58 U.S.

315
17 How. 315
15 L.Ed. 77

FERDINAND CLARK, APPELLANT,

v.
BENJAMIN C. CLARK AND WILLIAM H. Y. HACKETT.
December Term, 1854

THIS was an appeal from the circuit court of the United States for the
District of Columbia, holden in and for the county of Washington.
Ferdinand Clark, the appellant, prosecuted a claim before the
commissioners who acted under the treaty between the United States and
Mexico, which claim was for the unlawful seizure of the cargo of a vessel
called The Louisiana. The commissioners awarded to him $86,786.29; out
of which there was deducted, by agreement, a sum of money, as
compensation to the agents employed in its recovery, leaving $69,429.04.
The award was made on the 15th of April, 1851, and, on the 15th of May
following, Benjamin C. Clark, of Boston, filed a creditor's bill in the
circuit court of the United States for the District of Columbia, claiming
the fund, for himself and other creditors of Ferdinand Clark, who had
taken the benefit of the bankrupt law of the United States, on the 22d
March, 1843, in the State of New Hampshire. Soon after this bill was
filed, namely, on the 30th May, Hackett, the then assignee in bankruptcy
of Ferdinand Clark, filed his bill, also claiming the entire fund, for the
purpose of distribution amongst the creditors; Palmer, the original
assignee in bankruptcy, has died, and Hackett was appointed in his place.
The substance of Hackett's bill was as follows:
In this bill, Hackett sets forth his appointment as assignee, in place of
Palmer, deceased, and prays for leave to come in, under the prayer of the
original bill of B. C. Clark, and to be made complainant in said cause. He
then avers that Ferdinand Clark was duly and regularly declared a
bankrupt, in 1843, and that all his property and effects passed out of the
bankrupt, and vested in the assignee, Palmer, who was regularly
appointed, and is since dead, leaving the proceeding in bankruptcy still

pending; that the bankrupt had, among his assets, a claim on the Republic
of Mexico, which is the claim in satisfaction of which the award in
controversy was made; that the said claim was not described in any
manner to make the same available to his creditors, and that no such
evidences as would enable him to recover said claim were put into the
hands of the assignee; and that the assignee was ignorant of the true value
of the assets, and that he, therefore, reported them to the court as of no
value; that no right, title, or interest in said claim, ever passed out of said
assignee, or became revested in said bankrupt; that said bankrupt had
since prosecuted said claim, in his own right, falsely and fraudulently
claiming that his debts in bankruptcy had been satisfied, and that said
claim had revested in him; that the amount of said award legally belongs
to complainant, as assignee. The complainant then submits, that the said
Benjamin C. Clark and others, the creditors of said Ferdinand at the date
of his bankruptcy, being in the condition of cestuis que trust whose trustee
is dead, have complied with the true intent and meaning of the act of
congress. Prayer for an injunction and general relief.
The answer to this bill, amongst other things,
Admits that defendant had among his assets a claim against Mexico, and
that the claim on which the award was made is the same; admits that said
claim was set down in the schedule, but denies that it was not described so
as to make the same available to his creditors; and he expressly and
particularly denies that such evidences and information as would have
enabled said assignee to recover said claim were fraudulently withheld by
this defendant, and denies that his assets and effects generally were so
described in his schedules that the assignee was in ignorance of their true
value; avers that this Mexican claim was expressly mentioned in said
schedule, in the manner demanded by the rules and practice of the district
court of New Hampshire; that said claim was mentioned as subject to a
mortgage; that such mortgage did exist, in fact; that he did not know the
amount thereof, but verily believed it to be more than the value of the
claim; that no value was set to said claim, because he believed, and had
reason to believe, that said claim was wholly without value; that defendant
communicated to Palmer, the assignee, the situation of all the claims
mentioned in his schedules; that all the papers and evidences in support of
said Mexican claim were not in his possession, but had been, in the year
1842 or earlier, filed publicly before the commissioners appointed under
the convention of April 11, 1839, and were afterwards placed, and, at the
time of the commencement of the proceedings in bankruptcy, were in the
public archives of the government of the United States, and there
remained till the time of said award.

The defendant then sets forth more particularly the bankrupt proceedings
up to his discharge, on the 17th December, 1844, from all debts then
owing by him. He states that notice of the proceedings in bankruptcy was
published in the leading papers in the district, and that notice, personally
and by letter, was also served on all creditors, whose residence was
known; that, notwithstanding this, no creditor ever filed in the district
court any proof of debt, or any objections to the proceedings in
bankruptcy, or to the doings of the assignee, until after the award was
made.
The answer then avers, that on the 14th day of March, 1845, the assignee
filed a petition for an order to sell the estate of the defendant, and on the
14th it was so ordered; that, in pursuance of said order, Palmer did, on the
9th day of April, 1845, after posting up advertisements, &c., sell at public
auction all the estate and demands of the bankrupt, mentioned in the
schedules attached to the petition of Ferdinand Clark to be declared
bankrupt, to R. M. Clark, and that, by sale, said Mexican claim passed to
said R. M. Clark. And the answer denies all artifice or fraud to depress the
value of said demands, or this Mexican claim particularly; that on the 9th
of April, 1845, said Palmer executed a formal bill of sale, with schedules
attached to it, in which schedules this Mexican claim was included; that
on the 10th April, 1845, defendant purchased, for valuable consideration,
all the said property from R. M. Clark, including said claim; that he has
prosecuted said claim in his own name, and at his own risk and expense;
that complainant has not filed his notice with the secretary, according to
the provisions of the 8th section of the act of March 3, 1849.
On the 2d of June, 1851, the circuit court issued an injunction, restraining
the secretary of the treasury from paying, and Ferdinand Clark from
receiving, the amount of the award, until the further order of the court.
The 8th section of the act of March 3, 1849, (9 Stats. at Large, 394,)
authorized any person, who claimed any part of an award, to file a bill;
and directed the fund to remain in the treasury, to await the decision of the
courts.
The case went on in the circuit court, and much testimony was taken. A
part of it related to the proceedings in the bankrupt court of New
Hampshire, which are summarily referred to in the opinion of the court,
and need not be further noticed here.
On the 30th of May, 1853, the circuit court decreed that the fund should
be paid over to Hackett, for distribution in the bankrupt court of New

Hampshire, amongst the creditors of Ferdinand Clark.

From this decree, Clark appealed to this court.
It was argued by Mr. Lawrence and Mr. Nelson, for the appellant, and by
Mr. Carlisle and Mr. Johnson, for the appellee.
The arguments consisted chiefly in the examination of, and comments
upon, the facts in the case.
The following points of law were made by Mr. Lawrence:
1. That B. C. Clark, the complainant in the original bill, had no standing in
court at all, he being a mere general creditor at the time of bankruptcy of
appellant, and his debt having been discharged by the bankruptcy and
proceedings thereon.
2. That there was no privity between B. C. Clark (who had never made
himself a party to the bankrupt proceedings at all) and the assignee in
bankruptcy; but that Hackett, the assignee, must stand upon his own
compliance with the 8th section of the act of 3d March, 1849, or else fall.
3. That the circuit court of the District of Columbia had no jurisdiction in
this case, except that conferred by said 8th section. The fund was in the
treasury of the United States, and the parties were non-residents.
Inasmuch as Hackett, the assignee, had not given the bond nor filed the
notice specified in said 8th section, upon which the jurisdiction of the
court was to attach, the bill should have been dismissed.
Mr. Justice CATRON delivered the opinion of the court.

Ferdinand Clark applied for the benefit of the bankrupt law, and filed a
schedule of his debts, and another of his property and rights of property.
Pursuant to the latter schedule, the assignee in bankruptcy sold all Clark's
interest in the property, and rights of property, at auction, for the sum of two
dollars; Clark himself bidding at the sale, but ordering the title to be made by
the assignee to his (Clark's) sister, who relinquished to him by a formal deed on
the next day. By virtue of this purchase Clark claims to be bona fide owner of
all the property, and rights of property, he had given in or indicated on his
schedule.

The bill alleges that the claim against the Republic of Mexico, for an unlawful

seizure of the cargo of a vessel owned by the bankrupt, called The Louisiana,
the proceeds of which are in dispute, was not described in any manner to make
the same available to Clark's creditors; nor was any such information or
evidences of the claim put into possession of the assignee as would enable him
to recover it, but that all the information and evidences were fraudulently
whthheld by said bankrupt, and that his assets and effects generally were so
described in his schedule that the assignee was ignorant of their true value, and
in fact reported to the court that the same could not be sold; and that because of
this fraud the sale was void.
3

This allegation is put in issue by the answer, and was sustained by the circuit
court, which ordered the moneys awarded to Clark by the commissioners,
acting under our treaty of peace with Mexico, to be paid over to the assignee in
bankruptcy, and distributed by him among the bankrupt's creditors. From this
decree Clark appealed.

If the right of property to the claim for indemnity was concealed so that the
assets were sold for a nominal amount, and to Clark himself in the name of his
sister, then Clark's purchase was fraudulent, and the decree below, setting aside
the purchase, was proper. This is the rule prescribed by the 4th section of the
bankrupt law; and which rule would be enforced by the general principles
governing a court of equity, independently of the bankrupt law.

In his first schedule, the bankrupt did not mention the claim against the
Republic of Mexico, but in an amendment, filed in December, 1844, after he
had received his discharge, this claim is alluded to in connection with others, as
follows:

'United States government of America'Claim.

Spanish government, do.

Buenos Ayres government, do.

'Mexican Republic subject to a mortgage.'

10

This statement gave no information that the bankrupt claimed remuneration

against the government of Mexico for an illegal seizure of the cargo of the
schooner Louisiana. The proof is that Clark was prosecuting this claim before
he applied for the benefit of the bankrupt law, which was in January, 1843, and

relied on its ultimate recognition and payment through commissioners acting

under treaties with Mexico. He continued to pursue the claim, steadily and
earnestly, up to the time it was allowed in 1851, when there was awarded to
him 86,786 29/100 dollars.
11

Clark's letters to Mr. Caustin, his agent in Washington, who prosecuted the
claim, show, as does the deposition of Mr. Caustin, also, that in December,
1844, when the amended schedule was filed, the bankrupt had a right to expect
ultimate success, and did rely on it with much confidence. Clark's papers and
correspondence were extensive in regard to the matter, and which must have
been concealed from the assignee in bankruptcy, or he would not have reported
the assets as of no value in 1845, when they were sold.

12

From the obscurity of the schedule, and the concealment of the evidences of a
right of property from the assignee and the creditors, we feel satisfied that the
bankrupt intended to rid himself of his debts, and to secure to himself the
effects in dispute by contrivance, and that part of the contrivance was a
purchase in the name of his sister, for his own benefit.

13

Some minor objections to the decree below have been raised, which it is proper
to notice.

14

First, it is insisted that the circuit court of the District of Columbia had no
jurisdiction of the parties under the act of March 3, 1849, 8, to carry into
effect our treaty with Mexico of 1848. The 8th section provides that in all cases
arising under the act, where any person or persons other than those in whose
favor the award was made, claimed the money awarded, should within thirty
days after the date of the award notify the secretary of the treasury of his
intention to contest the payment of the money to the party to whom it was
awarded, and file with the district attorney a bond, &c., then the money should
be retained in the treasury, subject to legal investigation in the courts of justice;
and the party claiming the fund might file his bill in the circuit court in the
District of Columbia, which should have jurisdiction to determine the right of
property. In this instance the award was made on the 15th day of April, 1851,
and on the 15th day of May following, Benjamin C. Clark, of Boston, a
judgment creditor, filed his bill in the circuit court claiming the fund awarded to
Ferdinand Clark, and gave the notice and bond required by the act of 1849, 8.

15

This was a creditor's bill, on behalf of the complainant and all other creditors of
the bankrupt, and which alleged that the complainant had reason to believe the
assignee, Palmer, was dead, and invites him, if living, or any subsequent

assignee that might be appointed, to come in, &c. It was ascertained that Palmer
was dead, and Hackett was appointed successor to Palmer, May 19, 1851, and
on the 30th day of that month made himself a party to Benjamin C. Clark's bill,
by petition in the nature of an original bill. Other creditors came in, likewise,
but all of them after the thirty days had expired.
16

It is insisted that Benjamin C. Clark, as a general creditor of the bankrupt, had

no standing in court, his debt having been discharged by the certificate of
bankruptcy. Secondly, that Clark had never made himself a party to the
bankrupt proceedings, by proving his debt, and therefore Hackett must stand on
his own bill, and cannot connect himself with that of Clark.

17

3. 'That the circuit court of the District of Columbia had no jurisdiction in this
case, except that conferred by said 8th section. The fund was in the treasury of
the United States, and the parties were non-residents. Inasmuch as Hackett, the
assignee, had not given the bond nor filed the notice specified in said 8th
section, upon which the jurisdiction of the court was to attach, the bill should
have been dismissed.'

18

The bankrupt is personally discharged from his debts, and so are his future
acquisitions; but, the property and rights of property which vested in the
assignee are subject to the creditors of the bankrupt, as they were liable in his
hands before he applied for the benefit of the act; and the money in controversy
was held in trust for the creditors, in whatsoever hands it was found. Benjamin
C. Clark was a cestui que trust, and the treasury a stakeholder between
Ferdinand Clark and his creditors; Palmer, the assignee, had died, and there
being no trustee, the creditor had a right to file a bill and detain the fund for the
creditors generally, to be administered by an assignee subsequently appointed
by the bankrupt court.

19

The circumstance that Benjamin C. Clark has not proved his debt, and made
himself a party to the proceedings in bankruptcy, is immaterial; the proof that
debts were owing by Ferdinand Clark can be made at such times as the
bankrupt court may prescribe by its rules and orders; and we are not aware that
any objection can be interposed to reject Benjamin C. Clark's claim in the
bankrupt court of New Hampshire. All the creditors seem to be in the same
condition, no one having proved his debt. Benjamin C. Clark having the right
to sue and detain the fund in the treasury, Hackett could properly come in, and
make himself a party to the proceeding.

20

It is also insisted that this action is barred by the 8th section of the bankrupt

law, which provides that no suit shall be maintainable against any person
claiming an adverse interest touching property or rights of property surrendered
by the bankrupt, unless the same shall be brought within two years after the
declaration and decree in bankruptcy, or after the cause of action shall first have
accrued.
21

The interest adversely claimed, and which the statute protects, if not sued for
within two years, is an interest in a claimant other than the bankrupt; but,
supposing that Ferdinand Clark had been placed in that condition, as to the fund
in the treasury, by his pretended purchase of his own assets, yet as no cause of
action accrued to the assignee in bankruptcy against Clark, until he got
possession of the money, and as he never held the fund adversely, it follows
that the act does not apply; but if it did, the fund had no existence till the award
was made, which was only thirty days before the suit was brought. We order
that the decree of the circuit court be affirmed.

Order.
22

This cause came on to be heard on transcript of the record from the circuit court
of the United States for the District of Columbia, holden in and for the county
of Washington, and was argued by counsel. On consideration whereof it is now
here ordered, adjudged, and decreed by this court that the decree of the said
circuit court in this cause be and the same is hereby affirmed, with costs.