute; the taxes not to be paid are those only which shall diminish as.-sets necessary to pay depositors j and the word “ such ” in the •concluding clause relates to the definition of the preceding •clause, that is to those taxes, and to those only, whose payment will diminish the depositors’ fund. This interpretation of the .act has already been, in effect, given it in Johnston’s Case, where the court says (p. 172):

“The act of March 3,1879, now under consideration, was •passed for the undoubted purpose of relieving depositors in national banks from the payment of certain taxes not assessed ¡upon them, but upon the banks of which they are only customers — taxes which, under the pre-existing law, they would in-•direetly be obliged to pay when a bank is so insolvent that all its capital is gone, and it has nothing left with which to pay taxes except the money of its depositors. These semi-annual taxes are assessed against national banks in their corporate •capacity, upon their capital and business, in consideration of the franchise and benefits which the government grants to them, -and for other reasons. They are expected to come out of the ¡profits of the bank, and thus, reducing the dividends of the .-stockholders, they are atax upon the proprietors of the institu-vtion.”

It was clearly the intention of the statute to relieve the innocent customers of the bank, between whom and the govern;ment there Were no relations of tax-payer and tax-receiver, and mot to relieve the owners of the institution from their just liabilities.

Before the semi-annual tax became due, the bank had passed into the hands of a receiver and under tbe control of the Comptroller of the Currency. It became then the duty of that officer, under section 5234 of the Revised Statutes, and through the receiver, to take possession of all assets of the association and debts due it, and, if necessary, to enforce the individual liability of the stockholders; all moneys thus received to be paid to the Treasurer of the United States, “ subject to the order of the Comptroller.” By section 523(1 the Comptroller is directed, after providing for the redemption of the outstanding notes of the bank, to make a ratable dividend of the money paid over to him by the receiver “ on all such claims as may have been proved to him to his satisfaction or adjudicated in a court of competent jurisdiction,” and to continue this course as from time to time moneys come in from the receiver. The iiitent of this and other sections of the Revised Statutes bearing upon insolvent national banks is to throw the entire control into the hands of the Comptroller of the Currency, to centralize the power and responsibility, for the purpose of facilitating the winding up of the affairs of the association and the payment of its obligations.. The power and duty of the Treasurer to,, collect taxes become then subject to the general power of the Comptroller over the insolvent bank; the Treasurer represents, the United States as a creditor, while the Comptroller is the-embodiment of their visitorial power over corporations created, by the government.

In the winding up of this bank the United States had no. right, of priority over other creditors (Cook County National Bank v. The United States, 107 U. S. R. 445), and still less had they a lien upon funds in the hands of the Treasurer there deposited for a specified purpose.

The sum covered in by the Treasurer to pay this tax was taken from the fund described in the act of June 30,1874, as follows:

“Any association organized or to be organized under the provisions of said act, and of the several acts amendatory thereof, shall, at all times, keep and have on deposit in the Treasury of the United States, in lawful money of the United States, a sum equal to five per' centum of its circulation, to be held and used for the redemption of such circulation, which sum shall be counted as a part of its lawful reserve, as provided in section 2 of this act.”

By this act the Treasurer became a trustee charged with the care of the fund, which was to be held for one purpose only— that of redeeming the circulating notes. The bank having failed to redeem its notes passes into the hands of the Comptroller of the Currency, and the 5 per cent, fund becomes liable for the redemption of these notes, the contingency contemplated by the statute having arisen. But the Treasurer has no power over the fund, for the Comptroller is directed by section 5234 to take possession of assets of every description,” and section 5236 directs that after provision has been made for refunding to the United States “ any deficiency in redeeming the notes of such association the Comptroller shall make a ratable dividend among the creditors.” Bo prioi'ity is given any creditor except (section 5230) to the United States for one purpose, to wit, the redemption of the circulating notes, and the whole matter is placed in the charge of the Comptroller of the Currency. The Treasurer, therefore, had no power to touch this 5 per cent, redemption unless for one purpose, the redemption of the bank’s notes.

Section 5214 of the Revised Statutes provides that in the months of January and July every association shall pay to the Treasurer certain duties in lieu of all existing taxes, and section 5215 requires from each association, within ten days from the 1st days of January and July, a return, under the oath of the president or cashier, of certain facts necessary to make the assessment; failing this, the Treasurer is directed by section 5216 to make the assessment, and upon failure to pay he may (by section 5217) collect the sums due in the manner provided for the collection of United States taxes from other corporations, “ or the Treasurer may reserve the amount out of the interest as it may become due on the bonds, deposited with him by such defaulting association.”

No return coming from the bank, the assessment was made by the Treasurer on the 12th January, 1878, after the ten days bad expired, and on the same day he charged it against the 5 per cent, redemption fund. Here we have a technical compliance with the statute as far as the assessment is concerned, but some six weeks before the bank had become insolvent, had passed into the hand of the receiver appointed by the Comptroller, and its president and cashier were no longer in aposi-tiou to fulfill the requirements of the statute. The whole status contemplated by the law, to wit, a solvent bank neglecting- or refusing to furnish a sworn return, had long ceased to exist, and the penalty imposed by sections 5216 and 5217 became useless and inoperative. Neither was there reason for enforcing it, the bank being in the hands of officers of the United States, who had possession of all its assets, books, and papers, who alone were in position to make the return, and who alone had power to'pay the tax.

It is not necessary to decide how much, if anything, the defendants are entitled to recover for taxes due between July 1, 1877, and November 24,1877, when the receiver was appointed; the United States, having no lien therefor on the fund in the hands of the Treasurer, from which the money was taken, and having no priority over other creditors, must take from the Comptroller (into whose hands any recovery in this action will go), as do other creditors, its pro rata share of the net assets. There is nothing before us by which we can determine what that would be, and therefore, without prejudice to the right of the defendants to receive that sum, should the Comptroller consider the claim proved to his satisfaction, judgment will be entered for the claimant in the sum of $6,362.89.  