
    THE BATAVIA TIMES PUBLISHING COMPANY v. THE UNITED STATES
    [No. 45426.
    Decided April 6, 1942]
    
      Mr. Hugh H. Obeo/r for the plaintiff. Douglas, Obear <& Campbell were on the brief.
    
      Mr. Brice Toole, witb whom was Mr. Assistant Attorney General Francis M. Shea, for the defendant.
   GREEN, Judge,

delivered the opinion of the court:

The material facts alleged in the petition are in substance as follows:

In April 1938 there was a cause pending in this court entitled The Seminole Nation v. United States, in which Paul M. Neibell was attorney of record for the plaintiff, and a cause entitled The Wichita and Affiliated Tribes, etc. v. United States, in which C. C. Calhoun was the attorney of record. Mr. C. C. Calhoun was also of counsel in the 8'envinóle case.

The plaintiff herein being requested by the said C. C. Calhoun to print, did undertake and agree with the said C. C. Calhoun to print, and did in fact print at the request of the said C. C. Calhoun the brief in each of the above-mentioned cases. The plaintiff’s charge for printing the Seminole Nation brief (L 89) was $135.50 and for printing the Wichita-Caddo brief (E 542) was $96.25, or a total of $231.75 for both briefs, which said charge was a fair and reasonable charge.

In order that payment might be made of the aforesaid publishing charge through authorization of the Indian Bureau of the Department of the Interior and in accordance with the long existing custom prevailing in respect of such matters, the said Calhoun requested the plaintiff to deliver to him receipted bills, for voucher purposes only, for each of the aforesaid printing charges, and the plaintiff did, on the 23rd day of July 1938, although its said accounts had not, nor had any part thereof, then in fact been paid, deliver to the said Calhoun such receipted bills upon the understanding and agreement that the said Calhoun would collect said funds as the funds of the plaintiff and would deliver the Government’s check therefor, duly endorsed, to the plaintiff upon receipt thereof. That said practice is one which has long prevailed in many branches of the United States Government.

In due course the aforesaid bills were approved by the Indian Bureau and transmitted to the Comptroller General of the United States for payment.

On the 2nd day of August, 1938, the said Calhoun died leaving due and owing to the United States Government certain unpaid income taxes. The Comptroller General did purport to offset against the said unpaid taxes the amount in his hands which had been transmitted to him by the Indian Bureau for payment to Calhoun, although the said Calhoun had no beneficial interest in said funds whatsoever; and although said Comptroller General was advised of that fact, the said Comptroller General refused to pay the plaintiff herein the said amount so transmitted; that said funds in truth and fact belonged to the plaintiff and that said Calhoun and his estate had no interest therein except as a trustee for the plaintiff.

Wherefore,-the plaintiff asks judgment against the defendant for $231.75.

The defendant demurs to the petition on the ground that it does not state a cause of action.

The argument for defendant presents more specifically two grounds for the demurrer. The first is that there is no privity of contract between the plaintiff and the United States. This was not necessary. Attention is also called to the provisions of the Act of March 2, 1934, 48 Stat., 362, 377, authorizing payment to the attorneys for the Seminole Indians “in such sums as may be necessary to reimburse the attorneys for such proper and necessary expenses as may have- been -incurred” in the prosecution of the-Suit, and-also that the applicable appropriation act of June 22, 1936, 49 Stat. 1597, 1621, making provision for the payment of expenses incurred in the Wichita-Caddo case only authorized payment “for costs and expenses already incurred and those to be incurred by their duly authorized attorneys in the prosecution of the claims of said Indians now pending in the Court of Claims.”

We do not think these matters constitute any defense. The general rule is that in the absence of circumstances showing a different intention or understanding, property paid for with the money or assets of one person but the title thereto being taken in the name of another, is subject to a resulting trust arising by operation of law in favor of the person furnishing the consideration, and the party thus obtaining title is a trustee for the person paying the consideration. 65 Corpus Juris, section 154, pages 381, 382, and 383,-and cases-cited. Amessential element to the creation of the trust is that the grantee does not receive and hold the legal title as beneficial owner and this appears clearly in the case before us. It was definitely understood and agreed that Calhoun should have no beneficial interest in the money to be paid for printing. Whatever interest he acquired in this payment was solely for the benefit of the plaintiff.

The statutory provisions above set out authorized payment not merely of the expenses paid, but instead, of expenses “incurred” or “to be incurred” by the attorney for the Indians. When Calhoun contracted for the printing, the expense thereof was “incurred” or “to be incurred” and the money to be paid was due him. The Government completed all arrangements for payment and he was entitled -to receive the fund when he died; but in the meantime and before the Government had taken any proceedings to apply the fund to his income tax, he had divested himself of all beneficial interest therein. As Calhoun had an interest in the property merely as trustee the fund in fact belonged to plaintiff and the defendant has taken plaintiff’s property and applied it to Calhoun’s debt.

It is also urged that the claim of the United States to this money was prior to the claim of' the plaintiff under revised statutes, section 3466; Title 31 U. S. C. Sec. 191, but this contention assumes that the money or debt due from the Government belonged to Calhoun when appropriated; whereas the fact is, as shown above, that Calhoun had then no beneficial interest in it, and for that reason the Government had no right to appropriate this fund to the payment of Calhoun’s income tax.

It is objected that the transaction between Calhoun and the plaintiff was in effect an assignment or transfer to plaintiff of Calhoun’s claim against the Government and that such an assignment is void under the provisions of the U. S. Code, Title 31, Sec. 203. This is immaterial, for a resulting trust always has the same effect in the end as would a valid assignment. A more direct answer to the objection is that the petition does not allege any assignment or transfer, and there was none. The plaintiff obtained title through the law with reference to trusts, and- the contention made overlooks the well-established rule that the statute does not embrace cases where there has been a transfer of title by operation of law. See National Bank of Commerce v. Downie, 218 U. S. 345, and cases cited. It was said in Western Pacific Co. v. United States, 268 U. S. 271:

The object of this section is to protect the Government and prevent frauds upon the Treasury. It applies only to cases of voluntary assignment of demands against the Government, and does not embrace cases where there has been a transfer of title by operation of law.

In this case by operation of law a trust resulted without there being any assignment or transfer. Consequently the statute making transfers and assignments of claims against the United States void has no application.

It is also said that the plaintiff did not pay or furnish anything to the Government which formed the original consideration for the payment of the fund. This is clearly an error because the plaintiff furnished the printing which was the consideration of the debt and delivered vouchered receipts for voucher purposes only for the printing charge, upon the understanding Calhoun would collect the funds due and deliver the Government checks therefor, all of which the petition alleges was a custom or practice which has long prevailed in many branches of the United States Government.

It is also said that if there was any trust it was an express one. We have shown in a prior part of the opinion that all of the forms necessary to create a resulting trust had been consummated; but, if there was an express trust, we think this is entirely immaterial as the plaintiff’s rights would remain fixed by operation of law.

The demurrer must be overruled.

The argument of defendant is not made merely on the assumption that for the purpose of the demurrer the allegations of the petition are true. It seems to practically concede that these allegations actually relate the facts in the case. If this is the situation, there is no need to refer the case to a commissioner for findings upon the facts; and unless the defendant should within ten days advise the court of its desire to offer some evidence, the defendant will be considered to have elected to stand on the demurrer and judgment will be rendered for the plaintiff in the amount claimed in the petition.

It is so ordered.

LittletoN, Judge, concurs in the foregoing opinion and in the following concurring opinion.

JoNES, Judge,

concurring:

I concur in the result. The attorney was a mere instrumentality for accomplishing a purpose instituted by and approved by the defendant. Apart from that purpose, as disclosed by the statutes, the attorney had no interest whatever in the briefs as such, or in their printing.

To get a true concept of the background of this contract, the different statutes must be construed together. It must first be remembered that the Indians are in a sense wards of the Government. Their funds are deposited in a special account in the Treasury and their expenditures must be approved by an authorized official of the Government.

By the Act Approved May 20, 1924 (43 Stat. 133, 134), jurisdiction was conferred upon the Court of Claims to hear, examine and render judgment in any and all legal and equitable claims growing out of any treaty or agreement between the United States and the Seminole Indian Nation or Tribe.

To show the complete supervision of the Government over the entire proceeding, we quote from Section 2 of the act:

* * * The petition shall be verified by the attorney or attorneys employed to prosecute such claim or claims under contract with the Seminóles approved by the Commissioner of Indian Affairs and the Secretary of the Interior; and said contract shall be executed in their behalf by a committee chosen by them under the direction and approval of the Commissioner of Indian Affairs and the Secretary of the Interior. * * *

It will be noted that in this basic act the attorneys employed must be approved by the Commissioner of Indian Affairs and the Secretary of the Interior, and the contract must be executed in behalf of the Indians by a committee chosen under the direction and with the approval of both the Commissioner and the Secretary.

Pursuant to the above act, provision was made in the Appropriation Act of March 2, 1934 (48 Stat. 362, 377), for the sum of not exceeding $5,000.00 which was authorized to be expended out of any money standing to the credit of the Seminole Nation of Indians in the Treasury of the United States, in such sums as might be necessary to reimburse the attorneys for such proper and necessary [italics ours] expenses as may have been incurred or may be incurred in the investigation of records and preparation, institution and prosecution of suits of the Seminole Nation of Indians against the United States under the Act of May 20, 1924, supra. . It was .further, provided that such claims for expenses incurred must be approved by the Secretary of the Interior.

In the Appropriation Act of June 22, 1936 (49 Stat. 1597, 1621), an additional sum was authorized to be expended from the

tribal funds of the Wichita and affiliated bands of Indians of Oklahoma in the Treasury of the United States, upon proper vouchers to be approved by him, for costs and expenses already incurred and those to be incurred by their duly authorized attorneys in the prosecution of the claims of said Indians now pending in the Court of Claims, * * *

It will thus be seen that in protecting the Indians the defendant.,, authorized, through one of its agencies a suit to be brought against the Government in behalf of the Indians. It authorized certain expenses, including the printing of briefs, to be incurred. The attorney was merely the authorized channel through which the printing was ordered. He had no interest in the contract price of the briefs. He was simply the medium through which the contract was entered into, the conduit through which this necessary item of cost was to be paid to the proper party. This is true regardless of whether there was a trust.

It is true that the statute uses the expression “reimbursement” to the attorneys for necessary expenses incurred. This was merely a mattér of form.

We look to the substance rather than the form. That substance is made manifest in a reading of the statutes in their entirety. The briefs were printed for and on behalf of the Indians. They were to be paid for out of Indian funds. The entire transaction from the beginning to the end was supervised and directed by the Commissioner of Indian Affairs and the Secretary of the Interior. When the facts are considered in their entirety, it is manifestly a contract implied in fact, if not an express contract, on the part of the defendant in behalf of the Indians for the printing of the necessary briefs. It was authorized to be made through an attorney, approved by both the Indians and the proper agency of the Government.

To construe the use of the word “reimburse” as riding down the whole Course of dealing and manifest purpose that was sought to be accomplished through the supervision of the defendant as provided in the statutes appears as hypertechnical. It is rather apparent from the various acts that the Secretary of the Interior had authority to pay the necessary expenses in any manner he saw fit.

In this connection attention is again called to the fact that these were Indian funds. The expense was to be paid out of Indian funds. To permit the Government to use the funds of its ward to pay the personal debts of an attorney who had been selected with its approval would, to say the least, put the Government in an unfortunate position.

Not only the facts as a whole, but every consideration of justice calls for' a recovery on the part of the plaintiff for work actually done under the supervision and direction of the defendant.

Whitaker, Judge, concurs in this opinion.

Madden, Judge,

dissenting:

These are the essential facts, as I see them, in this case. Calhoun ordered from plaintiff the printing of legal briefs for Calhoun’s use as attorney for Indian tribes which were suing the United States in this court. Calhoun was entitled to receive payment from the.defendant for the amount of the printing cost, as a necessary expense of his representation of the Indian tribes. After the printing was done, he requested of plaintiff receipted bills for the printing in order to present such bills to the defendant as evidence that he was. entitled to reimbursement. This was not an unusual request.. However, since Calhoun was not financially stable, though personally honorable, Calhoun and plaintiff agreed that, inconsideration of Calhoun’s being given these receipted bills,, Calhoun would, in the language of plaintiff’s petition, “collect said funds as the funds of the plaintiff and would deliver-the government’s check therefor, duly endorsed, to the plaintiff upon receipt thereof.” Plaintiff gave Calhoun the receipted bills on July 23,1938. Calhoun presented them, with his claim for reimbursement, to the defendant. Calhoun’s claim was approved by the Indian Bureau and transmitted to the Comptroller General for authorization for payment. On August 2, 1938, Calhoun died, owing the defendant income taxes. The Comptroller General asserted an offset for these taxes against Calhoun’s claim, and it has never been paid. Calhoun’s executors in March 1940 advised the Bureau of Indian Affairs and the Comptroller General that Calhoun’s estate had no interest in the claim, that it belonged to plaintiff, and should be paid to plaintiff.

This recital seems to me to show that on July 23, 1938, Calhoun made an oral assignment or oral declaration of trust of a claim which he had against the defendant, together with an agreement to make a written indorsement of the check which, it was expected, the defendant would issue in payment of Calhoun’s claim, when that check should come into Calhoun’s hands. But this agreement to assign, or declaration of trust preliminary to an assignment, was void under the provisions of United States Code, title 31, sec. 203. That section provided that—

All transfers and assignments of any claim upon the United States * * * shall be absolutely null and void unless they are freely made and executed in the presence of at least two attesting witnesses, after the allowance of such a claim, the ascertainment of the amount due, and the issuance of a warrant for the payment thereof.

The agreement between Calhoun and plaintiff comes into complete collision with the statute. If it had the legal effect which plaintiff claims for it, of divesting Calhoun of his beneficial ownership of the claim and vesting that ownership in plaintiff, it was a “transfer” or “assignment” within the meaning of the statute. And not only was the required form for the intended transfer completely disregarded, but the subject matter was, at that stage, not assignable at all, regardless of form. The claim had not been allowed, the amount had not been ascertained, and no warrant had been issued.

The opinion of the court speaks of the transaction as a ■“resulting trust,” such as arises when C pays A for property and directs that A shall transfer the property to B and there is no proof that C intended to make a gift of the property to B, or that B should become the beneficial owner and should owe C the price paid by C to A. Ours is not, as I see it, such a situation. C (plaintiff) did not pay or furnish A (the Government) anything. It printed briefs for B (Calhoun), on Calhoun’s credit. Calhoun, upon delivery of the briefs, became the owner of them, and became entitled under the statute to reimbursement for their cost upon the presentation of the proper evidence. There is no assertion in the petition that at this stage of the transaction plaintiff was relying upon anything other than Calhoun’s credit. When, on July 23, plaintiff furnished Calhoun with receipted bills, the evidence required by the statute for Calhoun to receive reimbursement, plaintiff was not furnishing the consideration for the payment which Calhoun was to receive. It was merely supplying Calhoun with evidence necessary to prove his claim. The consideration, the printing of the briefs, had already passed, at a time when, so far as the petition shows, it was intended that Calhoun should own his own claim against the Government, and should owe plaintiff the price of the briefs which plaintiff had printed for him.

But a shorter answer to the resulting trust suggestion is that such a trust is a device invented by the courts to do justice in a situation where evidence is lacking as to what the actual intent of the parties was, and such a trust achieves a result in accordance with what would have been their fair intention if it could have been proved, or with justice, if the parties had no actual intention. Here we have no need to resort to such an invention. Whatever the transaction of the parties was, it was an express one. The petition states just what the parties intended. If the transaction intended is properly defined as a trust, it is an express trust, not a resulting one, and must stand or fall as an express trust.

The concurring opinion is based upon the idea that, looking through the form to the substance of the transaction, the United States was indebted to plaintiff, the printer, for briefs printed for the Indians whose money the United States held. This view places Calhoun, the attorney for the Indians, in the position of an agent for the United .States, authorized to incur a printing bill on its behalf, which it was bound to pay. If this was the real nature of the arrangement, it would follow that plaintiff should recover, since the United States would have no right to set off Calhoun’s debt to it against its debt to plaintiff.

I think that this was not the substance of the arrangement. If A agrees with B that he will reimburse B for an expenditure which B may make for a specified purpose, that does not give B an authority to subject A to a debt to C for that purpose. While in most cases it would not be any more burdensome to A to pay C than to reimburse B who has paid him, still that is not what A agreed to do. See 2 Williston on Contracts, sec. 402, p. 1157; Burton v. Larkin, 36 Kan. 246, 13 P. 398, 59 Am. Rep. 541. So C has rights only against B and will get no rights against A except by assignment, or some such proceeding as garnishment. Whatever rights C obtains against A in one of these ways will be subject to offsets and other defenses which any debtor has against his creditor. Grand Prairie Gravel Co. v. Trinity Portland Cement Co., (C. C. A. 5) 295 Fed. 140.

The statutes here involved did not, I think, intend fi> subject the United States to claims by printers, stenographers, hotel keepers, and others who might furnish goods or services to an attorney for the Indians.

There is one problem with reference to the propriety of the offset that might be noticed, although the parties have not mentioned it in briefs or argument. The statutes provided for the payment to Calhoun from the tribal funds-belonging to the Indians, but held by the United States. Thus the debt from the United States to Calhoun was owed, by it as trustee for the Indians, while Calhoun owed hi& debt for taxes to the United States as complete and beneficial owner. The right of the United States to set off the-one debt against the other is doubtful. If the United States did not have the right of offset which it asserted, plaintiff was not prejudiced, however, except to whatever extent his position as a creditor of Calhoun might have been improved by the payment of this claim into Calhoun’s estate. The-priority of the tax claim and other priorities would, in all probability, have prevented plaintiff from receiving any benefit from the payment of the claim to the estate.

I would sustain the demurrer.

On June 1,1942, the court filed the following order in the above case (No. 45426):

ORDER

This case comes before the court on plaintiff’s motion for judgment; and it appearing that on April 6,1942, the court, by opinion, overruled the defendant’s demurrer, and stated that “unless the defendant should within ten days advise the court of its desire to offer some evidence, the defendant will be considered to have elected to stand on its demurrer and judgment will be rendered for the plaintiff in the amount claimed in the petition”; and it further appearing that the defendant has not advised the court of its desire so to take evidence, and has filed no objection under the Eules to the allowance of plaintiff’s motion for judgment, now, therefore,

It is ordered, this 1st day of June, 1942, that plaintiff’s motion for judgment be and the same is allowed as to the entry of judgment and overruled with respect to the allowance of interest, and judgment is now entered for plaintiff in the amount claimed in the petition, to-wit, two hundred thirty-one dollars and seventy-five cents ($231.75).  