iSigj^,^-^^^^-^-^^;--— 5„ :^ (S^ntmii ICam §rl|aal ffiibratg Cornell University Library KF 1045.A7S79 Annotated cases on the law of suretyship 3 1924 018 854 889 The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/cletails/cu31924018854889 ANNOTATED CASES ON The Law of Suretyship SELECTED AND ANNOTATED BY ARTHUR ADELBERT Slg^ RNS, LL. D. OF THE CLEVELAND BAE. .AVTHOK Or TKEATISE ON THE LAW OF SURETYSHIP. rORMEKLY PK0FSS8OR OF LAW WESTERN RESERVE LAW SCHOOL, AND BY WELLS M. COOK OF THE CHICAGO BAR* rRonuoi or law Chicago kznt college op law. CINCINNATI, THE W. H. ANDERSON CO., PUBLISHERS 1922 COPTEIGHT, 1922, BY THE W. H. ANDERSON COMPANY, Cincinnati, Ohio CONTENTS See. 1. Sec. 2. Sec. 3. Sec. 4. Sec. 5. Sec. 6. See. 7. CHAPTER I. NATURE OF THE CONTRACT. FAOB Surety and Guarantor defined and distinguished 1 Capacity to contract in Suretyship 8 Consideration 24 Incompleted contracts of SKiretyship 35 Suretyship by operation of law 40 Interpretation of ambiguous words 43 Legal obligations ini Suretyship strictly construed 51 CHAPTER II. THE STATUTE OF FRAUBSi The English statute 57 The whole agreement including the consideration, must be ex- pressed in writing 57 If the "Memorandum" is in writing the contract itself may be oral 62 Application of the statute to contracts of indemnity 66 Credit given to the promisor 74 Joint liability with principal debtor 77 Discharge of original debtor 83 Consideration beneficial to the promisor 85 Promise to pay out of property in promisor's hands 91 Promisa to pay a. pre-existing liability of the promisor 95 Assumption of vendor's debt as part of purchase price 98 CHAPTER III. COMMERCIAL GUARANTIES. Sec. ll. General guaranty 100 Siec. 2. Special guaranty 104 Sec. 3. Retrospective guaranties 106 Sec. 4. Continuing guaranties HI Sec. 5. Absolute guaranties 117 Sec. 8. Guaranty of collectibility , 120 Sec. 7. Notice of acceptance of guaranty 123 iii Sec. 1. Sec 2. Sec. 3. Sec. 4. Sec. 5. Sec. 6. Sec. 7. Sec. 8. Sec. 9. Sec. 10. Slec. 11. IV TABLB OF CONTENTS. PAQE Sec. S. NVvbice to Guarantor of d€fault where the amount of debt and time of payment are fixed 130 Sec. 9. Notice to Guarantor of default where the amount of debt and time of payment are indefiniite. . ./.'. ..■.,/■ 132 Sec. 10. Bievocation of guafauty 136 CHAPTER IV. SURETYSHIP DEFETfSES. Sea 1. Material alteration of the principal contract 140 Sec. 2. The addition of a new party iiL the principali contract 151 Sec. 3. The additiion' of a new party as Surety or Guarantor 156 Sec. 4. Alteration of the prdnicipar contract by a. change in the diuities of the principal 157 See. 5. AlteratiqnB beneficial to the Surety. :. . 161 Sec. 6. D-iseharge of ptomieor, by extension of time to the principal. . 164 Sec. 7. Liability against Surety or Guarantor revived if payment of principal debt is void 174 Sec. .8. Voluntary release of security held by. the creditor 182 Sec. 9. Release of property in possession of creditor, but not held as security 187 Sec. 10. Release or extingTiishment of the liability of the principal 190 Sec 11. Release of principal without fault of creditor 195 Sec. 12. Fraud or concealment in the making of the Suretyship contract. 197 Steo. 13. Estoppel — Exitenit to which the creditor is chargeable who has the means of knowing facts materially affecting the Suretyship risk 206 Sec. 14. Unauthorized representations made by agents of the creditor. . 217 Sec. 15. Failjire to disclose facts coming to the knowledge of the cred- itor after the execution of the contract 229 Sec. 16. Stipulations in Sxiretyship conitraot requiring notice of any facts which may cause loss 234 Sec. 17. Fraud and misconduct of the principal 239 Sec. 18. Statements made to the promisor by the creditor after execution of 'the contract 253 See. 19. Release of Co-surety 255 See. 20. ReJease of Cosurety reserving rights against the remaining Surety 258 See. 21. Failure of creditor to sue principal when requested 261 See. 22. Failure of creditor to apply collateral of the principal when requested 268 Sec. 23. Stipulation discharging the Surety if claim is not made within a designated time ; 274 Sec. 24. Stipulation that default must be discovered during the life of the Suretyship contract ; 277 Sec. 25. Stipulation requiring creditor to institute criminial proceed- ings against the principal 279 Sec. 26. The prin'oipall's right of set-off or counter-claim against the creditoT aa a defense to the promisor 285 See. 1. Seo. 2. Sec. 3. Sec 4. Sec. 5. See. 6. Stec. 7. TABLE OP CONTENTS. V PAGE Sec. 27. Dissolution of partnership for which another is Surety 289 Siee. 28. Parol eyidemce to ahow Iiack of considera'ti'O'n for Suretyship contraot , , 296 Sec. 29. Guaranty by the Surety of aJl prior signatures 299 Stec. 30. iSbatutes of limitations 302 Sec. 31. Evidenioe against the Surety , 310 Sec. 32. Equitable exoneraition of the Surety 316 CHAPTER V. BONDS TO SECURE PRIVATE OBLIGATIONS. The signing and sealing of a, bond 321 Deliveiry and aooeptance of the bond 323 Inioorporation of other inatruments into the bond by reference. . 326 Commencement and duiration of liability upon a bond 329 Building bonds for the benefit of labor and material men 338 Measure of damages upon breach of the condition of a bond. . . . 356 Bonds to induce violation of law or to prevent performance of duty 359 CHAPTER VI. BONDS OF PUBLIC OFFICERS. See. 1. Who are public officers — Distinction betweeni official and oon- traxst relations 362 Sec. 2. Chajige in the duties of the principal by amendment to the law. 366 See. 3. Bonds of public officers not retroaxrtive 371 Sec 4. Liability for the negligenice or error of judgment of a public officer 375 Sec 5. Liability of iSiurety for failure of pubHe officer to acoovmt for the use of public funds 376 Sec 6. Liability for trespassi and other wrongs of public officers com- mitted colore officii 389 Sec 7. Liability for loss' of public money by failure of the bank used a« public depositary 399 Siec. 8. Judgment against the principal as evidence agaimst the Surety . 407 CHAPTER VII. JlTDIdAL BONDS. Seo. 1. Statutory requirements and other formalities affecting validity of bond 412 Successive appeal bonds 416 Bonds to procure injunctians 419 Attachment bonds ■ 443 Reptevin bonds 461 Bonds given' in the course of the admi'niiatration of the estaites of deceased persons 466 Bonds of guardians 483 Baal bands 494 Stec 2. Sec. 3. Sec. 4. See. 5. Sec. &. Sec 7. S6C 8. Sec. 1. Sec 2. Slea 3. See. '4. vi TABLE OF CONTENTS. CHAPTER VIII. CORPORATE SURETYSHIP. VMSS Oompieiisated suretyship is a contract of insuirance 502 Liability of eurety company as distinguiahed from that of graiudtous surety 507 Oompensated surety is no favorite of the la,w 610 Where susceptible of two constructions, one favorable to the creditor and the other favorable to the surety, the former will be adopted 516 Sec. 6. Measure of liability — Owporate surety can not be relieved from iits obligation! only where dejjarture is material and prejudicial. 520 Steo. 6. When are etaitemenits made m application, representations and when are they warranties 536 CHAPTER IX. THE RIGHT AM) REMEDIES OF THE PROMISOR ATTER P3TMENT. Sea 1. Equitable subrogation rests upon natural justice and is inde- pendent of contract 544 Seo. 2, Conventional subrogation 562 Sec. 3. Subrogation airises only when daim is paid in full 564 Siec. 4. Exitinguishinenit of the principal debt — ^Effect of payment by the Surety 566 Sec. 5, Judgment against the prinKiipal mot extinguished by payment by the Surety 582 Sec. 6. j9urety paying judgment against the principal entitled to have an assignment of the judgment 586 Seo. 7. Siurety entitled to all the rights and remedies of the creditor against the principal 591 Seo. S. The right of the creditor to "tack" to the original security the security taken for subsequent advancements. 596 Seo. 9. Subrogation as applied to one in the situation of a Surety .... 605 See. 10. Surety entitled to subrogation to a probata share of any divi- dend derived from the assets of the principal 610 Sec 11. Subrogation among Co-sureties 613 Sec 12. Subrogation between successive Sureties 615 Sec. 13. Subrogation in favor of the creditor to securities held by the Surety 619 Sec. 14. Remedies of the Surety in cases where he is deprived of subro- gation by act of the creditor 628 Sec. 15. The right of contribution came originally from cuistom 632 Sec 16. Contribution as a rule in equity 632 Sec. 17. Contribution between persons in the situation of a Surety 641 Sec. 18. 'A Surety for a Surety not liable in contribution 643 Siee. 19. Contiribution against one who became Surety at the request of e Co-surety 647 Sec. 20. One who aids in the oomrndssion of the default is barred from contribuitdon 651 Sea. 21t When, oonitributdoii may be enforced 652 TABLE OP CONTENTS. Vll PAGE Sec. 22. Equitable contributioMi before payment 655 Stec. 23. Oontribution as affected by the inisolveucy of one or more Co- sureties . ■ ■ 662 See. 24. Surety seeking coiLtributian must aooount to his Oo-suietieB for indemnity furnished him by the principal 663 Sec. 25. Surety voluntarily paying to prevent default by princdpal can not recover in contribution 669 Sec. 26. Promise to indemnify Surety is implied 673 Stec. 27. Indiemnity not available to Surety upon bail bond 676 Sec. 28. No implied promise of indemnity arises against those having the benefit of the principal contract, unless such parties were originally bound in the main oorabract 678 Sec. 29. Suretyship oonrtoraot executed without request of principal. . . . 681 Sec 30. When right of indemnity arises 683 Sec. 31. Payment by the Surety or transactions equivalent to payment. 685 Sec. 32. Surety can recover only the amount actually paid 686 Sec. 33. Bight of indemnity as alTected by the non-liability of the prin^ cipal 689 Sec 34. Eight of indemnity as affected by the non-liability of the promisor 691 Sec 35. Surety paying after discharge of principal in bankruptcy cam not recover indemnity '. 693 Sec. 36. When judgment against Surety is conclusive as to the right to recover indemnity 694 Stec. 37. Stipulaition that amount paid by Surety ishall be conclusive ttgaisat tihe xxrinclpal) , , , , i <••• • •.•..... 695 CASES REPORTED PAGE Allen V. KeMam, 94 Pa. 253 414 Amerioaji Bonding & Truat Co. v. Milwaukee Harvester Co., 91 Md. 733 . . 333 American Surety Co. v. Pauley, 170 U. S. 133 217, 516 Ames V. Huse, 55 Mo. App. 422 564 Amee v. Maelay, 14 Iowa, 281 190 Appleton V. Bascom, 3 Met. 169 673 Bagott V. MuUen, 32 Ind. 332 648 Bank v. Beekeir, 62 Q. S. 289 456 Bank of Ausfcpalasiia v. Reynell, 10 New Zealand, L. R. 257 239 . Barclay v. Gooch, 2 Esp. 571 685 Bardwell v. Lydell, . 7 Bing. 489 619 Bassett v. Fidelity & Deposit Co., 184 Mass. 210 475 Beilinger v. Thompson, 26 Oreg. 320 466 Biokford v. Gibbs, 8 Cush. 154 24 Biddinger v. Pratt, 50 O. S. 719 461 Bingham v. Mearsj 4 N. D. 437 i ; 268 BoBtwick V. Van. Voorhis, 91 N. Y. 353 323 Branidenberg v. Fliynn's Adm., 12 B. Mon. (Ky.) 397 615 Brogan v. National Sureity Co., 246 U. S. 257 352 Brown v. Ourtiss, 2 N. Y. 225 95 Building Assooiajtion v. dimmings, 45 O. S. 664 321 Bulkeley v. House, 62 Oonm, 459 643 Oalvert v. London Dock Co., 2 Keen. 638 161 Oarpenter v. King, 9 Met. 511 253 Carter v. Blaok, 4 Dev. & Bat. Law (N. O.) 425 '681 Chester v. Bank of Kingston, 16 N. Y. 336 '. 623 Chester v. Broderick, 131 N. Y. 549 '. 410 City of St. Louis v. Von Puhl, 133 Mo. 561 33S Clay V. Edgerfcon, 19 O. S. 549 117 Oolgarove v. Tallman, 67 N. Y. 95 40 Columbus H. V. & T. Ey. Co. v. Burke, 54 O. S. 98 419 Cook V. Chapman, 41 N. J. Eq. 52 436 Oopeland v. Cunningham,. 63 Alia. 394 37 Coijis V. Middleton, Turn. & Euss. 224 566 Coulthart v. Clementison, 5 Q. B. Div. 44 136 Courtis V. Dennis, 7 Met. 510 i 1 Oowles V. U. S. F. & Guaranty Co., 32 Wash. 120 510 Dair v. United' States, 16 Wall. 1 245 Danker v. Atwood, 119 Mass. , 146 35 is X CASES EEPOETED. PAOS Davies v. Hmnphries, 6 M. & W. 15o 652 Davis V. Gilltette, 52 X. H. 126 356 Deering v. The Earl of Winchelsea, '2 Boa. & Pul. 270 632 De Jernette v. The Fidelity & Casualty Co., 98 Ky. 558 274 Dood V. Winm, 27 Mo. 501 255 Boggett et al v. Black, 40 Fed. Rep. 439 453 I>oi]glasa V. Beynolds, 7 Pet. 113 HI Dowbiggen v. Boume, 2 Younge & Coll. 462 590 Eshleman v. Bolenius, 114 Pa. 269 651 Estate of Ramsey v. WhiLtbedi, 183 III. 550 28 FairchildB v. Hedges, 14 Wash. 117 399 Faraning v. The Londoin, Guaranty & Aocideuifc Co., 10 Viot. L. R. 8 . . . . 277 Farebrother v. Wodtehouise, 23 Beiav. 18 600 Fidelity & Casualty Co. v. The City Natioaiali Bank, 97 G. v. Courtney, 186 U. S. 342 , 221 Forbes v. Jackson, 19 Oh. Div. 615 596 Forburger Stone Co. v. Lion Bonding & Surety Co., 103 Neb. 202 343 Forst V. Leonard, 112 Ala. 296 326 Foamire v. National Surety Co., 229 N. Y. 44 349 Fox & Co. V. North & South Wales Bank, 6 App^ Crises, 1 549 Frazer v. Jordan, 8 EU. h, BL 303 166 Fredericktown Savings Inst. v. Michael, 81 Md. 487 177 Gates V. McKee, 13 N. Y. 232 43 Gibbs V. Blanchard, 15 Miioh. 292 77 Gillespie v. Torrance, 25 N. Y. 306 285 Glazier v. Douglas®, 32 Conn. 393 ;... 187 Governor v. Dodd, 81 IH. 162..; 375 Graves v. Lebanon Naitional Bank, 10 Bush. (Ky.) 23 206 Green v. CresBvvelll, 10 Ad. & El. 453 68 Green v. Hadfield, 89 Wis. 138 98 Griffith V. Sitgreav«s, 90 Pa. 161 20 Gwynne v. Burmell, 7 CI. &, Fin. 572 371 Hampton v. Phipps, 108 U. S. 260 623 Hare v. Grant, 77 N. O. 203 694 Hamer v. Dipple, 31 O. S. 72 10 Harris v. Newell, 42 Wis. 687 263 Hayes v. Ward, 4 Johns. Oh. 123 318 HiU V. King, 48 O. S. 75 582 Himrod Furnace Oo. v. Cleveland & Mahoning R. R. Co., 22 O. S. 451 ... 62 Hodgson V. Shaw, 3 Myl. & K. 183 569 Holme V. Brunskill, L. R. 3 Q. B. Div. 495 142 Howeli v. Anderson, 66 Neb. 575 470 Hulme V. Oolies, 2 Simons, 12 17 j Hungerford v. O'Brien, 37 Minn. 306 130 CASES EEPOBTED. XI FAOB Jackson's Adm'r- v. Jackson,. 7 Ala, 791 33 James Black Masonry & CSontiracting Oo. v. Nat. Surety Oo., 61 Wash. 471. 527 Jones V. Ordiard, 16 C, B. 614.... , 676 Keames v. Montgomery, 4 W. Va. 29 5 Kulenkamp v. Groff, 71 Mich. 675 296 Ladd V. Chamber of Commerce, 37 Oreg. 49 669 Layer v. Nelson', 1 Verm 456 * 632 Led'better v. McGeehees, 84 Ga. 227 91 Lee V. Yandell, 69 Tex. 34 8 Leggett, et al. v. Humphiries, 21 How. 66 51 Levpis V. Lee County, 73 Ala. 148 310 Liddell v. Wisell, 59 Vt. 365.. 662 Lieberman v. First National Bank, 2 Penn. (Del.) 416 214 Livingstoii, etc., v. Fidelity & Deposit Co. of Md., 76 O. S. 253 535 LabenBtedn v. Hymson, 96 Teim. 606 452 Lombard v. Mayberry, 24 Neb. 674 299 LowJon Guaranty Oo. v. Fearnley, L. E. 5 H. L. App. 911 279 London Tramway Co., Ltd., v. Bailey, 3 Q. B. Div, 217 697 Lowry v. Adams, 22 Vt. 160 10» Lumpkin v. Miifc, 4 Ga. 343 5'ft McBridie v. Potter-Lovell Co., 169 Maes. 7... 641 McClatchJe v. Durham, 44 Mich. 435 691 McKey v. Lauflin, 48 Kan. 581 462 McMullen v. Winfleld Buildiing & Ijoan Assn., 64 Kam. 298 302 McMurray v. Noyes, 72 N. Y. 523 120 McNaught V. McClaughry, 42 N. Y. 22 26 Mace V. Wells, 7 How. 272 693 Mallory v, Gillette, 21 N. Y. 412 85 Miathews v. Aikin, 1 N. Y. 595 544 Maure v. Harrison, 1 Eq. Case Abridg. 93 619 Mersman v. Werges, 112 U. S. 139 155 Middleseac Mfg. Oo. v. Lawrence, 1 Allen, 339 329 Mozingo V. Ross, 150 Ind, 688 306 Murdock v. Brooks, 38 Oal. 596 412 Nanz V. Oakliey, 120 N. Y. 84 479 Nutionali Mechanics Banking Aasnc v. Oonkling, 90 N. Y. 117 157 Offley V. Johnson, 2 Leonard, 166 632 Pacific Nat. Bank v. Mixter, 124 U. S. 721 448 Backer v. Benton, 35 Conn. 343 83 Pain V. Packard, 13 Johns. 174. 261 People V. Lee, 104 N. Y. 441 106 People V. Schuyler, 4 N. Y. 173 389 People V. Seelye, 146 HI. 189 487 ZU CASES REPORTED. PAGE Pteople V. VilBS, 36 N. Y. 459 366 People V. Walsenv 17 Ooilo. 170 384 P«f!tit V. Mercer, 8 B. Hon. (Ky.) 51 443 Petty V. Cook, 6 Q. B. 790 174 Philadelphia v. Fidieldty & Deposit Co. of Md., 231 Pa. St. 208 524 Phillip V. FoxaJl, L. E. 7 Q. B. 666 229 Pico V. Webster, 14 Oal. 203 407 Pierce y. Holzer, 25 Midi. 263 591 Polak v. Everett, L. E. Q. B. Mv. 669 182 Powers Dry Goods Co. v. Harlin, 68 Minn. 193 197 Eailton v. Mathews, 10 d. & Fin. 934 199 Bamsey v. Whdtbedc, 183 111. 550 28 E«ad V. OuttB, 7 Mb. 186 3 Reader v. Kingham, 13 a B. (N. S.) 344 70 Eeed v. Norris, 2 Myln. & Craig, 362 686 Bice V. Southgiate, 16 Gray. 142 683 EiobertBon v. Smafch, 129 Ind. 422 428 EjobinsoQ v. Boyd, 60 O. S. 67 637 EuBSelli V. Clark, 7 Oranchi 69 48 Etisaell V. Parley, 105 U. S. 433 430 Samuel v. Howarth, 2 Merivale, 272 164 Sands v. Durham, 98 Va. 302 605 Soot V. Stephenson, 1 Levinz 71 673 Secxmd Nat. Bank v. Becker, 62 0. S, 289 456 Shaeffer v. Clendenin, 100 Pa. 565 613 Shreve v. Hankinson, 34 N. J. Eq. 76 '. 562 Sibley v. McAllaater, 8 N. H. 389 _.. 689 Simpson v. Piemton, 2 Comp. & Meea. 430 75 Smdith V. Estate of Steele, 25 Vt. 427 173 Standard Oil Co. v. Amestad, 6 N. D. 255 289 State Bank v. Brown, 165 N. Y. 216 312 State V. Oooover, 28 K. J. L. 224 395 State V. Branch, 164 Ma. 592 49I State V. Pcckham, 136 Ind. 198 483 State V. McFetridge, 84 Wis. 473 373 Steel V. Dixon, 17 Oh. Div. 825 gg3 St. Louis V. Van Puhl, 133 Mo. 561 338 Suppiger v. Gmuz, 137 111. 216 464 Taussig V. Eeid, 145 111. 488 j32 Taylor v. Taintor, 16 Wall. 366 494 Taylor v. Wetmore, 10 O. 491 ] ^ | ,q. Thomas V. Cook, 8 Barn. & Cress. 728 \\\[ gg Thompson v. ladz, 3 C. B. 540 258 Tom V. Goodrich, 2 Johns. 213 678 Townsend v. Whitney, 75 N. Y. 425..... 586 Trustees of Schools v. Sheik, 119 111. 579. ............ 39- OASES REPORTED. XUl FAOB Tucker v. White, 5 Alleni, 322 447 Turner v. I>avies, 2 Bsp. 478 647 Tuxbury v. AGller, 19 Johns. 311 359 United States v. Hairtwell, 6 Wall. 385 362 U. iS, Fidelity & Giiarajity O. v. Bank of Dundee, 233 111. 475 502 V. Ptoetker, 180 Ind. 255 507 Wain V. Warlters, 5 East. 10 57 Wallace t. Jewell, 21 O. S. 163 151 Ward v. Hackett, 30 Minn,. 150 249 Waring, Ex. Parte, 2 Glyn. & Jam. 404 620 Watkins v. Perkins, 1 Ld. Ray. 214... 74 Wegner v. State, 28 Tex. Orim. Rep. 419 38 Western Maryland R. R. Co. v. Blue Ridge Hotel Co., 102 Md. 307 13 Wiloox V. Draper, 12 Neb. 138 123 Wildes V. Dudlow, L. R. 19 Eq. 198 72 Wilson V. People, 19 (Mo. 199 404 Winn. V. Sanfoni, 145 Mass. 302 195 Wolmerhausen v. Gullick, L. R. 2 On the 6th of May last, the plaintiff, who was baliff of the Buckinghamshire County Court, was about to arrest one Hitch- cock under a warrant of commitment for disobedience of an order made in a cause in the County Court of Malins v. Hitchcock, when the defendant (who was Hitchcock's brother-in-law) promised the plaintiff that, if he would forbear to execute the warrant, he the defendant would before 12 o'clock on the following Saturday morning pay the plaintiff £17, which sum the plaintiff said he was authorized by Malins to take in satisfaction of the debt and costs in the County Court, or surrender Hitchcock. The plaintiff accordingly fprbore to arrest Hitchcock ; but the defendant neither paid the money nor surrendered Hitchcock. The £17 was not the whole debt and costs in the suit in the County Court. These amounted to between £34 and £35. But the plaintiff in that suit had authorized the bailiff to take £17 in satisfaction. Under these circumstances, the present action was brought by the bailiff against Kingham upon his undertaking. SEC. 4.J EEADEE V. KINGHAM. 71 At the trial before the undersheriff of Buckinghamshire on the 2d of July last, it was objected on the part of the defendant, upon the supposed authority of Butcher v. Stewart, 12 Law J., Exeh. 291; 9 M. & W. 405; 1 Dowl. N. S. 620; Goodman v. Chase, 1 B. & Aid. 297, and Davies v. Fletcher, 2 Ellis & B. 271 (E. C. L. R. vol. 75), 22 Law J., Q. B. 429, that the defendant's promise being a promise to answer for the debt of another, it was one which the 4th section of the Statute of Frauds, 29 Car. 2, c. 3, required to be in writing. The undersheriff ruled that this was a conditional promise to pay and therefore within the 4th section of the Statute of Frauds, and ought to have been in writing; and that, on the evidence of the plaintiff, he had not released Hitchcock from the debt. He accordingly directed the jury to find for the defendant, reserving leave to the plaintiff to move to enter a verdict for him for £17, if the Court should be of opinion that his ruling was erroneous. Evans, on a former day in this term, obtained a rule tdsi. — He submitted that the promise sued upon was an original promise to pay the plaintiff £17 upon the consiiieration named, and not a collateral promise to answer for the debt or default of a third person within the 4th section of the Statute of Frauds. Lush, Q. C, and Hannen, on a subsequent day, showed cause. — The promise in question was a promise to answer for the debt or default of another, and therefore within the 4th section of the Statute of Frauds ; the debt of Hitchcock was not extinguished ; he remained and still remains liable upon the original judgment: Davies v. Fletcher, 2 Ellis & B. 271 (E. C. L. R. vol. 75). Part of the contract here was, that, Kingham failing to pay the money, Hitchcock was to be surrendered. The true test whether the Statute of Frauds applies or not, is, whether or not the principal remains liable for the debt: if he does, the promise is collateral, and must be in writing ; if not, it is an original promise, and need not be in writing. Eele, C. J. I am of opinion that this action is maintainable, notwithstanding the objection that the Statute of Frauds re- quired the defendant's agreement to be in writing and signed, and consequently that the rule to enter a verdict for the plaintiff should be made absolute. ****** There are two cases in the Court of Queen's Bench, where the plaintiff sued on a prom- ise to indemnify him in consideration of his having at the defend- ant's request become bail for a third party, and where it was held that the statute required the promise to be in writing. Those were 72 WILDES V. DUDLOW. [CHAP. IL the cases of Green v. Cresswell, 10 Ad. & E. 453 (E. C: L. R. vol. 37), 2 P. & P. 438, and Cripps v. Hartnoll, 31 Law. J., Q. B. 150. Whether the fact of the promise relating to bail makes any valid distinction, I do not stop to consider. But clear I am, that, upon the balance of authority, the promise of the defendant in this case is a collateral promise, and not within the statute. The debts are totally distinct debts, as well as the debtors. No satisfaction resulted to Malins on account of what passed between Kingham and Reader. Reader was the agent of Malins to accept £17 in satis- faction of the debt and costs in the County Court ; but he was not his agent to postpone the payment. If Malins had chosen, he might have revoked Reader's authority between the time of Hitchcock's release and the Saturday ; and the payment of £17 would have been no discharge of Malin's claim under the judgment The pay- ment of the £17 therefore, would not necessarily have been a dis* charge of Malin's demand, but only a discharge or satisfaction of the contract between Kingham and Reader. The case is clearly not one to which the Statute of Frauds can apply. Williams, J. I am of the same opinion. I think the authori- ties bind us to the principle that the 4th section of the Statute of Frauds applies only to the case of a promise made to one to whom another is answerable. ************* . Byles, J. I am of the same opinion. The Court of Queen's Bench in Thomas v. Cook, 8 B. & C. 728 (E. C. L. R. vol 15), 3 M. & R. 444, held that the promise, to bring it within the statute, must be made to the original creditor; and that a promise to in- demnify stands on the same ground. The Court of Exchequer in Haj-greaves v. Parsons, 3 M. & W. 561, in the written judgment of Parke, B., also lays it down that the debt in respect of which the promise is made must be due to the promisee. And the last dictum, in this Court, of my Brother Williams, in Fitzgerald v. Dressier, 7 C. B. N. S. 374 (E. C. L. R. vol. 97), is to the same effect. The case is therefore concluded by the authorities. Rule absolute. WILDES V. DUDLOW. L. R. 19 Eq. 198 (1874). Dudlow joined with another as an accommodation maker of a promissory note relying upon a verbal contract of indemnity made by Wildes, and being required to pay the note claims recovery on his contract of indemnity. SEC. 4.] WILDES V. DUDLOW. 73 Mr. Glasse, Q. C, and Mr. Herbert Smith, for the plaintiffs. Mr. Higgins, Q. C, and Mr. Grosvenor Woods, for the defendant. Dudlow. SiE R. Malins, V. C. The question is, whether this contract is,, within the 4th section of the Statute of Frauds, required to be in; writing. The words of that clause are, "charge the defendant; upon any special promise to answer for the debt, default, or mis- carriage of another." "What was the promise made by the testa- tor in this case to the defendant John Dudlow? It was not, " I engage with you to be answerable to you for the debt of "Wildes," because "Wildes did not owe Dudlow anything, but he says, ' ' If you will do a certain act, — namely, render yourself liable for that debt, — I will indemnify you." I think it perfectly clear that the only contract which I have to consider is, that between father and son. It is not that he will pay the debt of "Wildes, but that if the son will guarantee "Wildes' debt, he will see him harmless, or, in other wordSj indemnify him. If one man could induce an- other to alter his line of conduct in that way, and then meet him with the Statute of Frauds, that statute, instead of being a pro- tection against fraud, would be the direct means of fraud. The. statute enacts that if one man promises to pay the debt of an- other the promise is void unless it is in writing, and no one doubts that to be the law ; but it appears to me, upon principle, so plain that the present ease is not within the statute, that I am very glad to find that what occurred to me as being the proper view of the case is finally decided to be the law on the subject. There has been a conflict of authority, and I confess I am surprised to find that there has been so much conflict. The point was originally decided by two of the most eminent judges known on the bench (Mr.. Justice Bayley and Mr Justice Parke, afterwards Lord "Wens- leydale) in the ease of Thomas v. Cook, and they decided it upon the plainest principles of common sense and justice. I was there- fore surprised to find that in a later case of Green v. Cresswell the same Court, constituted at that time of other judges, had taken a different view, and a view which, if it had been maintained, I possibly should not have felt myself obliged to follow. But I am happy to find that, the matter having been most carefully and elaborately considered in the ease of Reader v. Kingham, when the full number of judges was present, the case of Green v. Cresswell was overruled, and the law as laid down by Thomas v. Cook re- stored The learned judges commented upon those eases, and said that the law was accurately laid down in Thomas v. Cook; and I 74 WATKINS V. PEBKINS. [CHAP. n. entirely agree in that expression of opinion. I accordingly decide that where one person induces another to enter into an engagement, by a promise to indemnify him against liability, that is not an agreement within the Statute of Frauds, and does not require to be in writing. This is a case in which a father induced his son to guarantee the debt of his son-in-law upon a promise that he would see him harmless. Upon every principle of justice he is bound to indemnify him; and I think, therefore, that the son is perfectly right in helping himself out of the estate which has come into his hands. The force of the decision in Reader v. Kingham was some- what shaken by the opinion expressed by Mr. Justice Blackburn in Mountstephen v. Lakeman, Law Rep. 5 Q. B. 613; but, as the de- cision of the Queen's Bench in that case was reversed in the Exchequer Chamber, and also in the House of Lords, the law rests on the plain and reasonable ground upon which it was put in Reader v. Kingham. The decision is, therefore, entirely in favor of the defendant; and I hold that the Chief Clerk has done per- fectly right in allowing this £1,000 with interest. Therefore the motion to vary the certificate in that respect must be dismissed with costs. Sec. 5. Credit given to the promisor. WATKINS V. PERKINS, 1 Ld. Eaymond 224 (1697). Per Holt, C. J. If A promise B, being a surgeon, that if B cure D of a wound, he will see him paid ; this is only a promise to pay if D does net, and therefore it ought to be in writing by the Statute of Frauds. But if A promise, in such case, that he will be B's paymaster, whatever he shall deserve, it is immediately the debt of A, and he is liable without writing. AccoED.— Holding that a promise to pay for services to another on the credit of the promisor, is not within the statute and need not be in writing. Sinclair v. Bradley, 52 Mo. 180; Milliken v. Warner, 62 Conn. 51; Hazeltine V. Wilson, 55 N. J. L. 250; Crowder v. Keys, 91 Ga. 180; Brander v. Krebs, 54 111. App. 652; Boston v. Farr, 148 Pa. 220; Barrett v. Johnson, 77 Hun 627; Arbuckle v. Hawks, 20 Vt. 538; Eddy v. Davidson, 42 Vt. 56- Weisel v. Spence, 59 Wis. 309; Neal v. Bellamy, 73 N. C. 384; Thurston v. James 6 E. I. 103 ; Meldrum v. Kenefiek, 15 S. D. 370. SEC. 5.] SIMPSON V. PENTON. 75 SIMPSON V. PENTON. 2 Comp. & Mees. 430 (1834). Assumpsit for money lent, money paid, and money due on an account stated. Plea — The general issue. At the trial, before BoUand, B., at the Middlesex Sittings in this term, it appeared that the plaintiff introduced the defendant to one Ovenston, an upholsterer, and asked him, in the presence of the defendant, if he had any objection to supply the defendant with some furniture ; and that, if he would, he (the plaintiff) would be answerable for it. That Ovenston asked the plaintiff how long credit he wanted; and that the plaintiff replied he would see it paid at the end of six months; and that he thought the amount would be about 40 1. or 50 1. Ovenston agreed, to it; and the plaintiff gave him the order. The defendant gave directions where the goods were to be sent to. The goods were accordingly sent, to the amount of 46 1. 10s. At the end of six months, the defendant not having paid any money, Ovenston applied to the plaintiff for payment and the plaintiff, gave him a bill at six months for the amount of the goods fur- nished, 46 1. 10s. ; and Ovenston received the money upon the bill when it became due. Bompas, Serjt., moved to enter a nonsuit. Bayley, B. If the goods were sold to Penton, and he was to be the paymaster, then the undertaking of Simpson was collateral, and within the Statute of Frauds. But, if it was an original under- taking on the part of Simpson to pay for the goods supplied to Penton, then, Simpson was bound to pay by the parol contract, and he had a right to consider the money paid for the goods as money paid for Penton 's benefit. Whether the contract was original or collateral, viz., whether it was binding on the parties to pay in the first instance, and at all events, or only binding in case the other does not, will depend on the contract between the parties. I think that the expression, " I'll be answerable," and " I'll see you paid," are equivocal expressions. And then we ought to look to the circumstances to see what the contract between the parties was. I do not say that without authority; for there was a ease, which I believe will be found in the 2d vol. of Douglas, in which the Court of King's Bench said, that a contract might be col- lateral or not, according to circumstances; and that it depends on the circumstances whether it is collateral or not. It was the case of Oldham v. Allen, and was decided in Michaelmas Term, in the 76 SIMPSON V. PENTON. [CHAP. n. 24th of Geo. 3 ; there the defendant had sent for a farrier to at- tend some horses and said to the farrier, " I will see you paid." The plaintiff knew the parties who were owners of some of the horses, and made them debtors, but debited the defendant for the others, whose owners he did not know ; the Court held that the promise was original in respect of those owners whose names he did not know; but, in respect of the others whom he did know, that it was collateral. In that case there was a construction on the very same words, making the promise either original' or col- lateral according to the circumstances. Here it is quite clear that the goods were furnished for Penton's benefit; but it does not appear that he said one word by which he pledged himself, so as to give Ovenston a right to call upon him. Simpson was asked, " what time he wanted to pay? " He says, "I'll see it paid in six months." It was left to the jury to say whether he was the original debtor, and they found that he was. I think the jury •were warranted in that finding. My opinion is founded substan- tially on the facts of the ease, and not on the equivocal expressions, as I consider the words capable of being explained by other cir- cumstances. I am satisfied, that, although Ovenston was willing to see if Penton would pay, he never had a legal claim upon him, but upon Simpson only. Vaughan, B. — There is no difficulty in these cases where the facts are rightly understood. I think that there is abundant evi- dence to show that this was not a guarantee. The goods were originally furnished on the credit of Simpson, treating him as the debtor for goods supplied to the us of another. This was an ac- tion for money paid, which the plaintiff says he has a right to re- cover, as it was paid on the defendant's account. The defend- ant said it was not paid under any authority from him, and that raises the question whether any authority was given. On that part of the case, it appears that the two go together to make the purchase; that the defendant stands by, and allows the plaintiff to pledge his credit; and, by doing that, I think he undertakes to repay the money paid on his account. BoLLAND, B. — The question submitted to me was, whether I ought to call the plaintiff, as there was no sufScient request to pay the money. The facts of the case established an undertaking founded on the original credit given to Simpson. The parties go together; Simpson pledges his credit to pay for the articles se- lected — Penton is the party benefited by them: he being present at the time, and hearing what Simpson says, is liable. SEC. 6.] GIBBS V. BLANCHAED. , 77 GtnsNEY, B. — I think the evidence warranted the finding — that the goods were supplied on the credit of Simpson. Bule refused. Accord.— Uberroth v. Eiegel, 71 Pa. 280; McCuUy v. Porzel, 158 Pa. 513; Gleason v. Briggs, 28 Vt. 135; Faires v. Lodanc, 10 Ala. 50; Clark v. Jones, 87 Ala. 474; Bugbee v. Kendrieksen, 130 Mass. 437; Phelps v. Stone, 172 Mass. 355; Cox v. Peltier, 159 Ind. 355; Ellis v. Murry, 77 Ga. 542; Rushing Produce Co. v.;Hilliard, 90 Ga. 555; Franks v. Stevens, 82 Mich. 192; Foster, et al., V. Flecher, 119 Miqh. 353; Hartley v. Varner, 88 111. 561; Lusk v. Throop, 189 111. 127; Guenther v. Sanders, 10 Ky. L. Rep. 447; King v. Franklin Lumber Co., 80 Minn. 274; Gallagher v. McBride, 66 N. J. L. 360; Garrett Williams Co. v. Hamill, 131 N. C. 57; MuUer v. Riviere, 59 Tex. 640; Lumber Co. v. Flint, 104 S. W. Rep. (S. Dak.) 1046. In determining to whom credit was given, evidence as to the circumstances under which the promise was made, may be resorted to. Dean v. Tallman, 105 Mass. 443; Cowdin v. Gottgetreau, 53 N. Y. 650; Boykin v. Dohlonde, 37 Ala. 577; Keate v. Temple, 1 B. & P. 158; Lakeman v. Mountstephen, L. R. 7 H. L. 17. If the vendor makes the charge in his books to the principal he will be. es- topped thereby from claiming a sale on the credit of the promisor. Matson v. Wharam, 2 T. R. 80; Hardman v. Bradley, 85 111. 162; Harris v. Frank, 81 Cal. 280; Webb v. Hawkins Lumber Co., 101 Ala. 630; Langdon v. Rich- ardson, 58 Iowa 610; Cahill v. Bigelow, IS Pick. 369. CoNTBA. — Lance v. Pearce, 101 Ind. 595; Larson v. Jenson, 53 Mich. 427. Charges on the books of the vendor against the promisor are presumptive evidence, though not conclusive, that the sale was on the credit of the prom- isor. Ruggles V. Gattou, 50 111. 412; Walker v. Richards, 41 N. Y. 388; Noyes V. Humphryes, 11 Gratt (Va.) 636. Sec. 6. Joint liability with principal debtor. JOHN GIBBS, ET AL. v. IRA BLANCHAED. 15 Mich. 292 (1867). Action of assumpsit for the value of a horse. The declaration recites that the defendant agreed that if the plaintiff would sell the horse to one Daily that the defendant and Daily would give the plaintiff their point note for the agreed price ; that the horse was delivered but the defendants refused to execute their note. M. J. Smiley, for plaintiff in error. H. F. Severens, for defendant in error. Cheistinacy, J. The main question in this case is whether the promise of Gibbs (one of the defendants below) comes within the second clause of the second section of our Statute of Frauds, as a 78 GIBBS V. BLANCHAED. [CHAP. H. " special promise to answer for the debt, default, or misdoings " of Daily, the other defendant. The declaration contains a special count upon the contract, and the common counts for goods sold and delivered. The special count sets forth that " in consideration that said plaintiff agreed to sell to the said Daily a certain horse which the plaintiff then and there had, of the value of sixty dollars, (the defendants?) undertook and promised the said plaintiff to make, sign, and de- liver their promissory note to said plaintiff or bearer in the sum " of sixty dollars for the purchase price of said horse, which said promissory note was to be payable thereafter, in six months from date." It further alleges that the plaintiff, relying upon said promise of said defendants, and in consideration thereof, did sell and deliver the horse to said John Daily for the price of sixty dollars. The breach alleges the failure and refusal to make and deliver the note, as well as the refusal to pay the money. It was clear, from the evidence, that the horse was bought for the benefit of, and delivered to Daily, and that the plaintiff would not have sold the horse on the credit of Daily alone. But upon the question whether Daily and Gibbs were to give a joint note, or whether the latter was only to indorse the note of the former, or to become his guarantor, the evidence was conflicting. There was evidence from which the jury might have found a joint promise, or in other words a promise by both to execute and deliver to the plaintiff a joint note for the price: and from the circumstances and subsequent acts of the parties the jury might have been authorized to find that the- note was to be made payable in six months; though they might also have found that no par- ticular time was mentioned or expressly agreed upon for which the note was to run. The evidence tending to show that the promise was joint, or that a joint note was to be given, was substantially this: Gibbs and Daily called upon the plaintiff together, and Gibbs asked plaintiff if he wanted to sell his mare. Plaintiff said he did. Gibbs in- quired the price, and being told sixty dollars, wanted to know if plaintiff would take Daily's note if he, Gibbs, would sign it and see it paid; to this plaintiff assented. The mare not being present, and Gibbs, being anxious to get home, said, Daily might go with plaintiff and see the mare, and if the mare suited him he might fetch her back with him and draw up a note and Daily might sign it, and the first time he, Gibbs, went to town he would sign it The mare was delivered to Daily, who signed a note for it at six SEO. 6.] GIBBS V. BLANCHAED. 79 months, which was afterwards indorsed by Gibbs on Sunday. This note was produced on the trial and tendered back to defend- ants. The court charged the jury that "if it was the understanding of the parties that Daily was the purchaser, and that he should give his note to tlie plaintiff for the price, and that Gibbs should so sign as only to be liable as indorser, the plaintiff must fail. If, however, the understanding of the parties was at the time, that Gibbs and Daily were the buyers of the mare, and that both were to be liable as purchasers for the purchase price, and, accord- ingly, should become joint makers of a promissory note for its payment, though Daily was less relied upon by the plaintiff than Gibbs, and though, in point of fact, it was understood that the mare, when bought, should belong to Daily, the plaintiff is entitled to recover. That the principle in this class of cases is, that if the agreement be such that two persons, in the purchase of goods, do at the same time become co-debtors to the seller for the price, then both are purchasers, and the case is not within the Statute of Frauds, and no memorandum in writing is necessary. But if it be such that one, at the time, becomes debtor to the seller, and the other security only for the debt, it is within the Statute of Frauds, and the undertaking of the security is void unless a memorandum of it in writing is made." Though the question is one requiring some accuracy of dis- crimination, I have come to the conclusion, after a careful ex- amination of the authorities, that the charge of the court was not only correct, but that it expresses the true rule of law applicable to the question with remarkable clearness. No question can arise as to the sufficiency of the consideration for the undertaking of Gibbs, whether original or collateral, within or without the statute. Without his promise, the plaintiff would not have parted with his property. The consideration, therefore, is equally as good in law as a sale of the horse to him alone would have been for his sole promise to pay the price. The plain, ordinary meaning of the language used in this clause of the statute would seem sufficiently to indicate that the class of special promises required to be in writing includes only such as are secondary or collateral to, or in aid of the undertaking or liability of some other party whose obligation, as between the promisor and promisee, is original or primary. If there be no such original or primary undertaking or liability of another party, there is nothing to which the promise in question can be see- go GIBBS V. BLANCHAED. [CHAP. 11. ondary Of collateral, and the promise is, therefore, originalin its nature, and not within the statute. In other words, the statute applies only to promises which are in the nature of guarantees for some original or primary obligations to be performed by an- other. This has been settled by a remarkably uniform course of decision since the passage of the statute,^- 29 Car. 2, c. 3, § 4,— which does hot essentially differ from our own and those of most of the States of the Union. So numerous and so uniform have been the decisions upon this point, that it would savor of affeeta- tiop to cite them. They will be found cited in most of the ele- mentary treatises. See Brown on Stat. Frauds, c. 10; Chitty on Cont.'p. 442 et seq:; 2 Pars, on Cont. 4th ed. 301. And though the terms original and collateral have been criticised, yet when used, the one to mark the obligation of the principal debtor, the other that of the person who undertakes to answer for such debt, they are strictly correct, and give the true view of this clause of the statute. Mallory v. Gillett, 21 N. Y. 412; Brown on Stat. Frauds, c. 10, '§ 192. As a result of this principle, that one must be held originally or primarily, and the other only collaterally, or in default of the former, it follows that the statute only applies to such promises made in behalf or for the benefit of another, as would, if valid, create a distinct and several liability of the party thus promising, and not a joi'ht liability with the party in whose behalf it is made. For if one be bound in the first instance and at all events, and the other only contingently, or on default of the first, the liability could not be joint. On the other hand, if the promise or the obligation of the two be joint, as between them on the one side and the promisee on the other, then neither is collateral to the other; and such joint promise is original as to both. Hence it has been held in England that an agreement to convert a sepa- rate into a joint debt is not within the statute; the effect being to create a new debt, in consideration of the former being extin- guished. Ex parte Lane, 1 De Gex 300 ; Brown on Stat, of Frauds, 193. Where the question arises (as it has in almost all the cases), as one of the several liability of the party promising in behalf of another (as for the price of goods sold to another), the true rule undoubtedly is, that if the latter (to whom the goods are sold) be liable at all, then the promise of the former is collateral, and must be in writing; because, from the very nature of such a ease> the party to whom the goods are sold, and in whose behalf the promise SEC. 6.] GIBBS V. BLANCHAED. 81 is made, is the principal debtor; and because it would be mani- festly unreasonable to hold that both were in such cases severally- liable as principals, as upon several original undertakings at the same moment. See Hetfield et al. v. Dow, 3 Dutcher 440 ; Dixon V. Frazee, 1 E. D. Smith, 32. And this rule applies equally when the promise is made in reference to a pre-existing liability of another, if the plaintiff in accepting the promise does not release the principal. In reference to all such cases the authorities may be said to be entirely uniform. But the rule thus established as to cases where the question is one of the several liability of the party making the special promise, can, I think, have no applica- tion to the question of a joint liability upon a joint promise of the two. The only intimation to the contrary which I have seen is to be found in a dictum of Judge Catron in Matthews v. Milton, 4 Yerg. 576, a case in which no such question was involved, there being no evidence tending to show a joint promise. To say that when the party originally owing the debt, or for whom goods are purchased and to whom they are delivered, is liable at all, no other person can be held severally liable unless the promise be in writing, is merely saying that such promise is collateral, and there- fore within the statute. But to say that they cannot both become jointly liable upon their joint promise, not in writing, to pay such debt or the price of such goods, if the party originally owing the debt or receiving the ' goods be at all liable, is but another form of declaring that it is not competent for both to become original promisors, as between them and the promisee, unless both are un- der an equal obligation, as between themselves, for the ultimate payment of the debt. Such a proposition, it seems to me, cannot be maintained either upon principle or ' authority; Such an ob- jection to a joint promise seems rather to have reference to some supposed defect of consideration (a question entirely distinct from the statute) than to the promise. And, if the party promising jointly with another to whom goods are furnished, cannot be bound jointly with the latter, because, as between the two promisors, he, not having received the goods, is under no obligation to pay; then the same reason ought to operate with still greater force against his several promise to pay the whole price of goods received by the other. But the law in the latter case is well settled the other way. It was very correctly remarked by Whelply, J., in Hetfield, et al. V. Dow, above cited, that, " to settle the rights of promisors inter sese, to ascertain as between them who is to pay the debt ulti- mately, is no part of the object of the act. It by no means f ol- 6 82 GIBBS V. BLANCHARD. [CHAP. U. lows that he who by the arrangement between the promisors ulti- mately may be bound to pay the debt is, as to the promisee, the principal debtor. That does not concern him." This view, it seems to me, rests upon sound reasons, — reasons which must nat- urally enter into the consideration of business men, in the ordinary transactions of business. Where a party has been willing to put himself in the position of an original promisor (either jointly or severally) to a vendor for goods purchased for the benefit of, or delivered to another, the vendor has a right conclusively to pre- sume that such relations or arrangements exist between the two as to make it the duty of the party or parties promising, as be- tween themselves, to pay according to the promise. And to allow the contrary to be shown to defeat the promise, would operate as a fraud upon the vendor. 4::|;«4:4e«««4!«H!* It is true that in Wainwright v. Straw, which most resembles the present case, the decision is placed in part upon the ground that the sale was made to both. The facts were that Straw and Cunningham both went to plaintiff's store and said they wished to buy a stove for Straw, but that both would be responsible. Now I can see no difference in legal effect between the case where A and B say to a merchant, ' ' We want to buy a stove for B, and both of us will be responsible;" and the case where A says, " B wishes to purchase a stove, but we will both be responsible." Sub- ;stantial]y, the transaction is the same ; in both cases alike it is a sale for the benefit of the one on the joint credit of the two, and the real question in both cases is, whether the credit was given to both jointly. I do not think the Court, in Wainwright v. Straw, based their decision upon the narrow and merely verbal ground of the use of the first person plural, showing merely who wanted the stove, but upon the broad ground above stated, that it was sold upon their joint credit. And in all such cases where the sale is upon thegoint credit and promise of the defendants, though the property is purchased for, and delivered to but one of them, I think the legal effect of the transaction constitutes, as between them and the vendor, a sale to the two jointly. The sale as be- tween the vendor and the vendee, is to the party or parties to whom the credit is given for the price* without reference to the question, for whose use it is purchased, or who, as between the promisors, is to be its owner when bought. This brings us to another point in the case. The sale (if upon the joint credit and promise of the defendants) was a joint sale to both, as between them and the plaintiff. But in the special SEC. 7.] PACKEK V. BENTON. 83 count of the declaration it is alleged as a sale to Daily alone. The plaintiff cannot therefore recover upon the special count. But upon the count for goods sold and delivered, the sale hav- ing been made to both, the plaintiff would be entitled to recover, if the facts be such as would warrant a recovery upon a sale made for the joint benefit of, and the property is delivered to both. I think there was no error in the charge or proceedings of the Court below, and that the judgment should be affirmed with costs. Cooley, J., and Campbell, J., concurred. AocoBD. — Ex Parte Lane, 1 De Gex, 300; Wainwright v. Straw, 15 Vt. 215; Eddy V. Davidson, 42 Vt. 56; Stone v. Walker, 13 Gray 613; Hatfield v. Dow, 27 N. J. L. 440; Eothman v. Fix, 25 Mo. App. 571; Boyee v. Murphy, 91 Ind. 1 ; Strickland v. Hamlin, 87 Me. 81 ; Munnell v. Barnes, 12 Ky. L. Eep. 467. Sec. 7. Discharge of original debtor. ELISHA A. PACKEE, ET AL, v. WM. J. BENTON. 35 Conn. 343 (1868). General Assumpsit for money had and received. The defendants agreed verbally with plaintiffs that if the plain- tiffs would advance them money with which to discharge all the indebtedness of Pilley & Co., a debtor of the plaintiffs, at fifty cents on the dollar, that they would take over all the assets of the debtor and would pay the plaintiffs seventy-five cents on the dol- lar, and would pay the plaintiffs in full if the amount could be realized from the assets, and in consideration of this arrangement plaintiffs agreed to discharge the debtors from all liability. The jury returned a verdict for the plaintiffs, and the de- fendant moved for a new trial for errors in the rulings and charge of the court. Watrous and Rogers, in support of the motion. Bronson, contra. Butler, J. It appears from the motion, that the defendant upon the trial in the court below objected to the evidence offered by the plaintiffs to sustain the action, on the ground, 1st, That there was no count in the plaintiffs' declaration to justify such proof; 2nd, That the agreement sought to be proved, if made, was void, not being in writing; and 3d, That no action at law 84 PACKER V. BENTON. [CHAP. n. could be maintained upon such an agreement, even if in writing. The evidence having been admitted, the court were requested to charge the jury to the same effect, and the court declined to charge as requested. In thus receiving the evidence objected to; and declining to charge, the defendant insists that the court erred. We think otherwise. H:4s=i:«=)=««««4:«««* 2. And we think, in the second place, that the evidence was properly admitted, and the contract provable although it rested in parol. We have no disposition to relax the rules, of construction ap- plicable to the statute of frauds, or in any manner to weaken that statute. Our views on that subject are fully expressed by Judge Dutton, in Clapp v. Lawton, 31 Conn. 95 ; and if this ease was as claimed, analogous to that, we should come to the same conclusion in respect to it. But this case differs essentially from that. There a third party received the property of the debtor and promised him generally to pay his debts. None of the cred- itors were parties to the arrangement, and the original indebted^ ness continued as before. Here the contract was tripartite, be- tween the debtor, a creditor, and a third person; and it contem- plated the discharge of the original debtor, and a new obligation, by the third party, to the particular creditor. Such new obliga- tion and indebtedness is not within the statute of frauds. In Turner v. Hubbell, 2 Day 457, the distinguished counsel for the defendant in error deduced from the cases which had then oc- curred under this branch of the statute, the following definition of the promise intended by it, to wit: " An undertaking by a person, not before liable, for the purpose of securing or perform- ing the same duty for which the party for whom the undertaking is made, is, at the same time, liable," and it was adopted by the court. With a single modification that definition furnishes as perfect a test as has ever been, or, we think, can be devised. The modification required is this: In the case of Williams v. Leper, 3 Burr. 1886, the promise to pay the debt was made after the original debtor had been discharged by reason of %, distress, and the coun- sel in Turner v. Hubbell seem to have assumed that a contract to pay the debt of another would be within the statute of frauds if the original debtor was liable at the time the promise was made. But it is now well settled that if the original debtor is discharged by the new contract it is not within the statute See the cases cited by Judge Dutton in his revision of Swift's Digest, page 248. The foregoing definition may be modified therefore, so as to read: SEC: 8.] MALLOEY V. GILLETT. 85 - ' An undertaking by a person not before liable, for the purpose of securing or performing the same duty for which, the party for whom the undertaking is made continues liable." Applying this test to the case in hand, it is obvious that the objection of the de- fendant ought not to prevail. It was the purpose and effect of the tripartite contract in question to discharge the original debtors in consideration of their giving up their property to the defendant, as well as to onerate the defendant, in consideration of that discharge, the assent of the plaintiff to the delivery of the property to the defendant, and of his agreement to loan the funds necessary to enable the defendant to purchase the debts and cariy out his speculation. As the orig- inal debtors did not continue liable, an essential element of the test was wanting, and the contract was not within the statute. A new trial must be denied. Accord. — Goodman v. Chase, 1 Barn. & Aid. 297; Butcher v. Stewart, 11 M. & W. 857; Langdon v. Hughes, 107 Mass. 272; Harris v. Young, 40 Ga, 65; Meriden Britannia Co. v. Zingsen, 48 N. Y. 247; Mulerone v. American Lumber Co., 55 Mich. 622; Martin v. Curtis, 119 Mich. 169; Day v. Cloe, 67 Ky. 563; Green v. Solomen, 80 Mich. 234; Whittemore v. Wentworth, 67 Me. 20; Watson. V. Jacobs, 29 Vt. 169; Williard v. Bosshard, 68 Wis. 454; Walker V. Hill, 119 Mass. 249; Bunting v. Darbyshire, 75 III. 408; Sheppard v. New- ton, 139 N. C. 533. Promise to pay the debt of another in consideration of the dismissal of a. pending suit is not a novation, as the original debtor remains liable. Ellison V. Wisehart, 29 Ind. 32; Duffy v. Wunseh, 42 N. Y. 243. Sec. 8. Consideration beneficial to the promisor. MALLORY V. GILLETT. 21 N. Y. 412 (1860). CoMSTOCK, Ch. J. This case ought to be one of first impression. By the statute of frauds, all promises to answer for the debt of a third person are void unless reduced to writing. One Haines owed the plaintiff a debt for repairs on a boat, for which the lat- ter had a lien on the chattel. In consideration of the relinquish- ment of that lien, and of forebearanee to sue the original debtor, the defendant promised the plaintiff, without writing, to pay the debt at a certain future time. There is no pretence that the de- fendant's promise was given or accepted as a substitute for the 86 MALLORT V. GILLETT. [CHAP. U. original demand, or that such demand was in any manner extin- guished. The promise was, therefore, to answer for the existing and continuing debt of another, or, in the language of the books; it was a collateral promise. The consideration was perfect, but as there was no writing the case ' seems to fall within the very terms of the statute. Authorities need not be cited to prove that the sufSciency of the consideration never takes a case out of the statute. Indeed, there can be no question under the statute of frauds in any case, until it is ascertained that there is a considera- tion to sustain the promise. Without that element, the agreement is void before we come to the statute. A naked promise is void on general principles of law, although it be in writing. The mere existence of a past debt of a third person will not sustain an agree- ment to pay it, unless there be forbearance to sue, or some other new consideration. In such a case, when we find there is a new consideration, we then, and not till then, reach the inquiry whether the agreement must be in writing. Such is this case. It is noth- ing to say that here was a new consideration. If such were not the fact, there would be no question in the case. There is sometimes danger of error creeping into thie law through a mere misunderstanding or misuse of terms. The words " orig- inal " and " collateral " are not in the statute of frauds, but they were used at an early day — the one to mark the obligation of a principal debtor, the other that of the person who undertook to answer for such debt. This was, no doubt, an accurate use of language; but it has sometimes happened that, by losing sight of the exact ideas represented in these terms, the word " original " has been used to characterize any new promise to pay an ante- cedent debt of another person. Such promises have been called original, because they are new ; and then as original undertakings are agreed not to be within the statute of frauds, so these new promises, it is often argued, are not within it. If the terms of the statute were adhered to, or a more discriminating use were made of words not contained in it, there would be no danger of falling into errors of this description. What is a promise to answer for the " debt or default " of an- other person? Under this language, perplexing questions may arise, and many have arisen, in the courts. But some proposi- tions are extremely plain; and one of them is, that the statute points to no distinction between a debt created at the time when the collateral engagement is made, and one having a previous ex- istence. The requirement is, that promises to answer for the debt, SEC. 8.] MALLOEY V. GILLETT. 87 &e., of a third person, be in writing. The original and collateral obligations may come into existence at the same time, and both be the foundation of the credit, or the one may exist and tjie other be created afterwards. In either case, and equally in both, the inquiry under the statute is, whether there be a debtor and a surety, and not when the relation was created. The language of the enactment is so plain that there is no room for interpretation; and its policy is equally clear. If A say to B, " If you will suffer C to incur a debt for goods which you will now or here- after sell and deliver to him, I will see you paid," the promise is within the statute. This no one ever doubted. But if A say to B, " If you will forbear to sue C for six months on a debt heretofore incurred by him for goods sold and delivered to him, I will see you paid " — is not the case equally plain? So if, in such a case, instead of forbearance, there is some other sufficient con- sideration, for example, forgiving a part of the debt or relin- quishing some security for it, the difference is still one of circum- stance, but not of principle. In the case first put, the consideration of the guaranty is the original sale of the goods on the faith of it; in the other, it may be forbearance or the relinquishment of some advantage, the original debt still remaining. Looking at thg comparative merit of these considerations, it would seem to be the highest in the first case, for the whole debt owes its Origin to the collateral promise, while in the other the debt remains as before, and only some collateral advantage is lost. But the ap- plication of the statute depends on no such test. These consid- erations are, all of them sufficient, and simply sufficient, to sustain the auxiliary undertaking. But if they also dispense with a writ- ing, then, sp far as I can see, there are no cases to which this branch of the statute of frauds can be applied. Such an extreme position has not been taken ; but it is said that the promise now in question need not be in writing, because it was new and original, and was founded on the relinquishment to the debtor of a security which the creditor held. To say that it was new and original, expresses no idea of any importance. Every promise is new and original that was never made before. An undertaking to answer for an old debt of a third person certainly has no more of originality than one to answer for a debt now con- tracted. As to the relinquishment of the lien or security, this, although a meritorious consideration, is, in judgment of law no more so than any other which is sufficient to sustain a contract. 88 MALLOEY V. GILLETT. [CH.VP. IT. Forbearance to sue has the same legal merit, and so has the re- lease of a part of the debt. There is nothing so remarkable or peculiar about this case that it may not be included in some general proposition which involves a principle of law. Now, one of these two propositions must, I think, be true : 1. The statute of frauds never applies to a prom- ise, the subject of which is an antecedent debt of a third person to which it is collateral; or, 2. It applies to all such promises where the consideration moves solely between the creditor and original debtor and the debt still remains. If the first is true, then the promise in question is valid without a writing, and so would any such promise be, without regard to the particular na- ture of the consideration ; it being necessary, of course, that there should be some sufficient consideration. If the first be not true, and the second is, then the promise in this case is void, because it falls directly within it. The first proposition cannot be true, upon the plain terms and evident policy of the statute; and no such doctrine was ever asserted. The univeisal truth of the sec- ond one necessarily follows, unless the law will discriminate be- tween different promises according as the consideration may differ in the particular nature or kind. But is such a discrimination possible, so long as, in any given case, the consideration is suf- ficient in the eye of the law, and moves solely between the original parties? No one, it seems to me, can hesitate to answer such a question in the negative. Yet we are told, without reason or principle, that when a creditor releases a security to the debtor, although without releasing the debt, a promise of another per- son, founded on that peculiar consideration, is not within the statute. The inevitable logic of such a proposition will include a like promise founded on any other consideration equally sufficient to sustain a contract; and, therefore, we are carried back to the first general proposition above stated, which is admitted to be false. It has already been observed, that, without a consideration, no question on the statute of frauds can arise. In this elementary view of the question, I do not understand that much difference of opinion exists. It is claimed, however, that the course of adjudication has been such, that we cannot de- termine the case before us according to a consistent rule of law. ****** It cannot fail to be seen, that nearly all the cases which have been mentioned, in fact all of them which exhibit a promise to pay or answer for the debt of another person, are es- sentially of one type. With great variety in the circumstances one SEC. 8.] MALIiOEY V. QILLETT. 89 controlling characteristic pervades them all. In every instance, the consideration of the promise was beneficial to the person promis- ing. This was the feature which imparted to the promise the character of originality, as that term is used with reference to the statute of frauds. In not one of them is it true that the un- dertaking was entered into upon a consideration merely beneficial to the debtor but of no concern to the promisor; and I can con- fidently say that not one of those cases contains even a dictum which, being understood, countenances the doctrine contended for on the part of the plaintiff in this case. The principle involved is the same which runs through other cases that have not been cited. For example, A, holding the note of B, transfers it to C, upon a consideration moving from C to him, and with a parol guaranty of the payment. This, in a merely formal sense, is a promise to answer for the debt of the maker of the note, and it has been strenuously contended that such a promise is within the statute. But the rule is otherwise ; it being considered that such transactions, however close to the letter, are not within the intent of the statute ; because they have their root in a new dealing which concerns the promisor, and in a new consideration which moves to him. Brown v. Curtiss (2 Comst. 225), was such a ease, in which Judge Bronson remarked: " This belongs to the third class of cases mentioned by Kent, Ch. J., in Leonard v. Vredenburgh: there was a new and distinct consideration independent of the debt of the maker, and one moving between the parties to the new promise. Such are also the cases of Johnson v. Gilbert, (4 Hill 178), and the very recent one in this court of Cardell v. McNeil, QcClQ€CL ah XXl6 laSX X6PII1. ^^s:{;^HsHt$$$^$^ These numerous authorities are decisive. They all present ex- amples whers the collateral undertaking was founded on a con- sideration sufficient to sustain the promise, but of no personal concern to the promisor ; yet the promises were void, because they fell within the precise terms and the undoubted policy of the stat- ute of frauds. Certainly, that statute was not enacted for cases where the promise would be void at the common law for want of a consideration to sustain it. If it was not enacted for the very cases where a new consideration arises, additional to the original debt, that being insufSeient according to all authority, then why was it ever passed? Indeed, the struggle in the courts has been to withdraw from its influence, not such cases as these, but others having a close formal resemblance, yet distinguishable, not be- cause there is a consideration, but because it moves to the prom- 90 MALLOBY V. GILLETT. [ CHAP. II. isor, and so gives to his undertaking an original character. A person who receives a consideration may be bound by any lawful promise founded upon it, and that promise may as well lie to pay another man's debt as to do any other act. The success of this struggle, in a variety of instances not within the intent of the statute, should not overthrow the very object for which it was enacted. i^iifttit:**!!!********** Without pursuing this discussion further, the general rule is, that all promises to answer for the debt or default of a third per- son must be in writing, whether the promise be made before, at the time, or after the debt or liability is created. Such is the rule, because so is the statute of frauds. The statute makes no excep- tion of any promise which is of that character. The courts have made no exceptions; as clearly they should not. But a consid- erable variety of undertakings, having points of resemblance and analogy to such promises, have been held not to be within the statute. These may be chiefly, if not wholly, arranged in the fol- lowing classes : 1. Where there was no original debt to which the auxiliary promise could be collateral ; for example where the prom- isee was a mere guarantor for the third person to some one else, and the promisor agrees to indemniiy him, or where his demand was founded in a pure tort. 2. Where the original debt becomes extinguished, and the creditor has only the new promise to rely upon; for example where such new undertaking is accepted as a substitute for the original demand, or where the original demand is deemed satisfied by the arrest of the debtor's body or a levy on his goods, the arrest or levy being discharged by the creditor's consent. 3. Where, although the debt remains, the promise is founded on a new consideration which moves to the promisor. This consideration may come from the debtor, as where he puts a fund in the hands of the promisee, either by absolute transfer or upon a trust, to pay the debt, or it may be in his hands charged with the debt as a prior lien, as in the case of Williams v. Leper, and many others. So the consideration may originate in a new and independent dealing between the promisor and the creditor, the undertaking to answer for the debt of another being one of the incidents of that dealing. Thus, A, for any compensation agreed on between him and B, may undertake that C shall pay his debt to B. So A, himself being the creditor of C, may transfer the obligation to B upon any sufficient consideration, and guar- antee it by parol. If we go beyond these exceptional and peculiar cases, and withdraw from the statute all promises of this nature, SEC. 9.] LEDBETTEB & HAEEIS V. MC GHEES & CO. 91 where the debtor alone is benefited by the consideration of the new undertaking, and this debt still subsists, then we leave absolutely nothing for the statute to operate upon. The judgment should be afSrmed. Selden, Denio, Clarke and Welles, J. J., concurred. Accord. — Harrison v. Sawtel, 10 Johns. 242; Prime v. Koehler, 77 N. Y. 91; Raabe v. Squier, 148 N. Y. 81; Emerson v. Slater, 22 How. (U. S.) 28; Garner v. Hudgins, 46 Mo. 309; Ames v. Foster, 106 Mass. 400; Bhodes v. Mathews, 67 Ind. 131; MeCreary v. Van Hook, 35 Tex. 631; Greene v. Burton, 59 Vt. 423; Miller v. Riviere, 59 Tex. 640; Patten v. Mills, 21 Kan. 163; Wills V. Cutler, 61 N. H. 405; Blrehell v. Neaster, 36 0. S. 331; Crawford v. Pyle, 190 Pa. 263; Lookout Mt. Ky. Co. v. Houston, 83 Tenn. 224. Sec. 9. Promise to pay out of property in promisor's hands. LEDBETTER & HARRIS v. McGHEES & CO. 84 Ga. 227 (1889). C. Rowell, for plaintiffs in error Dean <& Smith, contra. Blandpoed, Justice. The record in this case shows the following facts which were found to be true by the jury : McGhees & Co., Ledbetter & Harris and Ferguson & Co. entered into an agreement, whereby McGhees & Co. were to sell Ferguson & Co. certain goods, for which Ledbetter & Harris were to pay out of money which should thereafter come into their hands, due Ferguson & Co. for certain work the latter were to do upon a railroad as subcontractors under Ledbetter & Harris. The money was to be received by Ledbetter & Harris from a prior contractor for the purpose of paying Ferguson & Co. for such work as they might do. It was further agreed that Ledbetter & Harris should receive two per cent, upon all sums paid by them to McGhees & Co. on account of the goods to be sold and furnished by McGhees & Co. to Ferguson & Co. ; that Ferguson & Co. were to give orders or drafts upon Ledbetter & Harris in favor of McGhees & Co., and Ledbetter & Harris were to pay monthly for such goods as might be furnished. It is not disputed that Ledbetter & Harris re- ceived on account of the work a large amount of money, more than sufficient to have paid off the indebtedness of Ferguson & 92 LEDBETTER & HAEEIS V.. MC GHEES & CO. [OHAP. U. Co. to McGhees & Co. for the goods furnished. And Ferguson & Co. drew drafts upon Ledbetter & Harris from time to time in favor of McGhees & Co. for amounts due for the goods furnished by the latter. For two months after the arrangement was en- tered into between these parties, Ledbetter & Harris paid the drafts in accordance with the agreement ; but they failed to pay any more, and this action was instituted to recover of Ledbetter & Harris the amount due McGhees & Co. by Ferguson & Co. for the goods so sold and delivered. To this action there was a plea of the statute of frauds, and the question here is, whether the contract or 'arrangement between these parties falls within the spirit and letter of the statute of frauds, the same not having been in writing. We are of the opinion that this contract does not fall within the statute of frauds, although not in writing. We do not think it was a collateral undertaking on the part of Ledbetter & Harris, but think it was an original undertaking, fourided upon a suffi- cient consideration. In the first place, Ferguson & Co. were sub- contractors under Ledbetter & Harris, and it was to the interest of Ledbetter & Harris that their subcontractors should perform the work the latter had contracted to do, the same being work which Ledbetter & Harris had contracted to do and I'erguson & Co. having been substituted by them to do it in their stead. It was a contract to serve the pecuniary and business purposes of Ledbetter & Harris, involving benefits to them and damages to McGhees & Co. See 13 N. E. Rep. 80; 22 How. 43; 36 Mich. 324. Besides, Ledbetter & Harris were to receive two per cent, on such amounts as they might pay McGhees & Co. out of the funds 'com- ing into their hands belonging to Ferguson & Co. We think fur- thermore that inasmuch as Ledbetter & Harris were to receive and did receive the moneys which were to be paid to Ferguson & Co. for work done on the road, and which Ferguson & Co. had agreed should be paid by Ledbetter & Harris to McGhees & Co., and as Ledbetter & Harris had agreed so to apply the funds thus coming into their hands, this itself was a sufficient consid- eration- to suppbrt the promise of Ledbetter & Harris to pay to McGhees & Co. the debt due the latter by Ferguson & Co. This case is very much like the case of Andrews v. Smith, 2 Cromp. M. & E. (Exch) 626. In that case the declaration alleged that H. was employed to do work on certain houses, and that the defendant was employed as surveyor over him, and to receive moneys to be paid to H. for such work; and that inconsideratioit SEC. 9.] LEDBETTER & HAEEIS V. MC GHEES & CO, 93 that the plaintiff would provide and deliver to U. such materials as should be required to enable him to do the work, the defendant promised the plaintiff to pay him for them, out of sueh moneys received by him as should become due to H. for the work, if H. should give him an order for that purpose. The declaration then averred that H. gave the defendant such order, and that he re- quired certain materials, which the plaintiff provided and deliv- ered to him, to the value of 1,000 pounds, and that that sum became due to H. for the work; of all of which the defendant had notice, and was requested by the plaintiff to pay him for the materials out of such moneys received by him as were due to H. for the work. The breach assigned was, that although the de- fendant had received 1,000 pounds to be paid and then due to H., and though the said order had not been revoked, the defendant refused to pay the plaintiff. To this declaration a plea was filed that the promise in the declaration mentioned was a special prom- ise to answer for the debt of H., and that there was no memoran- dum or note thereof in writing. This plea was demurred to, and it was held that the plea was bad, for that the defendant's promise was an original and not a collateral one; Lord Abinger, Chief Baron, holding that " if the defendant contracted not to pay Hill's debt out of his own funds, but only faithfully to apply Hill's funds for that purpose when they should come into his hands, that contract would not be within the operation of the statute." Parke, Baron, held that there was nothing on the face of the declaration to imply a contract by the plaintiff with Hill, and " if that be so, it is clear the defendant's contract was an original, not a collateral one, and so not within the statute. But even if that were otherwise, this is nothing more than prospective assignment of funds which were to come to the defendant's hand for Hill, and an attornment, as it were, by the defendant to that assigoment; and the authorities show that in such case, the con- tract is not within the statute." In this judgment the other barons concurred. We are not aware that this decision has ever been overruled. It seems to us to be good law, and it runs al- most all fours with the present case. In Throop on the Validity of Verbal Agreements, § 526, et seq., the question involved, in, this ease is well considered, and the con- elusion we have arrived at fully established by the text and authorities cited. It was argued before us by the able counsel for the plaintiffs in error, that inasmuch as the accounts for the goods sold and 94 LEDBETTEE & HARRIS V. MC GHEES & CO. [CHAP. n. delivered to, Ferguson & Co. were charged to them on the books of McGhees & Co., and as McGhees & Co. had sued Ferguson & Co. and obtained judgment for the amount thereof, this made the case fall within the statute of frauds. In this view we do not concur. True, Ferguson & Co. are bound to pay this debt, but that does not render the liability of Ledbetter & Harris to pay the same any less. They are bound upon their agreement. They were in some sense trustees, under the agreement, as to the funds belonging toi Ferguson & Co; which came into their hands; and by the direction and consent of Ferguson & Co. should have in good faith applied these funds to the payment of the claim of McGhees & Co. Having failed to do so, they are liable. This was not a promise on the part of Ledbetter & Harris to pay the debt due by Ferguson & Co. to McGhees & Co. out of their own funds; if it were, probably such an agreement would fall within the statute of frauds and could not be enforced; but it was a promise to pay over such of the funds as might come into their hands belonging to Ferguson & Co. to McGhees & Co., as would be sufficient to satisfy the claims of the latter against Ferguson & Co. and having failed to do this they are liable for a breach of their contract; and although Ferguson & Co. may also be liable to Mc- Ghees & Co., this does not make the liability of Ledbetter & Harris any less for a breach of their contract. There are some exceptions taken by the plaintiffs in error to several charges of the court below and refusals to charge as re- quested ; but these exceptions, in the view we take of this ease, are immaterial. Inasmuch as there is no exception to the instruction of the court as to the evidence in the ease, and the jury having found the facts as we have stated, these exceptions need not be considered. Judgment affirmed. Accord.— Andrews v. Smith, 2 C. M. & 15. 627; Hughes v. Uwson, 31 Ark. 613; Bott'v. Barr, 95 Ind. 243; Mitts v. McMorran, 64 Mich. 664; Smith v! Exchange Banic, 110 Pa. 508; Fehlinger v. Wood, 134 Pa. 517; Hilton v. Dins- more, 23 Me. 410; FuUam v. Adams, 37 Vt. 391; McKenzie v. Jacl£son,"4 Ala. 230; Power v. Eankin, 114 111. 52. It has been held that the promisor is not bound upon his verbal promise to pay the debt of another out of property of the principal in his hands, without the express assent of the principal. Richardson v. Williams, 49 Me. 558. SEC. 10.] BROWN V. CURTISS. 95 Sec. 10. iPromise to pay a pre-existing liability of the promisor, BROWN V. CURTISS. 2 N. Y. 225 (1849). On error from the Supreme Court, where the action was as- sumpsit upon a guaranty, brought by Curtiss against Chester Brown. On the trial the plaintiff gave in evidence a promissory note as follows : " For value received I promise to pay Chester Brown or bearer fifty dollars, six months from date, with use. '.' Canaan, April 2, 1838. G. F. Beown." The defendant transferred this note to the plaintiff in ex- change for, and in payment of, another note of which the defendant was the maker, and executed a guaranty on the back of the note without, however, expressing any consideration in the contract of guaranty. E. Miller, for plaintiff in error. C. L. Monell, for defendant in error. Bronson, J. It is said on the one side, that the defendant is the maker of a promissory note, and liable as such; and on the other side, that he is an endorser, and }ias been discharged for the want of demand and notice. And, strange as it may seem, there are cases in the books which go to uphold both of these po- sitions. But they are both wrong. The defendant is neither maker nor endorser of a promissory note. On the contrary, he has in very plain terms made a contract of a different kind from either of those — one well known to .the law; and by that con- tract he must either stand or fall. He has' guarantied the pay- ment of G. F. Brown's note; and we have no right to turn that contract into one of a different kind. This is so plain a principle that it would seem to be enough to mention it, without saying anything more. And yet there are cases which hold, that the guarantor of a promissory note may sometimes be treated as maker, and sometimes as endorser. This has usually been allowed for the purpose of giving effect to the supposed intention of the par- ties as ascertained from extrinsic evidence; though there has not always been so fair an apology for altering the contract. But on whatever ground the courts may have acted, it is a dangerous 96 BKOWN V. CUETISS. [CHAP. U. proceeding. At the very best, it violates the salutary rule, that all prior negotiations between the parties are to be deemed merged in the final written agreement; and allows that agreement to be overruled by the conversations which preceded it. If the parties have made a mistake in drawing up their contract, the instrument may be reformed in equity, by a direct proceeding for that pur- pose. But the courts can have no right, under color of constru- ing the agreement, to say that it means something else from what the language of the instrument plainly imports. I have con- tended earnestly, though not always with success, for this doc- trine. (Seabury v. Hungerford, 2 Hill 80; Miller v. Gaston, id. 188; Manrow v. Durham, 3 id. 587; Leggett v. Raymond, 6 id. 639.) But the side of truth and principle will sooner or later prevail; and the decisions of the Court of Errors in Hall v. Newcomb (7 Hill 416; 3 id. 233 S. C), and of this court in (Spies V. Gilmore, 1 Comst. 321), have greatly shaken, if they have not entirely overthrown the cases in which the courts have taken the liberty to remodel the contract of the parties. Those cases have never had any ground of principle to stand on, and I trust they will never again be cited as authority in this State. I do not mean that the very words of any agreement are always to be followed. Construction is often necessary for the purpose of ascertaining what the parties intended by the words which they used. But when the meaning of the instrument has been ascertained, the office of construction is at an end; and the con- tract can only be enforced as the parties have made it. The defendant has very plainly contracted as a guarantor. If he is not liable as such, he is not liable at all; and if he is liable as such, he cannot get rid of the obligation by calling himself an endorser, or anything else. ************ The only remaining question is on the statute of frauds (2 R. S. 135, § 2.) If the case is within the statute, it is impossible to get over the objection that no consideration is expressed in the guaranty. I know it was held in Manrow v. Durham (3 Hill 584), that a guaranty like this was a promissory note, which im- ports a consideration, and was therefore valid. But that ease, which has been questioned elsewhere (Story, Prom. Notes, 597,) as well as at home, cannot be law. An undertaking that another man will perform his contract is not a promissory note. It is not within any definition which was ever given of a promissory note, and it cannot be held to be such, without confounding all legal distinctions in relation to the nature of contracts. SEC. 10.] BROWN V. CUETISS. 97 But I think the statute of frauds does not apply to this case. Although in form this is a promise to answer for the debt or default of another, in substance it is an engagement to pay the guarantor's own debt, in a particular way. He does not under- take as a mere surety for the maker; but on his own account, and for a consideration which has its root in a transaction entirely distinct from the liability of the maker. The defendant was a debtor to the plaintiff, and gave the note, with the guaranty, to satisfy that debt. This belongs to the third class of cases men- tioned by Kent, Ch. J., in Leonard v. Vredenburgh, (8 John. 38, 9), there was a new and distinct consideration independent of the debt of the maker, and one moving between the parties to the new promise. In such cases, where the party undertakes, for his own benefit, and upon a full consideration received by him- self, the promise is not within the statute. It would be good without any writing. The point was decided by the Supreme Court in Johnson v. Gilbert, (4 Hill 178,) and I do not think it necessary to refer to other cases holding the same doctrine. The case of Manrow v. Durham might have been placed upon the same ground on which I have put this, if Durham alone had signed the guaranty. He made the promise upon a new con- sideration, moving between the plaintiff and himself. But Moul- throp, the other defendant, was a mere surety; and as to him, the case was clearly within the statute. Jewett, Ch. J., and Gardiner, J., were of opinion that the guar- anty was within the statute of frauds, and therefore void. Judgment affirmed. ,'AccOED.— Cardell v. McNeil, 21- N. Y. 336; Malone v. Keener, 44 Pa. 107; Barker v. Scudder, 56 Mo. 272; Dyer v. Gibson, 16 Wis. 580; Wyman v. Goodrich, 26 Wis. 21 ; Mobile & Girard R. R. Co. v. Jones, 57 Ga. 198 ; Bryant V. Rich, 104 Mich. 124; Darst v. Bates, 95 111. 493; Bateman v. Butler, 124 Ind. 223; Eesshears v. Rowe, 46 Mo. 501. It has been held that a promise to guarantee the note of a third party executed direct to the creditor in settlement of the promisor's debt, is a col- lateral undertaking and within the statute. Dows v. Swett, 120 Mass. 322. 98 GREEN V. HADFIELD. [CHAP. U. Sec. 11. Assumption of Vendor's debt as part of purchase price. GEEEN, ET AL. v. HADFIELD. 89 Wis. 138 (1894). Action upon contract. For the appellant there were briefs of Frank M. Hoyt, at- torney, and Geo. E. Sutherland, of counsel. For the respondents there was a brief signed by W. J. Turner, of counsel, and Turner <& Timlin, attorneys. "WiNSLOW, J. The several contentions made by the defendant will b3 taken up in their order. ##******** 2. It is next objected that the alleged promise of the defendant was a promise to pay the debt of a third person, and hence void because not in writing. The facts established by the verdict or by uncontradicted evidence, which bear upon this question, are briefly as follows: The plaintiffs had a bill of sale of a part of the personal property in question, given by C. H. Hadfleld to them January 13, 1892, which was in fact given as security for present and future indebtedness, which bill of sale had never been filed. On the 30th day of January, 1892, the plaintiffs met C. H. and Joseph Hadfleld at a law office in Milwaukee. At this meeting, after lengthy negotiation, an agreement was reached by which C. H. Hadfleld, with the consent of the plaintiffs, transferred all, or nearly all, of his property, including that covered by the unrecorded bill of sale, to Joseph, and the plaintiffs surrendered to him their bill of sale ; and in consideration of the transfer and release Joseph orally promised to pay the debt to the plaintiffs, and immediately took possession of the property and business. This statement of facts renders it quite clear that Joseph's prom- ' ise, although in form a promise to pay the debt of another, was in fact a promise to pay his own debt in a particular way. Johannes v. Phenix Ins. Co., 66 Wis. 50. There was not only a consideration for this promise moving from C. H. Hadfleld to the defendant, but also a consideration moving directly from the plaintiffs to the defendant, consisting of the surrender of the bill of sale. It is said that this bill of sale was void, except as be- tween the parties, because it was in substance a chattel mortgage and had not been filed. It was not, ■ however, entirely valueless to the plaintiffs, and its release was clearly a benefit to the de- fendant. It was capable of immediate filiiig prior to the close SEC. 11.] GEEEk V. HADFIELD. 99 of the negotiations between the parties, and, moreover, the par- ties evidently treated it as a valid lien. Weisel v. Spenee, 59 "Wis. 301 ; Young V. French, 35 Wis. Ill ; Hewett v. Currier, 63 Wis. 387. Judgment affirmed. Accord.— Todd v. Tobey. 29 Me. 219; Robbins v. Ayres, 10 Mo. 538; First Nat. Bank y. Chalmers, 144 N. Y. 432; Peters v. George, 81 Pac. Rep. (Cal.) 1117; Keyes v. Allen, 65 Vt. 667; Shinker v. Armstrong, 86 Va. 1011; Hooper V. Hooper, 32 W. Va. 526; Allen v. McKnight, 32 Mont. 349. Such promise is binding on the promisor although made only to the prin- cipal debtor and may be enforced by the creditor for whose benefit it is made. Mason v. Hall, 30 Ala. 599; Sacramento Lumber Co. v. Wagner, 67 Cal. 293; Boals V. Nixon, 26 111. App. 617; Carter v. Zenblin, 68 Ind. 436; Stariha v. Greenwood, 28 Minn. 521; Wynn v. Wood, 97 Pa. 216; Putney v. Farnham, 27 Wis. 187; Green v. Richardson, 4 Colo. 584. 100 LOWEY v. ADAMS. [CHAP. Ul. CHAPTER III. COMMERCIAL GUARANTIES. Sec. 1. General guaranty. JOHN LOWRY, ET AL. v. HIRAM ADAMS. 22 Vt. 160 (1850). F. E. Woodiridge and E. J. Phelps, for plaintiffs. J. Pierpont, for defendant. Poland, J. From the bill of exceptions and other papers re- ferred to in this cise the following facts appear to have been proved by the plaintiffs at the trial of this cause in the county court. That E. N. Drury was the son-in-law of the defendant, and some time previous to September, 1846, had been in partner- ship with him in mercantile business in the city of Vergennes, and had purchased the defendant's interest in the partnership busi- ness and had succeeded him therein. That in the month of Sep- tember, 1846, Drury, being about to go to the city of New York to purchase his usual supply of fall goods for his' store in Ver- gennes, applied to the defendant for a letter of credit, to enable him to purchase said goods ; and the defendant, on the seventeenth day of September, 1846, gave to Drury a writing in these words, to wit : " Mr. E. N. Drury is buying goods in New York, and what he may want, more than he pays for himself, I will be responsi- ble for; Vergennes, September 17, 1846. (Signed) Hiram Adams." That Drury carried said writing to the city of New York, and, on the twenty-second day of September, 1846, pre- sented the same to Stearns & Johnson, and, upon the strength and credit of it, purchased of them a small bill of goods. That Drury left said paper in the possession of Stearns & Johnson, and at the same time told them, that he should buy goods of other persons in New York, and desired Stearns & Johnson to keep said paper in their possession and exhibit it to those who called on them to see it, and to hold it for the use and benefit of any person, from whom he might purchase goods. That on the same day or SEC. 1.] LOWBl V. ADAML.' within a day or two after, Drury applied to the plaintiffs to sell him a bill of goods on credit, and at the same time informed them of said writing, and that he had deposited the same with Stearns & Johnson for the purposes above stated; and the plaintiffs there- upon sent their clerk to the store of Stearns & Johnson to see the writing, and it was exhibited to the clerk by Stearns & John- son, and a copy of it was taken by him and delivered to the plain- tiffs. That the plaintiffs, being satisfied of the sufficiency of said paper, sold and delivered to Drury a bill of goods, amounting to the sum of $371.38, and took his note for the amount, payable in four months from date (September 25, 1846), relying upon the said paper as their security for payment. That on the ninth day of November, 1846, the plaintiffs, upon the credit and faith of said paper, sold and delivered to Drury another bill of goods, amounting to the sum of $81.90. That Drury returned with said goods to Vergennes, and continued to carry on his business there, as a merchant, until some time in the winter of 1847, when he failed and became insolvent, and the plaintiffs have never been paid for said goods. The plaintiffs introduced evidence tending to prove, that between the sixth day of December, 1846, and the second Tuesday of the same month they gave notice to the de- fendant, that they had sold and delivered the above mentioned bills of goods to Drury, upon the faith of defendant's said guar- anty, that the same were not paid for, and that they should look to the defendant for payment, — and also proved, that they gave notice to the defendant, on the twenty-fifth day of January, 1847, that Drury had not paid said note. The county court ruled, that the plaintiffs could not maintain their suit against the defendant upon said guaranty; whereupon the plaintiffs submitted to a ver- dict for the defendant, with leave to except to the ruling of the court; and the question is now before us upon the correctness of that decision. 1. The defendant insists, that, although the writing signed by him was not addressed to any particular perspn, yet that, when it had been presented by Drury to Stearns, & Johnson, and thev liad given Drury credit upon the faith of it, its object and purpose had become complete and executed, and that thereafter the paper was to have the same legal effect and consequences, as if it had been originally addressed to Stearns & Johnson by the defendant. If the purpose of the parties were such, that it might have been fulfilled by such use of the paper, or if the parties, at the time it was executed, might reasonably be supposed to have contem- 102 LOWKY i). ADAMS. [CHAP. lU. plated only a single purchase upon the credit of it, at some one particular house, this position of the defendant is doubtless cor- rect. It becomes important, then, to ascertain and determine, if possible the true object and intent of the defendant in executing the paper and delivering it to Drury ; for the law aims in all cases if possible to give effect to and carry out the real designs of the parties in every species of contracts; and in no one class of cases have the courts gone so far for that purpose, as in those of mer- chantable transactions and securities. For the purpose of ascertaining the intent of the parties in entering into any contract, courts will look at the situation of the parties making it, the subject matter of the contract, the motives of the parties in entering into it, and the object to be attained by it; and, even in cases where the contract is reduced to writ- ing, will allow all these circumstances to be shown by parol evi- dence, if the intent of the parties, upon the face of the contract, is doubtful, or the language used by them will admit of more than one interpretation. See French v. Carhart, 1 Comst. 96, and observations of Jewett, Ch. J., p. 102 ; Chit, on Cont. 74, and notes. When, from the contract itself and all the surrounding circumstances, the true object and intent of the parties has been ascertained, courts will enforce the contract according to that intent, unless there be found in the way some stubborn, inflexible rule of law, absolutely requiring a different determination. Considering the case in this view, what was the intention and understanding of the defendant, at the time he made and deliv- ered 'the guaranty, or letter of credit, in question, to Drury? Drury was going to New York to purchase his usual fall supply of goods for the business of a country store, where goods of every . variety and description are usually kept for sale. The defendant had been a merchant himself, and had formerly carried on the mercantile business in the same store then occupied by Drury, and must have known, that it would be impossible for Drury to have supplied himself with all the various kinds of goods, usually kept for sale in a country store, at any single house in New York, and that he must necessarily make purchases of goods at several dif- ferent houses. The defendant, having been in business and known to be responsible under this state of things, gives to Drury a gen- eral letter of credit to carry to New York, addressed to no one, in which he agrees to be responsible for the goods Drury may purchase, more than he pays for. It would seem from the writing itself, and from the situation of the parties, impossible for any SEC. l.J LOWEY V. ^JDAMS. 103 one to doubt, what the defendant really intended, when he exe- cuted the paper and delivered it to Drury. We are fully satisfied, that his object must have been, and that he intended, to give to Drury the necessary credit to enable him to purchase his fall stock *of goods, of the various descriptions and varieties kept in a coun- try store, at as many different houses, and of as many different dealers, as might become necessary for that purpose. Is there, then, any imperative rule of law in the way of giving effect to this intention of the parties, and which will prevent these plaintiffs, who sold goods to Drury upon the credit and faith of the defendant's letter, from holding the defendant liable, be- cause another firm had previously trusted Drury with a bill of goods upon the credit of the same letter ? No case has been shown us, and the counsel for the defendant admits, that after a la- borious search he had not been able to find any decided case, or statement by any elementary writer, that, upon a general letter of credit, like the present one, the signer could only be liable to the person who gave the first credit upon it. In the case of Mc- Clung et al. v. MeanS^ 4 Ham. Ohio R. 193, the Supreme Court of Ohio seem to have held, that, upon a guaranty very similar to the present, different persons might give credit upon the faith of it, — though judgment in that case was given for the defendant, upon another point. We do not find, that this precise point has been adjudged by the courts, either in England or in this country ■ but in many cases we find dicta fully warranting the sustaining of such an action. See McLaren v. Watson's Ex'r, 26 Wend. 436, 437, by Verplance, Senator; Burckhard v. Brown, 5 Hill 642. See, also, opinion of Judge Story, in note to Story on Bills, 545 to 555; Story on Cont. 737, and cases cited in notes; Smith's Merc. Law 448, and Am. editor's note; Lawrason v. Mason, 3 Cranch 492; Bradley v. Gary, 3 Greenl. 233. Without taking further space upon the question, we are not able to discover any principle, or authority, by which we are precluded from giving to the defendant's letter of credit the effect we are satisfied he intended, — that is, to make himself responsible to each and every person, who should sell goods to Drury, relying upon the faith and credit of it, and that he became liable to each in the same manner, and to the same legal effect and extent, as if he had given a separate letter to each. ************ The judgment of the county court is therefore reversed and a new trial ordered. .104 TATLOE V. WETMOEE. [CHAP. IH. AccoED.— Griffin v. Eembert, 2 Rich. N. S. (S. C.) 410; Van Wart v. Car- penter, 21 Up. Can. (Q.B.) 320; Wheeler v. Mayfield, 31 Tex. 395; Lonsdale V. Lafayette Bank, 18 0. 126; Union Banic v. Costerj 3 N. Y. 203; Tidioute Sav. Bank v. Libbey, 101 Wis. 193. In case of a general guaranty of negotiable paper a transfer of the paper^ carries with it the benefit of the guaranty. Commercial Bank v. Provident Inst., 59 Kan. 361; State Nat. Bank v. Hayden, 14 Neb. 480; Lemmon v. Strong, 59 Conn. 448; Gould v. Ellery, 39 Barb. 163; Stillman v. Northrup, 109 N. Y. 473; Carpenter v. Longan, 16 Wall. 271; Ellsworth v. Harmon, 101 111. 274; Tidioute Savings Bank v. Libbey, 101 Wis. 193. A general guaranty of commercial paper is not equivalent to an indorse- ment and the guarantor has the same defenses against the indorsee as the maker against the first payee. Central Trust Co. v. National Bank, 101 U. S. 68; Tuttle v. Bartholomew, 11 Met. 452; Walton v. MascpU, 13 M. & W. 452. CONTEA.— Nat. Ex. Bank v. McElfresh, 37 S. E. Kep. (W. Va.) 541. Sec. 2. Special Guaranty. JOHN TAYLOR, ET AL. v. CHAS. W. WETMOEE. 10 O. 491 (1841). This is an action of Assumpsit. The declaration contains two special counts. In the first, it is averred, that one C. D. Farrar, on the 26th of November, 1836, being desirous of purchasing a general assortment of goods ia the City of Pittsburgh, for a retail country store, on a credit, and being unknown to the business men of said city, applied to the defendants, Messrs. Wetmores, then doing business at Cuyahoga Falls, in Portage county, for a general letter of credit, directed to some one or more of their correspondents in the sa,id City of Pittsburgh, by means of which the said Farrar might be enabled to make his purchase; and the said defendants upon such appli- cation, made and delivered to Mr. Farrar a letter of credit, or written guaranty, addressed to Messrs. A. D. McBride & Co., merchants, in Pittsburgh, in the words following : " Cuyahoga Falls, Nov. 26th, 1836. " Messrs. A. D. McBride & Co. " Gentlemen — Mr. C. D. Farrar has concluded to purchase ' a few goods; we have that confidence in Mr. Farrar, that we will say, that we will be responsible to the amount of two thousand dollars for goods delivered him. We are truly, " C. W. & S. D. WETMOEE." SEC. 2.] TAYLOE V. WETMORB. 105 And which said letter, the plaintiffs aver, was taken by Mr. Farrar, and presented to Messrs. McBride & Cp. at Pittsburgh, who retained it, as security for themselves and such other merr chants in the said city, as should at that time, and on the faith of said guaranty, sell goods on a credit to the said Farrar. It is also averred, that Mr. Farrar was unable to obtain a gen- eral assortment of goods from the house of the Messrs. McBrides, whose business was confined to that of grocers, and therefore he made application to the plaintiffs, upon the strength of the said guaranty, then in the hands of McBride & Co., referring the plaintiffs to the house, of McBride & Co. and to the said guaranty; that the plaintiffs did, in fact, call upon McBride & Co., examined the letter of credit, and being satisfied with their statements in regard to the responsibility of the .defendant, and of the guaranty, in consideration thereof, sold and delivered to Mr. Farrar, upon a credit of six months, a bill of dry goods, amounting to seven hundred and sixty dollars, and seventy-five cents; of all which the defendants had due and timely notice. The plaintiffs then aver, that the credit has expired, and that Farrar has omitted to pay, &e. Birchard, for the plaintiffs. Otis & Turner, for the defendants. Wood, J. Under the averments in the declaration, and the testimony submitted, are the plaintiffs entitled to judgment? and I may here remark, in the outset, in this case, that I know of no arbitrary rule applicable to actions founded upon mercantile guar- anties, which creates obligations between the parties to which they have neither expressly nor impliedly assented. In all actions founded in contract, the agreement as set forth must be proved, or the circumstances existing between the parties must be such as to leave it clearly to be inferred. In enforcing them, courts of justice, though they may sometimes be confined by technical rules, always endeavor to ascertain the understanding and intentions of the parties, and these are considered as the essence of their agreements in carrying them into execution. Mercantile guar- anties are either general or special; though a single letter of credit may bear upon its face both of these distinctions. It may be general as to the whole world, to whom the bearer may be ac- credited, and to any portion of whom, at his own option, he may make the guarantor a debtor, and special, as to the amount of the credit, or unlimited or general in the amount, and special as to the parties. 106 PEOPLE V. LEE. [CHAP. lU. The first inquiry which arises here, is, whether the guaranty in question is not special as to persons. It is directed to the house of McBride & Co. in the city of Pittsburgh, and nothing upon its face evincing an intention to give Parrar credit, or to incur re- sponsibility with any other house. The counsel for the plaintiff here admit, that a surety cannot be held beyond the terms of his engagement, but they insist that, although it is addressed only to McBride & Company, as it does not say we will be responsible to you, it is a letter of credit to any other, who will advance the goods. It seems to us, this rea- soning is more ingenious than sound. The guaranty being ad- dressed to A. D. McBride & Co., it is to them the defendants speak when they say, " We will be responsible to the amount of $2,000," and it contains no general terms, by which either Parrar, or the house of McBride, had the authority to transfer it to the plain- tiffs, and they to make the defendants their guarantors, without their assent, express or implied. Judgment for the defendants. Accord. — Evansville Nat. Bank v. KaufiFman, 93 N. Y. 273; Johnson v. Brown, 51 Ga. 498; Nat. Bank of Peoria v. Diefendorf, 90 111. 396; MitcheU V. Railton, 45 Mo. App. 273 ; Dry v. Davy, 10 Ad. & Ell. 30 ; Strange v. Lee, 3 East 484; Wright v. Eussell, 2 W. Bl. 934; Barker v. Parker, 1 Durn. & E. 287. The right of action on a s,pecial guaranty, when fixed, may be assigned to another. Eobbins v. Bingham, 4 Johns. 476; Evansville Nat. Bank v. KaufF- man, 93 N. Y. 273. A guaranty addressed to two persons can not be acted upon by one of the two named. Smith v. Montgomery, 3 Tex. 199 ; Penoyer v. Watson, 16 Johns 100. A guaranty made for joint principals can not be enforced if the advances are made to one. Cremer v. Higginson, 1 Mass. 323; Holland v. Teed, 7 Have. 50; Hawkins v. New Orleans Print. & Pub. Co., 29 La. An. 134; Man- hattan Gas Light Co. v. Ely, 39 Barb. 174. Sec. 3. Retrospective guaranties. THE PEOPLE OP THE STATE OP NEW TORE v R PORTER LEE, ET AL. 104 N Y. 441 (1887). Appeal from judgment of the General Term of the Supreme Court. This action was brought upon two guaranties, given in 1880 and SEC. 3.] , PEOPLE V. LEE. 107 1881 to the State, by the First National Bank of Buffalo, to secure deposits of canal tolls. With exception of dates and names of guarantors the two in- struments were alike and in terms as follows : — " Whereas, The canal board has designated the First National Bank of Buffalo to receive a part of the deposits of canal tolls collected at Buffalo, N. Y., and the said First National Bank has agreed to receive and account for the same, on the terms and con- ditions expressed in its contract hereto annexed, bearing even date herewith: Now, therefore, in consideration of the tolls to be de- posited in said bank, and of one dollar to us, . . . in hand paid by the said people of the State of New York, we jointly and severally covenant, promise and agree with the people of the State of New York, that said bank shall well and faithfully do and perform all things contained in said contract, on its part to be done or performed, and shall well and faithfully account for and pay over all moneys deposited with it, or for which it shall in any way become liable, in and by said contract, according to the terms and provisions thereof, and that said bank shall account for, and pay over all moneys now in deposit in said bank, or due, or to be- come due therefrom, to the people of the State of New York. ' ' Eugene H. Lewis, for appellants. Denis O'Brien, Attorney-General, for appellee. EuGEB, Ch. J. The First National Bank of Buffalo had, prior to 1882, for a series of years, been annually appointed, a de- positary of the State, for canal tolls receivable in the city of Buffalo, and had annually executed and delivered to the State, contracts regulating the relations between them, the performance of which had been in each year guarantied on the part of the bank, by some of its directors, in their individual capacity. Early in the season of 1882 said bank became insolvent after it had been appointed a depositary, but before it had completed and delivered to the State, satisfactory security for the perform- ance of its obligations for the ensuing year, and after that time the State discontinued its relations with such bank. Upon its insolvency the bank was found to be indebted to the State in a large sum of money, and the question in this case arises over the liability of its guarantors, for such debt. The complaint embraces the guaranties of both the years of 1880 and 1881, in its allegations, and seeks to recover the balance appearing to be due on the account, at the commencement of the year 1882. These 108 ■ PEOPLE V. LEE. [CHAP. III. contracts and guaranties were expressed in precisely similar lan- guage, and so far as the parties to them are concerned are subject to the same rule of interpretation, and must be understood to have been intended, to cover the same class of obligations, and to differ only in respect to the time of their execution, and the period of time covered by their provisions. Such guaranties are joint and several in character and it would constitute no defense to an action upon any of them to show that there were other persqns liable to the State, for the whole or a portion of the same debt, claimed of the defendant, or that such persons are not made par- ties to the action. The defendants here are each and all obligors upon the bonds of both 1880 and 1881, and in the view we take of the case it does not enlarge their liability, to consider their situation as parties to the guaranty of 1880. It may be that, as the result of inves- tigation it will be discovered that other parties liable to the State, for a portion of the money due from the bank, at the time of its insolvency may be found, and, as a consequence flowing from such fact, that the defendants in this action may have a claim for con- tribution, from such parties, in case they are obliged to pay the whole sum due the State, but it is not perceived how that fact can affect the liability of such guarantors upon their express contract of indemnity. The only breach of the obligations of the guaranty alleged in the complaint consists of the refusal of the bank to pay the sum claimed to be due from it, by the State on the 20th day of April, 1882, and that amount consisted of the general balance due on the account, accruing through a series of years and covering the opera- tions of 1880, as well as those of 1881. "Whatever, therefore, may be the liabilities or obligations of the parties to the contract and guaranty of 1880, it is entirely immaterial in this action, for the guaranty of 1881 covers not only the transactions of that year, but also the liability resulting from the transactions of 1880, as represented by the balance due from the bank to the State, at the time of the execution of the contract and guaranty of 1881. ******* The inquiry here may, therefore, be limited to the liability which the signers of the guaranty of 1881, incurred by the terms and conditions of their agreement. The main question arises over their liability for the debt existing, at the time of the execution of the guaranty, and arising out of the transactions and deposits of the year 1880. SEC. 3.] PEOPLE V. LEE. 109 It is claimed by the appellants that the guaranty taken in 1881 was intended to be prospective in its operation only, and did not cover existing deposits. It is not claimed, but that the express terms of the undertaking cover such a liability, but it is contended that the words of the condition should be limited and controlled by the language of the recital, and, so restricted, could not rea- sonably be held to include an existing debt. It cannot be disputed but that there is much authority tending to support the position contended for by the appellants, but we think -the cases cited by them are generally cases where the lan- guage of the condition was doubtful and uncertain, and a considera- tion of the whole instrument and the circumstances surrounding the situation of the parties created an ambiguity, requiring the ap- plication of rules of construction, to determine the real obliga- tion of the parties. The rule contended for is, however, one of construction, and obtains only for the purpose of ascertaining the real intention of the parties in making their contract. (Burr v. American Spiral Spring Butt. Go., 81 N. Y. 175, 178.) It cannot prevail where the language of the condition clearly and unmistakably shows an intention to incur a liability not in terms referred to in the recital. Guaranties are subject to the same rules of interpretation as other contracts, and especially to that fundamental rule requiring them to be enforced according to the meaning and intent, and in the manner designed by the parties at the time of their execution. (Rochester Gity Bk. v. El- wood, 21 N. Y. 88, 90; Burr v. Am. S. S. B. Go., 81 N. Y. 175, 178.) While the liability of guarantors is strictissimi juris and can- not be extended by construction beyond the plain and explicit language of their contract, they are still subject to the rule that effect must be given to all of the language contract, and a mean- ing and effect, ascribed to each of the word and phrase used therein, if it can be done without violating its plain intent. The general rule is undoubtedly, that a contract cannot be construed to have a retroactive operation, and that such an effect can be given to it only where by express word or by necessary implica- tion it clearly appears to be the intention of the parties to embrace past transactions, but when this does appear, it is indisputably competent for parties to bind themselves for such liabilities. "We are clearly of the opinion, in this case, that the contract itself recognizes an existing liability on the part of the bank to the State, and provides for its extension and the security thereof by the guarantors. XIO PEOPLE V. LEE. [CHAP. in. This would seem to be not only a natural requirement on the part of the State, while taking a new security from a debtor con- templating extended and continued transactions, but a necessary measure of precaution to avoid the complications involved, in in- vestigating the transactions of former and perhaps remote years. It would be not only difficult, but almost impracticable, for the State to have its transactions, with such a depositary separated' into distinct divisions, and be compelled to seek its indemnity among the conflicting equities and claims of numerous sureties, liable upon different contracts for the transactions of different years. It is, however, not permissible, we think, to resort to rules of construction in such a case as this, for there is no ambiguity in the language of the contract, and it provides in express terms for the liability in question. Thus, it states not only that the bank shall " well and faithfully account for and pay over all moneys deposited with it or for which it shall in any way become liable in and by said contract, according to the terms and provisions thereof," but " that said bank shall account fqr and pay over all money not on deposit in said bank to the people of the State of New York." More explicit language could not be used, and it is impossible to assign any other meaning to the language used than that the sureties intended to be bound for the continuing security of the existing deposit. It is not competent for parties to such an undertaking to allege that they were ignorant of the existence of a debt expressly pro- vided for, or that they have been misled by the omission of their principal to notify them of its existence. (Western N. Y. L Ins Co. V. Clinton, 66 N. Y. 226, 330.) * The conclusions reached on the propositions discussed neces- sarily dispose of all other questions raised by the appellants. Judgment affirmed. Words of general import will not be construed as retrospective although susceptible of such meaning, the language employed must by express words include past indebtedness. Morrell v. Cowan, L. E. 7 Ch. Div. 151 • Wier Plow Co. V. Walmsley, 110 Ind. 242; Brooks v. Baker, 9 Daly 398. riEO. 4.] ' DOUGLASS V. REYNOLDS. Ill Sec. 4. Continuing gaarantie&. JAMES S. DOUGLASS, ET AL. v. REYNOLDS, BTENE & CO. 7 Peters 113 (1833). The ease is stated m the opinion of the court. Jones, for the plaintiffs. Taney, Attorney-General, contra. Stoey, J., delivered the opinion of the court. This ease conies before us upon a writ of error to a judgment of the district court of the district of Mississippi, in which the plaintiffs in error are defendants in the court below. The original action is founded upon a guarantee, given by Douglass and others in favor of one Chester Haring, by the fol- lowing letter: — " Port Gibson, December, 1807. " Messrs. Reynolds, Byrne and Co. "Gentlemen — Our friend, Mr. Chester Haring, to assist him in business, may require your aid from time to time, either by acceptance or indorsement of his paper, or advances in cash. In order to save you from harm by so doing, we do hereby bind ourselves, severally and jointly, to be responsible to you at any time for a sum not exceeding $8,000, should the said Chester Haring fail to do so. " Your obedient servants, " James S. Douglass. " Thomas G. Singleton. " Thomas Going." The declaration contains two counts. The first alleges that, upon the faith of the letter, the original plaintiffs accepted and indorsed drafts or paper of Haring to the amount of $8,000, which they were obliged to pay, and did pay at the maturity thereof; and of which they gave due notice to the defendants. The sec- ond count is for money lent, and money had and received. But this may be laid entirely out of the case, since it is very clear, that, upon a collateral undertaking of this sort, no such suit is maintainable. At the trial upon the general issue and the plea of payment, the plaintiffs, who are resident merchants at New Orleans, of- fered evidence to prove the payment of five promissory notes, dated on the 1st of May, 1829, payable to Daniel Greenleaf or 112 DOUGLASS V. REYNOLDS. [CHAP. IH. order, and indorsed by him, namely: one note due on the 20th of November, 1829, for $4,000; one due on the 20th of. December, 1829, for $4,500; one due on the 20th of January, 1830, for $5,500; one due on the 20th of February, 1830, for $5,500;' and one due on the 20th of March, 1830, for $5,500, in the whole amounting to $25,000; and that the notes had been discounted with the plaintiffs' indorsement thereon, and were taken up by them at maturity. It also appeared in evidence that soon after the letter of guar- antee had been received, acceptance had been made of the drafts of Haring'by the plaintiffs to the amoiint of $8,000; and that other large transactions of debt and credit took place betweeh them, upon which, on the 1st of May^ 1829, there was a balance of principal of $22,573.23, besides interest, due to the plaintiffs, and credits to a larger amount than $8,000 had come into posses- sion of the plaintiffs. And on that day the foregoing notes were received, and the following receipt written on the account con- taining the balance. < " Eeceived, Port Gibson, May 1, 1829, in part and on account of the above account, and interest that may be due thereon, the following notes, to wit (enumerating them), amounting in all to $25,000, which notes, when discounted, the proceeds to go to the credit of this account. " Reynolds, Byrne and Co." There was a good deal of other evidence in the cause, but it does not seem necessary to state it at large, since no part of it becomes important to a just understanding of the merits of the contro- versy, as it now stands before us. In the progress of the trial, the depositions of several wit- nesses who were clerks in the counting-house of the plaintiffs were read, in which they stated that they knew that the letter of credit was considered by the plaintiffs as covering any balance due by Chester Haring to the plaintiffs, for advances from that time to the extent of $8,000; and that advances were made, and moneys paid by them on account of Haring from the time of receiving the said letter of credit, predicated on the said letter always protect- ing the plaintiffs to the amount of $8,000, whenever the said amount or less might be uncovered ; and that it was considered in the said counting-house of the plaintiffs as a continuing letter of credit, and so acted upon by the plaintiffs. To the admission of this part of the depositions the defendants objected; but the SEO. 4.] DOUGLASS V. REYNOLDS. 113 court overruled the objeetion, and permitted the evidence to be read to the jury as evidence cf the reliance of the plaintiffs upon the letter of credit to the amount of the $8,000, for acceptance, payments, advances, and indorsements made to Haring. The de- fendants excepted to this admission of the evidence, and the pro- priety of this ruling of the court constitutes the first question in the case. We are of opinion that the evidence was rightly admitted in the view and for the purpose stated by the court below. It was not offered to explain or establish the construction of the letter of credit. See Russell v. Clarke, 3 Dall. 415, s. c. 7 Craneh 69, whether it constituted a limited or a continuing guarantee; and was not thus open to the objeetion which has been relied on at the bar, that it was an attempt by parol evidence to explain a writ- ten contract. It was admitted simply to establish that credit had been given to Haring upon the faith of it from time to time, and that it was treated by the plaintiff's as a continuing guar- antee ; so that if, in point of law, it was entitled to that character, the plaintiffs' claim might not be open to the suggestion that no such advances, acceptances, or indorsements had in fact been made upon the credit of it ; an objeetion which, if founded in fact, might have been fatal to their claim. Nothing can be clearer uj)on principle, than that if a letter of credit is given, but in fact no advances are made upon the faith of it; the party is not entitled to recover for any debts due to him from the debtor, in whose favor it was given, which have been incurred subsequently to the guarantee, and without any reference to it. The other exceptions are to certain instructions prayed by the defendants, and refused by the court. They are as follows: — 1. That the said letter of credit sued on is not a continuing guarantee, but is a limited on; and that when an advance or ad- vances, acceptance or acceptances, indorsement or indorsements, • had been made by the plaintiffs on the faith of said letter of credit to the amount of $8,000, the guarantee became functus officio, and ceased to operate upon any future advances, accept- ances, or indorsements, made by said plaintiffs for Chester Haring. And that if the said plaintiffs received from said Haring, in pay- ment of their advances, acceptances, or indorsements, made on account of said guarantee, the amount of $8,000, it was a disr charge of said letter of guarantee; and that any future advances, acceptances, or indorsements, cannot be charged against and re- 8 114 DOUGLASS V. EBYNOIiDS. [CHAP. III. covered from the defendants, by virtue of said letter of credit, ******************* The question involved in the first instruction is, whether the guarantee contained in the letter is a limited or a continuing guar- antee ; or, in other words, whether it covered advances, acceptances, and indorsem.ents, in the first instance, to the amount of $8,000, or terminated when these were discharged ; or whether it covered successive advances, acceptances, and indorsements made to the same amount at any future times, toties quoties, whenever the ante- cedent transactions were discharged. Upon deliberate consider- ation, we are of opinion that it is a continuing guarantee ; and we found ourselves upon the language, and the apparent intent and object of the letter. Every instrument of this sort ought to re- ceive a fair and reasonable interpretation, according to the true import of its terms. It being an engagement for the debt of an- other, there is certainly no reason for giving it an expanded sig- nification, or liberal construction beyond the fair import of the terms. It was observed by this court in Russell v. Clarke's Exec- utors, 7 Craneh 69, that " the law will subject a man, having no interest in the transaction, to pay the debt of another only when his understanding manifests a clear intention to bind himself for that debt. "Words of doubtful import ought not, it is conceived, to receive that construction." On the other hand, as these instru- ments are of extensive use in the commercial world, upon the faith of which large credits and advances are made, care should be taken to hold the party bound to the full extent of what ap- pears to be his engagement; and for this purpose it was recog- nized by this court in Drummond v. Prestman, 12 Wheat. 515, as a rule in expounding them, that the words of the guarantee are to to be taken as strongly against the guarantor as the sense will admit ; Fell on Guarantee, c. 5, p. 129, &c. ; and the same rule was adopted in the king's bench in Mason v. Pritchard, 12 East. 227. If we examine the language or object of the present letter, we think it is difficult to escape from the conclusion that it was in-- tended, and was understood by all the parties as a continuing guar- antee. There is no doubt that it was so interpreted by the plain- tiffs. The object is to assist Haring in business: " Our friend Mr. Chester Haring, ' ' to assist him ' ' in business may require your aid." It was not contemplated to be a single transaction, or an unbroken series of transaction for a limited period. The aid re- quired was to be " from time to time, either by acceptance of indorsement of his paper, or advances in cash." The very nature SBC. 4. J DOUGLASS V. REYNOLDS. 115 of sueh negotiations, with reference to the business of the party, unless other controlling words accompanied them, would seem to indicate a succession of acts at different periods, having no definite termination or necessary connection with each other. The lan- guage of the letter then proceeds: " In order to save you from harm in so doing, we do hereby bind ourselves, &c., to be respon- sible to you at any time for a sum not exceeding $8,000, should the said Chester Haring fail so to do." It is difficult to satisfy this language without giving to the guarantee a continuing operation. The parties agree to be responsible, at any time, for a sum not ex- ceeding $8,000 ; and if so, is not the natural,, nay necessary import, that the acceptances, indorsements, and advances are not limited in duration; but that whenever made, and at whatever future times, the same responsibility shall attach upon them, not exceed- ing $8,000 ? We think that it would be difficult to give any other interpretation of the language, without subjecting mercantile papers to refinements and subtleties which would betray innocent men into the most severe losses by an unsuspecting confidence in them. That the language fairly admits of, if it does not absolutely require this construction, cannot be doubted. If it does so, it is but common justice-that it should receive this construction in favor of innocent parties who have made acceptances, indorsements, and advances upon the faith of it, according to the rule already stated, that the words shall be taken as strongly against the party using them as the sense will admit. It is rare that in eases of guarantee the language of the instru- ments is such as to make the decision upon one an exact authority for that of another. The whole words and clauses are to be con- strued together, and that sense is to be given to each which best comports with the general scope and intent of the whole. So far as authorities go, however, we think they are decidedly in favor of the interpretation which we have adopted. In Mason v. Pritchard, 12 East 227, s. c. 2 Camp. 436, the words of the guarantee were, " to be responsible for any goods he hath or may supply my brother with to the amount of £100;" and the court were of opinion that it was a continuing or standing guarantee to the extent of £100, which might at any time become due for goods supplied until the credit was recalled. That case was certainly founded upon words less expressive and cogent than those of the case before us. In Merle v. Wells, 2 Camp. 413, the guarantee was: " I consider my- self bound to you for any debt he (my brother) may contract for his business as a jeweller, not exceeding £100, after this date." 116 DOUGLASS V. REYNOLDS. [ CHAP. HI. Lord Ellenborough held it a continuing guarantee for any debt not exceeding £100, which the brother might from time to time con- tract with the plaintiffs in the way of his business; and that the guarantee was not confined to one instance, but applied to debts successively renewed. The case of Sansom v. Bell, 2 Camp. 39, before the same learned judge, is to the same effect. The case of Bastow V. Bennet, 3 Camp. 220, was upon words far less stringent. There the guarantee was : "I hereby undertake and engage to be answerable to the extent of £300 for any tallow or soap supplied by B. to F. and B., provided they shall neglect to pay in due time." Lord Ellenborough held it a continuing guarantee, prin- cipally upon the force of the word any ; but the case went off upon another point. The cases cited on the other side are all distinguishable. Kirby V. The Duke of Marlborough, 2 Maule & Selw. 18, turned upon the ground that the whole recital of the bond showed that a limited guarantee for advances to a definite amount, when they were made the guarantee became functus officio. In Melville v. Hayden, 3 Barn. & Aid. 593, the guarantee was: " I engage to guarantee the payment of A. to the extent of £60 at quarterly account, bill two months, for goods to be purchased by him of B. ;" and the court held, that it was not a continuing guarantee, as the words ' ' quarterly account ' ' import only the first quarterly account ; and relied on the word ' ' any ' ' in Mason v. Pritchard, 12 East 227, as distinguishing that case from the one before them. The case of Rogers v. "Warner, 8 Johns. 119, was on a guarantee in these words: " If A. and B., our sons, wish to take goods of you on credit, we are willing to lend our names as security for any amount they may wish;" and the court held it to be a limited guarantee for a single credit. It is observable, that here no words of con- tinuing credit, such as " from time to time," or " at any time," are used; so that the whole language is satisfied by one transac- tion. It is, therefore, strongly distinguishable from that before this court. We cannot admit, therefore, as has been contended at the bar, that the courts have inclined to vary the rule of construction of instruments of this nature, and to hold them to be strictissimi juris as to their interpretation. And we are well satisfied that the au- thorities in no degree interfere with the construction which we have given to the terms of the present letter. The court below were then right in refusing the first instruction. SEC. 5.j CLAY V. ED6EET0N. 117 , Accord. — Holding that where the general words of credit create an am- biguity, resort should be had to the surrounding circumstances to ascertain the meaning. Wright v. Griffith, 121 Ind. 478; White's Bank v. Myles, 73 N. Y. 335; Mathews v. Phelps, 61 Mich. 327; Fennell v. McGuire, 21 Up. Can. (C. P.) 134; Mussey v. Rayner, 22 Pick. 223; Hotchkiss v. Barnes, 34 Conn. 27; Boehne v. Murpliy, 46 Mo. 57; Eindge v. Judson, 24 N. Y. 64; Grist v. Burlingsame, 62 Barb. 351; Gates v. McKee, 13 N. Y. 232; Crittenden v. Fiske, 46 Mich. 70; Wood v. Priestner, L. E. 2 Ex. 66; Heffleld v. Meadows, 4 C. P. Div. 595. In the case last cited the language of the guaranty was, " I, John Meadows, will be answerable for fifty pounds sterling, that Wm. York of Stanford, butcher, may buy of John Heffield." In reference to this the Court said : " It is , obvious that we can not decide that question upon the mere construction of the document itself, without looking at the surround- ing circumstances to seo what was the subject matter which the parties had in their contemplation when the guarantee was given. It is proper to ascer- tain that for the purpose of seeing what the parties were dealing about, not for the purpose of altering the terms of the guarantee by words of mouth passing at the time, but as a part of the conduct of the parties, in order to determine what was the scope and object of the intended guarantee." CoNTEA. — Boston & Sandwich' Glass Co. v. Moore, 119 Mass. 435; Cutler v. Ballou, 136 Mass. 337 ; Nicholson v. Paget, 1 Cromp. & Mees 48 ; Kay v. Groves, 6 Bing. 276; Gard v. Stevens, 12 Mich. 292; Birdsell v. Heacock, 32 O. S. 177. In this case the language of the guaranty was: "Please send my son the lumber he asks for and it will be all right." The evidence disclosed that the son was about to engage in the lumber business and was seeking by this arrangement between his father and the creditor, to establish a line of credit which would enable him to buy from time to time as his needs should require. The principal presented the letter and purchased a small amount of lumber and thereafter continued to purchase other and larger amounts from time to time, and the holding is the guarantor is liable only for the small amount he happened to call for when he presented the letter. The Court says: "Such an instrument should be confined to the immediate transaction, unless the language of the promise is sufficiently broad to show that it was meant to reach beyond the present, and render the guarantor answerable for future credits." Sec. 5. Absolute guaranties. ISAAC CLAY, ET AL., v. CHESTER EDGERTON. 19 0. S. 549 (1869). The ease is sufSciently stated in the opinion of the court. Henry H. Dodge, for plaintiffs in error. J. F. & S. B. Price, for defendant in error. Beinicbehofp, C. J. This is a petition in error prosecuted in this court to reverse a judgment of the District Court of Wood county, affirming a judgment of the Common Pleas of that county 118 CLAY V. EDGEItTON. [ CHAP. HI. in favor of the defendant in error, and against the plaintiffs in error. The plaintiff in the original case, Edgerton, attempted to bring his action against both Clay and Hoot ; and the following is a copy of the statements of his petition: " The plaintiff says that this his action is founded on a promis- sory note, of which the following is a copy : ' Montgomery, Febru- ary 28th, 1860. Four years after date I promise to pay Thomas S. Carman or bearer the sum of one hundred dollars, for value re- ceived with use. (Name in German) John Hoot.' On the back of said note are the following indorsements: ' Without recourse, D. L. June. ' 'I guarantee the payment of the within note to C. Edgerton or order. Isaac Clay. March 26th, 1863.' The defend- ant John Hoot is liable on said note as maker, and the defendant Isaac Clay as indorser and grantor. The plaintiff, Chester Edgerton, is the holder and owner of said note. There is due from the defendants to the plaintiff on said promissory note the sum of one hundred dollar?, which he claims with interest from the 28th day of February, 1860, and for which he asks judgment." Clay appeared and demurred to the petition, on the ground that it did not state facts sufficient to constitute a cause of action against him. The demurrer was overruled, and in the petition in error in the District Coiirt that ruling was assigned for error. Thereupon Clay answered in these words : * * * ^, * » " And defendant says that plaintiff never has presented said note to Hoot, the maker thereof, nor demanded payment of said Hoot thereof, nor has he presented said note to this defendant, or demanded payment thereof, nor notified this defendant that said note was unpaid ; and defendant says that for a long time after said note fell due, to wit, for nearly six months thereafter, said Hoot re- sided in Wood county, and was perfectly responsible, and said note could have been, with reasonable care or diligence, collected of said Hoot; wherefore this defendant prays that he may be hence dis- missed. ***************:^* In the second place it is argued by counsel for plaintiffs in error, that the petition is insufficient, because it contains no allegations of demand by Edgerton upon Hoot, the maker of the note, for pay- ment thereof, and notice to Clay of non-payment. On this point much confusion has doubtless arisen from a failure Skc. 5.] CLAY V. EDGEETON. 119 to discriminate between a guaranty which depends on some con- tingency or condition, and one which is in its terms absolute and unconditional. Where a guaranty is dependent on some condition or contingency expressed in, or fairly implied from, the terms of the contract of guaranty, a compliance with those terms on the part of the guarantee is necessary, and must be alleged and proved in order to a recovery upon it. But where the guaranty of pay- ment is absolute and unconditional, we are of opinion that it is not neeesary, in order to make out a prima facie case for recovery, to aver or prove either demand or notice. This, we think, is fairly inferable from what is said by this court in Bashford v. Shaw, 4 Ohio St. 266. And this view of the question is directly ruled in Allen v. Rightmere, 20 J. E. 365 ; Breed v. Hillhouse, 7 Conn. R. 523; Read v. Cutts, 7 Greenleaf's R. 186; and Heaton v. Hul- bert, 3 Seammon's 111. E. 489. We are aware that cases may be found in which the point has been ruled otherwise; but there is nothing either in Bashford v. Shaw, supra, or in Forest v. Stew- art, 14 Ohio St. 246, adverse to this conclusion; and what is said by the court in Greene v. Dodge & Cogswell, 2 Ohio 431, related to a case in which the court construed the contract of guaranty sued on to be a conditional one. Now the contract of guaranty in the case before us is absolute and unconditional. Its language is : " I guarantee the payment of the within note to C. Edgerton or order;" and we are of opinion that no averment of demand or notice in the petition was necessary; and if any loss had resulted to the guarantor by reason cf any laches on the part of the guar- antee, said laches, if it could be made available at all, would be matter cf defense to be set up by the guarantor. For these reasons we are of opinion that there was no error in the overruling of the demurer to the petition. Scott, Welch, White, and Day, JJ., concurred. AcccKD. — Davis v. Wells, Fargo & Co., 104 U. S. 159; Brown v. Curtis, 2 N. Y. 225; Donley v. Camp, 22 Ala. C59; Parkraan v. Brewster, 15 Gray 271; Chafoin v. Rich, 77 Cal. 476; Tyler v. Waddingham, 58 Conn. 375; Gage v. Mechanics Nat. Bank, 79 111. 62; Robert's v. Hawkins, 70 Mich. 560; Klein v. Kern, 94 Tenn. 34; Hubbard v. Haley, 96 Wis. 578; Campbell v. Baker, 46 Pa. 243; Milroy v. Quinn, 69 Ind. 406. In eases where the guaranty is absolute it is not necessary to first pursue and exhaust the principal before proceeding against the guarantor. Cole v. Merchants Bank, 60 Ind. 350; Woodstock Bank v. Downes, 27 Vt. 539; Rob- erts V. Riddle, 79 Pa. 468; Osborne v. Gullikson, 64 Minn. 218; Penny v. Crane Bros. Mfg. Co., 80 111. 244; London Bank v. Smith, 101 Cal. 415. Some of the earlier cases make no distinction between absolute and condi- 120 MC MUREAY V. NOTES. [CHAP. m. tional guaranties and hold that although the guaranty is absolute the prin- cipal must first be exhausted before recourse can be had to the guarantor, Rudy V. Wolf, 16 Serg. & R. 79; Johnston v. Chapman, 3 Pen. & W. (Pa.) 18; Farrow v. Respess, 11 Ired. Law (N. C.) 170; Benton v. Gibson, 1 Hill Law (S. C.) 56; Craig v. Phipps, 23 Miss. 240. Sec. 6. Cruaranty of collectibility. ALFRED W. McMUERT, ET AL., Executors, v. STEPHEN R. NOTES. 72 N. Y. 523 (1878). Appeal from judgment of the General Term of the Supreme Court. Esek Cowen, for appellant. Irving Browne, for respondents. Rapallo, J. The guaranty on which this action is brought is contained in an assignment of a bond and mortgage, and is in the following form : " I hereby covenant . . . that in case of foreclosure and sale of the mortgaged premises described in said mortgage, if the proceeds of such sale shall be insufficient to satisfy the same, with the costs of foreclosure, I will pay the amount of such de- ficiency to' the said party of the second part, or its assigns, on demand. ' ' On the part of the appellants, it is contended that this guaranty is subject to the rules applicable to guaranties of collection, and thus laches in foreclosing the mortgage, after default, is a de- fense. The respondents insist that it is a guaranty of payment, and that they were under no obligation to use diligence in endeav- oring to collect the mortgage debt by foreclosure. The fundamental distinction between a guaranty of payment and one of collection is, that in the first case the guarantor undertakes unconditionally that the debtor will pay and the creditor may, upon default, proceed directly against the guarantor, without tak- ing any steps to collect of the principal debtor, and the omission or neglect to proceed against him is not (except under special cir- cumstances) any defense to the guarantor; while in the second case the undertaking is that if the demand cannot be collected by legal proceedings the guarantor will pay, and consequently legal proceedings against the principal debtor, and a failure to collect SEC. 6.] MC MUEEAY V. 'NOYES. 121 of him by those means are conditions precedent to the liability of the guarantor; and to these the law, as established by numerous decisions, attaches the further condition that due diligence be ex- ercised by the creditor in inforcing his legal remedies against the debtor. These rules are well settled, and are not controverted, and the only question is to which class of guaranties the one now before us belongs. It is apparent upon the face of the instrument that the under- taking of the defendant was not an uncpnditional one that the mortgagor should pay, or that the guarantor would pay on default of the mortgagor, but only that the guarantor would pay, in case of a deficiency arising on a foreclosure and sale. The foreclosure and sale were consequently conditions precedent, and the general principle is, that wherever a condition precedent is to be performed for the purpose of establishing the liability of a surety or guar- antor, such condition must be performed in good faith and with due diligence. It is upon this principle that, in case of a guaranty of collection diligence is required of the creditor. I am unable to see why this principle is not applicable to the guaranty now in controversy. The respondents claim that it is an undertaking to pay any deficiency which may arise, and is,, therefore, a guaranty of payment of the mortgage debt to that ex- tent, and to be governed by the same rules as if it had been a guaranty of payment of the whole mortgage. But the fallacy of this reasoning is that it is not an unconditional guaranty that the mortgagor will pay the mortgage debt, or any part of it, but only that after the remedy against the land has been exhausted, and the deficiency ascertained by foreclosure and sale, the guarantor will pay such deficiency. The only difference between this and an or- dinary guaranty of collection is, that in the latter ease the under- taking is that after it has been ascertained by all such legal pro- ceedings as the case admits of that the demand cannot be collected, the guarantor will pay; while in the present case the only pro- ceedings which the creditor is bound to adopt are a foreclosure of the mortgage and sale of the mortgaged lands. To that extent the condition precedent exists alike in both cases, and the duty of ex- ercising due diligence attaches, there being nothing in the instru- ment qualifying or dispensing with it. The case of Goldsmith v. Brown, 35 Barb. 484, is relied upon by the respondents as Sustaining their position. In that case the covenant was, as construed by the court, to pay the deficiency upon 122 MC MURRAY V. NOYES. [CHAP. m. the mortgage debt whenever the remedy against the lands mort- gaged should have been exhausted and the deficiency ascertained. The decision in that case can only be sustained by construing the covenant as waiving diligence in foreclosing, and binding the cov- enantor to pay the deficiency without regard to the time of the foreclosure. Nothing in the covenant now under examination has any relation to the time of the foreclosure, or can be construed as waiving the diligence required by the general rules of law in per- forining the condition. The delay in foreclosing in the present ease was fourteen months after the mortgage debt became due. During upward of ten months of this time the property was a sufScient security, but afterward the buildings thereon were destroyed by fire, and the value was reduced below the amount of the mortgage debt. It cannot be questioned that this delay was sufficient to constitute laches. In Craig v. Parkis, (40 N. Y. 181), a delay of six months in foreclosing a bond and mortgage was held to be laches which discharged a guaranty of its collection. The judgment should be reversed, and a new trial ordered, with costs to abide the event. All concur. Judgment reversed. AccoBD.^- Beardsley v. Hawes, 71 Conn. 39; Durand v. Bowen, 73 Iowa 573; McNall v. Burrow, 33 Kan. 495; Jenkins v. Wilkinson, 107 N. C. 707; Stone V. Rockefeller, 29 O. S. 625 ; Evans v. Bell, 45 Tex. 553 ; N. Y. Security Co. V. Lombard Ins. Co., 73 Fed. 537; Bull v. Bliss, 30 Vt. 127. There is a difference in holding as to what constitutes the test of "due diligence" in endeavoring to collect from the principal, so as to fix the lia- bility of the guarantor. The weight of authority appears to be that where the principal can be shown to be financially irresponsible that legal proceed- ings need not first be instituted against the principal debtor. Perkins v. Cat- lin, 11 Conn. 213; Stone v. Rockefeller, 29 O. S. 025; McClurg v. Fryer, 15 Pa. 293; Woods v. Sherman, 71 Pa. 100; Marsh v. Day, IS Pick. 321; Miles V. Linnell, 97 Mass. 298 ; Dana v. Conant, 30 Vt. 246 ; Peck v. Frink, 10 Iowa 193; Braekett v. Rich, 23 Minn. 485; Dillman v. Nadelhoffer, 160 111. 125; Middle States L. B. & C. Co. v. Engle, 45 W. Va. 588 ; Dewey v. Clark Invest. Co., 48 Minn. 130; Camden v. Doremus, 3 How. 515, in the case last cited the court says: "The diligent and honest prosecution of a suit to judgment with a return of nulla bona, has always been regarded as one of the extreme tests of due diligence. This phrase and the obligation it imports, may be sat- isfied, however, by other means. The ascertainment, upon correct and suffi- cient proofs, of entire or notorious insolvency, is recognized by the law as answering the demand of due diligence, and as dispensing, under such cir- cumstances, with the more dilatory evidence of a suit." CoNTBA.— Craig v. Parkis, 40 N. Y. 181; French v. Marsh, 29 Wis. 649; Bosman t. Akeley, 39 Mich. 710. SEC. 7.] WILCOX V. DKAPEB. 123 Sec. 7. Notice of acceptance of gpiaranty. EDWARD P. WILCOX v. SOLOMON DRAPER. 12 Neb. 138 (1881). The facts appear in the opinion. Nelson J. Cramer and B. E. W. Spargus, for plaintiff in error. Solomon Draper, pro se. Maxwell, Ch. J. This is an action upon a guaranty, of which the following is a copy: " NiOBRAEA, Neb., July 20th, 1878. " E. P. Wilcox, Esq., Yankton, D. T. "Dear Sir — The bearer is Mr. F. Eldridge, of our town of Niobrara. He wishes to buy a bill of lumber for a house for my- self and will want a short time on part of it. If you will accom- modate him you will greatly oblige me and I will see you paid as he agrees. Any statement that he makes to you in regard to you and your brother starting a lumber yard here and purchasing wheat, you may depend upon. We are all quite anxious to have you go into that business here. " Very respectfully, " S. Draper." The petition states, that on the faith of this guaranty, the plain- tiff, on the 24th of July, 1878, sold to said Eldridge a bill of lum- ber for the defendant's house, amounting to the sum of $182.65, $50.00 being paid at. the time of receiving said lumber, and a credit of thirty days being given for the balance ; that Eldridge executed a promissory note for $132.65 ; payable at the First National Bank of Yankton, in thirty days from July 24th, 1878 ; that no part of the same has been paid, and that after said note became due, the plaintiff recovered judgment against Eldridge for the amount of same; that an execution was duly issued on said judgment and re- turned wholly unsatisfied, etc. A demurrer to the petition was sustained in the court below and the action dismissed. The cause is brought into this court by petition in error. There is no allegation in the petition that Draper was notified of the acceptance of the guaranty. And it is claimed that such an allegation is necessary to entitle the plaintiff to recover. ■ In Douglas v. Reynolds, 7 Peters 113-129, the action was upon the following guaranty: ' ' Poet Gibson, December, 1807. 124 WILCOX V. DEAPEB. [OHAP. IH. " Messrs. Reynolds, Byrne & Co. ' ' Gentlemen — Our friend, Mr. Chester Haring, to assist him in business, may require your aid from time to time, either by ac- ceptance or endorsement of his paper, or advances in cash. In or- der to save you from harm in so doing, we do hereby bind ourselves, severally and jointly, to be responsible to you at any time for a sum not exceeding eight thousand dollars, should the said Ches- ter Haring fail to do so. Your obedient servants, " James S. Douglass, " Thomas G. Singleton, " Thomas Going." On the trial of the cause in the Circuit Court the defendants asked the court to instruct the jury " that to entitle the plaintiffs to recover on said letters of guaranty, they must prove that notice had been given, in a reasonable time after said letters of guaranty had been accepted by them, to the defendants that the same had been accepted." The opinion of the court was delivered by Story, J., who says: " It is sufficient for us to declare, that in point of law the instruction asked was correct and ought to have been given. A party giving a letter of guaranty has a right to know whether it is accepted or not. It may be most material, not only as to his responsibility, but as to his future rights and proceedings. It may regulate in a great measure his course of conduct and his ex- ercise of vigilance in regard to the party in whose favor it is given. ****************** In Lee v. Dick, 10 Peters 482, the action was brought on the following guaranty, contained in a letter addressed to the plain- tiffs : " Gentlemen — Nightingale and Dexter of Henry county, Tenn., wish to draw on you at six and eight months. You will please ac- cept their draft for $2,000.00, and we do hereby guaranty the punctual repayment of it." It was held that the party accept- ing was bound to give notice of his intention to accept and act under the guaranty, if not at once, at least within a reasonable time. In Adams v. Jones, 12 Peters 207, Story, J., in delivering the opinion of the court, says: " We are all of the opinion that no- tice is necessary ; and that is not now an open question in this court, after the decisions which have been made in Russell v. Clarke, 7 Cranch 69; Edmundson v. Drake, 5 Peters 624; Douglass v. SEC. 7.] WILCOX V. DEAPEK. 125 Eeynolds, 7 Peters 113 ; Lee v. Dick, 10 Peters 482, and again rec- ognizing it at the present term in the case of Reynolds v. Douglass. It is in itself a reasonable rule, enabling the guarantor to know the nature and extent of his liability, to exercise due vigilance in guarding himself against losses, which might otherwise be unknown to him, and to avail himself of the appropriate means in law and equity, to compel the other parties to discharge him from future responsibility. ^HsiN^Hc****:!:****^: In Douglass v. Howland, 24 Wend. 35-49, it is denied that this doctrine has the sanction of the courts of England, or is founded on correct principles. Cowen, J., in reviewing the authorities as to notice, where the parties are acting under commercial guaranties, shows that the cases holding notice to be necessary are not sanc- tioned by the principles of common or commercial law, but must stand upon the reason of the rule. ********** The Supreme Court of Ohio in Powers and Weightman v. Bum- cratz, 12 Ohio State 284, after quoting a portion of the above opinion, say: " We have carefully examined the cases of Oxley V. Young, 2 H. Bl. 613, and Peel v. Tatlock, 1 Bos. & Pull. 419, and cannot see how the fairness and correctness of the com- ment upon them of Cowen, J., before quoted, can be denied or dis- puted. If there be English cases sustaining the doctrine of Doug- las V. Reynolds, they have not been cited in the decisions of the courts of the United States. In several of the cases decided in the State courts English cases are cited. In Craft v. Isham, 13 Conn. 28, 39, which, though decided before Douglass v. How- land, had not been reported, and is therefore not referred to by Cowen, J., it is said, as to the decisions in Douglass v. Reynolds, and Adams v. Jones, that, " so far from being opposed to, or un- supported by, authorities, they are founded on principles which have long since been settled, and are familiar in Westminster Hall. We barely refer to the authorities." The cases cited are: Mc- Iver V. Richardson, 1 Maul & Sel. 557; Gaunt v. Hill, 1 Stark. Ca. 10 ; Sjnnons v. Want, 2 Stark. Ca. 371 ; Payne v. Ives, 3 Dowl. & Ry. 664; Glyn v. Hertel, 8 Taunt 208; Bacon v. Chesney, 1 Stark Ca. 192 ; Combe v. Wolf, 8 Bing. 156 ; Phillips v. Astling, 2 Taunt. 206 ; Morris v. Clesby, 4 Maul. & Sel. 566. The bearing on the point of some of these eases it is difficult to perceive. Bacon V. Chesney was the case of a guaranty for goods to be sold on eighteen months' credit, and it was claimed that there had been a credit of only twelve, but it being shown there was a mistake, the 126 WILCOX V. DRAPER. [CPAP. IE, plaintiff recovered. In Coombe v. Woolf, the guarantoj" was held to be discharged by the giving time without his consent. In Phillips V. Astling, the guaranty was the price of goods to be paid by a bill, and the question was as to notice of its non-payment. In Morris v. Cleasby, there had been a sale by a factor on a del credere commission. It was said such a commission pre-supposes a guaranty, and that the obligation of the factor arises on the guaranty. " The guarantor is to answer for the solvency of the vendee, and to pay the money, if the vendee does not; on the fail- ure of the vendee he is to stand in his place, and make his default good. Where the f orpi of the action makes it necessary to declare upon the guaranty, application to the principal must be stated on the record. In all cases it must, if required, be proved, though in the ease of a foreigner, very slight evidence may be sufficient." 4 M. & S. 574. It will be seen that in none of these cases is there anything as to the acceptance of a guaranty, and so far as any of them bear on the doctrine of notice imposed by the contract, and that in reference to a collateral liability for the payment of & bill, of exchange. 2 Taunt. 206. The Supreme Court of Ohio in the case cited, after an elaborate review of the cases, overruled Taylor v. Wetmore, 10 Ohio 490. The court say, page 262 : " We are aware of the importance of adhering to former decisions, but do not think we are bound by an opinion which it was not necessary to express, and evidently was expressed without a thorough consideration of the question." ********** ****^it!H!!»iitl In Symons v. Want, 2 Stark. 371, the offer of guaranty was as follows: " I have no objection to guaranty the payment of the rent as far as that of each quarter during Mr. T. Want's continu- ance in possession." The court directed a non-suit upon the ground that it was a mere offer to guaranty, and no request to guarantee or notice of acceptance of the offer was proved. See, also, Mozley v. Tinkler, 1 C. & M. 692. But it may be said that the guaranty in this case being in- definite as to the amount of the debt, and time for which credit, should be given, notice was therefore required. This question was raised in Powers and Weightman v. Bumcratz. The court say, pj^ges 291-2: " We have examined some of those cases, in which the guaranty being indefinite as to the amount and time of the ad- vances, something might be expected in the pleadinf^s, or points made, as to the notice of the acceptance of the guaranty, but noth- ing of the kind appears. Johnson v. Nichols, 1 C. B. 251 ; Chap- SEC. 7.] WILCOX V. DEAPEH. 127 man v. Sutton, 2 Id. 634; Boyd v. Moyle, Id. 644; Martin v. "Wright, 6 Q. B. 917; Bell v. W. P. Bank of England, 9 C. B. 154; Harlor v. Carpenter, 3 J. Scott 172 ; Hitchcock v. Humf rey, 5 M. & G, 559 ; Mayer v. Isaac, 6 M. & W. 605 ; Liverpool Borough Bank V. Eceles, 4 H. & M. Exch. 139 ; Allen v. Kenning, 9 Bingh. 618. In the case of White v. Woodward, 5 C. B. 810, 814, it was claimed by counsel that: " The declaration should have averred notice to the defendant within a reasonable time after the supply of the goods." He said this question was first broached in Peel V. Tatlock, 1 B. & P. 419, and notice held necessary by Dr. Story in Cremer v. Higginson, 1 Mason 323, and 1 Story R. 22, 33. Creswell, J., said: " Suppose the defendant had no notice of the supply to Slater, and no notice of the non-payment by him, until the amount was demanded of him. What then? " The counsel replied: " The demand, if within a reasonable time, would be notice. ' ' Wilde, C. J., ' ' You do not show that it was not within a reasonable time. The defendant was liable ipso facto, upon Slater's failure to pay." Such is the only mention of the doctrine as to notice of acting on a guaranty, we have been able to find jn the English reports." *********** The rule as to notice in case of guaranty was unknown to the common law, yet it is sought to engraft it on our jurisprudence as a common law rule, — to attach conditions to the contract of guar- anty which are not applied to^ other contracts. When a proposi- tion of guaranty of one party is accepted by the other, this makes a complete contract. The proposition is made to the person of whom the credit is desired, and he accepts it. Upon what prin- ciples of law can it be said that this proposition, which was in- tended to be accepted and to take effect from that date, should not be binding on the guarantor without notice ? The guarantor makes the person whoin he vouches for and thinks worthy of credit, so far his agent as to transmit the written guaranty by him. Is it not the business of the guarantor to enquire of him about what has been done under the guaranty? We think it is. We therefore hold that a direct promise of guaranty requires no notice of ac- ceptance. The judgment of the District Court is reversed and the cause remanded for further proceedings. Reversed and remanded. The distinction sometimes made between guaranties where the amount of debt and time of payment are fixed, and guaranties where the amount of the debt and time of payment are indefinite, has not always been recognized in the American decisions as affecting the question of notice to the guarantor ot 128 WILCOX V. DRAPER. [CHAP. IH. the acceptance of the guaranty. The preponderance of holding is that notice of acceptance of the guaranty is neither essential to the inception of the contract nor a condition of the liability of the guarantor. Powers v. Bum- aratz, 12 O. S. 273; Wise v. Miller, 45 0. S. 388; Boyd v. Snyder, 49 Md. 325; Crittenden v. Fiske, 46 Mich. 70; Platter v. Green, 26 Kan. 252; Kloster- man v. Alcott, 25 Neb. 382; Bright v. McKnight, 1 Sneed (Tenn.) 158; Yancy V. Brown, 3 Sneed 89; City Nat. Banic v. Phelps, 86 N. Y. 484; Whitney v. Groot, 24 Wend. 82; Wright v. Griffith, 121 Ind. 478; Johnson v. Bailey, 79 Tex. 516; Carman v. Elledge, 40 Iowa 409; Case v. Howard, 41 Iowa 479; Calon V. Shaw, 2 Har. & G. 13; Union Bank v. Coster, 3 N. Y. 203; Fisk v. Stone, 6 Dak. 35. In the case of Smith v. Dann., 5 Hill (N. Y.) 543, the guaranty was as follows : " If you will let Messrs. Steele & Wall of this village, grocers and bakers, have one hundred dollars in goods at your store on credit of three months, you may regard me as guarantying the payment." It was held no notice was necessary. The Court says : " The defendant in- vited the plaintiffs to sell goods to Steel & Wall, on his promise to guaranty the payment of the debt. The plaintiffs assented, and delivered the goods. The proposition of one party was accepted by the other ; and according to our notions of the law this made a complete contract. Nothing further was necessary to its consummation. If the defendant wanted notice, and did not get it from the persons whom he thought worthy of credit, it was his business to inquire and ascertain what had been done. There is nothing in the de- fendant's undertaking which looks like a condition, or even a request, that the plaintiffs should give him notice if they acted upon the guaranty; and there is no principle upon which we can hold that notice was an essential element of the contract." Failure to give notice of acceptance of the guaranty has been held a de- fense to the guarantor in many cases to the extent of the damage resulting to the guarantor from lack of such notice. But no distinction is made in this class of cases between contracts for a definite time and amount and contracts for future optional advances at indefinite times. Winnebago Paper Mills v. Travis, 56 Minn. 480; Central Savings Bank v. Shine, 48 Mo. 456; Tolman V. Means, 52 Mo. App. 385; Walker v. Forbes, 25 Ala. 139; Cahuzac v. Samin, 29 Ala. 280; McCullum v. Gushing, 22 Ark. 540; Eapelye v. Bailey, 3 Conn. 438; Craft v. Isham, 13 Conn. 28; Coe v. Buehler, 110 Pa. 366; Evans v. McCormick, 167 Pa. 247; Wilkins v. Carter, 84 Tex. 438; Bank v. Downer, 27 Vt. 539 ; Ellis v. Jones, 70 Miss. 60 ; Ruffner v. Love. 33 111. App. 601. In the Federal Courts an instrument of guaranty, until accepted is consid- ered as a mere offer, and the guarantor is not bound unless notified of the acceptance. Eussell v. Clarke, 7 Cranch. 69; Edmonston v. Drake, 5 Peters, 637; Douglass v. Reynolds, 7 Peters 113; Lee v. Dick, 10 Peters 496. In the case of Adams v. Jones, 12 Peters. 207 (1838), the Court says: "This is not now an open question in this court, after the decisions which have been made in Russell v. Clarke, Edmonson v. Drake, Douglass v. Rey- nolds, Lee V. Dick. * » • » • » It is in itself a reasonable rule, en- abling the guarantor to know the nature and extent of his liability; to exer- cise due vigilance in guarding himself against losses which might otherwise be unknown to him; and to avail himself of the appropriate means in law anJ equity to compel the other parties to discharge him from future responsi- bility." See also Cremer v. Higginson, 1 Mason 323; Louisville Mfg. Co. v. SEC. 7.] WILCOX V. DRAPEB. 129; Welch, 10 How. 461; Davis v. Wells, 104 U. S. 165. In the case last cited the Court says : " The rule in question proceeds upon the ground that the case in which it applies is an offer or a proposal on the part of the guarantor, which does not become effective and binding as an obligation until accepted by the party to whom it is made; that until then it is inchoate and incom- plete and may be withdrawn by the proposer." In Davis Sewing Machine Co. v. Richards, 115 U. S. 527, the Court says: " A contract of guaranty, like every other contract, can only be made by the mutual assent of the parties. If the guaranty is signed by the guarantor at the request of the other party, or if the latter's agreement to accept is con- temporaneous with the guaranty, or if the receipt from him of a valuable consideration, however small, is acknowledged in the guaranty, the mutual assent is proved; and the delivery of the guaranty to him or for his use com- pletes the contract. But if the guaranty is signed by the guarantor without any previous request of the other party, and in his absence, for no considera- tion moving between them except future advances to be made to the principal debtor, the guaranty is in legal effect an offer or proposal on the part of the guarantor, needing an acceptanie by the other party to complete the con- tract." In Massachusetts, notice of acceptance of the guaranty is not deemed essen- tial to the inception of the contract, but it is held that without notice the guarantor may withdraw from the arrangement and escape liability, even though advancements have already been made, unless the creditor gives notice within a reasonable time. Bishop v. Eaton, 161 Mass. 499. Knowlton, J.: " The language relied on was an offer to guarantee, which the plaintiff might or might not accept. «»»*»» It was an offer to be bound in con- sideration of an act to be done, and in such a case the doing of the act con- stitutes the acceptance of the offer and furnishes the consideration. Ordinarily there is no occasion to notify the offerer of the acceptance of such an offer, for the doing of the act is a sufficient acceptance, and the promisor knows that he is bound when he sees that action has been taken on the faith of his offer. But if the act is of such a kind that knowledge of it Will not come quickly to the promisor, the promisee is bound to give him notice of his acceptance within a reasonable time after doing that which constitutes the acceptance. In such a case it is implied in the offer that, to complete the contract, notice shall be given with due diligence so that the promisor may know the contract has been made. But where the promise is in consideration of an act to be done, it becomes binding upon the doing of the act so far that the promisee can not be affected by a subsequent withdrawal of it, if within a reasonable time after- ward he notifies the promisor." A subsequent promise to pay will waive notice of acceptance of the guar- anty. Gamage v. Hutchins, 23 Me. 565; Sigourney v. Wetherell, C Met. 553; Ashford v. Robinson, 8 Ired. 114. 9 130 HUNGEKFOED V. O'bRIEN [CHAP. UI. Sec. 8. Notice to guarantor of default where the amount of debt and time of payment are fixed. CASSIE HUNGEKFOED v. JAMES K. O'BRIEN. 37 Minn. 306 (1887) Bawson <& Houpt, for appellant E. E. Corliss, for respondent. Dickinson, J. The defendant Sawbridge made his negotiable promissory note, which was indorsed to one Gage, who indorsed it in blank to the defendant O'Brien, and he, before maturity, trans- ferred it for value to the plaintiff, indorsing upon the note and signing the guaranty : ' ' For value, I hereby guaranty the pay- ment of the within note to Cassie Hungerford or bearer." The note was not paid. Nothing was done by the plaintiff at the ma- turity of the note to fix the liability of the indorser Gage. The defendant O'Brien had no notice of the non-payment of the note until more than a year after its maturity. Upon the trial of the issue raised by the answer of the defendant O 'Brien, evidence was presented tending to fehow that the maker of the note was solvent at the time of its maturity, but has since become insolvent; and that the indorser, Gage, was also solvent. The court directed a verdict for the plaintiff. The nature of the obligation of the guarantor is affected by the character of the principal contract to which the guaranty re- lates. The note expressed the absolute obligation of the maker to pay the sum named at the specified date of maturity or before. The guaranty of " the payment of the within note " imported an undertaking, without condition, that, in the event of the note not 'being paid according to its terms, — that is, at maturity, — the guarantor should be responsible. The non-payment of the note at maturity made absolute the liability of the guarantor, and an action might at once have been maintained against him without notice or demand. Such was the effect of the unqualified guar- anty of the payment of an obligation which was in itself absolute and perfect and certain as respects the sum to be paid, and the time when payment should be made, — all of which was known to the guarantor, and appears upon the face of the contract. The liability of the guarantor thus becoming absolute by the non-pay- ment of the note, the neglect of the holder to pursue such remedies as he might have against the maker (the guarantor not having SEC. 8.] HUNGERFOED V. O'bBIEN. 131 required him to act) would not discharge the already fixed and absolute obligation of the guarator, nor would neglect to notify the guarantor of the non-payment have such effect. It follows that the fact that the maker had become insolvent since maturity, or that a mortgage security had become impaired by depreciation in the value of the property, was no defense; nor was it a defense that the guarantor was not notified of the non- payment of the note. We are aware that the position here taken is opposed by some decisions. No valid agreement was shown be- tween the maker and the plaintiff extending the time of paymentj Prom the position above taken, it logically follows that the neglect of the guarantee to take the steps necessary to fix the liability of the indorser, Gage, did not discharge the guarantor. The latter, by his unqualified guaranty of the payment of the note, took it upon himself to see that the note was paid, and was therefore not entitled to notice of its non-payment. For the same reason, the plaintiff did not owe to the guarantor the duty of taking the steps necessary to fix the contingent liability of the indorser by demand and notice of dishonor. Philbrboks v. McEwen, 29 Ind. 347 ; Lang V. Brevard, 3 Strob. Eq. (So. Car.) 59; Pickens v. Finney, 12 Smedes & M. 468; 2 Lead. Cas. Eq., notes to Eees v. Berrington. No such obligation is involved in this contract of guaranty. Even in the ease of an ordinary indorsement, the holder, at maturity, is under no obligation to his indorser to give notice of dishonor to prior indorsers or parties. The last indorser becomes liable when he alone is notified, and he in turn may fix the liability of prior parties by giving notice to them. Order affirmed. Mitchell, J. (dissenting). I am unable to concur in thepropo- sition that the plaintiff owed no duty to O'Brien to take steps, at the maturity of the note, to fix the liability of Gage, the in- dorser. It does not seem to me that the fact that O'Brien's guar- anty of payment was unconditional and absolute is at all decisive of the question. As between the parties to this action, O'Brien occupied the position of surety, who, in case he had to pay the note, would have recourse against Gage, the indorser, provided steps were taken tg fix the liability of the latter. The question, therefore, is to be determined by the equitable principles which govern the relative rights and duties of creditor and surety. It is a well-settled rule of equity that any laches by the creditor in the care or management of collateral remedies or securities, if loss ensues, will discharge the surety pro tanto. Nelson v. 132 TAUSSIG V. EEID. [CHAP. lU. Munch, 28 Minn. 314, 322 (9 N. W. Rep. 863). As a surety, on payment of the debt, is entitled to all the securities of the creditor, if, through the negligence of the creditor who has them in his pos- session and under his control, a security, to the benefit of which the surety is entitled, is lost or not properly perfected, the surety, to the extent of such security, will be discharged. WulfiE v. Jay, L. R. 7 Q. B. 756. And we can see no difference in this respect whether the security is chattel or personal. This is not a case of mere passiveness by the creditor in not taking steps to enforce collection of the debt at maturity, but an omission to take steps to perfect and fix the lability of the indorser, which amounted to positive negligence. He had possession and control of the note on the day of its maturity, and consequently was the only person who could present it for payment or who would know whether or not it was paid, and hence was the only person in position to give notice to the indorser in case of its non-payment. To require him to do this, would, I think, be both good business morals and good law. AccoED. — Deck v. Works, 57 How. Pr. 292 ; Brown v. Curtis, 2 N. Y. 230 Read v. Cutts, 7 Greenl. 186; Breed v. Hillhouse, 7 Conn. 523; Allen v. Right- mere, 20 Johns. 365; Campbell v. Baker, 40 Pa. 243; Roberts v. Riddle, 79 Pa. 468; Bank v. Sinclair, 60 N. H. 100; Dickerson v. Dickerson, 39 111. 574 Penny v. Crane Bros. Mfg. Co., 80 111. 244; Wright v. Dyer, 48 Mo. 525 Kline v. Raymond, 70 Ind. 271; Clay v. Edgerton, 19 0. S. 549; Castle v, Rickly, 44 O. S. 490; First Nat. Bank v. Babcock, 94 Cal. 96; Hoover v. Mc- Cormiek, 84 Wis. 215; Wright v. Shorter, 56 Ga. 72; Roberts v. Hawkins, 70 Mich. 566; Holmes v. Preston, 71 Miss. 541; Fleuthan v. Steward, 45 Neb. 640; Hcyman'v. Dooley, 77 Md. 162; Walton v. Mascall, 13 M. & W. 72. CONTEA. — Ringgold v. Newkiik, 3 Ark. 96; Cox v. Brown, 51 N. C. 100; Reynolds v. Edney, 53 N. C. 406; Mayberry v. Bainton, 2 Harr. (Del.) 24. Sec. 9. Notice to guarantor of default where the amoant of debt and time of payment are indefinite. WM. TAUSSIG, ET AL., v. SIMON REID, ET AL. 145 111. 488 (1893). Appeal from the Appellate Court for the First District. Messrs. Kraus, Mayer & Stein, for the appellants. Messrs. Hofheimer & Zeisler, for the appellees. Mb. Justice Ceaig delivered the opinion of the courL SEC. 9.] TAUSSIG V. REID. 133 This is an action brought by Reid, Murdoch & Fischer against B. Kohn and Wm. Taussig, on the following written instrument : " Beid, Murdoch & Fischer, Chicago. " Chicago, January 14, 1887. " For value received, I hereby guarantee the prompt payment at maturity of any indebtedness owing to Reid, Murdoch, & Fischer, by Mrs. Mathilda Zuckerman, of 370 State street, and 214 and 216 North Clark street, Chicago, for goods purchased, or which may be purchased hereafter of them, to the amount of fifteen hundred dollars ($1,500.00) with interest on all the above indebtedness, ac- cording to the tenor and effect thereof, at the rate of eight per cent, per annum, and I agree to pay all costs or expenses paid or in- curred in collecting the same. ' ' Signed at Chicago, this 14th day of January, 1887. "Witness: Jos. Zuckeeman. (Signed) E. Kohn, (Signed) Wm. Taussig." In the Circuit Court the plaintiffs recovered a judgment for $1,680.34, the amount named in the instrument, and interest thereon from the time the action was brought. The judgment, on appeal, was affirmed in the Appellate Court, and for the purpose of reversing the latter judgment this appeal was taken. It appears from the record that, immediately upon the execution and deliv- ery of the writing, Reid, Murdoch & Fischer commenced selling goods to Mrs. Zuckerman on credit, and continued the sales until November 23, 1887. Her indebtednes to the firm varied in amount from time to time. On the first day of June, 1887, she was -in- debted in the sum of $1,762.30. On the 1st of July, 1887, $1,- 958.39. On the 1st of August, 1887, $1,925.98. On the 1st of Sep- tember, $2,112.68. On the 1st of October, 1887, $2,342.80. On the 1st of November, 1887, $2,389.51. On November 23, 1887, when the account was closed, $2,714.96. Mrs. Zuckerman failed on the 24th day of November, 1887, and this action was brought on the guaranty December 9th fbllowing. No notice was given the defendants by Reid, Murdoch & Fischer of the failure of Mrs. Zuckerman to pay for the goods which she purchased, and it was insisted on the trial that her insolvency, and the failure of Reid, Murdoch & Fischer to give notice of her default in payment, relieved the guarantors from liability on the guaranty. But the court held otherwise, and in the first instruc- tion on behalf of plaintiffs the jury were authorized to find for the plaintiffs, although demand and notice of non-payment had 134 TAUSSIG V. EEID. [CHAP. III. not been established, and the soundness of this ruling is the prin- cipal, and indeed the only, queston of any importance presented by the record. Whether notice of the default of a principal debtor is required in Order to fix the liability of a guarantor on a contract like the one involved, .is a question upon which the authorities are conflict- ing. We shall not attempt to review the authorities at length, nor shall we attempt to harmonize the various decisions bearing upon the question, but we shall content ourselves by stating what we understand to be the law on the subject, as established by the weight of authority. Story on Contracts, vol. 2, § 1133, in the discussion of the question, says: "Whenever the undertaking by a guarantor is absolute, notice is unnecessary, but where it is collateral merely, notice must be given within a reasonable time, otherwise the guar- antor will be discharged, unless he is not prejudiced by the want of notice." In Baylies on Sureties and Guarantors, 202, the au- thor says: " It may be laid down as a general rule, that in case of an absolute guaranty the guarantor is not entitled to demand or notice of non-performance, but where the undertaking is col- lateral, and not absolute, notice must be given within a reasonable time, unless circumstances exist which will excuse the want of no- tice. If the principal is insolvent when the debt becomes due or default is made, so that no benefit could be derived by the guaran- tor from the receipt of notice, no notice is required." Where the payee of a promissory note or third parties execute a contract written on the back of an unconditional promissory note for the payment of money at a specified time, in which they guar- antee the payment of the promissory note at maturity, the holder of the note is under no obligation to demand payment of the maker, and on default of payment, notify the guarantors. The reason is obvious. The contract of the guarantors is absolute and uncondi- tional, and it requires payment by the guarantors upon maturity of the note. This rule is clearly laid down in Gage v. Mechanics National Bank of Chicago, 79 111. 62, and is well sustained by au- thority. The principle upon which this doctrine rests is that the contract is absolute, and not conditional or collateral. But does the contract upon which this action is brought rest upon the same principle, or is it to be governed by a different rule? Is the con- tract in question an absolute contract, or is it collateral or con- ditional? By the terms of the agreement the appellants guaran- teed appellees payment to the amount of $1,500, for goods pur- SEC. 9.] Taussig v. eeid. 135 chased or for goods which might thereafter be purchased of them by Mathilde Zuckerman. It is not claimed that any liability exists on account of goods purchased before the execution of the guarantee, so that the words embraced in the guaranty, " for goods purchased," has no special bearing in construing the agreement. It will be observed that the amount of the goods which might be purchased, nor the time dur- ing which the deal between Mrs. Zuckerman and appellees should continue, was not mentioned or determined. The contract did not compel Mrs. Zuckerman to purchase or appellees to sell a dollar's worth of goods. They could deal with each other as much or as little as they might desire or as they might see proper. After the guaranty was executed, if appellees chose not to sell Mrs. Zucker- man any goods, it could not be claimed that an absolute guaranty existed, because there was no debt upon which it could operate. How can a guaranty be absolute where it is uncertain whether a debt will ever exist to which it could apply? We think it is manifest that the guaranty was not an absolute undertaking, but, on the other hand, the contract in question was a continuing guar- anty of a debt to be created in the fiiture, of an indefinite amount, depending entirely upon the will of appellees and Mrs. Zuckerman. Here the appellants were apprised when they executed the guar- anty that it was accepted by appellees; no further notice of ac- ceptance was, therefore, required. But while the testimony 'dis- closed that Mrs. Zuckerman became insolvent on the 24th day of November, 1887, no notice of her default in payment was furnished to appellants before her failure. We think that the decided weight of authority establishes the rule, that in ease of a collateral con- tinuing guaranty, like the one in question, reasonable notice of the default of payment on the part of the principal debtor should be given to the guarantor. And the guarantor will be discharged from payment so fas as he has sustained loss or damage, resulting from a failure of the creditor to give him such notice. Tiedeman on Com. Paper 421. Cases may arise where notice would result in no benefit, whatever to the guarantor; for example, where the principal debtor was insolvent when the guaranty was executed and remained in that condition. In such cases the failure to give notice could result in no loss to the guarantor, and could not be relied upon as a defense to an action on the guaranty. But where the guarantor may be able to protect himself, notice of default in payment imposes no unreasonable hardship on the creditor, and 136 COULTHAET V. CLEMENTSON. [CHAP. III. every principle of commercial usage requires that it should be given. Judgment reversed. Accord. — Parwell v. Smith, 12 Pick. 83; Whiton v. Hears, 11 Met. 563; Sylvester v. Downer, 18 Vt. 32; Bashford v. Shaw, 4 0. S. 267; Nelson v. Bostwiek, 5 Hill. 37 ; Goff v. Sims, 45 Ind. 262 ; Douglass v. Reynolds, 7 Pet. 113; Davis v. Wells, 104 U. S. 159; Beebe v. Dudley, 26 N. H. 249; Walker V. Forbes, 25 Ala. 139. In all cases vi^here notice of default is required, the failure to give notice within a reasonable time will discharge the guarantor only to the extent of his damage in not receiving notice. Bank v. Gaylord, 34 Iowa 246. " The guarantor is entitled to a notice, but cannot defend himself for want of it, unless the notice has been so long delayed as to raise a presumption of pay- ment or waiver, or unless he can show that he has lost, by the delay, oppor- tunities for obtaining securities, which a notice, or an earlier notice, would have secured him. *»»»«• If the notice be delayed a very short time, but by reason of the delay the guarantor loses the opportunity of obtain- ing indemnity, and is irreparably damaged, he would be discharged from his obligation. But, if the delay were for a long period, and it was nevertheless clear that the guarantor would have derived no benefit from an earlier notice, the delay would not impair his obligation." Sec. 10. Revocation of guaranty. COULTHAET v. CLEMENTSON, ET AL, 5 Q. B. Div. 42 (1879). • BowEN, J. This is an action brought by a bank upon a con- tinuing guarantee against the executor of a deceased guarantor. Messrs. B. & J. Clementson, cotton-brokers and spinners in the county of Chester, had a banking account with the bank of which the plaintiif is the registered public officer. In the year 1867 the bank required security for the advances which were likely to be made to Messrs. E. & J. Clementson, and on the 24th of August, 1867, a written guarantee was executed by Nathaniel Lawton, the deceased, and the defendant Joseph M. Clementson, who is now Nathaniel Lawton 's executor (and sued as such). The material part of the guarantee is as follows : — " We, the undersigned, Joseph Moxom Clementson, of Dukin- field, in the county of Chester, cotton-spinner, and Nathaniel Law- ton, of Micklehurst, flannel manufacturer, do hereby jointly and severally undertake, and agree to guarantee to the proprietors of SEC. 10.] COULTHAET V. CLEMENTSON, 137 or partners in the said banking- co-partnership for the time being the due and punctual payment when required of all such sums of money as may have been, .or may be from time to time, advanced or paid by or from the said banking co-partnership, or which the same co-partnership may have already paid, or become liable to pay, or may hereafter pay or become liable to pay for or on ac- count of the said Edward and John Clementson, or .their order, on any account whatsoever, with interest, commission, and the other banking charges upon such sums. . . . And we jointly and severally further agree as follows, namely, that this guarantee or engagement shall be considered a continuing guarantee, and shall noit be withdrawn, but shall continue in full force until three months after notice to the manager of the said banking co-part- nership in Ashton-under-Lyne in writing under our hands of our intention to discontinue or determine the same." Advances were duly made by the bank under this guarantee down to 'the death of the testator, Nathaniel Lawton, on the 19th of December, 1875, at which date the firm of Messrs. E. & J. Clementson were considerably indebted to the bank. It was ad- mitted, however, that sufiieient sums of money after notice of the death had been paid into the account, and generally appropriated to the current account, to cover any balance which was in fact owing at the date either of the death or of such notice. Upon the other hand, if the guarantee was not determined in law by death or notice of the death of the testator, it was admitted that the bank who continued their advances up to May, 1878, to the firm of E. & J. Clementson, were entitled to recover under this guarantee a large sum of £3,000 or thereabouts, which, in case of difference, is to be settled hereafter by a referee. The cause was tried before myself and a special jury at Liver- pool, when it was agreed that the jury should be discharged, and that the court should have power to draw all reasonable inference of fact. The evidence as to what had passed between the bank and the defendants as Nathaniel Lawton 's executor after Nathaniel Law- iton's death is not very clear. From a feeling of mutual courtesy the parties refrained from cross-examination of one another at the trial. It appeared that the bank knew of the death of Mr. Lawton, but had received no written notice of it addressed specially to them- selves. On the 12th of February, 1876, however, the defendant as executor had published in the proper newspapersi advertisements under 22 & 23 Vict. c. 35, requiring the creditors, of the deceased Nathaniel Lawton to send in particulars of claims to the solicitors of the executors on or before the 14thi of May, 1876. The bank and their ofScers were cognizant of this advertisemenit, as well as of Nathaniel Lawton 's death. ********** I am of opinion that the notice with which the bank in the pres- ent case was affected amounted to a discontinuance, so far as 138 COULTHABT V. CLEMENTSON. [cHAP. m. future advances were concerned, of the guarantee. A guarantee libe the present is Hot a mere mandate or authority revoked ipso facto by the dieath of the guarantor. . It is a contract, and the question from what time and on what notice it ceases to cover advances is a question of construction of the contract itself. In the case of such icontinuing guarantees as th© present, it has long been understood that they are liable, in the absence of anything in the guarantee to the contrary, to be withdrawn on notice. VarioiM Explanations have been offered of this reasonable, though implied, limitation. The guarantee, it has been said, is divisible as to each advance, and ripens as to each, advance into a irrevocable promise or guarantee only when the advance is made. This explanation has received the sanction of the Court of Common Pleas in the case oif Offord v. Davies, 12 C. B. (n. s.) 748. Whether the ex- jilanation be the true one or not, it is now established by author- ity that such continuing guarantee can be withdrawn on notice during the lifetime of the guarantor and a limitation to that effect must be read, so to speak, into the contract. But what is to happen on his death? Is the guarantee irrevocable and to go on forever? It would be absurd to refuse to read into the lines of the contract in order to protect the dead man 's estate a limitation which is read into it to protect him while he is alive. On the argument of the present case it was virtually conoeded that the provision as to three months' notice relating only to the guarantor's life, and there being no corresponding provision as to notice to be given on his death, the guarantee could be legally determined at any time after the guarantor's death by a proper notice to that effect. But there remains the question what is the proper notice to be given. To answer this question we must consider the change which the guarantor's death, has effected in the situation. The notice cannot any longer be given by the guarantor. He is dead. The executor of his will is guardian of his estate, and if notice is to be given by any one, the executor would seem the person to give it. But must the executor give special notice that the guar- antee is A^4thdrawn ; or is it not enough that the bank should be warned of the death of the testator and the devolution of his estate to others? In many cases the executor has no option to elect to eonJtinue the guarantee. Surely it would in such cases be idle to insist on special forms of withdrawal of a guarantee which nobody has a right to continue. Notiefe of the death and of the existence of a will is notice of the existence of trusts which m&j be incompati- ble with the continuance of the guarantee. If, indeed, under the testator's will, the executor has the option of continuing the guaran- tee, then from the absence of any specific notice of withdrawal, the bank may, perhaps, in spite of notice of the death, properly assume, as against the estate, that the guarantee is not to be determined. But if the executor has no option af the sort, then, in my opinion, the notice of the death of the testator and of the existence of a will IS constructive notice of the determination as to future ad- vances of the guarantee. The bank from that moment are aware that the person who could, during his lifetime, have diseonitinued SEC. 10.] COUIiTHAET V. CtEMENTSON. 139 thie guarantee by notice, cannot any longer be a giver of notice®; that his estate has passed to others who have trusts to fulfill, and it is easy for them to ascertain what those trusts are. If these truslta do not enable the executor to continue the guaranitee, then the bank has constructive notice that the guarantee is withdrawn. If, indeed, the conltracting parties desdre that on the death of the guarantor a special notice shall be necessary to determine the guarantee, they can so provide in the guarantee itself; and such a provision will, of course, bind the estate. Here there is- no such, provision. ' ^ • t. Judgmienlt will, therefore, be entered for the defendants, with Judgment for the defendcmts. The death of the guarantor will operate as a reviocation of the guaranty in all cases in which the guarantor might if living have revoked by giving notice. Fewlass v. Keeshan, 88 Fed. Rep. 573; Jordan v. Dobbins, 122 Mass. 168; Hayland v. Habich, 150 Mass. 112; Aitkin v. Lang, 106 Ky. 652; Harris v. Fawcett, L. R. 8 CJi. 66,; Lloyd's v. Harper, 16 Ch. Div. 290. In the case last cited the principal was made an underwriting member of Lloyd's Association, land furnished a guaranty in the following words: "My son Robert Henry Harper, being a candidate for admission to Lloyd's as an underwriting mem^ ber, I beg to tender my guarantee on his behalf, and to hereby hold myself re- sponsible for all his engagements in that capacity." The guarantor having died the question arose in this case as to whether the guaranty was limited' to the lifetime ht the guarantor. Tlie court says: "It was contended that it was limited to the lifetime of the guarantor. It appears to me impossible to say that it was so limited. It applies in terms to "all engagements in that capacity." Whether the engagements were entered into before or after the death of the father, it appears to me utterly impossible to say they were not engagements entered into by the son in the capacity of an underwriting member. The representatives of Mr. Harper are bound by Mr. Harper's guar- antee, ju«t as if he had entered into a covenant of a lease. In order to support the contention that the guarantee was ipso facto determined at the death ol the guarantor, it was contended that the guarantor could himself in his life^ time have revoked the guaranty, and that therefore it must be- assumed that his death would operate in the same manner, that is to say, it is said we must assume that the executors, as it was their duty to do, have revoked the guar- anty, and that matters are to be on the same footing as if the testator had exercised the option to determine it. Now the foundation of that contention appears to me utterly to fail. The testator, in my opinion, could not have de- termined the guaranty, and in that respect the case differs essentially from, the case of Coulthart v. Clementson, in which Mr. Justice Bowen followed the decision in Harris v. Fawcett, 1 Law Rep. 15 Eq. 311; with regard to the effect of death in determining a guarantee. «*******»» But here the consideration is given once for all, just as in the case of the granting a lease in which a third party guarantees the payment of the rent and the performance of the covenants. The father undertakes that if the son is admitted to the status of an underwriting memlber, he, the father, will guarantee all the son's engagements as such member. The moment the son was admitted to that status he became entitled to retain it until he had done some act which under the rules deprived him of his right to retain it. If the testator could at any time have determined the guaranty, he could have determined it the next day. The moment the son was admitted to the status of an underwriting member with all its privileges, if the father was at liberty to say, "I withdraw the guarantee," then the guarantee would have been utterly futile and idle." The death of the guarantor will not -ipso facto onerate as a revocation but knowledge of the death must be brought home to the creditor. Gay v. Ward, 67 Corn. 147; Cllark v. Thayer, 105 Mass. 216; Bradbury v. Morgan. 31 L. J. ex. 462. ^ 140 WOOD V. STBEUB. [ CHAP. IV. CHAPTER IV. SURETYSHIP DEFENSES. Sec. 1. Material alteration of the principal contract. WOOD V. STEELE. 6 Wall. 80 (1867). Error to the Circuit Court for the District of Minnesota. Mr. Justice Sw.\yne delivered the opinion of the Court. The action was brought by the plaintiff in error upon a promis- sory note, made by Steele and Newson, bearing date October llth, 1858, for $3,720, payable to their own order one year from date, with interest at the rate of two per cent, per month, and indorsed by them to "Wood, the plaintiff. Upon the trial it appeared that Newson applied to Allis, the agent of Wood, for a loan of money upon the note of himself and Steele. Wood assented, and Newson was to procure the note. Wood left the money with Allis, to be paid over when the note was produced. The note was afterwards delivered by Newson, and the money paid to him. Steele received no part of it. At that time, it appeared on the face of the note that " September " had been stricken out and " October llth " substituted as the date. This was done after Steele had signed the note and without his knowl- edge or consent. These circumstances were unknown to Wood and to Allis. Steele was the surety of Newson. It does not appear that there was any controversy about the facts. The argument being closed, the Court instructed the jury, " that if the said alteration was made after the note was signed by the defendant, Steele, and by him delivered to the other maker, Newson, Steele was discharged from all liability on said note." The plaintiff excepted. The jury found for the defendant, and the plaintiff prosecuted this writ of error to reverse the judgment. Instruc- tions were asked by the plaintiff's counsel, which were refused by the Court. One was given with a modiiieation. Exceptions were duly taken, but it is deemed unnecessary particularly to SEC. 1.] WOOD V. STEELE. 141 advert to them. The views of the Court as expressed to the jury covered the entire ground of the controversy between the parties. The state of the case, as presented, relieves us from the neces- sity of considering the questions — upon whom rested the burden of proof, the nature of the presumption arising from the altera- tion apparent on the fact of the paper, and whether the insertion of a day in a blank left after the month, exonerates the maker who has not assented to it. "Was the instruction given correct? It was a rule of the common law as far back as the reign of Edward III that a rasure in a deed avoids it. Brooke's Abridg- ment, Faits, pi. 11. The effect of alterations in deeds was con- sidered in Pigot's case, 11 Coke, 27, and most of the authorities upon the subject down to that time were referred to. In Master v. Miller, 4 Term, 320, the subject was elaborately examined with reference to commercial paper. It was held that the established rules apply to that class of securities as well as to deeds. It is now settled, in both English and American jurisprudence, that a material alteration in any commercial paper, without the consent of the party sought to be charged, extinguishes his liability. The materiality of the alteration is to be decided by the Court. The question of fact is for the jury. The alteration of the date, whether it hasten or delay the time of payment, has been uniformly held to be material. The fact in this case that the alteration was made before the note passed from the hands of Newson, cannot effect the result. He had no authority to change the date. The grounds of the discharge in such cases are obvious. The agreement is no longer the one into which the defendant entered. Its identity is changed; another is substituted without his consent, and by a party who had no authority to consent for him. There is no longer the necessary concurrence of minds. If the instru- ment be under seal, he may well plead that it is not his deed ; and if it be not under seal, that he did not so promise. In either case, the issue must necessarily be found for him. To prevent and pun- ish such tampering, the law does not permit the plaintiff to fall back upon the contract as it was originally. In pursuance of a stern but wise policy, it annuls the instrument, as to the party sought to be wronged. The rules, that where one of two innocent persons must suffer, he who has put it in the power of another to do the wrong must bear the loss, and that the holder of commercial paper taken in good faith and in the ordinary course of business is unaffected by 142 HOLME V. BRUNSKILU [ CHAP. IV. any latent infirmities of the security, haVe no application in this class of cases. The defendant could no more have prevented the alteration than he could have prevented a complete fabrication; and he had as little reason to anticipate one as the other. The law regards the security, after it is altered, as an entire forgery with respect to the parties who have not consented, and, so far as they are concerned, deals with it accordingly. f The instruction was correct, and the Judgment is affirmed. Accord. — Stayner v. Joice, 82 Ind. 35; Britton v. Dierker, 46 Mo. 591 j Brown v. Straw, C Neb. 536; Butler v. State, 31 Tex. Cr. App. C3; Newman V. King, 54 O. S. 273. HOLME V. BRUNSKILL. L. R. 3 Q. B. Dlv. 495 (1877). The plaintiff agreed to let a farm to the principal, as a tenant, and the defendant was surety for the due performance of the rental contract. During the tenancy the owner and tenant agreed that the tenant should give up a small part of the farm and that the rental should be reduced £10 per year. This action was against the surety for breach of the rental contract. Denman, J., after stating the facts and pleadings, delivered the following judgment : — In order to decide whether there is an alteration in the risk such as to discharge the surety, I think it is impossible to lay down an absolute rule that in all cases it is for the judge to decide as matter of law, whether the alteration was such as to have that' effect or not. There must, I think, be many cases in which the judge would have to take the opinion of the jury upon the ques- tion, whether the alteration was of such a character as to effect the surety in any way by substantially or materially altering the risk. By way of example, I think it is impossible to say that if in the present case the evidence were that the landlord and tenant had mei-ely agreed that the landlord should have the exclusive use of a small shed on the premises during the continuance of the tenancy, such an agreement would necessarily discharge the surety. I think it would in that case be a question for the jury at the most, whether the shed in question was of such importance, whether it played so material and substantial a part, if any at all, in assisting the tenant in keeping up his stock of sheep, as that 3B0. 1.] HOLME V. BRUNSKILL. 143 the depriving himself of it, by allowing the use of it to the land- lord, would render him less capable of performing the condition of the bond. In the present case I think that if the same tenancy had continued to exist, it would have been a question for the jury upon the evidence whether the alteration in its terms, so far as it relates to the giving up of the Bog Field, did make any material difference in the risk, in the sense above explained, and the jury having in effect found that it did not, I should not feel myself justified in holding the contrary as matter of law, and on that ground giving judgment for the defendants. The matter was one in its nature far more fit for the consideration of a special jury for the county of Cumberland than for a lawyer, and I cannot even say that I am dissatisfied with the view they took, though I might possibly, perhaps, through ignorance of sheep farming, come to a different conclusion upon the evidence if it had been for me to decide the question. But as to the other contentions of the defendant, namely, that the contract between the plaintiff and the principal was a differ- ent contract, and that the tenancy was a new tenancy after the agreement of March, 1876, I am of opinion that on this ground the sureties are not liable; I think it is impossible to contend that the words ' ' farm and lands called Riggindale ' ' in the recital of the bond, meant anything except Riggindale Farm as it then existed, namely, a farm of 234 acres including the Bog Field, and though in one sense it would still be called Riggindale Farm after the new agreement, I do not think that that fact would justify me in holding that I could reject that part of the recital of the bond as immaterial; on the contrary, I think it was a material part of the bond, and any such alteration of the holding as the> diminution of the farm by seven acres, and a reduction of the rent by £10, however unpre judicial it may in fact have been to the sureties, is on the face of it such an alteration in the agreement between the plaintiff" and the principal as necessarily to make it a new and different agreement which, unless assented to by the surety, must discharge him from his obligation. ««««hi4:««« The plaintiff appealed. C. Russell, Q. C, and Dickinson, for the plaintiff. Aspinall, Q. C, and C. Crompton, for the defendant. Cotton, L. J. This is an appeal of the plaintiff against a judg- ment by Denman, J., in favour of the defendant, Robert Bruns- kill. The action was on a bond for £1000, dated the 18th of March, 1873, executed by George Brunskill, Robert Brunskill, and 144 HOLME V. BEUNSKILL. [ CHAP. IV. others in favour of the plaintiff. The plaintiff was at the date of the bond, and still is, the owner of a farm called Riggindale, and before the execution of the bond he had agreed with George Bnins- kill .to let to him as yearly tenant, Riggindale Farm, including certain hill pasture held therewith, and also a flock of 700 sheep, and bond in which Robert Brunskill joined as surety for .George Brunskill, was given to the plaintiff to secure the delivery to him at the end of the tenancy of the flock of sheep in good order and condition. The material part of the condition of the bond is as follows. (The Lord Justice read the condition.) On the 9th of November, 1875, the plaintiff gave to George Brunskill a notice to quit the farm, which was in terms, a notice to quit ' ' on the 10th of April, 1876, or at the .expiration of the year of your tenancy, which shall expire next after the expiration of one half year from the service of the notice. ' ' The notice being served less than six months before the 10th of April, 1876, was ineffectual to determine the tenancy on that day, but was effectual to determine it on the 10th of April, 1877. Before the 10th of April, 1876, George Brunskill and the plaintiff met, and George Brunskill objected to the insufficiency of the notice to quit. Whereupon the plaintiff stated that he did not wish to take the farm from him but that he wanted part of the farm called the Bog Field, and it was thereupon agreed that George Brunslfill should surrender this on the 10th of April then next, and that his rent should from that time be reduced by £10 a year, and that the notice to quit should be considered as withdrawn. This agree- ment was carried into effect, and George Brunskill continued to hold the remainder of the farm; but early in October following, the plaintiff gave him due notice to quit on the 10th of April, 1877. Before this time arrived George Brunskill got into diffi- culties and had become insolvent. His trustee, sometime in March, 1877, gave up the farm, and it was then ascertained that the flock referred to in the bond was reduced in number and deteriorateflj^'i; in quality and value ; and the action has been brought to recover from the defendant, under his bond, compensation for the dimin-' ished value of the flock. Mr. Justice Denman, before whom the action was tried, gave judgment for the defendant, and against this judgment the plain- tiff has appealed. One ground on which the defendant relied in supporting the judgment was, that his obligation under the suretyship bond had expired before the deficiency arose, that is to say, that by the no- SEC. 1.] HOLME V. BRUNSKILL. 14:5 tice to quit and agreemeut made as to the surrender of the Bog Field, and the withdrawal of the notice, a new tenancy was cre- ated, to which the bond did not apply ; and for this he relied on the case of Tayleur v. Wildin, Law Rep. 3 Ex. 303, as an authority, that under the circumstances, a new tenancy was created; and it was on the authority of Tayleur v. Wildin that Mr. Justice Den- man, as we understand, principally relied, but we are unable to agree with this view. In Tayleur v. Wildin the tenant continued in the occupation of the farm after the day for which the notice to quit, which was withdrawn, had been effectually given, and the rent for which the surety was sued accrued in respect of the occu- pation after that day, and the Court considered the continuance of the tenant's possession after that time as a new tenancy, and that the guarantee which applied only to the old tenancy was therefore gone. But in the present case, the tenancy of George Brunskill was, in fact, determined on or before the day when, if the notice to quit had not been withdrawn, it would have ended. The deficiency and deterioration of the flock therefore occurred at the determination of the very tenancy to which the bond re- ferred. It was, however, argued that the effect of giving up the Bog Field, must be a surrender, of the old tenancy. But we are of opinion that this cannot be maintained, and that notwithstand- ing the surrender to a landlord of part of the land demised, the former tenancy of the remainder of the farm still continues. It was contended by the defendant, that even if there was a continuance of the old tenancy the effect of the surrender of the Bog Field was to discharge him as surety from all liability. The rBog Field contained about seven acres, and the jury, in answer to a question left to them at the trial, found that the new agree- ment with the tenant had not made any substantial or material difference in the relation between the parties, as regard the ten- ant's capacity to do the things mentioned in the condition of the bond, and for the breaches of which the action was brought. The plaintiff's contention was that this must be treated as a finding that the alteration was immaterial, and that, except in the case of an agreement to give time to the principal debtor, a surety was not discharged by an agreement between the principals made with- out his assent, unless it materially varied his liability or altered what was in express terms a condition of the contract. In my opinion this contention on behalf of the plaintiff cannot be sustained. No doubt, "there is a distinction between the eases, which have turned on the creditor agreeing to give time to the 146 HOLME V. BEUNSKILL. [CHAP. IV. principal debtor, and the other cases. Where a creditor does bind himself to give time to the principal debtor, he with an exception hereafter referred to, does deprive the surety of a right which he has, that is to say of the right at once to pay off the debt which he has guaranteed, and to sue the principal debtor, and without inquiry whether the surety has, by being deprived of this right, in fact suffered any loss, the courts have held that he is discharged. The exception to which I have referred is, where the creditor on making the agreement with the principal debtor expressly re- serves his right against the surety, but this reservation is held to preserve to the surety the right above referred to, of which he would be otherwise deprived. The cases as to discharge of a surety by an agreement made by the creditor, to give time to the principal debtor, are only an exemplification of the rule stated by Lord Loughborough in the case of Rees v. Berrington, 2 Ves. J. 540 : " It is the clearest and most evident equity not to carry on any transaction without the knowledge of him (the surety), who must necessarily, have a concern in every transaction with the principal debtor. You cannot keep him bound and transact his affairs (for they are as much his as your own) without consulting him." The true rule in my opinion is, that if there is any agreement between the principals with reference to the contract guaranteed, the surety ought to be consulted, and that if he has not consented to the alteration, although in cases where it is without inquiry evi- dent that' the alteration is unsubstantial, or that it cannot be otherwise than beneficial to the surety, the surety may not be dis- charged; yet, that if it is not self-evident that the alteration is unsubstantial, or one which cannot be prejudicial to the surety, the Court, will not, in an action against the surety, go into an inquiry as to the effect of the alteration, or allow the question, whether the surety is discharged or not, to be determined by the finding of a jury as to the materiality of the alteration or on the question whether it is to the prejudice of the surety, but will hold that in such a case the surety himself must be the sole judge whether or not he will consent to remain liable notwithstanding the alteration, and that if he has not so consented he will be dis- charged. This is in accordance with what is stated to be the law by Amphlett, L. J., in the Croyden Gas Company v. Dickenson, 2 C. P. D. at p. 51. The plaintiff, in support of his contention, that having regard to the finding of the jury, the surety was not discharged, relied SEC. 1.] HOLME V. BRUNSKILU 147 on varioTis dicta to the effect that any material change in the contract between the principals will discharge the surety. Even if by these expressions the judges intended to state that to have the effect of releasing the surety the alteration must be material, it dos not follow that they intended to lay down that no alteration would discharge the surety unless the jury in an action to enforce his liability, held it to be material, or to express any opinion at variance with the rule laid down by me. The ease of Sanderson V. Aston, Law Eep. 8 Ex. 73, was specially relied on by the plain- tiff. , But Martin, B., though he did not formally dissent from the decision of the majority of the Court, was not satisfied with the judgment; and if the decision is to be considered as based on the reason given by Pollock, B., that the Court was entitled to con- sider whether the alteration was material, it cannot, in our opinion, be sustained. In the present case, although the Bog Field contained seven acres only, yet it cannot be said to be evident that the surrender of it could not prejudicially affect the surety. Some of the wit- nesses for the plaintiff admitted that it was occasionally used for pasturing, that its loss would be appreciable in the spring, and that it might make a difference of fifteen in the number of the sheep which the farm would carry. The case may also be considered in another point of view. The bond given by the defendant the surety, was to guarantee the de- livery up of the flock of sheep therein referred to at the determina- tion of the tenancy of the Eiggindale Farm, which, in our opinion, must mean Eiggindale Farm as then demised to George Brunskill, and the bond certainly implied that he should continue to hold the farm as then demised till the flock was given up. The contention of the plaintiff, if it could be .supported, would make a variation in this contract, as to the materiality of which there is at least a doubt, and would make the defendant liable for a deterioration of the flock during the time when the tenant held a smaller farm than that contemplated by the contract of the surety. The plaintiff's counsel relied on some observations made by Lord Cottenham in the case of Hollier v. Eyre, 9 H. L. C. 57. But, in fact, those observations are in favour of the defendant and not of the plaintiff. What Lord Cottenham says is, " the surety will be left to judge for himself between his original undertaking and another substituted for it, but that is not the case where the con- tract remains the same, though part of the subject-matter is with- drawn from its operation." In this case, as already pointed out, 148 HOLME V. BRUNSKILIi. [CHAP, IT. the original contract of the surety was that the flock should be delivered up in good condition, together with the farm, as then demised to the tenant. No part of that which was guaranteed wa? ever withdrawn from the operation of the bond. But the plain- tiff attempts to substitute foi- the contract that the flock should be given up in good condition, with the farm, as then demised, a contract that it should be delivered up in like Condition with a farm of diiferent extent. In my opinion the surety ought to have been asked to decide whether he would assent to the variation. He never did so assent, and in my opinion was discharged from liability, notwithstanding the finding of the jury, inasmuch as in my opinion the question was not one which ought to have been sub- mitted to them. Lord Justice Thesigee concurs in this judgment. Brett, L. J. I speak with great deference when I say I can- not bring my mind altogether to agree with this judgment, and I feel bound to observe that I arrive at another view than that which has been expressed. As to the first part of the judgment I entirely agree. I do not think there was any new tenancy, and I ground that view on the fact of the finding of the jury, amongst other things, that the alteration was immaterial. It is the latter part of this view with which I cannot agree. In the first place, this case comes before us fettered by certain rules. We are bound to observe that it is a direct appeal from the decision of my Brother Denman, after a trial by jury; we are, therefore, not at liberty to ask whether the question he left was left in proper form. There cannot be a motion here for misdirection, and we are not at liberty to say that the finding of the jury was contrary to the evidence. It is a general rule that we have no right to look at the verdict, but accept it according to its ordinary construction. I find the question left to the jury was, whether the new agreement with the tenant, which we are told did not alter the tenancy, made a substantial or material difference in the relation between the parties as to the tenant's capacity to do the things mentioned in the bond, and for breach of which the action was brought. They not only found that, but my Brother Denman says that the matter is far more fit for the consideration of a jury of the county of Cumberland than for a lawyer, and he cannot say that he is dis- satisfied with their view. Therefore there is the finding of the jury with the assent of the judge. If it were necessary to give an opinion, considering I have not an intimate knowledge of these things, but from what I know of Cumberland farmers, so far SEC. 1.] HOLME V. BEUNSKILL. 149 from dissenting from the opinion of the jury, I think it is a Bubstantial finding. When one remembers how many views are taken as to farms in Cumberland, I should be inclined to agree with the jury and say it did not make any material difference. We are bound by that finding, and can act in conformity with it. Where there is a suretyship bond, and there are some alterations in the contract or relation of the parties under the bond as to guaranteeing its performance, the question is whether the altera- tion is not material or substantial, and whether the surety is re- leased. I cannot bring my mind to think he is, for the law takes no notice of alterations that are neither material nor specific. The proposition of law as to suretyship to which I assent is this, if there is a material alteration of the relation in a contract, the observance of which is necessary, and if a man makes himself surety by an instrument reciting the principal relation or con- tract, in such specific terms as to make the observance of specific terms the condition of his liability, then any alteration which happens is material ; but where the surety makes himself responsi- ble in general terms for the observance of certain relations between parties in a certain contract between two parties, he is not released by an immaterial alteration in that relation or contract. My opin- ion is in accordance with the finding of the jury, and it will be most dangerous in this particular case to put ourselves in the place of a jury and because we think seven acres may make a difference, or £10 a year may make a difference, to set aside the finding of the jury, which is that neither one is material or substantial. I think the surety is not released. The doctrine of the release of suretyship is carried far enoiigh, and to the verge of sense, and I shall not be one to carry it any further. Judgment affirmed. Solicitors for plaintiff: Johnston & Harrison, for Harrison & Little, Penrith. Solicitor for defendant: Arnison, Penrith. AccoED.^- Holding that a change in the terms of the principal contract, which either imposes some new obligation or takes away some obligation al- ready imposed, is a material alteration, although the change does not make the contract more burdensome or less burdensome. This class of cases rest upon the theory that the surety is not liable upon the sustituted contract, and that the original contract has been put an end to. Whitchter v. James Hall, 5 Barn. & Or. 269; Warden v. Kyan, 37 Mo. App. 466; National Bank V. Douglass, 51 Ga. 205; Weir Plow Co. v. Walmsley, 110 Ind. 242; Dcy v. martin, 78 Va. 1; Christian & Gunn v. Keen, 80 Va. 369; Rowan v. Sharps Eiile Mfg. Co., 33 Conn. 1; St. Louis Brewing Assn. v. Hayes, 71 Fed. Rep. 150 HOLME V. BEUNSKILL. [ CHAP. IV. 110; Parke v. White River Co., 110 Cal. 658; Chester v. Leonard, 68 Conn. 495; Plunkett v. Sewing Machine Co., 84 Md. 529; Prior v. Kiso, 81 Mo. 241; Evans v. Graden, 125 Mo. 72; Gardner v. Watson, 76 Tex. 25; Nichols V. Palmer, 47 Wis. 110; Titus v. Durkee, 12 Up. Can. (C. P.) 367; Bethune V. Dozier, 10 Ga. 235. In the case last cited the Court says: " No principle of law is better settled at this day than that the undertaking of the surety, being strioti juris he cannot, either at law or in equity, be bound farther or otherwise, than he is by the very terms of his contract. . . . He is not bound by the old contract, for that has been abrogated by the new; neither is he bound by the new contract, because he is no party to it. . . . Neither is it of any consequence that the alteration in the contract is trivial, nor even that it is for the advantage of the surety. Hon hace in foedera veni, is an answer in the mouth of ,the surety, from which the obligee can never extricate his case, however innocently or by whatever kind intention to all parties, he may have been actuated." It is held that if the alteration is made without fraudulent intent the surety is nevertheless discharged. Toomer v. Rutland, 57 Ala. 379; Bigelow v. Stilphen, 35 Vt. 525 ; Savings Bank v. Shafifer, 9 Neb. 1 ; Taylor v. Taylor, 12 Lea (Tenn.) 714; Newman v. King, 54 O. S. 273. In Cambridge Savings Bank v. Hyde, 131 Mass. 77, the note was written with interest at seven and one-half per cent. The holder wrote upon the back of the note, and without the knowledge or consent of the surety, the words: "Rate of interest to be 6% per cent, from Oct. 10th," the court held: " The parties did not intend to release the principal debtor of the sureties from the obligation to pay the note, but only to remit a portion of the inter- est payable under it for the use of the money. We know of no rule of law which requires us to defeat the intention of the parties by holding that this operated to discharge the original contract in whole. It is also clear that the change in the original contract, by reducing the rate of interest, could not be prejudicial to the sureties. It is to be borne in mind that there was no contract by the plaintiff giving time to the principal debtor, and no con- tract by the debtor that the amount of the note should remain on interest at the new rate for any time. The plaintiflF could at any time have sued on the note, and the sureties could at any time have paid the note, and have had » right to sue their principal at once. The agreement was merely a stipulation to remit a part of the sum which the plaintiff might claim under the note. It did not tie the hands of the creditor, or alter unfavorably the condition of the surety. If there was any consideration for it, so that it had any validity, it could not operate to the injury of the sureties, any .more than an indorsement of, or a receipt for, a part of the principal would. The change made in the terms of the note was necessarily beneficial to all parties bound by it. We are of opinion that the sureties were not discharged, even if they had no knowledge of the change." Contra. — Sanders v. Bagwell, 37 S. C. 145. A distinction seems to be made between an indorsement made upon a con- tract modifying its terms or waiving some of its requirements and an altera- tion in the contract itself, although the obligation to be performed remain the same in either case. Thus a change in the rate of interest by altering the language of the original contract discharges the surety. Patterson v. McNeeley, 16 O. S. 348; Harsh v. Klepper, 28 0. S. 200; Thompson v. Massie, 41 O. S. 307; Franklin Life Ins. Co. v. Courtney, 60 Ind. 134; Johnston v. May, 76 Ind. 293; Dewey v. Reed, 40 Barb, 16; Neff v. Horner, 63 Pa. 327. SEC. 2.] WALLACE V. JEWELL. 151 Sec. 2. The addition ef a new party in the principal contiact. SAMUEL WALLACE, ET AL. v. ALEXANDER M. JEWELL. 21 0. S. 163 (1871). On March 19, 1866, Jewell filed his petition in the Court of Common Pleas, against " Almon Rany, Bostic Rany, (under name and style of Rany Bros.,) Hiram Park and Samuel Wallace de- fendants," on a promissory note, of which the following is a copy: " $2,000. YouNGSTOWN-, Dec. 4, 1863. " Five months after date, I promise to pay to the order of A. M. Jewell, two thousand dollars at my mill in this place, with ints. at seven per cent, per annum, value received. " Almon Rant. " Rany Eros." Indorsed " Hiram Park." " Samuel Wallace." The petition states that Park and Wallace indorsed the note at the time it was made and before delivery. The plaintiff asked judgment against the defendants for the amount of the note and interest, less a payment of $1,000, August 10, 1864. Bostic Rany, as one of the firm of Rany Bros., and partner of Almon Rany, answered, that the plaintiff ought not to recover against Rany Bros., for that the signature of Rany Bros, was affixed to the note, at the request of the plaintiff long after the note became due, and that the plaintiff did not, within a reasonable time or at any time, demand payment of the note of the original makers, and give notice of non-payment, &c. Wallace and Park answered separately: 1st. That they sev- erally signed the note upon the back thereof as indorsers for Almon Rany the maker, and not as original signers, and that the plaintiff failed to demand payment of the maker of the note, and give notice to these defendants of non-payment, &c. ; and, 2nd. That they signed the note as indorsers for Almon Rany, and that, without their knowledge or consent, the note was materially altered, after it was delivered to the plaintiff, and while he held it, and after it became due, in this, that the signature " Rany Bros." who were not original makers of the note, was affixed to the face thereof. Thomas W. Sanderson, for plaintiff in error. 21 152 WALLACE V. JEWELL. [CHAP. IV. Hutchins & Glidden, for defendant in error. White, J. This ease is before us on error to the charge of the court as to the effect of the alleged alteration of the note, or the liability of the plaintiffs in error, who were the defendants below. The alteration consisted in adding, by the procurement or with the consent of the plaintiff, who was the payee, the name of an additional party as maker, after the note had been delivered as a perfect instrument against the original signers. In passing on the correctness of the charge, it is important to ascertain the character of the note before the alleged alteratioa, and the relation to it of the original parties. Leaving out of view the defence of Park and Wallace that they •signed upon the agreement that they were only to become bound as accommodation indorsers, which must have been found against them by the jury, the three held the relation to the note of original makers, Almon Rany being the principal, and Park and Wallace his sureties. Seymore v. Mickey, 15 Ohio St. 515; Same v. Same, 10 Ohio St. 283. The question as to the character of the note, has reference to whether it was joint as well as several. It is claimed on behalf of Jewell, the plaintiff below, that it was only the several note of the parties, and that the addition of another maker in no way af- fected its legal character. The ground of this claim is that the pronoun " I," is used in the body of the note ; and, it is said, that this makes it the note of each signer, but not the joint note of all. The opinion in Brownell v. Winnie, (29 N. Y. R. 408,) is cited as sustaining this claim. We cannot assent to this view. The language " I promise," &c., makes the note the joint or united as well as the several contract of all the signers. The pronoun represents the signers collectively as well as severally. *********^N**** There is nothing in the pleadings or the bill of exceptions in- dicating that the addition of the name of ' ' Rany Bros. ' ' was made for any other purpose than by adding an additional maker to the note. The charge assumes that to have been the character of the addition; for it states that the putting the name on the note after delivery, was a material alteration. If the object had been to guaranty payment, or to furnish ad- dition security otherwise than by becoming or assuming to become a joint maker, there could be no objection to the accomplishment of such object. The new agreement, in such case, would be a collateral one, and it would leave the integrity of the original note SEC. 2.] WALLACE V. JEWELL. 153 unaffected. Nor do we suppose the case would be altered, if, in giving such security, the new party should, by mistake or inad- vertence, sign the note in such way as to indicate, prima facie, that he was an original promisor, the real intention being otherwise. Such a ease would fall within the principle decided in Ex parte Yates, 2 De Gex and J. 191. ^ In regard to what is said in the note as to the place of payment, we consider the stipulation as having no other effect upon the obligations of the parties than as specifying the place of payment. The meaning would be the same, if, in speaking of the mill the name of the owner had been used instead of the possessive pro- noun " my." It is a general rule of law, that the unauthorized material al- teration of a written instrument by the holder, or with his consent, vitiates it as to non-consenting parties. The policy of the rule is to preserve the integrity of legal instruments by taking away the temptation of tampering with them. But it is contended that the adding the name of an additional maker to a promissory note, although the instrument may at the time be held as a valid subsisting obligation against the other makers, does not constitute a material alteration. We are unable to accede to this position. The question directly arose in Gardner v. "Walsh, (5 El. & BL 84) and was there fully considered ; and it was held by the court, (overruling Calton v. Simpson, 8 A. & E. 136,) that the addition of the name of another as maker was a material alteration, and, if made after the note was issued, would avoid it. In the opinion in that ease it is said: " If, after the note is a perfect instru- ment, according to the intention of the parties, as the joint and several promissory note of the defendant and Elizabeth Barton,, and after it had been ' completed, issued and negotiated, ' the plain- tiffs, without the consent of the defendant, had caused it to be signed by Alice Clarke, as a joint and several maker, along with the defendant and Elizabeth Barton, according to principle and authority, he is discharged from his liability upon it. There would be no difficulty in showing that, under certain circum- stances which might have supervened, this alteration might have been prejudicial to the defendant. But we conceive that he is discharged from his liability, if the altered instrument, supposing it to be genuine, would operate differently from the original in- strument, whether the alteration be or be not to his prejudice." The decision is but the application of the general principle in 154 WAIjLACE v. JEWELL. [chap. IV. regard to the alteration of instruments, to the particular mode of changing their legal meaning and effect by adding new parties without the consent of those originally bound. The principle is directed not against the mode but the fact of alteration. The case of Gardner v. Walsh, has generally been followed both in this country and in England. ********** The case of McCaughey v. Smith, (27 N. T. 39), is more nearly in point. In that case the action was against the indorser of a note to which the name of a new party, apparently as maker, had been added after the defendant's indorsement and without his consent. The decision was by a divided court, five of the judges concurring and three dissenting. In the opinion of the majority, speaking to the point of the effect of an alteration, it is said: " It is certainly the result of the later authorities that the addition of another maker to a note, made by one or more parties, is a mate- rial alteration of the contract. Instead of being tiie several or the joint obligation of the original party or parties, it becomes the joint or joint and several undertaking of diiferent contractors. It is not material whether the change be prejudicial or the con- trary; it is sufficient that it is material." Gardner v. Walsh, and Chappell v. Spencer, are cited as supporting the doctrine. The opinion then proceeds to state that " there is a difference between the present case and these however, which must not be lost sight of, ' ' and while the rule is not controverted, it is declared not to be applicable, in the opinion of the majority of the judges, to the case then before the court. The rule applies of course only where the name of the new party is added in the character of maker. Such an addition gives a different legal character to the instru- ment. The defendants might, by the altered condition of the note now in question, have been subjected to change of jurisdiction in the event of any litigation arising in relation to it between the parties, 9 B. Monroe, 7. In regard to the suggestion of counsel that Eany Bros, were not bound, and the further observation that the adding of their names imposed no more legal liability upon prior parties than if their names had been forged to the note, we may remark, that no altera- tion, whether it amounts to forgery or not, is, in fact, binding upon the non-consenting parties. If the legal operation of the in- strumeijt in its altered condition is different from the one they executed, it is sufficient for them to say of the contract evidenced by the altered instrument, into this we never entered. SEC. ,3.] MEKSMAN V. WEEGES. 155 The charge in the present case assumed that the adding of the name of the new party materially altered the note, but made its legal effect depend on what the plaintiff at the time conceived to be its effect, and on what he then designed as to the future use of the note. This of course involved what he conceived to be the legal character of the note before the alteration. The effect of a material alteration is thus made to depend, not upon the actual fact as to the character of the instrument before and after the alteration, but upon the conceptions and design of the holder at the time of the alteration. If the parties intended to do what they have apparently done, added a new party to the note in the char- acter of maker, its vitiating effect cannot be avoided by the con- ceptions of the plaintiff as to the character of the act, nor by his design in respect to the future use of the note. Judgment reversed and cause remanded for a new trial. Scott, C. J., and Welch, Day, and McIlvaine, JJ., concurred. AccoED. — Chadwick v. Eastman, 53 Me. 12; Shipp's Adm. v. Suggett's Adm., 9 B. Mon. 8; Hall's Admx. v. McHenry, 19 Iowa 521; Hamilton v. Hooper, 46 Iowa 516. Sec. 3. The addition of a new party as surety or guarantor. MEESMAN V. WERaES, ET AL. 112 U. S. 139 (1884). Mr. C. H. Gatch, for appellant. Mr. Galusha Parsons, for appellees. Mr. Justice Gray delivered the opinion of the court. He stated the facts in the foregoing language and continued : This court is of opinion that the degree of the Circuit Court cannot be sustained. The difference of opinion is not upon the facts of the case, but upon their legal effect. A material alteration of a written contract by a party to it discharges a party who does not authorize or consent to the altera- tion, because it destroys the identity of the contract, and sub- stitutes a different agreement for that into which he entered. In the application of this rule, it is not only well settled that a material alteration of a promissory note by the payee or holder discharges the maker, even as against a subsequent innocent in- dorsee for value; but it has been adjudged by this court that a material alteration of a note, before its delivery to the payee, by 156 MEKSMAN V. WBEGES. [CHAP. IV. i one of two joint makers, without the consent of the other, makes it void as to him; and that any change which alters the defendant's contract, whether increasing or diminishing his liability, is ma- terial, and therefore the substitution of a later date, delaying the time of payment is a material alteration. Wood v. Steele, 6 Wall. 80. See also Angle v. Northwestern Insurance Co., 92 U. S. 330; Greenfield Savings Bank v. Stowell, 123 Mass. 196, and cases there cited. The present case is not one of a change in the terms of the contract, as to amount or time of payment, but simply of the effect of adding another signature, without otherwise altering or defac- ing, the note. An erasure of the name of one of several obligors is a material alteration of the contract of the others, because it increases the amount which each of them may be held to con- tribute. Martin v. Thomas, 24 How. 315 ; Smith v. United States, 2 Wall. 219. And the addition of a new person as a principal maker of a promissory note, rendering all the promissors appar- ently jointly and equally liable, not only to the holder, but also as between themselves, and so far tending to lessen the ultimate liabil- ity of the original maker or makers, has been held in the courts of some of the States to be a material alteration. Shipp v. Suggett, 9 B. Monroe 5 ; Henry v. Coats, 17 Indiana 161 ; Wallace v. Jewell, 21 Ohio St. 163; Hamilton v. Hooper, 46 Iowa 515. However that may be, yet where the signature added, although in form that of a joint promissor, is in fact that of a surety or guarantor only, the original maker is, as between himself and the surety, exclusively -^ liable for the whole amount, and his ultimate liability to pay that amount is neither increased nor diminished; and, according to the general current of the American authorities, the addition of the name of a surety, whether before or after the first negotiation of the note, is not such an alteration as discharges the maker. The English cases afford no sufficient ground for a different conclusion. In the latest decision at law, indeed. Lord Campbell and Justices Erie, Wightman and Crompton held that the signing of a note by an additional surety, without the consent of the original makers, prevented the maintenance of an action on the note against them. Gardner v. Walsh, 5 El. & Bl. 83. But in an earlier decision, of perhaps equal weight, Lord Denman and Jus- tices Littledale, Patteson and Coleridge held that in such a ease the addition did not avoid the note, or prevent the original surety, |j on paying the note, from recovering of the principal maker the amount paid. Catton v. Simpson, 8 Ad. & El. 136 ; S. C. 3 Nev. & SEC. 4.] N. M. B. ASSN. V. CONKLING. 157 Per. 248. See also Gilbert on Evidence, 109. And in a later case, in the Court of Chancery, upon an appeal in bankruptcy, Lords Justices Knight, Bruce and Turner held that the addition of a suretty was not a material alteration of the original contract. Ex parte Yates, 2 DeG. & Jon. 191; S. C. 27 Law Journal, (N. S.) Bankr. 9. Decree reversed. Accord.— McOaughrey v. Smitili, 27 N". Y. 3®; Milkr v. Pinlcy, 26 Mick 249; Stone v. Wihite, 8 Gray, 589; State v. Dunn, 11 La. An. 549; Anderson V. BeHinger, 87 Ala. 334; Crandall v. Anhurn First Nat. Bank, 61 Ind. 349; Graham v. Rush, 73 Iowa 451; Barnes v. McKernan, 31 Neb. 165. Contra. — Soaps v. Eicbberg, 42 ID. App. 375 ; Keller v. Rock Island State Bank, 292 111. 553, 127 N. E. 94; Wallace v. Jewell, 21 O. S. 163; Brown v. Johflson Bros., 127 Ala. 292, 28 So. 579; Rankin v. Tygard, 198 Fed. 795; Swank v. Kaufman, 255 Ba. 316, 99 Atl. 1000, L. R. A. 1917D, 826; Bank of Commerce v. Webster (Okla.), 172 Pac. 942, L. R. A. 1918F, 696, and note at page 698. "Adding of another party to negotiable instrument after its execution and delivery as a material alteration." Section 124 of the Uniform Negotiable Instruments Act provides "when an instrument has been materially altered and is in the hands of a holder in due course, not a -party to the alteration, he may enforce payment according to its original tenor." Section 125, Id., provides inter alia that "any alteration which changes the number or relations of the parties is a material alteration." As respects negotiable instruments these sections seem to have codified the law on the subject, although there is a great conflict of authority upon thia question. In Ohio these sections are held to apply only to the physical alteration of a negotiable instrument. Richards v. Market Exchange Bank Co., 81 O. S. 348, 90 N. E. 1000, 26 L. R. A. (N.S.) 99. Sec. 4. Alteration of the principal contract hy a change in the duties of the principal. THE NATIONAL MECHANICS' BANKING ASSN. v. JOSEPH C. CONKLING, ET AL. 90 N. Y. 117 (1882). Eugene H. Pomeroy, for appellant. John H. Bergen, for respondents. Earl, J. In September, 1863, the plaintiff employed the de- fendant Joseph C. Conkling as a book-keeper in its bank, at a salary of $400. At the time of his employment, and to secure his fidelity, a bond in the penalty of $10,000 was executed to the plaintiff, which contained the following recitals and conditions : "Whereas, the above-named, the Mechanics' Banking Associa- tion, have appointed the above-named Joseph C. Conkling to the office of a book-keeper of the said association, and the said Joseph C. Conkling hath accepted the same and consented to perform the duties thereof, now the condition of this obligation issuchthat if the above-named Joseph C. Conkling shall faithfully fulfill and discharge the duties committed to and the trust reposed in him as such book-keeper and shall also faithfully fulfill and discharge the duties of any other office, trust or employment relating to the' business of the said association which may be assigned to him or which he shall undertake to perform, and shall also, without neglect or delay, inform the president and cashier of the said association of any embezzlemenit of the money, property or goods belonging to and of any fraud whatever committed upon, the said association, of 158 N. M. B. ASSN. V. CONKUNG. [CHAP. IV. any false entry, error, mistake or difference of accounts in the books thereof which he may discover, or which shall come to his knowledge as such book-keeper as aforesaid, or whilst engaged in any other office, duty or employment relative to the business thereof, and which he may discover, or which shall come to his knowledge, in any matter or thing whatever appertaining thereto; and shall also faithfully keep all the secrets of the said association; then the above obligation to be void, otherwise to remain in full force and virtue." The salary of Joseph as book-keeper was subsequently increased and he continued to be book-keeper until 1870. In that year he was appointed the receiving teller of the bank at an increased salary, and he continued to be and to act as such teller until Oc- tober lOj 1879, when he resigned. After his resignation it was discovered that while acting as teller he had embezzled $2,700 of the funds of the bank. This action was brought against all the obligors upon the bond to recover the amount thus embezzled. The respondents are the sureties upon the bond and they alone defended. There was no breach of the condition of the bond while Joseph held the employment of book-keeper, and the question to be de- termined is whether, according to the conditions of the bond, the sureties are liable for the embezzlement committed by their prin- cipal while acting as teller. We have come to the conclusion, not without some hesitation and doubt, that they are not. The recital in the condition of the bond shows that Joseph had been appointed to the ofiSce of book-keeper; that he had accepted that office and consented to perform the duties thereof. That was the office brought to the attention of the sureties and which they had in mind when they executed the bond. The recital in such bonds, undertaking to express the precise intent of the parties, controls the condition or obligation which follows, and does not allow it any operation more extensive than the recital which is its key, and so it has been held in many cases. In London Assurance Co. V. Bold (6 Ad. & El. (N. S.) 514,) Wightman, J., said: " In truth the recital is the proper key to the meaning of the condi- tion." In Hassell.v. Long (2 M. & S. 363), Ellenborough, Ch. J., ' said that the words of the recital of a bond afforded the best ground for gathering the meaning of the parties. In Pearsall v. Summersett (4 Taunt. 593), it was held, as expressed in the head- note, that " the extent of the condition of an indemnity bond may SEC. 4.] N. M. B. ASSN. V. CONKLINQ. ^^^ be restrained by the recitals, though the words of the condition import a larger liability than the recitals contemplate." (See, also, Peppin v. Cooper, 2 B. & A. 431 ; Barker v. Parker, 1 T. R. 287 ; Liverpool Waterworks Co. v. Atkinson, 6 East. 507 ; The Tradesmen's Bank v. "Woodward, Anthon's N. P. (2d ed.) 300.) Here the sureties undertook for the fidelity of their principal only while he was book-keeper ; but if while book-keeper the duties of any other office, trust or employment relating to the business of the bank were assigned to him, their obligation was also to ex- tend to the discharge of those duties. While book-keeper he might temporarily act as teller or discharge the duties of any other officer during his temporary illness or absence, or he might dis- charge any other special duty assigned to him, and while he was thus engaged the bank was to have the protection of the bond. There are no words binding the sureties in case of the appointment of their principal to any other ofSce. They might have been will- ing to be bound for him while he was book-keeper or temporarily assigned to the discharge of other duties, but yet not willing to be bound if he should be appointed teller or cashier, and as such placed in the possession or control of all the funds of the bank. This is a case where the general words subsequently used must be controlled and limited by the recital. A surety is never to be implicated beyond his specific engagement, and his liability is always strictissimi juris and must not be extended by constructon. His contract must be construed by the same rules which are used in the construction of other contracts. The extent of his obliga- tion must be determined from the language used, read in the light of the cricumstances surrounding the transaction. But when the intention of the parties has thus been ascertained, then the courts carefully guard the rights of the surety and 'protect him against a liability not strictly within the precise terms of his contract. The order should be affirmed and judgment absolute entered against the plaintiff, with costs. All concur. Order affirmed and judgment accordingly. AccoED. — Fourth Nat. Bank v. Spinney, 120 N. Y. 560; Baltimore First Nat. Bank v. Gerke, GO Md. 449; American Telegraph Co. v. Lennig, 139 Pa. 594; Kellogg v. Scott, 58 N. J. Eq. 344; Manufacturing Nat. Bank v. Dicker- son, 41 N. J. L. 448; Farrar v. Kramer, 5 Mo. App. 167; Garnett v. Farmers' National Bank, 91 Ky. 614. A change in the duties of a public officer by subsequent legislation has been held to discharge the sureties. Denio v. State, 60 Miss. 949; Bensinger v. Wren, 100 Pa. 500. In Miller v. Stewart, 9 Wheat. 680, the principal was 160 N. M. B. ASSN. V. CONKLING. [CHAP. IV. appointed deputy coUeeter for eight townships, and gave bond to faithfully perform the duties of such appointment, later, and before entering on the performance of his duties, his appointment was enlarged to cover nine town- ships, by interlining the name of another township in the certificate of ap- pointment ; — he committed default by failing to account for money collected from the original eight townships; in an action upon the bond it was held: "Nothing can be clearer, both upon principle and authority, than the doctrine that the liability of a surety is not to be extended by implication beyond the terms of his contract. To the extent, and in the manner, and under the cir- cumstances pointed out in his obligation, he is bound, and no further. It is not sufficient that he may sustain no injury by a change in the contract, or that it may even be for his benefit. He has a right to stand upon the very terms of his contract; and if he does not assent to any variation of it, and a variation is made, it is fatal. And courts of equity, as well as of law, have have been in the constant habit of scanning the contracts of sureties with considerable strictness. . . . It is no answer to say that it is not intended to make him liable for any money except what was collected in the eight townships. He has a right to stand upon the terms of his bond, which con- fine his liability to money received under an appointment for eight townships; and the pleadings admit that none was received until the appointment was altered to nine. It will scarcely be denied, that if upon the agreement to include the ninth township, the original instrument had been destroyed, and a new instrument had been executed, the obligatory force of the bond would, as to the surety, have been gone. And in reason or in law, there is no difference between that and the case at bar. The alteration made the instrument as much a new appointment as if it had been written and sealed anew. It is not very material, to decide whether the alteration operated by way of sur- render, or as a revocation, or as a new appointment superseding the other. It was, to all intents and purposes, an extinguishment of the separate exist- ence of the appointment for the eight townships." Distinction is made between a promotion to a higher office and the tem- porary assumption of the duties of another office. In the latter case the sureties upon the bond will be liable for defalcations of the principal while temporarily discharging the duties of another. Johnson v. Eaton Milling Co., 18 Colo. 331; Third ISfat. Bank v. Owen, 101 Mo. 558; Wallace v. Exchange Bank, 126 Ind. 265. It was held in Eastern Railroad Co. v. Loring, 138 Mass. 381, that where the railroad extended its connections and thus increased the business of the office of the principal, who was a ticket agent, that this was not such an alteration of the duties of the principal as would relieve the sureties upon his bond. It was held, however, in an earlier case in Massachusetts (Grocers' Bank V. Kingman, 16 Gray. 473), that an increase in the capital stock of the bank from $300,000 to $750,000, was a ground for discharging the sureties of the cashier by reason of the increase of his responsibilities, but this theory was distinctly repudiated in Lionberger v. Krieger, 80 Mo. 160. If new duties are added which do not modify the duties recited in the bond or interfere in any way with their due performance, the liability of the sureties is not affected. Harrisburg Sav. & Loan Assn. v. U. S. Fidelity & Guaranty Co., 197 Pa. 177. The question frequently arises in cases where an agent gives bond to in- SBO. 5.] CALVERT V. DOCK CO. 161 demnify his principal against loss while acting in a certain territory, and thereafter has additional territory assigned to him. It is held that the sure- ties are discharged. Wheeler & Wilson Mfg. Co. v. Brown, 65 Wis. 99; White S. M. Co. V. Mullins, 41 Mich. 339. Sec, 5. Alterations beneficial to the surety. CALVEET, Executor, v. THE LONDON DOCK COMPANY. 2 Keen, 638 (1838). A bill in equity was filed in this case by Calvert as the per- sonal representative of Richard Laycock, deceased, and the prayer was that the plaintiff and the estate of Laycock be discharged from the bond mentioned in the bill, and that the defendant be re- strained from all further proceedings at law against the plaintiffs. The following were the circumstances of the case: By con- tract, in writing, dated the 29th day of September, 1829, Robert Streather, a builder, agreed with James Warre, the treasurer of the London Dock Company, on behalf of the company, to perform certain works, which were to be commenced twenty days after no- tice, and to be completed in twelve months from the commence- ment. Streather was to provide all materials and labor, in con- sideration of £52,200, and being allowed to appropriate certain materials mentioned. The engineer of the company was to be the sole judge of the works, and was to employ competent persons to perform the works, if Streather failed to do so ; and in that case, the costs thereof were to be deducted from the sum to become due to Streather under the contract. A provision was made for vary- ing the price, on any variation being made in the work specified in the contract; and Mr. Ware, for the company, agreed to pay the £52,200 by instalments, — viz., three-fourths of the cost of the work certified to be done every two months, and the remaining one- fourth after the full completion of the contract. On the Sd of November, 1829, Streather, and Warburton and Laycock, as his sureties, executed to James Warre, as treasurer of the company, their joint and several bond for the sum of £5,000, conditioned to be void if Streather should well and truly ob- serve, perform, and keep the promises and agreement contained in the contract, which, on the part of Streather, were and ought to be performed, according to the true intent and meaning of the contract. 162 CALVERT V. DOCK CO. [CHAP. IV. Notice having been given, Streather commenced the works on the 28th of December, 1829, but did not complete them in twelve months, or before the 28th of March, 1831, to which day the time for completing the works was enlarged, with the consent of War- burton and Laycock. The time having expired, the London Dock Company gave notice to the sureties that they wOuld be called upon to pay the £5,000, under the bond. On the 13th of April, 1831, Streather quitted the works, and soon afterwards became bankrupt. The company alleged that they had sustained damage to the amount of more than £7,000, by the default of Streather; and in January, 1835, they caused actions to be brought against the sure- ties, to recover the full penalty of the bond ; and in the particulars of their demand they stated that they had made payments on account of the contract, to the amount of £49,619 5s., and in com- pleting the works £18,875 3s. 2d., making together £68,494 8s. 2d.; that there had become due to Streather, on the contract, £52,200; for varied and increased work, £3,721 16s. 8d. ; and for the imple- ments, engines, and materials he had left, £4,857 3s. 9d., — making, in all, £60,779 Os. 5d. ; and they represented the differences as the amount of their loss sustained ^y the non-performance of the works by Streather. Under these circumstances the plaintiffs filed their bill; and after alleging that the referee in the action against the company had stated, that although the payments made to Streather amounted to £49,619, the value of the work done by Streather was only £36,429, they charged, that in executing the bond, the sureties con- sidered, and had a right to consider, that the company, until the entire performance of the contract, would have retained in their hands so much of the contract price as by the contract they were entitled to retain as a security for the performance of the rest of the contract; and that by advancing to Streather more than they were bound to do, the company deprived the plaintiffs of the benefit of that security, and thereby, in equity, released them from the bond; or, at least, could not equitably recover against the plain- tiffs any loss which they might have sustained by making such advances; and ought not to be permitted to sue the plaintiffs on the bond, for if they had not made such advances, they would not have sustained any loss by the non-performance of the contract. The common injunction, for want of answer, was obtained. SEC. 5.] CALVEET V. DOCK CO. ■'■ The actions were tried on the 20th of February, 1836. The plaintiffs there obtained a verdict, with only nominal damages. It is now asked that the common injunction which has been granted might be made perpetual, and that the defendants might pay the costs of suit. Mr. Tinney, Mr. Eindersley, and Mr. Boupell, for the plaintiffs. Mr. Pemierton, Mr. Phillimore, Mr. Blunt) for the defendants. The Master of the Rolls (after stating the case) proceeded : — The defendants do not dispute the fact that their advances to Streather exceeded the sums which they were bound to advance under the contract, but they say, that the increased advances were made for the purpose of giving Streather greater facility to per- form the contract. It is said that the performance of the work by Streather was impeded by his want of funds; and that by the advances made to him he was enabled to do more than he other- wise could have done, and that to assist him was to assist his sure- ties; and it was only for the purposes of affording that assistance that the company did more than they were obliged to do. The argument, however, that the advances beyond the stipula- tions of the contract were calculated to be beneficial to the sureties, can be of no avail. In almost every ease where the surety has been released, either in consequence of time being given to the principal debtor, or of a compromise being, made with him, it has been contended, that what was done was beneficial to the surety, — and the answer has always been, that the surety himself was the proper judge of that, — and that no arrangement, different from that contained in his contract, is to be forced upon him ; and bear- ing in mind that the surety, if he pays the debt, ought to have the benefit of all the securities possessed by the creditor, the ques- tion always is, whether what has been done lessens that security.- In this ease, the company were to pay for three-fourths of the work done every two months; the remaining one-fourth was to remain unpaid for till the whol6 was completed ; and the effect of this stipulation was, at the same time, to urge Streather to per- form the work, and to leave in the hands of the company a fund wherewith to complete the work if he did not; and thus it mate- rially tended to protect the sureties. What the company did was perhaps calculated to make it easier for Streather to complete the work, if he acted with prudence and good faith; but it also took away that particular sort of pressure which, by the contract, was intended to be applied to him. And the company, instead of keeping themselves in the situation of 164 SAMUELb V. HOWARTH. [CHAP. IV. debtors, having in their hands one-fourth of the value of the work done, became creditors to a large amount, vrithout any security; and under the circumstances I think that their situation with re- spect to Streather was so far altered, that the sureties must be con- sidered to be discharged from their suretyship. I think, therefore, that the plaintiffs are entitled to have the in- junction made perpetual, and that they are also entitled to the costs of this suit. The plaintiffs appear not to have had a complete legal defence, though they had a case which reduced the damages to a nominal amount. They could not, however, anticipate the result of the action. They had an equitable defence; and, under the circum- stances of this case, if an application had been made for the pur- pose, I do not think that the plaintiff in equity would have been ordered to give judgment; and, after the verdict with nominal damages, the application to the Court of King's Bench made by the plaintiffs at law made it important for the defendants there to proceed with their bill in equity. AccOED. — Polak V. Everett, 1 Q. B. Div. 676; Reese v. United States, 9 Wall. 13; Prairie Bank v. United States, 164 U. S. 227; Martin v. Thomas, 24 How. 315; Chester v. Leonard, 68 Conn. 495; Simonson v. Grant, 36 Minn. 439; Eyan v. Morton, 65 Tex. 258; Post, Adm. v. Losey, 111 Ind. 74; Kiessig V. Allspaugh, 91 Cal. 231; .Evans v. Graden, 125 Mo. 72; Smith v. Molleson, 148 N. Y. 241; Finney v. Condon, 86 111. 78. Sec. 6. Discharge of promisor by extension of time to the principal. SAMUELL V. HOWARTH. 3 Merivale 272 (1817). The plaintiff was a guarantor for the payment of a bill of goods purchased of the defendant. The principal, at the maturity of the credit, accepted drafts payable in three months, and at the ma- turity of these drafts they were renewed. The plaintiff filed a bill in equity praying that the guaranty might be delivered up and cancelled and that the creditor might be restrained from proceed- ing at law against the plaintiff. The Lord Chancellor. The guaranty given in this case is gen- eral in its terms, and must be construed, according to its legal ef- fect, in favor of the surety. SEC. 6.] SAMUELL V. HOWAKTH. 165 The liabilities of sureties are governed by principles which have been long settled in equity and are now adopted in courts of law. I say, now, because the Court of Common Pleas formerly held a different doctrine. But at present it is firmly established that the same principles which have been held to discharge the surety in equity will operate to discharge him also at law. However, as the same relief is to be obtained in both, a court of equity will not send a party who is suing here to a court of law for the discharge to which he is equally entitled in this place. The rule is this: That, if a creditor, without the consent of the surety, gives time to the principal debtor, by so doing he dis- charges the surety; that is, if time is given by virtue of positive contract between the creditor and the principal — not where the creditor is merely inactive. And, in the case put, the surety is held to be discharged,- for this reason, because the creditor, by so giving time to the principal, has put it out of the power of the surety to consider whether he will have recourse to his remedy against the principal, or not ; and because he, in fact, cannot have the same remedy against the principal as he would have had under the original contract. Now, in the present case, the creditor has been supplying goods to the principal debtor, from time to time, upon a certain credit, the extent of which, not being expressly stipulated between the parties, I must take to be credit given according to the usual course of trade. The surety says, I will be answerable for the amount of such goods as you shall furnish during the period from the 2d of April, 1814, to the 2d of April, 1815. It is impossible for me to hold that this is an engagement by which he (the surety) has rendered himself liable for an indefinite time beyond the ex- piration of the period limited for the delivery of the goods. It cannot be supposed that the plaintiff meant he could continue lia- ble, after the 2d of April, 1815, so long as the defendant might choose to renew the bills of the principal debtor. You cannot eon- tend in support of such an extravagant proposition. It has been truly stated that the renewal of these bills might have been for the benefit of the surety ; but the law has said that the; surety shall be the judge of that, and that he alone has the right to determine whether it is, or is not, for his benefit. The creditor has no right — it is against the faith of his contract — to give time to the principal, even though manifestly for the benefit of the surety, without the consent of the surety. Injunction continued. 166 PRAZEB V. JORDAN. [CHAP. IV. AccoED. — Thomas v. Stetson, 58 Me. 229; HendeTson v. Ardery, 36 Pa. 449; Meggett v. Baum, 57 Miss. 22; Dodgson v. Henderson, 113 111. 360; Price V. D^ne Savings Bank, 124 111. 317; Mobile & Montgomery Ry. y. Brewer 70 Ala. 135; Yeary v. Smith, 45 Tex. 56; Boberts v. Richardson, 39 Iowa, 290; Todd v. Greenwood, 40 Mich. 294; Edwards v. Coleman, 6 T. B. Mon. (Ky.) 567; Insurance Co. v. Hauch, 83 Mo. 21; Deal v. Cochran, 66 N. C. 269; Ide v. Churchill, 14 O. S. 383. In the case last cited the Court says: — "The obligation of the surety can only be created in writing, and no equitable extension of its terms by construction or otherwise, is allowed. Every contract ia composed of the material terms and stipulations embraced in it, and, among these, none is more important than the time of performance. It follows, from the principles already Stated, that whatever changes any of thess material terms and stipulations, so as to destroy the identity of the obligation to which the Surety acceded, necessarily discharges him from liability. An engagement to pay money in six months, is not the same as one to pay it in twelve months; and if the creditor, by a valid agree-, ment with the debtor, extends the time of performance from the shorter to the longer period, he supersedes the old obligation by the new, and can- not enforce payment until the longer period has elapsed. If the Surety is sued upon the old agreement to which alone his undertaking was accessory, he l.as only to show that that has ceased to exist, and no longer binds his principal; arid it he is sued upon the substituted agreement, he is entitled, both at law and in equity, to make a. short and conclusive answer non haec in foedera veni. But such an agreement between the principal parties, is per- fectly valid and legal; and until some method can be devised for depriving the principal of the benefits of a valid agreement, or of binding the . surety to an agreement to which he never acceded (a work hitherto thought not to be within the powers of either courts or legislatures) the discharge of the l?.tter must ensue." Extension of time will discharge the promisor in suretyship even though no injury results therefrom. Bowmaker v. Moore, 7 Price, 223; Bees v. Berrington, 2 Ves. 540; United States v. Hillegas, 3 Wash. C. C. 70; Haden V. Brown, 18 Ala. 641; Roberts v. Richardson, 39 Iowa, 290. PRAZER V. JORDAN. 8 EU. & Bl. 303 (1858). Action by the plaintiff as endorsee, against the defendant as drawer and endorser of a bill of exchange. Plea, that after the endorsement of the said bill to the plaintiff, and after the bill had become due, and whilst the plaintiff was the holder, he, with- out the consent and against the will of the defendant, agreed with Messrs. Kerin & Co. that in consideration that Kerin & Co. would bind themselves to see the said bill paid to the plaintiff, the plaintiff would give time to the acceptor of the bill for the space of ten days. SEC. 6.] FEAZEE V. JORDAN. 167 Atherton, for the plaintiff. Hugh Hill, contra. Coleridge, J., now delivered the judgment of the Court. This was an action by the indorsee against the drawer of a bill of exchange ; and the defendant pleaded that the plaintiff, without the defendant's consent, had entered into an agreement with Messrs. Kerin that they would give time to the acceptor in con- sideration of Messrs. Kerin promising that they would see the bill paid. The first question for our consideration, on the special case stated for our decision, was whether the plea was proved. This was a question of fact; and we intimated our opinion, during the argu- ment, that that plea was proved by the facts stated. The remaining question on which we took time to consider was, whether a binding agreement, for a good consideration, with a per- son who is no party to a bill of exchange, to give time to the ac- ceptor, without the consent of the drawer, discharges, the drawer. It was said, in support of the plea, that the plaintiff had placed himself in such a situation as that he could not sue the acceptor without rendering himself liable to an action for damages. And it was said that the case fell within the doctrine laid dowa by the Court of Exchequer in the case of Moss v. Hall, 5 Exch. 46, 50, where Parke, B., says: " Whenever a party's hands are effect- ually tied up, so that he cannot break such an engagement without being made liable for a breach of it, the surety is discharged, the rule being that there must be either a new security given to extend the time, or a binding agreement, upon a sufficient con-, sideration, to suspend the remedy." It was said that the case of Ford V. Beech, 11 Q. B. 852, had established that a contract of this nature with the acceptor to suspend proceeding does not con- stitute a defense to an action, but only gives a cross action for breach of the agreement to give time, and therefore that the ex- oneration of the surety in such case does not depend on the action against the principal debtor being barred by the agreement; and that the real reason of the discharge is that the party has sub- jected himself to an action for suing in breach of the agreement; and that this extends to the ease of a contract with a stranger as well as to one with the principal debtor, as the being liable to an action if he sues the debtor will render the creditor less likely to sue the debtor in proper time. There certainly were authorities from which it has been often supposed that the reason of the discharge of the surety, by an agree- 22 168 FRAZER V. JORDAN. [CHAP. IV. ment with the principal debtor to give time to him, arose from the right of action against the acceptor being suspended or gone. The doctrine so well established, that a parol agreement, on good con- sideration, to give time to a bond debtor, does not discharge the bond surety at law, because a parol contract cannot effect a con- tract under seal, seems founded on this notion ; as does also the doe- trine of its being necessary that there should be a consideration for the promise to make it binding in point of law, though such consideration would be requisite as well to found an action for damages on the promise, as to raise a defence to the action on the original cause of action. Since the case of Ford v. Beech, 11 Q. B. 852, however, we must take it for granted that agreements of this nature operate only to give a cross action, and do not -prevent an action on the original cause of action. However the doctrine arose, we must consider it quite settled that an agreement, for good consideration, with the principal debtor, so far ties up the hands of the creditor who has entered into such an agreement, as that the surety is discharged; and we quite agree with the doctrine of Lord Wensleydale, in Moss v. Hall, 5 Exch. 46, that this remains law, notwithstanding the argu- ment which appears to have been raised in that case, founded on Ford V. Beech. The surety has a right at any time to go to the creditor and say, " I suspect the principal debtor to be insolvent; I will pay you; and I wish you to sue him." See the observations of Williams, J., in Strong v. Foster, 17 Com. B. 201, 219. If, by a binding agreement with the principal debtor, the creditor has agreed not to sue him for a limited time, it would be a breach of faith of which the principal debtor would have a right to complain, if an action were brought against him within the period. And this is held to discharge the surety, although it seems, from Ford V. Beech, that he could still do so at the risk of an action by the principal debtor on the contract to suspend suing. It is, how- ever, a very different question whether this doctrine is to be ex- tended for the first time to a ease of a contract with a stranger, of which the debtor is ignorant, to which he is not privy, and in which the damages to the stranger for breach of contract may be merely nominal. The doctrine contended for would go the length of establishing that, whenever the creditor has placed himself in a position in which it is against his interest to sue the debtor, he has discharged the surety. We think that the doctrine ought not to be extended to the case of a contract with a stranger. The principal debtor, having given SEC. 6.] PEAZEK V. JORDAN. 169 / no consideration for the promise, has no ground to complain of the breach of it, and cannot say that faith has been broken with him. There is no privity of contract with him; and we see nothing on which any right, either at law or in equity (see Lord Abinger's observations in Lyon v. Holt, 5 M. & W. 253, 4), for him to insist on such a contract can be founded. The stranger may have some private reason of his own to wish for some indulgence to be shown ; and, if he has given a good consideration, may be entitled to damages, — nominal, or large or small, according to any legal inter- est he may have ; but surely he is the only person to take advantage of his contract. No such doctrine as that there can be a discharge in such case arising from a contract with a stranger has ever yet been estab- lished. In all the text-books which were cited, the rule is laid down as to a binding contract with the acceptor or principal debtor. The case of Moss v. Hall, on which the principal reliance was placed by the defendant, was the case of a contract with the accep- tor ; and it was to such a case that the observations of Lord Wensley- dale were addressed; and the only case in which it has been sug- gested that a contract with a stranger would be sufScient is a strong authority against such a doctrine. That was the case of Lyon V. Holt, 5 M. & W. 250, which was an action by the indorsee of a bill of exchange, alleged in the declaration to have been drawn by Hobson on Hynes, and indorsed by the drawer to the defendant, and by him to Messrs. Woosters, and by them to the plaintiffs. The defendant pleaded that the indorsement by the defendant was not directly to Woosters, but was an indorsement by the defendant to John Holt & Co. (persons other than the defendant), and by John Holt & Co. to Woosters, and that there had been an agreement be- tween the plaintiffs and John Holt & Co. to give time to all the parties on the bills in question, amongst others, and a giving of time in consequence. At the trial, the agreement between the plaintiff and John Holt & Co. to give time to all the parties on the bill, and the giving the time, was proved : but it was not proved that John Holt & Co. were parties to the bill. A verdict having passed for the defendants, and a rule having been obtained to enter a verdict for the plaintiffs, the question arose, whether it was a material allegation that John Holt & Co., the persons with whom the agreement was made, were parties to the bill; and it was suggested that it was sufficient to show a contract to give time to the acceptor, and that there was nothing in the authorities to show that the contract must be with him. The Court, after taking 170 PRAZEE V. JORDAN. [CHAP. IV. time to consider, held that the plea was not proved, and ordered the verdict to be entered for the plaintiffs. This was a decision that the allegation, that the person with whom the agreement to give time to prior parties on the bill is made is a party to the bill, is a material part of the plea. If, as contended in the present case, a contract with a stranger was suflScient, the plea would have been proved by proof of the contract with Holt & Co., though they were strangers to the bills. Thig is a distinct authority in favor of the plaintiffs; there is no case or doctrine the other way; and the text writers all treat the agreement which is to discharge the surety as one made with the principal debtor. We are not inclined to extend the rule for the first time to a contract with a stranger; but, for the reasons already stated, we think that the plea is bad, and therefore that judgment should be entered for the defendant. Judgment for the defendant. If the agreement to extend time la without consideration and on that ac- count not enforceable, the creditor is not precluded from pursuing his remedy against the principal, and the promisor under these circumstances cannot claim his discharge. Boardman v. Larrabee, 51 Conn. 39; Tobin Canning Co. V. Fraser, 81 Tex. 407; Lowman v. Yates, 37 N. Y. 601; Olmstead v. Latimer, 158 N. Y. 313; First Nat. Bank v. Lineberger, 80 N. C. 454; Zane V. Kennedy, 73 Pa. 182; Shaffstall v. McDaniel, 152 Pa. 598; Goodwin v. Hightower, 30 Ga. 249; Sullivan v. Hugely, 48 Ga. 486; Ford v. Beard, 31 Mo. 459; Robinson v. Dall, 38 Wis. 330; Hayes v. Wells, 34 Md. 512; Berry V. PuUen, 69 Me. 103. Payment by the principal of obligations already due will not amount to a consideration for an extension. Halliday v. Hart, 30 N. Y. 474; Parmalee V. Thompson, 45 N. Y. 58; Solary v. Stultz, 22 Fla. 263; Turnball v. Brock, 31 O. S. 649. Payment of interest in advance furnishe.s an adequate consideration for an agreement to extend the time of payment of the principal obligation. People's Bank v. Pearsons, 30 Vt. 711^ MahaY v. Lanfrom, 86 111. 513; Kalei V. Hise, 70 Ind. 301; Merchants' Ins. Co. v. Hauck, 83 Mo. 21; Limelock Bank v. Mallett, 34 Me. 547; Rose v. Williams, 5 Kan. 483. If the payment of interest in advance is usurious it is nevertheless a good consideration for an extension. Wild v. Howe, 74 Mo. 551; Osborn v. Low, 40 0. S. 347; Meyers v. Bank, 78 111. 257; Lemmon v. Whitman, 75 Ind. 318; Fleming v. Barden, 126 N. C. 450; Glenn v. Morgan, 23 W. Va. 467. In those states where the penalty of usury is the forfeiture of the entire interest or where it is considered as a part payment on the principal debt, the acrree mcnt for extension is not supported by a consideration and the surety is not discharged. Polkinghorne v. Hendricks, 61 Miss. 366; Nightingale v. Me- ginnis, 34 N. J. L. 461; Hartman v. Banner, 74 Pa. 36. It is held that a promise to pay interest in advance for a specified time, is 171 SEC. 6.] HULME V. COLES. ^'^ a sufficient consideration for an agreement to extend the time. MeComb v. Kittridge, 14 O. 351; Wood v. Newkirk, 15 0. S. 295; Fawcett v. Freshwater, 31 O. S. 637; Dodson v. Henderson 113 111. 360. Contra. — Abel v. Alexander, 45 Ind. 523. The acceptance of interest in advance without any agreement to extend the time does not operate as an extension 'of time. Oxford Bank v. Lewis, 8 Pick. 458; Haydenville Savings Bank v. Parsons, 138 Mass. 53; Citizens Bank v. Mooreman, 38 Mo. App. 484; Gard v. Neff, 39 0. S. 607; Morse v. Blanchard, 117 Mich. 37. Contract to extend time will not be implied from the fact that the creditor accepts from the debtor collateral securities maturing at a later date. Austin v. Curtis, 31 Vt. 64; Remsen v. Graves, 41 N. Y. 471; Sigourney v. Wetherell, 6 Met. 553; Merriman v. Barker, 121 Ind. 74; German Am. Sav. Inst. v. Vahle, 28 111. App. 557; Fireman's Ins. Co. v. Wilkinson, 35 N. J. Eq. 160; Thurston v. Jannes, 6 R. I. 103. CoNTBA. — Munster & Leinster v. Bank of France, 24 L. R. Ir. 82. Sureties upon bonds of public officiers are discharged by acts of the Legis- lature extending the time within which such officiers must settle their accounts. State V. Roberts, 68 Mo. 234; Johnson v. Hacker, 8 Heisk (Tenn.) 388; Davis V. People, 1 Gilm. (111.) 409; People v. McHatton, 2 Gilm. 638; King County V. Ferry, 5 Wash. 536; Pybus v. Gibb, 6 El. & Bl. 902; Lord Campbell, C. J. ; " It may be considered settled law that where there is a bond of suretyship for an officer, and, by act of the parties or by act of Parliament, the nature of the office is so changed that the duties are ma- terially altered, so as to afiFect the peril of the sureties, the bond is avoided. * * * There is no inconvenience, for, when an Act of Parliament alters the duties of an offieier, it will be easy to require him to give fresh sureties, or the surety bonds may be framed so as to continue the liability of the sureties, whatever alterations might take place by the act of the Legis- lature." CONTKA. — Worth V. Cox, 89 N. C. 44; Commonwealth v. Holmes, 25 Gratt, 771; State v. Swinney, 60 Miss. 39; State v. Carleton, 1 Gill (Md.) 249. HULME V. COLES. 2 Simons 12 (1827). A motion was made, in this cause, for an injunction to restrain the defendant, the administrator of Catherine Coles, deceased, from proceeding in an action which he had commenced against the plaintiff for recovering money due on a bond given to the de- ceased, in which the plaintiff had joined, as surety, with one Burckhardt. The facts admitted by the answer, and relied upon in support of the motion, were that in June, 1817, Catherine Coles had commenced an action upon the bond against Burckhardt, and on the 23d of that month, without the plaintiff's privity, took a 172 HULME V. COLES. [CHAP. IV. cognovit from him for the amount of the debt, with a stipulation that no judgment should be entered up or execution issued until the 1st of August following. The plaintiff insisted that this pro- ceeding was a giving of time to the principal, v/hich discharged him, the surety, from all liability under the bond. Mr. Shadwell and Mr. Whitmarsh, in support of the motion. Mr. Sugden and Mr. Campbell, for the defendant. A surety is never discharged by the delay of the creditor in suing the principal debtor, unless the creditor makes an agreement with the principal by which he is prevented from suing him. In this case the creditor's remedy against the principal was never lost, nor were his hands tied for a moment; by the arrangement the remedies of the surety were not diminished or affected in any manner. It is clear that, in the usual course, judgment could not have been obtained in the action until long after the 1st of Au- gust, and therefore the period for getting the benefit of the action has been shortened, and not extended. The Vice Chancellor. The principle of discharging a surety by the giving of time by the creditor, is a refinement of a court of equity, and I will not refine upon it. By the arrangement com- plained of, time was not given, but the remedy was accelerated. Motion refused. , Accord. — Blackstone Bank v. • Hill, 10 Pick. 129 ; Wright v. Watt, 52 Miss. 634; Smith v. Mason, 44 Neb. 610; McKeeknie v. Ward, 58 N. Y. 541; Gardner v. Norstrand, 13 Wis 543. Even delays by the creditor which deprive him of his right of action against the principal will not in all cases deprive him of his action against the surety; — such as a failure to prosecute u claim against the estate of a deceased principal until the claim is barred by statute. Villars v. Palmer, 67 111. 204; Moore v. Gray, 26 0. S. 525; Hooks v. Branch Bank, 8 Ala. 680; Banks v. State, 02 Md. 88; Willis v. Chowning, 90 Tex. C17, or where the principal has made a general assignment for the benefit of his creditors, and the creditor delays the proof of his claim until barred by statute. Dye V. Dye, 21 0. S. 86; Richards v. Commonwealth, 40 Pa. 146; Sichel v. Carrillo, 42 Cal. 500; Smith v. Gillam, 80 Ala. 296. • CoNTKA.— Auchampaugh v. Schmidt, 70 Iowa, 642; Bridges v. Blake, 106 Ind. 332. It is held that where the creditor delays the prosecution of his claim against a public officer until it is barred by the statute of limitation that the claim is also barred against the surety. State v. Blake, 2 O. S. 151; Ramsey, J. : " The Legislature has in terms limited all actions against the officer for malfeasance and nonfeasance in office to one year. This is done for his protection against these charges, made after it may well be presumed, the ej'idence to refute them has been lost, or, in the multitude of official duties, the circumstances have been forgotten. After all this care to pro- SEC. 6.] SMITH V. STEELE. 173 tect his rights and interests, it would indeed be singular if it was intended to leave open his liability in another form for the same causes, to be sup- ported by exactly the same evidence, and attended by the same consequence, for fifteen years; thus, to every intent and purpose, nullifying the whole policy of the other provision." 'JACOB SMITH V. ESTATE OF ELIZUR STEELE. 25 Vt. 427 (1853). A. P. Hunton and Peck & Colby, for plaintiff. 1. The case shows that there was sufficient property placed in the hands of the intestate, by the principal, to pay, and for the purpose of paying, the note in question. The surety holds this property in trust for the benefit of the plaintiff, as well as of him- self, and for its misapplication he is responsible to the plaintiff. Hebard & Martin, for defendant. Eedfield, Oh. J. The only question made in the present case is, how far a surety who has ample collateral security from the principal, is precluded from taking advantage of any enlargement of the time of payment, by arrangement between the creditor and the principal, this property having subsequently, by consent of the principal, gone to pay other of his debts. This case states, that the first contract for the enlargement of time was made in January, 1843, the note falling due in April following, which was for one year, and that this agreement was renewed from time to time, until the decease of defendant, Steele, m August, 104 (. ««4:^i!i4:««4Ci!:Hs«*4:4: Upon general principles, it seems to us, that so long as the surety was fully secured, by property in his hands, he should be estopped from objecting to any enlargement of the time of payment, made by arrangement between the creditor and principal. If this fact is known to the creditor, it would certainly place his conduct in a very different light, from what it is when no such indemnity ex- ists. We can all see, that in such a case there can probably be no fraud in fact. And in equity, (and in law, we think the rule should be the same,) there is no fraud if such indemnity exists, whether known to the creditor or not. And this ground of de- fence for the surety, goes upon the supposed basis of fraud. 1 Story Eq. § 327. In such a case, the surety is the virtual prin- cipal, and ought to be bound by every enlargement of the time of payment quite as much, perhaps more, than are joint principals 174 PETTY V. COOK. [ CHAP. IV. by such a contract made by one of their number and the creditors, of which there is no doubt. A surety who is fully indemnified, by property in his possession, which, by the terms of the assignment, he is at liberty to convert at once into money, as in the present case, stands much in the same light as a surety, who has received the amount of the debt in money from his principal. And in such case he is clearly the principal.. And so, if he had received half the money, he would become a co- principal ; and in all these cases, as it seems to us, on general prin- ciples, he should not be permitted to claim the privileges of a strict surety, without indemnity. ************ And to the extent of contract of enlargement, made while the surety had ample indemnity of the kind shown here, there can be no doubt he would be estopped from setting up this defence. And as he had such security, when the first contract of enlargement of time of payment was made, and nothing appears but such was the fact, at the subsequent times of such enlargement, the case must be opened upon this point alone, and go back to ascertain the facts, in regard to this subject. How far the surety, after having such property assigned to pay the debt, or indemnify him against signing the note, could place himself in the same situation he was before, is a point of some diffi- culty. Judgment reversed and case remanded. AccoED. — Kleinhouse v. Generous, 25 O. S. 667; Chilton v. Robbins, 4 Ala. 223. Sec. 7. liability against surety or guarantor revived if payment of principal debt is void. PETTY V. COOK. L. R. 6 Q. B. 790 (1871). Plea, on equitable ground, that a promissory note was made by the defendant and one S. D. Steele jointly, for the accommodation t of S. D. Steele and as his surety, to secure a debt due to the plain- ' tiffs from S. D. Steele alone, of which the plaintiffs at the time of making the notes had notice, and that after the note became due Steele paid to the plaintiffs the amount due on the note, which pay- ment operated as a full satisfaction and discharge of the plaintiffs' claim against the defendant. SEC. 7.] PETTY V. COOK. 175 Keplicatipn, on equitable grounds, that the payment was made in contemplation of bankruptcy and was a fraudulent preference, and that the plaintiffs were compelled to refund the payment to the trustees in bankruptcy. Declaration by payee against maker of a promissory note for £100, with interest, payable on demand, and accounts stated. Demurrer and joinder in demurrer. Herschell, in support of the demurrer. The replication is no answer to the pleas. The creditor, by accepting payment of his debt from the principal debtor, has discharged the surety. Pay- ment under a fraudulent preference is not void but voidable; when the payment was made it was not a void payment, and there was a time when the surety could have pleaded it as a discharge. There was also an interval of time during which the surety had lost the right to step in and become the creditor of the principal debtor; the surety is prejudiced in having lost that right; the payment by the principal debtor is therefore a good payment so as to discharge the surety. Any contract between the creditor and the principal debtor prejudicial to the rights of a surety discharges the surety. (Blackburn, J. Is there any case which says that an innocent act unconsciously done discharges the surety ? In Hulme v. Coles, the Vice-Chancellor says: " The principle of discharging a surety by the giving of time by the creditor is a refinement of a court of equity, and I will not refine upon it." I also think we ought not to refine upon that doctrine.) Forbes, contra. Blackburn, J. It seems to me clear, both in equity as well as law, that the plaintiff is entitled to sue the surety, and that there is nothing stated in the pleadings which has discharged the latter from liability. As early as Rees v. Berrington, 2 Ves. 540, a case decided in 1795 by Lord Loughborough, it was held, on what cer- tainly seems artificial reasoning, that where time is given by a creditor to a principal debtor without the consent of the surety, the surety is in equity discharged, however short the time may be on the ground that he is thereby deprived of his right on paying off the creditor to sue the principal debtor. Lord Eldon, also, in Samuel 1 v. Howarth, cited in the notes to Rees v. Berrington, says: " The rule is that if a creditor without the consent of the surety gives time to the principal debtor, by so doing he discharges the surety, that is, if time is given by virtue of positive contract, between the creditor and the principal — not where the creditor 176 PETTY V. COOK. [CHAP. IV. is merely inactive. And in the case put, the surety is held to be discharged, for this reason, because the creditor by so giving time to the principal has put it out of the power of the surety to consider whether he will have recourse to his remedy against the principal or not, and because hej in fact, cannot have the same remedy against the principal as he would have had under the orig- inal contract. ... It has been truly stated that the renewal of these bills might have been for the benefit of the surety, but the law has said that the surety shall be the judge of that, and that he alone has the right to determine whether it is or is not for his benefit. The creditor has no right, it is against the faith of his contract to give time to the principal, even though man- ifestly for the benefit of the surety, without the consent of the surety." I think it impossible to read the principle laid down by Lord Eldon without thinking that it is based upon highly technical reasoning, however accurate it may be. It is clear that a creditor who gives time to the principal debtor without reserv- ing his right against the surety, and alters the rights of the surety, discharges him; but that time given by a creditor, which in num- berless cases does not injure the surety, should discharge him, is to my mind not justice, although established by courts of equity. The ground, however, on which this doctrine is based, is that by giving time to the principal debtor the creditor does an act' which is against good faith, and injurious to the surety; that doctrine cannot apply to the present case, for the creditor accepted money which he had no right to refuse, and the acceptance of which he had no means of knowing would injure the surety. He therefore did an act injurious to the surety, and the surety is not discharged. I think Pritchard v. Hitchcock, 6 M. & G. 151, is in point. Judgment for the plaintiff'. ,<;; AccoKD. — Harner v. Batdorf, 35 O. S. 113; Watson v. Poague, 42 Iowa, 582. If the signature to a renewal note is forged the liability upon the original note is revived against the surety. Lovinger v. First Nat. Bank, 81 Ind. 334; Goodrich v. Tracy, 43 Vt. 314; Kincaid v. Yates, 63 Mo. 45; Bank v. Buchanan, 87 Tenn. 32; Emerine v. O'Brien, 36 0. S. 491; Ritter v. Sing- master, 73 Pa. 400; Second Nat. Bank v. Wentzel, 151 Pa. 142. The avoidance of the substituted contract for usury will revive the liability upon the original contract. Bank v. Dauckmeyer, 70 Mo. App. 168; Burn- hisel v. Firman, 22 Wall. 170. If the new contract accepted in payment was executed without authority, the surety will be held on the original contract although delivered up and cancelled. Glass v. Thompson, 9 B. Mon. (Ky.) 237; Williams v. Gilchrist, II N. H. 535. SEC. 7.] SAVINGS INST. V. MICHAEL. 177 FREDEKICKTOWN SAVINGS INST. v. JOHN L. MICHAEL. 81 Md. 487 (1895). Messrs. Charles W. Boss and John S. Newman, for appellant. Messrs. John C. Motter and William P. Maulshy, for appellee. Egberts, J., delivered the opinion of the court: The record of this appeal contains three exceptions, two of .which relate to the admissibility of the proof offered, and one to the rulings of the court below in rejecting the prayers of the plaintiff and granting that of the defendant. The questions are interest- ing and important, not only on account of the large sum involved, but of the principles of law invoked, and which we are now called upon to consider and apply. This is an action brought upon a promissory note in the Circuit Court by Frederick county. The note sued upon is as follows : " $5,000.00. Feedeeick, Md., Aug. 4th, 1892. ' ' Six months after date, we jointly and severally promise to pay to the order of the Frederick Town Savings Institution five thou- sand dollars, for value received, negotiable and payable at the Frederick Town Savings Institution. " Wm. Wilcoxon, " Andrew J. Wilcoxon, " Jno. L. Michael." The principal question in the case arises on the issue taken on the replication to the second plea. The plea states that William Wilcoxon, the principal in said note, satisfied and discharged the same by payment before suit brought thereon. It is not, however, a technical question of pleading which we are called upon to de- cide. The material inquiry is. Did said Wilcoxon satisfy and dis- charge said note by payment, in such manner as to relieve the appellee, Michael, from further liability as surety thereon? This is the plain issue presented, and which we are now to determine. The facts shown by the record touching the question of payment pleaded by the appellee are that the appellant bank was on the 21st of March, 1893, the holder of four notes of said Wilcoxon and sureties, variously dated, and for various sums, and which together aggregated the sum of $11,300. The note sued on was one of the four making up said last mentioned sum. Being thus indebted, and repeatedly pressed by the appellant for additional security to that then held by it, Wilcoxon and wife agreed to give the ap- 178 SAVINGS INST. V. MICHAEL. [CHAP. IV. pellant their note for the sum of $11,300, secured by mortgage on his real estate. This offer was accepted by the appellant without qualification or condition. The mortgage was thereupon executed and delivered to the appellant, and the new note then discounted by it. From the proceeds of the said new note the indebted- ness of said Wilcoxon, evidenced by said four notes, was paid, and the same were then delivered by the appellant to said Wil- coxon. Within four months after the execution of said mortgage, Wilcoxon applied for the benefit of the insolvent laws of the State of Maryland, and was adjudged to be insolvent. Trustees having been selected under the provisions of the law, they filed, with the sanction of the court, a bill in equity to set aside said mortgage, as giving to the appellant a fraudulent preference, under the provisions of the insolvent laws. Wilcoxon being a merchant or trader, and found to be insolvent at the time of the execution and delivery of the mortgage, the court decreed it to be an unlawful preference, and struck down the same. An important question arises here as to the effect resulting from depriving said mortgage of its character as a legal preference. It is contended by the ap- pellant that the action of the court in the insolvency proceedings not only deprived said mortgage of its quality as a lien or prefer- ence in the distribution of the assets of the insolvent estate of Wil- coxon, but that such action extinguished the liability of the surety in said note, for the payment of which the mortgage was given to secure. We have been referred to many cases touching the lia- bility of sureties, as to what constitutes payment and what does not, and we fully concur in the doctrine announced thereon. This, however, is not a case where, in the renewal of a note, the signa- ture of the surety has been subsequently ascertained to be a forgery. In such a case the renewal is invalid, and does not operate as a payment of the original note, nor does it effect an extinguishment of the right of action thereon. This is the almost universal eon- cession of the declared doctrine of the courts in England and in this country. There is, however, but small analogy- between the case of a forged signature to a note and the case now under con- sideration. In the one instance, as far as the surety is concerned, the note is a nullity. In the pther, which is the case now before us, we have a mortgage given to secure a perfectly valid note, but in consequence of the provisions of the insolvent law the mortgage is not allowed to stand as a legal preference in the appellant's favor, in the distribution of the assets of the insolvent SEC. 7.] SAVINGS INST. V. MICHAEL. 179 estate, only, however, because it has been executed and recorded within the inhibited period contained in the statute. * * * * It will be necessary to consider, in the first place, the legal attributes of the joint note of Wilcoxon and wife for the sum of $11,300, which the appellant discounted for the purpose of paying the four notes of Wilcoxon and sureties, at the time held by the appellant, and which were delivered to "Wilcoxon when the note of himself and wife were passed to the possession of the appellant. We may have occasion, later on, to examine some of the conse- quences attending the execution of the mortgage. But let us in- quire as to the legal status of the note of Wilcoxon and wife after the mortgage had been declared an illegal and fraudulent prefer- ence. It was not a necessary incident to the execution of a valid mortgage that a note of any kind should have been given. The mortgage would have been equally valid without it, and if given, it was only collateral to the note, and the wife was in no sense a necessary party to the note. The almost universal practice in this State has been for the wife to join with her husband in the execution of the mortgage, for the sole purpose of releasing and conveying her potential right of dower, but, to the accomplish- ment of this purpose, it was in no respect essential that she should join in the making of the note. Since the passage of Act 1872, chap. 270 (Code, art. 45, § 2), by which the wife is authorized, jointly with her husband, to contract in writing on any note, bill of exchange, etc., there is a manifest object to be obtained in having the wife join in the note, as well as the mortgage, especially if she be seised, or possessed of the property. As already stated, the appellant was urging upon Wilcoxon to give additional secur- ity for the notes which were already in the possession of the bank ; and yet, as soon as the new note and mortgage were delivered to the bank, it voluntarily surrendered to Wilcoxon the four notes on which he was originally indebted. It is not a reasonable infer- ence that the appellant was sufficiently well satisfied with the character of the new security which it had taken in payment of the original indebtedness of Wilcoxon, on said four notes, as to possession of the four notes, by delivering up the same to Wil- cause it, of its own motion, and not otherwise, to part with the coxon, so that the new note and mortgage were in no just sense additional security? But there is another suggestive fact in the record, which the testimony makes clear, and that is, the appellant cannot, under the circumstances of the case, justly claim to have been without notice of the financial status of Wilcoxon, and his 180 SAVINGS INST. V. MICHAEL. [CHAP. IV. liability to be declared an insolvent without four months of the execution of the mortgage. The appellant had in his possession at that time four notes covering an indebtedness of $11,300, and each of said notes was for money borrowed by Wilcoxon during the year 1892. These notes, or most of them, had been renewed from time to time, and were long past due ; yet Wilcoxon had not, to the 21st of March, 1893, the date of said mortgage, paid one farthing in discharge of the principal sums constituting his in- debtedness on said notes. The doctrine is well recognized that insolvency may be inferred from the circumstances surrounding a transaction. If the appellant knew that Wilcoxon was a tradeij and indebted to it in the sum of $11,300, and that he had for nearly two years failed to pay his notes at maturity, in the ordinary course of business, and further knew that he had, within four months of the execution of the mortgage, suspended payment of his negotiable paper, and had failed to resume payment thereof, within twenty days thereafter, did not these circumstances consti- tute reasonable cause from which the bank was justified in believ- ing that Wilcoxon 's business credit and pecuniary standing were bad, and such as would warrant the belief on the part of the bank that, if it accepted a mortgage from him to secure itself, he would be liable to be proceeded against under the provisions of the insolvent laws 1 If with knowledge of the facts recited, — and we cannot escape the conviction, based upon the testimony in the record, that the appellant had such knowledge, — it then deliv- ered up the four original notes to Wilcoxon, the appellant has taken a venture, the consequences of which it must accept. We are, after careful consideration, unable to lend our sanction to the theory advanced, that, in striking down the mortgage as a fraudulent preference under our insolvent laws, the note which the mortgage was given to secure must also abide the same result. We do "not think, upon principle or authority, that any such con- clusion follows from the premises stated. In AUers v. Forbes, 59 Md. 376, 43 Am. Rep. 557, which was an action brought by Forbes against AUers and wife to recover on three promissory notes signed by them, as joint makers, the husband pleaded, in his own be- half, that he had been discharged under the insolvent laws; and, for a further plea, defendant and wife pleaded that by the dis- charge of the husband they were jointly and severally discharged from all liability on account of said notes. Judge Miller, deliver- ing the opinion of the court, said: " We oan discover no possible reason why the discharge of her husband under the insolvent laws SEC. 7.] SAVINGS INST. V. MICHAEL. 181 should release her and her property. Her property does not pass to his trustee, nor are her rights therein in any way affected by his insolvency. The statute makes her stand, with respect to the obligations so signed by her, in the same position as any other party so signing them would stand." The same conclusion was reached by Vice Chancellor Hall, on a similar state of facts, in construing the English married woman's property act of 1870, in the case of Davies v. Jenkins, L. E. 6 Ch. Div. 728. We have re- ferred to these cases with but one purpose in view, and that is to ascertain the legal status of the wife, as affected by her husband's insolvency, in a case like the present, where she has, jointly with her husband, executed a note. There is nothing in the record to show whether Mrs. Wileoxon is possessed of property, or not, and there can be no just reason assigned why the appellant should be deprived of its indisputable right to proceed against her. If it had been the intention of the parties to controvert the respon- sibility of Mrs. Wileoxon as surety on said note, it was their privilege to have done so at the trial below, but this they did not do; and, without indulging in speculation as to her financial abil- ity or looking to the consequences, as they may. affect either party to this cause, we must apply the law as we find it. It is a well established law in this State that a married woman is competent to become surety, on a note which she has signed jointly with her husband, and it is wholly immaterial whether she has separate property, or not. In some of the States where the laws relating to married women have undergone changes of like character with our own, there have been well considered decisions of the courts of those States holding femes covert liable to the extent announced by this court. It has been argued that the note is void, as against the wife, because there is no consideration to bind her. A different view, is, however, taken by Chief Justice Gray, who delivered the opinion of the court in Major v. Holmes, 124 Mass. 108. He says: " Before the Statute of 1874, chap. 184, the fe- male defendant would not have been liable in either of these cases, because contracts could only be made by a married woman in reference to her separate property, business, or earnings. . . . But this statute has removed that restriction, and, in the broadest terms enables a married woman to make contracts, oral and written, sealed and unsealed, in the same manner as if she were sole, and does not require that the consideration of her eon- tracts should inure to her own benefit." We have given careful examination and consideration to the questions presented by this 182 POLAK V. EVERETT. [CHAP. IV. appeal, and, finding no error in the rulings of the court below, we must affirm the same. Judgment affirmed, with costs. McSherrt, J., dissenting. Beiscoe and Beyan, JJ., concur in this dissent. Sec. 8. Volantary release of security held by the creditor. POLAK, ET AL., v. EVERETT. L. E. Q. B. Div. 669 (1876). The plaintiffs, who were merchants, entered into an agreement with the defendant, a discount broker — which agreement recited that one Nazarkiewich was indebted to the plaintiffs in a large sum and had arranged to dispose of his business to a company about to be formed under the title of E. Nazarkiewich & Co., and would liquidate the indebtedness by paying a part in cash and a part in full paid shares in the company to be formed. It was also agreed that the outstanding book-accounts of Nazarkiewich should be col- lected by a trustee and one-half the proceeds applied to the redemp- tion of the shares of the company — the shares to be redelivered to Nazarkiewich as fast as redeemed. The defendant guarantied the fulfillment of the agreement, so far as it related to the redemption of the shares. Subsequently the plaintiffs released the book-accounts from the operation of the agreement, and they were turned over to Nazar- kiewich and by him sold to the company. Nazarkiewich made default in redeeming the shares and this ac- tion was commenced against the guarantor. The defendant was chairman of the company and had full Imowl- edge of all the transactions, but did not at any time consent to the release of the book-accounts. Mclntyre, Q. C, and J. C. Mathew, in support of the motion. Philirick, Q. C, and B. E. Webster, showed cause. Blackburn, J. We think that the defendant is entitled to judgment, on the ground that what has taken place has discharged him as a surety. Now, first, upon the leave reserved, with power for the Court to draw inferences of fact, we must take it to be the fact that though the defendant was well aware of this release being executed. SEC. 8.] POLAK V. EVERETT. 183 he was not an assenting party to it. Then it is argued that knowl- edge on the part of the surety that there is going to be a release of a part of the security is enough without assent. I cannot see any authority for that. In Piekard v. Sears, 6 Ad. & E. 469, 474, it was held that he who stands by and sees another alter his position on the faith of a fact which he can contradict, cannot afterwards take advai^tage of that alteration. But the rule was corrected in Freeman v. Cooke, 2 Ex. 654, where it was said that if a man stands by and allows aijyother to act without objecting, when, from the usage of trade or otherwise, there is a duty to speak, his silence would preclude him as much as if he proposed the act himself. But to say that a person, who, being a surety, becomes aware that the creditor is going to give tinie or do something else which, if done without his assent, may discharge him, is bound to warn the creditor against doing it, is a thing for which no authority whatever has been cited. That brin;;s us to the question whether what was done in this case did,, upon the established principles of equity, discharge the surety. It has been established for a very long time, beginning with Eees V. Berrington, 2 Ves. 540, to the present day, without a single ease going to the contrary, that on the principles of equity a surety is discharged when the creditor, without his assent, gives time to the principal debtor, because by so doing he deprives the surety of part of the right he would have had from the mere fact of enter- ing into the suretyship, namely, to use the name of the creditor to sue the principal debtor; and if this right be suspended for a day or an hour, not injuring the surety to the value of one farth- ing, and even positively benefiting him, nevertheless, by the princi- ples of equity, it is established that this discharges the surety altogether. The reason given for this, as stated in Samuell v. Howarth, by Lord Eldon is because the creditor, by so giving time to the principal, has put it out of the power of the surety to con- sider whether he will have recourse to his remedy against the prin- cipal or not, and because he in fact cannot have the same remedy against the principal as he would have had under the original con- tract. And he adds: " The creditor has no right, it is against the faith of the contract, to give time to the principal, even though manifestly for the benefit of the surety, without the consent of the surety." The principle being, as I understand it, that as it is very undesirable that there should be any dispute or controversy about whether it is for his benefit or not, there shall be the broad prin- 23 184 POIiAK V. EVERETT. [CHAP. IV. ciple, that if the creditor does intentionally violate any rights the surety had when he entered into the suretyship, even though the damage be nominal only, he shall forfeit the whole remedy. Whether that was a good or a just principle originally, is a matter which it is far too late to think about now. I must own I have had considerable doubts about the justice of that 'principle, but from the time of Rees v. Berrington it has been undisputed law, and nothing but the legislature can interfere to alter it. Now, in the present case the interference with the rights of the surety is not by giving time to the debtor, but it is equally ^s :great an interference. The surety at the time he entered into the suretyship had a right to have these book-debts appropriated to re- duce the principal debt, and that right he has been deprived of \>y the act of the creditor in releasing the book-debts to the person collecting them. That equitable right has been taken away by his wilful act, and in Mayhew v. Crickett, 2 Sw. 185, 193, upon this very question. Lord Eldon says : ' ' When one surety has been discharged the co-surety is entitled to say to the creditor asserting a claim against him. You have discharged the surety from whom I ought to have compelled contribution, either in my own name in equity, or using your name at law." Lord Eldon is speaking here of withdrawing execution on a judgment ; the precise amount does not appear, and it was possibly very small; but it was held that the creditor having done this did discharge the surety, on a view which, according to Lord Eldon, is obvious in law and equity. Now, admitting this to be so, it has been argued by counsel for the plaintiffs that there is a distinction to be taken to this extent, as I understand their argument. The debt here secured — for it is really the same thing as if the debt were secured — is £6,000. Half of the book-debts only were pledged as an equitable security for this amount, and they were a security for every portion of the £6,000, but if they paid 20s. in the pound they would only produce £4,000, so that there would be some £2,000 which would still re- main for which the surety would have been liable; and the argu- ment is that the interference with the rights of the surety in respect to a matter which, though a security for the whole debt, is of less value than the whole debt, does not come within the principle and the authorities. As far as the authorities go, none were cited in which that distinction was taken. There does not seem to be the least authority for it on principle, once concede the rule that where the creditor wilfully interferes with the rights of the surety and SEC. 8.] POLAK V. EVERETT. 185 alters the equitable rights which he had acquired, alters them, even though it may be for the surety's benefit, — without the sur- ety's assent, the surety is discharged. And it seems to me the principle must equally apply if he alters the surety's privilege of coming upon a security, being a security for the whole undi- vided debt, although of less value, as if he had altered a security of equal value with the whole debt. There are two or three dis- tinctions to be taken notice of. For instance, there is Wulff v. Jay, Law Rep. 7 Q. B. 756, — and that case was perfectly rightly decided, — where a person is a creditor with a pledge or surety he is in equity bound to account not only for the money he has actu- ally made out of the pledge, but also for the moneys he might, ought, and should have made out of the pledge and he must allow fot that whether he made them or not, and if by laches he haa diminished the value of the pledge he is bound to allow for the sum he ought to have made. But his laches does not discharge the- surety, for it does not come within the principle which applies where the surety's rights have been changed or varied. His rights remain as before. The case seems to be like the case where the creditor does not choose to sue the debtor. That does not discharge the surety, for the surety's right remains untouched. So in the ease where there is a failure to make the most he could of the pledge, that does not in the slightest degree discharge the surety,, though the amount which ought to have been recovered by making a proper use of it is to be allowed in reduction of the debt. In the present case it is not a question of laches, or not making the best of the pledge that could be made, but it is a case of prevent- ing the surety having any recourse against these book-debts at all. There are other eases, but I do not think it is necessary to go inta them. There is a distinction made in equity between those rights of the surety which he acquired at the time when lie entered into the suretyship, such as securities the creditor then held, and other rights, and he has a right to all those; and Mayhew v. Crickett, 2 Sw. 193, establishes, if that security is destroyed, the debt is gone. There are other cases which turn upon this. After the security is established, the surety has a right to have the benefit of new securities ; but those not being a part of the original right,, it is a different question whether the dealing with those would discharge the surety. The present case does not come within that principle. Taking it as it stands here, it seems to me that the defence is made out, and consequently that the defendant should have judgment. 186 POLAK V. EVERETT. [CHAP. IV. On appeal, The Court (Jessel, M. R., Kelly, C. B., Mellish, L. J., and Denman, J.) had no doubt that the view taken by the Queen's Bench Division was correct, and afSrmed the judgment for the same reasons. Judgment affirmed. A9COBD. — Henderson v. Huey, 45 Ala. 275; Winston v. Yeargin, 50 Ala. 340; Kirkpatriek v. Howk, 80 111. 122; Weik v. Pugh, 92 Ind. 382; Guild v. Butler,^ 127 Mass. 386; Cummings v. Little, 45 Me. 183; Stallings v. Bank, 69 Ga. 701; Bank of Monroe v. Gifford, 79 Iowa, 300; Union Bank v. Cooley, 27 La. An. 202; Taylor v. Jeter, 23 Mo. 244; Brown v. Rathburn, 10 Oreg. 158; Clow V. Derby, 98 Pa. 432; Terapleton v. Shakley, 107 Pa. 370; Day V. Eamey, 40 0. S. 446; Plankington v. German, 93 Wis. 560; Pearl v. Deacon, 24 Beav. 186. If the securities released have no value the sureties are not discharged, ex- cept where the securities were deposited with the creditor as a condition of the suretyship. Hardwiek v. Wright, 35 Beav. 133; Rainbow v. Juggins, 5 Q. B. Div. 422; Blydenburg v. Bingham, 38 N. Y. 371; Green v. Blunt, 59 Iowa, 79 ; Lilly v. Roberts, 58 Ga. 303. The substitution of other securities of equal value does not release the sureties. State Bank v. Smith, 155 N. Y. 185; Thomas v. Cleveland, 33 Mo. 126; Lafayette Co. v. Hixon, 69 Mo. 581. The negligent release or loss of securities by the creditor will discharge the surety, such as a failure to put upon record a mortgage given the creditor by the principal until after other liens have intervened. Burr v. Boyer, 2 Neb. 265; Teaff v. Ross, 1 O. S. 469; State Bank v. Bartle, 114 Mo. 276; Sullivan v. State, 59 Ark. 47 ; WulfF v. Jay, 7 L. R. Q. B. 756. Contra. — Pillbrooks v. McEwen, 29 Ind. 347. Negligently omitting to take the necessary steps to collect obligations of third person, held by the creditor as additional security until they become worthless, will discharge the surety. Kemmerer v. Wilson, 31 Pa. 110; Fen- nell V. McGowan, 58 Miss. 261; City Bank v. Young, 43 N. H. 457; Crim v. Fleming, 101 Ind. 154. It is held that the creditor owes' no duty to the surety to take active measures to enforce liens which he may have acquired against the property of the principal. Kindt's App. 102 Pa. 441. The creditor owes the duty of active diligence in preserving liens but no Bucti duty is imposed in acquiring liens on the property of the principal. Smith V. Irwin, 77 N. Y. 466; Farmers Bank v. Raynolds, 13 O. 85; Knight V. Charter, 22 W. Va. 422; Summerhill v. Tapp, 52 Ala. 227; Jerauld v. Jrippett, 62 Ind. 122; Crawford v. Gaulden, 33 Ga, 173.. If a creditor institutes legal proceedings for the collection of a debt, the pegligence of the officers of the law is considered the act of his own agencies, and the surety of the judgment debtor discharged, as where through the aegligence of the sheriff a levy on the property of the principal is released. Miller v. Dyer, 1 Duv. (Ky.) 363; Lamsden v. Leonard, 55 Ga. 374. SEC. 9.] GLAZIBE V. DOUGLASS. 187 Sec. 9. Release of property in possession of creditor, but not held as seonrity. CARLOS GLAZIER v. SAHIUEL DOUGLASS. 32 Conn. 393 (1865). The defendant was surety upon a note held by the plaintiff. A firm of which the plaintiff was a member owed the principal a sum larger than the amount of the note, and had they been sued by the principal the firm could, under the statute, have set off the claim held by the plaintiff. With full knowledge of all the facts the firm paid the principal the amount owing to him without requiring the offset to be made — and with knowledge that the principal was insolvent. T. C. Perkins and C. E. Perkins, ior the plaintiff. G. Chapman and McFarland, for the defendant. Butler, J. The defence set up in this ease cannot be sustained. By a series of decisions adopting the equitable principles of the civil law, there have been annexed to the undertaking of a surety in a case like this, three conditions, and if either is broken by the creditor that undertaking becomes inoperative, and the surety is discharged. The first is that the creditor shall present the note to the maker for payment at maturity, and if dishonored use due diligence in giving notice to the surety. The second is that no obligatory exten- sion of the tinie of payment shall be given which will preclude the surety, if he pay the note to the creditor, from enforcing im- mediate repayment by compulsory process from the principal debtor. And the third is, that the creditor shall apply in pay- ment of the debt, or hold in trust for the benefit of the surety, all securities which he may receive or procure for that purpose by contract or opera,tion of law, so that if compelled to discharge the debt the surety may be subrogated to them. And the surety may waive the benefit of these condition by assent. But although in some special cases in equity the creditor may be compelled to pro- ceed against the maker, the law annexes no condition requiring the creditor to proceed against the principal debtor, or do any act (Whatever his opportunity or however much it may subserve the interest of the surety,) to procure security or enforce payment from that principal ; and he may remain entirely passive, and rely On the undertaking of the .surety, whether the principal debtor be solvent or insolvent. 188 GLAZIER V. DOUGLASS. [CHAP. IV. In respect to what shall be deemed a security within the mean- ing of the condition, there has been some contrariety of decision. The better opinion is that it must be a mortgage, pledge or lien — some right to or interest in property which the creditor can hold in trust for the surety, and to which the surety if he pay the debt can be subrogated, and the right to apply or hold must exist and be absolute. Mortgages and pledges made or given as security are, as a matter of course, within the condition. But even these may be received under such a qualified or contingent contract that they may be released. Thus in Pearl Street Congregational Society v. Imlay (23 Conn. 10) a mortgage was given as security with the under- standing that other security when offered should be received and the mortgage released, and this court held that the creditor could safely carry out the agreement and release the mortgage. The right to hold the security in that case was created by the agree- ment, and was contingent, not absolute, and the interest of the surety in it could be no greater than that of the creditor. The contrariety of decision spoken of has been chiefly in respect to liens obtained by process or operation of law. Judgment liens made such by the local law, are assignable, and clearly within the condition. But it has been made a question whether a lien obtained by levy of execution on the goods of the principal debtor can be released or abandoned, and the better opinion now is that it cannot be. :!:4:s|c4:4c!|:4s4c4:4s4c4c«4c But it is otherwise in respect to liens acquired by attachment on mesne process. As the creditor is " under no obligation of active diligence," and therefore need not commence a suit what- ever his opportunity, so if he commences one he is under no obli- gation to pursue it, for it involves trouble and expense not re- quired of him where goods are taken by the ofScer in execution. Hurd V. Little, 12 Mass. 502; Bank of Montpelier v. Dixon, 4 Verm. 587; Craae v. Stickles, 15 id. 252; Baker's Exrs. v. Marshall, 16 id. 522. Applying these principles to the case it is clear that the de- fense is groundless. If it appeared from the finding that the plaintiff was individually indebted to Eogers & Co. for goods pur- chased of them after the note was given, that indebtedness, in the absence of any agreement to that effect, would not be a security in his hands, within the condition annexed by law to the defend- ant's undertaking. The plaintiff would have had no lien upon it, and no right by contract or operatioif of law to apply it; nor SEC. 9.]' GIjAZIEB v. DOUGLASS. 189 would he hold the debt in trust for the benefit of the surety; nor il the defendant paid the note could he claim to be subrogated tc it. The plaintiff could have retained it, and if sued could offset it, but that the defendant had no more right to insist he should do, than to insist that he should do any other act to secure or enforce payment. The surety could have paid the note and at- tached the debt by foreign attachment. The defendant cites several dicta to the effect that, " where the creditor has the means of satisfaction actually or potentially in his hands and releases them, the surety is discharged." The dicta were all made in cases where there was a lien, and the money or property held under a right of application. Thus, in the case in the 8th of Pickering (Baker v. Briggs) property had been as- signed by the debtor in trust to pay the note, and the money was in the hands of the assignee subject to the call of the creditor, and Judge Parker said it was the same as if in his own hands, and as he had funds with the right to apply them, he could not call on the surety. There the right to apply was created by the assign- ment of the debtor, and the money was strictly a security. In Commonwealth v. Miller's Admrs. (8 Serg. & Rawle 457) a lien had been acquired by the levy of execution on goods, and the dictum cited had reference to such a state of facts. In Law v. East India Co. (4 Vesey 829), funds had been left in the hands of the creditor to pay the debt, and there was a right of applica- tion. In Lichtenthaler v. Thompson (13 Serg. & Rawle 157) the plaintiff was a lessor, and the defendant surety for the fulfill- ment of the lease, and the lessor had a lien by statute on the goods of the lessee which had been taken by another creditor in execution and sold, but his lien extended to the money which he fraudulently permitted a prior lessor to claim, and the court held the right to the money a security which the plaintiff was bound to apply to the ofiScer for and obtain. These and all the other cases from which the defendant cites are cases of lien, with right of application, and would not sustain the defense if the debt to Rogers & Co was the individual debt of the plaintiff. But however that might be the debt was in fact the company debt of the firm of Lincoln & Co., of which the plaintiff was a member. Although the general agent of the company within the scope of the partnership business, he had no right to insist that the debt to Rogers & Co. should be retained, and the company be subjected 190 AMES V. MACLAT. [CHAP. IV. to suit to enable him to collect his debt of Rogers & Co. by off-set, without the assent of his co-partners. To obtain that assent re- quired active diligence, which the surety had no right to demand of him. The Superior Court must be advised to render judgment for the plaintiff. In this opinion the other judges concurred. A bank holding note of a depositor secured by indorsement of a surety owes no duty to the surety to retain and apply the deposit to the note, but may pay the cheeks of the maker for the entire deposit and hold the surety Strong V. Foster, 17 C. B. 201; Nat. Bank v. Peck, 127 Mass. 298; Voss v. German Bank, 83 111. 599; Nat. Bank of Newburgh v. Smith, 66 N. Y. 271; Second Nat. Bank v. Hill, 76 Ind. 223 ; People's Bank v. Legrand, 103 Pa. 309; First Nat. Bank v. Shreiner, 110 Pa. 188. If the note is made payable at the bank the surety will be discharged, if the bank does not apply funds on deposit belonging to the principal on the day of maturity. Commercial Bank v. Henninger, 105 Pa. 496; German Bank v. Fftreman, 138 Pa. 474; Home Bank v. Newton, 8 111. App. 563. Sec. 10. Eelease or extinguishmeiit of the liability of the principal. AMES V. MACLAY, ET AL 14 Iowa 281 (1862). The complainants were sureties upon the bond of one McDonald, a sheriff. In an action upon the bond the principal and sureties severed in their defenses. The issues against the sheriff were first heard and resulted in a judgment in favor of the sheriff but judgment was later entered against the sureties. This bill is brought to set aside that judgment. A. B. Cotton; for the appellant. Grant (& Smith, for the appellee. Wright, J, The judgment upon demurrer against the sureties was rendered on the 4th of March, 1848. The verdict and judg- ment in favor of McDonald, the principal, was on the 5th of the month. Respondents resist the relief asked, upon the ground that there was neither accident, mistake, misrepresentation, nor fraud, and that Chancery has no jurisdiction, although the party has lost his remedy at law through ignorance of a fact which he might have learned with due diligence and inquiry, or by bill of discovery. Penny v. Martin, 4 John. Ch. 566 Or, the same principle, may SEC. 10.] 4MES V. MACLAY. 1^1 be stated as in Ballance v. Loomis, 22 Ills. 82, that if a party seeks to set aside a judgment by proceeding in Chancery, he must show himself clear of all laches, and also that every efiEort was made to prevent a judgment against him. Or, still again, as in Kreichbaum v. Bridges & Powers, 1 Iowa 14, following Story's Eq. Jr. § 887, that to authorize relief against a judgment, it must appear that it is against conscience to execute it, and also that the injured party could not have availed himself of the main facts, at or before the trial, and that there was no fault or negligence on his part. And see Houston v. Wolcott, 7 Iowa 173. , Complainant does not controvert these principles, but places his case upon the ground, that as the principal, McDonald, by the verdict and judgment was discharged from his liability, the sure- ties are, in equity, discharged. And this proposition he bases upon the doctrine that the rights of the surety, and his relation to his principal are the same after as before judgment, and that when from any cause the principal ceases to be bound, the liability of the surety should likewise cease. Or, following Jackson v. Griswold, 4 Hill 529, the argument is this: that a decision against the debt discharges the surety. And this, not upon the ground that he is a party to such decision, but because the judgment extinguishes the debt; and the principal thing being thus de- stroyed, the incident (the obligation of the surety) is destroyed with it. The effect is the same as a release by the creditor, or a payment by the debtor, who may do any act in discharge of his surety, but nothing by which he shall be concluded beyond his original objection. As favoring these views, complainant cites a number of cases, to the effect that if the creditor after judgment shall disable him- self from collecting his debt from his principal debtor, he is held to have exonerated the surety also. Of this class is Hubbell v. Carpenter, 5 Barb. 520, where the creditor after judgment gave the maker of the note an obligation not to collect the same against him, but reserved the right to enforce it against the in- dorser. So, in the Manufacturers' and Mechanics' Bank v. The Bank of Pennsylvania, 9 Watts & Serg. 335, where the creditor after judgment entered into an agreement with the maker of the note to stay proceedings against him. And substantially to the same effect is Storms v. Thorn, 3 Barb. 314, and the other au- thorities cited. We are not inclined, however, to give these cases weight, as applied to this case. To make them applicable we must first assume that the judgment in favor of the sheriff was 192 AMES V. MACLAT. [CHAP. IV. the act of the creditor, alter the judgment against the sureties, in the same sense and to the same effect as the stipulation to give time to the principal debtor, or an agreement to release him. The reasoning v^hich upholds this proposition is not ten- able. If the judgment in favor of McDonald in equity dis- charges the sureties from their liability, it must be not because it was the agreement or act of Maclay, but because it being de- termined that the principal is not liable, the incidental liability, that of the sureties, likewise ceases. Chitty, in his work on Contracts, 460, quoting from Pothier, says that: " It results from the definition of a surety's engage- ment as being accessory to a principal obligation, that the ex- tinction of the principal obligation necessarily induces that of the surety; it being of the nature of an accessory obligation that it cannot exist without its principal; therefore, whenever the principal is discharged, in whatever manner it may be, not only by actual payment or a compensation, but also by a release, the surety is discharged likewise ; for the essence of the obligation being that the surety is only obliged on behalf of a principal debtor, he therefore is no longer obliged when there is no longer any principal for whom he is obliged. ' ' This rule comports with the duties and relations of the surety to the principal, accords with reason and good conscience, and is fully recognized by the authorities. Is there, then, in this ease, any technical or stem rule of the law to prevent its application? We conclude not, and that we can do what right reason and good conscience dic- tate, without running counter to the rule which requires diligence from suitors in all courts, or the equivalent principle that a party who applies for relief against a judgment at law must show in- justice, and that he has been without fault or negligence. What are the facts of this case? McDonald, the sheriff, was the principal, and of course primarily and principally liable for the alleged nonfeasance. He, after a full and fair trial, has been entirely and absolutely released from his liability. In other words, it has been authoritatively determined by the judgment of a com- petent tribunal that the alleged nonfeasance was not established, and that plaintiff (one of the present respondents) had no cause of action. By this adjudication the principal "is no longer obliged," or obligated, so far as the claim of Maclay is con- cerned. Now, does it accord with the alphabet principles gov- erning the relation of principal and surety that the latter shall be obliged to pay that for which the former is no longer liable? Or SEC. 10.] AMES V. MACLAY. 193 rather, is it not consistent with every rule governing the relation that as the condition of the surety is to be favored, he should not be required to pay a debt which he can never recover from his principal, the principal obligation having been extinguished? But it is suggested that this view loses sight of the fact that the sureties severed in their pleas, and that they were guilty of negligence in not relying upon the same defense as that made by their principal. We are not unmindful of the, at least, ap- parent strepgth of the argument. It is to be remembered, how- ever, that judgment was rendered against the sureties before the issues were tried between their principal and the creditor. It was, therefore, practically impossible for them to rely upon such sub- sequent adjudication as a protection to themselves. And then suppose they had pleaded the same defense, and the result had been the same as it was. Would this have been such diligence as to obviate the effect of the rule for which respondents insist? If it would, we confess that we cannot see how they should be placed in any worse position by having mistaken their proper legal defence. But the argument that the sureties are concluded and forever estopped from resisting the judgment against them by their fail- ure to present their proper defence is radically defective in that it ignores the great general principles at the foundation of their liability, and continues the accessory obligation after that which induced it has been completely extinguished. We would not say that if the principal had been discharged before, and the sureties had failed to rely upon that fact as a legal defence, they could be afterwards heard in equity. That case is not before us. They could not avail themselves of a defence which did not exist. Their failure to make the same defence as their principal should not, in equity, conclude them to the extent of compelling the payment of money for their principal, for which it is conclusively and finally settled he was never liable. Indeed, under such circumstances, we do not believe that a case can be found sustaining such liability. We give no weight to the fact that a motion was made to set aside the judgment. No action was ever taken upon it. Com- plainant might, therefore, resort to his concurrent equitable remedy. This he has done. The decree is Reversed. Accord. — State v. Parker, 72 Ala. 181; Baker v. Merriam, 97 Ind. 539; State V. Coste, 36 Mo. 437 ; Brown v. Bradford, 30 Ga. 927 ; Crim v. Wilson, 61 Miss. 233. Whatever releases the principal will also release, the surety. Cragoe v. 194 AMES V. MACLAY. [CHAP. IV. Jones, L. R. 8 Ex. 81; Grundy v. Meighan, 7 Ir. L. Rep. 519; Bull v. Coe. 77 Cal. 54; Trotter v. Strong, 63 111. 272; Anthony v. Capel, 53 Miss. 350; Brown v. Ayer, 24 Ga. 288; Riggin v. Craeth, 60 0. S. 114; Paddlefcrd v. Thacher, 48 Vt. 474; States v. Parker, 72 Ala. 181; Loekwood v. Penn. 22 La. An. 29. If the main contract is void by reason of a prohibition of statute the surety is discharged. Swift v. Beers, 3 Denio. 70; Morse v. Hovey, 9 Paige, 197; Russell v. Failor, 1 O. S. 327; Mound v. Barker, 71 Vt. 253. If the main contract was induced by the duress of the creditor the surety is discharged. Osborn v. Robbins, 36 N. Y. 365; Gkiffith v. Sitgkeaves, Ante page 20. Where the principal contract fails for want of consideration or because obtained by fraud, the suretyship also fails. Sawyer v. Chambers, 43 Barb. 622; Scroggin v. Holland, 16 Mo. 419; Gunnis v. Weighley, 114 Pa. 191; Bryant v. Crosby, 36 Me, 562. If the claim against the principal is released but the remedies against the surety specifically reserved the surety is not discharged. Neville's Case, 6 Ch. 43; Ex. Parte Gifford, 6 Ves. 805; Bateson v. Gosling, L. R. A. 7 C. P. 9; Rockville Bank v. Holt, 58 Conn. 526; Mueller v. Dobscheuts, 80 111. 176. The release of the principal with a reservation of rights against the surety, hais sometimes been considered as a covenant not to sue the principal, this fiction being employed so as to place the right of action against the surety a more consistent basis. Price v. Barker, 4 Ell. & Bl. 760, Cole- ridge, J. " To entitle the plaintiff to our judgment, it must appear that the deed operated only as a covenant not to sue, and that the rights of the plain- tiff as against the surety were preserved by the particular reservation in question, nothwithstanding such covenant not to sue. " With regard to the first question, two modes of construction are for con- sideration. One, that, according to the earlier authorities, the primary inten- tion of releasing the debt is to be carried out, and this subsequent pro- vision for reserving remedies against co-obligors and co-contractors should be rejected as inconsistent with the intention to release and destroy the debt evinced by the general words of release, and as something with the law will not allow, as being repugnant to such release and extinguishment of the debt. The other, that, according to the modem authorities, we are to mould and limit the general words of the release by construing it to be a covenant not to sue, and thereby allow the parties to carry out the whole of their inten- tions by preserving the rights against parties jointly liable : • • • and we think that we are bound by modern authorities to carry out the whole intention of the parties as far as possible by holding the present tobe a covenant; not to sue, and not a release." If the surety is fully indemnified he will not be released by the release of the principal. Jones v. Ward, 71 Wis. 152; Moore v. Paine, 12 Wend. 123. SEC. 11.] WINN V. SANFOED. 195 Sec. 11. Belease of principal without fault of creditor. WINN V. SANFORD. 145 Mass. 302 (1887). The principal, a married woman, executed a bond to her hus- band to secure her covenant with him to release dower, the bond was as follows : — " Know all men by these presents that we, Susan B. Winn, wife of John Winn, of Nantucket, as principal, and Frederick C. San- ford, of Nantucket, as surety, are holden and stand firmly bound unto John Winn, of Nantucket, above named, in the sum of three hundred dollars, to the payment of which to the said John Winn, or his executors, administrators, or assigns, we hereby jointly and severally bind ourselves, our heirs, executors, and administrators. The condition of this obligation is such that whereas, in a settle- ment of differences between said John Winn and Susan B. Winn it was agreed by said Susan B. Winn, and on her behalf, that she should give to said John Winn a bond, with surety, ' to release dower whenever requested, and make no further claim on said John Winn for any support or for any cause whatever:' Now, therefore, if said Susan B. Winn shall, whenever requested, sign release of dower in any real estate of said John Winn, and shall make no further claim upon him for any support or for any cause whatever, then this obligation shall be void: otherwise it shall be and remain in full force and virtue. ' ' /. Brown, for plaintiff. L. Le B. Holmes and Eliot D. Stetson, for defendant. DEvens, J. It is true, as a general proposition, that the lia- bility of a guarantor or of a surety is limited by that of his prin- cipal; ibut to this there are certain exceptions. Thus, where the principal is excused from liability for reasons personal to himself, and which do not affect the debt he has incurred, or the promise he has made, the surety would not be entitled to the benefit of this excuse. In such case he is, in a certain sense, an independent promisor, and must perform his promise. In Miggs v. Barnard, 4 Bing. 169, the defendants had guaranteed the purchases made by a married woman incapable of making a contract. The ques- tion in the ease was whether this guaranty should have been in writing ; but it is assumed throughout by court and counsel that if 196 , WINN V. SANFORD. [CHAP. IV. it had been, the defendant would have been liable, although there eould have been no liability on the part of the principal. In a similar manner, where one becomes a surety for the perform- ance of a promise made by a person incompetent to contract, his contract is not purely accessorial, nor is his liability necessarily as- certained by determining whether the principal can be made liable. Fraud or deceit in inducing the principal to make his promise, or illegality thereof, which would release the principal, would release the surety, as these affect the character of the debt; but incapacity of the principal party promising to make a legal contract, if understood by the parties, is the very defense on the part of the principal against which the surety assures the promisee. Yale v. "Wheelock, 109 Mass. 502. The bond in the case at bar is several as well as joint. It appears from it that Mrs. Winn is the wife of the promisee, and it recites the agreement made between them. The agreement made by her is void, so far as the evidence now discloses, solely because of her incapacity to contract; but this should not release the defendant Sanford from his engagement that she should perform the promise made by her. The defense which Mrs. Winn personally has, resulting from her situation, should not be open to him. Nor do we perceive that any distinction can be made, as suggested by the defendant, be- tween the promise of a married woman,. which is void, and that of a minor which is voidable. In either case the surety assures the promisee against the incapacity of the principal to make a legal contract, whether it be more or less complete. ****** Exceptions sustained. AccoBD. — Kimball v. Newell, 7 Hill, 116; Envin v. Downs, 15 N. Y. 576; Davis V. States, 43 Ind. 103 ; Whitworth v. Carter, 43 Miss. 61 ; Lobaugh v. Thompson, 74 Mo. 600; Allen v. Berryhill, 27 Iowa, 534; Weed S. M. Co. v. Maxwell, 63 Mo. 486; Wiggin's Appeal, 100 Pa. 155; Davis v. Commission- ers, 72 N. C. 441; St. Alban's Bank v. Dillon, 30 Vt. 122; Lee v. Yandeix, Ante page 8; Kuns v. Young, 34 Pa. 60; Barker v. Kennett, 54 Mo. 82. SEC. 12.] POWERS CO. V. HAELIN 197 Sec. 12. Fraud or concealment in the making of the siiretyship con- tract. POWERS DRY GOODS COMPANY v. MONS J. HARLIN. 68 Minn. 193 (1897). P. J. McLaughlin and Geo. F. Edwards, for appellant. Shaw, Cray, Lancaster & Parker, and Charles E. Bond, for re- spondents. Collins, J. After defendants Harlin Bros, had made an as- signment for the benefit of their creditors, among whom was plain- tiff, a corporation, a composition agreement was made and entered into between the debtors and each of their creditors upon a basis of 33 1-3 per cent, of the entire indebtedness. In accordance with this agreement, plaintiff accepted and received the debtors' promis- sory notes, with sureties, as hereinafter stated, while all other creditors received their money immediately. Defendant Seder- berg was one of the creditors signing the composition agreement, and, after it had been signed by all parties thereto, he became a surety upon one of these notes. At maturity this note was taken up by the execution and delivery of another note for the same sum executed and delivered by Harlin Bros, with Sederberg as surety. Defendant Hanson also became a surety upon one of the original notes, and so did defendant Nelson. When these three notes matured, separate actions were brought, and each of these sureties answered. Upon trial by the court without a jury, the court found that, before the composition agreement was signed by any of the cred- itors, plaintiff, as a condition to its signing the same, and without the knowledge of any of the other creditors of Harlin Bros., and without the knowledge of any of the parties who became sure- ties, demanded that Harlin Bros, give their written promise to pay plaintiff a larger percentage than was to be paid to the other cred- itors, and that pursuant to this demand, and before plaintiff signed the composition agreement, and as a conJition to said signing, Harlin Bros, acceded to the demand, and thereupon exe- cuted and delivered to plaintiff three promissory notes for the balance due, 66 2-3 per cent, of plaintiff's entire claim, taking back from the plaintiff its written stipulation to discharge and surrender the note last mentioned upon payment of 25 per cent, of the same. The court also found that neither of these sureties had any 198 ^ POWERS CO. V. HARLIN. [CHAP. IV. f knowledge of this secret agreement until long after the note on which Sedei;;berg became surety had been renewed, as before stated; that each of the sureties signed at the request of Harlin Bros., and upon their representations that they had made a valid and complete composition with all of their creditors on the basis of 33 1-3 per cent, of their total indebtedness; and, further, that neither of the sureties would have become such, had they known to the contrary. Later, Harlin Bros, again being insolvent, made another assignment for the benefit of their creditors. The ques- tion in this case is, must the secret agreement found by the trial court to have been made between plaintiff creditor and defendant debtors, and to have been executed as a condition for the plaintiff's signature to the composition agreement, ,by the delivery of the debtors' note for the balance of plaintiff's claim over and above the amount stipulated for in • the composition agreement, be held to have discharged the sureties upon the notes given in accord- ance with the terms of the agreement last mentioned? The an- swer to this question turns, we think, upon whether or not the composition agreement itself was rendered invalid by the execu- tion of the secret arrangement whereby the plaintiff secured the debtors' note before referred to. #j|:**##:,.*#» We are convinced that the fraud tainted the entire transac- tion, to the extent that the composition itself could have been repudiated by the innocent creditor. We are unable to distin- guish between the composition and the secret agreement which was the foundation upon which it rested. We cannot concur in any line of reasoning which separates and severs the fraudulent whole into two parts, one good and to be upheld, the other bad and to be denounced. If fraud vitiates all contracts into which it enters, it has no stopping place in a transaction of this kind, no half- way house beyond which it has no footing. It permeates the composition agreement through and through. With these views of the effect of the secret agreement upon the composition, we are brought to a consideration of the rights of these sureties on the composition notes, and these rights we regard as well settled in this State and elsewhere. The duty of a creditor to a surety is thus stated in Doughty v. Savage, supra, at page 155 : "It is clear and well-settled principle that a security given by a surety is voidable on the ground of fraud, if there is, with the knowledge or assent of the creditor, such a misrepresentation to or concealment from the surety, of the transaction between the creditor and his debtor, that, but for the same having taken place, SEC. 12.] ftAII^TON v. MATHEWS. 199 either the suretyship would not have been entered into at all, or being entered into, the extent of the surety's liability might be thereby increased." A number of eases are cited in support of this doctrine. It has also been approved in this court recently, in Trader's v. Herber, 67 Minn. 106, 69 N. W. 701. The remaining inquiry is, would knowledge of the existence of the secret agreement have been cal- culated to materially influence the sureties when determining whether they would enter into their contracts of suretyship on the composition notes? The object of that agreement was to re- lease the debtors from a portion of their indebtedness, and the sureties entered into their contract for this purpose, induced so to do by the representations and belief that the debtors were to be freed and released from any further liability. In this they were deceived, and through the concealment of the plaintiff, payee of the notes, the object was not attained. By reason of the fraud it was within the power of the innocent creditors to ignore the composition, and recover the balance due upon their claims. The ability of the debtors to meet their notes or to indemnify the sureties was hazarded and impaired at once by the contingency. That the extent of the sureties' liability and the risk they had assumed were materially increased, is obvious. The concealment was a fraud upon them, and exonerated them from their obliga- tions. Order affirmed. It was held that where the principal purchased merchandise of the creditor at a higher price than the regular market price with the understanding that the excess should be applied on a pre-existing indebtedness, that the guaran- tor was discharged, this arrangement not being communicated to him. Pid- coek V. Bishop, 3 Barn. & Cr. 605. In Ham v. Greve, 34 Ind. 18, the surety was induced to sign a note on a representation that it was in payment of goods then being sold to the princi- pal, but in fact, it was in settlement of a pre-existing debt. This was held to discharge the surety. EDWARD RAILTON v. THOMAS G. MATHEWS, ET AL. 10 Cl. & Fin. 934 (1844). The respondents, Mathews and Leonard, carried on business in partnership at Bristol; their business extended to Scotland, and was conducted by their agents in Glasgow. Messrs. Rowley and Hickes acted as such agents from January, 1832, to February, 24 200 RAILTON V. MATHEWS. [CHAP. IV. 1834, when they dissolved partnership, and it became necessary for the respondents to make a new appointment of agency. Hickes and Rowley then severally applied for the appointment. The respondents gave it to Hickes. The appointment was by letter, dated Bristol, 25 January, 1834, in these terms: " Sir, — We ap- point you as our agent for the sale of dye wares, and to collect all our moneys; you finding us security for £3000, as proposed." Hickes, upon being so appointed, entered upon the agency, or rather continued the agency held before by him. and Rowley. Being afterwards required by the respondents to find the security, he proposed his brother, who resided in England, and the ap- pellant, who was a writer in Glasgow. The respondents agreed to accept the proposed sureties without any communication with either of them; and the necessary bond having been prepared and transmitted to the agent, was subscribed by him and by the ap- pellant at Glasgow . in September, and by the other surety in October, 1835. The bond was in the English form, and in the penal sum of £4000, conditioned that the agent should faithfully conduct himself as the clerk and commission agent of the re- spondents, and satisfactorily account to them for all moneys re- ceived on their account. In May, 1837, the respondents discovered that Hickes had acted ■unfaithfully in the agency, and had contrived to apply their moneys to his own use to a large amount. They gave notice of this discovery to the sureties; and subsequently, by the third respondent, their mandatory in Scotland, raised an action against all the obligors in the bond, concluding for count and reckoning of the whole of the agent's actions, and for payment of the £4000, or such part thereof as might be found to be due by the agent. The appellant alone defended the action; but before any final Judgment was pronounced, he raised an action against the re- spondents for reduction of the bond, upon various grounds, prin- cipally on this : ' ' that the bond was obtained fraudulently by the respondents, and on the procurement thereof they were guilty of a fraudulent concealment of material circumstances known to them, and deeply affecting the credit and trustworthiness of the said Hickes." The libel then, after stating various circumstances importing the respondents' knowledge of Hickes' misconduct and irregularities in the agency during the period of his partnership with Rowley, summed up the whole statement to this effect : That although at and prior to the time of receiving the bond, the re- spondents had been made acquainted with the misconduct oi SEC. 12.] EAILTON V. MATHEWS. 201 Hickes in misapplying the funds of the firm of Rowley & Hickes to his own private purposes; and although, from their own ex- perience of his gross irregularities under the agency, they were perfectly aware that he was unworthy of trust, they totally failed to communicate (to the sureties) the said circumstances or either of them or the existence of any balance on the agency accounts then standing against Hickes ; on the contrary, while they accepted and took possession of the bond, they fraudulently suppressed and concealed the said whole facts and circumstances regarding the conduct and irregularities of Hickes, and the state of his ac- counts, which circumstances were wholly unknown to the appel- lant, and the respondents, by their whole conduct in the premises, deceived and misled the appellant into the belief that Hickes was in every respect trustworthy, while they well knew the reverse ; whereby the bond was obtained by them through fraud and deceit, and the undue concealment of material facts, which they knew, if communicated, would have prevented the appellant from under- taking the said obligation or subscribing the bond; or the re- spondents were guilty of fraudulent concealment of material cir- cumstances in obtaining the bond, and the same was therefore null and void. Mr. Serjeant Talfourd and Mr. Fleming, for the appellant. Mr. F. Kelly and Mr. Anderson, for the respondents. Lord Cottbnham: Entertaining an opinion against the judg- ment pronounced in the court below, if I had felt any doubt upon the subject, or had considered it a case which required more in- vestigation of the facts than it has received, I certainly should have been unwilling to dispose of it without taking time for further consideration ; but the facts are so simple, and the points are so free from doubt, that I see no reason why the House should not at once dispose of the case. The real question is, whether the way in which the learned judge put this case to the jury, and described to them the duty they had to perform, was or was not consistent with and properly applicable to the issue raised for their consideration. The issue, in my opin- ion, very clearly describes the point which the Court wished to have investigated. The terms of the issue must, of course, be construed as they stand; but it is not immaterial to look to the points raised in the pleadings, for the purpose of construction. If there were any doubt upon the meaning of the terms used, I would look to the summons for reduction of the instrument of suretyship; and I find several facts appearing, as having passed 202 RAILTON V. MATHEWS. [CHAP. IV. between the party who was the subject of the suretyship and those by whom he had been previously employed ; and I find the matter stated in these terms: " That the parties totally failed to com- municate the said circumstances, or either of them, or the exist- ence of any balance on the agency account then standing against the said George Hickes, to the pursuer or to the said Henry Wil- liams Hickes; and on the contrary, while they accepted and took possession of the said bond, they fraudulently suppressed and con- cealed the said whole facts and circumstances regarding the conduct and irregularities of the said George Hickes," &c. There is an imputation made of direct fraud, a fraudulent intention influencing the acts of the parties, and there is a direct statement of such concealment. It has not been contended, and it is impossible to contend, after what Lord Eldon lays down in the case of Smith v. The Bank of Scotland, 1 Dow 272, that a case may not exist in which a mere non-communication would invalidate a bond of suretyship. Lord Eldon states various cases in which a party about to become surety would have a right to have communicated to him circum- stances within the knowledge of the party acquiring the bond; and he states that it is the duty of the party acquiring the bond to communicate those circumstances, and that the non-communica- tion, or, as he uses the expression, the concealment of those facts would invalidate the obligation and release the surety from the obligation into which he had entered. Now, when the issue in this ease was tried, such being the points raised between the parties, we have nothing to do with the evidence in the cause, or the facts proved, or the conclusion to which the jury might or might not have come under the circum- stances, but with the question whether the charge which was made to them was such a charge as we conceive ought to have been made to them. The issue for their consideration was, as a matter of fact, ' ' whether the pursuer, Edward Eailton, was induced to sub- scribe the bond of caution or surety by undue concealment or deception on the part of the defenders, or either of them;" rais- ing these two propositions which were raised in the pleadings in the cause, either of which, if found in the affirmative, would lead to the conclusion of the cause. The question ^ looking at the terms in which the matter was left to the jury, and the mode in which the learned judge in- formed the jury they ought to perform their duty — is whether there may not have been a case brought before the jury for their SEC. 12.] KAILTON V. MATHEWS. 203 consideration of improper and undue concealment (which I un- derstand to mean a non-communication of facts which ought to have been communicated), which would lead to the relief of the surety, although the non-communication might not be wilful and intentional, and with a view to the advantage which the party was thereby to receive. That which I find here extracted from the charge of the learned judge, I understand to be one proposition. The learned judge lays it down distinctly that the concealment, to be undue, must be wilful and intentional, with a view to the advantage they were thereby to receive. In my opinion there may be a case of improper concealment or non- communication of facts which ought to be communicated, which would aifect the situation of the parties, even if it was not wilful and intentional, and with a view to the advantage the parties were to receive. The charge, therefore, I conceive, was not consistent with the rule of law; I think that it narrowed the question for the consideration of the jury beyond the limits which the rights of the parties required to have submitted to the consideration of the jury. "Without going further into the law which regulates the rights of these parties than that which was stated by Lord Eldon in Smith V. The Bank of Scotland, we find that in a judgment of this House in the case of an appeal from Scotland, and therefore one peculiarly valuable in the case now under consideration, that has been declared to be the law. The terms used by the learned judge in directing the jury having limited the question for their consid- eration much more than the rule of law would justify, it appears to be quite clear that this case has not been properly tried, that the exceptions were properly taken, and that this House is bound to pronounce such a judgment as ought to have been pronounced by the Court of Session. Lord Campbell. — This case has been very satisfactorily ar- gued on both sides; with great brevity, but every thing has been argued which could be for the advantage of the clients or the assistance of your Lordships; and having listened to all which has been urged on both sides very attentively, I, without the smallest hesitation, come to the conclusion that the bill of excep- tions ought to be allowed, and that there must be a new trial. The question really is. What is the issue which the Court di- rected in this case? " Whether the pursuer, Edward Railton, was induced to subscribe the said bond of caution or surety by undue concealment or deception on the part of the defenders, or either 204 EAILTON V. MATHEWS. [CHAP. IV. of them? " The material words are, " undue concealment on the part of the defenders." What is the meaning of those words? I apprehend the meaning of those woi-ds is, whether Railton was induced to subscribe the bond by the defenders having omitted to divulge facts within their knowledge which they were bound in point of law to divulge. If there were facts within their knowl- edge which they were bound in point of law to divulge, and which they did not divulge, the surety is not bound by the bond; there are plenty of decisions to that effect, both in the law of Scotland and the law of England. If the defenders had facts within their knowledge which it was material the surety should be acquainted with, and which the defenders did not disclose, in my opinion the concealment of those facts, the undue concealment of those facts, discharges the surety; and whether they concealed those facts from one motive or another, I apprehend is wholly im- material. It certainly is wholly immaterial to the interest of the surety, because to say that his obligations shall depend upon that which was passing in the mind of the party requiring the bond appears to me preposterous; for that would make the obligation of the surety depend on whether the other party had a good mem- ory, or whether he was a person of good sense, or whether he had the motive in his mind, or whether he was aware that those facts ought to be disclosed. The liability of a surety must depend upon the situation in which he is placed, upon the knowledge which is communicated to him of the facts of the case, and not upon what was passing in the mind of the other party, or the motive of the other party. If the facts were such as ought to have been com- municated, if it was material to the surety that they should be communicated, the motive for withholding them, I apprehend, is wholly immaterial. Then we come to the direction given by the learned judge. He says, " The concealment, therefore, being undue, must be wilful and intentional with a view " (and that is with reference to the motive) " to the advantage they were thereby to receive." Now, according to my notion of the issue, that is an entire misconcep- tion of it: according to this direction, although the parties ac- quiring the bond had been aware of the most material facts which it was their duty to disclose, and the withholding of which would avoid the bond, if they did not wilfully and intentionally with- hold them, that is to say, if they had forgotten them or if they thought by mistake that in point of law or morality they were Tiot bound to disclose them, then, according to the holding of the SEC. 12.] EAILTON V. MATHEWS. ^ learned judge, it would not be a concealment. But the learned judge does not stop there; he goes on, " with a view to the ad- vantage they were thereby to receive:" introducing those words conjunctively, and, in effect, saying that it was not an undue concealment unless they had their own particular advantage in view. That appears to me a misconception. I will suppose that their motive was kindness to Hickes; to keep back from those who, it was material to him, should continue to have a good opin- ion of him, the knowledge of those facts; that it was a pure kindness on their part, to prevent those parties entertaining a bad opinion of him, and not from any selfishness, this concealment took place. Although that might be the motive, yet the fact that he was in arrear and had been guilty of fraudulent conduct, and that he was a defaulter, were facts which it was most material for the surety to be acquainted with. If those were held back merely from a kind motive to Hickes, and not at all from any selfish mo- tive on the part of those to whom the bond was to be executed, the effect in point of law would be the same as if the motive were merely the personal benefit of the parties to receive the bond. It appears to me, therefore, that the learned judge has misunder- stood the meaning of the issue, and that having told the jury that a concealment to be undue must be wilful and intentional with a view to the advantage which the parties were thereby to receive, that was a misdirection, and that it had a tendency to mislead the jury; that it was wrong in point of law, and that the excep- tion to that direction ought to be allowed. Interlocutor complained of reversed; bill of exceptions allowed; and a new trial directed. If the creditor sustains a relation of confidence to the surety his failure to make disclosure of facts known to him, materially affecting the risk of the surety, is equivalent to an affirmative misrepresentation. Bank v. Ander- son, 05 Iowa, 692; Remington S. M. Co. v. Kerzertee, 49 Wis. 400; Harrison V. Lumbermen Ins. Co., 8 Mo. App. 37; Benton Bank v. Boddicker, 105 Iowa, 548. The requirement of good faith toward the surety has established the rule that constructive fraud results from the failure to make disclosures of facts known to the creditor, even though a confidential relation does not exist. Bellevue Bldg. & Loan Assn. v. Jeckel, 104 Ky. 159; Dinsmore v. Tidball, 34 O. S. 411; Wells Fargo & Co. v. Walker, 9 N. M. 456; Com. Life Ins. Co. v. Chase, 72 Vt. 176; Wilson v. Monticello, 85 Ind. 10; Fassnaeht v. Erasing Gagen Co., 18 Ind. App. 80; Traders Ins. Co. v. Herber, 67 Minn. 106; Denton v. Butler, 99 Ga. 264; Third Nat. Bank v. Owen, 101 Mo. 558; Assurance Co. V. Thompson, 68 Cal. 208. Non-disclosure of the insolvency of the principal does not amount to a con- structive fraud. Farmers Bank v. Braden, 145 Pa. 473. 206 GRAVES V. LEBANON BANK. [CHAP. IV. Sec. 13. Estoppel — extent to which the creditor is chargeable who has the means of knowing facts materially affecting the surety- ship risk. GRAVES, BT AL. v. THE LEBANON NATIONAL BANK. lOBuah (Ky.) 23 (1873). Bountree, John Bodman, for appellants. W. J. Lisle, W. B. Harrison, for appellees. Judge Lindsay delivered the opinion of the court. The judgment now before this court for revision is that ren- dered in the cross-action of the National Bank of Lebanon v. E. A. Graves, D. L. Graves, and R. C. Harris, sureties for Mitchell, the defaulting cashier. ************* The National Bank of Lebanon organized under the provisions of the national currency act of June 3, 1864. It commenced busi- ness on or about the 3d of August, 1869, at which time Mitchell was selected as cashier, and was at once inducted into office. Al- though required to execute bond immediately, for reasons not satisfactorily explained by the record the bond was not delivered until about the 1st of November following. In June, 1870, Mitchell was discovered to be a defaulter to a large amount. He failed to make good the losses occasioned by this breach of duty, or to sufficiently indemnify the bank, and this action was instituted to recover from his bondsmen the amount of these losses. From what has already been said it is not necessary to notice further the technical defenses relied on by appellants, except to state that we do not regard it as essential that banking insti- tutions doing business under the national currency act shall sig- nify their acceptance of the official bonds of their cashiers by a written memorandum to that effect entered upon the journals or minute-books kept by their directory. The acceptance of the bond may be presumed from the fact that after it has been submitted to the directory for approval it is retained by the bank, and the cashier permitted to enter upon or continue in the discharge of his duties; and that it was presented to and approved by the directory may be established by oral, tes- timony. * * *************** The defalcations for which appellants are sought to be held liable are alleged to have occurred between the 14th of Septem- ber, 1869, and the 3d of June, 1870. The court below adjudged that the sureties in the bond should account for such as occurred .SEC. 13.] GEAVES V. LEBANON BANK. ^^' after its acceptance, and rendered judgment against them for $8,089.23. The first business transacted by the bank after its organization was the purchase of the assets of the banking firm of Burton, Mitchell & Co. Mitchell, the defaulting cashier, was a member cf that firm, and had been acting as its cashier. The National Bank accepted from Burton, Mitchell & Co. bills and notes represented to amount to about fifty-one thousand dollars, but which in point of fact amounted to only about thirty-nine thousand dollars. This dis- crepancy was the result of embezzlements upon the part of Mitchell while acting as cashier for said firm. It may be presumed, that Burton, the senior member of the firm, who became one of the directors of the National Bank, was ignorant of these embezzle- ments. The directory seem to have relied implicitly upon the integrity of Mitchell, and hence he was enabled not only to con- ceal the frauds practiced on Burton, Mitchell & Co., but by such concealment to commence the discharge of his duties as cashier of the National Bank by a fraud upon it. In October, 1869, the banking association, pursuant to the pro- visions of section 34 of the national currency act, and the amend- ment thereto of March 3, 1869, made a report to the comptroller of the currency, and on the 23d day of that month caused it to be published in the Lebanon Clarion, showing in detail and under appropriate heads its resources and liabilities at the close of busi- ness October 9, 1869. This report was sworn to by Mitchell, and certified to be correct by three members of the directory. Similar reports were made and published in the same news- paper touching the condition of the association on the 22d of January, the 24th of May, and the 9th of June, 1870. None of these reports showed embezzlements upon the part of the cashier or any officer connected with the bank. They were not only not calculated to excite suspicion as to the manner in which the afllairs of the association were managed, but tended to inspire the public with confidence in its prosperity and in the integrity of those to whom its business affairs were committed. Appellants plead and rely upon the statements thus officially promulgated by the officers of the bank as constituting an estoppel upon it to assert against them claims that can not be established without showing that these official reports, made and published in obedience to law, were not true. We are not inclined to the opinion that they can claim immunity upon account of any report 208 ' GRAVES V. LEBANON BANK. [CHAP. IV. made after they became the sureties of Mitchell. The reports are sworn to by him, and it may be assumed that upon his repre- sentations, and upon what appeared from the books of the asso- ciation as kept by him, the directors were induced to certify to their accuracy. The directors may have been negligent in the discharge of their duties, and this negligence may have enabled Mitchell for the time to misappropriate the funds of the bank, and to conceal its true condition by the false reports made to the comptroller of the currency and by false entries upon the books of the association. But this negligence can not avail the sureties who covenanted that their principal should " well and truly perform the duties " of his position and should " well and truly account for all moneys and other valuables that ' might ' pass through his hands." Their covenant is unconditional, and no failure of duty upon the part of the directors of the association, short of actual fraud or bad faith, can be deemed sufficient to exonerate them from its per- formance. The exaction of the bond implies that the association was not willing to rely alone upon the watchfulness and care of the directory. It required in addition to that safeguard that the honesty and fidelity of its cashier should be guaranteed by sureties who were able to make good any losses it might sustain by reason of his negligence or dishonesty. There is a qiiestion, however, arising upon the facts stated in the pleadings and fully sustained by the proof, the decision of which, it seems to this court, must be in favor of the sureties; and this question being decided in their favor, their exoneration from liability on account of Mitchell's misconduct while acting as appellee's cashier, and after the bond was delivered and accepted, follows as a necessary sequence. There is no principle of law better settled than that persons proposing to become sureties to a corporation for the good eon- duct and fidelity of an ofScer to whose custody its moneys, notes, bills, and other valuables are intrusted have the right to be treated with perfect good faith. If the directors are aware of secret facts materially affecting and increasing the obligation of the sureties, the latter are entitled to have these facts disclosed to them, a proper opportunity being presented. (Morse on Bank- ing, 226.) White and Tudor, in their note to the ease of Rees v. Berring- ton (2 Leading Cases in Equity, page 707), state the rule as fol- lows : ' ' Wherever therefore there is any misrepresentation, or SEC. 13.] GRAVES V. LEBANON BANK. ^^^ even concealment' from the surety, of any material fact which had he been aware of he might not have entered into the contract of suretyship, it will thereby be rendered invalid, and the surety will be discharged from his liabilities." The cases cited by the commentators fully sustain the principle as stated. Mr. Justice Story takes even broader ground: " Thus, if a party taking a guaranty from a surety conceals from him facts which go to increase his risk, and suffers him to enter into the contract under false impressions as to the real "state of facts, such concealment will amount to a fraud, because the party is bound to make the disclosure, and the omission to make it under such circumstances is equivalent to an afSrmation that the facts do not exist." (1 Story's Equity Jurisprudence, sec. 215.) The learned judge cites in this connection from Maltby's case (1 Dow, Parliament. Cases) the instance of a party who, knowing himself to have been cheated by his clerk, concealed the fact, applied for security in such a manner and under such circum- stances as held out the clerk as one whom he considered a trust- worthy person, and thereby induced another to become his surety. The contract of suretyship thus obtained was held to be void, the silence under such circumstances being treated as expressive of a trust and confidence held out to the public equivalent to an aflBrmation. It may not be true that the directors of the Lebanon Bank had actual knowledge of the frauds committed by Mitchell while cashier of Burton, Mitchell & Co., nor of the false entries made by him on the books of the institution under their control in order to con- ceal those frauds, but it is true that either with or without ex- amination they published reports of the affairs of the banking institution, the natural if not the necessary effect of which was to mislead the public. That these reports reached the eyes of ap- pellants we can not doubt. They each resided in or near the town of Lebanon, and were subscribers to and readers of the local paper in which the publi- cations were made; and as they were each largely interested as stockholders in the banking institution, it may be assumed that they read and examined at all events the first ofScial statement made by the officers to whom they had intrusted the management of that portion of their estate invested in the stock of the banking association. If it could be shown that the directors were cognizant of the fraud of Mitchell, committed on the first day of his eon- 210 GEAVES V. LEBANON BANK. [CHAP. IV. nection with the bank and in the performance of his first duty as cashier, and that they concealed this fact from these appellants, and permitted the false statement of October 9, 1869, to be for- warded to the comptroller of the currency and published to the world, there could be no shadow of doubt that the concealment and publication would amount to a fraud upon the sureties. It is proper, however, to consider the legal effect of two circum- stances connected with the failure of the directory of the bank, to apprise the sureties of the fraud of Mitchell, and of the publica- tion of October 23d in the Lebanon newspaper. The first is that the directors, or at least so many of them as were sworn as wit- nesses, state that they were not apprised of the perpetration of the fraud. The second is that the report of October 9, 1869, pub- lished on the 23d of that month, was but a statement of the con- , dition of the affairs of the association as shown by its books. Upon the first question it is to be observed that several of the directors, and among them Burton, of the firm of Burton, Mitchell & Co., upon whose indorsement its assets were received by the Lebanon Bank, were not sworn at all; and further, that it ap- pears upon the journal kept by the directory, as of date August 3, 1869, that " the bills of exchange and accounts of the firm of Burton, Mitchell & Co., bankers, having been submitted for ex- amination and examined, it was resolved by the board of directors to receive the same, with the indorsement of Messrs. Burton, Mitchell & Co., and the cashier was directed to transfer the same to the books of the National Bank." Whether this written mem- orandum, kept by the directory as evidence of its official action, is or not conclusive as to the examination of the bills of exchange and accounts of the firm of Burton, Mitchell & Co., need not here be decided. The fact of the examination is not directly con- tradicted by any evidence in the case, and for the purposes of this litigation the presumption should be indulged that it was actually made. From the depositions of the president of the bank, of Wilson, a director, and of Wilkins, who was first the clerk and is now the cashier of the institution, it is manifest that the most cursory ex- amination of the biUs, notes, and accounts turned over to the bank by Burton, Mitchell & Co. would have disclosed a deficit of more than twelve thousand dollars. We cannot, without disregarding the proof before us, fail to conclude that the directory either was advised of this discrepancy in Mitchell's accounts, or that it relied on his representations and SEC. 13.] GRAVES V. LEBANON BANK. ^^^ the indorsement of Burton, Mitchell & Co., and made no examina- tion, notwithstanding the bills, notes, and accounts purchased amounted in the aggregate to more than half as much as the capital of the institution for which they were acting. The directors may not have been bound to notify the sureties of the manner in which this transaction was conducted; but most assuredly these parties had the right, under the circumstances, to presume that in the first business transaction of the bank, involv- ing as it did so considerable an amount, the directory exercised at least slight diligence, and this presumption was greatly strength- ened by the published report appearing on the 23d of the fol- lowing October. A fraud may be perpetrated as well by the assertion of facts that do not exist ignorantly made by one whom the person acting upon the assertion has the right to suppose has used reasonable diligence to inform himself, as by concealing facts known to exist which in equity and good conscience ought to be made known. The publication as to the resources and liabilities of the asso- ciation on the 9th of October, 1869, does not purport to have been made from its books. It was styled " Eeport of the Condition of the National Bank of Lebanon at the close of business October 9, 1869." The resources and liabilities are stated under appropriate heads. The report is sworn to by the cashier, and its accuracy at- tested by three members of the board of directors. There is nothing in the publication to indicate that it was founded upon the books of the association. The clear import of the language used is that it exhibits the actual condition of the aifairs of the bank. It is in proof that the forms furnished by the comptroller of the currency authorized the reports to be made out from the books ; but it is not shown that the sureties knew anything about these forms; and looking to the law defining the duties as well of the comptroller as of the officers of the bank, they would acquire no such information. The 34th section of the currency act requires every association organized under its provisions at stated times to make reports to the comptroller, which " shall exhibit in detail and under appro- priate heads the resources and liabilities of the association before the commencement Of business on the morning of the first Monday of the months of January, April, July, and October of each year." The amendment of March 3, 1869, requires five of these reports each year, to be verified by the oath or affirmation of the presi- 212 GRAVES V. LEBANON BANK. [CHAP. IV. dent or cashier and attested by the signature of at least three of the directors, each of which is to be published in a newspaper published in the place where the association does business, if there be one, and if not, then in a newspaper published in the county- nearest thereto. This amendment provides, as did the original act, that the resources and liabilities of the association shall be reported; and as conclusive evidence that the actual and not the apparent resources and liabilities are to be reported, the comp- troller is empowered by the amendatory act to call for special reports from any particular association whenever in his judgment it shall be necessary, " in order to a full and complete knowledge of its condition." It seems therefore that before the delivery and acceptance of the cashier's bond, and before appellants had become guarantors for his diligence, honesty, and fidelity, the banking association, pursuant to the provisions of the law to which it owed its exist- ence, published to them and to the world a statement of its condi- tion, from which it appeared that its affairs were being prudently and honestly administered, and from which they and the public had the right to believe that the cashier, to whom had been in- trusted the moneys, notes, and valuables of the bank, had up to that time acted as a trustworthy person. If the sureties acted upon the impression thus created by the affirmative act of the party now claiming to enforce the stipula- tions of their bond, it is plain that they should be discharged from liability. For reasons satisfactory to our minds we have already decided that it should be presumed that the sureties did read and examine the report published in the Clarion of the 23d of October, 1869. It yet remains to be determined whether the bond was accepted before or after that time. It bears no date except, "the day , 1869." The legal presumption therefore is that it did not become binding on the bondsmen until the last day of that year. The bank fails to show the exact date of its delivery. One of the directors gives it as his recollection that it was about the 1st of October, 1869. The president and one other director fix the time of delivery at about the 1st of November, 1869, and the presi- dent states as a circumstance conducing to sustain his recollection that he was in that year a member of the State legislature, and that the bond was handed to him a month or more before he left for Frankfort, which was early in December. The directory itself SEC. 13.] GRAVES V. LEBANON BANK. 2113 was not willing to fix the date of the acceptance of the bond, and in an order entered upon its minute-book, purporting to record the action of the board at the time of its approval, neither the month nor the day is given. Considering the presumption arising from the want of a spe- cific date to the bond and the preponderance of the testimony offered by the bank itself, we conclude that it was not accepted earlier than the 1st of November, 1869, about one week subse- quent to the publication of the report of October 9th of that year. We have therefore a case in which the directory of the bank held out to others as a trustworthy officer a man who had been guilty of repeated embezzlements and frauds, all of which might have been discovered by the exercise of slight diligence. However in- nocently the publication tending to show that Mitchell was an honest and faithful officer may have been made, the fact remains that the public had the right to act upon the presumption that the three directors attesting the accuracy of the statements con- , tained in the publication had made some investigation at least to inform themselves as to the matters to which it related. The effect of the published report was to inspire the public with confidence in the officers of the bank, to disarm suspicion, and to prevent inquiry. The losses occasioned by the fraudulent appropriations by Mitchell of the bank's money after the acceptance of his bond must fall upon either the association or upon his sureties. The latter are free from blame. They acted in the matter with reason- able prudence and discretion. They relied upon the truth of rep- resentations made by those having the right to speak for the bank. These representations have turned out to be untrue. Had the sureties suspected that they were untrue, . it can not be supposed they would have entered into the contract of surtyship. Such being the case, the contract must be adjudged invalid. The judgment against the sureties is reversed, and the cause re- manded with instructions to dismiss appellee's cross-petition. The implied duty of the creditor to communicate to the surety facts known to be of such a character as to materially affect the risk is considered in a number of cases where the suretyship promise is solicited by the principal and where the creditor has no communication with the surety prior to the execution of the contract. Lee V. Jones, 17 C. B. (N. S.) 482. In this ease the principal was in de- fault on the date of the execution of the bond, which was well known to the "reditor. The bond was solicited by the principal without the intervention of the creditor and this was held to be a fraud on the surety; the Court says: 214 ^ LIEBEEMAN V. BANK. [CHAP. IV. " The argument for the plaintiffs before us was, in substance, that, under such circumstances, though there might be a concealment or non-disclosure of material facts, there was not and could not be any misrepresentation on the plaintiff's part; and that, without it, there could be no fraud • » » Now, whether the handing the agreement by the plaintiff's to the defendant amounted to an inaccurate representation or not, depends, as I think, on the question whether in such a transaction as that described in the agreement, it might or might not naturally be expected that the masters might have al- lowed a balance of this extent to accumulate, and might have allowed the account to stand over unsettled for so long a time. • * * xhe improba- bility that anyone could suppose that sureties would have entered into such an agreement if they had known the truth, is so great that the jury might well think that the plaintiffs knew that the defendant was in ignorance of it." See also Sooy v. State of New Jersey, 39 N. J. L. 135 where the bond of the treasurer of the State was accepted without any communication be- tween the parties, except that the State furnished the form of the bond. The fact of a previous defalcation being known to the State, it was held to be a fraud not to disclose this to the surety, and it is placed upon the ground that the continuance of the Treasurer in office amounts to a tacit asserton by the State that his past conduct was regular, and the silence of the State equiva- lent to deceit. NATHAN LIEBEEMAN v. FIRST NATIONAL BANK. 2 Penn. (Del.) 416 (1900). Mr. Benjamin Nields, for appellant. Mr. Lewis G. Yandegrift, for appellees; Lore, Ch. J., delivered the opinion of the court. Nathan Lieberman, the appellant, one of the sureties on two official bonds of Peter T. E. Smith, late paying teller of the First National Bank of Wilmington, has appealed in this case from the decree of the chancellor made December 3, 1898, which dissolved a preliminary injunction granted by the late Chancellor Wolcott November 6, 1893, restraining the bank from collecting the amount of certain defalcations of Smith, made by him while acting as teller of the said bank. The bonds bore date, respectively, No- vember 1, 1879, and July 6, 1885. Each bond was in the penal sum of $15,000, and set forth that said Smith had been duly elected and chosen teller of the bank during the pleasure of the board of directors ; that each was conditioned for the faithful discharge of the duties of his office as teller of the said bank. Annexed to each bond was a joint and several warrant of attorney to enter judgment thereon. During the life of the first bond, between November 1, 1879, and July 6, 1885, Smith fraudulently abstracted funds of the bank to the amount of $11,650. During the life of SEC. 13.] LIEBEEMAN V. BANK. 215 the second bond, between July 6, 1885, and July 5, 1891, he so abstracted $27,750. These defalcations were iraudulently con- cealed by false entries made by Smith on the books of the bank. The defalcations were discovered about February 18, 1893, and a confession was made by Smith. Upon the 24th day of February, 1893, judgment was entered in the Superior Court of the State of Delaware on each of said bonds; said judgments being No. 299 to February terni, 1893, on the bond of November 1, 1879, and No. 301 to the said term on bond of July 6, 1885. On the latter judgment, execution was issued October 19, 1893, and thereunder the goods and chatties of Lieberman were taken in execution, and further proceedings were restrained by the preliminary injunction of November 6, 1893. The chief assignments of error relied on and urged in the brief and argument on behalf of the appellant were (1) that the bonds were void as to Lieberman because he was induced to become surety thereon by fraudulent representations of the respondent; (2) that, at the time of th'i entry of the judgments, action on the bonds was barred by the statute of limitations. 1. The appellant contends that under the evidence in this case there is clear proof that immediately before complainant became surety on the bond of November 1, 1879, he had a conversation with George D. Armstrong, cashier of said bank; that Armstrong then told him that he would run no risk in becoming surety for Smith, as he was " a good, reliable, honest man, and his accounts are all straight, and as paying teller he cannot take anything," and that he had read the published statements of the bank, show- ing its then resources and liabilities ; that immediately before com- plainant became surety on the bond of July 6, 1885, he had a further conversation with George D. Armstrong, cashier of the bank; that Armstrong then told him that Smith's books and every- thing were straight, and that ' ' there was no risk whatever in going on his bond again;" and that he had read the statements of the bank, with its then resources. Complainant avers that he was in- duced to become surety for Smith because of such statements made to him by the cashier, and by the published reports of the bank, showing its resources and liabilities, immediately before he became surety; that these reports were made and published pursuant to an act of Congress, and the cashier, who made oath thereto, and the directors, who certified to the correctness thereof, did so under the authority conferred upon them, and in discharge of a duty imposed upon them by law ; that, from the facts thus proved, the 25 216 LIEBERMAN V. BANK. [CHAP. IV. bonds signed by the complainant are void as to him because he became surety thereon by reason of such fraudulent representa- tions of the respondent. It nowhere appears in the testimony that Armstrong, the cashier, was authorized by the bank in any way to make representations in this matter of surety on Smith's bonds or that it was in the line of his duty as cashier to do so. Any statements made by him to Lieberman as to Smith's honesty, the condition of his books and accounts, and the probable risk to his surety could, therefore, in no wise bind the bank. Lieberman took them at his own risk, as the individual judgments of Arm- strong. The Supreme Court of Kentucky, in Graves v. Lebanon Nat. Bank, 10 Bush. 23, held that published reports of the assets and liabilities of a national bank, under the acts of Congress, which were false, but which, under the proof, induced a person to become surety on the official bond of the cashier of the bank, made the bond void as to such surety, and relieved him from liability thereon. The contrary doctrine is maintained in Ashuelot Sav. Bank v. Albee, 63 N. H. 152, where, after reviewing the Graves case, the court says: Such " report was not due to persons con- sidering the question of becoming sureties of the treasurer. It was a duty imposed by statute for the benefit of depositors, and not to enable a reader of the published reports to determine whether the treasurer was a man whose official bond he could safely sign." This reason applies with equal force to the case now before us. It is difficult to perceive upon what principle of law or equity such published reports of the bank can be held as an inducement to Lieberman to become surety on Smith's bond. They were not made by the bank for that purpose. Their publi- cation from time to time had no relation to such suretyship, nor did they disclose upon their face whether Smith was honest or dishonest. If Lieberman saw fit to draw from such reports the conclusion that he could safely become surety on Smith's official bond, it was unquestionably his own volition, and without par- ticipation of the bank, and for which the bank should not be held responsible. There seems to be, therefore, nothing either in the statements of the cashier, Armstrong, or in the published reports- of the bank, that would relieve Lieberman of his liability as surety on the bonds. ************** The testimony in this case discloses no such laches as would discharge the surety. It shows that Smith was generally esteemed as an honest and capable officer ; that the usual examinations of the condition of the bank from time to time were had both by; SEC. 14.] SURETY CO. V. PAULEY. 217 the officers of the bank and by a government examiner; that no suspicion of the defalcations of Smith existed in the mind of anyone at any time prior to February, 1893 ; that Lieberman made no request for an examination of Smith 's accounts ; that the defal- cations were therefore concealed by Smith, who was a skilled ac- countant. There is no claim that the bank did not exercise good faith towards the surety at all times. ******** Now, therefore, it is ordered, adjudged, and decreed that the said the First National Bank of Wilmington, the respondent, have liberty to collect on each of its judgments entered on each of the said bonds in the Superior Court of the State of Delaware, in and for Newcastle county, against Nathan Lieberman, the appellant, the sum of $15,000, with interest thereon from the 3d day of December, 1398, the date of the said decree, and the date of the authoritative and legal ascertainment of the amount due on each of the said bonds. And it is further ordered that the appellant pay the costs in this case within three months, or attachment issue. Accord. — Tapley v. Martin, 116 Mass. 275; Franklin Eanic v. Stephens, 39 Me. 532; Farmington v. Stanley, CO Me. 472; Wayne v. Bank, 52 Pa. 343; Anaheim Co. v. Parker, 101 Cal. 483; Bowne v. Mt. Holly Bank, 45 N. J. 360. Sec. 14. TTnanthorized representations made by ag^ents of the cred- itor. AMERICAN SURETY CO. v. PAULEY. 170 U. S. 133 (1898). Mr. Henry C. Willcox and Mr. Walter D. Davidge, for plaintiff in error. Mr. Walter D. Davidge, Jr., was on their brief. Mr. Edward Winslow Paige, for defendant in error. Me. Justice Harlan delivered the opinion of the court. The defendant in error as receiver of the California National Bank of San Diego, California, brought this action against the plaintiff in error, a corporation of New York, upon a bond cf the latter for $15,000 guaranteeing or insuring the bank, subject to certain conditions against any act of fraud or dishonesty commit- ted by George N. O'Brien in his position as cashier of that insti- tution. This bond was based upon an application by O'Brien to the Surety Company accompanied by written declaration and answers to questions relating to his age, history, habits, financial condition, 218 SURETY CO. V. PAULEY. [CHAP. IV. etc. He presented with the application the following certificate, signed by J. W. Collins as president of the bank: " I have read the foregoing declarations and answers made by George N. 'Brien, and believe them to be true. He has been in the employ of this bank during three years; and to the best of my knowledge has always performed his duties in a faithful and satisfactory man- ner. His accounts were last examined on the 28th day of March, 1891, and found correct in every respect. He is not to my knowl- edge, at present in arrears or in default. I know nothing of his habits or antecedents affecting his title to general confidence, or why the bond he applies for should not be granted to him." The bond was executed July 1, 1891. After reciting that the employe, O'Brien, had been appointed in the service of the em- ployer, the bank, had been assigned to the officer or position of cashier, and had applied to the American Surety Company of New York tor a bond. «««HcH:4:«4:4s4s4:*** On the application of Collins, a bond, with like conditions, was made the same day by the Surety Company in the penalty of $25,000 guaranteeing the hank against loss by any act of fraud or dishonesty on his part as its president. The complaint set out certain acts of fraud and dishonesty by O'Brien in his ofSee of cashier whereby, it was alleged, the hank lost an amount in excess of that named in the bond. All the ma- terial allegations of the complaint were denied by the answer. The result of the trial was a judgment in favor of the plaintiff for $16,847.50, which was the amount of the bond with interest. * « On the 13th and 14th day of October, 1891, O 'Brien, being cash- ier, fraudulently and dishonestly placed to the credit of Collins, the president of the bank, two sums, $20,000 and $24,500. The bank suspended business on the 12th day of November, 1891, at which time Collins had to his credit on its books only $11,420.90. Of the above sums aggregating $44,500 falsely cred- ited to him, he drew out, on his own checks, $33,029.10, which was wholly lost to the bank. ************* In its charge to the jury the trial court called attention to an- other defence made by the company, namely, that the bond was void by reason of fraudulent misrepresentations and concealments of Collins acting as the president of the bank. The court said: "It is said that this bond of indemnity was obtained upon an application which was certified to by the bank itself, and that in the application facts were misrepresented and facts were con- SEC. 14.] SURETY CO. V. PAULEY. 219 cealed with fraudulent intent on the part of the bank; therefore that the bond is void. The application was accompanied by a cer- tificate of Collins, the president of the bank. The only knowledge of any facts which ought to have been communicated, or were misrepresented, the only knowledge which the bank possessed at the time that application was made, was the knowledge of Collins himself. Ordinarily a corporation, like any other principal, is chargeable with the knowledge of any facts which are known to its agents; but in this case all these transactions, if there were any transactions of a fraudulent and dishonest character on the part of the cashier, were transactions for the benefit of Collins, and he was a participator in the fraud, and under those circumstances the law does not infer that the ageut or the officer will communicate the fact to his principal, the corporation, and under such circum- stances the corporation is not bound by his knowledge. So this defence melts away and there is nothing of it whatever." The company insists that in obtaining the bond in suit Collins acted for the bank, and as a corporation can only speak by agents, the bank is responsible for any false or fraudulent statements in the certificate given by Collins to the Surety Conatpany, and which he signed as president of the bank. In support of its contention the company cites Franklin Bank V. Cooper, 36 Maine 179, 197; Graves v. Lebanon Nat. Bank, 10 Bush. 23, 29; Veazie v. Williams, 8 How. 134, 156; Bennett v. Judson, 21 N. Y, 239 ; Nat. Life Ins. Co. v. Minch, 53 N. Y. 144, 149 ; Holden v. New York & Erie Bank, 72 N. Y. 286, 292 ; Elwell V. Chamberlin, 31 N. Y. 611, 619. ********** Without stopping to consider whether each of the above cases was correctly decided, it may be observed that those relating to sureties in bonds given to corporations arose directly between the" sureties and corporations represented by their boards of directors or by some of their officers acting within the authority conferred upon them; and that those relating to the liability of a principal by reason of the acts or representations of his agent, arose out of the agent's acts or declarations in the course of the business entrusted to him. None of the cases cited embrace the present one. In the first place, the procuring of a bond for O'Brien, in order that he might become qualified to act as cashier, was no part of the business of the bank nor within the scope of any duty imposed upon Collins as president of the bank. It was the business of O'Brien to ob- tain and present an acceptable bond. And it was for the bank, by 220 StJRETT CO. V. PAULEY. [CHAP. IV. its -constituted authorities, to accept or reject the bond so pre- sented. The bank did not authorize Collins to give, nor was it aware that he gave nor was he entitled by virtue of his office as president to sign, any certificate as to the efficiency, fidelity or integrity of O'Brien. No relations existed between the bank and the Surety Company until O'Brien presented to the former the bond in suit. What therefore Collins assumed in his capacity as president to certify as to O'Brien's fidelity or integrity, was not in the course of the business of the bank nor within any authority he possessed. He could not create such authority by simply as- suming to have it. The Circuit Court of Appeals, speaking by Judge Lacombe, well said that there were many acts which the president of a bank may do without express authority of the board of directors, in some eases because the usage of the particular bank impliedly authorized them, in other cases because such acts were fairly within the ordinary routine of his business as president; but that the making of a statement, as to the honesty and fidelity of an employe for the benefit of the employe, and to enable the latter to obtain a bond insuring his fidelity, was no part of the ordi- nary routine business of a bank president, and there was nothing to show that by any usage of this particular bank such function was committed to its president. It must therefore be taken, as between the».-bank and the com- pany, that the former cannot be deemed, merely by reason of Collins' relation to it, to have had constructive notice that he as president gave the certificate in question. The presumption that the agent informed his principal of that which his duty and the interests of his principal required him to communicate does not arise where the agent acts or makes declara- tions not in execution of any duty that he owes to the principal,, nor within any authority possessed by him, but to subserve simply his own personal ends or to commit some fraud against the prin- cipal. In such cases the principal is not bound by the acts or declarations of the agent unless it be proved that he had at the time actual notice of them, or having received notice of them, failed to disavow what was assumed to be said and done in his behalx. ****************** In his treatise on Equity Jurisprudence, Pomeroy says: " It is now settled by a series of decisions possessing the highest au- thority that when an agent or attorney has, in the course of his employment, been guilty of an actual fraud contrived and carried out for his own benefit, by which he intended to defraud and did SEC. 14.] FIDELITY CO. V. COURTNEY. 221 defraud his own principal or client, as well as perhaps the otheir party, and the very perpetration of such fraud involved the neces- sity of his concealing the facts from his own client, then under such circumstances the principal is not charged with constructive notice of facts known by the attorney and thus fraudulently con- cealed." Vol. 2, § 675. Further citation of authorities would seem to be unnecessary to support the proposition that if Collins gave the certificate that he might, with the aid of O'Brien as cashier, carry out his purpose to defraud the bank for his personal benefit, the law will not pre- sume that he communicated to the bank what he had done in order to promote the scheme devised by him in hostility to its interests. In our judgment the Circuit Court of Appeals correctly held that plaintiff's right of action on the bond was not lost because its president, Collins, made to the defendants false representations as to the cashier's honesty; and that when two officers of a corpora- tion have entered into a scheme to purloin its money for the benefit of one of them, " in pursuance of which scheme it becomes neces- sary to make false representations to a third person ostensibly for the bank, but in reality to consummate such scheme and for the benefit of the conspirators, and not in the line of ordinary routine business of such officers and without express authority, the cor- poration being ignorant of the fraud, the officers are not in thus consummating such theft the agents of the corporation." * * # Having considered, all the questions which, in our judgment, need to be examined, and perceiving no error of law in the record to the prejudice of the substantial rights of the Surety Company, the judgments of the Circuit Court and the Circuit Courts of Appeals are Affirmed. Accord. — U. S. Fidelity & Guaranty Co. v. Muir, 115 Fed. Rep. 264; Per- petual Building & Loan Assn. v. Fidelity & Guaranty Co., 118 Iowa, 733; Taylor v. Commercial Bank, 174 N. Y. 185. FIDELITY & DEPOSIT CO. v. COURTNEY. 186 U. S. 342 (1902). Action brought by the receiver of the German National Bank of Louisville to recover upon a bond of indemnity conditioned to hold the bank harmless against loss by reason of any fraud of Jacob M. McKnight, the President of the Bank. The answer of the surety alleged that the bond was executed FIDELITT CO. V. COURTNEY. [CHAP, IV. relying upon certain statements of the cashier of the bank, that the books of McKnight had been examined and found to be correct and that these statements were false. Mr. Thomas A. Whelan and Mr. Edward J. McDermott, for pe- titioner. Mr. St. John Boyle was on their brief. Mr. W. M. Smith, for defendant in error. Me. Justice White delivered the opinion of the court. We shall consider under separate headings the several proposi- tions upon which reliance is placed to demonstrate that error was committed by the trial court. *********** 4. The court erred in refusing to permit the defendant to read as evidence to the jury a letter of Edwin Warfield, president of the defendant, and dated May 15, 1896, and addressed to the Ger- man National Bank of Louisville, Kentucky, and also the reply of R. E. Reutlinger, the cashier of the said bank> written on May 29, 1896, addressed to the defendant, said lett6r having been an in- quiry by the president of the defendant as to the renewal of the bond of McKnight, and the response being an assurance by the cashier of the bank that McKnight had up to that time performed his duties in an acceptable and satisfactory manner, and he, the cashier, knew of no reason why the bond should not be continued. These letters, it being contended, were erroneously excluded on the ground that it had not appeared from the evidence that there was special authority from the board of directors to the cashier to write the letter of response of May 29, 1896. Further, the court also, it is asserted, erroneously refused to allow the defendant to prove by circumstantial evidence that the board of directors' se- lected the bondsman of McKnight and paid for the bond, and that the said cashier was acting in this matter with the knowledge and for the benefit and with the approval of the board of directors. We are constrained to the conclusion that error was committed in rejecting the evidence referred to in the foregoing contention. It was competent for the defendant to show that the bank had concerned itself in and about the obtaining of the bond and re- newals in such manner as to cause the transaction to become in effect the business of the bank. The bank had notice from the terms of the original bond that it was issued in reliance upon statements and representations made on its behalf to the surety company, and that, in the ordinary course, renewals, which were to be optional with the surety company, might also be based upon further statements to be made on behalf of the bank. Thus, in the original bond, it was recited that " The said employe has de- SEC. 14.] FIDELITY CO. V. COURTNEY. 223 livered to the company a certain statement, it being agreed and understood that such statement constitutes an essential part of the contract hereinafter expressed." It was a reasonable and proper precaution, in anticipation of a desired renewal, to pro- pound the inquiries which were submitted by the surety company. The inquiry v/as contained in a written communication, addressed to the bank, it was received by the bank, and it was proper to presume that it was delivered to the official who made reply thereto, by authority of the bank, he being the executive officer who was charged with conducting the correspondence of the bank. We think the making of the certificate was an act done in the court of the business of the bank, by an agent dealing with the surety com- pany for and on behalf of the bank. It did not purport to be, nor was it designed to be, the mere personal representation of the individual who filled the office of cashier, but it was an ofificial act, performed on behalf of the bank. The information solicited was such as was proper to be asked of and communicated by the bank, and as the renewal was presumably made upon the faith of the statements contained in the certificate, the bank ought not to be heard, while seeking to obtain the benefits of the stipulations agreed to be performed by the surety, to deny the authority of its officer to make the representations which induced the surety to again bind itself to be answerable for the faithful performance by McKnight of the duties of his employment. Railway Companies V. Keokuk Bridge Co., 131 U. S'. 371. In Guarantee Co. v. Me- chanics' &c. Co., 183 U. S. 402, this court recognized as binding upon the bank a certificate given by one of its officers embodying replies to questions asked ' by the guarantee company respecting one of the employes of the bank, although no proof was introduced that special authority had been conferred upon the officer to make the certificate. Nor does the ruling in American Surety Company V. Pauly, 170 U. S. 156, warrant the claim that it is an authority against the admissibility of the certificate here in question. In the bond considered in the Pauly case, it was not agreed that the state- ment of the president, upon which the bond was obtained should be the basis of the bond. The answers made by the person who was president of the bank to the interrogatories of the surety com- pany were but mere commendations by one individual of another individual, at a time when, as said by the court, " no relations ex- isted between the bank and the surety company." Again, in the Pauly case, no letter of inquiry was addressed to the bank, unlike the practice pursued with respect to the renewal here in contro- 224 FIDELITY CO. V. COUHTNEY. [CHAP. IV. , versy, and the letter, whose contents in the Pauly case was claimed to be binding on the bank, was written by one who was not charged with the duty of conducting the correspondence of the bank. As held in Xenia Bank v. Stewart, 114 U. S. 224, a communication which on its face evidences that it was written by the cashier of a bank, should not be excluded from the jury as not being an act of the bank, where " it appears with reasonable certainty to have regard to the business of the bank. ' ' In the case at bar it is mani- fest these elements were present, and the exclusion of the certifi- cate, as also of the evidence designed to establish that the giving of the certificate was an act done in the course of the business of the bank, was erroneous. 4:4G^ii4ss|c«:^*:ll:lc;lc^* 5. The trial court erred in not instructing the jury that the knowledge possessed by an ofiScer or director of the bank, of the fraudulent purposes of McKnight, though such knowledge had not been communicated to the bank, should be treated as the knowledge of the bank; and also erred in not instructing the jury that the knowledge which any officer or director of the bank might have acquired of the fraudulent conduct of McKnight, if such officer or director had exercised customaj-y supervision, should be imputed to the bank. , The questions which these propositions embrace were raised by the exceptions taken to certain pc rtions of the charge to the jury, referred to in the record as instructions Nos. 5, 6 and 7. In in- struction No. 5 the court told th6 jury, in general terms, that the bank, under the stipulations contained in the bond, owed to the surety the duty of exercising due and customary supervision over McKnight to prevent the commission by him of fraudulent acts, and further instructed that if the bank knewof the fraudulent purposes of McKnight in connection with the drafts and checks upon which recovery was sought, the surety would not be liable. Exception was taken to this instruction, on the ground that it " did not submit correctly to the jury consideration of knowledge on the part of the officers or directors of the bank other than Mc- Knight, which they had, or would have had, if customary super- vision had been exercised." Instruction No. 6, and the objection made to it, reads as follows : "I do not think that the knowledge of a cashier of a bank, speaking generally, is the knowledge of the bank as to any matter that does not come within the customary or ordinary duties of a cashier or those which have been specially imposed upon him by the action of the bank. I do not think Mr. R. E. Reutlinger, in SEC. 14.] FIDELITY CO. V. COURTNEY. 225 this case, in respect to any matter which he knew or could do, rep- resented the bank, if it was outside of his ordinary duties; and I do not recall anything that he knew, so far as the proof shows that would in anywise affect the liability of the defendant in this case. ' ' Objection was made to the foregoing portion of the charge, on the ground that the knowledge of the cashier of the acts of Mc- Knight in respect to his overdrafts, his transactions in connection with the $2000 note signed by the two aldermen and with the Qhecks to Edmunds, and the several checks for McKnight's indi- vidual account, was the knowledge of the bank, and that the jury should have been sp told. Instruction No. 7 dealt with the $2000 note transaction. In ef- fect, the jury were instructed that the knowledge of the cashier acquired in the performance of his duties might be imputed to the bank, but that the vice president or an individual director did not hold such an official relation to the bank as that his knowledge of wrongdoing by IVIcKnight, if not communicated to the bank, could be treated as the knowledge of the bank. We do not deem it necessary to analyze the instructions given by the court for the purpose of determining whether they were in all respects accurate, because we are of the opinion that if the court in anywise erred it was in giving instructions which were more favorable to the defendant surety than was justified by the principles of law applicable to the case. It is well settled that, in the absence of express agreement, the surety on a bond given to a corporation, conditioned for the faith- ful performance by an employe of his duties, is not relieved from liability for a loss within the condition of the bond by reason of the laches or neglect of the board of directors, not amounting to fraud or bad faith, and that the acts of ordinary agents or em- ployes of the indemnified corporation, conniving at or cooperating with the wrongful act of the bonded employe, will not be imputed to the corporation. United States v. Kirkpatrick, (1824 9 Wheat. 720, 736; Minor v. Mechanics' Bank, (1828) 1 Pet. 46; Taylor v. Bank of Kentucky, (1829) 2 J. J. Marshall (Ky.) 564; Amherst Bank v. Root, (1841) 2 Metcalf, 522; Louisiana State Bank v. Ledouz, (1848) 3 La. Ann. 674; Pittsburg, Fort Wayne & Chicago By. Co. V. Schaeffer, (1868) 59 Penn. St. 350, 356; Atlas Bank v. Brownell, (1869) 9 Rhode Island 168. The doctrine of these cases is thus epitomized in 59 Penn. St. 357 : " Corporations can act only by officers and agents. They do 226 FIDELITY CO. V. COURTNEY. , [CHAP. IV. not guaranty to the sureties of one officer the fidelity of the others. The rules and regulations which they may establish in regard to periodical returns and payments are for their own security, and not for the benefit of the sureties. The sureties, by executing the bond, became responsible for the fidelity of their principal. It is no collateral engagement into which they enter, dependent on some contingency or condition different from the engagement of their principal. They become joint obligors with him in the same bond, and with the same condition underwritten. The fact that there were other unfaithful officers and agents of the corporation, who knew and connived at his infidelity, ought not in reason, and does not in law or equity, relieve them from their responsibility for him. They undertake that he shall be honest, though all around him are rogues. Were the rule different, by a conspiracy between the officers of a bank or other moneyed institution, all their sure- ties might be discharged. It is impossible that a doctrine leading to such consequences can be sound. In a suit by a bank against a surety on the cashier's bond, a plea that the cashier's defalcation was known to and connived at by the officers of the bank, was held to be no defence. Taylor v. Bank of Kentucky, 2 J. J. Marsh. 564." So, also, in 3 La. Ann. 674, the court, after suggesting the dis- tinction between the knowledge of the governing body of a bank, the board of directors, of the default of a bonded employe,, and the knowledge of such default by another officer or employe, not communicated to the board, thus tersely stated the applicable doc- trine (p. 684) : " It cannot be said that if one servant of a bank neglects his duty, and by his carelessness permits another servant of the bank to commit a fraud, the surety of the fraudulent servant shall be thereby discharged." And see American Surety Co. v. Pauly, 170 U. S. 156, 157, and eases cited. In other words, the principle of law discussed in the case of The Distilled Spirits, 11 Wall. 356, viz., that the knowl- edge of an agent is in law the knowledge of his principal, is in- tended for the protection of the other party (actually or con- structively) to a transaction for and on account of the principal had with such agent. In the very nature of things, such a prin- ciple does not obtain in favor of a surety who has bonded, one officer of a corporation, so as to relieve him from the obligations of his bond, by imputing to the corporation knowledge acquired by another employe subsequent to the execution of the bond, (and from SEC. 14.] FIDELITY CO. V. COURTNEY. 227 negligence or wrongful motives, not disclosed to the corporation,) of a wrong committed by the official whose faithful performance of duty was guaranteed by the bond. As the rule of imputation to the principal of the knowledge of an agent does not apply to such a case, it must follow that it can only obtain as a consequence of an express provision of the contract of suretyship. Was there such a provision in the bond now under consideration ? ^ Now the clause of the bond sued on, and as to which the court was instructing the jury in the portions of the charge under consid- eration, is as follows: " ' That the employer shall observe, or cause to be observed, due and customary supervision over the employe for the preven- tion of default, and if the employer shall at any time during the currency of this bond condone any act or default upon the part of the employe which would give the employer the right to claim hereunder, and shall continue the employe in his service without written notice to the company, the company shall not be re- sponsible hereunder for any default of the employe which may oc- cur subsequent to such act or default so condoned. ' ' ' Manifestly, this stipulation is not fairly subject to the con- struction that it was the intention that the neglect or omission of a minority in number of the board of directors or the neglect or omission of subordinate officers or agents of the bank should be treated as the neglect or omission of the bank. The provision is not that a minority in number of the board of directors or that subordinate officers or agents would exercise due and customary supervision, and would not condone a default of the bonded em- ploye or retain him in his employment after the commission of a default, but the agreement is that the bank would do or not do these things. This in reason imports that the things forbidden to be done or agreed to be done were to be either done or left undone by the bank in its corporate capacity, speaking and act- ing through the representative agent empowered by the charter to do or not to do the. things pointed out. To hold to the contrary would imply that the bond forbade the doing of an act by a per^ son who had not power to perform or command performance by one who could not perform. Assuredly, therefore, the conditions em- bodied in the stipulation to which we have referred, both as to doing and non-doing, contemplated in the reason of things the execution of the duties which the contract imposed on the bank, either by the governing body of the bank, its board of directors, or by a superior officer, such as the president of the bank, having a 228 FIDELITY CO. V. COURTNEY. [CHAP. IV. general power of supervision over the business of the corporation, and vested with the authority to condone the wrongdoing or to discharge a faithless employe. That is to say, the stipulation in all its aspects undoubtedly related to the bank, acting through its board of directors or through an official who, from the nature of his duties, was in effect the vice principal of the bank. The de- cision in Guarantee Co. v. Mechanics' &c. Co., 183 U. S. 402, it may be remarked, in passing, is not antagonistic to the views we have just expressed^ because in that case aU the information which was held imputable to the bank had been communicated to the president of the bank. Now, applying the principles previously expounded to the case in hand, it is evident that the court rightly refused to instruct the jury that the mere knowledge of one or more directors, less than a majority of the board, and of the vice president of the bank, of the default of the president, was imputable to the bank. Indeed, as we have previously said, when the charge which the court gave is considered, it is apparent that the court went quite as far as the law warranted, in favor of the defendant, since the court instructed that knowledge acquired by the cashier in the course of the business of the bank, and not communicated by him to the board of directors, should be regarded as the knowledge of the bank. 6. The Court of Appeals erred in affirming the action of the trial court in instructing the jury that the carelessness of the directors in the management of the bapk was not an issue for them to consider. In considering the clause of the charge to the jury which pro- vided that " due and customary supervision over the employe" should be observed " for the prevention of default," the trial court told the jury that it imported " a reasonable vigilance upon the part of the bank to prevent defaults," that is, to prevent the commission of fraudulent acts by McKnight. To instruct the jury in broad terms that if they found that the directors were careless in the management of the bank generally they should find for the defendant, could only have served to mislead. The court did not err in refusing the requested instruction. Judgment affirmed. Mr. Justice Gray and Mr. Justice Brewer did not hear the argument and took no part in the decision of this ease. Accord. — Issaquab Coal Co. v. U. S. Fidelity & Guaranty Co., 126 Fed. Eep. 92. SEC. 15.] PHILLIP V. FOXALL. 229 Sec. 15. Failure to disclose facts coming to the knowledge of the creditor after the execution of the contract. PHILLIP V. POXALL. L. K. 7 Q. B. 666 (1872). F. M. White, in support of the demurrer. Willis, contra. QuAiN, J. This is an action brought by the plaintifiE on a con- tract whereby the defendant guaranteed the honesty of one John Smith, a servant in the employ of the plaintiff, to the extent of £50. The contract is set out in the declaration, and recites the employment by Smith, and that it was his duty to collect money for the plaintiff, and account to her for all sums of money so col- lected, and that the plaintiff had before the giving of the guarantee held in her hands a sum of money belonging to Smith as a security for the proper performance by Smith of his duty, which sum the plaintiff had agreed to pay back to Smith on receiving the de- fendant's guarantee. The declaration then proceeds to allege that in consideration that the plaintiff would pay over to Smith the money so held, and continue him in the service of the plaintiff in the same capacity as before, the defendant guaranteed and prom- ised the plaintiff to make good and be answerable to her for any loss, not exceeding £50, which she might at any time sustain through any breach by Smith of his duty during the continuance of such service; and it alleges a breach, in the usual form, that Smith failed to pay over sums of money to the amount of £50 which he had collected on behalf of the plaintiff. In answer to this declaration the defendant divides the time during which the service lasted, and during which the loss was sustained, into two periods : first, from the 8th of June, 1869, when the contract was made, to the 20th of November, 1869 ; and, sec- ondly, from the last-mentioned day to the 4th day of April, 1871, when the service terminated. As to the first period the defendant admits his liability for loss incurred by the acts of the servant during that period, and he has paid £10 into court, which he alleges is sufficient to reimburse the plaintiff for such loss. As to the second period he pleads a plea on equitable grounds, which is to this effect : — that the servant had been guilty of defalcations in the course of his service between the 8th of. June and the 20th of November, 1869, which the plaintiff had discovered on the latter day, and that the plaintiff then, without communicating such 230 PHILUP V. FOXAUj. [chap. IV. discovery to the defendant, and while the defendant was ignorant of the servant's dishonesty, agreed with the servant to continue him in her employ as before, and the servant on the other hand agreed to pay to the plaintiff £3 a month on account of the previous defalcations. The plea then alleges that the servant was continued in the plaintiff's service accordingly on those terms. The plea then goes on to state, that the loss in respect of which the plea is pleaded was occasioned by acts of dishonesty committed by the servant during the continuance of the service, as so agreed on, after the 20th of' November, and between that time and the termination of the service, the defendant during that time being wholly ig- norant of the previous defalcations of the servant; and that by reason of the plaintiff not having given the defendant notice of such defalcations he was prevented from revoking the guarantee. To this plea the plaintiff has demurred, and the question ar- gued before us was whether the plea afforded a good defence to so much of the cause of action as it was pleaded to, namely, the loss occasioned by the defalcations of the servant committed between the 20th of November and the end of the service. We are of opinion that the plea is good. We think that in a case of a continuing guarantee for the hon- esty of a servant, if the master discovers that the servant has been guilty of acts of dishonesty in the course of the service to which the guarantee relates, and if instead of dismissing the servant, as he may do at once and without notice, he chooses to continue in his employ a dishonest servant, without the knowledge and consent of the surety, express or implied', he cannot afterwards have recourse to the surety to make good any loss which may arise from the dishonesty of the servant during the subsequent service. Suppose that the state of facts, which arisen here in the course of the service, had existed before or at the time when the guarantee was given, in other words, that the servant had previ- ously committed defalcations in the plaintiff's service, and had agreed to repay them at the rate of £3 a month, and that this fact had been concealed by the master from the defendant when he gave the guarantee, it cannot, we think, be doubted that a fraud would have been committed on the surety which would have re- lieved him from all liability on the contract. This we think is established by the judgments of the House of Lords in Smith v. Bank of Scotland, 1 Dow 272, 292, and in Railton v. Mathews, 10 CI. & P. 934, 943. In the former case Lord Eldon says, " If a SEC. 15.] PHILLIP V. POXALL. 23l man found that his agent had betrayed his trust, that he owed him a sum of money, or that it was likely he was in his debt ; if under such circumstances he required sureties for his fidelity, holding him out as a trustworthy person, knowing, or having ground to believe, that he was not so, then it was agreeable to the doctrines of equity, at least in England, that no one should be permitted to take advantage of such conduct even with a view to security against future transactions , of the agent." In the latter ease Lord Cottenham cites with approbation the opinion of Lord Eldon in Smith v. Bank of Scotland, and Lord- Campbell adds, " If the defenders had facts within their knowledge which it was material the sureties should be acquainted with, and which the defenders did not disclose, in my opinion the concealment of those facts — the undue conceAnent of those facts — discharges the surety." We dp not think that the principles of law as laid down in these eases have been materially altered by the decision of the House of Lords in the subsequent case of Hamilton v. Watson, 12 CI. & P. 109, or by that of the Court of Exchequer in the North British Insurance Co. v. Lloyd, 10 Ex. 523. In the former case the principle above mentioned was not denied, but the question that arose was as to its application to the facts of that particular case, and Lord Campbell states that the criterion for the necessity of voluntarily disclosing any particular fact in cases of this kind may be, whether the fact not communicated was one that could " not naturally be expected to have taken place between the par- ties who are concerned in the transaction." In North British In- surance Co. V. Lloyd, the Court of Exchequer held that the rule, as to the effect of concealment in marine insurance cases, did not apply to contracts of suretyship, and that in the latter cases the concealment must be fraudulent in order to avoid the contract. In Lee v. Jones, 17 C. B. (N. S.) 482, the majority of the judges in the Exchequer Chamber held that a concealment by the creditor — that at the time of the contract the principal debtor was al- ready indebted to the creditor in a considerable amount, of which the surety was ignorant — was evidence to go to the jury of such a fraud on the surety as would discharge him from liability. It must depend (as observed by Blackburn, J., in the case last cited) " upon the nature of the transaction in every case, whether the fact not disclosed is such that it is impliedly represented not to exist." We cannot doubt but that previous acts of dishonesty by the servant in the same service, known to the master, would be 26 232 PHILIP V. FOXALL. [CHAP IV, such a fact, and if concealed from the surety would avoid the contract: vide Story's Equity Jurisprudence, vol. i, ss. 215 and 324. If, therefore, it is correct, as we think it is, on these authori- ties, to say that such a concealment as is here pleaded, if it had been practiced at the time yhen the contract was first entered into, would have discharged the surety, we think that in the case of a continuing guarantee a similar concealment made during the progress of the contract ought to have a similar effect as regards the future liability of the surety, unless his assent has been ob- tained, after knowledge of the dishonesty, that his guarantee should hold good during the subsequent service. One of the rea- sons usually given for holding that such a concealment as we are here considering would discharge the surety from his obligations, is, that it is only reasonable to suppose that such a fact if known to him must necessarily have influenced his judgment as to whether he would enter into the contract or not; and in the same manner it seems to us equally reasonable to suppose that it never could have entered into the contemplation of the parties that, after the servant's dishonesty in the service had been discovered, the guar- antee should continue to apply to his future conduct, when the master chose for his own purposes to continue the servant in his employ without the knowledge or assent of the surety. If the ob- ligation of the surety is continuing, we think the obligation of the creditor is equally so, and that the representation and understand- ing on which the contract was originally founded continue to apply to it during its continuance and until its termination. If the guarantee at its inception was founded, as suggested, by Lord Eldon in Smith v. Bank of Scotland, on the trustworthiness of the servant, so far as that was known to both parties, as soon as his dishonesty is discovered and becomes known to the master, the whole foundation for the continuance of the contract as regards the surety fails; and it seems to us in accordance with the plain- est principles of equity and fair dealing, that the master should, on making such discbvery, either dismiss the servant, or, if he chooses to continue him in his employ without the knowledge or assent of the surety, that he must himself stand the risk of loss arising from any future dishonesty. "It is the clearest and most evident equity" (says Lord Loughborough in Rees v. Berringon, 2 Ves. 540, 543), "not to carry on any transaction without the knowledge of him (the surety) who must necessarily have a con- cern in every transaction with the principal debtor. You cannot SEC. 15.] • PHILLIP V. FOXALL. 233 keep him bound and transact his affairs (for they are as much his as your own), without consulting him. You must let him judge whether he will give that indulgence contrary to the nature of his engagement. ' ' Thus in the present case, the conduct of the master in retaining the servant in his employ, when he might have discharged him for dishonesty, seems, in the words of Lord Lough- borough, an indulgence granted to the servant without the assent of the surety, and contrary to the nature of his engagement. The time at which the surety will be discharged from further liability in cases of this kind will vary according to the circumstances of each ease ; but we intend our judgment to apply only to cases like the one now before the court, where the master, having the power of at once discharging the servant for dishonesty, deliberately con- tinues him in his service, after he becomes aware of the dishonesty and without the assent or knowledge of the surety. ***** Since the argument of this case, the judgment of Malins, V. C, in Burgess v. Eve, Law Rep. 13 Eq. 450, 458, has beei* published. The chief question in that case was whether the contract before the court was or was not a continuing guarantee, but in the course of his judgment the Vice-Chancellor expresses an opinion which directly applies to the present case. " My opinion is " (he says), " and I have no hesitation in expressing it, that a person who gives a guarantee would have a right to say to the person taking it, ' You will continue at your own peril to employ the person on whose behalf I have the guarantee;' provided that the clerk or other person has been guilty of embezzlement or gross misconduct, or has turned out to be unworthy of the confidence reposed in him by the persons giving that guarantee for him. If the em- ployer under such circumstances refused to give the guarantee up, the person giving it would have a right to file a bill in this court, and in my opinion would succeed in the contest, because the court would direct the bond to be delivered up to be cancelled." And the same opinion is repeated in other parts of his judgment. It may be said that this opinion was not necessary for the decision of the case before the Vice-Chancellor and is not therefore a bind- ing authority. That may be so, but the opinion seems to us to be founded on equity and good sense, and as such we adopt it as directly applicable to the case now before us. For these reasons we think that the plea is good, and that the defendant is entitled to our judgment. AccoKD. — Sanderson v. Ashton, L. R. 8 Exeh. 73 ; Enright v. PalVey,. L. R. 4 Ir. 397; Comm. Ins. Co., v. Scott, 81 Ga. 540; Roberts v. Donovan, 70 234 FIDELITY CO. V. GATE CITY BANK. [CHAP. IV. Cal. 108; Saint v. Wheeler, 95 Ala. 362; Eapp v. PhcEnix Co., 113 111. 390. The creditor owes no duty to the surety to give him notice of a mere breach of the main contract by the principal. Watertown Fire Ins. Co. v. Simmons, 131 Mass. 85; JStna Co. v. Fowler, 108 Mich. 657; Lancashire Co. V. Callahan, 68 Minn. 277; Charlotte Co. v. Gow, 59 6a. 685; Wilkerson v. Crescent Co., 64 Ark. 80; Pheonix Ins. Co. Findley, 59 Iowa, 591. The creditor need not exercise dilligence in the interests of the surety to discover defaults or facts affecting the risk of the surety. Newark v. Stout, 52 N. J. L. 35; Frelinghuysen v. Baldwin, 16 Fed Kep. 452; Phillips v. Bossard, 35 Fed. Rep. 99 ; Atlas Bank v. Brownell, 9 E. I. 168. Misconduct of the principal not directly connected with the subject matter of the suretyship need not be communicated. LaBose v. Logansport Bank, 102 Ind. 332. Sec. 16. Stipulations in suretyship contract requiring notice of any fnrts •nrTiifiVi mav Rsiiise loss. facts which may cause loss. THE FIDELITY AND CASUALTY CO. v. THE GATE CITY NATIONAL BANK. 97 Ga. 634 (1895). This action was upon the bond of Lewis Redwine, the receiving- teller of the bank, which contained a stipulation requiring the bank to notify the surety of any act of the principal which might involve a loss to the surety of more than $100.00. John L. Hopkins & Sons, for plaintiff in error. Dorsey, Brewster & Howell, contra. Lumpkin, Justice. In view of what we consider the controlling question in this case, it is not essential to deal specially with the numerous assign- ments of error contained in the record, and we shall therefore eon- fine our remarks to the points upon which we have found it neces- sary to rule. sf*******it*if*if*** 2. The main question in the case is whether or not, under the stipulations expressed in the contract, the knowledge of the bank's bank to notify the surety of any act of the principal which might involve a loss to the surety of more than $100.00. act done by him involving a loss to the Company of more than $100.00, was imputable to the Bank itself. This ease does not fall within the general rule applicable to banks in their dealings with the general public. Much of a bank's business is necessarily en- trusted to its subordinate officials or servants, and in a large num- ber of instances it will, upon the doctrine of constructive notice, be held to know what comes to their knowledge. This rule is SEC. 16.] .FIDELITY 00. V. GATE CITY BANK. 235 founded upon necessity, and has for its object the protection of cashier of fraud or dishonesty on the part of Redwine, or of any those who deal with and trust the bank. The transaction out of which this bond grew was of an altogether different kind from those usually occurring between a bank and its customers. The contract was not made for the purpose of protecting the Com- pany in any dealings it might have with the Bank; but on the contrary, the Company undertook to protect the Bank in the matter of delegating some of the duties it owed to others to Eed- wine for performance in its behalf. In other words, the Company agreed to save the Bank from loss, to a limited extent, by reason of its thus trusting Redwine. As naturally incident to a contract of this nature, the Company stipulated that the bank should gain no benefit thereunder if it continued in its service an employee known to be unworthy of trust, without prompt notice to the Com- pany after he had been discovered by the Bank to be untrust- worthy. There is not a syllable in the contract, however, bearing the construction that the Bank should exercise any degree of dili- gence in inquiring into or supervising the conduct of Redwine, in order that the Company might be saved from loss through his misconduct. The Bank did not undertake to exercise reasonable care and diligence to find out if Redwine had become untrust- worthy; but as to this matter, the Company, in effect, invited the Bank to repose in peace; for it guaranteed that Redwine would remain honest and faithful. Only after knowledge had actually come to the Bank that he was, or had become otherwise, was it under any duty to the Company; and then, it was only required to immediately notify the Company of what" it had ascertained. This bank, it seems, was conducting its business in the manner usual with such institutions, having a cashier, assistant cashier, receiving and paying tellers, bookkeepers, etc. It was not, so far as the Company was concerned, under any duty of keeping itself informed as to the conduct of Redwine. The Company must have known and contemplated that the Bank's business was to be car- ried on through its employees, including Redwine; and yet, it entered into a contract which does not even suggest that it should be protected if any of these employees other than Redwine should fail in the duty they undoubtedly owed the Bank of informing it of any misconduct on his part. Evidently, the Company chose to rely solely upon the care which the Bank would most probably exercise in protecting itself, and consequently did not require any fixed supervision ovef Redwine, being willing to content itself 236 FIDELITY CO. V. CV.TE CITY BANK. [ CHAP. IV. with the assurance that the interests of the Bank would neces- sarily require such a supervision of him as would, in all proba- bility, enable the Bank to obtain actual knowledge of any fraud, dishonesty or negligence of which he might be guilty. In the light of the foregoing considerations, we cannot think that the parties to this contract contemplated that the Bank would be bound to act upon mere constructive notice of Redwine's short- comings. The " knowledge " referred to meant actual knowledge. Constructively, whenever Eedwine- — he being an employee of the Bank handling its money — misapplied the same, the Bank itself would have immediate notice of the fact; for his knowledge, as a servant of the Bank, would, if the doctrine of constructive no- tice were applicable, be its knowledge. Surely, the contract can- not be construed as contemplating any such result as this. Again, suppose another employee was colluding with Eedwine in con- cealing his shortage; the knowledge of such other employee would be, constructively, the knowledge of the Bank. Or, suppose Red- wine and another employee, also under bond, were both misap- propriating the Bank's funds, and each found the other out. Could it be said in defense to a suit on Redwine's bond that the other employee's knowledge was the knowledge of the Bank? or, when suit on the other employee's bond was entered, that Redwine's knowledge was constructive notice to the Bank, and the legal equivalent of the " knowledge " referred to in the Company's bond? In the absence of any guarantee on the part of the Bank that its other employees would be honest and faithful, and in view of the purpose of the condition inserted in the bond, it would seem that the better construction of it would be that the Bank only obligated itself to act in good faith and impart only actual knowl- edge on its part. The bond would, indeed, be of no practical pro- tection if, in order to realize its benefits, the Bank had to insure, not only the honesty and fidelity, but the faithful and conscien- tious attention to duty, of a dozen others of its employees. Stu- pidity of an employee in not comprehending ordinarily apparent facts and circumstances which would be equivalent to actual knowledge if within the knowledge of the Bank itself, might lead to a forfeiture of the bond; while forgetfulness or mere negligent inattention to duty on the part of such employees would bring about the same result. The cashier, according to the undisputed testimony in this case, SEC. 16.] FIDELITY CO. V. GATE CITY BANK. 237 was a mere employee. Unless the Bank obligated itself to use his eyes and ears, it had no knowledge of Redwine's misconduct. The following cases throw much light upon the subject under consideration: In Pittsburg &c. Railroad Co. v. Shaeffer, 59 Pa. St. 350, s. c. 8 Am. Law. Reg. (n. s.) 110, it was held that where an officer of a corporation violates his duty, knowledge on the part of other officers of the corporation of the default, or even connivance, in it, does not discharge the sureties. In that case, the defaulting employee had given a bond, with sureties, for the faith- ful discharge of his duties. In delivering the opinion of the court, Sharswood, J., says: " Corporations can only act by of- ficers and agents. They do not guarantee to the sureties of one officer the fidelity of the others. The rules and regidations which they may establish in regard to periodical returns and payments are for their own security, and not for the benefit of the sure- ties. The sureties, by executing the bond, become responsible for the fidelity of their principal. It is no collateral engagement into which they enter, dependent on some contingency or condition dif- ferent from the engagement of their principal. They become jointly obligors with him in the same bond and with the same con- dition underwritten. The fact that there were other unfaithful officers and agents of the corporation, who knew and connived at his infidelity, ought not in reason, and does not in law or equity, relieve them from the responsibility for him. They undertake that he shall be honest, though all around him are rogues. Were the rule different, by the conspiracy of the officers of a bank or other moneyed institution, all their sureties might be discharged. It is impossible that a doctrine leading to such consequences should be sound. In a suit by a bank against a surety on the cashier's bond, a plea that the cashier's defalcation was known to and con- nived at by the officers of the bank, was held to be no defense. Taylor v. Bank of Kentucky, 2 J. J. Marsh. 564." In the latter case, it would seem that a mother bank established a branch, putting it into the hands of a directory for manage- ment, and itself appointing a cashier, requiring of him a bond. In speaking of a plea filed in defense to a suit upon the bond, Judge Robertson said, pages 569, 570: " It imputes to the di- rectory of the branch bank only a knowledge of the delinquencies of the cashier, and a connivance at them. It was their duty, if they had any such knowledge, to communicate it to the mother bank. And if they failed to do it, there would be more reason for charging them with fraud on the mother bank, than for im- 238 FIDELITY CO.. V. GATE CITY BANK. [CHAP. IV. puting to it any fraud on the sureties of the cashier. It is not the presumption of either law or fact, that everything known to the branches is communicated to the principal bank. The cashier of a branch is an agent of the mother bank; the directors of the same branch are other agents of the same parent institution. Suppose these several agents combine to defraud their principal, is the one excused by the fact that the other is particeps? Is the surety of one exonerated, because the other has co-operated in the malfeasance? Or suppose one connive at a fraud or improper conduct of the other, is the employer responsible, because one of its agents knew of the delinquency and might have prevented its recurrence? The legal maxim, ' Q%i facit per alium facit per se,' does not apply to such a case. The connivance of the branch is not that of the mother bank. The fraud of the branch is not that of the mother institution, because, if the plea be true, there was a tacit combination of the agents to injure the principal. If A employ a principal to transact particular businesSj and exact from him security for his fidelity, and constitute another agent to per- form other associate and supervisory functions, surely, if they both conspire to defraud their constituent, the security shall not be permitted to say that the act of the agent is that of the principal." I The above authorities will suffice to show that the doctrine of constructive notice has no application to transactions such as that in the present case. Not having retfuired the Bank to insure the fidelity of all its other employees as a condition precedent to re- covery on Eedwine's bond, the Company cannot take advantage of the failure of duty on the part of one of the Bank's employees. Undoubtedly it was the duty of McCandless, the cashier, to inform the Bank as to any misdoings of Redwine of which he knew. This was, however, a duty he owed the Bank and not the Company, which could only derive a benefit therefrom by express stipula- tion in its contract to the effect that it should be entitled to have such duty of McCandless to the Bank faithfully performed. The iBank suffered from such neglect to a far greater extent than did the Company, whose liability under its bond was limited in amount; and surely the Bank is not equitably estopped from claiming a benefit under the bond which it expressly stipulated for. * * * Judgment reversed'.:'% If the bond contains stipulations requiring notice of the happening of specific things, such as notice to the surety if the principal shall engage in speculation or gambling, failure to give such notice will discharge the surety, j3EC. 17. J BANK V. REYNELL. 239 even though the employer in good faith believed that the risk was not thereby increased. Guarantee Co. of North American v. Mechanics Savings Bank & Trust Co., 183 U. S. 402; Fuller, C. J.: "The company's defense did not rest upon the duty of diligence growing out of the relation of the parties, but on the breach of one of the stipulations entered into by them. The question was not merely whether the conduct of the bank was contrary to the nature of the contract, but whether it was not contrary to its terms. Engagement in speculation or gambling was what the company sought to guard against be- cause experience had admonished it of the probability that speculation or gambling would lead to acts involving loss for which it would be responsible. * • « rjijjg provisions intended to protect the company in this case were not in themselves unreasonable and so far as they operated to compel the bank to exercise due supervision and examination, and due vigilance, were consistent with sound public policy. We think it was the duty of this bank to have made prompt investigation, or at all events to have notified the com- pany at once of the information that it had." Sec. 17. Fraud and misconduct of the principal. , BANK OF AUSTRALASIA v. REYNELL. New Zealand, L. B. 257 (1891). This was an action upon a guaranty. John Beatty Gresson, a solicitor, of Christchurch, had an account with the branch of the Bank of Australasia at that place, which, early in March, 1891, was overdrawn to the extent of £2,000. The account was guar- anteed by his father up to £1,500. On the 9th of March, 1891, Gresson saw the manager of the bank, and obtained from him a printed form of gi:.aranttee, stating that he was going to Rangiora to get his father to sign a guarantee for an increased amount. He then stated further that he thought of buying, a certain farm, and, that, if he did buy it, he would require considerable advances, and asked whether he could obtain them from the bank on a guar- antee by the defendant Reynell supported by a deposit of deeds of Reynell, the manager replying that there would be no difSculty about it. The defendant Reyneli was a client of Gresson, who had acted as his solicitor and banker for many years, but he was unknown to the bank manager except by reputation. The de- feiidant, having on the 10th of March received a note from Gres- son requesting him to do so, called at Gresson 's ofBee on the 11th of March. Gresson then told him that he had an overdraft at the bank of £2,000, that his father had guaranteed it up to £1,500, and that he wanted him (the defendant) to guarantee the remain- 240 BANK V. EEYNEUj. [chap. r. ing £500, adding that he only required it for three months. The defendant having agreed to do this, Gresson produced the form of guarantee which he had obtained from the bank manager, say- ing that he had had the document filled up because he had thought that the defendant would be willing to sign it. The defendant asked what the nature of the document was, and Gresson then read it over to him, reading it as a guarantee for £500 only. The de- fendant asked whether signing it would make him liable for any part of the £1,500 guaranteed by Gresson 's father, to which Gres- son replied that it would not, that it was just for £500. The de- fendant remarked that he had not heard Gresson read anything about three months, to which Gresson replied that he would make that all right, that he would write a note to the bank manager that it was only for three months, and fix it to the document. The defendant then said he would sign it, and Gresson pointed out to him where to sign, and he signed his name. The form of guaran- tee used was almost wholly printed, containing only two blanks for the name of the person whose account was to be guaranteed, and one blank for the amount to be guaranteed- The facts of the case, so far as they could be ascertained, were not disputed at the trial. There was, however, nothing to show whether the amount to be guaranteed had or had not been filled in at the time when the defendant signed, but it was assumed both in the Supreme Court and in the Court of Appeal that the amount had then been filled in as £5,000, instead of £500 as represented by Gresson to the defendant, , that being the state in which the document after- wards came into the hands of the bank. The blank in which the amount was filled in was on the same page as the defendant's signature, and only about fourteen lines above it. Defendant, however, did not notice any blank for the amount, or what amount, if any, had been filled in, but signed the document relying on Gresson 's statement that it was for £500 only. At the foot of the document was a certificate in the following words " I have read the foregoing bond (the foregoing bond has been read to me), and I understand that I am individually liable for the amount ex- pressed therein," with directions in the margin that one or other of the alternative statements was to be struck out, and the certifi- cate signed by the guarantor. The words ' ' I have read the fore- going bond ' ' having been struck out, Gresson asked the defendant to sign the certificate, stating that it was to the effect that the document had been read over to him, and the defendant there- upon signed the certificate also. Defendant then left the guar- SEC. 17.] BANK V. EEYNELL. ' 241 antee with Gresson to be handed to the plaintiff bank, and Gresson the same day handed it to the bank, it being then filled in (whether before or after its signature by the defendant) as a guarantee up to £5,000. Gresson at the same time deposited with the bank the title deeds of certain property of the defendant. The bank ac- cepted the document in good faith as a guarantee by the defendant of Gresson 's account with it up to £5,000, and during the two following days, the 12th and 13th of March, made advances to Gresson on the faith of it up to the full amount of £5,000. A few days afterwards, the defendant's suspicions being aroused by finding that he had been deceived by Gresson in regard to an- other transaction, the defendant called on Gresson, and demanded to see the guarantee. Gresson then confessed that he had made it out for £5,000 instead of £500, and the defendant and he went immediately to the bank, when the defendant stated to the man- ager what had occurred, and repudiated the guarantee as a for- gery. Up to the time of the discovery of this fraud Gresson had been a practitioner of first-rate standing and reputation, and he had been in especially confidential relations with the defendant. He shortly afterwards died insolvent, and the bank commenced this action to recover £5,000 upon the defendant 's guarantee. The action was tried at Christehurch before Denniston, J., and a jury on the 15th of June, 1891. The only question which was left to the jury was whether the defendant had been guilty of negligence in signing the guarantee, and this they answered in the negative by a three-fourths verdict. Upon this the learned judge gave judgment for the defendant with costs, reserving leave to the plain- tiff to move at the first sitting of the court in banco for judgment or for a new trial, and staying proceedings until then. Motion for judgment or for a new trial was subsequently made on behalf of the plaintiff accordingly, but was refused by the learned judge and from this decision the plaintiff bank now appealed. H. D. Bell, Hislop, and Wilding, for the appellant. G. Harper and J. C. Martin, for the respondent. Richmond, J. : The decision appealed from affirms that the guarantee sued upon is an absolutely void instrument, that it is not even good for £500, and that the defendant is entitled to deny the effect of his signature as completely as if it had been a forgery ; so that, supposing the instrument to be a deed, which by the law of this colony it probably is, the plea ot non est factum would be avail- able. The authority principally relied upon for this conclusion is Foster v. Mackinnon, L. R. 4 C. P. 704. There are, however, two 242 BANK V. EEYNEI/L. [CHAP. IV. material points of distinction between that case and the present. In the first place, the defendant in Foster v. Mackinnon was a gentleman described by counsel in the case as of great age and impaired physical powers; secondly, the indorsement by the de- fendant of a bill of exchange had been procured by a representa- tion that the document on which he was putting his signature was a guarantee. In the present case the defendant, Mr. Reynell, is not, so far as appears, an aged man, or in anywise incompetent to transact business ; and he knew he was signing a guarantee. But more than this: the Court of Common Pleas based its de- cision on exactly the two points in which that case differs from the case before this court. Though much is not said in the judg- ment as to the physical incapacity of the defendant, it is plain from the citation of the cases collected in Comyn's Digest, Tit. Fait. (B. 2), and of Thoroughgood's case, 2 Rep. 9b, all which relate either to illiterate men unable to read, or to blind and aged men, that the physical condition of the defendant was a main ground of the judgment. It is equally certain that the Court laid great stress on the circumstance that the fraudulent misrepre- sentation was a total misrepresentation of the nature of the docu- ment, and not merely a partial misrepresentation of its contents. They say "it was as if he had written his name on a sheet of paper for the purpose of franking a letter, or in a lady's album, or on an order for admission to the Temple Church, or on the fly-leaf of a book ; and there had already been, without his knowledge, a bill of exchange or a promissory note payable to order inscribed on the other side of the paper." The decision in Foster v. Mackinnon, therefore, cannot govern the present case; but a dictum in the judgment is relied upon as favourable to the present defendant. In a passage cited by Mr. Justice Denniston, Mr. Justice Byles says: " It seems plain, on principle and on authority, that if a blind man, or a man who cannot read, or who for some reason (not implying negligence) forbears to read, has a written contract falsely read over to him, the reader misreading to such a degree that the written contract is of a nature altogether different from the contract pretended to be read from the paper which the blind or illiterate man after- wards signs, then, at least if there be no negligence, the signature so obtained is of no force. ' ' On the strength of this passage it is argued that a man neither illiterate nor blind, nor in any way in- capable, may avoid his deed as against an innocent third party on the plea that it has been falsely read to him by a person in his SKC. 17.] BANK V. EEYNELIi. 243 confidence, if he can make some reasonable excuse for not having used his own eyes. None of the ancient authorities warrant such a statement of the law; but, passing this over, and not contest- ing the authority of the Court of Common Pleas to lay down a rule upon the subject, it is to be observed that the dictum of the Court supposes a total misrepresentation of the nature of the instrument, so that it is not possible to bring the present case within the rule supposed to be laid down. But, again, pass over this objection, and it has still to be asked, what sort of reason can Mr. Reynell give for allowing anybody to obtain his signature to this guarantee in the way in which it was obtained? The form of guarantee is printed. The blank for the amount secured is on the same page with the signature, and only a few lines above it. The writing is plain and legible: " Five thousand pounds." A single glance at the document is enough to show the amount it stands for. The only reasons or, rather, excuses assigned, or as- signable, are that persons in business are in the habit of reposing trust of this kind in those employed by them, and that Mr. Reynell was apparently justified in the confidence he placed in the particu- lar person who deceived him. All this may be true enough, al- though the former of the two propositions is, to say the least of it, doubtful; but it now turns out that Mr. Reynell 's confidence was misplaced and was abused, and the question is, who is to suffer? To this the general answer which the law gives is not doubtful. It is expressed in the words of Lord Holt in Hern v. Nichols, 1 Salk. 289, which have been echoed in a hundred deci- sions : " Seeing somebody must be a loser by this deceit, it is more reasonable that he that employs and puts a confidence in the deceiver should be a loser than a stranger." Either, then, we must suppose that this equitable principle is to be set aside in cases like the present, or that the defendant is in law to be deemed guilty of negligence within the meaning of the rule supposed to be laid down in Foster v. Mackinnon. There can be no doubt as to the choice to be made in this alternative, and that the de- fendant cannot be allowed to shift onto the plaintiff the conse- quence >of his own error of judgment. The term " negligence " as used by the Court of Common Pleas in the passage cited must be understood as meaning negli- gence in that larger and popular sense in which a person who is careless of his own affairs, as in leaving unlocked a desk or a drawer containing valuables, is said to be negligent, and not in the strict legal sense of the word, which implies the omission of ■244 BANK V. EEYNELD. [CHAP. IV. some duty towards another person. By negligence in the larger sense a man may incur no liability to others, though they may occasionally suffer through its remoter consequences, as in Swan v. The North British Australasian Company, 32 L. J. Ex. 273 ; John- son V. The Credit Lyonnais Company, 3 C. P. D. 32, and Baxen- dale v. Bennett, 3 Q. B. D. 525; but, on the other hand, when a man has been deceived through his own negligence of this species, he should not be allowed to make that very negligence — that breach of duty to himself — a ground for repudiating acts on the faith of which innocent third parties have advanced their money. The case has been treated on the part of the defendant as if the gist of the action had been negligence. This is a misconcep- tion. The bank is not seeking to recover damages from Mr. Rey- nell for any breach of duty on his part to use due care, but is standing on its contract. The question of negligence was, how- ever, left to the jury, and was by them decided in favour of the defendant. But I agree with Mr. Justice Denniston that any question of negligence which can arise in the present ease is one of law. The allegation of negligence, though made by the plain- tiff bank in the second count of the statement of claim as part of an alternative cause of action founded on estoppel, is no part of its substantial case. It is properly the defendant who intro- duces the question of his own negligence (in the popular sense) by setting up a defence importing that without fault on his part he was deceived. It appears to me to be the duty of the judge in such a case to rule, for the reason already given, and on the authorities already cited, that non est factum is not pleadable, and that the question of legal negligence does not arise. As the plaintiff does not need to rely on an estoppel, there is no occasion to inquire whether Reynell's conduct was the proxi- mate cause of the loss which must fall on one or other of the parties to this action. There can, however, be no question that his conduct, in whatever terms it may be described, was an imme- diate contributory cause of the loss. Call it negligence, or call it error in judgment, it was conduct in the transaction with the bank within the meaning of the well-known cases which have been cited at the bar. The court cannot assume that the amount for which the guarantee was given was fraudulently filled in after Mr. Reynell had signed. This would be to presume the commission of a crime. The conduct of Reynell and that of the solicitor were joint and contemporaneous ingredients in the production of the SEC. 17.] DAm V. UNITED STATES. 245 instrmnent as delivered to the bank. The case is therefore dis- tinguishable from Swan v. The North British- Australasian Land Company and other eases of that class, where the intervening criminal actions of third persons were the sole proximate cause of the loss. i^Hf^nititiSfieSfSf******* Judgment must therefore be entered for the appellant, with costs here and below on the highest scale. AccoED. — Marks v. First National Bank, 79 Ala. 550; Ladd v. Board, 80 m. 233; Davis Co. v. Buckles, 89 111. 237; Lucas v. Owens, 113 Ind. 521; Martin v. Campbell, 120 Mass. 126; Johnston v. Patterson, 114 Pa. 398; Kulp V. Brant, 162 Pa. 222; Quinn v. Hard, 43 Vt. 375; Page v. Krekey. 157 N. Y. 307. In the ease last cited the surety was illiterate and signed while in a state of intoxication. The principal represented to him that the paper he was signing was an application for a license under the excise law whereas in fact the paper was an unlimited letter of guaranty. The Court held : " While it has been quite uniformly held here that an instrument pro- cured by fraud, trick or artifice, or executed by a party in such a state of in- toxication as to be incapable of consenting or contracting, is valid as between the parties to the transaction, these facts do not always constitute a defense as against an innocent person, who is himself free from any fraud or negli- gence, . and who has advanced money or property to another upon the credit afforded by an instrument like this. But even in such a case, the person who has signed the paper is not liable upon it unless it is found that he failed to observe proper care and caution and was chargeable with negligence in at- taching his signature. If he actually signed the paper, though procured to do it by fraud, and is chargeable with negligence, he is liable to an innocent party who acted to his prejudice upon the faith of the instrument. Such cases are not governed by the rules applicable to the bona fide holder of ne- gotiable paper procured by fraud, but by the equitable rule that where one of two innocent parties must suflfer, he who has put it in the power of a third person to commit the fraud must sustain the loss. If the defendant is to be held liable in this case, it must be upon the principal that his misplaced con- fidence in Thinnes, he enabled him to obtain property from the plaintiff, who is an innocent third party." DAIR V. UNITED STATES. 16 Wall. 1 (1872). The United States brought an action of debt on a distiller's bond, executed by Jonathan Dair and William Sauks as principals, and by James Dair and William Davison as sureties. There was no dispute as to the right to recover against the principals, but the sureties, who pleaded separately, denied their liability upon the bond, and upon the issue thus raised by them, there was the fol- lowing special finding by the court : — 246 DAIR i;. UNITED STATES. [CHAP. n\ " That the said James Dair and V/illiam Davison signed the said writing obligatory upon the day of its date, as sureties, at the instance of Jonathan Dair, one of the principals, but that it was signed by them upon the condition that said writing obligatory was not to be delivered to the plaintiff until it should be executed" by one Joseph Cloud as co-surety ; that the said writing obligatory, upon its signing by them upon the condition aforesaid, was placed in the hands of the said principal, Jonathan Dair, who afterwards, without the performance of that condition, and without the consent of the said James Dair and William Davison, delivered the same to the plaintiff. And, that when the bond was so delivered, it was in all respects regular upon its face, and that the plaintiff had no notice of the condition." Messrs. J. E. McDonald and J. M. Butler, for the plaintiffs in error. Mr. G. H. Williams, Attorney-General, and Mr. C. H. Hill, As- sistant Attorney-General, contra. Me. Justice Davis delivered the opinion of the court. It is important that the question involved in this case should be settled, on account of the various interests connected with the administration of governmental affairs, requiring ofScial bonds to be taken, which, as a general thing, are rarely executed in the presence of both parties. It is easy to see, if the obligors are at liberty, when litigation arises and loss is likely to fall upon them, to set up a condition, unknown to the person whose duty it was to take the bond, and which is unjust in its result, that the difficul- ties of procuring satisfactory indemnity from those who are required by law to give it, will be greatly increased. Especially is that so, since parties to the action are permitted to testify. In Green v. The United States, 9 Wallace 658, the causes of ac- tion and defence were the same as in this suit, but as the judgment was reversed on another ground, and the merits of the defence were not discussed, they were not decided. As the case was sent back for a new trial, the court thought proper to call the attention of the court below and of counsel to the subject, and took occasion to say that it had grave doubts whether the facts set up were a valid defence to the action. Subsequent reflection has confirmed the views then entertained, and we are now prepared to say that the position of the defendants cannot be maintained. The ancient rules of the common law in relation to estoppels in pais have been relaxed, and the tendency of modern decisions is to take a broader view of the purpose to be accomplished by them, and they are now SEC. 17.] DAIE V. UNITED STATES. 247 applied so as to reach the case of a party, whose conduct is pur- posely fraudulent or will effect an unjust result. It must be conceded that courts of justice, if in their power to do so, should not allow a party who, by act or admission, has in- duced another with whom he was contracting to pursue a line of conduct injurious to his interests, to deny the act or retract the admission in ease of apprehended loss. Sound policy requires that the person who proceeds on the faith of, an act or admission of this character should be protected by estopping the party who has brought about this state of things from alleging anything in oppo- sition to the natural consequences of his own course of action. It iS) accordingly, established doctrine that whenever an act is done or statement made by a party, which cannot be contradicted with- out fraud on his part and injury to others, whose conduct has been influenced by the act or admission, the character of an estoppel will attach to what otherwise would be mere matter of evidence. Why should not this principle of estoppel, on every reason of justice and good faith, be applied to the covenant on which this action is founded. The bond was in all respects regular, executed according to prescribed . forms, and accepted by the officer whose duty it was to take it, as a completed contract. There was nothing on the face of the paper or in the transaction itself to put the officer on inquiry, or to raise even a suspicion in his mind that a condition was annexed to the delivery of the instrument. The transaction was one of ordinary occurrence in the administration of the revenue laws, and if the officer was satisfied of the sufficiency of the indemnity, there being no circumstances to create distrust that the principal obligors who tendered the bond were not up- right men, there was nothing left for him to do but to take it and issue the license. This was done, and the government will be greatly prejudiced if the sureties who were relied on to perform the conditions in case of the failure of the principals, can defeat a recovery on the ground that they did not intend to be bound unless another shared the responsibility, and so told the principal obligors who solicited their signatures. But they did not inform the revenue officer of this condition, and their omission to do so then estops them from setting it up now. The silence which they imposed upon themselves at the time makes their present conduct culpable, for it is not to be doubted that the officer in charge of this business would have acted differently if the information which the principals received had been communicated to him. In the execution of the bond the sureties declared to all persons interested 27 248 DAIE V. UNITED STATES. [CHAP. IV. to know that they were parties to the covenant and bound by it, and in the belief that this was so they were accepted and the license granted. They cannot, therefore, contravene the statement thus made and relied on without a fraud on their part and injuiy to another, and where these things concur the estoppel is imposed by law. As they confided in Dair it is more consonant with reason that they should suffer for his misconduct than the government, who was not placed in a position of trust with regard to him. The case of Paulding et al. v. The United States, has been cited as an authority against the position taken in this case ; but it is not so, because the additional securities to be procured in that ease were named on the face of the bond, and this fact is stated in the plea. If the name of Joseph Cloud appeared as a co-surety on -the face of this bond, the estoppel would not apply, for the reason ihat the incompleteness of the instrument would have been brought to the notice of the agent of the government, who would have been put on inquiry to ascertain why Cloud did not execute it, and the pursuit of this inquiry would have disclosed to him the exact con- dition of things. In any case, if the bond is so written that it appears that sev- eral were expected to sign it, the obligee takes it with notice that the obligors who do sign it can set up in defence the want of execu- tion by the others, if they agreed to become bound, only on condi- tion that the other co-sureties joined in the execution. We are aware that there is a conflict of opinion in the courts of this country upon the point decided in this case, but we think we are sustained by the weight of authority. At any rate, it is clear on principle that the doctrine of estoppel in pais should be applied to this defence. It would serve no useful purpose to review the authorities. This work has been performed in several well-considered eases in Maine, Indiana, and Kentucky, and although these courts do not rest their decisions on the same ground, yet they all agree that the facts pleaded in this suit do not constitute a bar to the action. Judgment affirmediji^ Accord.— Tidball v. Halley, 48 Cal. 610; Ward v. Hackett, 30 Minn. 150j Mathis V. Morgan, 72 Ga. 517; Rhode v. McLean, 101 111. 467; Mowbray v. State, 88 Ind. 324; Gibbs v. Johnston, 63 Mich. 671; State v. Churchill, 48 Ark. 426; Lewiston v. Gague, 89 Me^, 395; Mieklewait v. Noel, 69 la. 344; North Atchison Bank v. Gay, 114 Mo. 203; Brumback v. German Bank, 46 Neb. 540; Rusaell v. Freer, 56 N. \. 67; Vass v. Riddick, 89 N. C. 6; Whit- aker v. Richards, 134 Pa. 191; Dun v. Garrett, 93 Tenn. 650; Balloff v. 94.Q SEC. 17.] WARD V. HACKETT. ^^^ Wichita Co., 74 Tex. 339; Belden v. Hurlbut, 94 Wis. 562; Benton Bank v. Boddicker, 105 Iowa, 548. CoNTEA. — Johnson v. Cole, 103 la. 109. The doctrine of special agency has sometimes been urged and it has been held that the principal being a special agent to deliver the instrument, the promisor cannot be bound except within the strict terms of the agency. People V. Bostwick, 32 N. Y. 445; King v. Stall, 81 Ala. 92; Evans v. Daugh- try, 84 Ala. 68; State v. Allen, 69 Miss. 508. If the body of the bond contains the name of co-obligors who do not appear as signers, it is held sufficient to put upon the creditor the burden of ascertain- ing whether the instrument is delivered in accordance with the understanding of the promisor. Pawling v. United States, 4 Cranch. 219; Allen v. Marney, 65 Ind. 398 ; Hessell v. Johnson, 63 Mich. 623 ; Ward v. Churn, 18 Grat. 801. Contra. — Grim v. Jackson Tp. 51 Pa. 219. A promise or stipulation by the creditor that a certain thing will be done or tJiat certain facts will exist where the doing of these things is not made a condition of the contract, cannot be set up as a basis of de- fense by the surety, such representations not being in a legal sense, fraudu- lent. People V. Healy, 128 111. 9; Kitson v. Farewell, 132 111. 327; Cassel- berry v. Warren, 40 111. App. 626; Gallager v. Brunei, 6 Cowen 346 j Sheldon v. Davidson, 85 Wis. 138; Warner v. Benjamin, 89 Wis. 290; Mooney v. Miller, 102 Mass. 217; Dawe v. Morris, 149 Mass. 188; Robert- son v. Parks, 76 Md. 118; New Brunswick Land Co. v. Conybeare, 9 H. L. 711. In the ease of Gage v. liewis, 68 111. 604, the retiring partner promised his guarantor against the firm debts that he would not resume business. The breach of this stipulation was held no defense to the guarantor. The Court says : " It cannot be said that these representations and promises were false when made, for until the proper time arrived, and plaintifif refused to comply with them, it could not positively be known that they would not be per- formed. Even, if, at the time they were made, it was not intenaed to comply with them, it was but an unexecuted intention, which has never been held, of itself, to constitute fraud. If they legally amount to anything, they con- stitute a contract." ALBERT L. WARD v. SAMUEL HACKETT, ET AL. 30 Minn. 150 (1883). Mitchell, J. Defendant Elwis signed a negotiable promissory note as surety for defendant Hackett, and delivered it to Hackett, upon condition that he should not deliver it to plaintiff, the payee, until he procured the signature of one Johnson as co-surety. Hack- ett failed to get Johnson's signature, but, without the knowledge or consent of Elwis, got defendant Rice to sign it, and then delivered it to plaintiff, who took it in the ordinary course of business for a valuable consideration, without any notice of the facts herein- before stated and now set up by way of defence. Elwis now claims 250 ' WARD V. HACKETT. [CHAP. IV. that he is not liable, first, because the note was delivered without Johnson 's signature, contrary to the condition upon which he signed it and left it with Hackett; second, that the addition of the name of Rice to the note, without his knowledge or consent, amounted to a material alteration of the instrument, which discharged him. These two questions we will consider in the order named. 1. The form' of the note, when Elwis signed it and gave it to Hackett, was such that it was apparently complete. There was nothing on the face of the paper indicating that any other co-surety was expected to become a party to the instrument, and no fact was brought to the knowledge of the plaintiff, before he accepted the note, calculated to put him on his guard, or which should have induced inquiry. Elwis by his acts clothed Hackett with apparent authority to launch the note as it then was. The surety having thus placed the instrument, perfect on its face, in the hands of the proper person to pass it to the payee, the law justly holds that, as against the payee who takes it in good faith, for value, without any notice of this condition, the apparent authority with which the surety has clothed his principal shall be regarded as the real au- thority, and in such case the condition shall not avail the surety. This is too well settled to require discussion. 2. The second point is more important. It has been very fully and ably argued by appellant, but, unfortunately for us, the re- spondent has not deemed it necessary to discuss the question at any considerable length. The position of appellant is that the fact of Hackett 's obtaining the name of another surety upon the note with- out his knowledge or consent, although done before the note was de- livered' to plaintiff, amounted to a material altel-ation of the instru- ment, which discharged him, even although plaintiff had no notice of the facts when he took the note. If this be the law, we are satisfied its announcement would be a surprise to the business and commercial world. It would render commercial paper a very un- certain and unsafe subject with which to deal. But we have care- fully examined aU of the numerous cases cited by appellant, and dp not find one that goes far enough to sustain him. Many of these cases hold that a material alteration of a note made by one of the promisors before its delivery without the knowledge of the other promisor, makes the note void as against such other promisor, although the payee have not notice of the alteration when he takes the note. Such is doubtless the law. But, upon examination, these will all be found to be cases where the body of the note or the contract itself was changed, as by alteration of the date, rate of SEC. 17.] WAED V. HACKETT. ^^^ interest, or amount of the note. And {he reason given why, in such cases, the party is discharged, is the self-evident one that the contract is no longer the one he made. Numerous cases are also cited to the effect that the addition of a new party to a note, with- out the consent of the other parties, is a material alteration of the instrument. But these will be found to be cases where the new name was obtained after the note was fully issued and delivered to the payee, and at his instance or with his knowledge. We have been referred to no case, and have found none, going so far as to hold, where a surety signs a promissory note and intrusts it to his principal, and the principal, while the instrument is still in- choate and has not become eifectual as a contract by delivery, pro- cures an additional signer, that this would be a material alteration and release the first surety. Two of the case cited might, at first sight, seem to favor such a doctrine, but, upon examination, will be found not to sustain it, even if the payee knew, when he took the note, the circumstances under which the additional signature was obtained. The case of Haskell v. Champion, 30 Mo. 136, was one where, at the instance of the payee, the names of new principal obligors were substituted in place of the original one, by changing the individual signature of one partner into the firm signature, thus attempting to make a party surety for persons for whom he had never agreed to be responsible. The case of Hall v. McHenry, 19 Iowa, 521, contains dicta by some of the judges which go farther than any decision we have found. In that case the name of the additional surety was ob- tained before delivery of the note, but at the instance and for the benefit of the payee. After the note was delivered, the payee cut off the name of this additional surety without the knowledge or consent of the first surety. Wright, J., who delivered the opinion of the court, while admitting that he had found no authority to that effect, argues that thus adding a new surety, even before delivery of the note, would amount to a material alteration of the instru- ment, which would . discharge the original surety, provided the payee knew, when he took the note, of the circumstances under which the additional name was added. He then states that the court was not agreed on this proposition, and then proceeds to de- cide the case upon another point, to wit, that cutting the additional name off the note was a material alteration, which discharged the original surety. The rule that a maferial alteration of a contract avoids it had 252 WARD V. HACKETT. [CHAP. IV, its origin largely in the necessity of preserving and protecting the integrity and sanctity of contracts. Properly applied, the rule is a salutary one. But the general sentiment of courts now is that the doctrine had been extended quite far enough, and that formerly, especially in England, it had been carried too far, and applied to cases not within the mischief intended to be prevented. Therefore, the tendency now is, if not to restrict, at least not to extend it beyond what has been already decided. To hold that the obtaining of an additional surety to a note, under the facts of the case at bar, amounted to an alteration of the instrument that would discharge Elwis, would in our judgment be harsh, technicail, and work injus- tice, and establish a doctrine contrary to the general understanding of business men, which ought to be the law of such cases, and is the only just basis of the implied contract resulting from the facts. In dealing with commercial paper, ebmplete on its face, and signed by several parties, we apprehend it never occurs to a business man that it is incumbent upon him to inquire of each maker whether he understood when he signed the paper just what other parties were to sign with him, or whether any additional names have been subse- quently added without his knowledge or consent. To require any such thing would be inconvenient, without reason, and an innova- tion upon business usages. The idea that when a person signs a note as surety, and delivers it to his principal, no other surety is to be obtained, and, if the note cannot be negotiated in that form it cannot be used at all, unless all parties consent to the introduc- tion of a new surety, is, we apprehend, contrary to the general understanding of the commercial world. It seems to us that, at least as against an innocent holder, the principal . obligor, to whom the paper has been intrusted by the surety has implied authority to obtain additional sureties, until the note is launched into the market by delivery to the payee ; and, as already remarked, this common understanding is the only just basis of an implied contract resulting from the facts. Courts have, in some eases, gone so far in holding that the addition of a new name to a note, under certain circumstances, amounted to a material and unauthorized alteration of the instrument, that it may be difficult to state the principle which distinguishes some of these cases from the present, nor do we feel compelled to attempt to do so. But whether or not the reason we have suggested be the correct one, we are satisfied that neither upon principle nor authority did the obtaining of Rice as additional surety amount, under the facts of this case, to an alteration of the instrument such as to release SEC. 18.] CARPENTER V. KING. 253 Elwis. As Rice's claim to be discharged is entirely predicated upon the assumption that Elwis was released, it is unnecessary to consider it further. Order affirmed. Sec. 18. Statements made to the promisor by the creditor after ex- ecution of the contract. DAVID N. CARPENTER v. ZADOCK KING. 9 Met. 511 (1845). Devens, for the defendant. Alvord, for the plaintiff. Shaw, C. J. There are several grounds, appearing in the bill of exceptions, upon which the court are of opinion that a new trial must be granted. But as both parties have requested the opinion of the court upon one aspect of the case, which we suppose em- braces its true merits, and may be decisive, we have so considered it. "We assume then, that King, the defendant, entered into a contract, by promissory note, jointly, or jointly and severally, with Cyrus Alden, for the payment of money to the plaintiff ; that the note did not express that either was principal or surety; that in point of fact, if it is competent to prove it by evidence aliunde, King was surety for Alden, and that known to the plaintiff ; that Alden gave the defendant security to indemnify him against such liability; that an action was brought and a joint judgment recovered against Alden and the defendant, which was satisfied in part only;. that the plaintiff, not intending to deceive or defraud the defendant, informed him, that the debt was paid in full, when in fact it was not so ; after which, the defendant relinquished his security, Alden died insolvent, and this action was brought against the defendant, as survivor, to recover the balance of the judgment. This case, we think, presents three questions: 1st. Whether it is competent, when two or more have signed an obligation for the payment of money jointly, or jointly and severally, for one to show, by evidence aliunde, that he was surety for the other. 2d. Whether, if such evidence were admissible in a suit on the original contract, that contract is merged and consolidated by the judgment, so that a new debt arises, in which all must be deemed principals, and so that, in an action of debt on the judgment, it is no longer competent to go into evidence aliunde, to show that the defendant was surety. 3d. Whether, if a creditor, without any intention to 254 CAEPENTEE V. KING. (CHAP. IV. deceive or mislead a surety,, informs Mm that the debt is paid by the principal, and the surety afterwards relinquishes his security, this is a good defence in a suit against the surety. 1. It appears to us very clear, that the fact may be proved, by any competent evidence, that, in a contract executed by two, one was principal and one surety, and that it is not necessary that it should so appear by the contract. It is a fact collateral to the contract, and no part of it. It may appear in the body of the in- strument, or the term " principal " may be annexed to the signa- ture of the one, and ' ' surety ' ' to that of the other. In that case, the fact and notice of it accompany the note or obligation, into whose hands soever the same may come. Still it is a collateral fact, showing the relation in which the pronaisors stand to each other. Baker v. Briggs, 8 Pick. 122; Harris y. Brooks, 21 Pick. 195. In the last case, the point was directly decided. So, in order to ascertain the relation of the promisors to each other, with a view to a remedy, when one pays the whole, or more than an aliquot part. These remedies are not secured by the original contract, and form no part of it; they are given by law, and do not depend on the fact of their having united in signing the instrument. The instrument is resorted to for the purpose of showing that both were bound. Therefore, where parties were sureties, on different bonds, for the same debt or duty, the law gave a remedy for con- tribution, in the same manner as if they had united in signing the same bond. Deering v. Earl of Winchelsea, 2 Bos. & Pul. 270. So where two or more have signed a note, not designating either as principal or surety, prima facie both are principals, and if either pay the -vyhole, he shall have contribution. But it may be always shown by evidence aliunde, as between themselves, that the note was made wholly for the accommodation of one, showing him to be the principal debtor. If he pay the whole, he has no contribution; if the other pay the whole, he shall have an action for money paid, for the whole amount. ************* 3. In regard to the other point, we consider it well settled, by numerous authorities, that when a creditor, who knows that one debtor is a surety, gives him notice that the debt is paid by the principal, and such debtor, in consequence, changes his situation, as by surrendering security, or forbearing to obtain security when he might, or otherwise suffers loss by it, he is discharged. And al- though the debt has not been paid, and such notice was given by mistake, and without any fraudulent design, it is a mistake made SEC. 19.] DODD V. WINN. 255 at his own peril, and lie shall rather bear the loss than throw it upon one who has been misled by it. In general, that which would afford a surety a remedy in equity against his creditor, by injunction, is a good defence at law, when suit is against the surety alone. King v. Baldwin, 2 Johns. Ch. 554, and 17 Johns. 384. A doubt was suggested in Baker v. Briggs, 8 Pick. 128, whether the surety could avail himself, in any form of such matter of defence, in a joint suit against him and the prin- cipal; a doubt which has not been resolved, that we are aware of, by any subsequent judicial decision. Here the point does not arise, because the suit is against the surety alone, as survivor. Verdict set aside, and a new trial granted. A mere expression of an opinion that the principal will pay and that the surety will probably not be called upon will not delease the surety. Howe Mach. Co. V. Farrington, 82 N. Y. 121; Brubaker v. Okeson, 36 Pa. 519. In thia case the Court says : " It never yet has been held, that a declaration of the creditor that the principal debtor was good enough, that the surety was in no danger, and that the debt would be collected from the principal, without more was sufficient to estop the creditor from proceeding against the surely. Such declarations are exceedingly common. They are often made to induce the surety to go into the contract, and they are repeated after- wards, without any design to mislead, or without being understood as a waiver of any rights. They are made and received as expressions of opinion. They never invite confidence, nor is confidence often reposed in them. Stand- ing alone, they will not discharge the surety." Sec. 19. Release of co-surety. DODD V. WINN. 27 Mo. 501 (1858). Error to Ralls Circuit Court. This was an action in favor of Levi Dodd against Isham 0. "Winn, on a promissory note executed by David C. Glascock, M. McDonald, R. P. Richmond, Minor J. Winn, James G. Caldwell, and said Isham 0. Winn. The jury found the following special verdict: " We, the jury, find a special verdict as follows: On the 6th day day of April, 1849, the plaintiff Dodd sued Minor J. Winn, on the same note now sued on, before the recorder of the city of Hannibal, the said Minor being one of the obligors in the note. Said Dodd recovered a judgment before said recorder against said Minor on the 6th day of April, 1850 ; and an execution was issued 256 DODD V. WINN. [chap. IV. by said recorder on said judgment on the 11th day of April, 1850, and placed in the hands of the marshal of said city, and by him levied on a house in said city as the property of Minor J. "Winn; that said marshal advertised said house for sale under said execu- tion, but did not sell "the house, being ordered by the plaintiff's counsel to tear down the advertisements and return the execution ' no property found ; ' which he did ; and no execution has since issued on said judgment by the recorder. The jury further find as follows, that when the marshal levied on the house as aforesaid, a part of said house was owned by said Minor J. Winn, which part so owned by him was worth the sum of $137.50. Said house was standing on a piece of ground owned by Jeremiah Strode, who had leased it to said Minor J. Winn, with the privilege of taking off when he pleased any house he might erect thereon. Minor J. Winn had built the house in question on said lot, but had sold a part of it before the execution was levied as before stated. The jury further find that David C. Glascock was the principal in the note sued on, and that Minor J. Winn and Isham 0. Winn were each securities for said Glascock." The court rendered judgment on this verdict in favor of plain- tiff for eighty dollars debt (four-fifths of the original note sued on), and assessed damages for the detention thereof at seventy- six dollars. Lamb & Lakenan, for plaintiff in error. ' Porter & Harrison, for defendant in error. Richardson, Judge, delivered the opinion of the court. The law is well settled that a valid agreement between the cred- itor and the principal debtor to extend the time of payment or any improper interference by the creditor with the process of law after the commencement of a suit, by which the surety may be in- jured or subjected to greater risk, or be delayed in the right of payment of the debt to proceed against the principal, if made or done without the assent of the surety, will discharge him from his liability, 24 Mo. 333 ; 26 Mo. 243 ; and the relation of principal and surety or of co-sureties is not extinguished by judgment. Kice V. Morton, 19 Mo. 263. A release of the principal will discharge the surety, but one surety may be discharged, without prejudice to an action against the others, to the extent that they would be liable in a suit for contribution between the mselves. Ronton v. Lacy, 17 Mo. 399. The creditor cannot, by discharging one, in- crease the liability of the other ; and he will not be allowed, by dis- charging one, to impose on the other a greater proportion of a SEC. 19.] DODD V. WINN. 257 common burden than in equity he ought to bear. At law, if there are several sureties and one is insolvent and another pays the whole debt, he can only recover against the solvent sureties their pro rata part as if all of them were solvent ; but the rule in equity is more just and reasonable, and the insolvent's share is apportioned among those who are solvent, 1 Story Eq. § 498. The eighth section of our statute concerning securities provides that one surety at the suit of another shall not be liable to pay more than his due proportion of the original demand, but what is his due proportion will vary according to the circumstances. Thus, if there are three sureties, and all of them are solvent, and one pays the debt, each of the others will be liable to him for one-third of the amount only; but if one of them is insolvent, the other will be liable for one-half. In this case it seems that Glascock was the principal debtor, and that the other five parties to the note were sureties. Now if all the sureties were solvent, and the defendant paid the debt, he could only require M. J. Winn to contribute one-fifth part of it, and therefore could only ask to have one-fifth abated, and could only complain of the conduct of the plaintiff in releasing the levy of the execution to that' extent. But if the other sureties are in- solvent, M. J. Winn would be bound to contribute to the de- fendant one-half instead of one-fifth of the debt ; in which case, if the plaintiff had released to M. J. Winn, he could only demand of the defendant the other moiety; and, on principle, the same result must follow if he could have made half the debt but for his improper interference with the execution. These questions cannot be determined from the meagre statement of facts in the Special verdict. It does not appear whether the other sureties were solvent or not. The statute authorizes this court to remand a cause when the facts in a special verdict are insufficiently found, 2 E. C. 1855, p. 1301, § 35; and the judgment then will be reversed and the cause remanded ; Judge Napton concurring. Judge Scott not sitting. The generally accepted rule is that a release of one co-surety discharges the other to the extent that the remaining surety is thereby deprived of hig right of contribution. Morgan v. Smith, 70 N. Y. 537. Lewis v. Armstrong, 80 6a. 402; Thomson v. Clark, 31 111. App. 404; Waggener v. Dyer, 11 Leigh (Va.) 384; Jemison v. Governor, 47 Ala. 390; Rice v. Morton, 19 Mo. 263; Gordon v. Moore, 44 Ark. 349; Smith v. State, 46 Md. 617; Klingen- smith V. Klingensmith, 31 Pa. 460. A discharge of a co-surety by operation of law, without the fault or pro- curement of the creditor, such as a, discharge in bankruptcy, leaves the re- 258 THOMPSON V. LACK. [CHAP. IV. mainjng surety liable for the full amount. Sacramento Co. v. Bird, 31 Cal. 66. Sec. 16 of the National Bankruptcy act of 1898 provides that the liability of one who is co-debtor with the bankrupt, shall not be altered by the dis- charge of the bankrupt. Sec. 20. Release of co-surety reserving^ rights against the remaining surety. THOMPSON, ET AL. v. E. J. LACE. 3 C. B. 540 (1846). Covenant. The declaration stated that theretofore, and in the lifetime of the said John Springall, to wit, on the 11th of Oc- tober, 1834, by a certain indenture then made between John Lack of the first part, the defendant and Charles Parry Lack of the second part, and the said John Springall of the third part — profert — the said John Lack, for the considerations therein men- tioned, did give, grant, &c., unto Springall, one annuity or clear yearly sum of £37 to be paid during the term of ninety-nine years, to commence, &c., if John Lack should so long live; to have the said annuity of £37 unto Springall, his executors, administrators, and assigns, during the said term of ninety-nine years, to com- mence as aforesaid, if John Lack should so long live, to be paid at, &c., by four equal quarterly payments, &c., in every year ; that it was agreed that the defendant and the said C. P. Lack should respectively guarantee the payment thereof and of such propor- tionable part thereof as in the said indenture mentioned, and all costs, charges, and expenses to be incurred or occasioned by rea- son of any default in payment thereof, or of any part thereof; that in pursuance of the last-recited agreement they the defendant and C. P. Lack, did, in and by the said indenture, for themselves, their heirs, &c., and each of them did thereby for himself, his heirs, &c., covenant with Springall, his executors, &c., by the said indenture, that, if John Lack, his heirs, &c., should make any de- fault in payment of the said annuity of £37, or any part thereof, and such proportionable part thereof as aforesaid, then that the defendant and C. P. Lack, their heirs, &c., or some or one of them, should and would, from time to time, immediately after any such default should be made as aforesaid, well and truly pay unto Springall, his executors, &c., the said annuity of £37, and all iarrears thereof, and such proportionable part thereof as aforesaid. Breach — that, after the making of the said indenture, and in the SEC. 20.] THOMPSON V. IiACK. 259 lifetime of the said John Lack, who is still living, and during the said term of ninety-nine years, and after the death of Springall, to wit, on the 11th of January, 1846, a large sum of money, to wit, the sum of £74^ of the said annuity, for two years of the said term then last elapsed, became due from the said John Lack to the plaintiffs as executors as .aforesaid ; yet the said John Lack had not paid the said sum of £74, or any part thereof, but therein had failed and made default, of all which the defendant had always had notice; yet neither of them, the defendant or C. P. Lack, as sureties for the said John Lack, had paid the same, or any part thereof, and the said sum of £74, still remained in arrear, con- trary to the said indenture, and the said covenant of the defend- ant in that behalf. Third plea — that, after the making of the said indenture in the declaration mentioned, and whilst the same was in full force and virtue, and in the lifetime of Springall in the declaration mentioned, and before any portion of the said sum in the declara- tion mentioned, and claimed to be due and payable from the de- fendant, became due and payable, and before the commencement of this suit, to wit, on the 11th of January, 1844, and indenture was made between William Thompson of the first part, Springall of the second part, and C. P. Lack, in the declaration and in the said indenture of covenant mentioned, of the third part — protert — whereby Springall, for the considerations therein expressed, acquitted, released, exonerated, and forever discharged C. P. Lack, in the declaration mentioned, of and from the payment of the said annuity or yearly sum of £37 in the said indenture of cove- nant in the declaration mentioned, granted, and of and from the performance of the joint and several covenants therein contained in the said indenture of covenant in the declaration mentioned, on the part of the said C. P. Lack, and from all claims and demands of Springall, deceased, against the said C. P. Lack in respect thereof; and that the said indenture of release, and the release therein contained, and thereby made, were made without the con- sent or knowledge and against the will of the defendant — verifica- tion. The plaintiffs prayed that the indenture might be enrolled; by which indenture — after reciting the grant of an annuity of £27 to one William Thompson, and the grant of an annuity in ques- tion, and that E. J. Lack (the defendant) and J. Lack had made default in payment of the said annuities, and that C. P. Lack had paid up all arrears of Thompson's annuity to the 18th of De- 260 THOMPSON V. LACK. [CHAP. TV. cember then last, and of the annuity in question to the date of those presents; and also reciting that C. P. Lack had applied to Thompson and Springall to release him from his covenants re- spectively contained in the said indentures of grant of annuity, and all claim and demand of them the said Thompson and Spring- all respectively against him in respect thereof, on payment by the said C. P. Lack unto Thompson and Springall of £259 5s., which they }iad agreed to do, subject nevertheless, and v^ithout prejudice, to the respective rights of Thompson and Springall, to enforce the payment of their said several annuities as against E. J. Lack and John Lack: — it was witnessed that, in consideration cf £259 5s., to Thompson and Springall paid by C. P. Lack, Thompson (as to and concerning only the said annuity of £27) did remise, re- lease, &c., and Springall (as to and concerning only the said annuity of £37) did remise,- release, &e., C. P. Lack, his heirs, &c., from the payment of the said several annuities or yearly sums of £27 and £37 by the said therein-before in part recited indentures of grant of annuity granted, and of and from the performance of the joint and several covenants contained in the said several indentures, or in either of them, on the part of the said C. P. Lack, his heirs, executors, &c., and from all claims and demands of them Thompson and Springall respectively, and their several and respective heirs, &c., against him in respect thereoi Provided always, nevertheless, and it was thereby agreed between the said parties, that nothing therein contained should extend, or be construed to extend to, or prejudice, the respective rights of the said Thompson and Springall, and their respective execu- tors, administrators, and assigns, to enforce the payment of the said several annuities of £27 and £37 respectively, as against the said E. J. Lack, or either of them, their or either of their heirs, executors, &c. The plaintiffs then demurred generally to the third plea. Bowling, Serjt., for the plaintiffs. Channell, Serjt., for the defendants. AViLDE, C. J. With respect to the third plea, the question is, what is the effect of the deed which is therein described as a re- lease ? Are you at liberty to separate that which professes to be a release, from the proviso? or must you take them both together, and say what is their entire effect ? It seems to me, that you must look at the whole of the deed; and that raises the point, whether a party may give a qualified release. Solly v. Forbes is a decision that you may give such a release; and, although in Nicholson v. SEC. 21.] PAIN V. PACKAED. 261 Revill there are to be found expressions used by Lord Denman, in delivering the judgment of the court, inconsistent with that view, it seems to me that those expressions are more of the nature of obiter dicta than those attributed to Lord Eldon in Ex parte Gif- ford. In the latter case, Lord Eldon decided, in conformity with the principle established by Solly v. Forbes, — which I consider is a decisive authority, — that a release may be qualified, and pre- vented operating as a discharge of a co-surety. The question here is, whether the release in this deed is qualified, and reserves the remedy against the defendant. It is admitted that the in- tention of the parties is clear ; and strong grounds should be laid before the court to induce it not to give effect to the deed accord- ing to such intention. I see nothing in the present case to prevent us from deciding in conformity with Solly v. Forbes. Generally speaking, a release of one will operate as a discharge to all. There- fore, in Nicholson v. Revill, the plaintiff having received a sum of money from one of the parties to a promissory note, and having erased his name from the instrument, it was held, that such erasure operated as a release to the other parties thereto; and what was necessary for the decision of that case, was in accordance with the general principle. I am of opinion that this was a qualified release, and did not discharge the co-surety. I think, therefore, the general demurrer sustainable by the deed as set out on oyer. Judgment for the plaintiffs. Accord. — Hood v. Hayward, 124 N. Y. 1; Glasscock v. Hamilton, 62 Tex. 143; Kearsley v. Cole, 16 M. & W. 128; Price v. Barker, 4 El. & Bl. 760. Sec. 21, Failure of creditor to sue principal when requested. PAIN V. PACKARD. 13 Johns. 174 (1816). This was an action of assumsit, on a promissory note made by Packard & Munson, in which Packard alone was arrested, the other defendant being returned not found. The defendant, Pack- ard, pleaded, 1. Non-assumpsit. 2. That he signed the note, which was for 100 dollars, payable on demand, as surety for Mun- son; that he urged the plaintiff to proceed immediately in col- lecting the money due on the note from Munson, who was then solvent; and that, if the plaintiff had then proceeded immediately to take measures to collect the money of Munson, he might have 262 PAIN V. PACKARD. [CHAP. IV. obtained payment from him; but the plaintiff neglected to pro- ceed against Munson, until he became insolvent, absconded, and went away out of the State, whereby the plaintiff was unable to collect the money of Munson. 3. The third plea was like the second, except that the defendant alleged a promise, on the part of the plaintiff, that he would immediately proceed to collect the money of Munson, and a breach of that promise, by which the defendant was deceived and defrauded, and prevented from ob- taining the money from Munson, &c. There was a demurrer to the second and third pleas, and a joinder in demurrer, which was submitted to the court without argument. Per Curiam. The facts set forth in the plea are admitted by the demurrer. The principles laid down in the case of The Peo- ple V. Jansen, (7 Johns. Rep. 336), will warrant and support this plea. We there say, a mere delay in calling on the principal will not discharge the surety. The same principle was fully and ex- plicitly laid down by the court, in the case of Tallmadge v. Brush. But this is not such a case. Here is a special request, by the surety, to proceed to collect the money from the principal; and an averment of a loss of the money, as against the principal, in consequence of such neglect. The averments and facts stated in the plea are not repugnant, or contradictory to the terms of the note. The suit here is by the payee against the makers. The fact of Packard having been security only, is fairly to be pre- sumed to have been known to the plaintiff. He was, in law and equity, therefore, bound to use due diligence against the principal, in order to exonerate the surety. This he has not done. There can be no substantial objections against such a plea. It may be said, the surety might have paid the note and prosecuted the principal ; but although he might have done so, he was not bound to do it. If he had a right to expedite the plaintiff in proceeding against the principal, and chose to rest on that, he might do so. In the case of the Trent Nav. Co. v. Harley, (10 East, 34,) the plea was similar to the present, and not demurred to. The de- fendant must, accordingly, have judgment upon the demurrer. Judgment for the defendant. Accord.-^ King v. Baldwin, 17 Johns. 384; Manchester Co. v. Sweeting, 10 Wend. 163 ; Remsen v. Beclcman, 25 N. Y. 552 ; Black River Bank v. Page, 44 N. Y. 453; Colgrove v. Tallman, 67 N. Y. 95; Martin v. Skehan, 2 Colo. 614; Thompson v. Robinson, 34 Ark. 44; Thomson v. Watson, 10 Yerg, (Tenn.) 362. SBC. 21.] HAKEIS V. NEWELL. 263 HARRIS V. NEWELL. 42 Wis. 687 (1877). Action upon a promissory note signed by James Stewart and E. H. Newell, payable to Chapman or bearer and transferred to the plaintiff. Newell by his answer alleged that he was a surety and that the note was wholly for the benefit of Stewart and at the maturity of the note Stewart was solvent and fully able to pay the note, and that he notified Chapman who was then the owner of the note to proceed to collect from Stewart, but that Chapman refused and neglected to do so until after Stewart had become insolvent. The trial court refused to receive any evidence in support of these allegations of the answer and directed a verdict against Newell. 6. Stevens, for the appellant. J. W. Lush, for the respondent. Ryan, C. J. 1. On the face of the promissory note, the appelr lant appears as a principal. "We entertain very grave doubt whether it would be competent for him, as against the holder of the note, so far to vary his contract by parol as to show that he signed the note as surety for the other maker. See 1 Parsons on Bills, 233. We have lately held that an indorser cannot vary the legal contract of indorsement by parol. Charles v. Denis {ante p. 56); Eaton v. McMahon {ante, p. 484). The contract of a surety, and the contract of a principal, signing a promissory note, vary in some respects, different from that set up by the appellant in this case. And it is difficult to see why the same rule should not apply to the contract of maker and to the contract of indorser. The appellant sets up the knowledge of the payee, at the time, that he signed the note as surety. This could not well affect the admissibility of parol evidence to vary the contract as he signed it. Where one, being a surety as between him and his principal, executes the contract as a principal himself, it may well be that the other party relies on his liability as principal, and would not have accepted his liability as surety. He may know that, as be- tween themselves, one of the parties with whom he contracts is a surety ; but he may accept their contract because, as to him, both are principals. In any view, it is difBcult to see on what prin- 28 264 HAKRIS v. NEWEUL. [CHAP. IV. ; ciple the surety may be admitted to limit his written contract by parol. This question was not raised at the bar, and is too important to be passed upon without argument. Our first inclination was to order a reargument on the point. But as the other question was very ably discussed, and as we are prepared to do so, we have concluded to decide this case upon it, as if the appellant were a surety in form. II. A disposition is shown in some of the cases to overlook somewhat the distinction between sureties and guarantors; but the contract of a surety is essentially different from the contract of a guarantor. Oxford Bank v. Haynes, 8 Pick. 423; Crad- dock v; Armor, 10 Watts 258. The contract of a surety is col- lateral to the contract of his principal, and binds the surety for the contract of the principal. It is not merely a contract to per- form upon failiire of the principal, but binds the surety equally with the principal for the performance of the contract of the principal. The surety assumes for himself the liability of his principal. And, as Lord Eldon remarks in Wright v. Simpson, 6 Vessey Jr. 714, as between the creditor and the surety, the cred- itor assumes no obligation of active diligence against his princi- pal ; and it is the business of the surety, not of the creditor, to see that the principal performs. This is the legal contract. But, because the surety has no in- terest in the contract of his principal, and because the creditor or the principal debtor may prejudice the surety by delay, equity will sometimes interfere in behalf of the surety, either against his principal or against his creditor. In such a case the surety may proceed in a court of equity against the principal, to com- pel him to pay the debt, or against the creditor to compel him to proceed at law to collect his debt from the principal. 1 Story's Eq., § 327; Wright v. Simpson, supra; Hayes v. Ward, 4 Johns. Ch. 123 ; Bishop v. Day, 13 Vt. 81. This well established equitable jurisdiction appears to preclude the legal right claimed in this case for the surety ; the right to notify the creditor to proceed, and, upon failure of the creditor to do so, to stand released at law. For, if the surety could thus of himself put the creditor in motion, it is difficult to see why he should resort to a court of equity to do for him what he could do for himself. This power to put the creditor in motion appears to be more safely reposed in the discretion of a court of equity, than vested SEC. 21.] HARRIS V. NEWELL. as a legal right at his option in the surety. The diligence of creditors is generally to be trusted; and when they forbear, it is generally from prudent motives, having regard to all interests concerned. The legal right of a surety to interfere against such forbearance might well be mischievous and oppressive. It is true that the creditor and principal debtor may collude to the prejudice of the surety. That would be a proper ground for equitable in- terference. But it is safer, in any case, to leave the surety to the equitable remedy, to be exercised in view of all the circumstances, than to make him his own chancellor to control the action of his creditor. And it is not to be overlooked, that this jurisdiction of courts of equity does not proceed upon any limitation of the legal right of the creditor, or of the legal liability of the surety, but upon the general principle of equitable jurisdiction, to prevent oppres- sion by the inequitable exercise of legal right. The legal doctrine that a surety may interfere, on his own motion, between his principal and their creditor, and thus limit his own liability upon his own contract, may be said to be quite modern, and has not been generally adopted. It has always been held by all courts that mere delay of the creditor, without sus- pending his right to proceed against the principal, will not, in the absence of fraud discharge the surety. But in Pain v. Pack- ard, 13 Johns. 174, the court inaugurated the new doctrine, that notice by a surety to the creditor to proceed against the principal, and failure of the principal to proceed, to the injury of the surety, will operate to discharge the surety from his liability. And this appears to be still the rule of decision in New York. Kemsen v. Beekman, 25 N. Y. 552, In King v. Baldwin, 17 Johns. 384, Spencer, C. J., says, " that the creditor is under an equitable obligation, and such is the es- sence of the contract, to obtain payment from the principal debtor, and not from the surety, unless the principal is unable to pay the debt." This is bringing the contract of a surety very near to the contract of a guarantor. And so Wright, J., who delivers the opinion of the court in Remsen v. Beekman, supra, reiterating the doctrine, calls the surety a guarantor, and his contract a guaranty. We entertain, in common with the whole profession, the most profound deference for the judgments of Chief Justice Spencer. But even the authority of so illustrious a common-law judge ought .not to mislead us. And we cannot but think that he confounded -the equitable remedy of a surety with his legal liability. The 266 HARRIS V. NEWEUj. [chap. IV. creditor is indeed under an eqiiitable obligation, which a court of equity will enforce, to obtain payment from the principal debtor; and that may be said to enter into the contract. But the essence of the contract is the legal undertaking to pay the debt, which a court of law will enforce ; quite consistent with the equitable remedy. And it seems to us manifest that the rule in New York interpolates a condition into the contract of the surety, that he will not pay when the creditor neglects his notice to exer- cise active diligence against the principal. It is not a, little singular that the Court of Chancery in the same State appears to have adhered to the strict legal construc- tion of the contract, while the courts of law were varying it by an equitable construction. After the decision of Pain v. Packard, and commenting upon it, Kent, C, says in King v. Baldwin, 2 Johns. Ch., 554: " The established doctrine is, that mere delay in calling on the principal will not discharge the surety, provided that delay be unaccompanied with any settled or binding con- tract for that purpose. . . . When the eases all speak of the right of a surety to coerce the creditor to sue, by means of an application to chancery, they imply that he cannot do it by merely calling on the creditor, or by any notice or act in pais. The cases of discharge are all founded on the fact of a new agree- ment between the debtor and creditor, varying the contract by which the security originally stood bound. . . . "When the surety has ample and well-settled means of relief, through the medimn of a court of equity, which will at once compel the cred- itor to do his duty, it is not necessary, and, as I hiunbly appre- hend, not expedient, to introduce a new principle of action be- tween creditor and surety. Will it not open a litigious inquiry as to the certainty and efficiency of the notice, and does not such a weapon, left at large, in the hands of a surety, afford tempta- tion to vexation, imposition and fraud? " And Walworth, C, in Warner v. Beardsley, 8 Wend. 194, comments with some severity on Pain v. Packard, to which he submits, however, as binding au- thority in that State. He says that the latter case was decided without argument, and that two, at least, of the judges who con- curred in it, afterwards expressly dissented from it; and that when the Court of Errors reversed the chancellor's decree in King V. Baldwin, 17 Johns. 386, although Spencer, C. J., delivered the opinion, it was in opposition to the votes of all the other justices of the Supreme Court who took part in the decision. As Walworth, C, remarks in Warner v. Beardsley: " In Penn- SEC. 21.] HAEBIS V. NEWELL. 267 sylvania, where they have no court of chancery to enable the surety to proceed in his own name to compel payment, it has, after much hesitation, been decided that where the principal is solvent, the surety will be discharged, if the creditor does not proceed and collect the debt, on request, or permit the surety to proceed in his name." But we believe that the doctrine of Pain v. Packard, as a rule of judicial construction, is confined to those two States. There is a full and learned note to Pain v. Packard and King v. Baldwin, in the Court of Errors, by the learned authors of Am. Lead. Cases, by which it appears that the doctrine of those cases does not pre- vail in England, in the Federal Courts, or in the courts of any other State in which it has not been adopted by statute. The learned counsel of the respondent cited cases against the doctrine, from Maine, New Hampshire, Vermont, Massachusetts, Illinois, South Carolina and Federal Courts. A review of these cases would fully sustain our view. And the learned counsel for the appellant cited in support of his position only cases in New York and Penn- sylvania, and in Alabama, Arkansas and Tennessee, which go upon statutes. There are, indeed, dicta in some of the cases turning upon statutes, approving the rule of Pain v. Packard. But these can avail little for the unsound doctrine, against the strong and universal current of authority outside of the infected States. Indeed, the adoption in those States of such statutes may be regarded as a strong concession against the rule independent of them. The question was not in Gardner v. Van Norstrand, 13 "Wis. 543, cited for the appellant, and was, therefore, not considered by the court. Mr. Justice Cole does no more than affirm the general doc- trine, that when a creditor does anything inconsistent with the rights of a surety, the surety will be discharged. But he does not attempt to define the rights of the surety, or the duty of the creditor. There may, undoubtedly, be cases in which the equitable remedy might be too slow a proceeding to avail the surety. But he has always open to him a speedier and more satisfactory remedy, as suggested in Gardner v. Van Norstrand, and many other cases. He has an instant right to pay the debt and become subrogated to the rights of the creditor. He then becomes, as against his principal, dominus litis. It is said that this may be inconvenient. That is but another way of saying that it is inconvenient to be- come a surety. 268 BINGHAM V. MEAES. [ CHAP. IV. With these views, we cannot doubt that the learned judge of the court below properly excluded the appellant's defense. By the Court. — The judgment of the court below is affirmed. Accord. — Bellows v. Lovell, 5 Pick. 307; Dane v. Cordnan, 24 Cal. 157; Bull V. Allen, 19 Conn. 101; Ingels v. Sutliff, 36 Kan. 444; Eaton v. Waite, 66 Me. 221; Gray v. Farmer's Bank, 81 Md. 631; Inkster v. First Bank, 30 Mich. 143; Smith v. Freyler, 4 Mont. 489; Quillen v. Quigley, 14 Nev. 215j Wilds V. Attix, 4 Del. Ch. 253; Louisiana Bank v. Ledoux, 3 La. Ann. 674; Thompson v. Bowne, 39 N. J. Law 2; First Bank v. Homesly, 99 N. C. 531; Snow V. Horgan, 18 E. I. 289; Benedict v. Olson, 37 Minn. 431; Morrison V. Citizens Nat'l. Bank, 65 ,N. H. 253 ; Carpenter, J. : " As between creditor and surety, it is the surety's business to see that the principal pays. The creditor's chief purpose in requiring a surety is to avoid the necessity of re- sorting to legal remedies against the principal, to escape the vexation and expense of litigation, and cast the burden upon another. The surety's con- tract is, that he will himself pay the note when it falls due, and not that he will pay it in case the payee or holder cannot by due diligence enforce pay- ment by the principal. If he performs his contract, the creditor has neither cause nor opportunity to institute legal poceedings." There are many holdings to the effect that a promisor in suretyship may maintain a bill in equity to compel a creditor to proceed against the prin- cipal. In Ee Babeock, 3 Story, 390; Thompson v. Taylor, 72 N. Y. 32; Whitridge v. Durkee, 2 Md. Ch. 442; Irick v. Black, 17 N. J. Eq. 189; Eensch v. Keenan, 42 La. Ann. 419. Sec. 22. Failure of creditor to apply collateral of the principal when requested. J. F. BINGHAM v. E. ASHLEY MEAES, ET AL. 4N. Dak. 437 (1894). Mr. E. A. Hears, with Mr. A. S. Drake, for appellants. Messrs. Newman, Spalding & Phelps, for respondent. CoRUSS, J., delivered the opinion of the Court : The defendants were sureties on an undertaking given on ap- peal to this court from a judgment. Their only defense to this action against them on the undertaking is that the principal on whose behalf they signed the undertaking assigned to the plain- tiff, 'as collateral to the claim on which such judgment was ren- dered, certain promissory notes secured by real estate mortgages, and that such collateral security is sufficient to pay such judgment and all expenses; that they have notified the plaintifiE that he must resort to such collateral to collect his claim, but that he has SEC. 22.] BINGHAM V. HEARS. °" failed to do so. Under the circumstances of this case, these facts do not constitute a defense. The general rule is that the surety has no right to insist that the creditor shall first proceed against the principal debtor, or any security which such debtor may have given him. Upon default the surety may at once be sued. It is true that in cases characterized by exceptional features, equity may compel the creditor to resort first to the property of the prin- cipal debtor where this will occasion no inconvenience or delay to the creditor. See Philadelphia & R. R. Co. v. Little, 41 N. J. Eq. 519. But the facts of this litigation do not call for the ap- plication of this rule. There is no claim that the principal debtor is insolvent, or that these collateral securities will not be avail- able to the sureties in their hands for their indemnity after they have become by payment subrogated to all the rights of the plain- tiff therein. There is also another rule which appears to be well supported, but this case is not brought within its scope. There is authority for the doctrine that upon indemnifyiag the creditor against the expenses of the proceedings the surety may, in equity, compel him to first exhaust his remedies against the principal debtor. But in this case no offer of indemnity appears to have been made. This is a simple action at law upon a contract. The right of the sureties with respect to this collateral security is to resort to it themselves on paying the debt, and not to compel the creditor to resort to it. It is because of this right of a surety to look to such security for indemnity after he has paid the debt that the release of such security by the creditor will discharge the surety. When the surety is sued, he cannot, in an ordinary case at least, defend on the ground that the principal should have been first sued, and all efforts to collect the debt from him ex- naUStea. 5^ :!:4:H:4:4:«4:^'4:4:H:H:4:««4: The fact that the principal debtor has not been sued, or that collateral security has not been exhausted, is never a defense of itself. It is not a defense, even when a request of the surety is shown that the creditor sue the principal or resort to his collateral unless the surety is prejudiced by the failure of the creditor to act as requested: and then only to the extent of such prejudice. To have made out a defense because of the failure to resort to this collateral security, defendants should have proved that they had been prejudiced thereby. The judgment of the District Court is affirmed. All concur. A petition for rehearing was subsequently filed in response to 270 BINGHAM V. MEARS. [ CHAP. IV. which on January 2, 1895, the following opinion was handed down : The earnestness with which counsel for defendants have pressed upon us their application for rehearing constrains us to go more fully into the discussion of the exceedingly interesting . question presented on this appeal. In their main features, the English common law and the Roman civil law differed radically from each other touching the right of the surety to require the credr itor to proceed against the principal debtor or the security the debtor had given the creditor before coercing payment by the surety. In the earlier period of Roman jurisprudence the right of the surety to compel the creditors to resort first to the princi- pal to collect his demand appears to have been well established ; but the rule was gradually departed from. Justinian, however, re- stored it, and from his time the doctrine was universally recog- nized throughout the empire. It has been incorporated in the jurisprudence of many of the nations of Europe. But it never secured a footing in England. There the con- trary doctrine has prevailed from the earliest times. The com- mon-law rule is that the surety must pay and seek reimbursement from the principal or out of the securities the latter has given the creditor. This was always the rule in courts of law. But in equity and in bankruptcy proceedings a rule somewhat analogous to that of the civil law grew up. This rule, however, was less sweeping in its effects upon the creditor than the rule promulgated by Justinian. It more carefully guarded his rights from preju- dice. The English law regarded the promise of the surety as an absolute promise, unless it was in terms conditional. The surety was under the same obligation as the principal to pay the debt. The courts of law therefore ignored the equities between the principal and the surety when the creditor was seeking to collect his claim of the latter. In equity, also, the promise of the surety was looked upon as an unconditional promise; but equity, unlike the law, would not, under all circumstances, refuse to consider the rights of the surety in his relation to the principal; and whenever a case arose, special in its character, calling for the aid of equity to protect the surety from injury, that court, true to its traditions and its fundamental principles, extended relief to the surety, whenever it could do so without, on the other hand, affecting the right of the creditor to the payment of his debt according to the terms of his contract. But in all such cases equity required that the creditor should be saved from SEC. 22.] BINGHAM V. MEAES. 271 delay, from expense, and from all rjsk. "When the object of the surety 's appeal to equity was to compel the creditor to exhaust the collaterals in his hands before proceeding against the surety, the foundation of equitable relief was the inability of the surety himself to enforce such collateral after paying the debt, or the possibility that the creditor by some act had impaired its value or destroyed its legality. The mere fact that the creditor held security for the debt did not entitle the surety to appeal to equity for a decree that the creditor look first to such security for his pay. In such a case the surety could protect himself by paying the claim, and by being subrogated to the creditor's rights to the security. But if, after payment by him, he could not enforce such security, or if grave doubt existed as to its legality because of some act of the creditor with respect to it, then a special case was presented, necessitating the interference of equity to preven^ injustice to the surety; but even in such cases equity never in- terposed its aid without exacting the most ample protecting of the creditor against all damages because of delay, and all expenses of, other proceedings than those against the surety, and the most complete indemnity against all loss because of the creditor's right of recovery against the surety being postponed. ****** Said the chancellor in Hayes v. Ward, 4 Johns. Ch. 123, 131: " I am not aware that there is any general rule in chancery that the cfsditor must look to the principal debtor, and exhaust his remedy against him, before he can be permitted to resort to the surety. The general language in the books and the practice have been otherwise, and the surety has been considered (without any formal adjudication upon the point, and perhaps without any examination of it upon principle) as amenable in ordinary cases to the creditor in the first instance, though the creditor may have taken ample security. The creditor has usually called on the surety at his election, and left him to resort to the principal debtor for his indemnity after he has paid the debt, and after he has been clothed, by substitution with all the rights and securities of the creditors. ' The holder of the security, therefore, in gen- eral cases,' says Lord Eldon in Wright v. Simpson, 6 Ves. Jr. 734, 'may lay hold of the surety; and. till very lately, even in cir- cumstances under which the surety would not have had the same benefit that the creditor would have had.' But in late cases, and under particular circumstances, Lord Eldon admits that the surety has a right to call upon the creditor to do the most he can for his benefit." Referring to these cases holding that this may be 272 BINGHAM V. HEARS. [ CHAP. IV. done, the chancellor says of them; " But all the instances to which I have alluded may be considered as cases of a special natiire. They do not appear to establish any such general rule as that derived from the civil law requiring the principal debtor to be first sued, which rule prevails in all those countries where the civil law is an essential part of the municipal law of the land." The chancellor granted relief to the surety in this case upon the ground that there was reason to believe that the creditor, by tainting his security with usury by subsequent dealings there- with, had rendered it void; thus placing the surety in a position where he could not have the benefit of it upon paying the debt. On this question the chancellor said: " I put this case entirely upon the ground of the allegation, to which no answer has been given, that the mortgage is infected with usury, and would be useless and void if placed by substitution in the hands of the surety. If this should happen to be the case, the plaintiff, on paying, might be deprived of all indemnity from his principal by reason of the conduct of the creditor;" ******* In a recent case in the Circuit ' Court of Appeals that court rendered a decision directly in point. Davis v. Patrick, 6 C. C. A. 632, 57 Fed. Rep. 909. In the course of the opinion the Court said: " Some cases have been cited by the learned counsel for the plaintiffs in error, the authority of which we do not dispute, that under certain circumstances a court of equity, at the in- stance of the surety, will coerce a creditor to proceed with the collection of his claim against the principal debtor. But these are cases where, by the delays and forbearance of the creditor, the surety is liable to sustain loss, or where the creditor has access to a fund for the payment of his debt, which the sureties cannot make available. The principle has never been extended to a case like the one at bar, where the creditor has merely exercisef ; his right of election as between two riamedies for the collection of a debt, and where the securities held by the creditor may be made immediately available to the surety by his paying the debt and seeking subrogation." ************ The general rule that some peculiar equity must exist in favor of the surety — that the case must be an exceptional one to en- title the surety to relief — applies as fully when the surety is seeking to compel the creditor to first sue the principal as when he is insisting that the creditor shall first exhaust the security he holds. These rules of the common law constitute the law of this State, so far as they have not been changed by statute. We will SEC. 22.] BINGHAM V. HEARS. ^'^^ shortly come to tha^ subject. Now, it is obvious that defendants' answer discloses no special equity in their favor. The security which they ask the court to compel the creditor to exhaust they can secure absolute control of by themselves paying the claim they owe. As between the creditor to whom a debt is owing and the surety who owes it, equity very properly declares that the creditor ought not to be compelled to enforce, for the benefit of the surety, the security he holds, but that the surety himself should pay the debt, and enforce such security for his own benefit. The equitable right of a surety to compel the creditor, under certain peculiar circumstances, to proceed first against the prin- cipal or collateral security, does not rest upon the terms or nature of the contract on which he is surety, but upon the broad equitable principle that, as between himself and the principal debtor, the latter ought to pay the debt. Harris v. Newell, 42 Wis. 692. When, coupled with this equity, special facts, which take the case out of the ordinary category, are found to exist, the right exists irrespective of the terms or nature of the contract, provided, of course, that the right is not waived by the language of the con- tract. The cases cited by counsel for plaintiff do not hold to the contrary. They merely hold that the surety upon such an un- dertaking is liable absolutely, and no execution against the princi- pal upon the judgment appealed from is necessary before suing the surety. The authorities cited by counsel for defendants are cases in which the court had both parties before it, or the property of both which had been pledged for the debt, or in which, by reason of the peculiar nature of the litigation, it was possible to protect the surety's equity without in the least degree interfering with the right of the creditor to enforce the contract without delay. The whole trend of the common-law decisions is in the direc- tion of regarding the right of the creditor to compel the surety to at once perform his contract as superior to the equity of the surety that, as between himself and the principal, the latter ought to pay the debt. The rehearing is denied. The judgment is affirmed. All concur. AccoED. — Iriek v. Black, 17 N. J. Eq. 189; London Bank v. Smith, 101 Cal. 415; First Nat. Bank v. Wood, 71 N. Y. 407. 274 DE JEENETTE V. FIDELITY CO. [CHAP. IV. Sec. 23. stipulation discliargiiig the surety if claim is not made within a designated time. DE JERNETTB v. THE FIDELITY AND CASUALTY CO. 98 Ky. 558 (1896). T. 0. Edelen, for appellant. Thomas H. Eines and N. McC. Mercer, of counsel on same side. Murray & Eskridge and O'Neal, Phelps & Pryor, for appellees. Judge Paynter delivered the opinion of the court. De Jernette was elected sheriff of Breckinridge county, and in January, 1891, qualified as such, with W. I. Ramsey as his dep- uty. To indemnify De Jernette against loss, on account of his deputy's fraud or dishonesty, the Fidelity and Casualty Co., of New York, executed and delivered to him its bond, to cover the period from January 19, 1891, to January 19, 1892. Among others there is a provision in the bond as follows: " It is hereby declared and agreed that, during such term or any subsequent renewal of such term, . . . the company shall, at the ex- piration of three months next after proof satisfactory to its offi- cers of a loss, . . . make good and reimburse to the employer to the extent of the sum of four thousand dollars, ... by reason of fraud or dishonesty of the employed, . . . amount- ing to embezzlement or larceny, which has been committed and discovered during the continuance of said term or any renewal thereof, and within three months from the death, dismissal or retirement of the employed : Provided, That on the discovery of any such fraud or dishonesty as aforesaid, the employer shall im- mediately give notice thereof to the company, and that full par- ticulars of any claim made under this bond shall be given in ■writing, addressed to the company's secretary, at its oflSce in the city of New York, within three months after such discovery as aforesaid, and within three months after the expiration of this bond. . . . Any claim made under this bond or any renewal thereof shall embrace and cover only acts committed during its currency, and within twelve months next before the date of the discovery of the act or default upon which such claim is based." On the 19th of January, 1892, a renewal receipt was issued to cover the ensuing year, in which receipt there is used language as follows: " The contract under bond No. 53,939 is hereby re- newed in accordance with the tenor of the bond, the guaranty to SEC. 23.] DE JEBNETTE V. FIDELITY CQ. 275 cover the period above named only." The period to which it referred was from January 19, 1892, to January 19, 1893. A renewal of the policy constitutes a separate and distinct con- tract for the period of time covered by such renewal. It is, how- ever, a contract with the same terms and conditions as is evidenced by the bond which is renewed, because the renewal receipt re- cites that it is renewed " in accordance with the tenor of the bona. Hc4si|c«*H:4:4sii!«:|e4c4:«:)::|:«« By the express terms of the policy, " within three months after such discovery as aforesaid, and within three months after the expiration of this bond, the employer shall give full particulars of any claim under the bond to the company." This was not done for more than three months after the expiration of the renewal of the bond, and for more than one year after the expiration of the bond. The company desired by these provisions to require vigi- lance on the part of the employer to discover and give notice of the fraud or dishonesty of the employed. It was of the ut- most importance that this be done. The company could protect itself to some extent by having such information. It required and had the right to expect vigilance on the part of the employer. The amount which it is alleged Ramsey fraudulently appro- priated is $4,048.98. The account filed shows that $346.92 was so appropriated in 1891, and the balance before . January 19, 1893, and that it " was so done and committed by said Ramsey between the 19th day of January, 1891, and the 19th day of January, 1893, but the knowledge of which never came to plain- tiff until May 3, 1893." The employer was guilty of gross negli- gence in failing to make a discovery of the fraudulent conduct of his deputy. Doubtless he was unaware of the terms of the guaranty bond requiring him to make the discovery within a given time, still he is presumed to know its provisions and is bound by them. It is not contended by counsel for appellant that the provisions of the bond limiting the liability of the company are not bind- ing on him, but it is insisted in effect that a renewal of the bond in 1893 would have the effect of continuing the liability of the company for acts committed during its continuance or a renewal thereof, if the discovery should be made and notice given thereof within the time stated. To illustrate: Suppose the fraud and dishonesty, of Ramsey, on account of which this action was brought, had occurred between January 19, 1891, and January 19, 1892, the period covered by the bond, the discovery could be made be- 276 DE JEENETTE V. S'IDELITY CO. [CHAP. IV, tween January 19, 1893, and January 19, 1894, the period of the alleged renewal, and notice given of it v^ould be a compliance vfith the terms of the contract, and the liability of the company would then be continued. If this be a proper interpretation of the contract, if there had been ten renewals, the company's liability would continue imder them for acts committed during the first year of the guaranty. As heretofore stated, we do believe the bond is a distinct con- tract, and the renewals are separate and distinct contracts, but of the same tenor of the bond. Therefore, the liability of the com- pany for an act committed during a given period must be deter- mined by the terms of the contract in force at the time of its commission, and a subsequent renewal does not extend the time for the discovery of the wrong and the enforcement of a liability of the company therefor. The acts for which a recovery is sought in this case were, as alleged, committed between January 19, 1891, and January 19, 1893, therefore a renewal from the latter date to January 19, 1894, does not affect the rights of the parties for such acts. The lan- guage in the bond, which reads as follows, " that any claim made under this bond or any renewal thereof shall embrace and cover only for acta and defaults committed during its currency, and within twelve months next before the date of the discovery of the act or default upon which said claim is based," means to limit the company's liability for acts committed during the period covered by the bond, or one covered by a renewal thereof, which were committed within twelve months before the date of discov- ery. Under the terms of the bond the discovery must be made within three months after the expiration of the contract, during the currency of which the act was committed. Wherefore the judgment is affirmed. AccoKD. — Cal. Savings Bank v. American Surety Co. 87 Fed. 118. Similar provisions in insurance policies are construed as conditions prece- dent to a right of recovery. Insurance Co. v. McGookey, 33 O. S. 555; Quinlan v. Insurance Co., 133 N. Y. 56; Riddlesbarger v. Insurance Co., 7 Wall. 386; Thompson v. Phenix Ins. Co., 136 U. S. 287. SEC. 24] FANNING V. GUARANTEE CO 277 Sec. 24. Stipulation that default must be discovered during the life of the suretyship contract. PANNING ET AL. v. THE LONDON GUARANTEE AND AC- CIDENT COMPANY, LIMITED. 10 Vict. L. E. 8, (1884). Action upon a guaranty of the fidelity of a salesman in the em- ployment of the plaintiffs. The policy was for the term of one year from the date of the policy, 7th August, 1882, and was subject to the conditions indorsed thereon as conditions precedent to the right of the plaintiff to recover. The contract was that during that year and any year thereafter in respect of which the defendants should accept, and the plaintiffs should pay the pre- mium — the defendants would, at the expiration of three months next after proof satisfactory to the directors, &c., of a loss as in the said policy had been given to the defendants, make good to the extent of £1000, all and any pecuniary loss sustained by the plaintiffs by reason of any fraud or dishonesty of the employed in connection with the duties, &e., as should amount to a criminal act, and should be committed and discovered during the con- tinuance of the said policy. The first condition was that, on the discovery of any fraud, &c., the employer should immediately give notice thereof to the company," and any claim made in respect of the policy should be in writing addressed to, &c., within three months after such discovery, and the company should be entitled to call for particulars and proofs of the correctness of such claim, &c. The second condition provided that the employer should, if and when required by the company, use all diligence in prose- cuting the employed to conviction, &c. The third condition was that the policy should extend to cover only such losses as might have been incurred . . . within the period of twelve months previous to the date of any notice of claim that might be made under it. The facts of the case were not in dispute. The defendants de- clined to renew the policy at the end of the year (7th August, 1883). The defalcations were discovered on 20th September, 1883. Stawell, C. J. By the contract between the parties in this case, frauds, in respect of which the defendants are to be liable, must have been committed and discovered during the continuance of the policy. The advantage and protection afforded to the in- surers by such a stipulation are obvious; it. is important to such 278 FANNING V. GUARANTEE CO. [ CHAP. IV. companies as the defendants to know when their liability ceases, as well as to be informed as soon as possible of the commission of frauds insured against, so as to enable them to inquire into the mode in which they may have been committed, and devise means to protect themselves in the future against similar frauds; and also to have the offender, if discovered, prosecuted promptly, and thus deter others from committing like offences. No doubt a case may be suggested in which a fraud, committed immediately before the end of the twelve months, could not pos- sibly be discovered in sufficient time to comply strictly with the conditions; but the assured by his contract undertakes the lia- bility of such a risk. These conditions are made conditions prece- dent to any right to recover, and the plaintiff must abide by them. The third is obviously framed to meet particular eases. The pleas cast upon the plaintiffs the burden of proving the fulfilment of the conditions; they are attached to and form part of the contract, and both parties must be governed by them ; one of those conditions essential to sustain the plaintiffs' action has not been proved, and the Eule to enter a verdict for the defendants must therefore be absolute. HiGiNBOTHAM, J. I am of the same opinion. The contract is subject to a number of consistent, and not unreasonable condi- tions for the protection of the insurers. It is reasonable that the assured should give notice of frauds immediately after their dis- covery, and also within a reasonable time give notice of the claim. The conditions in question might not afford a reasonable proj;ec- tion if the policy were held to last a considerable time after the twelve months. The policy was made for a year ; but it might, by consent of both parties, be renewed for an indefinite time by payment of premiums ; in which case the provisions as to notice of defalcations would not afford sufficient protection to the com- pany, if the assured were not to exercise a reasonable supervision over the employed. Where the policy lasts only one year, and is terminated by the insurer, a case like the present may result in hardship to the assured: but they must be assumed to have understood the mean- ing of the words used. I do not see any injustice or unfairness on the part of the defendants. I do not see any evidence of waiver of any of the conditions by the defendants. HoLEOYD, J. I am of the same opinion. I express no opinion ' on the second ground of the Ru^. The words." during the con- tinuance of this policy, ' ' in the body of the document, must mean SBC. 25.] LONDON CO. V. PEARNLEY. 279 while the policy continues in force, whether terminated at the end of the first year or renewed for subsequent years. The in-- surers were to be liable only for losses sustained by reason of frauds committed and discovered during the continuance of the policy; the meaning of that must be the same as to both commit- ting and discovery. The only further question then is whether there is anything in the conditions to which the contract is sub- ject which extends that liability. The plaintiffs relied on the com- bined effect of the first and third conditions ; but I think their only effect is to restrict the liability of the defendants. Rule absolute.. Attorneys for the plaintiffs: Elingender, Ckarsley & Dickson, Attorneys for the defendants : Moule & Seddon. Accord. — Commercial Mutual Building Soe. v. London Guarantee & Accident Co., 7 Montreal L. E. Q. B. 307. Sec. 25. StipTilation requiring creditor to institute criminal pro- ceedings against the principal. THE DIRECTORS OP THE LONDON GUARANTY CO. v. BENJAMIN LISTER FEARNLEY. L. R. 5 H. of L. Appeals 911 (1880). The action was brought to recover a sum of £1000 upon a guar- antie policy given by the appellants, dated 8th of March, 1875, by which the plaintiff (the present respondent) was to be in- demnified against any fraud or dishonesty (which should amount to embezzlement of money), which should be committed by one Frederick Marshall, then about to be employed by the plaintiff as manager of a tavern in Duke Street, Dublin. The policy was for one year, and one. of the articles declared that, subject to the provisions in the memorandimi of association, " and subject to the conditions herein contained, which shall be conditions precedent to the right on the part of the said employer to recover under this policy, during the year from the date hereof, and during any year thereafter in respect of which the company shall consent to accept, and the employer shall pay, on the day of the date hereof, the aforesaid premium, the company shall at the expiration of three months next, after proof satisfactory to the directors of the loss herein mentioned has been given to the company, make good and 29 280 LONDON CO. V. PEABNIiBY. [ CHAP. IV. reimburse to the employer to the extent of the sum designated in the margin hereof as the amount guaranteed, and no farther such pecuniary loss sustained by the employer by reason of any fraud or dishonesty of the employed in connection with the duties hereinbefore referred to, as shall amount to embezzlement of money, and be committed and discovered during the continuance of the policy, and within three months from the death, dismissal, or retirement of the employed." Among other provisions in the policy was the following : " Provided, that the employer shall, if and when required by the company (but at the expense of the company, if a conviction be obtained), use all diligence in prosecuting the employed to conviction for any fraud or dishonesty (as aforesaid) which he shall have committed, and in consequence of which a claim shall liave been made under the policy; and shall, at the company's expense, give all information and assistance, to enable the com- pany to sue for and obtain the reimbursement by the employed, or by his estate, of any moneys which the company shall have become liable to pay." Action was brought on this policy. Many defences were pleaded, but the seventh plea became the only one material to be con- sidered. That plea was in the following form : ' ' That although the plaintiff was required to do so by the defendants, yet he did not use diligence in prosecuting the said Frederick Marshall for the said fraud or dishonesty, which the plaintiff alleges he the said Frederick Marshall was so guilty of, as in the plaint stated, nor had the said plaintiff the said Frederick Marshall brought to trial." The plaintiff demurred to this seventh defence on the ground that it did not " disclose any grounds of defence good in substance, and therefore the plaintiff demurs in law to the said defence, because it is not alleged therein, nor does it appear there- from, that there was any obligation on the plaintiff to prosecute the said Frederick Marshall and bring him to trial for embezzle- ment, or that the non-performance of any such obligation was a condition precedent to the plaintiff's right of action." The Court of Exchequer allowed the demurrer. On appeal the judges were equally divided, and the judgment of the court beloff. stood affirmed. This appeal was then brought. Mr. Webster, Q. C, and Mr. J. G. Mathew (Mr. D. FitzgerM, of the Irish Bar, was with them), for the appellants. The Attorney-General for Ireland {Mr. Law), and Mr. McBlavM (of the Irish Bar), for the respondent. sec. 25.] london co. v. feaknley. 281 Lord Blackburn : My Lords, it has long been the practice of companies insuring against fire, for the purpose of their own security, to incorporate in their policies, by reference to their proposals, various stipula- tions for matters to be done by the assured making a claim before the company is to pay them, and (as the remedy by action for not complying with these stipulations would not afford them any protection) to make the fulfilment of those conditions a condition precedent to their obligation to pay. There was much contro- versy on the subject about a century ago; but since the case of WoraJey v. "Wood, 6 T. R. 710, it has been settled law that this mode of protecting themselves is effectual. Those who prepared the policy for the company in the present case wished to do the same, but have not been happy in the words they have chosen for the purpose. So far as any of their stipu- lations, or, as the policy calls them, "conditions," are for some- thing to be done preliminary to the completion of the proof, sat- isfactory (that is, which ought to be satisfactory) to the directors,, from which completion of proof the time of the payment is to run, I think it is not disputed that they have effected their object. But such stipulations as relate to things to be done after payment is due are not, and cannot be, conditions precedent. The pro- vision in question as to the employer, when required, using all diligence in prosecuting the employed to conviction is coupled with a stipulation that he shall give all assistance to enable the company to obtain reimbursement from the employed or his estate is different; that latter stipulation is not and cannot be a condi- tion precedent to the obligation of the company to pay: the com- ■pany cannot be entitled to reimbursement till it has, at least, become liable to pay. It seems to me unlikely that those who framed the policy stipulated for the prosecution by the employer, with a view to facilitate reimbursement, and I do not think the words such as to require us to pay this consideration on the instrument, a construction which seems to me unreasonable. I think that the two matters are separate and independent, and that the meaning of the first part of the stipulation is that the em- ployer who is not entitled to recover except for loss by embezzle- ment, shall, if required, subject his proof to the test of bringing it before a magistrate, and so subjecting it to the defence of the person accused of embezzlement, before the directors are called on to say whether the proof is satisfactory. The stipulation thus imderstood is one not at all unreasonable, and is one the nature 282 IX5ND0N CO. V. PEABlSrLEY. [ CHAP. IV. ■of which makes it necessary, for the protection of the company, that it would be made a condition precedent to an action for damages, for not doing this would give the company no redress. .-. It seems to me, therefore, that the whole question is reduced to that of the construction of an ill -penned instrument: a matter on which opinions always may differ, and in this case have dif-: fered. I do not think that, the rules which are laid down as to the construction of agreements in which there are cross contracts, in order to see whether those cross contracts are dependent or in- dependent, are of much assistance, where, as here, the question is, whether a matter is expressly made a condition precedent;, nor that much good can be done by arguing on the words used, or citing cases: it would be merely repeating what has been said below. All agree that the question is, what is the intention to be collected from the words. I agree that the intention is ob- scurely expressed ; and that the obscurity is the fault of the language used by the company, which can be amended in future by so framing the policy as to leave no doubt as to its meaning; and this is, I think, the strongest argument against putting on the instrument the construction which I do. But, after making all due allowance for this, I am obliged to come to the conclusion that the intention must have been what I have last stated, and that it is sufficiently expressed to have the effect of making this a condition precedent. I need not say that, knowing that the Lord Chancellor takes a different view, I express my opinion with difSdence. I think that the decision below should be reversed with costs, and I beg to move accordingly. LoKD Watson : My Lords, the parties to this appeal in the year 1875 entered^ into a contract of insurance by which the company, in considera- tion of certain premiums paid, and to be paid, and subject to the conditions therein expressed, agreed to make good to the extent of £1000 the pecuniary loss sustained by the insured, by reason of such fraud or dishonesty on the part of his servant, one Marshall, as should amount to embezzlement of money. It was expressly declared that the conditions therein declared should be conditions precedent to the right of the insured to recover under the policy. By the third proviso contained in the policy it is conditioned as follows: " Provided that the employer shall, if and when required by the company (but at the expense of the company if a conviction be obtained), use all diligence in prosecuting the SEC. 25.] LONDON CO. V. FEAENLEY. 283 employed to conviction for any fraud or dishonesty (as afore- said) which he shall have committed, and in consequence of which a claim shall have been made under this policy, and shall, at the company's expense, give all information and assistance to enable the company to sue for and obtain reimbursement by the em- ployed or by his estate of any moneys which the company shall have become liable to pay." A claim having been made under the policy, the directors be- fore admitting or denying liability, required the insured to prose- cute the employed criminally. With that requisition the insured did not comply ; and the only question presented in this appeal for the decision of the House is — whether the stipulation, which the insured thus failed to implement, was or was not a condition precedent to his right to recover the amount of his loss from the company. It cannot, with any propriety, be said that the stipulation in question goes to the root of the contract between these parties. Nevertheless, it may be a condition precedent, provided it appears that the parties intended it should have that effect. In the words used by the noble Lord (Blackburn) in his judgment in the Queen's Bendh in the case of Bettini v. Gye, 1 Q. B. Div. 183, at p. 187, " Parties may think some matter, apparently of very trivial importance essential; and if they sufficiently express an intention to make the literal fulfilment of such a thing a condi- tion precedent, it will be one." That an insuring company can claim the protection of the rule thus expressed is settled by the ease of Worlsey v. "Wood. The effect of the general declaration that all the conditions of the policy shall be conditions precedent appears to me to be pre- cisely the same as if a similar declaration had been repeated at the commencement of each proviso, and of each separate condi- tion embodied in such proviso. I therefore take the case on tne same footing as if the parties had stipulated in these terms with regard to proviso 3: " That it shall be a condition precedent to the right of the employers to recover, that they shall, if and when required by the company, use all diligence in prosecuting the employed to conviction," &c., &c. When the parties to a contract of insurance choose in express terms to declare that a certain condition of the policy shall be a condition precedent, that stipulation ought, in my opinion, to receive effect, unless it shall appear either to be so capricious and 284 LONDON CO. V. PEAENLEY. [ CHAP. IV. unreasonable that a court of law ought not to enforce it, or to be sua natura incapable of being made a condition precedent. In the present case I am of opinion that, having regard to the character of the risk insured against, it would not be an un- reasonable thing for the company to stipulate that, before ad- mitting or being subjected to liability for the sum insured, the employers should, as a condition precedent to their right of re- covery, use, if and when required, all possible diligence to prose- cute the fraudulent person to conviction. But it is contended for Mr. Fearnley, the respondent, that, according to its sound con- struction, the stipulation which the parties have made in regard to a criminal prosecution of the employed cannot become a condi- tion precedent to his right to recover, even by virtue of an ex- press declaration to that effect. And that contention is undoubtr edly well-founded, if in the case of the insured's obligation to prosecute criminally, as in the case of his obligation to give in- formation and aid in civil proceedings, the time of the perform- ance be, from the nature of the obligation, necessarily postponed until the directors of the company have admitted liability and paid the money. It appears to me that the stipulations with respect to proceed- ings criminal and civil contained in the third proviso of the policy, constitute two distinct and separate obligations. They are so independent of each other that the company may require the performance of one of them only, and the insured, if required to perform both, might implement the one and leave the other unful- filled. The words of the proviso do not fix any limit of time within which the obligation of the insured to institute a criminal prose- cution must be performed ; but it does not necessarily follow that the obligation must be treated as if its performance were referable to a period subsequent to the company's admission of liability. Although the proviso does not absolutely fix the time of perform- ance, it provides that the insured shall proceed whenever, re- quired by the company, so that the contract of the parties leaves it entirely to the company to determine at what time criminal proceedings shall be initiated. Now, it appears to me that when that which is left indeterminate in a contract, whether it be time, or place, or quantum, becomes fixed and ascertained in the man- ner stipulated by the contracting parties, it must be treated just as if it had been an original term of the contract. And seeing that the directors, before admitting liability, did, in the exercise SEC. 26.] GILLESPIE V. TOEEANOE. ^^^ of their undoubted right, require the insured to fulfil the condi- tion of the policy with respect to criminal prosecution, I am of opinion that it must be regarded as a condition precedent. I have only this observation to add, that when, as in the present ease, the parties to a contract make a stipulation in which noth- ing is expressed as to time, and which might, according to its own terms, be fulfilled either within or after the period during which, it could operate as a condition precedent, and the parties then go on to declare that it shall be a condition precedent, I think the declaration must, prima facie, be held to be a sufficient expression of their intention to limit the time of performance to the antecedent period. On these grounds I have, after much hesitation, formed an opinion that the judgments under appeal, in so far as these allow the demurrer to the appellant's seventh defence, ought to be re- versed and the demurrer overruled. Sec. 26. The .principars right of set-off or counter-claim against the creditor as a defense to the promisor. GILLESPIE, ET AL. v. TORRANCE. 25 N. Y. 306 (1862). Charles A. Bapallo, for the appellant. William Stanley, for the respondents. Selden, J. The defence in this case is not founded on a failure of the consideration of the note, otherwise than by a defect in the quality of the timber for which it was given. That being so, if there was neither warranty nor fraud in the sale of the timber, the defect in quality constitutes no defence. The answer does not allege fraud in the transaction, and unless it shows a warranty of the quality of the timber, it presents no defence to the note, either partial or total. The argument of the appellant's counsel, to maintain the position that the defence rested upon a failure of consideration, and not upon a claim for damages on a breach of warranty, is very ingenious; but the an- swer and the proof show that all the timber contracted to be delivered to Van Pelt, and for which the notes were given, was in fact delivered, and the real ground of complaint is, that a much larger proportion of it than was shown by the inspector's certifi- cates, upon the faith of which the purchase was made, proved to 286 GILLESPIE V. TORRANCE. [CHAP. IV. be of inferior quality. The law being well established that such defect of quality, in the absence of fraud or warranty, constitutes no defence to the note, or to any part of it, and there being no pretence of fraud, it follows that the defence, if there is any^ rests upon a breach of warranty. The question then arises, whether the plaintiff, an accommoda' tion indorser upon a note given by Van Pelt to the plaintiffs for the timber, can avail himself of a breach of the contract of war- ranty in regard to the quality of the timber, made by the plaintiffs to Van Pelt, on the sale to' him. To decide this question, it is necessary to ascertain the ground upon which such defences, by way of recoupment, as they were denominated prior to the adop- tion of the Code, now, partially, if not wholly, merged in the much broader term, counter-claim, were admitted. If we regard such defences as resting upon a failure of the consideration of the contract on which the plaintiff's action is founded, then unques- tionably the defendant could avail himself of the breach of war- ranty in this case, because an indorser or surety may always, where the contract has not been assigned, show a failure, partial or total, of consideration of his principal's contract which he is called upon to perform. But if such defences are regarded as the setting off of distinct causes of action, one against the other, then it is clear, as will be shown hereafter, that this defendant could not avail himself of such defence. The subject of the precise ground on which a defendant is al- lowed to reduce a recovery against him, in an action upon a contract, by alleging and proving fraud or breach of warranty — whether the contract, where there is fraud, is regarded as de- stroyed, and the recovery had on a quantum meruit, or whether the reduction of the plaintiffs' claim rests upon a partial failure of consideration, or upon the setting off of distinct claims against each other ^ has often been discussed, but without any general concurrence of opinion on the question. A careful examination of the subject, I think, must lead to the conclusion, that wherever recoupment, strictly' such, is allowed, distinct causes of action are set off against each other. This would seem to follow frorn the right of 'election, which all the cases admit the defendant has, to set up his claim for damages by way of defence, or to resort to a cross-action to recover them. In many cases the defendant's damages would exceed the amount of the plaintiff's claim, which shows conclusively that such dam- ages do not rest upon a mere failure of consideration. Where SEC: 26.] GILLESPIE V. TOEEANCE. 287 there is fraud, the party deceived, on discovering the fraud, may rescind the contract ; but if he does not do that, the contract on his part remains entire, not broken and not modified, and he is bound to perform it fully according to its terms; he has, however, aris- ing from the fraud, a distinct cause of action, the amount of which he may set off against any liability on his part growing out of the transaction in which the fraud was perpetrated. As was said by Bronson, J., in Van Epps v. Harrison: " When sued for the price, the vendee may in general recoup damages; but while he retains the property he cannot treat the contract as wholly void, and refuse to pay anything. By retaining the prop- erty he affirms the validity of the contract, and can be entitled to nothing more than the damages which he has sustained by reason of the fraud." The same principle is applicable to cases of war- ranty, except that the breach of warranty gives no right to rescind, unless there is an express contract to that effect. In ordinary cases of breach of warranty, therefore, both con- tracts remain binding to their full extent, and where recoupment is allowed, damages for a breach on one side are set off against like damages on the other side. The ' ' cross-claims arising out of the same transaction compensate one another, and the balance only is recovered." It has always been optional, as is suggested above, since the doctrine of recoupment has gained a foothold in the courts, with a party who has sustained damages by fraud or breach of warranty ■ in the purchase of goods, when sued for their price, to set off or recoup such damages in that action, or to reserve his claim for a cross-action; and when he elected to recoup he could not, under the Revised Statutes, have a balance certified in his favor, nor could he maintain a subsequent action for such balance. Under the Code of Procedure, doubtless a balance might be recovered, but the right of election to set up a counter-claim in defence, or to bring a cross-action for it, still exists. Now it is not easy to reconcile with these established principles, the right of the defendant in this suit to avail himself of the claim which Van Pelt may have against the plaintiffs on a breach of war- ranty. 1. Such damages constitute a counter-claim, and not a mere failure of consideration, and not being due to the defendant, cannot be claimed by him. 2. Van Pelt has a right of election whether the damages shall be claimed by way of recoupment in the suit on the note, or reserved for a cross-action. The de- fendant cannot make this election for him. 3. If the defendant 288 GILLESPIE V. TORRANCE. [CHAP. IV. has a right to set up the counter-claim, and have it allowed, in this action, it must bar any future action by Van Pelt for the breach of warranty ; and as no balance could be found in defend- ant's favor, he might thus bar a large claim in canceling a small one. If the right exists in this case, it would equally exist if the note was but $100 instead of $1,800. 4. Supposing the other notes given for the timber to have been indorsed by different persons, for the accommodation of Van Pelt, and all to remain unpaid, each of the .indorsers would have the same rights as the defendant. If they were to set up the same defence, how would the conflicting claims be reconciled? In the case which was shown on the trial, there would seem to be a strong equity in favor of the defendant to have the note can- celed or reduced, by applying towards its satisfaction the damages which appear to be due to Van Pelt for the breach of warranty. It is, however, an equity, in which Van Pelt is interested to as great, and possibly to a greater, extent than the defendant, and cannot be disposed of without having him before the court, so that his rights, as well as those of the defendant, may be protected. That remedy may be open to the defendant still, notwithstanding the judgment; especially if the insolvency of the parties renders that course necessary for his protection. My conclusion is, that the court below was right in holding that the defendant could not set up the breach of warranty in defence, partial or total, to the suit on the note ; and as the warranty pre- sented the only ground on which there could be a claim of defence under the answer, there is no necessity for considering the other questions presented in the case. The judgment should be affirmed. All the judges concurring. Judgment affirmed. Accord. — Hiner v. Newton, 30 Wis. 640; Stockton Savings & Loan Soc. V. Giddings, 96 Cal. 84; Osborne v. Biyce, 23 Fed. Rep. 171; Lasher v. Williamson, 55 N. Y. 619; Newton v. Lee, 139 N. Y. 332; Beard v. Union Co., 71 Ala. 60; B. & O. Ry. v. Bitner, 15 W. Va. 455; Thalheimer v. Crow, 13 Colo. 397. Contra. — Scroggin v. Holland, 16 Mo. 419 ; Aultman v. Hefner, 67 Tex. 54; Berchervaise v. Lewis, L. R. 7 C. P. 372; Alcoy Ry. v. Greenhill, 41 London Solicitors Jour. 330. For special equitable reasons, such as the insolvency of the creditor, it has been held that cross-demands in favor of the principal may be ad- judicated without having the principal before the Court. Jarratt v, Martin, 70 N. C. 459 ; Scholtz v. Steiner, 100 Ala. 148. SEC. 27.] STANDARD OIL CO. V. AENESTADi 289 Where all the parties are before the Court the right of equitable set-off or counter-claim on cross-demands between principal and creditor and in favor of the surety is generally conceded. Livingston v. Marshall, 82 Ga. 281; Waterman v. Clark, 76 111. 428; Himrod v. Baugh, 85 111. 435; Konehel v. Lofquist, 40 111. App. 442; Reeves v. Chambers, 67 la. 81; Spencer v. Almoney, 56 Md. 551; Concord v. Pillsbury, 33 N. H. 310; Andrews v. Var- rell, 46 N. H. 17; St. Paul v. Leek, 57 Minn. 87; Wagner v. Stocking, 22 0. S. 297; Hollister v. Davis, 54 Pa. 508; Wartman v. Yost, 22 Grat. 595; McHardy v. Wadsworth, 8 Mich. 349; Pierce v. Bent. 69 Me. 381; Mahurin v. Pearson & Bellows, 8 N. H. 539. In the case last cited the Court says: " There are several considerations which show the propriety of allowing the set-off in this case. If the debt from the plaintiff to Pearson, which was offered in set-off, was contracted after that now in suit, it very probably might have been regarded by the parties as in effect a payment thus far. It is at least but equitable that it should so operate, whether contracted be- fore or after. The rule in equity is, that if a creditor have security, the surety, on payment by him, is entitled to be substituted, and to have the benefit of that security. " If, instead of having security, the creditor owes the principal part of the amount, and the principal is willing to put in a set-off, it is equally reasona- ble that the surety should have the benefit of the credit which the creditor has obtained of the principal. And, moreover, it will tend to prevent multiplicity of actions; for, should the plaintiff collect his debt of Bellows, the latter must have an action against Pearson to recover the amount, and Pearson will have a right of action on the claim now offered in set-off." Sec. 27. Dissolution of partnersMp for which another is surety. STANDARI) OIL CO. v. ARNESTAD, ET AL. 6 N. Dak. 255 (1896). Mr. Melvin A. Hildreth, for appellant. Mr. F. W. Ames, for respondents. Corliss, J., delivered the opinion of the court. The object of this suit is to hold the defendants, as sureties apon a bond, liable for the embezzlement of one of the principals in such obligation. The Standard Oil Company, the plaintiff herein, having selected as its agents at Mayville, in this State, the firm of Arnestad & Eggerud, required of them a bond with sureties as a condition of shipping them its goods, to be handled by them as such agents at that point. In response to this demand the bond in suit was executed by the firm, and by defendants Hanson and Gullicks as sureties. The sole question before us relates to the liability of the sureties. Their only defense is that the bond se- cured the honesty of only the firm, and that before the embezzle- 290 STANDABD OIL CO. V. AENESTAD. [CHAP. IV, ment in question took place Eggerud had withdrawn from the firm, and that at the time the money sued for was misappro- priated the business of such agency was being carried on by Arnestad and Lindstrom. As the construction of the bond is involved, we deem it necessary to quote it in full: " Know all men by these presents: That we, Mike Arnestad and Ole Eggerud, copartners as Arnestad & Eggerud, principals, and John P. Hanson and C. Gullicks, sureties, are held and firmly bound unto the Standard Oil Company in the sum of five hun- dred dollars ($500), lawful money, to be paid to the Standard Oil Company, its executors, administrators, and assigns, for which payment well and truly to be made we bind ourselves, our heirsi executors, and administrators^ severally and collectively; firmly by these presents. The condition of the above obligation is such that if, through the neglect, carelessness, or inattention to the business of the said company by the said Arnestad & Eggerud, or either of them, or any of their employees to whom they may in- trust the business of the said company, the company shall sus- tain any loss or damage, then the said Arnestad & Eggerud, and parties hereto subscribed as sureties, shall indemnify the said company to the amount of this bond; and the subscribing parties also firmly bind themselves to sustain and pay the Standard Oil Company, not to exceed the amount of this bond, any loss result- ing to the said company through the theft or fraud on the part of the said Arnestad & Eggerud, or anyone to whom they may intrust the business of the company. The direct purpose of this bond is to secure and indemnify the said company against any loss from shortage on account of stock not being properly ac- counted for, and loss on account of funds belonging to the said company being misappropriated by the said Arnestad & Eggerud, or either of them, or anyone to whom they shall intrust the busi- ness of the said company. If the said Arnestad & Eggerud shall faithfully and aiccurately perform the duties as agents for the Standard Oil Company, and shall correctly account for all stocks or funds belonging to the said company which shall be intrusted to him or his employees acting in his stead, whose acts he herein directly assumes, then the above obligation to be void; otherwise to remain in full force and virtue. ' ' It is urged that by the use of the words " or either of them " the parties intended to cover the individual defalcation of either member of the firm as well after the dissolution of the firm as 291 SEC. 27.] STANDAED OIL CO. V. AENESTAD. before. But we are lanable to discover any justification for such a construction of the instrument. We think that these words were employed (unnecessarily employed, it is true) to express what the law would have implied had they been omitted, 1. e., that both partners need not join in the wrongful act to render all parties to the obligation liable. The bond was given to secure the plaintifE from loss growing out of the agency held by the copartnership, and there is nothing in its language to indicate that the parties were contracting with reference to a possible dissolution of the partner- ship, and the continuance of the agency by one of the firm. Other provisions of the bond indicate the exact reverse. The instrument declares that " the subscribing parties also firmly bind themselves to sustain and pay to the Standard Oil Company, not to exceed the amount of this bond, any loss resulting to the said company through the theft or fraud on the part of said Arnestad & Eggerud, or anyone to whom they may intrust the business of the company. -' Again, the bond provided that, " if the said Arnestad & Eggerud shall faithfully and accurately perform the duties as agents for the said Standard Oil Company, and shall correctly account for all stock or funds belonging to the said company which shall be intrusted to him or his employees acting in his stead, whose acts he herein directly assumes, then the above obligation to be void/' etc. It is evident that the words, " to him or his employees acting in his stead, whose acts he herein directly assumes," were intended to express the plural instead of the singular. In preparing the bond, a blank was probably used which had been so worded as to apply to a single agent. Looking at the whole instrument, and interpreting it in the light of surrounding Circumstances, we are unable to find in it any purpose on the part of the obligors to give, or on the part of the obligee to exact, security for the act of either partner after the partnership as such had ceased to act for the plaintiff. Had this been the object of the parties, an ex- plicit provision to that effect could, and certainly would, have been incorporated in the bond. We are therefore forced to fall back upon the inquiry whether the law will imply any promise on the part of the sureties to be responsible for Arnestad 's honesty after he had ceased to be associated with Eggerud in the business. On this point we have no doubt. A surety who engages to be re- sponsible for the honesty of a firm may be entirely influenced by the consideration that one of the partners is a man of integrity, and of such strength of character, and such shrewdness and watch- fulness in business affairs, that the risk of dishonesty from tiie 292 STANDARD OIL CO. V. AENESTAD. [ CHAP. IV. action of the other partner, in whom the surety may place no trust, is reduced to the minimum. The sureties in this case may have been willing to become bounden for the fidelity of Arnestad & Eggerud while acting as a firm, and yet at the same time not willing to incur the hazard of obligating themselves as sureties of the partner Arnestad alone. Based upon such considerations as these, the rule of law has long been established that the surety, standing upon the very letter of his contract may insist that he cannot be held for aught that is done after the dissolution of the firm, for which alone he became responsible. The case of Dupee v. Blake, 148 111. 453, so far as the principle of law is concerned, presents the same features as the case at bar. The Court there said: " The rule is that, if a surety engages for an individual, the engagement is understood to extend to the acts of that indi- vidual alone, and will not continue if he takes in a partner; In other words, the surety for a single individual is not liable for a partnership of which such individual is a member. A surety who guarantees that a firm composed of particular individuals will do certain acts or discharge certain duties cannot be held liable where there is a change in the firm, although the firm name is not changed. As the surety's liability is strictissimi juris and cannot be extended by construction, his guaranty to a partnership is extinguished if any partner is taken into or retires from the partnership, unless it appears from the terms of the instrument that the parties intended the guaranty to be a continuing one with- out reference to the composition of the firm. A party may be induced to become surety for the individuals who compose a firm because of his confidence in their integrity, prudence, accuracy, and ability as business men, but he cannot be presumed to have intended to become responsible for the possession of such quali- ties by some third person, who may be afterwards taken into the firm without his knowledge or consent. It is often in the power of one partner, by want of discretion or integrity, to ruin an- other." Our attention has been called to certain decisions which it is urged with great earnestness are opposed to the authorities already cited, and we are requested to follow them as enunciating the sounder doctrine. These decisions are Palmer v. Bagg, 56 N. Y. 523, 64 Barb. 641 ; Hayden v. Hill, 52 Vt. 259. But, in our judg- ment, these cases are plainly distinguishable from the case before Tjs for final settlement. Their facts were different from the facts of this controversy in vital particulars. The sureties there had SEC. 27.] STANDARD OIL. CO. V. ARNESTAD. 293 become responsible for the honesty of an individual agent. As the Court very properly held, such sureties took the risk, not only of their principal 's honesty, but also of the dishonesty of those whom he might employ in any capacity to assist him in the prosecution of the business of the agency. Should he hire a subagent as an assistant, the sureties would still be bound. And so they would remain liable if he should see fit to give such assistant an interest in the property of the business of the agency, provided the obligee did not deal with the new firm as agents, and thus extinguish the original agency. The sureties in those cases undertook to guaran- tee the fidelity of the agent to his trust, and therefore necessarily agreed to be responsible for whatever he should do himself or through his agents and employees*. They agreed to assume the risk of his integrity and his business judgment in employing as- sistants in any capacity. It is upon this ground that all these decisions relied on by counsel for plaintiff proceed. In Hayden V. Hill, 52 Vt. 259, the Court said on this point: " (1) The report shows that Mitchell took in one Clapp as a partner, and that said agency was managed, and funds therefor received, during a portion of the time by the partnership ; and it is claimed that a portion of the funds from sales and leases of the property were received by Clapp, and never actually came into the hands of Mitchell. But the report further states that the plaintiff never recognized such partnership, and dealt solely with Mitchell. He refused even to receive a note indorsed by the partnership name. If the plaintiff had seen fit to have consigned the property to the partnership, and dealt with it in such manner that the firm of Mitchell & Clapp would have been the responsible parties in the accounting, these defendants, as sureties for Mitchell on the bond, could not be liable to respond for the laches of the firm, for it would be the default of a different party from that for which they were bound. Mitchell was at liberty to employ such agency as he chose to assist him. He could pay assistants a stipulated salary, or compensate them with a portion of the profits of the business. It was a matter of indifference to the plaintiff, so long as Mitchell fulfilled all the stipulations of his agreement. If he employed unfit agencies, and thereby the property was squandered and lost, it was, so far as this plaintiff is concerned, the default of Mitchell alone, and he and his sureties must respond. If the fact that defendant took in a partner in conducting the business of the agency did enhance the risk of these defendants, as the sureties of Mitchell, it was not induced or recognized by the plaintiff, and was a mat- 294 STANDARD OIL CO. V. ARNESTAD. [CHAP. IV. ter over which the defendants had quite as much control as the plaintiff. We think that the referee was right, under the circum- stances of the case, in finding that Mitchell was ' responsible for the acts of Clapp,' as for any other agent or assistant that he employed, in conducting the business of the agency; and that money that came to the hands of Clapp in the conduct of this business by legal intendment came to the hands of Mitchell. Pal- mer V. Bagg, 64 Barb. 641." And in Palmer v. Bagg (56 N. Y. 525), the Court said: " We do not think this sufficient to change the relations between Fanning and the plaintiffs. The latter did no act creating or recognizing any change. The agencies or means which Fanning employed to dispose of the machines after receiv- ing them did not necessarily interfere with the relations between him and the plaintiffs. ... He might employ other persons to aid in the selling and pay them wages or a percentage, or a share of profits as partners. So long as the plaintiffs confined their dealings with him under the power of attorney, they would not be affected by any arrangements he should make." In neither of these cases did it appear that the obligee had dealt with the firm. Had this appeared, a different question would have been presented, for then the sureties could have claimed that their bond did not cover a partnership agency, but only an individual agency. And it is apparent from the language of the courts in these cases that this fact would have constrained them to hold that the sureties were not liable. Finally, it is said that it does not appear that the plaintiff knew of the withdrawal of Eggerud from the firm, and that hence it follows that the old firm, as a firm, was still liable to the plaintiff for the funds misappropriated, no matter by whom they were em- bezzled. Upon this foundation plaintiff builds up the argument that, inasmuch as the principals in the bond are liable, so are the sureties. But this reasoning entirely misapprehends the nature of the obligation of the sureties in this case. By signing the bond, they did not, in effect, assert to the plaintiff that they would be bound whenever the principals in the bond were liable in any way to the plaintiff, whether because of their having embezzled the property, or by reason of the doctrine of estoppel which would seal their lips against a denial of liability. They merely agreed to become responsible for the fidelity of the firm so long as each of the members of the firm should remain in the business. They con- tracted to be bound for the acts of Arnestad so long as they could have the protection resulting from the association of Eggerud with SEC. 27.] STANDARD OIL CO. V. AENESTAD. 295 him in the same business. But they did not guarantee the integ- rity of Arnestad alone, unwatched and influenced by Eggerud, who imay have been the only person in whom they reposed any trust. If the plaintiff was ignorant of the change in the firm, so were the sureties; and, if the sureties have a right to stand upon the terms of their contract, then it behooved the plaintiff to ascertain at its peril whether all the persons for whom the sureties had be- come responsible still remained at the helm of the business of the agency. On this point the decision of the court in Birch v. De Eivera, 24 N. Y. S. R. 770, is decisive. The Court there said : " The fact that the plaintiffs were not notified of the change is immaterial. They may have an action against the firm as it ex- isted before the change because of failure to notify them of such change, or to publish the dissolution. That proceeds upon an- other principle, namely, the presumption attached to continuous firm dealings without notice. The guarantor, however, is not re- sponsible for the state of facts which might justify a recovery against the original members. There is no evidence here that he was aware of the change. He seems to have been as much without notice as the plaintiffs themselves. But were it otherwise, we may saj", in the language of Lord Blackburn, ' Nothing is stated to show either that the defendant was under any obligation to inform the banking house of that fact or that he took any steps to conceal it. ' At all events, his contract is to guarantee a co-partnership firm composed of certain persons, and that contract cannot be altered or extended without his consent." See also Blackhouse v. Hallj 6 Best. & S. 507. We are unable to agree with counsel for plaintiff that there is not sufficient evidence of the dissolution of the firm of Arnestad & Eggerud. The evidence on the point is very satisfactory. Nor do we find anything in the case to rebut it. The deficit sued for having resulted from misappropriation of funds by Arnestad after Eggerud had retired from the business, the district court was right in rendering judgment for the sureties on the bond. It follows that such judgment must be aflSrmed, and it is so ordered. All concur. .Accord. — Cremer v. Higginson, 1 Mass. 323; Holland v. Teed, 7 Hare, 50; Cosgrove Brewing & Malting Co. y. Starrs, 5 Ont. 189; Simson v. Cook, 8 Moore, 588; Hawkins v. New Orleans Printg. & Pub. Co., 29 La. Ann. 134. .30 296 KULENKAMP V. .GEOFF. [CHAP. IV, Sec. 28. Parol evidence to show lack of consideration for snietyship contract. WILLIAM KULENKAMP v. JOHN GROPP. 71 Mich. 675 (1888). The facts are stated in the opinion. Messrs. Hewett & Freeman and E. B. Norris, for defendant, ap- pellant. Messrs. John W. Patchin and Sawyer & KnowUon, for plaintiff; appellee. MoESE, J., delivered the opinion of the court : The plaintiff brought suit in justice court upon the following promissory note: $116.00. Freedom, March 30, 1886. One year after date I promise to pay to Charles Kulenkamp, or bearer, the sum of one hundred and sixteen dollars, for value re- ceived, at the People's Bank, at Manchester, with use at seven per cent. P. Joseph Leeg.. John Geoff. He obtained judgment. The defendant, Groff, thereupon: ap- pealed to the Circuit Court for the County of Washtenaw. Upon' the trial in said circuit the defendant, Groff, gave evidence tend- ing to establish the following facts : On the day the note was executed Charles Kulenkamp, a brother of the plaintiff, held an auction upon his farm for the sale of personal property. The plaintiff at this sale put up a span of horses of his own, and the defendant, Groff, assisted him in the sale by acting as a " by-bidder " to run the price up. One of these horses was bid in by defendant Lerg for the sum of $116. By the terms of the auction sale the purchaser of property, not paying therefor down in cash, was required to give his note, with a signer or surety thereto. The note in question was drawn up by the auc- tioneer's clerk. Lerg signed it, and left it with the clerk. He requested Groff to sign with him, but Groff refused. Afterwards the plaintiff accosted Groff, and requested him to sign it. The defendant testifies as follows in regard to the conversation between himself and plaintiff : ' ' Kulenkamp said I ought to sign SEC. 28.] KULENKAMP V. GEOFF. '^^'^ • the note. He was satisfied with Mr. Lerg for his pay ; but he was rather slow, and thought if I would sign it he would get his pay out of it quicker than he would if I was not on, because he would not see me suffer, and I would not be holden on the note. He would see that I would not lose anything or have any trouble about it; and I told him it may be he would go to work and dispose of the note, and then where would I be ? He, agreed to hold the note. He said it was a custom at auctions. If he did not get any signer, some others would want to give notes without signers. He agreed to hold the note and see that I did not have any trouble. I re- fused, and after a while I said I would do it, but I wanted a witness. Mr. Burtless stood off a little way, and we got him up, and told it before him." The defendant Lerg had no part in obtaining the signature of Groff to the note, and was not present when defendant signed it. Upon this showing, which was not rebutted, the circuit judge ruled that no defense had been made to the note, and instructed the jury to find accordingly. The plaintiff had verdict and judg- ment for the face of the note, and interest, The counsel for the defendant contend that this oral proof was admissible, and established a perfect defense to the note, if found to be true by the jury, to whom it should have been submitted. They claim that they have the right to show by parol, as between the original parties to the instrument, that it was never to be used or have any being as against Groff; and also that the testimony shows that the signature of Groff was procured by fraud upon the part of plaintiff, which fraud can be shown by parol. It is ad- mitted that the general rule is that oral contemporaneous evidence is not admissible to vary, alter, or contradict the terms of a written instrument. But it is argued that to this rule there are several well recog- nized exceptions, when the contest is between the immediate par- ties to a note. In such case parol evidence is admissible to im- peach the consideration, to show fraud or illegality in its inception, or that it was delivered conditionally for a specific purpose only. The defendant's counsel insist that their claims, as before set forth, comes within the exceptions as to fraud and a delivery for a specified purpose. As far as the claim of fraud is concerned, it is not tenable. The signature of Groff was not procured by false pretenses — by the statement of any fact as existing which did not exist — but upon false promises which have not been performed. It is no more nor 298 KULENKAMP V. GEOFF. [CHAP, IV. less than the non-performanee of an oral agreement made at the time the note was signed, and which oral agreement was totally at variance with the terms of the written contract as set forth in the note. This cannot be considered such a fraud as would nullify the note. If proof of this unperformed agreement not to hold Groff upon this note, in plain contradiction to its terms, can be admitted to destroy his liability upon it, then any unperformed oral agreement made at the time a written contract or note is executed may be admitted- under the claim of fraud, to defeat the terms and purpose of the written agreement. The maker of a note, as well as the surety or indorser, may say : " It is true, I signed the note, but it was agreed I was not to pay it, and the collection of it is a fraud upon me." Written instruments, under the admission and use of such proof to defeat them, would be of but little value, and altogether uncertain, and of no more strength tiian oral agreements. ;!s4:;|s:!c«4s««4:;i::i;:i:^ As before shown, there was no such fraud or illegality in the inception of this instrument as would vitiate it. Nor can it be claimed to have been delivered conditionally or for a " specified purpose only." It was delivered under the promise that, although Groff had solemnly agreed in writing to pay it, he should not be holden upon it. This is the substance of the whole matter. There was no condition attached to the delivery except this, that the oral agreement not to pay should supersede and control the written contract to pay. If this defense can be allowed, then, as before said, in speaking of the claim of fraud, every promissory note as between the immediate parties thereto, and every contract in writing, is open to parol proof that it does not correctly represent the agreement made ; and oral evidence may be given to contradict,.,' alter or vary such written agreement. This is not t&e law in thia State. But we think the evidence admissible to show no consideratid^ for the promise made in the note. If the defendant's theory be correct, he did not execute this note at the request of Lerg, the principal maker, and the consideration running from plaintiff to Lerg had nothing \o do with the signing of the note by the de- fendant. Neither was there any consideration passing from Lerg to the defendant. If, then, there was any valid consideration for the execution of this note by the defendant, it must have been one passing from the plaintiff to him. There is no showitig that plaintiff would not have parted with SEC. 29.] LOMBARD V. MAYBERRY. 299, his property, and taken the note of Lerg in payment for the same, without the signature of the defendant; but, on the contrary, the evidence given by the defendant shows that the plaintiff was will- ing to make the sale, relying upon Lerg alone for payment, and that he claimed that he desired the name of the defendant only for the purpose of aiding him in securing a quicker payment from Lerg. The note, then, if the defendant's testimony be taken as true, was signed by defendant to accommodate the plaintiff, with the promise that it never should be used against him. We can see no consideration moving to defendant from anyone for the execu- tion of this note by him. There is no dispute but his undertaking was really that of a surety. Such a contract, not under seal, must be supported by a sufficient consideration. The usual considera- tion in such cases is that the credit to the principal debtor is in- duced or given because of the promise of the surety. This is not the case here. Nor is there shown any consideration arising out of either benefit to Lerg or the defendant, or detriment to the plaintiff to support the contract of the defendant here. Judgment will be reversed, and -new trial granted, with costs. The other justices concurred. Accord. — Campbell v. Gates, 17 Ind. 126; Port v. Eobblns, 35 Iowa, 208; Paton V. Stewart, 78 111. 481 ; Wallace v. Hudson, 37 Tex. 450. Sec. 29, Guaranty by the surety of all prior signatures. '' B. LOMBARD, JE., v. CHAS. N. MAYBEERY. ET AL. 24 ISTeb. 674 (1888). 8. P. Davidson, .for plaintiff in error. E. W. Thomas and A. M. Appelget, for defendants in error. Cobb, J. : The plaintiff in error brought this action in the dis- trict court of Johnson county, alleging that on May 26, 1884, the defendants in error, Vallace S. Smith, as principal, and Phineas Jones, Almon Eeed, E. W. Smith, Moses Roberts, and Charles N. Mayberry, as sureties, executed their bond to the plaintiff in $5,000 guaranteeing the payment at maturity of the several notes and negotiable securities (forty-one in number) sold by Wallace S. Smith to the plaintiff, and guarantee to be paid to the plaintiff at maturity at his office in Lincoln, Nebraska ; and if not paid at maturity by the makers, or if received by said Smith, and not paid 300 LOMBARD V. MAYBEERY. [ CHAP. IV. to the plaintiff, or if in the hands of said Smith, at the date of said bond, and not paid to the plaintiff, the principal and sureties were to pay the same within thirty days from the date of the bond; and if not paid to said &iiith, nor yet due, to pay the said notes and negotiable securities within thirty days from maturity re- spectively. s|sH:N:4:si!4sHc4s!i:«iIs4:4s:i:4:4c« The defendants, Reed, Roberts, and Mayberry, answered and denied the allegations that they executed the bonds dated May 26, 1884, and April 3, 1883; that the promissory notes were executed by the makers, or that they were negotiated by said Smith; that said Smith ever collected or had in his hands any money that should have been paid to said plaintiff; and they aver that if the defendant, Mayberry, signed the bond sued on, his signature was obtained by the fraudulent representations of the plaintiff, or his agents, that the signatures to the bond above said Mayberry 's were genuine, whereas they were forged, and that said Smith at the date of the bond of May 26, 1884, was a defaulter, and had em- bezzled money and property of the plaintiff, which the plaintiff knew, but concealed the fact, in order to induce the defendant, Mayberry, to sign said bond, which was without consideration to said Smith, or to the defendant, Mayberry. The plaintiff joined the issues, denying each allegation of the defendant's answer. There was a trial to a jury and a verdict for defendants. The court in its discretion submitted three special findings to the jury : I. Did defendant Almoii Reed sign the b<5nd sued on? II. Did defendant Moses Roberts sign the bond sued on ? III. When defendant Mayberry signed the bond in suit, did he believe the names of defendants Reed and Roberts to be their genuine signatures to the bond? The jury found the first and second in the negative and the third m the anirmative. ********^N***** The Court charged the jury, at the request of the defendants, that if they found from the evidence that defendant Mayberry signed the bond sued on, after the names of defendants Roberts and Reed appeared thereon, as obligors, and that defendant Mayberiir believed that such signatures were genuine, but that such signa- tures were really forgeries, and if they further found that Mr. Davidson was then acting as agent for the plaintiff, and saw May- berry sign" such bond, and handed him the pen with which he was SBC. 29.] iOMBAED V. MAYBEEEY. 301 to sign the same, and did sign the same, then Mayberry is not legally bound by such bond. To this instruction the plaintiff excepts in the 11th assignment. It does not appear that the defendant, Mayberry, was either ignorant or ill-advised' of the character of his principal, and of his business transactions, but the evidence is that he was thoroughly acquainted with both. It was his privilege and opportunity to have made due investigation of the genuineness of the signatures. He examined the bond, and signed it without the superinducement of the plaintiff, or his agent, and without condition as to the signa-. tures of others. It was primarily on his suggestion and inter.- position that the bond was taken, to supersede the former one on which he was a surety. Therefore, it would seem that an instruc- tion, or inference, from the Court to the jury that he was liable to suffer from a mistaken belief of the genuine signatures of his co-sureties may be deemed to have been prejudicial to the plaintiff, and to have deprived him of a fair trial. That Mayberry was not liable as a surety, under his mistaken belief, is not an accepted rule of law to warrant the plain charge of the Court. The con- tract of the surety is to be strictly construed, and his liability would seem to be equal to that of the principal in this guaranty, and not less. The surety who signs an obligation, after the names of others, admits, without warranty, the genuineness of those sig- natures, and if the principal's or the co-sureties' names be forged without his knowledge, and without complicity of the holder, it is no defense to the surety that " he believed that such signatures were genuine." So, that, if this rule be maintained by sufficient authority, the defendant, Mayberry, is indebted to the plaintiff, as the bona fide holder of the bond, though the names of Roberts and Eeed were forged to it. In the case of Selser v. Brock, 3 Ohio St. 302, it was held that where a fraud was practiced by a principal debtor in procuring, a surety to sign a note, without the knowledge of the creditor, the obligation of the surety was valid and binding ; and further, that a surety who had signed his name to a promissory note after the names of others, in effect affirmed the genuineness of the previous signatures, and could not avoid his liability by showing that they had been forged by the principal, but of which the creditor had no knowledge. This precedent is wholly analogous to the case before us. It was affirmed in a later decision of Bigelow v. Comegys, 5 Ohio St. 256, wherein it was held that the surety on a replevin bond could 302 MC MULLEN V. W. B. & L. ASSN. [CHAP. IV. not set up the defense that he was induced to sign the bond upon the fraudulent representation of the principals that a co-surety, who was responsible, had already signed it, when in fact his sig- nature was a forgery. The doctrine of the rule was thoroughly considered in the case of Helms v. The Wayne Agricultural Society, 73 Ind. 325, where the instructions to the jury were considered to have expressed the' true rule in the proposition that, " when the name of one of two, or more, obligors in a bond, note, or other writing obligatory had been forged, the supposed co-obligor, though a surety only, and though he signed in the belief that the forged name was genuine, is nevertheless bound, if the payee, or obligee, accepted the instru- ment without notice of the forgery." This then is the law to be applied to the case at bar. It corrects the instructions as to the belief of the defendant, and as to the forging of the names of co- defendants and holds the makers of the bonds to be liable to the plaintiff. It is supported directly, and in principle, by abundant authorities not important to further analyze in this opinion. ^ , The judgment of the district court is reverse'" and the cause re- manded to that court for further proceedings in accordance with law. The other judges concur. Reversed and remanded. Accord. — Trevalthan v. Caldwell, 4 Heisk. (Tenn.) 535; Stoner v. Milli- ken, 85 111. 218; Wheeler v. Traders Deposit Bank, 21 Ky. L. Rep. 1416; U. 8. V. Boyd, 8 App. D. C. 440; Cook v. Boyd, 16 B. Mon. 556; State v. Baker, 64 Mo. 167; Hewitt v. Hewitt, 72 Mo. 603. Sec. 30. Statutes of limitations. J. F. McMULLEN, ET AL. v. WINFIELD BUILDING & LOAN ASSOCIATION. 64 Kan. 298 (1902). Messrs. J. Jay Buck and McDermott & Johnson, for plaintiffs in error. Messrs. Eerrick & Rogers and L. H. Wehb, for defendant in error. Johnston, J., delivered the opinion of the court : J. F. McMullen acted as secretary of the Winfield Building & SEC. 29.] MC MULLEN V. W. B. & L. ASSN. 303 Loan Association from its organization in January, 1881, until January, 1892 ; having been elected at the beginning of each year during that period. On January 13, 1885, he was elected for that year, and gave a bond in the sum of $2,000, signed by J. C. Mc- MuUen as surety, which was dated February 2, 1885, and ap- proved four days later. He failed to account for all the moneys •received by him, and on Febraary 2, 1892, this action was brought against him and his surety upon the bond mentioned. In the petition it was alleged that, during the period covered by the bond, J. F. McMullen, as secretary, collected $2,190.91 more than he had accounted for or paid over to the treasurer of the associa- tion, and that this amount he had f rauduleDtly converted to his own use. There was a further averment that by false entries made in the books of the association and by false statements and re- ports, he had concealed his wrong and defaults, and that therefore the association had no knowledge of the same until January, 1892. It is next contended that the action was barred by the statute of limitations. A default may be said to have occurred in the be- ginning of 1886, and the action was not brought until February, 1892 — more than six years after the default. It was based on the written bond, and therefore falls within the five-year limitation. The question then arises. Was the action brought within five years after the cause of action accrued? It was alleged that the secre- tary artfully and fraudulently concealed his misappropriations by making false entries in the books, and by failing to make entries in the books of moneys received by him, as well as by making false entries and statements in his written reports of the transac- tions of his office, and that the association had no knowledge of his \iTongful and fraudulent acts until some time in January, 1892. Among the agreed facts, it is stated that the secretary's reputation for honesty and integrity during all the time that he was in charge of his ofSce was good, and that the officers and members of the association had perfect confidence in his honesty and integrity. They believed that his statements and reports as to the money col- lected and paid out were true, and they had no knowledge that he had collected more than was reported until about the 1st day of January, 1892. Did this fraudulent concealment interfer with the operation of the statute of limitations? Did the cause of action accrue when the fraud was committed, or not until the fraudulent conduct and defaults were discovered ? Courts of equity have been holding that, independent of a statutory provision, the defendant's S04 MCMULLEN V. W. B. & L. ASSN. [CHAP.iy. fraud and concealment of a cause of action will postpone the run- ning of the statute of limitations until such time as the plaintiff discovers the fraud ; and this, upon the theory that the defendant, having by his own wrong and fraud prevented the plaintiff from bringing his action, cannot take advantage of his own wrong by setting up the statute as a defense. Some authorities confine this rule to proceedings in courts of equity, but hold that at law neither fraud, concealment, nor other circumstance will affect the opera- tion of the statute, unless it is expressly provided for by statute. The weight of authority in this country and in England applies the rule to actions at law as well as to, suits in equity. In Bailey v. Glover, 21 "Wall. 342, 22 L. ed. 636, Justice Miller, in holding that concealed fraud was an implied exception to the statute of limitations, equally applicable to suits at law as well as in equity, said: Statutes of limitations are intended "to prevent frauds; to prevent parties from asserting rights after the lapse of time had destroyed or impaired the evidence which would show that such rights never existed, or had been satisfied, transferred, or extinguished, if they ever did exist. To hold that by concealing a fraud, or by committing a fraud in a manner that it concealed itself, until such time as the party committing the fraud could plead the statute of limitations to protect it, is to make the law, which was designed to prevent fraud, the means by which it is made successful and secure. ' ' McMullen, by reason of his position and duties, occupied a trust relation, and was in fact an agent of the association. His misconduct and default was a breach of the relation of trust and confidence, and the general rule is that the statute of limitations does not begin to run until the breach of trust or default in the performance of duties occurs and is brought to the knowledge of the principal. In Lieberman v. First Nat. Bank (Del), 40 Atl. 382, 2 Bonn. (Del.) 416, 48 L. E. A. 514, 45 Atl. 901, which was a case brought upon the bond of a defaulting bank clerk, it was con- tended that, while the rule as to concealed fraud was enforceable against the one who committed the fraud, it did not apply to in- nocent sureties, who had no knowledge of, and did not participate in, the fraud. The Court, after reviewing many authorities hold- ing that sureties stand in no better position than their principal, said: " It therefore seems to" be established that, in cases on official bonds, concealed fraud on the part of the principal will deprive both principal and surety of the benefit of the statute of limitations ; that the statute does not begin to run until the fraud is SEC 30.] MCMULLEN V. W. B. & L. ASSN. 305 discovered. The reason seems to be that in such bonds the sure- ties guarantee the good conduct and faithfulness of the principal in the discharge of the duties of his office, and that, in equity and good conscience, they should not be exempt from liability for his misconduct and peculations because by fraudulent concealment he has prevented discovery until the time limited by the statute to bring action has expired. Any other construction would make the very frauds against which the sureties covenanted the means for relief from liability. The bond in such cases, instead of se- curing faithfulness of the officer, would tend to promote on his part skilful and fraudulent concealed peculations, and would be an inducement to fraud. If concealed fraud, which the principal undertakes not to perpetrate, deprives such principal of the pro- tection of the statute, is it not equally reasonable that the under- taking of the surety that such fraud should not be perpetrated excludes the surety also? The principal undertakes not to com- mit fraud. The surety guarantees that he shall not commit fraud, There would seem to be no substantial reason why their respective liabilities for such fraud should be different." So, here, the surety guaranteed the honesty and faithfulness of McMullen, and promised to make good his defaults, and there is no good reason why the surety should be relieved of liability for the dishonesty of the secretary when by reason of the same dishonesty the liability was covered up. We think the liability of the surety depends upon the liability of the principal. There is no distinction between their liabilities in cases of concealed fraud and the statute does not begin to run in favor of either until the fraud is discovered. On the part of the surety there is a contention that the books of the association were open to the inspection of its officers and mem- bers, that they should have detected the fraud, and that, if due diligence had been exercised, the dishonesty could have been de- tected, and the defalcation prevented or reduced. While negli- gence frequently is a bar to relief, on the principle that one ought not to recover from a surety damages caused by himself, the fact is that the surety made an unconditional promise to make good the defaults of his principal. No positive duty to the surety was im- posed upon the officers and members to keep so close a watch over the conduct of the secretary that no fraud could be committed nor defalcation occur. Of course, they could not act in bad faith to- ward the surety, and relying upon his liability, omit any effort to protect the funds of the association after receiving notice of the dishonesty and unfaithfulness of the secretary. He was a trusted 306 MOZINGO V. BOSS. [CHAP. IV. ofiSeer, charged with the management of their business, and, as he bore a good reputation for honesty during most of his incumbency, they had a right to assume that he would faithfully perform his duties until they received notice to the contrary., They had no knowledge or notice of unfaithfulness until 1892, and the mere fact that they did riot detect crookedness in his books and reports before that time is not an indication of bad faith toward the surety, and does not exonerate him. The judgment of the District Court will be affirmed. . All the justices concur. Eehearing denied. Accord. — Moore v. Waco BIdg. Assn. 19 Tex. Civ. App. 68; Wayne v. Com. Nat. Bank, 52 Pa. 343; Taypley v. Martin, 116 Mass. 275. ELIZABETH MOZINGO v. MOSES M. ROSS. 150 Ind. 688 (1898). Messrs. Fippen & Purvis, for appellant. Messrs. Fertig & Alexander, for appellees. Jordan, J., delivered the opinion of the court : This action was commenced by appellant on March 2, 1897, to recover a judgment on a promissory note, and also to set aside an alleged fraudulent conveyance of land by the appellee Moses M. Eoss, to his coappellee Martha Price, and to subject the lands so conveyed ibo the payment of the judgment sought to be recov- ered upon the note. The note in suit appears to have been exe- cuted on December 20, 1882, by one Francis M. Ross, together with the appellee Moses M. Ross, to appellant, for the sum of $150, due in twelve months after the date thereof. The following par- tial payments seem to have been made on the note, and indorsed thceon, as shown by a copy filed as an exhibit with the complaint, to wit: September 26, 1883, $12; January 6, 1887, $20, as in- terest; December 24, 1887, $15; November 27, 1889, $57.57; De- cember 13, 1889; $20. Among other defenses interposed by the appellee Moses M. Ross, under his separate answer, against a recovery upon the note, was the statute of limitations of ten years. Appellant replied to this answer in three paragraphs, but sub- sequently dismissed the first and second. The third paragraph of the reply, in avoidance of the defense of the statutes of limitations SEC. 30.] MOZINGO V. ROSS. 307 set up by the appellee Moses M. Ross, averred that said Ross had executed the note in suit as the surety for one Francis M. Ross, and alleged the truth to be that said Francis M., the principal, had made the various partial payments on the note, as set out in the exhibit filed with the complaint, and that long before ten years had elapsed after the execution of the note, to wit, within six years after its execution, said principal, Francis M., with the knowledge and consent of the defendant Moses M. Ross, his surety, but without the knowledge or consent of the plaintiff, removed from the State of Indiana, and became a nonresident of said State, and has so re- mained and continued to be a nonresident up to the present time; and, by reason of his being such nonresident, it is alleged that the plaintiff could not proceed against him as the principal for a judg- ment on the note. A demurrer was sustained to this paragraph, and, appellant refusing to further plead, judgment was rendered that she. take nothing by her action, and that the defendants re- cover of her. their costs. The sustaining of the demurrer to the third paragraph of reply is the only error assigned. Appellant insists that the facts alleged in the reply were sufSeient to avoid the defense of the statute of limitations set up in the answer. The questions presented for decision are: First, Will a partial pay- ment, of a principal debtor suspend the running of the statute of limitations in favor of his surety ? Second, Will the absence of the principal debtor from the State suspend the statute in favor of such surety ? Passing the consideration of the infirmities that are urged against the pleading in controversy, to the effect that it pleads evidence instead of facts, and that it is deficient in not setting out the partial payments made, instead of referring to them only, as shown by the exhibit filed with the complaint, we proceed to determine the real question discussed by the counsel of both parties to this appeal. Burn's Rev. Stat. 1894, § 302 (Rev. Stat. 1881, § 301, Horner's Eev. Stat. 1897, § 301), relative to the statute of limitations, pro- vides: " No acknowledgment or promise shall be evidence of a new or continuing contract, whereby to take the case out of the operation of the provisions of this act, unless the same be con- tained in some writing signed by the party to be charged thereby. ' ' Burn's Rev. Stat. 1894, § 303 (Rev. Stat. 1881, § 302; Horner's Rev. Stat. 1897, § 302), provides that " the acknowledgment or promise of one joint contractor or executor or administrator shall not render any other joint contractor, executor, or administrator liable under the provisions of this act." The next section — 304 308 MOZINGO V. ROSS. [ CHAP. IV, (303) — declares that " nothing contained in the preceding sec- tions shall take away or lessen the effect of any payment made by any person," etc. It is the settled rule that an admission of continued indebtedness may be inferred from the fact of part payment by a debtor. Such inference, however, is not one of law, but of fact. The payment is only prima facie evidence of the acknowledgment or admission of the debtor, and is subject to be rebutted by other evidence and the tircumstanees under which it was made. The statute, as we have seen, declares that no ac- knowledgment or promise shall be evidence of a continuing contract to take the case out of the operation of the statute, unless it be in writing signed by the party to be charged thereby. It is fur- ther provided that the promise or acknowledgment of a joint con- tractor shall not have the effect to render any other joint con- tractor liable. It is expressly declared, however, that these pro- visions of the law shall not take away or lessen the effect of any payment made by any person; consequently, they leave the effect of a partial payment untouched. The rule applicable to a pay- ment, in taking a case out of the provisions of the statute of limitations, or rather, extending the time during which the action may be commenced, does not depend on any provisions of the statute of limitations, but is the result of judicial decisions, and the reason of the rule depends wholly upon such decisions. The reason upon which the rule is said to rest is that a partial pay- ment, voluntarily made by a debtor, upon a claim or debt, is in the nature of an acknowledgment or admission by him of his lia- bility for the whole demand ; and from the fact that he made the payment a new promise on his part to pay the remainder of the debt may be implied, and, under this legal inference, such new promise arises at the time the partial payment is made. The origin of the rule is fully considered and set forth in Van Keuren v. Parmalee, 2 N. Y. 523. It must be evident, we think, that, to bring the case within the reason of the rule, the payment should be made by the party to be charged with its effect, or by his agent duly authorized tc so charge him. A partial payment being treated by the law as nothing more than prima facie evidence of an admis- sion or acknowledgment that the debt is due, it would seem in reason, that it could and should only affect the party that makes it, unless he has authority to speak for others as well as himself. This doctrine finds support in the well affirmed rule that the ac- knowledgment of a debt made by one partner after the dissolution of a partnership is not sufficient to take the case out of the opera- ^EO. 30.] MOZINGO V. ROSS. 309 tion of the statute of limitations as to the other partners. In the case of Bottles v. Miller, 112 Ind. 584, it is held that a pay- ment upon a promissory note by one joint and several maker will not defeat the operation of the statute of limitations as to any other maker, nor deprive the latter of his right to avail himself of the statute as a defense. While the question in that ease does not appear to have been fully considered, the decision thereof seemingly being controlled by the construction which the learned judge, speaking for the court, placed upon the statute of limitations, we are, however, satisfied, in view of the authorities, that the conclu- sion reached by the court upon the question in that appeal was correct. The statute, as heretofore said, in effect declaring that the ac- knowledgment or promise of one joint contractor will not take the ease out of its operation as to any other joint contractor, no suffi- cient reason can be given, nor would any seem to exist, that would make a partial payment more potent in its effect than an express acknowledgment or promise by a debtor. Especially ought this to be true in view of the fact that such payment is treated by the law as evidence only of a new promise to pay the remainder of the debt. We are of tha opinion, and so hold, that the correct and better rule is that a partial payment can serve only to suspend the running of the statute of limitations as against the party making the payment, by himself or duly authorized agent; and the fact that the one making the payment is the principal debtor does not alter nor change the rule as to other debtors who executed the note or obligation as his sureties. We are aware that there are decisions of the higher courts of sister States which hold that the payment by one or more parties jointly and severally liable upon a note or other obligation, made before the limitation attaches, will suspend the running of the statute in favor of the others; but the great trend of the decisions of courts of other States sustains the conclusion we have reached. The absence from the State of the principal debtor in this case did not suspend the running of the statute in favor of the appellee, his surety. Bottles v. Miller, 112 Ind. 584 ; Davis v. Clark, 58 Kan. 454; 2 Wood, Limitation of Actions, § 246. It follows that the court did not err in sustaining the demurrer to the reply, and the judgment is therefore affirmed. AccosD. — Van Keuren v. Parmerlee, 2 N. Y. 533; Shoemaker v. Bene- dict, 11 N. Y. 176; McLaren v. McMartin, 36 N. Y. 88; Hunter v. Robert- son, 30 Ga. 479 ; Marienthal v. Mosler, 16 0. S. 556 ; Steele v. Souder, 20 Kao. 39; Davis v. Clark, 58 Kan. 454. CoNTU-i. — Woonsocket Inst, for Sarg's v. Ballon, 16 R. I. 351. 310 LEWIS V. LEE COUNTY. [OHAP. IV. Sec. 31. Evidence against the surety. LEWIS V. LEE COUNTY. 73 Ala. 148 (1882). Geo. P. Harrison, Jr., and Geo. W. Hooper, for appellants. W. H. Barnes & Son, contra. Beickell, 0. J. : There are cases which go so far as to maintain that the declarations or admissions of the principal, without re- striction as to the time or circumstances under which they were made, are evidence against the surety — 3 Phill. on Ev. (C. & H. notes) , 261. There are other cases affirming the proposition pressed in the argument of the counsel for the appellee, that when prin- cipal and surety are jointly sued on a joint or a joint and several obligation, any admission or declaration made by the principal, which is competent evidence against him, is also competent against the surety; for the reason, it is said, that as the suit is against several joint contractors or joint obligors, a recovery to the same extent must be had against all or none, unless one or more of the defendants interposes a personal defense, such as infancy, cover- ture, or bankruptcy. — Pendleton v. Bank of Kentucky, 1 T. B. Monroe (Ky.) 171 ; Amherst Bank v. Root, 2 Mete. 541 ; Atlas Bank V. Brownville, 9 Ehode Island 168. Without any limitation as to the nature of the action, approved text writers state that the mere naked admissions of the principal, not made in the course of any business, or as parts of any acts with which the surety is connected by his contract, can not be i-eceived as evidence to charge the surety.— 1 Greenl. on Ev. § 187 ; 2 Whart. on Ev. § 1212. This is the rule which has been recognized in this court as to the ad- missions or declarations of the principal, or his acts not in the transaction of business for which the surety is bound. — Bondurant V. Bank, 7 Ala. 830; Dumas v. Patterson, 9 Ala. 484. In the first of these cases the declarations of a sheriff in reference to the time at which an execution in his hands was to be paid, accompanied with evidence of the payment were received to charge his sureties who were separately sued ; the court holding that the declarations, having been made while the sheriff was acting ofScially, though not simultaneous, were parts of the res gestce, the payment of the money. In the other case, the admissions of a sheriif that he had collected money on an execution, not made while acting officially, merely narrative of a past act, were held inadmissible against his sureties, when sued jointly with him. In TovTnsend SEC. 31.] LEWIS V. LEE COUNTY 311 T. Everett, 4 Ala. 607, the annual settlements of a county treasurer with the Court of County Commissioners, and the statement made by him to his successor in office of the amount of moneys remain- ing in his hands, were held competent evidence against his sureties. These were acts which he was bound by law to perform — they were official duties specially imposed upon him; and fidelity in the performance of official duties the surety guaranteed. The Court said: " It may be conceded that the acts or declarations of a principal which will be evidence against the surety, must be made or done in the performance of the duty for which the surety is responsible ; but the concession will not avail the surety in this ease, as that is literally the fact here." These cases illustrate the rule as it has been settled in this State. The main inquiry is, as is said by Mr. Greenleaf , whether the declarations or admissions of the principal were made during the transaction of the busi- ness for which the surety was bound; if so, they are admissible against the surety. If otherwise ; if not concomitant with any act for which the surety is bound ; if they are mere narrations or admissions of past transactions, they are mere hearsay, and not competent evidence against the surety, whether he is sued sev- erally or jointly with the principal. The reason is well stated: " The surety is considered as bound only for the actual conduct of the party, and not for whatever he might say he had done ; and, therefore, is entitled to proof of his conduct by original evidence, where it can be had, excluding all declarations of the principal, made subsequent to the act to which they relate, and out of the course of his official duty." 1 Greenl. on Ev. § 187. In the case before us, we lay no particular stress upon the fact that prior to the making of the declarations or admissions of Lewis his term of office as county treasurer had expired. There remained the duty of stating his official account, and of delivering to his successor all the money, books, papers and property of the county, which had come to his possession, and his declarations or admis- sions accompanying either of these acts, and explanatory of them would be competent original evidence against his sureties, though his official term had expired. The point of objection to the com- petency of the evidence of his declarations, as against his sureties is, not that they were made after his term of office had expired, but that they were not made while he was doing any act, transact- ing any business, or performing any duty for which the surety was bound. They were subsequent in point of time to all official acts or duties to which they refer, and are simple admissions that in 31 312" STATE BANK V. BR6WN. [ CHAP. IV. his official capacity he had received moneys of the county. As against himself they were competent original evidence. — Lewis v. Lee County, 66 Ala. 480. As to his sureties, they were mere hear- say, creating no inference or presumption of liability for which they were bound to answer. The Circuit Court erred in refusing the instructions requested, limiting to the principal the operation and eifect of these admissions. *********** The judgment must be reversed, and the cause remanded. AccoED. — Hatch V. Elkins, 65 N. Y. 489; Stetson v. Bank, 2 0. S. 167; Comm. V. Brassfield, 7 B. Mon. 447; City of St. Louis v. Foster, 24 Mo. 141; Jenness v. City of Black Hawk, 2 Colo. 578; Lacoste v. Bexar Co., 23 Tex. 420. If the principal and surety are sued jointly the admissions of the principal are held to be competent against the surety. Magner v. Knowles, 67 111. 325; Montgomery v. Dillingham, 11 Miss. 647; Amherst Bank v. Root, 2 Met. 522. Declarations of the principal made at the time of the transaction to which they relate, are admissible against the surety as a part of the res gestae. Blair v. Perpetual Ins. Co., 10 Mo. 559; Society v. Fitzwilliams, 84 Mo. 406; Casky v. Haviland, 13 Ala. 314; Dobbs v. The Justices, l7 Ga. 624 ; McKim v. Blake, 130 Mass. 593 ; Paxton v. State, 59 Neb. 460. STATE BANK OF PIKE v. GEORGE M. BROWN, ET AL. 165 N. Y. 216 (1901). Mr. C. 8. Cary, for appellants. Mr. G. 8. Van Qorder, for respondent. "Vann, J., delivered the opinion of the court : The burden of proof was upon the plaintiff to show that the condition of the bond was broken by the failure of "White, " at the expiration of his term of ofifiee," and " upon request to him " made, either to render the just and true account required, or to pay over and deliver the moneys and other valuable things which had come into his possession as cashier. In order to meet the burden of proof, the plaintiff read in evidence, under objection and excep- tion, its by-laws, which, in specifying the duties of the cashier, among other things provided that he should " keep a full and com- plete set of books of the association, showing a systematic and accurate exhibit of the affairs of the association, such as are usually kept in well-conducted banking institutions." They also provided that he should have " personal supervision ... of the taking and discounting of commercial paper." Next, without any pre- liminary proof, it offered in evidence the books of the bank, or such SEC. 31.] STATE BANK V. BROWN. 313 parts thereof as were applicable. The books were separately re- ceived, subject to the objection that each was immaterial and in- competent as against the defendants, who duly excepted to the various rulings admitting them. Under exceptions founded on similar objections, certain computations, made by a witness from these books, were received, which tended to show the different items of shortage precisely as found by the referee. The following questions, rulings, and answers illustrate the nature of this evi- dence and- the method of introducing it: " Q. State what you have done with reference to the items, bills discounted, in the same manner. State the computation you have made, and the statement as contained of that item of bills discounted, and the result of your computation." This was objected to by the de- fendants " as immaterial and incompetent; that the entries upon the books from which the computation is made are not evidence as against the defendants;" and " that it does not appear that the defendants' principal made those entries or was in any way re- sponsible for them. ' ' The objection was overruled, the def endants- excepted, and the witness answered : " I took the accounts them- selves representing notes and bills discounted, listed them, and footed them. I found there was $90,813.33. The daily statement register shows $91,036.37, a difference of $223.04. That was a shortage in the bills discounted. I proved up the certificates of deposit, and made the computation of them." Q. " State what you found with reference to that." This was objected to as be- fore, and upon the further ground that the certificates of deposit should be produced, as they were the best evidence; but the ob- jection was overruled, and the defendants again excepted. The witness then stated his computations as before, and testified that they showed a shortage in certificates of deposit of $1,283. Subse- quently the certificates were produced, but as to the other accounts there was no evidence to establish a breach of the condition of the bond, except the bare fact that the books showed a shortage. The expert who made the computations testified: " The question aS to whether there was this discrepancy of $223.04 is determined by me from the examination of the entries in the books made prior to January, 1893, and my examination of books and bills receiv- able, as I found them on August 15, 1895." This necessarily in- cluded entries made before the bond was given. After the books and computations were thus received, it appeared that the journal and ledger were kept principally by White, but that the auxiliary books were kept by other persons, one of whom was living within 314 STATE BANK V. BROWN. [ CHAP. IT. the State at the time of the trial. It did not appear whether "White was then within reach of a subpoena or not, but it was shown that he disappeared about the 15th of August, 1895, and no further evidence was given on the subject. The entries made by White, after the bond was given, were admissible against his sureties, because they were the acts of their principal relating to the money and property in his custody which they had promised he should account for and pay over. The en- tries read in evidence, however, did not appear to have .been made by him. The defendants were not responsible for the way in whicQ }*o discharged his general diities as cashier, but only for his failure to sender a just account of what came into his hands in that capacity, and to pay over and deliver accordingly. They were strangers to the books of the bank. They had no right of access to them, and the entries made therein by persons other than "White were, no more binding upon them than upon the public generally. Neither the books nor the by-laws are referred to in the bond. The duties imposed upon "White by the bond were not those im- posed upon him by the by-laws, and the former were not to be performed until after the latter had ceased through the expiration of his term of office as cashier. The bond did not make the books evidence, and, aside from the entries made by White after the date of the bond, they could be lawfully received against the defendants to the extent only that they were admissible against strangers gen- erally, according to the principles of the common law governing the subject. Without any. preparatory proof, the books were admitted in solido as evidence per se against the sureties. They were received upon the mere statement that they were the books of the bank, made by a witness who never saw them until after White had ceased to be cashier. There was no proof of original entries by the per- sons who made them, and none even of their handwriting, custom or duties. The testimony subsequently given did not relieve the situation; for, while it appeared that the journal and ledger were mainly kept by "White, it did not appear that the entries in ques- tion were made by him, and the auxiliary books were kept by other persons, one of whom, at least, could have been produced as a witness. The computations were not admissible unless the books were admissible, because they were made solely from the boobs, iand were of no importance except as summary statements of the contents of the books. They were made in part from entries of an earlier date than the bond. 6EC. 31.] STATE BANK V. BEOWN. 315. All the entries, except those made by White after the execution: of the bond, were hearsay evidence as against the defendants. They were the written statements of third persons, made within the sanction of an oath, with no proof as to who made them,, or that, the person making them, was dead, or without the jurisdiction of the court, or that they were made in the usual course of business, in accordance with a uniform practice to make them when the transactions occurred, and to make them precisely as they occurred. Foi aught that appears, they may have been false when made, to the knowledge of the person making them. Neither the books nor the computations made, therefore, were admissible against the. de- fendants, beca,use the necessary conditions precedent were not com- plied with by the plaintiff. This case should not be confounded with those which authorize books to be read in evidence after a proper foundation has been laid; nor with those which sanction; as competent entries made upon the books of a copartnership in the regular course of business as against the copartners having access thereto. We do not hold that the pertinent entries in the books were not admissible under any circumstances, but simply that they were not admissible when offered, and were not made admissible by any evidence subsequently received. As the books were the foundation of the judgment rendered by the referee as to all of the recovery, at least, except the part relating to certifi- cates of deposit, the incompetent evidence necessarily affected the result, and requires a reversal. The judgment should be reversed, and a new trial granted, with costs to abide the event. CBeien, Baetlett, Haight, Maetin, Landon, and Cullen, J J., concur. The books of account of a defaulting principal are at most but prima facie evidence against the surety. Supreme Council Catholic Knights v. Fidelity & Casualty Co., 63, Fed. Rep. 48; Bissell v. Saxton, 66 N. Y. 55; Super, visors V. Bristol, 99 'N. Y. 316; Mann v. Yazoo City, 31 Miss. 574; Hatch" V. Attleborough, 97 Mass. 533; Lowry v. State, 64 Ind. 421; MeShane v. Howard Bank, 73 Md. 135; United States v. Boyd, 5 How. 29. Nelson, J.; " It has been contended, , that the returns of the receiver to the treasury' department after the execution of the bond, which admit the money to be then in his hands to the amount claimed, should be conclusive upon the' sureties. We do not think so. The accounts rendered to the department of money received, properly authenticated, are evidence, in the first instance,, of the indebtedness of the officer against the sureties; but subject to explv' tion and contradiction. They are responsible for all the public moneys whicH were in his hands at the date of the bond, or that may have come into. them afterwards, and not properly accounted for; but not for moneys ■which 316 HATES V. WARD. [CHAP. IV. the officer may choose falsely to admit in his hands, in. his account with the government. The sureties can not be conclud^ by a fabricated account of their principal with his creditors; they may always inquire into the reality and truth of the transactions existing between them." Contra. — Morley v. Metamora, 78 111. 394; Chicago v. Gage, 95 IlL 693' Longani v. Taylor, 130 111. 412. Sec. 32. Equitable exoneration of the surety. HAYES V. WARD, ET AL. 4 Johns. Ch. 123 (1819). Biggs, for the plaintiff. C. Baldwin, for the defendant. The Chancellor. It appears from the case that the defendant Beach is the principal debtor to the defendant Ward, on the note in question, and that the plaintiff, who indorsed it, stands in the character of surety. The plaintiff originally indorsed the note without consideration, for the benefit of the drawers, W. & H., and the defendant B. took it from the drawers, in consideration of lots agreed to be sold to one of the makers, or of a partnership, into which one of them was to be admitted. This consideration failed, for the lots were not sold, nor the partnership entered into. As between those original contracting parties, the note was without consideration, and could not have been enforced. When the note was passed by the defendant B. to the defendant W. the dealing, was exclusively between these two defendants, and the plaintiff's name remained on the note, as indorser, without any consideration for his indorsement. We have no direct evidence that the fact of his being a naked guarantor, or surety, without interest, was known to the defendant W., when he received this and the other notes from B., yet the facts are siifficient to justify such an inference. The note was not received by the defendant W. in the ordinary course of commercial business. It was taken upon the sale of bank shares ; and instead of relying upon the credit of the prior parties to the note, accompanied with the indorsement of the defendant B., he took a bond and mortgage from B., as eventual security for the payment of the note. This and the other notes were sold by B. to the defendant W., almost immediately, after they were drawn, and the defendant W. admits that they were received by B. from one of the makers; nor does he deny a knowledge of that fact, at the time he took the bond and mortgage from B. The knowledge of that fact was sufficient notice to him, thaf the plaintiff was a voluntary indorser, for the a'ccommoda'tion of the makers; and the defendant W. appears, from the pleadings and proofs, to be justly chargeable with knowledge, at the time he took the mortgage, that the plaintiff was a gratuitous indorser. The plaintiff is then entitled, in equity, to all the privileges with which la surety is clothed, not only as it respects the defendanrt B., but as it respects the defendant Ward, the present holder. I shall, SEC.Sii.] HATES V. WARD. 317 therefore, in the further consideration of this case, assume tlie fadt as clearly true, and well established, that between the plaintiff and the defendants, W. and B., the relationship existed of creditor on the one part, and principal debtor and surety on the other. This relationship was coeval with the bond and mortgage, and the parties to this suit are entitled to all the rights, and bound by all the duties, resulting from that relation. .The grave and difficult question then presents itself, whether the defendant W. ought to be required to resort, in the first instance, to the mortgage which he took from B., and which he says is a valid lien, and sufficient to satisfy the note. It is alleged that the mortgage security is destroyed by the usury, and that it would be unavailing in the hands of the plain- tiff, if he were to pay the note, and have the bond and mortgage essigned to him (and which, as surety, he would have a right. to demand) by way of substitution and indemnity. It is further alleged, that if the defendant W. has destroyed the validity of his own security taken from the principal debtor, he can not have recourse to the plaintiff, because he has voluntarily disabled him- self from affording to the plaintiff, as surety, the requisite sub- stitution. The right of substitution is a valuable right belonging to a siurety, and the creditor must do nothing to impair it. There would be much equity in the plaintiff's case, if it should finally appear that the defendant "W. had hy his own act rendered the adequate security which he took from the principal debtor, illegal and void. The very taking of that security by him may have excited confidence in the surety, and lulled him to sleep, and deprived him of taking other and sound security, for his own eventual responsibility, until it was too late, and the rights of third persons had intervened. This consideration renders it an act of benevolence and equity, and imposesi it as an obligation upon the creditor who takes security from the principal debtor, to take it fairly and lawfully, and to hold it impartially and justly. According to the doctrine of the civil law, the surety may, per exceptionem cedendarum actionum, har the creditor of so much of his demand as the surety might have received, by an assignment of his Hen and right of action against the principal dehtor ; pro- vided, the creditor had, by his own unnecessary or mproper act, deprived the surety of that resource. The surety, by his very char- acter and relaition of surety, hasi an interest that the mortgage taken from the principal debtor should be dealt with in good faith, and held in trust, not only for the creditor's security, but for the surelty'si indemnity. A mortgage so taken by the creditor is taken and held in trust, aS' well for the secondary interest of the surety, as for the more direct and immediate benefit of the creditor, and the latter must do no wilful act, either to poison it, in the first instance, or to destroy or cancel it, . afterwards. These are gen- eral principles founded in equity, and lare 'contained in the doc- trines laid down in Pothier's Treatise on Ohligations, Nos. 496, 519, 520, to which reference has heen made in the former decisions of 318 HAYES V. WARD. [CHAP. IV. this court. . Cheesebraugh v. Millard, 1 Johns. Ch. Rep. 414; Steevens v. Cooper, 1 Johns. Ch. Rep. 430, 431. This doctrine does not belong merely to the civil-law system. It is equally a settled principle in the English chancery, that a surety will be entitled to every remedy which the creditor has against the principal debtor, to enforce every security, and to stand in the place of the creditor, and have his securities transferred to him, and to avail himself of those securities against the debtor. This right of the surety stands not upon contract, but upon the same principle of natural justice, upon which one surety is entitled to contribution from another. 2 Ves. 622; 1 Wightvpick 2-6; 1 Desaussure 409; 2 Madd. Ch. Rep. 437; 14 Ves. 162; 10 Ves. 412; 11 Ves. 22. But the application of these principles is not, necessarily, the question, at present. If the defendant W. should be required to prosecute previougily upon his mortgage, and he should be defeated in that remedy, by the invalidity of the mortgage, arising from Ms own illegal act, and should then recur back to the plaintiff, it would be iu time to examine whether this case fell within the range of the doctrine to which. I have referred. The only point now to be settled is, whether the defendant W. shall be stayed in his suit at law, until he has tried his remedy against the mortgaged premises. ! I am not a.ware that there is any general rule in chancery, that the creditor must look to the principal debtor, and exhaust hss remedy against him, before he can be permitted to resort to the surety. The general language in the books and the practice have been otherwise, and the surety has been considered (without any formal adjudication upon the point, and, perhaps, without any examination of it upon principle) as amenable, in ordinary eases, to the creditor, in the first instance, though the creditor may have Itaken ample security from the principal debtor. The creditor has usually called on the surety at his election, and left Mm to resort to: the principal debtor for his indemnity, after he has paid the debt, and after he has been clothed, by substitution, with all the rights: and securities of the creditor. " The holder of the security, therefore, in general cases," says Lord Eldon, in, Wright v. Simp- son, 6 Ves. 734, "may lay hold of the security; and till very lately, even in circumstances, under which the security would not have .'had the same benefit, that the creditor would have had." But in late eases, and under particular circumstances. Lord Eldon. admits, that the surety has a right to call upon the creditor to do the most he can for his benefit. It is now considered as a settled rule (see the cases referred to in King v. Baldwin, 2 Johns. Ch. Rep.. 562) that a surety may resort to chancery, if he apprehends danger from the creditor's delay, and compel the creditor to sue the principal debtor, though, probably, he must indemnify the creditor against the consequences of risk, delay, and expense. This is what Lord Eldon. supposes in the case already referred to. As early as the time of Lord SEC. 32.] HATES V. WARD. 319 Kepper North (1 Vem. 190), it was held, that equity \TOuld coror pel the principal debtor to pay the debt, after it had become due, at the instance of the surety, and though the latter had not been sued, for it was "unreasonable that a man should always haver such a cloud hanging over hdm." It seemsi, also, to be now con- sidered (2 Fonb. 302, n. i.; 17 Ves. 57, 520) as the right of a surety to call upon a creditor having another fund, which the surety The retention of a bond by the obligee is prima facie evidence of the accept- ance of the same. Engler v. Peoples Fire Ins. Co., 46 Md. 322; Union Bank of Md. V. Eidgeley, 1 Har. & G. (Md..) 324; Mailers v. Crane Co., 92 III. App. 514. Delivery of the bond to a third person to be delivered to the obligee is held to constitute a sufficient delivery to bind the surety. Frank v.- Frank, 100 Va. 267 ; Wylie v. Bank, 63 S. C. 406. If the bond recites that the liability begins to run from its date, the surety will be liable from the date of the bond although delivery of the bond was not made till a later date, .ffitna Life Ins. Co. v. American Surety Co., 34 Fed. Eep. 291; Supreme Council Catholic Knights v. Fidelity & Casualty Co., 63 Fed. Eep. 48. Sec. 3. Incorporation of other instruments into the bond by ref erence. FORST, ET AL. v. LEONARD, ET AL. 112 Ala. 296 (1895). Appeal from the Circuit Court of Jefferson. B. C. Jones and James E. Webb, for appellants. Trotter & McAdory, 0. W. Ward and L. Y. lApscomb, contra. McClellan, J. There was but one contract between Mrs. Porst and her husband on the one hand, and Leonard and Alfred on the other. This contract was for the building of a house by the lat- ter parties, for the former. It is not stated in the contract whether the house was to be of one or more stories, but it was to be built according to specifications therein referred to, but not incorporated or attached, and nothing in the contract as set out in the com- plaint is at all inconsistent with the idea that the building of a one-story house was the contemplation of the contract itself and provided for in the specifications made a part thereof. The con- tract recites that it is entered into " by and between S. J. Alfred and H. N. Leonard, doing business under the firm name of Alfred & Leonard as contractors and builders, of the first part and Mrs. M. Forst and A. Forst, her husband and agent, parties of the second part." This contract stipulates for the execution of a good and satisfactory bond by Alfred and Leonard for the faithful per- formance of the building contract, its " stipulations and agree- ments, and to complete the house ready for. occupancy in ninety SEO. 3.] FOEST V. LEONAKD. 327 days from the date of " the contract. The bond which was exe- cuted by these contractors and others as sureties in the penal sum of $1,000 contains the following defeasance: " The condition of this obligation is such, that whereas the said H. N. Leonard and S. J. Alfred have contracted with the said Mrs. M. Forst and her hus- band, A. Forst, as follows: The said H. N. Leonard and S. J. Alfred have contracted with the said M. Forst, and het husband, A. Forst, to build a one-story frame dwelling, now, therefore, if the said H. N. Leonard and S. J. Alfred shall truly and faithfully perform all the obligations of the said contract, then this obligation shall be null and void, otherwise to be of full force and effect. The complaint, upon this bond for breaches of said contract, al- leges that at the time of the execution of the bond the contract was entered into by H. N. Leonard and S. J. Alfred jointly for the building of a certain one-story dwelling house in the city of Bessemer, and that the said bond, set out in the complaint, is the bond which the said H. N. Leonard and S. J. Alfred obligated them- selves to execute in and by the terms of said contract. There is, in our opinion, no discrepancy between the contract indicated by the reference in the bond and the contract set out in the complaint as being that intended to be secured by the bond. The bond re- cites a contract to biiild a one-story dwelling house. The contract set out is in terms to build a dwelling house, and there is nothing in it indicating that the house is to be other than a one-story house. The bond recites that the contract was entered into by H. N. Leon- ard and S. J. Alfred ; and this is literally true, for the contract ex- pressly sets forth that it is " made and entered into by S. J. Alfred and H. N. Leonard. " It is true they describe themselves as ' ' doing business under the firm name of Alfred & Leonard, as contractors and builders," and sign the papers under the different name of " Leonard & Alfred," but whether their firm name be the one or the other, the fact remains that they entered into a contract, ac- cording to its own recital, in their individual names, and, further, that the contract is the joint and several contract of H. N. Leonard and S. J. Alfred whether it be also the contract of " Alfred & Leonard," or " Leonard & Alfred " as a partnership or not. It was not essential for the bond to set out the terms and specifications of the contract to build the dwelling, either under the statute of frauds or in view of the inquiry whether the bond and contract for any other purp.ose are to be read together. A sufficient reference in the bond to the contract as one "to build a one-story frame dwelling," makes all the stipulations of the contract a part of the 328 POEST V. LEONARD. [CHAP. V. bond, and the bond is not to be taken merely as security for the building at some indefinite time, and in some way some sort of " a one-story frame dwelling house." Nor is it any objection to reading these papers together, assuming that the bond sufficiently refers to the contract, either for the purposes of the statute of frauds or otherwise, that ,f or aught that is. recited in the bond the contract may have been a verbal one ; for as said by Kekewich, J., in Oliver v. Hunting, L. R. 44 Ch. Div. 208 : " If you find a refer- ence to something, which, may be a conversation, or may be a writ- ,ten document, you may give evidence to show whether it was a conversation or a written document; and, having proved that it was a written document, you may put that written document in evidence, and so connect it with the one already admitted or proved."— Ridgway v. Wharton, 6 H. L. C. 238. Then the only remaining question arising in this case is whether the reference in the bond to the contract is sufficient in itself, or as aided by admissible parol evidence, to make the contract set out in the complaint part and parcel of the bond. Waiving inquiry whether the reference is filled by the production of the written con- tract, we shall assume that parol evidence is necessary. Is it ad- missible? We think there can be no doubt about it. Its only necessary office in the case is the, identification of a contract shown by the bond itself to have, been entered into between named parties for a certain purpose, and to be an existing undertaking. We do not understand it to have ever been the law that parol evidence was inadmissible under these circumstances for this purpose. With- out such evidence the whole contract is existent and evidenced by writing. The oral evidence does not add or take away a single term to or from it. But merely by clearing away an ambiguity or uncertainty in the reference of one part of this wholly written contra,ct to another, such evidence brings the separated parts to- gether. But if the rule were ever otherwise, it is not so either here or in England at the present time. To the contrary, it is thoroughly well established, there and here, that where a contract, required to be in writing by the statute of frauds, rests upon the contents, of two separate papers, and the only thing lacking to a compliance with that statute is the ideintification of the two papers in their re- lation to each I other, that identification may be supplied by oral evidence. We need only cite some of the authorities. — Long v. Miller, 4 C. P. D. 450; Cave v. Hastings, 7 Q. B. D. 125; Oliver V. Hunting, L. R. 44 Ch. Div. 205 ; Kennedy v. Cramling, 33 S. C. 367 ; Thayer v. Luce, 22 Ohio St. 62 ; Work v. Cowhick, 81 111. 317; SEC. 4.] MIDDLESEX CO. V. LAWRENCE. 329 Wood on Statute of Frauds, § 364 ; Beckwith v. Talbot, 95 TJ. S. 289 ; Jenkins v. Harrison, 66 Ala. 345 ; Robbins v. Webb, 68 Ala. 393; Oliver V. Ala. Gold Life Ins. Co., 82 Ala. 417. There is no merit in the suggestion that these papers cannot be taken together because the contract is signed by Leonard & Alfred only, and the bond is signed by them and others. — District of Columbia v. J. H. & E. K. Johnson, 1 Maekey 51. Our conclusion, therefore, is that upon proof of the three facts alleged in the coinplaint which rest, or are supposed to rest, in parol, in connection with the bond and building contract, the plain- tiff would be entitled to recover. The Circuit Court erred in sus- taining the demurrer to the complaint. Its judgment is reversed, and the cause remanded. ■ Reversed and remanded. Accord. — Mackenzie v. Edinburg School Trustees, 72 Ind. 189; Jordan v. Eavanaugh, 03 Iowa 1S2; City of New York v. N. Y. Refrigerator Co., 82 Hun 553; Kimball Co. v. Baker, 62 Wis. 526; Locke v. MeVean, 33 Mich. 473; State v. Tidemann, 69 Mo. 515; New Britain v. Tel. Co., 74 Conn. 326; McCuUough V. Moore, 111 111. App. 545; Graham v. Middleby, 185 Mass. 349; Title Co. v. Sabin, 112 Wis. 105. It has been held that a reference in a bond to the by-laws of a corporation for a further description of the duties of the principal, incorporates the By- Laws into the contract. Humboldt Sav. & Loan Soc. v. Wennerhold, 81 CaL 528. Sec. 4. Commencement and duration of liability upon a bond. THE MIDDLESEX MFG. CO. v. JAMES LAWRENCE, ET AL. 1 Allen 339 (1861). Dewey, J. This is an action of contract against the executors of the late Abbott Lawrence, upon a bond executed by him as surety for Samuel Lawrence, dated December 8, 1848, the condition of which was as follows : " Whereas the said Samuel Lawrence has been duly appointed treasurer of the Middlesex Company, now the condition of this obligation is such, that if the said Samuel Lawrence shall faithfully perform and discharge the duties of treasurer of said company during the term for which he has been elected, and for and during such further time as he may continue therein by any re-election or otherwise, then this obligation shall be void; otherwise it shall re- main in full force." .330 MIDDLESEX CO. V. LAWRENCE. [CHAP. V. It appears by the agreed statement of facts that Samuel Law- rence, having previously been elected to this office in 1847, was continued therein by re-election at the annual meeting of the cor- poration in December 1848, and continued to hold the same until May, 1849, when he resigned, and his resignation was accepted, ■ and W. W. Stone was elected in his place, and, on the 19th of May, 1849, gave bond, and discharged the duties of the office from that time until the annual meeting in December, 1849, when Samuel Lawrence was again elected to the office and entered upon the same, but gave no new bond. The claim of the plaintiffs is to recover for defaults of Samuel Lawrence after May 19, 1849, he having been regularly elected at each annual meeting until 1857, and having served as treasurer during that time, except for a short period in the year 1851, when another person held the office without giv- ing any bond. The general principles of law to be applied to cases of sureties in official bonds have been so fully discussed, and the earlier cases so fully cited, in the case of Amherst Bank v. Root, 2 Met. 522, that it is unnecessary minutely to recapitulate them here. The precise case before us was not then before the court; but the great leading principle, that such surety is not to be held beyond the precise terms of his contract, was there, as elsewhere, fully acknowledged. The recent case of Chelmsford Company V. Demarest, 7 Gray 1, approaches nearer to the present. That was also an action on a bond given for the faithful performance of the duties of a treasurer of a manufacturing corporation. The con- dition of the bond was, " whereas said P. has heretofore been chosen treasurer of said company, now therefore, if said P. during his continuance in said office shall faithfully and punctually perform all the various duties," etc. The bond was given on the occasion of his first election in 1845, and he continued in office until 1852, but gave no new bond. It was held by the court that the office being one which by law was to be annually filled by an election, (Rev. Sts. c. 38, § 4,) his sureties were bound only for the year for which he was chosen, and for such further time as was rea- sonably sufficient for the election and qualification of his successor. That case settles the character of the office of treasurer which was held by Samuel Lawrence, and limits the liability of the sure- ties to any ordinary bond for the faithful performance of its duties. But it is contended on the part of the plaintiffs that, to the pres- ent bond were superadded obligations extending the liability to his present term of office, by the introduction qf the clause, " and for aad during such further time as he may continue therein by any re- SEC. 4.] MIDDLESEX CO. V. LAWRENCE. 331 election or otherwise." We perceive no objection to the validity of such a bond so embracing an extended term. There would be words inserted in the bond clearly indicating an intent to extend the liability. But such words are to be construed strictly. The lia- bility must be clearly indicated, and the intent obvious. Had the present been a case of an election of Samuel Lawrence as treasurer in 1848, and a continuous holding of the office for the succeeding eight years by successive annual re-elections, the plaintiffs might, as it would seem, have held the sureties liable for any default by him during the whole term ; and that was the case provided for on the bond. But it appears in the statement of facts that, in May, 1849, Samuel Lawrence resigned the office which he held under the elec- tion in 1848, and his resignation was duly accepted, and another person was elected treasurer, accepted the office and gave bond with other sureties for the faithful performance of the duties thereof, and the same was so held by him for a period of seven months. At the next annual election Samuel Lawrence was again chosen treas- urer, and entered anew upon the duties of the office and the de- fendants are sought to be charged with his subsequent defalcations. Is this case provided for in the bond? The words are " and for and during such further time as he may continue therein by any re-:election or otherwise." It is insisted, on the part of the de- fendants, that they apply only to a continuous holding, and not to a resumption of the office after ceasing for a time to hold the same. No adjudicated case is found directly applicable to the present inquiry. But, from the observations falling from different judges; in the case. of Mayor, Aldermen, etc., of Berwick upon Tweed v. Oswald, 3 El. & Bl. 653, we should infer that they would hold that the obligation of a surety on a bond like the present would not em- brace a holding of the office of treasurer by disconnected appoint- ments. The form of the bond in that case was, that D. Murray, elected treasurer, should duly account and pay over all such sums as he " shall or may recover or receive in virtue of my said ap- pointment as treasurer as aforesaid, during the whole time of my continuing in the said office, in consequence of the said election, or under any annual or other future election of the said council to the said office." Murray had actcfi as treasurer for a period of more than six years continuously, the bond being executed on the 15th of January, 1842; and the ground of defense was that in 1843, by force of a new statute, the office which, at the time of giv- ing the bond, was an annual one, had been changed to an office 332 MIDDLESEX CO. i;. LAWEENCE. [CHAP. V. thereafter to be held at the pleasure of the mayor, aldermen and burgesses. In discussing that question, the present one incidentally arose and was discussed ; and it seems to be assumed to 'be a contract in reference solely to a continuous service, as will be found in the remarks of Cresswell, J., who was for supporting the right to main^ tain the action in the case before him, and who says : ' ' Each of the re-elections of Murray was immediately on the termination of the period for which he had been previously elected ; his tenure of oflSce was therefore continuous, and the money was received while he continued in the office of treasurer." Aldersoh, B. says: " In the first place, it is a contract to answer for money only during his continuance in office, though, it is true, under successive elec- tions. If, therefore, he ceased to be continuously re-elected, the liability of the surety was at an end. " Parke, B. says: " I think that the meaning of the words clearly is, that if the person elected fill the same office continuously; for the use of the word continue shows that it was not intended to apply to disconnected appoint ments at future periods. ' ' In the opinion of the Court such is the correct and legal con- struction applicable to the bond in the case before us. The words apply to a continuous holding of the office, and do not embrace a case of resumption of the office after having ceased to hold it, and after another person has exercised its duties upon an election and qualification therefor by giving an official bond. The bond was for the faithful discharge of the duties of the office during the term for which he had been elected, and during such further time as he might continue therein. The word ' ' continue ' ' excludes all idea of intermission in the office. The bond of December 8, 1848, was, as to all future liabilities, discharged by the appointment of W. W. Stone, as treasurer, on the 19th of May, 1849, and the new bond taken of him. The case will, by the agreement of parties, be referred to an assessor to report as to any breaches of the bond occurring before May 19, 1849. B. F. Butler & W. P. Webster, for the plaintiffs, cited Chelmsford Co. V. Demarest, 7 Gray 1 ; Hassell v. Long, 2 M. & S. 363 ; Amherst Bank v. Root, 2 Met. 522. B. B. Curtis, for the defendants. The appointment to an office or agency will be presumed to be continuous wliere nothing to the contrary appears in the contract or in the By-Laws of the corporation, and a bond given to secure the fidelity of the principal during " Continuance in office " will be binding so long as the employment con- tinues without interruption. Union Bank vv. Eidgely, 1 Har. & 6. (Md.) SEC. 4.] AMERICAN B. & T. CO. V. HARVESTER CO. 333 324; Dedham Bank v. Chickering, 3 Pick. 335; Peoples Building & Loan Assn. V. Wroth, 43 N. J. L. 70. If the bond by its terms is limited to one year no liability attaches for defaults committed under subsequent reappointments to the office or agency. Welch V. Seymour, 28 Conn. 387; Mutual Building & Loan Assn. v. Miles, 16 Fla. 204 ; Savings Bank v. Hunt, 72 Mo. 597 ; Citizens Loan Assn. v. Nugent, 40 N. J. L. 215. A bond which runs "during continuance in office" is limited to one year if the By-Laws of the corporation require • the officer to be elected annually. Mutual Bldg. & Loan Assn. v. McMulIen, 1 Penny (Pa.) 431; State v. Mann, 34Vt. 371. AMERICAN BONDING AND TRUST CO. v. MILWAUKEE HARVESTER CO. 91 Md. 733 (1900). John L. G. Lee (with whom was E.J. D. Cross on the brief), for the appellant. Edgar H. Gans and W. Calvin Chestnut (with whom were Hod- son & Hodson and B. H. Haman on the brief), for the appellee. BoTD, J., delivered the opinion of the Court. The appellee sued the appellant on a surety bond for losses sus- tained by the former through Upton S. Brumbaugh in connection ■with the duties of his position as its general agent. There are two counts in the declaration, but they are similar, excepting as to the dates, the appellant having renewed for a year a bond which it had given for the previous year to ' ' make good and reimburse to ' ' the appellee to the extent of two thousand dollars, such pecuniary loss as it may sustain " by reason of any fraudulent or dishonest acts of the employed in connection with the duties of said position, amounting to embezzlement or larceny. ":t******* 2. That on the demurrer to the defendant's second and seventh pleas we do not understand to be questioned in this court, and therefore the next point to be considered is the alleged error in not sustaining the demurrer to the plaintiff's replication to the defend- ant's third plea. That plea alleges that all the moneys collected by Brumbaugh, during the term of the bond and the renewal thereof, were paid over to the plaintiff and hence there was no pecuniary loss to it during the term of the bond sued upon. It sets out a list of ac- counts showing the names of parties from whom they were collected, the dates and amounts of collections, being in the aggregate $2,814.85, and alleges that each and every item of them was paid over. The plaintiff by the replication " denies that the sums of 334 AMERICAN B. & T. CO. V. HABVESTER CO, [CHAP.V. money included in the claim of $2,814.85 as itemized in said plea, were paid over to the Milwaukee Harvester Co., on the accounts for which it is alleged in said plea they were collected, and hence denies the statement in said plea that there was no pecuniary loss to the plaintiff during the term, of said bond, and plaintiff further alleges that there was an actual deficit of $2,814.85 in the accounts of said Brumbaugh during the terms of said bond." * # , # i^ ^, The discussion of this point must therefore be narrowed to the inquiry whether the fact that the money collected by the agent was paid to the plaintiff, although on accounts other than those so collected relieved the agent of embezzlement and the de- fendant of liability, and, giving the plea the greatest possible lati- tude, we are not called upon to discuss the many technical defenses that may be interposed on the charge of embezzlement. * * # , Independent of authority we cannot understand how the position of the appellant can be successfully maintained. If Brumbaugh had fraudulently converted this money to his own use by paying it to some creditor other than the plaintiff, there could, be no question as to the responsibility of the bonding company, and upon what principle can it be relieved merely because he so used it in payment of other debts he owed the plaintiff? If the bonding company had given the appellee one bond to be in effect from December 1st, 1895, to December 1st, 1896, and another from the latter date to December 1st, 1897, and Brumbaugh had collected from A and B $1,000 during the first year, which he appropriated to his own use, and during the second year collected from C and D a thousand dollars which he paid to the Harvester Company to be credited on the accounts of the first year, and that company did so credit A and B without any knowledge that the sums were collected from C and D, and there was still a deficit of a thousand dollars at the end of the second year, a suit on the first bond would have been met by the defense that Brimibaugh's obligations were cancelled by the payment so made, and the books of the appellee would have tended to sustain that defense. Then if suit was brought on the second bond, according to the appellant's theory it could defeat that action because the money received by the agent during that year had in fact been paid over to the plaintiff. Bonds of this character would be worse than useless if such results could follow, as the party undertaking to be indemnified by them might be mis- led and subjected to loss by relying on what he believed to be se- curity, but which would prove to be a snare and delusion. Or take another instance, suppose the agent collected one hundred SEO. 4.] AMERICAN B. & T. CO. V. HAEVESTEE CO. 335 dollars from each of four parties and paid to his principal two hun- dred dollars to be credited on the accounts of A and B but kept the balance, and the bonding company was sued for the amounts he received from C and D, could it be possible that it would be a defense to say that the money paid on account of A and B was actually received from C and D, and that having been paid to the principal he could not recover, or if the agent was indicted for embezzlement of the money received from C and D would it avail him to prove that that particukr money was paid over to the prin- cipal, although it was paid on account of what the agent had re- ceived from A and B ? If that be true, then if a bank officer ap- propriates one hundred dollars to himself one week and replaces that with another hundred dollars, so appropriated, the next week, and continues that operation from time to time until he finally owes the last hundred dollars, which he does not pay, he could not be convicted of embezzlement, or a bonding company could not be held liable on a bond of this character for the last hundred dol- lars, because the agent had paid that money over to his principal, although he had appropriated the last sum to pay what he pre- viously owed. If Brumbaugh had been the agent of the Harvester Company for Maryland and Virginia, and the appellant had been his surety for collections in Maryland alone, and another company for those in Virginia, and he ha^ collected $2,800.00 in Maryland which he converted to his own use, and afterwards collected $2,- 800.00 in Virginia, which he paid to his principal to be credited on account of the Maryland collections, would the appellant admit that it was still liable because the money paid was in reality col- lected from the Virginia debtors ? Or could the other company be excused because that money (even if he paid the identical notes received by him) was actually received by the principal, although without knowledge of the source it came from, and was credited by the direction of the agent to the Maryland claims ? Other illus- trations might be given to show not only how useless securities of this character would be, but the results that might follow, if such a doctrine as is contended for be adopted. It might as well be said that if A owes B five dollars and he surreptitiously takes that amount out of the safe of B and then pays B the debt with it, that it would not be larceny, for he could with equal propriety say he had not appropriated it to his own use but had taken it simply to pay B, although he was thereby cancelling a debt he owed him. As the point is now presented to us, the agent used his principal's money received during the term and under the conditions of , the 336 AMERICAN B. & T. CO. V. HARVESTER CO. [CHAP. V bond and applied it to his own use — that is, to the payment of debts he owed the principal, on account of collections previously made by him for which he was liable, and it was therefore as much a conversion of the principal's money as if he had paid it to some third party. He could not successfully defend himself from the charge of embezzlement by reason of such payment nor can his security do so under the terms of this bond. There is no allega- tion that the Harvester Company was in anywise responsible. for, or knew of, the use of money, which the appellant was liable for under the bond, by Brumbaugh to pay other debts he owed it. If it had been accepted with such knowledge, another question would have arisen. If then we were without authorities on the subject we would have no difficulty in reaching the conclusion that the defense intended to be relied on under this plea is not well taken but those reflecting on the question are not wanting. In Frovwifelter v. State, use County Commissioners, 66 Md. 80, the suit was on a tax collector's bond. The collector had applied part of the money which he had collected, for the year for which the bond was liable, to his defalca- tions for pervious years and the sureties contended that that could not be done and they still be liable. This Court said on page 87: " If the commissioners or the treasurer knew that the money was applied to the taxes due for previous years had been collected* on the levy of 1881, certainly they would have had no right to permit such application. But in the absence of any knowledge of the sources from which it was obtained, it is difficult to see how they could have prevented Myers from applying it to his indebtedness for any year which he might name. "When the money was in his possession there was nothing to identify it or to distinguish it from other funds under his control, or rightfully belonging to him. The obligation assumed by his sureties was that he should pay the money in discharge of the tax levied, within the time required by law. If he paid it in discharge of previous taxes, it was as much a breach of his bond as if he had retained it in his own pocket "We think the law on this point is correctly stated in Inhabitants v. Bell, 9 Metcalf 499, and in Gwynne v. Burnell, 7 Clark and Fin- nelly 572." In the case last cited there were several opinions filed to the same effect, but Baron Gurney thus tersely stated his con- elusions: " The application of any part of the money collected under the assessments of that year, to cover any deficiency in any former year, is just as much a breach of his duty and a forfeiture of his bond as if he had paid the money to any other creditors oi SEC. 4.] AMERICAN B. & T. 00. V. HAEVESTER CO. 337 lost it at the gaming table." To the same effect are State v. Sooy, 39 N. J. L. 539 ; Com. v. Knettle, 182 Pa. 176 ; County of Pine v. Williard, 39 Minn. 125; Crawn v. Com. 84 Va. 282; Rogers v. State, 99 Ind. 218; Stone v. Seymour, 15 Wend. 19; Hecox v. Citizens' Ins. Co., 2 Fed. Rep. 535; State v. Smith, 26 Mo. 226. Those cases in nowise conflict with the general principles applicable to sureties, such as that they are only liable for defaults, eftc, dur- ing the time the bonds are in force, but they hold that default is made by the application of money collected under the terms of the bond to the payment of other debts, even if such debts are due the obligee of the bond, provided, of course, he is not a party to its misappropriations and has no knowledge of it. That the agent will be guilty of embezzlement by the misappro- priation of funds under these circumstances, if the evidence shows sufficient fraudulent conduct on his part as to amount to that crime, was expressly decided in Rex v. Hall, Russ. and Ryan, 463. There a clerk who had received eighteen pounds in one-pound notes for his employer charged himself with twelve of them and the same day received other money and paid over that sum and the other six pounds to his employer on account of another debt due by him t» the master. He was held to be guilty of embezzlement. See also State V. Baumhager, 28 Minn. 226 ; 2 Bishop New Crim. Law, sec- tion 377 (ed. of 1892) ; Roscoe's Criminal Evidence (456). So if we give this replication the construction placed upon it by the appellant, it was an answer to the plea and the demurrer was properly overruled. No other questions having been urged before us, the "judgment will be affirmed. Judgment affirmed, appellant to pay the costs. Where the bond recites that the principal will pay over all money which comes into his hands as agent the sureties will be liable for his default in paying over money previously collected and which he had on hand at the time of the execution of the bond. Mutual Life Ins. Co. v. Wilcox, 8 Biss. 197. 338 crry op st. louis v. von puhl. [chap. v. Sec. 5. Building bonds for the benefit of labor and material men. CITY OF ST. LOUIS v. VON PUHL, ET AL 133 Mo. S61 (1895). Appeal from St. Louis City Circuit Court. G. W. Lubke and W. B. Homer, for appellant. Willis H. Clark,, for respondent, Municipal Trust Company; and Laughlih, Wood & Tansey, for respondent, Butler. Macfarlane, J. Defendants Von Phul and Joseph Grimm se- cured a contract from the city of St. Louis to repair the sidewalks in a certain district. The contract provided in detail for the work, the materials to be used, and for the payment therefor by special tax bills to be charged against adjacent property. At the end of, and as a part of, the contract was this obligation, signed by the contractors and the Municipal Trust Company and Edward Butler as securities : " The said St. Louis Sidewalk Company, Stephen Von Puhl and Joseph V. Grimm, proprietors, as principal, and Municipal Trust Company and Ed. Butler as sureties, hereby bind themselves and their respective heirs, executors, and administrators, unto the said city of St. Louis in the penal sum of ten thousand dollars, lawful money of the United States, conditioned that in the event the said St. Louis Sidewalk Company shall faithfully and properly perform the foregoing contract according to all the terms thereof, and shall, as soon as the work contemplated by said contract is com- pleted, pay to the proper parties all amounts due for material and labor used and employed in the performance thereof, then this obligation to be void, otherwise of full force and effect, and the same may be sued on at the instance of any material man, laboring man, or mechanic, in the name of the city of St. Louis, to the use of such material man, laboring man, or mechanic, for any breach of the condition hereof; provided that no such suit shall be in- stituted after the expiration of ninety days from the completion of the above contract." The Glencoe Lime and Cement Company furnished the con- tractors materials for use in performing their contract. The suit is upon the contract, wherein plaintiff claims a balance due on account of materials furnished amounting to $9,153.30. 3E0. 5.] CITY OP ST. LOUIS V. VON PUHL. 839 On the trial plaintiff offered in evidence an ordinance of the city providing for constructing and repairing sidewalks. The defendants, the Municipal Trust Company and Edward Butler, objected to the introduction of any testimony in the case as against them for the reason that the petition failed to state or to show facts sufficient to constitute any cause of action in favor of either the city of St. Louis or the Glencoe Lime and Cement Com- pany against the said defendants or either of them, and that un- der the allegations made in the petition, neither the city of St. Louis nor the Glencoe Lime and Cement Company have any right of action upon the instrument sued upon against the said defend- ants or either of them. The objection was sustained, and judgment was rendered in favor of said defendants and plaintiff appealed. I. That a contract between two parties upon a valid considera- tion may be enforced by a third party, when entered into for his benefit, is well settled law in this State. This is so though such third party be not named in the contract, and though he was not privy to the consideration. Rogers v. Gosnell, 58 Mo. 590; State ex rel. v. Gaslight Co., 102 Mo. 482 ; Ellis v. Harrison, 104 Mo. 276, and cases cited. It is sufficient in order to create the necessary privity that the promisee owe to the party to be benefited some ob- ligation or duty, legal or equitable, which would give him a just claim. IL It is the policy of the law in this State to give security and protection to those who expend labor or supply material in making improvements for the benefit of private persons. This is done by securing to them by express law a lien upon the improvements upon which the labor was done, and in which the materials were used. The right to such security does not depend upon the character of the contract between the owner and contractor, under which the improvements were made. That these lien laws are founded upon principles of equity and right can not be questioned. The principle is that the labor ex- pended and the material employed create the improvements and the one benefited thereby should see that compensation therfor is made. i Through considerations of public policy the law had made no provision by lien, or otherwise, for the protection of the laborer and material men for labor employed or material used^ in improving the public streets. But it can not be denied that the same equity exists and that the same moral obligation rests upon the city to protect those who improve its streets as rest upon those making 340 " CITY OP ST. LOUIS V. VON PUHL. [CHAP. V. private improvements. " Individuals clothed with public func- tions, even when ".onstituting a corporation, are no more excused from moral obligations than when acting in a private capacity." Knapp V. Swaney, 56 Mich. 350. There can, we think, be no doubt that the duty the city of St. Louis owed to anyone who should labor upon, or furnish material for, the improvements contemplated by the contract would create such a privity between them as would entitle the latter to the bene- fits intended to be aif orded them under the express conditions of the bond. III. But it is said that the bond, in so far as it undertakes, as a condition, to require the contractor " to pay to the proper parties all amounts due for material and labor used and employed in the performance " of the contract, is void for the reason that the city had no power to exact it. It must be, and is, conceded, that ' ' a municipal corporation has no general authority to exchange promises with other corporations or persons; its contracts, to be valid, must be within the scope of the authority conferred upon it by law, and for municipal pur- poses." Thomas v. Port Huron, 27 Mich. 323. But municipal corporations have not only the rights and powers expressly granted them but also such implied powers as are neces- sary to carry into full effect those expressly granted. " Their contracts will be valid when made in relation to objects concern- ing which they have a duty to perform, an interest to protect, or a right to defend. ' ' Vincent v. Nantucket, 12 Cush. 105. The charter grants to the city of St. Louis not only the power to improve its streets, and keep them in repair, but requires all such improvements to be let out by contract to the lowest bidder, and further requires a bond to be given by the contractor with at least two sufficient sureties. These powers and duties are express. Can it be doubted that under these express powers would be also implied the authority to provide by contract every detail of the duty of the contractor ? The power to make improvements and to let contracts therefor and to exact of the contractor a bond for the faithful performance of his contract necessarily implies the power to do every thing necessary for the faithful performance of the work, for the protection of the city and its citizens, and for securing the best and lowest possible bids. Indeed we are unable to con- ceive of any matter of detail incident to the contract and the work that the city might not require that a private person could re- quire. jJBC. 5.] CITY OF ST. LOUIS V. VON PUHL. 341 The charter requires a bond from the contractors to be taken The conditions of the bond are not specified, except that it shaii be for the faithful performance of the contract. The form and conditions are therefore left to the practical wisdom and business experience of the municipal authorities to whom it is intrusted. The same may be said in reference to the terms of the contract. The question, then, is this: Is the requirement of the contract and the condition of the bond, that laborers and material men shall be paid, a proper and reasonable incident to the express power to improve the streets by contract and to require a bond or the contractor? We think it is, even aside from any moral obli- gation the city was under to protect the laborers and material men. Such a requirement gives credit to the contractor and enables him to secure labor and purchase material more readily and on better terms than could be done without the credit. Thus the con- tractor can secure better labor and cheaper materials and is en- abled to take the contract on lower terms than he could otherwise safely do. It also enables one with small means and limited credit to compete with those more advantageously circumstanced. The city is thus enabled to secure greater competition in bidding and to obtain better execution of the work on lower terms. It was not only to the interest of the city, but its plain business, duty to secure those advantages. We therefore think the city had the implied power to require the condition in the bond upon which plaintiff seeks to recover. We are unable to draw a substantial distinction between the power exercised by the city in making this provision for laborers and material men, and that exercised in requiring the contractor to pay all such creditors as a condition to receiving his compensa- tion from the city for the improvement. It is a question of power m eaCn case. ^:{:;Ii:);Hc$:I«#:!:^$:{:H:^#:*i Several cases have been cited by defendants in support of their position that the action will not lie for want of authority in the city of St. Louis to require such conditions. It has been held in this State, and in some others, that a private citizen whose property was consumed by fire, was not entitled to the benefit of a clause in a contract between the city and a water company whereby the latter obligated itself to furnish a supply of water sufficient to extinguish all fires, and to be re- sponsible for all damages resulting from a failure to do so. Hows- mon V. Trenton Water Co., 119 Mo. 305, and cases cited. Those cases are distinguishable from this one in the fact that u 342 CITY OP ST. LOUIS V. VON PUHL. [CHAP. V. the contracting cities were: under no legal or moral obligation to its citizens to extinguish fires, and there was therefore not such privity between the city, as promisee, and the citizens^ as would give the latter a right of action on the contract. It may also be said, as another distinguishing feature, that the general power granted a city to provide for the prevention and extinguishment of fires carried with it no implied power to make contracts for indemnifying citizens for losses by fire. Such con- tracts are neither beneficial to the city nor incident to the power conferred. They are merely independent contracts, which the cities have no more power to make than they have to make contracts with an insurance company for insuring the property of all citi- zens against loss by fire. **********,« The ease of Kansas City, etc.. Company v. Thompson, 120 Mo. 221, in its facts, is not fairly distinguishable from this one, and is an authority directly sustaining the position of defendants. But after a careful reconsideration of the question decided we are all of the opinion that the principles announced in that case can not be sustained either on reason or authority, and it should be, and with the concurrence of all the judges of division two is, over- ruled. The judgment of the circuit court is reversed and the cause is remanded. All the judges concur. AccoED. — Sepp V. McCann, 47 Minn. 364 ; Salisbury v. Keigher, 47 Minn. 367; Lyman v. City of Lincoln, 38 Neb. 794; Doll v. Crume, 41 Neb. 655; King V. Downey, 24 Ind. App. 262; American Surety Co. v. Raeder Assignee, 15 0. C. C. 407; Jordon V. Kavanaugh, 63 Iowa 152; Baker v. Bryan, 64 Iowa 561; Knapp v. Swaney, 56 Mich. 345. In the case last cited, as to the authority of a municipality to require a con- tractor to give bond conditioned upon the payment of labor and material claims, the Court says: " It would be very strange if it (a municipal body) were found lacking in authority to stipulate, in a contract for the building; that the contractors when calling for payment, shall show that they are per- forming their obligations to those who supply the labor and materials, and that the county is not obtaining the building at the expense of a few of its people. We cannot think such is the case." SEC. 5.] FORBUEQER V. LION BONDING 00. 343 FORBURGER STONE CO. v. LION BONDING & SURETY CO. BT AL. 103 Neb. 202, 170 N. W. 897 (1919). Action by the Porburger Stone Company against the Lion Bond- ing & Surety Company and others. Judgment for plaintiiE, and the Surety Company appeals. Affirmed. A. G. Wolfenbarger and P. Anderson, for appellants. Burkett, Wilson & Brown, contra. Sedgwick, J. 1. A building contractor entered into a contract to construct a building, and gave a bond for the faithful performance of the con- tract. This defendant was surety on the bond. The plaintiff furnished material to the contractor which was used in the con- struction of the building, and he brought this action against the surety on the bond to recover the value of the material. The bond required the contractor to perform all of the conditions of his contract, and one of the conditions of his contract was that he should pay for all the materials which he used in the building. Therefore this contractor's bond contained an agreement for the benefit of this plaintiff, and it has been frequently held by this court that, under such circumstances, a party for whose benefit the contract was made, can maintain an action directly against the party who has contracted for his benefit. Doll v. Crume, 41 Neb. 665, 59 N. W. 806, and cases cited. And various other decisions of this court are to this effect. 2. This bond contained the following provision-. "That the said surety shall be notified in writing of any act on the part of said principal, which shall involve a loss for which the said surety is responsible hereunder, immediately after the occurrence of such act shall hav« come to the knowledge of the duly authorized repre- sentative or representatives of the obligee herein, who shall have the supervision of the completion of said contract. " It is conceded that no notice was given the surety as provided in the bond, and the serious, and perhaps difficult, question in this case is whether the third person, who is a beneficiary under this contract can re- cover without having given the notice specified. In Doll v. Crume, supra, it was held: "That the contract between the city and Davis (the contractor] and his sureties, and the promises and liabilities of the latter thereon, were of a dual nature — a promise to the city that 344 FOEBURGEB V: LION BONDING CO. [CHAP. V. Davis should perform the work in the time and manner he had agreed, and a promise, in effect, to Crume to pay him for the labor he should perform for Davis." This proposition of law is dis- cussed at length in the opinion. In Knight & Jillson Co. v. Castle, 172 Ind. 97, 87 N. E. 976, 27 L. E. A. (N. S.) 573, it was held that under a similar contract the beneficiary could not recover without having given the notice provided for in the contract. The note in the L. R. A. is exhaustive, in which it is said: "A contrac- tor's surety bond to a public corporation is dual in its nature, being for the benefit and protection of the obligee against loss or damage from a failure of the contractor to perform his contract, and also for the benefit of laborers and materialmen who do work and furnish materials in the performance of the contract. And when the rights of the latter are once fixed, no act of the corpor- ation will destroy or impair them" — and cites our case of Doll v. Crume, supra, and other authorities upon this proposition. In Doll V. Crume, supra, the contract was with a public corporation, bat the opinion does not consider that fact as material, as would be seen from a reading of the opinion, in which it is said: "Suppose that' Davis [the contractor] had borrowed $100 for 90 days from a bank, and given his note therefor, which note had been signed by the plaintiffs in error as sureties. Now, if the bank, without the knowledge of the plaintiffs in error, had extended the time of the payment of this note, then such extension would have released the sureties from liability thereon ; but in the case supposed, if at the time Davis borrowed the money plaintiffs in error had promised ithe bank that, in consideration of its lending the money to Davis, they would pay a debt of $10 which he owed to C, then any agree- ment between Davis and the bank for an extension of the time of payment of the note would not affect C." That is to say, the surety on the contractor's bond has agreed that the contractor will pay the materialman. .The contractor, of course, was under obli- gation to pay the materialman, and the contract, being for the benefit of the materialman, is distinct, according to the authority of this decision, from the contract that the contractor shall perform his work as he agreed to do. There are two contracts — one that the materialman shall be paid, and the other that the contractor shall perform his contract with the owner of the property. The entering into the contract with the contractor by the owner is the consideration for the agreement to pay the materialman for the material. In the L. R. A. note, above referred to, it is said that SEO. 5.] FOEBUEGEB V. LION BONDING CO. 345 the decisions are not unanimous, and "a majority incline to hold that such conduct [conduct of the nominal obligee] does not and cannot affect them [the materialman] after their rights become fixed." The rights of laborers and materialmen to be paid for their labor and material are "fixed" when they have faithfully performed the labor or furnished the material; and, under these decisions, no failure of the contractor thereafter- can invalidate the right so fixed. That the duty to give the specified notice is placed entirely upon the obligee named in the contract, and relates only to his performance of the work he has contracted to do, ap- pears from the words of the contract. The surety is to be notified "of any act on the part of said principal * * * immedi- ately after the occurrence of such act shall have come to the knowl- edge of" the representatives of the obligee "who shall have the supervision of the completion of said contract. ' ' This plaintiff did not have any representative in this business, and neither the plain- tiff nor any one for him had supervision of the completion of the contract. The plaintiff could not know when some act of the con- tractor came to the knowledge of the owner of the building. It would be impossible for the plaintiff to give the notice to the surety. Laborers and materialmen are in the same position with respect to such contracts. If a laborer who has performed a few day's work for the contractor would be in danger of losing his wages unless he keeps himself posted as to the doings of the con- tractor and the owner of the building, and sees that they perform their respective duties,, he would not be protected as perhaps sound public policy would require. As said in Des Moines Bridge & Iron Works v. Marxen & Rokahr, 87 Neb. 684, 128 N. W. 31 : "It is better than the law with respect to contracts should be certain than that it should in all particulars conform to the views of the courts of some of our sister states'. The defendants in the ease at bar must have contracted with refer- ence to the law as announced in the cited cases, and the defendant bonding company must have known that it was assuming an obli- galaon to pay the subcontractors and materialmen, as well as the laborers and mechanics engaged in constructing the courthouse referred to. The plaintiff, in contracting to furnish material for the courthouse, also had a right to reply upon the law repeatedly stated by the court, and should not be deprived of the defendants' obligation to pay for that material because a like bond could not be enforced in the state of New York. We are not convinced that "we should overrule a long line of our decisions, and shall not do 346 FORBUEaEE V. LION BONDING CO. [OHAP. V. 60 in the instant case." That was an action for material furnished a contractor for a public building, and was before the statute mak- ing the contractor's bond responsible for materials (Laws 1913, c. 170), and yet it is said that — ^"the defendant bonding company must have known that it was assuming an obligation to pay the subcontractors and materialmen, as well as the laborers and mechanics engaged in constructing the courthouse referred to." We think that, under our former decisions, the parties interested must know that the surety on a contractor's bond in which it is agreed that the contractor will pay laborers and materialmen, is directly liable for labor and material used by the contractor in the construction of the building under his contract; and we think we ought to adhere to that principle. The judgment of the district court is affirmed. Au>iacH, J. and Dean, J., dissent. Cornish, J. (dissenting). The fact that the beneficiary is a laborer or materialman can, I take it, make no difference. If pub- lic policy, or the status of laborers or materialmen, is to given them rights superior to other beneficiaries under similar circumstances, the opinion should make that clear and tell the reason why. What right can an entire stranger to a contract have in it? The English and Massachusetts courts say none. The contractual rela- tion requires a meeting of minds and a consideration. Hence only the parties or privies to a contract can enforce it, say they. When the contract's promise is to save the promisee from a pos- sible loss, it may easily happen that its enforcement will be directly beneficial to a third peron, because the promisee's loss, provided against, may be the promisee's liability to the third person. Many courts, including this, have, in such case, enforced the contract at ithe suit of third party (beneficiary), the same as if he were a promisee or obligee named in the contract. They have likened the case to novation. Eeally, the right eomes to the stranger to the contract by a sort of unexpected grace. The liability of the obligor to him can hardly be said to be contractual. The courts see in the situation and relation of the parties a duty which the promisor ought not to refuse to perform, and they permit to be done by direct means the thing that would ordinarily come about anyhow by in- direct means. SKC. 5.] POEBUBGBB V. LION BONDING CO. 347 Just as the stream can never rise higher than its source, nor the less include the greater, nor the accidental be more regarded thaa the intentional, nor one reap where he has not sown, so the promisor is never bound to more than his promise, and the stranger to the contract can have no better nor higher rights in the contract than the parties to it. He gets any possible right he may have through the promise made to the obligee, and that is the promise that must be left as made and only as made. Such has been the holdings of these courts. In this opinion we are announcing the law to be : That an entire stranger to a contract, who (probably) did not know of it w'hen made, for whose fortunes neither of the parties cared except as his own interest might be affected, who never did a thing in reliance on the contract (save commencing this action), who paid no con- sideration for a promise, to whom none was made and who made none himself, may, notwithstanding these facts (undisputed), not only recover on the contract, but recover regardless of its condi- tions. It there any precedent for this? None. In Getchell & Martin Lumber & Mfg. Co. v. Peterson & Sampson, 124 Iowa, 599, 100 N. W. 550, cited, the promise was made in words to the third party as well as to the principal obligee, and the opinion states that material was furnished in reliance upon the promise. In statutory bond cases the law makes the laborer and material- man, in terms, a party to the contract in his own, separate, and independent right. Municipal bond cases are distinguishable in this: The officials act in a representative capacity; the laborer or materialman has no lien for his protection. He should be protected by the munic- ipality, who gets the benefit of his work. It does no extreme vio- lence to the contract to say that the parties must have intended his protection as the main purpose of the bond, that the city was acting as his agent, and that a promise was made to him, just as subse- quently enacted statutes provide. . 21 R. C. L. p. 1016, § 64. In the instant case, no contention can be made but that the con- tract is a private contract ; the parties at the time owing no duty to any third person. Under the rule announced, if ._., having faith in the character and ability of young Mr. B., who is seeking employment under C, promises C. that, if he employs B., B. will make the payments of funds coming into his hands from time to time to the persons to 348 FORBUEGEE V. UON BOITOING CO. [CHAP. V. whom the funds should go, on the perfectly reasonable condition, however, that when C. learns of a default of B. he will inform A., and, if afterwards C. neglects to give A. the information of B.'s default, which he knows, so that A. is released from his promise to C., still A. is liable to the persons to whom the payments should have been made by B. When one of such persons sues as benefi- ciary, and A. sets up the promise that he should be notified of de- faults, and ^hows that, with notice, he could have saved half, or all, of the loss, we are holding that the third person (beneficiary) makes a good reply as follows : "How could you expect me to give you notice? I never knew of your contract with B. until irnme-: diately before commencing this action." It seems to me that the reasoning is unsound and the conclusion unjust. No court will adhere to the rule in its general applicationi The entertaining of doubts about a proposition, plain and simple in itself, always invites confusion. We should pray to be delivered from temptation to do so. Hard cases make law bad. When the meaning of a valid contract is plain, that is the law of the contract. When courts go contrary to its intent, they legislate. Once we agree that the promise defendant made to the obligee was that the contractor would make the payments, and that promise was on condition that defendant should be notified by the obligee of defaults, there is no need for discussion. But is there room for good-faith dispute that such was the prom- ise made in terms only to the obligee and that notice was not given t One might, with some show of equity, argue (as has been held in certain insurance cases) that the condition precedent ought not to defeat plaintiff's recovery unless the obligee's breach damaged defendant. This contention, however, is not made. The defend- ant can complain: "I am held, contrary to the only promise I raade which was to the obligee, to save him harmless upon con- dition." The argument by analogy quoted in the opinion from Doll V; Grume, 41 Neb. 655, 59 N. W. 806, can have no possible application here. Here the promise, that "$10 which he owed to C." would be paid, is unquestionably coupled with a condition, and is not absolute, as in the supposed case. Besides, in the analogy quoted, the argument assumes A. 's promise to C, made to the municipality as his agent or representative. In the case in hand, it cannot be said that more than one contract, more than one promise (which is SBC. 5.] FOSMIRK V. NATIONAL SURETY CO. 349 what the opinion probably means), or more than two parties to the contract, were contemplated. The right of the citizen to freely contract, and to be held only in accordance with his promise as made, is one of the foundations and safeguards of civil liberty. AccOBD. — Lajboneajs or materialmen were 'given' judgment on a surety bond given to thlei employer ■or owner, the plaintiffs being held to be intended as 'beneficiaries in the following: Hay v. Haasett, 174 Iowa, 601, 156 N. W. 734 bond given to a muniwpality; ■Concrete 'Steel 'Co. v. Illinois Surety Co., 163 Wis. 41, 157 N. W. ®43; Hoyal Indemnity Co. v. Northern Ohio Granite & Stoii'e Co., 100 Ohio iSt. 373, 126. N. E. 405, 12 A. L. R. 37'8'; State ex rel. Marble Cliff Quarries Co. t. Watts, 100 Ohio St. 380, 126i N. E. 407. Contra. — ^Standard Gas Power Corp. v. New England Casualty Co., 90 N. J. Law, 970, 101 Atl. 281; Parker v. Jeffery, 26 Or. 186', 37 Pac. 71-2; Fosttnire T. Niat. Surety Co., 229 N. Y. 44, 127 N. E. 47i2; First M. E. Church v. Isenbeig, 246 Pa. St. 221, 92 Atl. 141. It is sometimes provided by statute that a builder's bond shall be givea for the benefit lof laborers and materialmen. Federal statutes: 30 Stat. 908, c. eiS; 33 Stat. 811, c. 778 (Comp. St. § 6923') ; Illinois Surety Co. v. John Davis Co., "244 U. S. 376, 37' Sup. Ct. 614, 61 L. ed. 1206; California: Code Civ. Proo. § 1203; Carpenter v. Furrey, 128 Cal. 66&, 61 Pac. 369; Ingold v. Hickory, 178 N. C. 614, 101 S. E. e2S. FOSMIEE V. NATIONAL SURETY CO. 229 N. y. 44, 127 N. E. 472 (1920). M. 0. Gamer and William J. Griffin, for appellant. Fred. E. W. Dwrrovf, for respondent. Cakdozo, J. In June, 1916, Wagner & Braim entered into a eon- tract with the state of New York for the construction of part of the state highway in the village of Saugerties. The Highway Law (Oonsol. Laws, e. 25, § 130, subd. 7) requires every such contractor, to execute a bond in the form prescribed by the commission with sufficient sureties, conditioned for the performance of the work in accordance with the contract, for the commencement and comple- tion thereof within the prescribed time, and for the payment of any direct or indirect damages that shall be suifered or claimed on account of siuch construetion during the time thereof and until the highway is accepted. In obedience to that statute, Wagner & Braun, as principals, and the defendant, National Surety Company, as surety, made their bond in favor of the people of the state of New 350 FOSMIRE V. NATIONAL SUEETT CO. [CHAP.T. York, in the sum of $25,245, with a condition which reads as fol- lows: "Now, therefore, the condition of this obligation is such that if ihie said principal shall well, truly and faithfully perform the work in accordance with the terms of the contract and with the plans and specifications, and will commence and complete the work within the time prescribed in the contract on his part to be kept and per- formed according to the terms and tenor of said contract and s'hall protect the said state of New York against and pay any excess of cost as provided in said contract and all amounts, damagas, costs, and judgments which may be recovered against said state or its officers or agents or which the said state of New York may be called upon to pay to any person or corporation by reason of any damages, direct or indirect, arising or growing out of the doing of said work, or suffered or claimed on account of said construction or improve- ment during the time thereof and until the final completion and ac- ceptance of the work, or the manner of doing the same, or the neg- lect of said principal, or his agents or servants, or the improper performance of the said work by the said principal, or his agents, or servants, or from any other cause, and if the above bounden prin- cipal, his heirs, executors, administrators, or assigns shall and do well and truly pay or cause to be paid in full the wages stipulated and agreed to be paid to each and every laborer employed by the said principal or by his agents, then this obligation shall be null and void, otherwise to remain in full force and virtue." The plaintiff, a laborer employed upon the work, brings this action against the surety to recover unpaid wages due from the contractors to himself and a fellow laborer whose assignment he holds. The question i^ whether the bond gives a cause of action in his favor. We think the cause of action is in favor of the people solely. Eastern Steel Co. v. Globe Indemnity Co., 227 N. Y. 586, 125 N. B. 917 ; Buffalo Cement Co. v. McNaughton, 90 Hun, 74, 35 N. Y. Supp. 493, afSrmed on opinion below 156 N. Y. 702, 51 N. E. 1089. In so holding, we put our decision upon the single ground that the bond, read in its entirety, is inconsistent with an intention that the plaintiff and others in like position should have the right to sue upon it. If that intention is absent, the right to sue will be denied. Simson v. Brown, 68 N. Y. 355. A different question would be here if the bond had been conditioned for the payment of wages and nothing else. The interest of the state in the welfare of those who labor on its public works might then point to an intention to create a cause of action in their favor. Matter of Int. Ry. Oo. v. BBC, 5.] FOSMIBE V. NATIONAL SURETY CO. 351 Eann, 224 N. Y, 83, 120 N. E. 153; Williston on Contracts, §§372, 402. Cf. 28 U. S. Stat. 278; 33 U. S. Stat. 811 (U. S. Comp. St. § 6923) ; Texas P. Cement Co. v. MeCord, 233 U. S. 157, 34 Sup. Ot. 550, 58 L. Ed. 893. For the purpose of this opinion, we assume, without attempting to decide, that when such an inten- tion is revealed, there is no legal obstacle in the way of its enforce- ment. Seaver v. Eansom, 224 N. Y. 233, 120 N. E. 639, 2 A. L. R. 1187; Lawrence v. Fox, 20 N. Y. 268; Williston, supra. But the diflSeulty which the plaintiff meets at the threshold of his case is in making out the intention that such a right should be conferred. Sim- son V. Brown, supra ; Garnsey v. Eogers, 47 N. Y. 233, 7 Am. Rep. 440; Knickerbocker L. Ins. Co. v. Nelson, 78 N. Y. 137, 153; Pardee v. Treat, 82 N. Y. 385; White v. Rice, 97 N. Y. 296; Standard Gas Power Corp. v. New England Casualty Co., 90 N. J. Law, 570, 101 Atl. 281. The dominant purpose of this bond was protection to the state. That is plain alike from its terms and from those of the statute which required that security be given (Highway Law, supra). This dominant purpose will be defeated if laborers may ignore the people, and sue in their own right. They may then sue for wages as often as there is default, and, exhausting the penalty of the bond, leave nothing for the state. That danger was pointed cut in Buffalo Cement Co. v. McNaughton, supra, where a like bond was given to a city by the contractors for a sewer: "Such actions might have been brought before the completion of the sewer, and the penalty named in the bond ex- hausted, and the city thereby deprived of the protection which the bond was intended to give it." (Buffalo Cement Co. v. McNaugh- ton, supra, at page 79. Lancaster v. Freseoln, 203 Pa. 640, 644, 53 Atl. 508.) The state did not intend to make the employes of its contractors the beneficiaries of a cause of action to be enforced in hostility to its own. There is nothing far-fetched or visionary in the danger that would follow the recognition of such competing claims of right. In this very case, we have the admission of counsel that the state completed the -work on the default of the contractors, and did so at increased cost and hea\'y loss, for which the bond was the security. The outcome illustrates the pos- sibilities of a divided right of action. The plaintiff fails, therefore, to establish that he and his fellow laborers were the donees of a right to sue. Anson on Contracts (Huffcut's Ed.) p. 282; (Corbin's Ed.) p. 338. The concession of each, a right would do more than frustrate the purpose of the 352 BBOGAN V. NATIONAL SUHBTT CO. [OHAP.V. bond. It would frustrate the purpose of the statute which di- rected that a bond be given. The statute does not permit, and the commission in exacting the bond did not intend, that the security should be exhausted at the instance and for the benefit of persona other than tthe state itself. "What the defendant's liability would be if th,e action were prosecuted by the people we need not now determine. That question is not here. This case is decided when we hold, as we now do, that the action will not lie at the suit of the plaintiff now before us. * * * Reversed. AocoBD.— Fiirsit) M. K Caiuirch y. Isenbeits, 246 Pa. St. 221, 02 Atl'. 141. BROGAN V. NATIONAL SURETY COMPANY. 246 U. S. 257 (1918). John A. Cline, for plaintiff in error. John M. Garfield, for defendant in error. Mb. Justice Beandeis delivered the opinion of the court ■ This is an action against the surety on a bond given, under tha Act of February 24, 19G5, c. 778, 33 Stat. 811. The claim of Brogan, an intervening petitioner, was allowed by the claim of Brogan, an intervening petitioner, was allowed by tha District Oourt; but the judgment was reversed by the Circuit Court of Appeals and judgment entered against him upon the un- disputed facts (228 Fed. Rep. 577). The case comes here on writ of error under § 241 of the Judicial Code. The facts undisputed or as found by the lower court and accepted by the Court of Appeals were these: The Standard Contracting Company undertook to deepen the channel in a portion of St. Mary's River, Michigan, located "in a comparative wildnemess at some distance from any settlement. There were no hotels or boarding houses" and the contractor "was compelled to provide board and lodging for its laborers." Groceries and provisions of the value $4,613.87, furnished it by Brogan, were used by the con- tractor in its boarding house; and were supplied "in the prosecu- tion of the work provided for in the contract and the bond upon SBC. 5.] BEOGAN V. NATIONAL SURETY CO. 35S whicli this suit is based. They were necessary to and wholly con- Bumed in such work." The number of men employed averaged 80. They were "boarded" partly on the dredges, partly in tents supplied by the contractor; all under an arrangement made with the labor' unions — by which the contractor was to board the men and deduct therefor $22.50 a month from their wages. The con- tract and the bond executed by the National Surety Company bound the contractor to "make full payment to all persons sup- plying him with labor or materials in the prosecution of the work provided for in" the contract. The supplies furnished by Brogan under these circumstances were clearly used in the prosecution of the work, just as supplies furnished for the soldiers' mess are used in the prosecution of war. In each case the relation of food to the work in hand is proximate. But the. surety contends that the words "in the prosecution of" the work are not used in the bond and the act in their natural sense, but should be given a conventional meaning so as to exclude labor and materials which contribute to construction only indi- rectly, as do the supplies consumed by a contractor in operating his plant. In support of the position, attention is called to the fact that while the Act of 1894 provided that the bond should have "the additional obligations that such contractor or contractors shall promptly make payments to all persons supplying him or them labor and materials in the prosecution of tne work;" and that suit might be brought and recovery had upon this bond by any person who had supplied "labor or jnaterials for the pros- ecution of such work;" the Act of 1905 specified that recovery could be had by the persons who had "furnished labor or mate- rials used in the construction or repair" of the work. But the change in phraseology is not significant. The purpose of the amendment was merely to secure to the United States preference over others in the satisfaction of its claim against the contractor. Illinois Surety Co. v. Peeler, 240 U. S. 214, 218. See Report of Committee on H. R. 13, 626, 58th Cong., 2d sess., No. 2360. It was pointed out in Mankin v. Ludowici-Celadon Co., 215 U. S. 533, 538, that "In respect to the condition of the bond required to be given,, the language of the amended act is precisely the same as that contained in the act of August 13, 1894;" and in Hill v. American Surety Co., 200 U. S. 197, 201, that "In respect to the persons entitled to the benefit of the bond there has been no mate- rial change in the act." Illinois Surety Co. v. Peeler, sv^ra, p. 224. 354 BBOGAN V. NATIONAL SUKETT CO. [CHAP.V. This court has repeatedly refused to limit the application of flie act to labor and materials directly incorporated into the public work. Thus in Title Guaranty & Trust Co. v. Crwne Co., 219 U. S. 24, 34, the claims for which recovery was allowed under the bond included not only cartage and towage of material, but also claims for drawings and patterns used by the contractor in making molds for castings which entered into the construction of the ship. In United States Fidelity Co. v. Bartlett, 281 U. S. 237, where the work contracted for was building a breakwater, recovery was allowed for all the labor at a quarry opened fifty miles away. This included, as the record shows, the labor not only of men who stripped the earth to get at the stone and who removed the debris, but carpenters and blacksmiths who repaired the cars in which the stone was carried to the quarry dock for shipment ; and who re- paired the tracks upon which the cars moved. And the claims allowed included also the wages of stablemen who fed and drove the horses which moved the cars on those tracks. In Illinois Surety Co. V. John Davis Co., 244 U. S. 376, recovery was allowed not only for the rental of cars, track and other equipment used by the con- tractor in facilitating his work, but also the expense of loading this equipment and the freight paid thereon to transport it to the place where it was used. As shown by these eases, the act and the bonds given under it must be construed liberally for the pro- tection of those who furnish labor or materials in the prosecution of public work. The Circuit Court of Appeals deemed immaterial the special circumstances under which the supplies were furnished and the findings of fact by the trial court that they were necessary to and wholly consumed in the prosecution of the work provided for in the contract and bond. In our opinion these facts are not only material, but decisive.. They establish the conditions essential to liability on the bond. The bare fact that the supplies were fu^ nished to the contractor and were consumed by workmen in its employ would have been immaterial. A boarding house might be conducted by the contractbr (like some company stores concerning which States have legislated, Keokee Coke Co. v. Taylor, 234 TJ. S. 224) as an independent enterprise undertaken solely in order to utilize the opportunity for separate and additional profit afforded by the congregation of many laborers in the particular locality where the public work is being performed. The laborers miglit resort to such a boarding house in the exercise of individual choice SEO. 5.] BROGAN V. NATIONAIj , SURETY CO. 355 in the selection of an eating place. Under sucli circumstances the fumdshing of supplies would clearly be a matter independent of the work provided for in the contract and would not entitle him who had furnished the groceries used in the boarding house to recover on the bond. But here, according to the undisputed facts and ith© findings of the trial court, the furnishing of board by the contract was an integral part of the work and necessarily involved in it. Like the supplying of coal to operate engines on the dredges, it was indispensable to the prosecution of the work, and it was used exclusively in the performance of the work. Groceries furnished to a, contractor under such circumstances and consumed by ths laborers, are materials supplied and used in the prosecution of the public work. The judgment of the Circuit Court of Appeals is therefore reversed and that of the District Court affirmed. Reversed. Me. Justice McKenna, Me. Justice Pitney, and Me. Justice McReynolds dissent. AccoBD.— Indemnity Co. vs. Gnaarfte Co., 100 O. S. 373, 126 N. E. 406, 12 A. L. R. 378; Alexander Lumber Co. v. Aetna Co., 296 111. '500, 29 N. E. 871; Forburger Stone Co. v. 'Lion, Bonding & Surety Co., 103 Nebr. 202, 170 ST. W. 897., 171 N. W. -im-, Equitable Surety Co. v. U. S., .234 U. S. 44S; Oomcrete Steel Co. v. Illinois Surety Co.,, 163 Wis. 41, 197' N. W. 543. CONTEA.— Fosmiire v. National Surety Co., 22S N. Y. 44, 127 N. E. 472; First M. B. Church v. Isenberg, 246 Pa. St. 221, 92 Atl. 141. 356 DAVIS V. GILLET. [CHAP. V. Sec. 6. Measure of damages upon breach of the conditions of a bond DAVIS V. GILLETT 52 N. H. 126 (1872). Debt, founded upon the defendant's bond, which was as follows: Know all men by these presents, that I, Orville H. Gillett, of Keene, in the county of Cheshire, am holden and stand firmly bound unto William L. Davis, of Keene aforesaid, in the sum of one thousand dollars, to the payment whereof well and truly to him I bind myself, my heirs, executors, administrators, and assigns firmly by these presents. Sealed with my seal and dated this (eleventh) day of May, A. D., 1866. The condition of this obliga- tion is such, that whereas the said Davis has purchased of the said Gillett his goods, tools, and stock in trade, and the good will of his establishment at Keene, and the said Gillett has agreed that he will not hereafter, for ten years next ensuing, without the written consent of the said Davis, carry on, work at, or be interested in the stove or tin business at said Keene : — Now if the said Gillett shall keep and perform his said agreement with the said Davis, and shall not at said Keene hereafter in any way during said term be interested in the manufacture or sale of stoves or tin ware, or the business lately carried on in said Keene by said Gillett, but shall suffer and allow the said Davis to have and control said business and the good will thereof, during said time, then this obligation to be void, otherwise in full force. 0. H. Gillett, (seal.) Signed, sealed and delivered in presence of W. B. DOWNEE, S. C. Foster, Wheeler & Faulkner, for the plaintiff. Lane & Healey, for the defendant. Foster, J. In this case the defendant has given to the plaintiff his bond in a form very commonly adopted, in which, having ac- knowledged himself to be holden and bound to the plaintiff in the sum of one thousand dollars, he recites a condition to the effect that having agreed, for a certain valuable consideration, not to do certain things, he stipulates that, upon the performance of such condition, the obligation shall be void. It is not denied, nor doubted, that the condition incorporates SEC. 6.] DAVIS V. GILLETT. 357 a lawful and proper contract, the performance of which may be en- forced at law; and the bond is unquestionably intended to be a security for the performance of the defendant's covenant. The rules applicable to the construction of such an instrument are defined with tolerable certainty, and are as well expressed by Mr. Sedgewick, in his treatise on the Measure of Damages, as in any other text-book in which the authorities upon this subject have been collected, arranged, and discussed. The learned author finds certain rules and principles to be deducible from the very numerous adjudications upon the subject involved in the present inquiry. The substance of these principles is, that the language of the agreement is not conclusive, and that the effort of the tribunal called to put a construction upon it will be to ascertain the true intent of the parties, and to effectuate that intent. In order to do this courts will not be absolutely controlled by terms that may seem to be quite definite in their meaning, but will be at liberty to consider and declare a sum mentioned in a bond to be a penalty, even although it may be denominated liquidated damages, and vice versa, if manifest justice requires that a con- struction opposite to the expressed language of the instrument should be adopted. In such cases, the court do not assume (as they certainly could not) to make a new contract for the parties ; but they conclude that the parties have incorrectly and inconsiderately expressed their in- tention. The Court, therefore, ascertain the intention, and then give effect to it. From all the cases, it seems to be manifest that the general disposition of the courts in this country is to regard the sum ex- pressed in a bond as a penalty or security for the performance of the condition, and not as liquidated damages, in cases where the parties have not expressly declared it to be certainly the one or the other ; and, therefore, if the agreement assumes the form of a bond, with condition that it shall be void upon the performance or non- performance of an act, the prima facie presumption is, that the sum of money mentioned therein is intended merely as a security and not as liquidated damages; and this presumption will stand until controlled by very strong considerations. It is true, that where the condition is of the character expressed in this instrument, for a breach of which the damages are altogether uncertain and indefinite, the Court would more readily incline to regard the sum of money named in the bond as the liquidated 358 DAVIS V. gili;et. [chap. v. amount which the parties had agreed to regard as the damages for a failure to perform the stipulated condition, than as mere security; but where the parties have omitted to make their inten- tion certain by the use of unequivocal expressions which would bind them (and so .render judicial interpretation of their language un- necessary), the general rule seems to be settled, that the damages will not, be considered as liquidated. We see no sufficient reason to take this case out of the operation of the general rule, as we have expressed it; and we have been unable to find any reported cases in conflict with it. On the con- trary, in support of these views, we may refer to Sedgwick on the Measure of Damages 452-486, passim, and notes; Esmond v. Van Benschoten, 12 Barb. 365; Tayloe v. Sandiford, 7 Wheat. 13; Astley V. Weldon, 2 Bos. & Pul. 346; Street v. Rigley, 6 Ves. 815; Price V. Green, 16 M. & W. 346, 354; Davies v. Penton, 6 B. & C, 216; Higginson v. Weld, 14 Gray 165; Richards v. Bdick, 17 Barb. 260; Story's Eq. Jur., sec. 1318; Bouv. Law Die. (14th ed.) tit. Liquidated Damages ; Smith v. Wainwright, 24 Vt. 97 ; 3 Pars. Con. J.56-164, passim, and note; Tayloe v. Sandiford, 7 Wheat, 13, in which Mr. Ch. J. Marshall uses the following language: "In general, a sum of money in gross, to be paid for the non-perform- ance of an agreement, is considered as a penalty, the legal opera- tion of which is to cover the damages which the party, in whose favor the stipulation is made, may have sustained from the breach of contract by the opposite party. It will not, of course, be con- sidered as liquidated damages; and it will be incumbent on the party who claims them as such to show that they were so considered by the contracting parties." The cases in our own Reports — Chamberlain v. Bagley, 11 N. H. 234 ; Brewster v. Edgerly, 13 N. H. 275, and Mead v. Wheeler, 13 N. H. 351 — are not in conflict with these views, which, moreover, are supported by Blaisdell v. Blaisdell, 14 N. H. 78. The rule of construction of the bond in suit is determined by the principles of the common law; the statutes of this State (re- ferred to by the plaintiff) having reference only to the practical enforcement of the agreement, after its true intent and purport shall have received judicial interpretation. Gen. Stats., ch. 213, sees. 9 and 10. We are therefore of the opinion that the ruling at the trial term was correct, and that the plaintiff is entitled to judgment for such sum as shall be found equitably due, upon such evidence as may be submitted to the court. SEC. 7.] TUXBUEY V. MILLER. 359 Unless the parties have expressly declared the penalty to be a liquidated amount the sura named in the bond is deemed a mere security fixing the limit of liability, and only so much of the penalty is recoverable as adequately covers the damages sustained. Rawlings v. Adams, 7 Md. 26; Wright v. Wright, 49 Mich. 624; Longfellow v. McGregor, 61 Minn. 494; Hirt v. Hahn, 61 Mo. 496; People's Building & Loan Assn. v. Wroth, 43 N. H. L. 70; City of Aberdeen v. Honey, 8 Wash. 251; Cairnes v. Knight, 17 O. S. 69; Scott V. Phillips, 140 Pa. 51; Wallis v. Keeney, 88 111. 370; Shattuck v. Adams, 136 Mass. 34; Turck v, Marshall Silver Mining Co., 8 Colo. 113. The intent of the parties as to whether the sum named is liquidated or penal security may be shown by parol. Hosmer v. True, 19 Barb. 106; March v. Allabough, 103 Pa. 335; Hurd v. Dunsmore, 63 N. H. 571. A different rule applies where the penalty nam^d in the bond is imposed by Statute and the State is the beneficiary, in such a. case the sura naraed in the bond is presumed to be liquidated damages. Clark v. Barnard, 103 U. S. 436; Indianola v. G. W. T. & P. Ry., 56 Tex. 594. Surety upon the bond is liable for interest upon the ascertained damages from the date of the demand of payment. Frink v. Southern Express Co., 82 Ga. 33; United States v, Poulson, 30 Fed. Rep. 231; Brighton Bank v. Smith, 94 Mass. 243. Interest may be recovered even though the amount is thereby raised beyond the sum named as penalty in the bond. Beers v. Shannon, 73 N. Y. 292; Burchfleld v. Haffey, 34 Kan. 42; Tyson v. Sanderson, 45 Ala. 364; Natchitoches v. Redmond, 28 La. An. 274; Standard Oil Co. v. Holmes, 82 111. App. 476. Many cases support, the view that stipulations in building contracts for the payment of a fixed sum per day for each day of delay beyond the date agreed upon in the contra,ct, amount to liquidated damages. Downey v. O'Donnell, 86 111. 49; Louis v. Brown, 7 Ore. 326; Louisville Water Co. v. Youngstown Bridge Co., 16 Ky. La* Rep. 350; Westerman v. Means, 12 Pa, 97; Curtis v. Brewer, 17 Pick. 513; Collier v. Betterton, 87 Tex. 440; Reichenbach v. Sage, 13 Wash. 364; Malone v. Philadelphia, 147 Pa. 416; Wolf v. Des Moines & Ft. Dodge Ry. Co., 64 Iowa, 380 ; Hennessey v. Metzger, 152 111. 505. Where the sum named in the bond is greatly disproportionate to the probable loss from the breach the bond will not be considered an agi'eement to pay liquidated damages. Clements v. Sehuykill R. R. Co., 132 Pa. 445; Cochran v. People's Ry. Co., 113 Mo. 359; Colwell v. Lawrence, 38 N. Y. 74. Sec. 7. Bonds to induce violation of law or to prevent performance of duty. TUXBURY V. MILLER. 19 Johns. 311 (1822). In error to the Court of Common Pleas of Tompkins county. Miller brought an action of debt against Tuxbury, in the court below, on a bond, to which there was a condition, that if Angel Bart 360 TUXBURY V. MILLER. [CHAP.V; Hartsough (who was then applying for a discharge under the in- solvent act) should, after obtaining his discharge, execute and deliver to M., his promissory note for one hundred dollars, payable in six months, with interest, then the obligation to be void, etc. T. pleaded, 1. Non est factum; 2. That H. had not been discharged according to the condition of the bond ; 3. That while the applica- tion of the insolvent was pending, and after notice was given to the creditors to appear and oppose his discharge, the plaintiff, pre- tended that he was employed by several creditors to oppose the dis- charge of H. ; and that, with a view to prevent that opposition, and in consideration that the plaintiff had promised not to appear and oppose the discharge of the defendant, he, the defendant, executed the bond, etc. Wherefore, the said bond, by such corrupt and un- lawful agreement, was void- in law, etc. The plaintiff replied, and took issue on the first plea, and specially, to the second plea, tendering issue, in which the defendant joined ; and he demurred to the third plea, and the defendant joined in demurrer. The court below gave judgment for the plaintiff on the demurrer, and awarded a venire to try the issues, which were, in fact, tried- at the same term, and a verdict for the plaintiff on both, but the jury assessed no damages, no breaches having then been assigned by the plaintiff. Breaches were, afterwards, assigned, and a writ of in- quiry of damages awarded, and an inquisition returned, by which the damages were assessed at 111 dollars and 82 cents; and the court, thereupon, gave judgment for the plaintiff, for the debt and damages. On return to the writ of error, the cause was submitted to the court, without argument. Per Curiam. As to the mode of proceeding to assess the dam- ages, it may, perhaps, be resolved into a matter of practice which this court could not control. It is, however, the most fit and proper course, that the jury who are to try the issues in fact, should also assess the damages. But we are of opinion, that the judg- ment of the court below on the demurrer was erroneous. The agreement in pursuance of which the bond was given, was, in judgment of law, a corrupt agreement. The bond was given as a reward to the plaintiff, for not opposing the discharge of the in- solvent. The transaction implies that there was good ground for opposition, and that, if such opposition had not been withheld, the insolvent could not legally have obtained his discharge. Such bargains are against public policy, and the true intent of the act; for they tend to facilitate fraud, by screening it from scrutiny. .SEC. 7.] TUXBUKY V. MILLEK. '361 (Waite V. Harper, 2 Johns Rep. 386. Bruce v. Lee, 4 Johns. Rep. 410). We are, therefore, of opinion, that the judgment of the court below ought to be reserved. Judgment reversed. Accord. — Cheltenham Fire Brick Co. v. Cook, 44 Mo. 29 ; Vanover v. Thompson, 49 N. C. 485; Buffalo Press Club v. Greene, 86 Hun. 20; Walker V. Gregory, 36 Ala. 180; Weinbrlnner v. Weisiber, 3 T. B. Mon. (Ky.) 35; Goodwin v. Blake, 3 T. B. Mon. 106; Eaton v. Littlefield, 147 Mass. 122; Thome v. Travellers Ins. Co., 80 Pa. 15; Lea v. Collins, 36 Tenn. 393. Bonds to induce a public oiiieer to refrain from doing that which the law requires him to do are void. Harrington's Adm. v. Crawford, 61 Mo. App. 221; Cass County v. Beck, 76 Iowa, 487; Hardesty v. Price, 3 Colo. 556; Buffendean v. Brooks, 28 Cal. 641; Morgan v. Hale, 12 W. Va. 713. 362 UNITED STATES V. HABTWEIiL. [CHAP. VI, CHAPTER VI. BONDS OF PUBLIC OFFICERS. Sec. 1. Who are public officers. — Distinction between official and contract relations. UNITED STATES v. HARTWELL. 6 Wall. 385 (1867). Defendant was a clerk in the office of the asistant Treasurer of the United States at Boston, and was appointed to his position by the assistant Treasurer with the approval of the Secretary of the Treasury. The appointment was provided for, and the salary fixed by act of Congress. The Defendant was indicted as a public officer for embezzlement Mr. Stanhery, A. G., and Mr. Ashton, special counsel for the United States. Messrs. H. W. Paine and B. M. Morse, contra. Me. Justice Swayne delivered the opinion of the court. Was the defendant an officer or person " charged with the safe- keeping the money ' ' within the meaning of the act ? We think he was both. He was a public officer. The General Appropriation Act of July 23d, 1866, authorized the assistant treasurer, at Boston, with the approbation of the Secretary of the Treasury, to appoint a speci- fied number of clerks, who were to receive, respectively the salaries thereby prescribed. The indictment avers, the appointment of the ♦ defendant in the manner provided in the act. An office is a public station, or employment, conferred by the appointment of government. The term embraces the ideas of tenure, duration, emolument, and duties. ^ The employment of the defendant was in the public service of the United States. He was appointed pursuant to law, and his compensation was fixed by law. Vacating the office of his superior would not have affected the tenure of his place. His duties were SEC. 1.] UNITED STATES V. HABTWELOj. 363 continuing and permanent, not occasional or temporary. They were to be such as his superior in office should prescribe. A government office is different from a government contract. The latter from its nature is necessarily limited in its duration and specific in its objects. The terms agreed upon define the rights and obligations of both parties, and neither may depart from them without the assent of the other. ********** Me. Justice Miller, dissenting. Mr. Justice Grier, Mr. Justice Field, and myself, being unable to concur with the majority of the court in the answer given to the first of the questions certified to us, I proceed to state the reasons for our dissent. The question is thus stated in the certificate from the Circuit Court: Is the defendant liable to indictment under the sixteenth section of the act of Congress of August 6th, 1846 ? The statute here referred to is that commonly kjiown as the Sub-Treasury Act, establishing a system for the safe-keeping, trans- fer and disbursement of the public moneys. The sixteenth section commences by providing, " that all officers and other persons charged by this act, or by any other act, with the safe-keeping, transfer and disbursement of the public moneys, other than those connected with the Post-office Department, are hereby required to keep an accurate entry of each sum received, and of each payment or transfer, " and certain uses of those moneys by such officers are then defined, each of which shall constitute an act of embezzlement, and shall be a felony. It is then declared that when any officer shall pay out other funds than such as he has received, such pay- ment shall be held to be a conversion to his own use of the amount specified in the receipt, or voucher which he may take at the time. Then follows this language: " And any officer or agent of the United States, and all persons advising or participating in such act, being convicted thereof before any court of competent jurisdic- tion, shall be sentenced to imprisonment for a term not less than six months nor more than ten years, and to a fine equal to the amount of money so embezzled." What we have here attempted to state is all contained in a single sentence, very loosely drawn, leaving it extremely doubtful whether the punishment prescribed in the words last quoted is lintended to apply to any other act than the conversion mentioned in the clause just preceding them. There are also other provisions in the same section which we will notice hereafter ; but the first ♦inquiry that arises is whether the defendant stands in such rela- 364 UNITED STATES V. HABTWELL. [CHAP.fl. tion to the custody of the public moneys that he is liable to be punished under this statute. It is conceded by the Attorney-General, we think very properly that the act is only applicable to officers or other persons charged by law with . the safe-keeping, transfer or disbursement of the public moneys. It may be also conceded that the defendant's position as clerk is an office provided for by the statute, the salary of which is also fixed by a subsequent act of Congress. The section of the act of 1846, which we are now considering, in describing the class of persons who may become guilty of embezzlement^ speaks of them as ' ' officers and other persons charged by this aet, or any other act, with the safe-keeping, transfer and disbursement of the public moneys." Admitting that the words " safe-keeping, transfer, and disbursement," are to be taken distributively, and that one charged with either of those duties may become liable under the statute, the question still remains: Is a clerk in the office of the assistant treasurer, charged by this act, or any other aet of Congress, with either of those duties? It is not sufficient that he may, by order of the assistant treasurer, by whom he is appointed, be placed in such a position that it is his moral duty to safely keep or to disburse the public money. If reliance is placed upon the language just cited, this duty must be imposed on him by some act of Congress. This unavoidable construction of the act is not a mere technical adherance to its Verbiage, but is founded in obvious consistency with the other provisions of the statute. The clerks in the office of the assistant treasurer are, by the terms of this act, appointed by him alone, although by an act passed long since, and which can have no effect on the construction of this one, the assent of the Secretary of the Treasury is required. But they still derive their appointment from the assistant treasurer, and are removable at his pleasure. Their duties are prescribed by him, and he assigns each clerk to the performance of such functions as he may think proper. No act of Congress, nor any otner law, confers upon these clerks any power or control over the public money. If they exercise such control, they get it from the assist- ant treasurer alone. They give no bond to the government, but the assistant treasurer may require them to indemnify him by bond, as is the rule in many large establishments. Their direct re- sponsibility is to him. On the other hand, the assistant treasurer is the person, and the only person in his office, charged by act of Congress with the SEC. 1.] UNITED STATES V. HARTWELL. 365 custody or control of the public moneys. The third section of the act, after describing the buildings, rooms and safes in New York and Boston, in which the money is to be kept, says that " the as- sistant treasurers from time to time appointed at those points, shall have the custody and care of the said rooms, vaults and safes respectively, and of all the moneys deposited within the same, and shall perform all the duties required to be performed by them in reference to, the receipts, safe-keeping, transfer and disbursement of all moneys according to the provisions of this act. ' ' To secure the 'performance of the duties thus imposed, sections seven and eight provide for bonds, with sufficient surety, as often as the Secretary of the Treasury may require, and in sums as large as he may deem proper. The assistant treasurers are not, however, the only officers charged by this act with the safe-keeping, transfer or disbursement of the public moneys, and we are referred to section six for an enumeration of the classes of persons thus charged. By that sec- tion it is enacted " that the Treasurer of the United States, the treasurer of the mint of the United States, the treasurers and those acting as such of the various branch mints, all collectors of customs, all surveyors of customs acting also as collectors, all assistant treasurers, all receivers of public moneys at the several land offices, all postmasters, and all public officers of whatever character, be, and they are hereby, required to keep safely, without loaning, using, or depositing in banks, or exchanging for other funds than as allowed by this act, all the public moneys collected by them or otherwise at any time placed in their possession and custody, till the same is ordered by the proper department or officer of the government to be transferred or paid out." All the classes of persons here specifically described are officers who are charged by some act of Congress with the duty of col- lecting, receiving or holding public money. Was the general phrase, " all public officers of whatever character," intended to in- clude only other public officers charged by law with the custody of public money, or was it intended to include any clerk, or other em- ploye of such officer, who might, by his permission or order, have the occasional custody of the money under that officer 's supervision or control ? We think the latter would be a loose and unjustifiable construc- tion, at variance with the spirit of the context, and with the rules of construing penal statutes. 366 "" PEOPLE V. VIIiAS. [chap. VI. Accord. — Thomas v. Chicago & C. S. Ey. Co., 37 Fed. Kep. 548; United State's V. MeCrory, 91 Fed. Rep. 295. An official oath is deemed the distinguishing characteristic of a public office. Trainor v. Board of Auditors, 89 Mich. 162; McCormiclc v. Thatcher, 8 Utah 294; State v. Wilson, 29 0. S. 347; Worthy v. Barrett, 63 N. 0. 190; Collins V. Mayor, 3 Hun. 680; Lindsey v. Attorney General, 33 Miss. 508. A further indicia of public office is that the duties are prescribed by statute. State V. May, IOC Mo. 488; A Notary Public is a public officer. People v. Rathbohe, 145 N. Y. 434; Thomas v. Steele, 22 Wis. 207 ; In ire Notaries Public, 9 Colo. 629. A piiblie office is not a contractual relation, as the officer may at any time put an end to the relation by resignation. Hoboken v. Gear, 27 N. J. L. 265 ; United States v. Edward, 1 McLean 467. A public officer acquires no settled contract rights to have the office con- tinued for the time he was elected or appointed nor to have the compensa' tion remain unchangedl The Legislature may abolish the office or diminish the salary, subject only to constitutional restrictions. Nichols v. MacLean, 101 N. Y. 526; Trustees of Dartmouth College v. Woodward, 4 Wheat. 518- 694; Story, J., " It is admitted, that the State legislatures have power to enlarge, repeal and limit the authorities of public officers, in their official capacity, in all cases, where the constitutions of the States respectively' do not prohibit them; and this, among others, for the very reason, that tliere is no express or implied contract, that they shall always, during their con- tinuance in office, exercise such authorities; they are to exercise them only during the good pleasure of the legislature." In the case of Hall v. Wisconsin, 103 U. S. 5 the State Legislature provided for the appointment of three commissioners to make a geological survey. The statute defined their duties and fixed the compensation; and authorized the Governor to enter into a contract with the commissioners for six years. It was held that the relations of the commissioners to the State was con- tractual and not official and that a subsequent repeal of the statute pro- viding for the appointment did not effect the tenure of their employment. Sec. 2. Change in the duties of the principal by amendment to the law. THE PEOPLE OF THE STATE OF NEW YORK v. ALDEN VILAS, ET AL. '36 N. Y. 459 (1867). ' J. H. Martindale, Attorney-General, for the appellant. J. C. Brown, for the respondent. Grover, J. ***** * The real question in this case is, whether the addition made to the capital of the fund placed in charge of the commissioners by the act of April 10, 1850, discharged SEC. 2.] PEOPIiE V. VIIiAS. 367 the sureties upon their official bonds. An examination of that act will show that it contains no provisions affecting such a result, un- less it is produced by this addition thereby made to the capital of the fund. This presents a question of vast importance to the public. It not only affects all the official bonds of all this class of com- missioners holding office at the time of the passage of the act, but, on examination into the matter, would, I think, show that it affected a great number of official bonds in other cases. This con- sideration cannot change the law if settled in favor of the sureties, but the obvious inconvenience of a rule working such results re- quires a thorough examination of the reasons, and authority upon which it is claimed to be established. As between private parties, the law is that any alteration in the obligation or contract, in re- spect of which a person has become surety without the consent of the latter, extinguishes his obligation and discharges him (Burge on Surety, 214; Theobold, § 132; Whirton v. Hall, 5 Barn. & Cress. 269) ; and this result follows, irrespective of the inquiry whether the alteration could work any injury to the surety or not (Bangs v. Strong, 4 Com., 315). The reason upon which this rule is founded is, that the surety has never made the contract upon which it is sought to charge him. sHis answer is, if it is sought to charge him upon the altered contract, that he never made any such bargain; and if upon the original contract, that such contract no longer exists, having been legally terminated by the altered or substituted contract made by the parties. In either contingency, the answer furnishes a. complete defense. It is claimed by the defendants, that the same rule is applicable to official bonds. In this they are right, if the reasons apply and the same answers can be given. An official bond is a contract with the people for the faithful discharge of the official duties of the officer. In the present case it was, that Jackson should faithfully discharge the duties of said commissioner, pursuant to the act entitled an act authorizing a loan of certain moneys belonging to the United States, deposited with the State of New York for safe keeping, and should discharge his said duties without favor, malice or partiality. These duties Jackson had not performed, but the sureties claim to be discharged, on the ground that, subsequent to the making of the bond, five hundred dollars was added to the capital of the fund. The duties of the comniissioner as to this five hundred dollars were precisely the same as required for the capital of the fund, and precisely those rsquired by the act referred to in the bond. The position of He defendants must go to the extent that any alteration made by; 368 PEOPUE V. VILAS. [chap. VI. the legislature in the act affecting the duties of the commissioner will discharge his sureties. In other words, that the bond is to be regarded as a contract faithfully to discharge the duties of the office as then prescribed by the act, and that any alteration in these duties made by the legislature subsequently, alters the contract, and hence discharges the sureties. If this position be sound, it follows that no change can be made by the legislature relative to the amount of money in their hands, the mode of loaning, it, their compensation or their duties in any respect, without discharging their official bonds. It may be remarked that it would not only relieve the sureties upon the bond but the officer himself, unless it should be held that his continuance in office after the passage of the act making the change was an assent on his part to such change. The analogy between this class of cases and the contracts of individuals fails in this respect. In the latter no alteration can be made without the mutual assent of both parties. In the former the legislature have power at any and all times to change the duties of officers, and the continued existence of this power is known to the officer and his sureties, and the officer accepts the office and the sureties execute the bond with this knowledge. It is, I think, the same in effect as though this power was recited in the bond. Had this been done it would not be claimed that the sureties were discharged by its exer- cise. That an individual given a guaranty of the faithful perform- ance of a contract by one party containing a clause authorizing the other to make alterations in certain of its provisions, it would not be claimed that the surety was discharged by alterations so author- ized ; and yet this is nothing more than the sureties knew the legis- lature were competent to do in the present case. "Why has it never been claimed in behalf of officers who had given bonds for the dis- charge of their official duties, that a contract had been made with them in relation thereto unchangeable by the legislature? Simply because it is understood that all these acts are subordinate to the ' law-making power, and necessarily subject to such changes as may from time to time be deemed expedient. Every official oath is so interpreted. It is not true that one taking an oath to discharge the duties of any office simply swears to discharge them as then pre- scribed by law ; but that he swears to discharge them as they may from time to time be fixed and regulated by the law-making power. So an official bond conditioned for the discharge of the duties of the office should in like manner be understood, not as restricted to du- ties as then prescribed by law, but as embracing the duties of the SEC. 2.] PEOPLE V. VILAS. 369 office as from time to time fixed and regulated by the legislature. It may be said that, although such might be the general rule, yet that the bond in the present case contains a reference to the act, and requires the duties to be performed in accordance therewith. To this it may be answered, that section three of the act providing for giving the bond and its requisites requires no such reference, and that the bond in suit, in addition thereto, contains all required, that is, the true and faithful performance of its duties without favor, malice or partiality. The act does not prescribe the amount of money to be placed in, or which shall remain in the hands of the commissioners. In the absence of authority determining the ques- tion otherwise, my conviction is, that any alteration, addition or diminution of the duties of a public ofBcer made by the legislature, does not discharge his official bond or the sureties thereon so long as the duties required are the appropriate functions of the par- ticular officer. That all such alterations are within the contempla- tion of the parties executing the bond. That imposing duties of another description, and not appropriate to the office, would dis- charge sureties not coming within such contemplation. ^^ ^ ^ Hunt, J. This was an action brought against the defendants as sureties upon the bond of one Mahlon Jackson, who was ap- pointed a commissioner for loaning certain moneys of the United States, under chapter 150 of the laws of 1837. By an act of the legislature, passed in April, 1850, and subsequently to the appoint- ment of Jackson, certain additional duties were imposed upon the commissioners thus appointed, which consisted chiefly in receiving, investing and accounting for certain moneys, formerly under the control of other commissioners. Jackson was a defaulter to the amount of $2,134.59, of which $500 was of the moneys received by virtue of the last mentioned act, and the residue was of moneys re- ceived by him under his original appointment. The judge at the circuit held that the act of 1850, and the transfer under it, dis- charged the sureties of Jackson, and that no recovery could be had against them. The plaintiffs were nonsuited, and the judgment of nonsuit was affirmed at the General Term. The plaintiffs now ap- peal to this court. s|:Hs4:H:H!H:4:sH*«4:4::|:s|: The defendants are sureties simply, and must respond according to their' bond, nor more, nor less. It cannot be enlarged or ex- tended, nor are we called upon to diminish it. The position to which Jackson was appointed, was that of a public office. He was appointed by the governor, with the coneurrende of the senate. He was required to take the usual oath of office, and, in various sec- 12 370 PEOPLE V. VILAS. [CHAP. VI. tions of the act, the position' is in terms designated aa an office. The chief dtity of his office was to receive and invest certain moneys intrusted to his care by the State. When an additional sum of money was placed in his charge by virtue of the act of 1850, it was in all respects subject to the same regulations and to be dis- posed of in the same way as the other moneys in his custody. No alteration was made in the nature, character or duties of his oHiee. ij. 5j. s|s *.* « *.* * * * * * ***** The additional duty imposed upon Jackson by the act of 1850, was plainly of the same nature and character as the duties belong- ing to the office when the sureties executed their bond. It was simply to receive, invest and pay the interest on an additional amount, at the same time, in the same manner, and subject to the same regulations as were prescribed in respect to the moneys al- ready in their hands. ^^#^,^,^:i,:j:f,^^;^^ If, however, this statute did alter the nature and duties of the office of commissioner in the manner alleged by the respondent, so that the peril of the sureties was increased, did it operate to release them entirely, or only as to liabilities arising from such additional duties ? The case of the sureties for the perf ormance! of his duties by a public officer, is not precisely the same as if their principal was a party to an ordinary civil contract. His position is rather that of an agent or servant of the government than a contracting party. In the present case certain duties were im- posed upon commissioners by the laws in existence prior to 1850, when the sureties assumed their responsibility. A subsequent law imposing additional duties does not impair the prior laws or the obligations under them. Herein the present case differs from the most of the authorities cited, which were cases of contract simply. The altered contract in those cases takes the place of and en- tirely ends the original contract, and if the party is not a surety upon the substituted contract, he is so upon none, for none other is in existence. In the present case the superadded duties have not affected the original duty. It remains in force and the obliga- tion for its performance is the same as if no new law had been passed. ****************** New trial should be had. All concur. Reversed. 'AccoRD.T— Board of Education v. Quick, 99 N. Y. 139; Colter v. Morgan, 2 B. Mon. (Ky.) 278; King v. Nichols, 16 O. S. 80; Dawson -v. State, 38 0. SEC. 3.] GWYNNE V. BURNELL. 371 S. 1; Commonwealth v. Holmes, 25 Gratt. 771; United States v. SlcCartney, 1 Fed. Rep. 104; Prickett v. People, 88 111. 115. The rule applies only in those cases in which the new duties imposed are of the same general character as those originally connected with the office. Denio v. State, 60 Miss. 949. In this case the Court says: "The distinction is between an increase by the Legislature of the duties of an office of the same nature or like kind as those before pertaining to it, after the execution of the bond, and the addition of new duties, not of the same nature or kind with those before belonging to it. Every official bond is executed with a knowledge of the right, and the practice of the Legislature, to enlarge the 'duties of the officer, and for every additional duty imposed by competent authority, .which is not in kind, but in degree, merely different from those before pertaining to the office, and leaves the office unchanged in its functions, the bond before given may be fairly held to be a security, while for any duty, not pertinent in its nature to the office as existing when the bond was given, it cannot be justly said to have been within the contemplation of the obli- gors that they should be bound for them, and they are not so bound." An increase or diminution of the compensation of a public officer will not release the sureties upon his bond. Sacramento County v. Bird, 31 Cal. 68. ; An extension of the tenure of office by legislative act does not impose any liability upon the surety for the extended period. Peppin v. Cooper, 2 Barn. & Aid. 431; Bigelow v. Bridge, 8 Mass. 274; Moss v. State, 10 Mo. 338; State Treasurer v. Mann, 34 Vt. 371; Patterson v. Freehold Tp., 38 N. J. L. 255; Miller V. Stewart, 9 Wheat. 680; Smith v. United States, 2 Wall. 219; Dover V. Twombly, 42 N. H. 59; Welch v. -Seymour, 28 Conn. 387; Brown v. Latti- more, 17 Cal. 93; King County v. Ferry, 5 Wash. 536. CoKTEi. — Commonwealth v. Dewey, 15 Gratt. 1. Sec. 3. Bonds of public officers not retroactive. LAWRENCE GWYNNE v. JOHN BURNELL, ET AL. 7 CI. & Fin. 572 (1839). 1 Sir W. Follett, for the plaintiff in error. Mr. Serjeant Taddy, for the defendants in error. Mr. Wightman, on the same side. , The Lord Chancellor. — There are, my Lords, some questions in this case on the merits and some on the pleadings, and I should wish to frame such questions to the Judges as will procure answers satisfactory in every possible way. The following were the questions afterwards proposed for the opinion of the Judges : — 1. A bond is given by the defendant, as surety for A. B., a collector of assessed taxes for the parish of D., in the county of E., for the year 1828, to the commissioners of the assessed taxes, 372 GWYNNE V. BUENELIj. [CHAP. VI. with a condition to the following effect: " That if the above bounden A. B. do and shall well and faithfully demand and collect all and every the sum and sums of money in the said assessments charged and specified, of the respective persons from whom the same shall or may be payable, and shall and do, in case of non- payment thereof, duly enforce the powers of the said Acts against such persons who may make default therein, and also well and truly pay or cause to be paid unto the Receiver-General of the said taxes, rates, and duties for the said county of E., all such sums and Bums of money as shall come to the hands of the said A. B. as such collector, upon the days and at the times by the said Acts appointed for the payment thereof, and according to the true intent and meaning of the said Acts; and also do and shall, when thereunto required, at such times and places as shall be appointed for that purpose, give and render, or cause to be given and rendered, unto the commissioners appointed or to be appointed to put the said Acts in execution, or to any two of them, a just and true account in writing of all such sum and sums of money which he the said A. B. shall have collected and received by virtue or on account of the said assessments, and shall forthwith pay and deliver the same unto the said commissioners, or any two of them, or unto such person or persons whom they or any two or more of them shall appoint, then this obligation to be void, or else to remain in full force and effect." A. B. paid to the Eeceiver-General of the taxes for the said county all the sums of money collected and received by him, and which came to his hands as collector for the year 1828, at the proper days and times mentioned in the condition, and appointed by the Acts of Parliament (43 Geo. 3, c. 99, and 3 Geo. 4, c. 88) for payment thereof; but he did not pay all those sums to the account or service of that year, but a part only, and the residue he paid to the account or service of former years for which he had been collector ; but the defendant not having been surety for the said A. B. for the former years ; and by such payment the account of ^ former years was paid up and satisfied. Was this conduct of A. B. a breach of the condition of the Bond ? Mr. Justice Coltman. The first question proposed by your Lordships in this case does not appear to me to be doubtful. The condition of the bond is (amongst other things) that Eichard Bigg shall well and truly pay to the Receiver-General <*all such sums of money as shall come to the hands of the said R. Bigg as Buch collector, upon the days and at the times by the said Acts SEC. 3.] GWYNNE V. BUENELL. 373 appointed for the payment thereof, and according to the true intent and meaning of the said Acts. Now, the moneys in ques- tion, not having been paid to the service or account of that year in respect of which they had been assessed, but in payment of what must for this purpose be considered as the private debt of the collector, cannot, I think, be considered as having been paid according to the true intent and meaning of the Acts. The con- dition of the bond, therefore, has been broken, and the bond for- leited. ^t^^'^'^^^'ii^^'^*^^***** Mr. Baeon Gurney. It appears by the special verdict, to which the first question refers, that A. B. was duly appointed collector of the assessed taxes for the year 1828 ; and that the plaintiff in error duly entered into a bond with a condition for payment by A. B. to the Receiver-General of the taxes of all the sums collected and received by him, and which came to his hands as collector for the year 1828 ; but that he did not pay all those sums to the ac- count or service of that year, but a part only, and the residue he paid to the account or service of former years for which he had been collector, for which former years the party in this cause was not surety. The plain and necessary result from this statement is, that A. B. violated his duty, and that the bond is forfeited. The appointment is for the year 1828. The duty under that appointment is confined to that year. The bond is for the due performance of his duty for that year. It was his duty to apply the collection of that year to the account or service of that year. The application of any part of the money collected under the assessments of that year, to cover any deficiency in any former year, is just as much a breach of his duty, and a for- feiture of this bond, as if he had paid the money to any other creditor, or lost it at the gaming table. The suretyship was for the condutc of the collector in the year 1828, and no other, Neither the collector nor the surety was contemplated in any other character than as collector and surety for that year. The collector for the former year might have been different; the sur- eties for the former year were different; but these circumstances cannot make any difference in the consideration of this ques- tion. ******************* Me. Baeon Parke. My answer to the first question proposed by your Lordships is, that in the case^ suggested the conduct of A. B. was a breach of the condition of the bond, by which he was ' ' well and truly " to pay to the Receiver-General all the sums of money 374 GWYNNE V. BUENELU [ CHAP. VI. collected by him, according to the true intent and meaning of the Statutes 43 Geo. 3, c. 99, and 3 Geo. 4, c. 88. ' It seems to me that this condition is to be construed pre- cisely in the same way as if another person had been collector for a former year, the appointment being annual; and it could not admit of the least doubt but that it would have been a breach of such a condition if the money received, instead of having been paid to the Receiver-General to the account of the year for the year for which it was received, had been lent to a former collector, to enable him to pay his arrears, although that collector had really so applied it. The question is precisely the same, so far as re- lates to the breach of the condition of the bond ; and the payment to the account of a wrong year is in effect an appropriation by A. B. to the payment of his own debt ; though certainly the damage is not the same, from the circumstance of this debt being due to the public as if he had applied it to the payment of a pri- vate debt of his own. It makes, however, a most material dif- ference to the parishioners, who are a fluctuating body, whether the collections of each year are paid to the account of that year or to that of a former year, for which the same person has acted as collector. In the latter case suspicion is lulled, and no in- quiry made until the sureties of the former year, or the collector himself, are dead or insolvent; and the inhabitants of the parish are rendered liable for the arrears due from their predecessors, and have the amount levied upon them — an evil which might have been avoided if each year's collection had been duly paid, as it ought to have been, to the account of that year. Accord. — State v. Sooy, 39 N. J. L. 539 ; Crown v. Commonwealth, 84 Va. 282 ; State v. Powell, 40 La. An. 234 ; Eogera v. State, 99 Ind. 218 ; Supervis- or3 Lauderdale v. Alford, 65 Miss. 63; Frownfelter v. State, 66 Md. 90. If the officer has given bonds for successive terms in the same office, and a shortage is shown at the end of the last term, the law presumes the default occurred in the last term in the absence of evidence to the contrary. Kelley V. State, 25 O. S. 567; Pine County v. Willard, 39 Minn. 125; Bruce v. United States, 17 How. 437; Hetten v. Lane, 43 Tex. 279; Clark v. Wilken- son, 59 Wis. 543; Goodwine v. State, 81 Ind. 109; Bockenstedt v. Perkins, 73 Iowa 23 ; Kagay v. Trustees, 68 111. 75 ; Heppe v. Johnson, 73 Cal. 265. Where the officer at the close of his first term charges himself in his final report with the full amount of his first term balance, the sureties upon his second term bond will be liable for the shortage, although it was embezzled in the first term; the public record being constructive notice to the sureties of the amount that should be on hand. Morley v. Metamora, 78 111. 394. It has been held that where a sheriff levies execution in his first term but sells the property and receives and converts the money in his second term, SEC. 4.] GOVERNOE V. DODD. ^'° that the first term sureties are liable. The act is considered an indivisible one and in its entirety to date from the levy. Elkin v. Peeople, 4 111. 207; State V. Roberts, 12 N. J. L. 114; Wooddell v. Bruffy, 25 W. Va. 463. A second bond given in the same term in pursuance of a requirement of law and covering the same duties as the first bond is cumulative and i3 liable for the defaults of the whole term, including those committed before its exe- cution. State v. Moses, 18 S. C. 366; Miller v. Moore, 3 Humph. (Tenn.) 189; Longmire v. Fain, 89 Tenn. 393. Sec. 4. Liability for the negligence or error of judgment of a public oficer. THE GOVERNOR" OF THE STATE OP ILLINOIS v. LEVI A. DODD. 81 111. 162 (1876). Mr. Calvin H. Frew, for the appellant. Me. Justice Walker delivered the opinion of the Court : It appears, from the evidence in this case, that Barr, John- son & Co., on the 13th day of September, 1872, recovered a judg- ment against one David W. Morse, but the clerk, in entering it up omitted to name any sum for which the recovery was had. The minutes of the judge trying the case show that the amount found in favor of the plaintiffs was $223.02, and the clerk after- wards issued an execution against Morse and in their favor for that amount. The sheriff levied it on a large quantity of personal property, amounting in the aggregate to perhaps the value of $1,500. This property was taken from the sheriff by writs of replevin, and was recovered on trials had, as we infer, upon the ground that there was no judgment under which the execu- tion could issue, and the plaintiffs having lost their debt, as they claim, by reason of the failure of the clerk to perform his duty in entering up the judgment, brought suit on the clerk's bond against him and his sureties, to recover damages sustained by reason of the nonfeasance of the clerk. A trial was had in the court below, by the Court and a jury resulting in a verdict and judgment in favor of defendant. A motion for a new trial was entered, but it was overruled by the Court before judgment, and the plaintiffs appeal. The record, as presented to this court, strongly tends to show, Barr, j'ohnson & Co., were prevented from collecting their debt 376 GOVERNOE V. DODD. [CpAP. VI. solely by reason of the negligence of the clerk to record the judgment pronounced by the court in their favor. Had that been done, it would seem that they could have realized their debt. This, then, fairly presents the question whether the clerk is liable for nonfeasance, as well as misfeasance or malfeasance in office. The statute has prescribed the condition of his bond, and the law provides that it shall . be " conditioned for the faithful performance of the duties of his office, and to deliver up the papers," etc., appertaining to his office, when required so to do, etc. Now, he and his sureties, by the terms of their bond, have engaged and bound themselves that he, as clerk, shall perform the duties of his office. It is not that he shall not wilfully and wrongfully violate those duties, or that he shall not be guilty of malfeasance in office. According to the condition of this bond, lie and his sureties could only escape liability by his faithful performance of his official duty. Their agreement was, that they, rshould only escape liability by his performing his duties as clerk. This is the plain and unmistakable meaning of the language, and it seems so clear to us that we are at a loss to make it more obvious. By it and they agree that they shall be responsible if •he fails to perform ■ his official duty, and it is for this purpose t^at the bond is required. He virtually engages with the people, when he assumes the duties of his office, that he is competent' to discharge them, and that he will not be wanting in their faithful performance. If he may omit one duty without liability; why may he not omit all with impunity ? We do not have the shadow of a doubt that he and his sureties are liable for any failures to perform an official duty. The act of the 19th of February, 1859, Sess. Laws, p. 133, pro- vides: " That it shall be the duty of clerks of courts of rec- ord in this State, to enter of record all orders, judgments and decrees of their said courts, before the final adjournment of their respective courts, at each term thereof, or as soon thereafter as practicable. ' ' This enactment imposes no new duty, but enlarges the time within which it shall be performed. It was a common law duty of a clerk of a court of record, and he was appointed to the of- fice for the purpose, to enter upon the roll of the proceedings of the Court all of its orders, judgments and decrees, with the issuing of process of the court, and the performance of other duties, of the office; and the common law practice was, that the proceed- ings of each day should be so entered as to be read on the next SEC. 4.] GOVERNOR V. DODD, 877 morning, and then signed by the judge. This statute imposed no new duty, but simply declared the common law, which had existed from the earliest period when a record of proceedings of the courts of England was had. Here was a plain duty, which no one could mistake; and it appears that it was omitted by the officer who had undertaken for its performance, and his sureties had engaged that he should perform, and he and they must be held liable for any loss or in- jury that has resulted to Barr, Johnson & Co., by reason of its non-performance. Numerous authorities might be cited from the courts of other States to show that the law imposes the liability, if they were needed to sustain so plain a proposition. All understand that sheriffs, constables, and other ministerial officers, are held liable for mere nonfeasance of duty. Sheriffs and constables are not unfrequently held liable for failing to levy an execution, failing to return it, for permitting property seized on execution to be retaken by the defendant, and in a number of other cases, wher& loss is occasioned to the plaintiff by mere non-action, uninten- tional, and caused by mere negligence or omission to perform a, duty. No reason is preceived for making any distinction be- tween such officers and a clerk. The conditions of their bonds, in this respect, are the same, and their liability necessarily should be the same. The court below, therefore, should have given appellant's in- structions, so far as they accord with the views here expressed, and it erred in refusing to grant a new trial. The judgment must be reversed and the cause remanded. Judgment Reversed. AocOBD. — Strain v. Babb, 20 S. C. 342; Witkowski v. Hern, 82 Cal. 604;- Eosenthal v. Davenport, 38 Minn. 543; Topping v. Windley, 99 N. C. 4; Spain V. Clements, 63 Ga. 786. Liability for error of judgment is not evaded by showing that the officer acted upon the advice of others. Such as where the official is advised by the Attorney-General of the State. Dodd v. State, 18 Ind. 56. 378 STATE V. MCFETEIDGB. [CHAP. VI. Sec. 5. liability of surety for failure of public officer to account for the use of public funds. STATE OP WISCONSIN v. EDWARD C. McFETRIDGE, ETAL. 84 Wis. 473 (1893). Action upon the bond of the State Treasurer to recover interest received by him from banks for the use of public funds. Mr. David 8. Ordway, with' Mr. Joshua Stark, for the sureties, appellants: Messrs. J. L. 'Connor, Atty-Gen., Wm. F. Vilas and B. M. Bash- ford, for respondent : Lyon, Ch. J., delivered the opinion of the court: This case, and that of State v. Harshaw, (Wis.) 54 N. W. Rep. 17, which involves substantially the same legal questions, were argued together in this court. It is proper and just to say at the outset that the arguments contain abundant evidence of the great labor and research bestowed upon the cases by the able counsel of the respective parties to the controversy. We acknowl- edge our obligations to counsel for the great aid we have derived from their arguments^ We shall not discuss all the propositions argued, and shall refer to comparatively few of the numerous cases and authorities cited in their support, although we have carefully examined large numbers of them. These citations will be preserved in the report of the cases. We think the determina- tion of these cases must be controlled by the construction whicli is giveii to certain statutes concerning the rights, duties, and lia- bilities of the state treasurer, and the sureties in his official bond, and by the application of certain principles which, are quite ele- mentary in the law. With these preliminary observations, we thewill proceed to consider the McFetridgei Case. The alleged failure of the state treasurer, the defendant Ed- ward C. McFetridge, to perform his duties, as one of the com- missioners of the public lands, in the investment of the trust funds in the treasury, under sections 258, 258a, and 262a, Sanborn & Berryman, Ann. Stat., which is assigned in the complaint as a breach of the condition of the bond in suit, has no significance on this appeal, for the reasons that no findings in respect thereto were made or demanded and no exception is preserved in the record which presents the matter of such alleged failure of duty SEC. 5.] STATE V. MC PETRIDGE. 379 to the consideration of this court. No further reference to the subject will be required. On this appeal therefore, this is siinply an action of law on the official bond of the state treasurer, Mc- Fetridge, against him and his surviving sureties in such bond, to recover certain sums of money which he received from time to time during his specified term of office, from banks and banking associa- tions and firms, as compensation paid by them on loans of public funds to, or deposits with, such banks, associations, and firms. For convenience these depositaries are referred to in this opinion under ■ the general designation of banks. It is strongly urged on behalf of the defendants that, although the treasurer may be liable to the State in some form of action for the money thus received by him on account of such loans or deposits, yet, unless the sureties are also liable therefor on the bond in suit, there can be no re^^ Govery in this action against the treasurer. This is probably a correct statement of the law. At least, for the purposes of this case itwill be soregarded; ************* If we correctly understand the argument on the part of the defendants, it is that on either of three propositions or hypotheses the money here in; controversy belongs to the treasurer individ- ually. These propositions are: First. The legal title to the pub- lic moneys which came to the hands of. Treasurer McFetridge is in him, and not in the State; that the relation between him and the State was that of debtor and creditor only, and hence that it is no concern of the State what the treasurer did with the public money, or how much profit he made out of it, provided he ac- counted properly for what he received ; that his obligations to the. State were fully performed when he paid or delivered to the per- sons entitled thereto the amount of money which he received in the first instance; and hence that the sums received by him from the banks in which he deposited the public funds, as interest on such deposits, whether paid to him as a gratuity, or pursuant to a previous agreement or understanding,, belonged to him individually, as incident to the legal ownership of the money. Second. The deposit of the public funds in banks by Treasurer McFetridge was without authority of law, and it was not in the contemplation of the State or the sureties in his official bond, that he would make such deposits and receive interest thereon. Hence liability for such interest, even though the State may recover it of the treasurer, is not within the true intent and meaning 6i the con- ' dition of his bond, and the sureties are not liable therefor. Third. If the first proposition above stated is negatived, and the State 380 STATE V. MCFETEIDGE. [CHAP. VI. Leid to be the owner of the public funds that came to the hands of Treasurer McFetridge, he is still absolutely liable on his bond to account for and pay over to the persons entitled thereto, or deliver to his successor in ofSce, all such funds. Because he is thus absolutely liable therefor, the ordinary liability of a trustee to account to his cestui que trust for all profits made by him out of the trust money or property does not exist, and the money claimed in this action is not recoverable by the State, but belongs to the treasurer individually. This proposition assumes that the deposits were lawfully made and the interest claimed lawfully re- ceived by the treasurer. We now proceed to consider the above propositions in the order stated, and the determination of them is believed to be decisive of the judgment which ought to be rendered in the case. I. It is assumed for the purposes of the case that, if the legal title to the public funds which lawfully came to the hands of Treasurer McFetridge was vested in him, there can be no recovery by the State, either against him or the sureties in his official bond, for any profit he may have made by the use of such funds. The question whether the State is the owner of the public funds in the hands of its treasurer, or whether the legal title thereto is in the treasurer, must be determined by the statutes prescribing the rights, duties, and liabilities of the treasurer. ,f # „, ^ ^ ^ III. Having determined that the public funds which came to the hand of Treasurer McFetridge belonged to the State, and that he violated no law when he deposited such funds in banks and stipulated for and received interest thereon, we are next to de- termine the third and last proposition or hypothesis of the de- fendants, which is that the treasurer was absolutely liable to the State on his official bond for all the moneys of the State which came to his hands by virtue of his office, and that, because of such absolute liability, any interest he may have realized on such deposits belonged to him individually. While such absolute liability of the treasurer will be assumed for the purposes of the case, it seems to us that no such conclusion necessarily results therefrom, The treasurer may well be held liable absolutely for all moneys of the State coming to his hands, and be held liable also for in- terest on the deposits in question. Stated in another form, such absolute liability does not necessarily estop the State to maintain that such interest was received by the treasurer by virtue of his office, and belongs to his office. There are cases, however, which SEC. 5.] STATE V. MO FETEIDGE. 381 apparently sustain the contention of defendants' coimsel on this branch of the case. ****«#*#******* With all due deference to the able courts which have asserted or intimated the existence of the alleged rule under consideration, v/e are constrained to say that in our opinion they have failed to demonstrate, either by authority or upon principle, that the game has any place in our jurisprudence. It has already been held herein that the public funds were lawfully deposited by Treas- urer McFetridge with the banks, and that he lawfully received from such banks compensation by way of interest for the use of such deposits. Under those circumstances; and in the absence of any statute separating the interest from the fund and diverting it to other uses, such interest was an accretion or increment to the fund, thus becoming a part of it, and logically and necessarily be- longs to the owner of the fund, to wit, the State. It is immaterial that the treasurer stipulated for interest on the deposits, or that the banks paid him such interest without stipulation, both the treasurer and the banks intending that he should retain the same as his own, and believing that he was entitled thereto. Such in- tention and belief cannot affect the ownership of the interest, or its essential character as a portion of the public funds in the hands of the treasurer. Notwithstanding such intention and belief, the interest was in fact paid to the State treasurer and belonged to his said ofSce, within the meaning and intention of the bond in suit. A lawful act cannot be rendered unlawful merely because the actors intended to follow it by an unlawful act. So, when the treasurer lawfully receives money which of right belongs to his ^office, he receives it by virtue of his office, and cannot, by forming and executing an intention to retain the money as his own, divest the act of receiving the money of its official character. The fact remains that he received it virtute offieii. This is a most salutary rule, which should never be departed from unless clearly abrogated by some statute. We find no such statute in this State. A large majority of the adjudications cited in the arguments of the case, aside from those specifically commented upon herein, may be classified as follows : (1) Those which hold that the officer owns the public funds which came to his hands, and for that rea- son cannot be required to account for gains derived therefrom. (2) Those which hold that, although the officer is not the owner of the funds, if he unlawfully use the same for his own profit, his gains cannot be recovered in an action on his official bond. (3) 382 STATE V. MCFETRIDGE. [OHAP. TI, Those which hold that he is not such owner, and that his liability to account for the public funds coming to his hands is absolute, or at least equal to the common-law liability of a common carrier for the safe transportation and delivery of goods committed to it for carriage, and yet that for any profit or gain made by the officer out of the use of such sums, he must account to the owner of the fiinds, whether the same was made lawfully or unlawfully. (4) These which. hold that if the officer, not being such owner, makes gains out of the public funds by the lawful use thereof, such gains attach to the fund by way of accretion or increment, and become a part of it, and belong to the owner of the fund, and, if not accounted for, an action at law may be maintained on the official bond of the officer, against him and his sureties, to recover such gains. Having determined that the fund thus deposited in banks by Treasurer McFetridge belonged to the State, we assume the accuracy of the rule held by the cases in the second class above mentioned, and under the rule of the cases in the fourth class, which we approve, we hold Treasurer McFetridge and his sure- ties liable in this action for the interest in question. ***** Upon due consideration our conclusions upon the whole case are (and the court so holds) that the funds which Treasurer Mc- Fetridge deposited with banks were the property of the State ; that in making such deposits as treasurer, and stipulating for and re- ceiving interest thereon, or receiving interest thereon without such stipulation, he did not violate any law of the State ; that such in- terest so paid to him, being an accretion or increment to the fund, increasing it by the amount of interest thus paid thereon, belongs to the State ; that Treasurer McFetridge received such interest by virtue of his office of State treasurer, and the same belonged to his said office; that his failure to account therefor to the State or to deliver the same to his successor in office, as required by law, is a breach of the conditions of his official bond ; and that this action can be maintained on such bond, against him and his sureties therein, to recover the interest thus received by him and unac- counted for. In determining this case the Court has adopted many of the views of the learned circuit judge, but withholds its approval. of others. Inasmuch as we arrive at the same conclusion peached by him, although by different processes of reasoning, it is unnecessary further to discuss the propositions in his very able opinion which we are not prepared to adopt, The judgment of the Circuit Court must be affirmed. A motion for rehearing was subsequently filed in response to SEC. 5.] STATE V. MC VETEIDGE. 383 which Winslow, J., on April 11, 1893, delivered the following opinion : Motions for rehearing are made in these cases upon the ground that interest should not have been allowed upon the interest moneys received by the treasurers from the date of the expiration of their respective terms of office, but only from the time of the commence- ment of these actions, or, at most, from. the time when demand was made. The ground is taken that these demands of the State were in doubt and unliquidated, and consequently did not bear interest, and reliance is placed upon Marsh v. Fraser, 37 Wis. 149, and Shipman v. State, 44 Wis. 458. Both of the eases cited were for the recovery of claims strictly unliquidated and incapable of as- certainment by mere computation. Such is not the case here. It has already been held by the court, in these very cases, that the sums of interest on the public funds received by the treasurers from the banks became, when receiVed, additions to the several funds, and belonged to the State; that the same were received by the treasurer by virtue of his office, and belonged thereto; and that the failure to deliver the same over to his successor in office was a breach of his official bond. These propositions are not now contended against. Under them it is difficult to see how the right of the State to recover interest from the time when the treasurer was bound to turn over the money to his successor can be success- fully controverted. Certainly, it would be admitted, we think, that, if the main body of any of the State funds was not accounted for by the State treasurer at the time of the expiration of his term, interest would be recoverable thereon from the time he should, according to law and the terms of his bond, have paid it over. Under the decisions already made in these cases the inter- est moneys received stand on the same footing. They became at once, when received by the State treasurer. State money received by virtue of his office, and integral parts of the various funds which earned them. They were capable of exact ascertainment by computation. It was as much the treasurer's duty to turn these amounts over to his successors as to turn over the principal of the funds, and consequently a failure to do so is equally a breach of his bond, and no demand was necessary. The previous decisions of this court seem to settle the question. Motions denied. AccoBD. — Wilkes Barre v. Bockafellow, 171 Pa. 177; Bichmond County Supv. V. Wandel, 6 Lans. 33 j United States v. Mosby, 133 U. S. 286; Hunt 384 PEOPLE V. WALSEN. [CHAP. V!. V. State, 124 Ind. 306; State v. Keim, 8 Neb. 63; Wheeling v. Black, 25 W. Va. 266; Simmons v. Jackson, 63 Tex. 428; Hughes v. The People, 82 111. 78; Chicago V. Gage, 95 111. 593. PEOPLE OP THE STATE OP COLOEADO v. PRED WALSEN, ET AL. 17 Colo. 170 (1892). Messrs. Joseph H. Maupin, Atty-Gen., L. 8. DixoUi H. Biddell. and Wells, McNeal & Taylor, for the people. Messrs. Waldron & Hillhouse, Hugh Butler, Wolcott <& Taiie, Benedict & Phelps, C. 8. Thomas, and Bartels & Blood, for defend- ants in error. Hayt, Ch. J., delivered the opinion of the court : It is contended by appellant that the State treasurer is a bailee or trustee of the public funds, and, as sueh, subject to the com- •mon-law liabilities of trustees. The absolute liability of the treas- urer and his sureties for all public money received by him as treasurer is fixed by the State Constitution. In this respect the obligation of the treasurer is different from that of an ordinary trustee. Such a trustee is only held to the exercise of reasonable care with reference to the property. If the trust funds are stolen or otherwise lost without fault of the trustee, he is not liable. Not so, however, with the State treasurer. No amount of care will excuse him in case of loss by theft, fire, or by insolvency of the banks selected as depositaries. He must make the loss good to the State. He can only be discharged by paying over the money when required, and the sureties upon his official bond also assume this unusual liability. Re House Resolution, 12 Colo. 395. The language of our Constitution, which makes the treasurer absolutely liable, takes away an important right of a trustee; It is claimed that under our statutes the treasurer is required to pay out the identical money received by him, and that his duty in this respect is similar to that of a bailee at common law ; hence it is argued his liability is the same. The following statutes are cited in support of this contention: Gen. Stat. § 1353. "The treasurer shall — First. Receive and keep all moneys of the State not expressly required by law to be received and kept by some other person. Second. Disburse the public moneys upon warrants drawn upon the treasurer according to law, and not otherwise. Third. Keep a just, true and comprehensive account of all moneys SKO. 5.] PEOPLE V. WALSBN. 3^85 received and disbursed. Fourth. Keep a just and true account of each head of appropriation made by law, and the disbursements made under the same. Fifth. Render his accounts to the auditor for settlement quarterly, or oftener, if required. Sixth. Report to the governor, at least twenty days preceding each regular ses- sion of the General Assembly, a detailed statement of the condi- tion of the treasury, and its operations for the two preceding fiscal years. Seventh. Give information in writing to either House of the General Assembly, whenever required, upon any subject con- nected with the treasury, or touching any duty of his office." It is also provided that when he shall receive any public money he shall forthwith enter the same in a book, to be kept for that pur- pose, setting down the amount and the particular nature of the funds received. And it is further provided that in case of death or resignation of the treasurer, the governor shall appoint two persons, who, with the secretary of State, shall proceed to the oiSce of the State treasurer, and seal up and secure all moneys, papers and other things supposed to belonged t& the State. As to the lat- ter provision, the most that can be claimed is that it is a precau- tion deemed necessary to preserve from spoliation the public prop- erty, and prevent the same from passing into the hands of the personal representatives of the treasurer in ease of his death. We find nothing in the statutes authorizing the conclusion that the identical money must be paid. We think the provisions with re- gard to his account are for the purpose of the more easily detect- ing any failure to charge himself with the funds received. Cer- tainly nothing is specified in reference to paying out the funds. There is nothing to prevent him from receiving gold and paying out silver or paper money ; or he may, if he chooses, receive the money and pay by check, if acceptable to the creditor. Indeed, we think in this age, with its advanced facilities for the transac- tion of business without handling the currency, it is not to be pre- sumed that the Legislature would make an exception in case of the State treasurer, in the absence of language directly indicating such intention. In this respect, then, the obligation of the State treas- urer is dissimilar from that of a bailee at common law. The dis- tinction between officers invested with the collection and disburse- ment of public funds and a private bailee has been pointed out and enforced in many adjudicated cases. *****#*:„ The Constitution declares that the njaking of profit by him, either directly or indirectly, out of public funds, shall be deemed a felony, and punished as provided by law. This provision ree- ls 386 ( PEOPLE V. WALSEN. [ CHAP. VI. ognizet) that a profit may, in fact, be made by the treasurer, although it declares the making thereof a felony, to be punished as provided by law. It does not provide that the profit to be made shall inure to the benefit of the State. ' By the next succeed- ing section, however, power is expressly lodged in the Legislature to make all reasonable and proper regulations regarding the safe- keeping and management of the public funds. Ample provision in the premises is here conferred upon the Legislature. It was not until subsequent to the expiration of Walsen's term of office that the General Assembly exercised this, power; The continued neglect to act in the premises was clearly not the result of an over- sight ^Sfli the part of the law-making department of the govern- ment. It was called to the attention of the House of Representa- tives by this court in an opinion in 1889, in response to a resolution relating to House Bill No. 349. See 12 Colo; 395. The power of the Legislature was pointed out at that time, and its duty in reference thereto suggested. It was certainly not then contem- plated that the treasurer could be held liable in the State that the law was then to be found. The intention of that Legislature upon this subjectwill be apparent from a glance at the Act in reference to public funds, passed at that 'Session. See Sess. Laws 1889, p. 297. By this Act all public funds or corporate subdivisions of the State were provided for with much particularity; the State treas- urer and the funds of the State alone being excepted. That this omission was purposely made is apparent from the circumlocution employed to cover all other ofSees and all other public funds. The first section of said Act commences as follows: " If any officer appointed or elected by virtue of the Constitution of this State, or any law thereof, as an officer, agent, or servant of any incor- porated city, town, municipal township, school-district, or county, or other subdivision of this State, shall convert to his own use, in any way whatever, or shall use by way of investment in any kind of property or merchandise, or shall make way with or secrete any portion of the public funds or moneys . . ." Passing on to the third section, we find, among, other things therein provided, the following, with reference to the recovery of benefits-: ". . • but the person or persons, body or bodies corporate, or other asso- ciation shall be liable to the county, city, town, township, or school- district where funds are deposited, in an action for the recovery of all such benefits or advantage as would, by the terins of such contracts or agreement, have accrued to sUch officer, agent, or servant; and payment to the officer, agent or servant shall not SEC. 5.] PEOPLE V. WALSEN. 387 protect the person or persons, body or bodies corporate, or other association, against an action of recovery brought by the county, city, town, township or school-district whose funds are so de- posited. " It is plain that the Legislature, for reasons best known to the members of that body, was not then in favOr of giving to the State a right of action against the State treasurer for inter- est received upon State funds. This was undoubtedly a proper subject of legislation, and, whatever may be the private views of the members of this court, it must be remembered that it is the province of the courts to declare the law, and not to make it. The Eighth General Assembly made provision for the payment; to the State of all interest, collected upon the money belonging to the State, and at the same session doubled the salary of the treasurer. This is the first legislation upon the subject of such interest to be found in our statutes. Sess. Laws 1891, pp. 196-198j^ From what has been said it is apparent that both the legislative and judicial departments of the government has construed the Constitution as requiring additional legislation, in order that the State could recover interest. This construction has, from the first, been adopted by the officers of the executive department. And successive governors have, in their public messages, urged upon the legislative department the necessity for suitable legislation upon the subject. That contemporaneous construction of this character, long acquiesced in, while not controlling, is entitled to great weight, is recognized by many authorities. Sedgw. Stat. & Const. Law, p. 214 et seq.; Endlich, Interpretation of Statutes, chap. 13; Perley v.. Muskegon County, 32 Mich. 132, 20 Am. Rep. 637 ; Balbott v. Hooser, 12 Bush. 408. The courts of last resort in several of the States have been called upon to determine questions in reference to the liability of public officers for interest collected upon the public funds under their control. In some instances the decisions have been based upon statutes, and are of no benefit here. The remainder are divided between those in which the liability of: the treasurer is declared and those in which it is denied. In Illinois, a recovery has been upheld, although the opinion is to some ex- tent predicated upon a statute. See Hughes v. People, 82 111. 78; Cooper V. People, 85 111. 417. In New York, in the case of Rich- mond County Suprs. v. Wandel, 6 Lans. 33, the right of the county to recover for interest actually paid into the treasury, and after- wards withdrawn and retained by the treasurer, under an allow- ance made to him by the auditing board, was upheld; the court holding that the auditing board was without authority to make such 388 PEOPLE V. WALSEN. [OHAP. VI. allowance. So in United States v. Mosby, 133 U. S. 273, 33 L. ed, 625, the supreme Court of the United States held that interest on public moneys deposited in bank belongs to the United States. The way was paved for this decision, however, as early as 1872, in the case of United States v. Thomas, 82 U. S. 15 Wall. 337, 21 L. ed. 89, where the court held that a collector of public money, under bond to keep it safely, and pay it when required, is not absolutely bound to pay the money, but is excused if prevented from returning it by the act of God or the public enemy, with- out any neglect or fault on the part of the officer. The measure of the liability of the officer seems to be the distinction upon which all, or nearly all, adjudicated cases may be harmonized. In those jurisdictions where the liability of the officer is held to be absolute, no action can be maintained against him for the interest or profits made upon the money in the absence of a statute authorizing such recovery; while, on the contrary, in those jurisdictions in which the officer is held to a less strict liability, a different rule prevails. Thus, in Indiana, it has been repeatedly held that a public oflScer cannot be required to pay over interest received by him upon the public funds in his hands. Eoek v. Stinger, 36 Ind. 346; Shelton v. otate, 5o inCl. OOl. rls^s^ls^c^:**^:*!!:*:** No case has been cited from jurisdictions in which the ofBcer's liability is absolute, where, in the absence of statute he has been held as a bailee or trustee of the fund, with common-law, liabilities as to the interest thereon. It is not claimed that Walsen did not pay over, when required, all the money collected by him as treas- urer; the claim being that he made a profit out of this money, and that such profit belongs to the State. The treasurer was not required to loan the principal. If he did put it out, and secured interest upon it, as charged, or if he had invested it in business and made a profit, although such acts are felonies under our Con- stitution, we are of the opinion that such profit cannot be recovered by the State under the law as it then existed. The discharge of the principal of course relieves the sureties. In fact, the reasons for his discharge apply with even more cogency as to them. Finding the judgment of the District Court to be in accordance with law, it must be affirmed. Accord. — Commonwealth v. Godshaw, 13 Ky. L. Rep. 572; Eenfroe v. Col- quitt, V4 Ga. 618; Egremont v. Benjamin, 125 Mass. 15; Wilson v. Wichita, 67 Tex. 647. SEC. 6.] PEOPLE V. SCHUYLER. 389 Sec. 6. liability for trespass and other wrongs of public ofScers committed colore officii. THE PEOPLE V. CORNELIUS SCHUYLEE, ET AL. 4 N. Y. 173 (1850). This was an action of debt brought in the Supreme Court, upon the official bond executed by Schuyler as sheriff of the county of Rensselaer, and by the other defendants as his sureties, to the people of the State of New York. The declaration set forth the bond in the penalty of $10,000, and conditioned that the said Schuyler should " well and faithfully in all things perform and execute the office of sheriff of said county of Rensselaer, during his'icontinuance in said office by virtue of his election thereto, with- out fraud, deceit or oppression. ' ' J. Pierson, for appellants. 8. Stevens, for respondents. Gardiner, J. The only question presented by the pleadings is, whether the sheriff and his sureties are liable upon his official bond, for a trespass committed by the former in taking the goods of the relator, in an attempt to execute regular and valid process, issued against the property of another. The bond was in form to the people of the State; it was in effect a security, not only to suitors, who might have a direct Mterest in the action of the sheriff, but to every citizen who might be injured by his official misconduct. Before and at the time of the alleged trespass, Schuyler was sheriff of the county of Rensselaer. As a public officer, the attachment in question was necessarily and lawfully delivered to aiid received by him. He assumes to levy and draw up his- inventory as sheriff; as sheriff he rightfully summoned a jury, to determine the title to the property seized, and subsequently, in his official character received an: indemnity and detained the goods, in opposition to the verdict. He received the attachment, therefore, not colore officii, but in vir- tue of his office. His sureties undertook " that he should faith- itilly execute" the process. If he had " in a:ll things" per- formed his duty, he would have seized the goods of Fay or re- turned the writ, instead of which he levied upon the goods of Batchellor; as the property of the defendant in the attachment. Upon principle, and upon grounds of public policy, it seems to me, that the responsibility of his sureties should be different from 390 PEOPLE V. SCHUTLEB, [CHAP. VI. those they would incur, if the sheriff had entered upon the prem- ises of the relator, and removed his goods without any process whatever. In the last ease supposed, the sheriff would act in his own right, and might be resisted as any other wrongdoer.' In the one before us, he was put in motion by legal authority, invoked in behalf of others, and could command the power of the county to aid him in its execution. Respect for the process of our courts, and for the ofScial character of the sheriff, if it did not forbid forcible opposition (which must have been unavailing), is incom- patible with the notion of making resistance indispensable as a means of protection. This must be the alternative, if those who are thus aggrieved are driven to rely exclusively upon the responsir bility of the offlcer, who, as in this case, may be wholly insolvent. It was, however, assumed by Judge Cowen, in Ex parte Eeed^ (4 Hill 573,) that no such distinction was recognized by our law, and that in neither case would the sheriff or his sureties be liable upon his official bond. He remarks " that the words of the ob- ligation can not be extended beyond nonfeasance or misfeasance, in respect to acts which by law he is required to perform as sheriff." This may be admitted; but in the case then before the court, and in the present, the sheriff as the executive officer of his county, received a regular process issued by a court of competent jurisdiction, by which he was commanded to act as sheriff. If he had neglected to act without some legal excuse, it would have been a nonfeasance ; if he had acted wrongfully in attempting to obey the mandate, it would have been a misfeasance " in respect to acts which he was required to perform as sheriff." The distinc- tion is between a case in which a duty is imposed at law upon an officer as such, which he is bound by his peril faithfully to dis- charge, and one in which there is no such obligation. "Where the duty exists, and it is neglected, or performed in an improper man- ner, the sureties upon principle should be liable, otherwise not. The learned judge, in the case referred to, says " that the words of the obligation are operative for the purpose of obliging the sheriff to act properly, in all those things which come within the scope of his power or duty." The answer to this suggestion is, that it is within the power of every officer receiving process, to execute it or to abstain from its execution, for reasons which he can assign, and which the law will recognize ; and with this power it is within " the scope of his duty to act properly if he elects to act under it at all." It is true, as Judge Cowen remarks, " that a trespass is not the faithful performance of the office, or any per> SEC. 6.] PEOPLE V. SCHUYLEE. 301 formance at all." It is, however, equally true, that the faithful performance of the ofSce was the duty imposed by law upon the sheriff, and guarantied by his sureties. They now insist, in bar of the action, not that the sheriff fulfilled this obligation, but that in violating it he committed a trespass. Again, the learned judge remarks, " there being no authority, there is no ofSce, nothing oiBeial." If by this we are to understand, that there being no authority for the act complained of as a breach of official duty, there was no office and nothing official, the argument, if sound, would preclude a recovery in any case against the sureties. If an authority could be shown, their defense would be complete ; if there was none, the act would be extra official, and not within the scope of their undertaking. ***#********* There is another consideration which is deserving of attention. The action of trespass against sheriffs for the seizure of property in the execution of legal process, is sui generis. It is regarded by the law in many instances, as a means of determining the title to property, rather than in the light of an ordinary trespass. Good faith upon the part of the officer is presumed, and he may con- sequently require and receive indemnity before proceeding to the final execution of the writ. (8 John. R. 185; 8 Cowen, 67.) The form of the indemnity in this case was prescribed by statute, and the sheriff made the sole judge of its sufficiency. (2 R. S. 4, §§ 10, 11.) His sureties on payment of the judgment against their principal, would be entitled to subrogation, and to the benefit of his security; while no provision is made for its assignment to those who have been deprived of their property. The omission, I grant, will not enlarge the undertaking of the sureties. But it shows, what indeed is manifest from the whole structure of the statute, that its framers supposed that in all his proceedings under it, the sheriff was in an important sense acting officially; that the idea did not occur to them, that in making an erroneous seizure under the attachment, the sheriff divested himself of all the insignia of his office, to be resumed when he took a bond and detained the property. This is the view of the defendants. We are inclined to regard the original taking as a misapplication by the sheriff of the authority of his office, for which his sureties are responsible. The judgment of the Supreme Court must be reversed. , Beonson, Ch. J., and Jewett, Harris and Taylor, Justices, con- curred. Pratt, J. (dissenting). In the examination of this case it be- comes necessary, in the first place, to ascertain the precise nature 392 PEOPLE V. SCHUYLEB. [CHAP. VI. Of the covenant into which the sureties of the sheriff have entered, in order that we may be the better prepared to examine the ques- tion whether their covenant has been broken. The condition as presented in .the statute, which is precisely the same as that set out in the pleadings, is in these words: that the sheriff "shall well and faithfully in all things, perform and execute the office of sheriff of said county, during his continuance in said office, by virtue of the said election, without fraud, deceit or oppression." (IK. S. 378.) The statute also provides that " whenever a sheriff shall have become liable for the escape of any prisoner, committed to his custody, or whenever he shall have been guilty of any default or misconduct in his office, the party injured may apply to the Supreme Court for leave to prosecute the official bond of such sheriff." (2 R. S. 476.) It is clear to me that the sureties under this bond, guarantee the public against official delinquency on the part of the sheriff, and that the guaranty extends to that alone. That in no case except for an escape can they be made liable, unless it be proved th^t the sheriff has violated some duty resting upon him as a public officer; and in all cases except 'when the action has been brought for an escape, it is a perfect defense on their part if it appear that the sheriff exercised due diligence; that he was guilty of no want of fidelity to his trust. The case of an escape is an exception. It is made so by the statute, and therefore no degree of diligence will excuse them. But even in that case, the form of the action as- sumes that the sheriff has been negligent, and proof of the escape is made conclusive evidence of the fact. The bail for the limits which the sheriff is required to take is his protection, and he must look to that for his indemnity; but except this there is no case where anything mOre is required of him than due care and fidelity. This is evident from the terms of the condition of the bond, and the provisions of the statute, which give a right of action for its violation. The sheriff " must well and faithfully perform and execute the office," and for any " default or misconduct in his office, ' ' the condition is violated. Now the language of the statute appears to me to be plain and easy of construction, and no notions of public policy can justify a departure from the plain and obvious meaning of the condition of the bond. It is an elementary principle, that the undertaking on the part of sureties, is not to be extended by construction, one iota beyond its terms, but on the contrary, it is to be strictly construed in their favor. (18 John. 389; 10 id. 180.) The question therefore, SEC. 6.] PEOPLE V. SCHUYLER. 393 in this case, is not whether the sheriff has not done some act colore officii for which he may be liable to an action, but the ques- tion for our consideration is whether the declaration shows any mis- conduct in his office; any want of fidelity to the trust reposed in him as sheriff ; or any failure in his official duty as such, by which the plaintiff has suffered damage. Now what duty has he violated? or what negligence or miscon- duct has he been guilty of ? An attachment had been delivered to him, under which he proceeded to levy on some property, supposed by him to belong to the defendant in the execution. The relator interposed a claim of title; the sheriff summoned a jury to try the validity of such claim, and they found the property in the relator. A sufficient indemnity was then tendered to^ him by the plaintiff in the attachment, and the sheriff thereupon detained the property. In all this the sheriff followed the express direc- tions of the statute. Had he deviated from these directions, he would clearly have departed from his duty, and made himself and sureties liable to an action. (2 R. S. 4, §§ 10, 11; 8 John. 185; 1 Hall 595; 8 Cowen 67.) How then, it may well be asked, can a breach of duty be predicated upon an act by the sheriff, which the statute requires him to perform, and which, if he should neg- lect to perform, would itself constitute a breach of duty? Are the sheriff and his sureties placed by the law in any such em- barrassing dilemma? Does the law tolerate any such legal ab- surdity, as that an act is at the same time both a performance and a violation of official duty; a performance and a breach of the conditions of a bond? And yet, if this declaration can be sus- tained upon this point, it must be upon this hypothesis, however absurd it may be. The question may be asked, how then was the sheriff made liable at all? How could an action of trespass be sustained against him for taking property which a due discharge of his official duty re- quired him to take? The answer is, he was made liable not upon the assumption that he has violated his duty as sheriff, but by utterly repudiating his official character, and bringing an action against him as a naked trespasser. Had an action been brought against the sheriff for official misconduct, or neglect of official duty, he would have defended successfully by showing the facts set out in this declaration. But the claimant made no complaint of that character, but reposing upon the strength of his title, makes that the issue, and thus the official character of the sheriff in the commission of the act becomes entirely immaterial. Hence 394 PEOPLE V. SCHUYLER. [CHAP. VI. the question which was discussed at some length upon the argu- ment, whether the sheriff, in taking the property, acted ofScially or not, becomes immaterial. The question is not in what char- acter the sheriff intended to act, but in what character is he made liable. If he is not made liable for some misconduct in his office, for some want of fidelity to his trust, it is not within the under- taking of his sureties. Thus I can not perceive any difference "between a case of this kind, and one where the officer should take property without any process. So far as his liability is con- cerned, the process neither aids nor injures him. The question tried does not depend upon his good or ill conduct, whether the circumstances raised a strong presumption that the property be- longed to the defendant in the execution or not. *«***» But it has been attempted in this case to bring the act within that class to which I have conceded the liability of sureties to extend. It is insisted that the duty rested upon the sheriff in this case to seize the property of the defendant in the execution or to return the writ. But the difficulty in this argrmient is that the sheriff was not made liable for not seizing the goods of Fay, but for seizing the goods of the relator. The relator has no right of action against the sheriff or anybody else for this neglect The plaintiff in the attachment is the only man who has any interest in that matter. The most subtle ingenuity will scarcely be able to explain how a trespass upon the property of the relator can constitute a neglect to seize the goods of the defendant in the attachment, so as to give the former a right of action for such neglect. But it is insisted that public policy requires that the sureties should be made liable; that the rights of third persons would be otherwise unsafe, because they could not successfdlf resist the sheriff, he having the power of the county at his com- mand. Arguments from mere inconvenience are never very satis- factory or controlling, and ought never to be allowed for the purpose of extending the liability of sureties. But I can not appreciate the supposed difficulty. It is quite clear that if the isheriff should attempt to seize the property of the wrong man, the latter would have a right to resist force with force, and hav- ing the right with him there can be no reason why he should not be successful. (8 Pick. 133.) The claimant would therebj^ have the advantage, as he could protect those who might assist hiin, whereas those who might assist the sheriff would be tres- passers. ***********'******* But as a question of policy, the inquiry may well be made, why SEC. 6.] PEOPLE V. SCHUYLER. 395 should the sureties of the sheriff be made liable in cases of this kind? Through efforts to defraud creditors and sometimes when no sucK intention exists, difiScult and perplexing questions of title or priority of lien often spring up. The sheriff is generally a mere medium through whom the judgment creditor upon the one side and the claimant on the other litigate these questions. There is no motive for either the sheriff or the party to interfere with the claims of others, except when they honestly desire to litigate the question of title or priority of claim. On what principle, then, is a party in the position of the relator in this case entitled to any greater security than other litigants? Why should the creditor not be allowed to litigate with such claimant without involving the interests or liability of the sheriff and sureties? In cases of this kind, the property is almost uniformly taken by the direction of the plaintiff in the execution. The claimant thus has the re- sponsibility of such plaintiff in addition to that of the sheriff. As a general rule he is better protected in securing the fruits of the litigation than ordinary litigants. I must confess, therefore, that I am imable to perceive, had we power to extend the liability of the sureties, why upon principles of public policy it should be done. Whilst, according to the terms of their covenant, the sureties should be held to guaranty to the public the official fidelity of the sheriff, there is no good reason why they should be held liable for the consequences of a litigation which in no sense involves his OniCial conduct. 4:Hs4sH:4:4:4:4s4s«4;4:««4: ; Buggies, J., and Hurlbut, J., concurred. Judgment reversed. Accord. — Ohio v. Jennings, 4 O. S. 419; Cummings vs. Brown, 43 N. Y. 514; Lammon v. Feusier, 111 U. S. 17; State v. Fitzpatrick, 64 Mo. 185; Greenfield v. Wilson, 13 Gray. 384; Turner v. Lisson, 137 Mass. 191; Comm. V. Stockton, 5 T. B. Mon. (Ky.) 192; Charles v. Haskins, 11 Iowa 329; Turner v. Killian, 12 Neb. 580; Thomas v. Markham, 43 Neb. 823; Holliman V. Carroll, 27 Tex. 23; Van Pelt v. Littler, 14 Cal. 194; Hursey v. Marty, 61 Minn. 430; State v. Farmer, 21 Mo. 160; Hobbs v. Barefoot, 104 N. C. 224. If the officer in making an arrest or to prevent the escape of a prisoner or in serving a writ uses unnecessary violence his bond is liable in damages. Drolesbaugh v. Hill, 64 0. S. 257; Clancy v. Kenworthy, 70 Iowa, 740; Cash V. People, 32 111. App. 250; Brown v. Weaver, 76 Miss. 7 ; -Stephenson v. Sin- clair, 14 Tex. Civ. App. 133; State v. Becker, 132 Ind. 371. If the officer acts under a void writ or without process, he is a trespasser and his sureties are not liable as he does not act under color of his office. McLcndon v. State, 92 Tenn. 520; Cornell v. People, 37 111. App. 490j Gerber V. Aekley, 32 Wis. 233 396 STATE V. CONOVEE. [CHAP. VI. THE STATE v. HOLMES CONOVER, ET AL. 28 N. J. L. 224 (1860). B. F. Randolph, for defendants. Littell and Dayton, for plaintiffs. Haines, J. The question presented by the demurrer is, whether a sheriff, who having an execution against the goods and chattels of one person, levies upon and sells those of another, is guilty of a breach of the condition of his official bond, and thereby renders his sureties liable. ; The condition of the bond set out in the declaration is in, ac- cordance with the provisions of the statute (Nix. Dig. 749, § 2), and is, that ' ' the said Holmes Conover shall well and truly exe- cute the office of sheriff, and in all things touching his ofiSce, shall well and truly, justly and faithfully, perform and execute the same, as well in respect to all persons concerned as to the State." The 11th section of the same act provides that it shall be lawful for the governor, upon application in writing by any person " who may be aggrieved, or suppose himself to be ag- grieved, by the default, malpractice, or misconduct of any sheriff, in his office, ' ' to order a prosecution of his official bond. By the terms of the bond and its condition the sureties became liable for the official acts of the principal. They stipulated that he should well and truly execute the office of sheriff, and that in all things touching his office he would well and truly, justly and faithfully, execute and perform the same; and they are not sub- ject to prosecution except for some alleged neglect, default, mal- practice, or misconduct of the sheriff in his office. Their liability, then, depends upon the question, whether the conversion of the goods of the relators under an execution against another party was an official act. If it was, they are liable; if not, they are not liable, and the demurrer must be allowed. In examining this question, it may be premised, that the lia- bility of sureties is not to be extended by construction, but to be limited to the terms of the obligation, considered according to their true intent and meaning. In The People v. Spraker, et al., 18 Johns. Rep. 396, it is said that to render sureties liable, the ease must be within the words and plain meaning of the statute. It would be against public policy, as well as against common justice, to prescribe the terms of SKC. 6.] STATE V. CONOVEB. 397 the bond, and then, by construction, to extend its obligations be- yond the fair intent and plain meaning of those terms. A man who holds the office of sheriff may do many things which will render himself personally liable, but for which his sureties are not responsible. The sureties do not bind themselves to pro- tect the public against ievery act of their principal, nor do they become his sureties to keep the peace. And it is necessary to determine what acts of such a person are official and what not ofSeial. It is a principle, long and well established, that official acts are those which are done by virtue of the office; such as, if properly done, exculpate both the officer and his sureties from responsi- hility, but which, if neglected of improperly done, render both liable. If the authority is exceeded, or the duty omitted, an action may be maintained against the officer in his official capacity, and his sureties held responsible for it. Unofficial acts are such as are committed under color of the office, such as cannot be lawfully done and cannot be justified by the official character of the sheriff, or by any process in his hands. Selly v. Birdsall, 15 Johns. Rep. 267 ; Alcoek v. Andrews, 2 Esp. C. 540, note ; Pratt, Just., in The People v. Schuyler, et al., 4 Comst. Rep. 187. If a sheriff, having an execution in his hands, seize the prop- erty of a stranger he is a trespasser. He may be resisted not- withstanding his being a' sheriff and having the execution. If he calls for assistance, he and the persons assisting are all trespassers, and may be resisted force by force. If the person resisting be indicted for obstructing an officer in the discharge of his duty, it must appear that the person obstructed was acting in an official capacity, with legal process or other authority to do what he was attempting when so obstructed. If it appear that he was acting under color, and not by virtue of official authority, the party resisting is not liable to a civil or criminal prosecution. One acting under color of authority cannot justify the act. He is not acting officially. If sued for the trespass, it is in his pri- vate capacity. If he plead authority, and seek to justify, the issue tendered is to try whether he was acting in his private or official capacity. If determined against him, it is because the act was without authority and extra-official. Where there is no au- thority there is no office, and the act cannot be virtute officii. He is as much a trespasser as if he had no writ or were not an officer He acts not by virtue of his office, or under any authority con- 398 , STATE v. CONOYBB. [ CHAP. VI. f erred by it, but under color or pretence of the office; and it ig of no consequence whether he seized the goods by mistake or de- sign, he is equally a trespasser. The question is not whether his intentions were good, but whether his power was sufficient. li'or such unauthorized act, the sureties never assumed any re- sponsibility. It was not done in the execution of his office nor was it anything touching his office. It was no default, malprac- tice, or misconduct in his office. To say otherwise would re- quire that the condition of the bond be extended beyond the words and the plain meaning and clear intent of it. Such appears to me to be the clear result of the inquiry upon principle. For au- thority, we find no case in point in this State. The absence of any decision of a question so important is persuasive proof that the profession has not regarded the sureties of a sheriff liable under such circumstances. ««4c:„«««««*4,4.«^ We are referred to the case of The People v. Schuyler, 4 Comsfe 173, decided in the Court of Errors of the State of New York, as definitely settling, in that State, the liability of the sureties of a sheriff who seizes the goods of a person not a defendant in the writ The reasoning of the majority of the court in that case has failed to satisfy me of the soundness of such a conclusion. It is the opinion of a divided court of five judges against three dissent- ing. It is not expressive of much confidence in its results. Judge Gardiner, who delivered the opinion of the majority, says, " we are inclined to regard the original taking as a misapplication by the sheriff of the authority of his office, for which his sureties are responsible. ' ' The learned judge seems to disregard the distinction between acts done under color and those done by virtue of the office, and does not, I think, give a proper construction to the authorities to which he refers and on which he relies. « * * * The case of People v. Schuyler, being the determination of the highest tribunal, may settle the law of New York, but its rea- soning, for which alone it can be used here, is not such as to justify us in adopting it as the law of New Jersey. The opinion of the dissenting judges is, in my judgment, a bet- ter exposition of the law, and more in conformity with the true principles of this question, and is also in accordance with the previous decisions of the courts of that State bearing upon it. Prom every view I can take of the case before us, both on prin- ciple and authority, I am satisfied that the seizing of the property of a person not named in the writ is not an official act done by SEC. 7.] i PAIKOHILD V. HEDGES. 399 virtue of the oflSce, but unoiScial and done by color of the office, for which the sureties are not liable. And hence the demurrer must be sustained, and judgment rendered for the defendant. Justices Vredenburgh and Van Dyke concurred. Accord. — State v. Brown,. 54 Md. 318; Stockwell v. Robinson, 9 Houst. (Del.) 313. Sec. 7. Liability for loss of public money by failure of the bank nsed as public depository. JAMES C. FAIRCHILD v. JOHN B. HEDGES. 14 Wash. 117 (1896). Messrs. Snell & Bedford, for appellant. Messrs. Coiner & Shackleford, for respondents. Gordon, J., delivered the opinion of the court : The appellant was, for four years prior to January, 1895, the qualified and acting treasurer of Pierce county, and the re- spondent Hedges succeeded him as such treasurer. The respond- ents Holmes, Rogers, and Bartholomew constitute the board of commissioners, and the respondent Gloyd is county auditor of said county. From the record it appears that, during his term of office as such treasurer, the appellant deposited sums of money coming into his hands as silch treasurer in various banks, some of which banks thereafter failed, and this proceeding was insti- tuted by the appellant, to compel the respondents to accept, in settlement of appellant's account, as treasurer, certain receivers' certificates of insolvent banks. The petition asserts that the de- posits were made with the . knowledge of the respondents, and in accordance with his business custom; that neither the county of Pierce nor the board of county commissioners of said county provided him with any safe place for keeping the funds ; that the safest and surest manner of keeping them was to make a deposit of them in reliable banks of good standing in the community; that the several banks selected by him as places of deposit were of high standing and repute, etc. The lower court sustained respondents' motion to quash the affidavit upon which the application for a writ of mandate was based, and, the relator electing to stand thereon, judgment of dismissal was rendered, from which he ap- peals. For a better understanding of the nature of the contro- versy, we quote the following from the opening statement con- 400 FAIECHILD V. HEDGES, [CHAP. VI. tained in appellant's brief, viz: " The question at issue in this action is narrowed by agreement of parties to the consideration of the one question, to wit: ' Is the county treasurer of Pierce county, Wash., liable personally or upon his bond for money de- posited in a bank which afterwards becomes insolvent, in a case where there is no charge of negligence or want of care in any de- gree against the treasurer, and where it is further admitted that the county has not provided a suitable and safe place in which to deposit the amount of money which may come into the treasurer's hands? ' " ,„ . ' Appellant's contentions are: (1) That the treasurer is not the debtor or insurer of the money that comes into his hands, but only the bailee for hire, or trustee of an express trust, who was only responsible for the exercise of good faith and reasonable skill and diligence in the discharge of his trust; and (2) that there is no statutory or constitutional inhibition against depositing such funds in the banks for safe-keeping; that, under the circum- stances, it was his duty to so deposit said funds ; and that he ■would be liable for negligence only in selecting such depositories. Section 5, art. 11, of the Constitution of the State, requires that " the legislature shall provide the strict accountability of the said officers (referring to the county officers) for the fees which may be collected, and for all public moneys which may be paid to them or officially come into their possession." The statute makes it the duty of the county treasurer to receive all moneys due and accruing to the county and disburse the same in the manner pro- vided by law, and requires him, before entering upon the duties of his office, to give a bond to the county, conditioned, among other things, that " all moneys received by him for the use of the county shall be paid as the commissioners shall from time to time direct, except where special provision is made by law for the payment of such moneys, by order of any court, or otherwise, and for the faithful discharge of his duties." 1 Hill's Code, § 211. An ex- amination of all the authorities has satisfied us that, while such officers are bailees, " they are special bailees, subject to special obligations, ' ' and that "it is evident that the ordinary law of bailment cannot be invoked to determine the degree of their re- sponsibility. " United States v. Thomas, 82 U. S. 15 "Wall. 337, 21 L. ed. 89. " His liability is to be measured by his bond, and that binds him to pay the money." Boyden v. United States, 80 U. S. 13 Wall. 17, 20 L. ed. 527. On this branch of the case, this court, in Marx v. Parker, 9 SEC. 7.]' FAIRCHILD V. HEDGES. 401 Wash. 473, after reviewing the authorities bearing upon the propo-s sition, said: " It seems to us that every one of the earlier cases cited, where the expression was used that such and such an officer was not a bailee, or a mere bailee, or was a debtor, must be re- garded from the standpoint of the court and the particular case. They were, one and all, cases where suit had been brought upon the bond of the officer, and he was attempting to excuse his de- fault because he had lost the money by robbery, or from some other cause over which he claimed to have had no control. But in every such case it was held that his liability was absolute, and the true reason under United States v. Thomas, supra, must be, not that he was any the less a bailee, but that the statute imposed upon him a measure of duty larger than that found in the common law." We take it that it is fundamental in the law of bailments that the amount of care which the bailee is required to take of the goods or property intrusted to him may be expressly fixed by the contract, and that it is only in the absence of an express agree- ment that the law presumes it to have been the intention of the parties that a bailee for hire (other than common carriers and the like) is required to exercise only ordinary care, prudence, and caution in the custody and control of the property with which he is intrusted. In the well-considered case of Pine Island Bd. of Edu. V. Jewell, 44 Minn. 427, the court says: " There is some conflict in the decisions as to the responsibility of public officers and their sureties for the loss of public moneys without negli- gence or fault on the part of the officers. While in some cases the rule of responsibility of bailees for hire has been applied, exonerating officers who have been found guiltless of negligence, this measure of responsibility is not generally accepted. The great weight of authority in this country will sustain the general propositions, with respect to the liability of such officers and their sureties for the loss of public moneys, that where the statute, in direct terms or from its general tenor, imposes the duty to pay over public moneys received and held as such, and no condition limiting that obligation is discoverable in the statute, the obliga- tion thus imposed upon and assumed by the officer will be deemed to be' absolute, and the plea that the money has been stolen or lost without his fault does not constitute a defense to an action for its recovery ; that the rule of the responsibility of bailees for hire is not applicable in such cases ; that, where the condition of a bond is that the officer will faithfully discharge the duties of the office, and where the statute, as before stated, imposes the duty of 14 402 FAIECHILiD U. HEDGES. [CHAP. VI. payment or accountability for the money, without condition, the obligors in the bond are subject to the same high' degree of responsibility; and that the reasons upon which these propositions, rest are to be found both in the unqualified terms of the contract and in considerations of public policy." In Wilson v. "Wichita County, 67 Tex. 647, the court says: "It is too well settled to require discussion that an officer who is custodian of public money does not occupy the relation of a mere bailee for hire, who is responsible only for such care of the money as a prudent man would take of his own. He is bound to account for and pay over the public money." In Rose: v. Douglass Twp., 52 Kan. 451, the court says: " By accepting the office of tovshiship treasurer, Mc- Nabb assumed' the duty of receiving and safely keeping the money of the township, and paying it out according to law. He or his sureties are bound to make good any deficiency which might occur in the funds which came under his charge whether they were lost in the bank or otherwise. " *********** We think that, by the great weight of authority upon the ques- tion, an officer, such as a county treasurer, under our law, is held to the rule of strict accountability. As is said in Thompson y-. Township 16, 30 111. 99, " They know well, on assuming their position, the hazards to which they are exposed, and they voluns tarily assume the risks, and are paid for so doing." And if "it appears to be a harsh. measure of justice to hold that the treasurer and his sureties are liable, on his official bond, for the money de- posited under the circumstances disclosed in the affidavit of de-. fense, and subsequently lost without his fault or negligence, it is impossible to reach any other conclusion without ignoring!, the authority of well-considered cases." Baily v. Com., 10 Atl. Rep. 764. We have examined all the cases cited in the able brief of the appellant bearing upon this proposition, but are unable to perceive that they are in conflict with the doctrine above laid down. A single case need only be referred to, — Law 's Estate, 144 Pa. 499, 14 L. R. A. 103. It was there held that the guardian, who de- posited the moneys of his ward in a bond believed by him to be solvent, was not liable for the : funds so deposited upon the failure of the bank. We think that the distinction is very clear between the liability and duty of one receiving moneys as a guardian, for the benefit of a private individual, and the liability imposed by statute and by express undertaking upon a public officer as in the case at bar. As to the former, " he is merely the trustee or agent of the private parties interested in the money, and no greater SEC. 7.] FAIECHILD V. HEDGES. 403 or higher responsibility should be imposed upon him than would be imposed upon any agent or trustee. People, Nash, v. Faulkner, 107 N. Y. 488. The loss in this case was not occasioned by the act of God or a public enemy, and we are not called upon to decide whether, under the circumstances attending such a loss, the officer would be exempt from liability. This conclusion neces- sarily leads to an affirmance of the judgment entered below, and renders it unnecessary to decide whether a county treasurer may lawfully deposit the funds of his county in a bank or banks. Affirmed. Accord.— Tillinghast v. Merrill, 151 N. Y. 135; State v. Moore, 74 Mo. 413; Omro Supervisors v. Kaine, 39 Wis. 468; Havens v. Lathene, 7 N. C. 505; Inglis V. State, 61 Ind. 212; Griffin v. Levee Comm. 71 Miss. 767; Nason v. Directors of the Poor, 126 Pa. ,445 ; State v. Hill, 47 Neb. 456 ; Lowry v. Polk County, 51 Iowa 50; Perley v. Muskegon County, 32 Mich. 132; State v. Nevin, 19 Nev. 162; New Providence v. McEachron, 33 N. J. L. 339; McKinney v. Robinson, 84 Tex. 489; Thomassen v. Hall Co., 63 Neb. 777; Northern Pae. Ey. Co. V. Owens, 86 Minn. 188. If the statute requires the public officer to deposit the funds in a bank the sureties are not liable for loss resulting from the insolvency of the bank if due care is used in selecting the bank. City of Livingston v. Woods, 20 Mont. 91. Many cases hold that sureties upon bonds of public officers are not liable for loss of public money by theft or robbery, without fault or negligence of the officer. State v. Houston, 78 Ala. 576; Cumberland v. Pennell, 69 Me. 357; Healdsburg v. Mulligan, 113 Cal. 205. In the case of the United States v. Preseott, 3 How. 578 the Court says: "Public policy requires that every depositary of the public money should be held to strict accountability. Not only that he should exercise the highest degree of vigilance, but that ' he should keep safely ' the moneys which come to his hands. Any relaxation of this condition would open the door to frauds, which might be practiced with impunity. A depositary would have nothing more to do than to lay his plans and arrange his proofs, so as to establish his loss, without laches on his part. Let such a principle be applied to our post- masters, collectors of customs, receivers of public moneys, and others who receive more or less of the public funds, and what losses might not be antici- pated by the public? ... As every depositary receives the office with a .full knowledge of its responsibilities, he can not, in case of loss, complain of hardship. He must stand by his bond and meet the hazards which he volun- tarily incurs." This holding has been followed in United States v. Morgan, 11 How. 154; "United States v. Dashiel, 4 Wall. 182; Boyden v. United States, 13 Wall. 17; 'United States v. Jones, 36 Fed. Rep. 759 ; State v. Harper, 6 0. S. 698 ; Hal- bert v. State 22 Ind. 125; District of Taylor v. Morton, 37 Iowa 550; Red- wood County V. Tower,' 28 Minn. 45; State v. Lanier, 31 La. An. 423. In United States v. Thomas, 15 Wall. 337 the Federal Supreme Court departs from the principle of the earlier precedents in holding that the seizure of public funds by the authorities of the Confederate States by the exercise 404 WILSON V. PEOPLE. [CHAP. VI. of military force exonerates the sureties on the bond of the officer. Several members of the Court dissent on the ground that the cases of United States V. Preseott (Supra) and other cases following it should have been overruled. At least one court has held that the sureties upon the boiid of an officer are liable for losses resulting from the act of God. State v. Clark, 73 N. C. 255. JAMES WILSON v. PEOPLE OP THE STATE OP COLORADO. 19 Colo. 199 (1893). Messrs. Macon & Macon and D. P. WUson, for appellants. Mr. Charles E. Gast, for appellee. GoDDAED, J., delivered the opinion of the court: Prom the agreed facts it appears that the money was lost through no fault of the clerk. He deposited the money in a bank of reputed solvency, as clerk of the court, and in doing so acted as prudent men ordinarily do with their own funds. The judg- ment of the court below must therefore be upheld, if at all, upon the principle that the conditions of his ofScial bond imposed upon him an absolute obligation to pay the money when required, and that no exercise of diligence on his part will exonerate him from such obligation. Such is the contention of counsel for appellee, and for its support he relies on the case of United States v. Preseott, 44 U. S. 3 How. 578, 11 L. ed. 734, decided by the Supreme Court of the United States in 1844, as the leading case, and several other cases in that court, as well as some decisions by State courts, which approve and follow the doctrine therein announced. In these cases in which the rule contended for was sustained, the court had under consideration the liability im- posed by the official bond of receivers of public money, and the conclusions arrived at were influenced largely by considerations of public policy. Whether the ease at bar is sufficiently analogous to these cases to bring it within the rule therein announced it is unnecessary to decide, since the Supreme Court of the United States, in a later case, has very much modified, if it has not in effect overruled, the extreme doctrine laid down in its earlier decisions. In the case of United States v. Thomas, 82 U. S. 15 Wall. 337, 21 L. ed. 89, Justice Bradley, in speaking of the lead- ing case of United States v. Preseott, supra, said: " After recit- ing the condition of the bond, the court adds, with a greater de- gree of generality, we think, than the case before it required: SEC. 7.] WILSON V. PEOPLE. '105 ' The obligation to keep safely the public money is absolute, witb- out any condition, express or implied; and nothing but the payment of it, when required, can discharge the bond.' This broad language would seem to indicate an opinion that the bond made the receiver and his sureties liable at all events. . . . And as the money in the hands of a receiver is not his, as he is only custodian of it, it would seem to be going very far to say that his engagement to have it forthcoming was so absolute as to be qualified by no condition whatever, not even a condition implied by law. ' ' And after reviewing the principal cases relied on by appellee he further said: " So much stress has, in almost every case, been laid upon the bond as forming, either directly or indirectly, the basis of a new rule of responsibility; that it seems especially important to ascertain what are the legal obligations that spring from such an instrument. The learned judges in the great generality of the remarks made, in some of the cases referred to, with regard to the liability of a receiving officer, and espe- cially of his sureties, by virtue of his bond, have evidently over- looked what we conceive to be a very important and vital dis- tinction between an absolute agreement to do a thing and a con- dition to do the same thing, inserted in a bond. In the latter case tLie obligor, in order to avoid the forfeiture of his obligation, is not bound at all events to perform the condition, but is ex- cused from its performance when prevented by the law or by an over-ruling necessity. And this distinction, we think, affords a solution to the question involved in this case. . . . The con- dition of his (an official) bond is collateral to the obligation or penalty; it is not based on a prior debt, nor is it evidence of a debt; and the duty secured thereby does not become a debt until default be made on the part of the principal. Until then, as we have seen, he is a bailee, though a bailee resting under special obligations. The condition of his bond is, not to pay a debt, but to perform a duty about and respecting certain specific property which is not his, and which he cannot use for his own purposes." While the majority opinion distinguished the case under con- sideration from those preceding it, we think the reasoning of the learned justice who wrote the opinion logically and necessarily overrules the doctrine laid down in the former cases. If, as therein announced, the obligation imposed by the bond is absolute, and the officer was an insurer of the money received by him, how could the manner or cause of its loss affect his liability? Wherein is he more at fault when overpowered by one or two robbers than 406 WILSON V. PEOPLE. [CHAP. VI. he is when intimidated by an army? Justice Miller refused to concur in the majority opinion because it did not frankly over- rule those cases and abandon the doctrine on which they rested, and in his dissenting opinion stated his personal views upon the question as follows: " When the case of United States v. Dashiel (71 U. S. 4 Wall. 182, 18 L. ed. 319), came before the court I was not satisfied with the doctrine of the former cases. I do not be- lieve now that on sound principle the bond should be construed, to extend the obligation of the depositary beyond what the law imposes upon him, though it may contain words of express promise to pay over the money. I think the true construction of such a promise is to pay when the law would require it of the receiver, if no bond had been given ; the object of taking the bond being to obtain sureties for the performance of that obligation. Nor do I believe that, prior to these decisions, there was any principle of public policy recognized by the courts, or imposed by the law, which made a depositary of the public money liable for it, when it had been lost or destroyed without any fault of negligence or fraud on his part, and when he had faithfully discharged his duty in regard to its custody and safe-keeping. ' ' We believe the true rule is that a public officer who receives money by virtue of his office is a bailee, and that the extent of his obligation is that imposed by law. That, when unaffected by constitutional or legislative provisions, his duty and liability is measured by the law of bailment. If a more stringent obligation is desired, it must be prescribed by statute. That his official bond does not extend such obligation, but its office is to secure the faithful and prompt performance of his legal duties. Instances where the constitution and statutes of this State have increased the common law liability of certain officers were recognized by this court in two cases, at least. In the case of State v. Walsen, 17 Colo. 170, it was held that by constitutional provisions the State treasurer was made absolutely liable for State moneys re- ceived by him; and in the ease of McClure v. La Plata County Comrs. (Colo.), 34 Pac. Rep. 763 (recently decided), it was held that a county treasurer, by virtue of the statute regulating the duties of his office, was a bailee with express and extraordinary liability. No constitutional or statutory provision in this State imposes a more stringent obligation upon a clerk of the district court than that imposed by the common law. This rule of com- mon law, as laid down by Justice Story, is as follows: "In respect to property in the custody of the officers of a court, pend- SEC. 8.] PICO V. WEBSTER. 407 ing process and proceedings, such officers are undoubtedly re- sponsible for good faith and reasonable diligence. If the prop- erty is lost or injured by any negligent or dishonest execution of the trust, they are liable in damages. . . . The degree of diligence which officers of the court are bound to exert in the custody of the property geems to be such erdinary diligence as belongs to a prudent and honest discharge of their duties, and such as is required of all persons who receive compensation for their services." Story, Bailm. § 620. It is insisted in argument that its doctrine refers only to specific property, and does not apply to money deposited with the clerk, because it is assumed that he holds the relation of debtor to the fund, and, therefore may use it as his own. To this we cannot agree. The money received by him is a trust fund, and a conversion of it to his own use ;would constitute embezzlement, and subject him to a criminal .prosecution. The defendant Wilson, as appears from the agreed facts, did not mix the money in question with his own funds, or in any manner treat it as his own. He deposited it in the bank as clerk, and the bank had notice thereby that the money so de- posited was held by him in his official capacity. At the time of the deposit the bank was in good standing. We think, under the circumstances, he is not chargeable with any fault that should render him or his sureties liable for the loss. The judgment of the coiirt below will be reversed, with directions to enter judgment for defendants. ' AccoED. — State v. Copeland, 96 Tenn. 296; State v. Houston, 78 Ala. 070; State V. Gramm, 7 Wyo. 329. Sec. 8. Judgment against the principal as evidence against the surety. PICO V. WEBSTER, Sheriff. 14 Cal. 203 (1859 D. W. Perley, for appellants. 0. L. Bridges, for respondent. • Baldwin, J., delivered the opinion of the court — Field, C. J., and Cope, J., concurring. This suit was brought on the official bond of defendant, Webster, who was Sheriff of San Joaquin County, against Webster and his sureties. The suit brought to recover damages for the levy 408^ " PICO V. WEBSTER. [CHAP. VI. by Webster on property of plaintiff, which levy was made under color of process. Suit, was brought against Webster for the tres- pass involved in this levy and seizure, and judgment recovered against him before the institution of this suit. The record of this recovery was offered as evidence by the plaintiff on the trial. The defendants offered to prove, on their part, that Webster was not guilty of the trespass complained of, and that the property seized was not the property of the plaintiff here. But the Court refused to admit the testimony, upon the ground that the judgment against the Sheriff was conclusive of all the facts passed upon and decided by the record. To this ruling the defendants ex- cepted, and now present it for review here on appeal. There is no little conflict in the cases on this subject. There can be no doubt, that where a surety undertakes for the prin- cipal, that the jprincipal shall do a specific act, to be ascertained in a given way, as that he will pay a judgment, that the judg- ment is conclusive against the surety ; for the obligation is express that the principal will do this thing, and the judgment is con- clusive of the fact and extent of the obligation. As the surety in such cases stipulates without regard to notice to him of the proceedings to obtain the judgment, his liability is, of course, independent of any such fact. (Wain v. Gold, 5 Pick. 480; Lin- coln V. Blanchard, 17 Vermont, 474; see, also, Eiddle v. Baker, 13 Cal. 295.) It is upOn this ground that the liability of bail is fixed absolutely by the judgment against the principal. But this rule rests upon the terms of the contract. In the case of official bonds, the sureties undertake, in general terms, that the principal will perform his ofScial duties. They do not agree to be absolutely bound by any judgment obtained against him for official miscon- duct, nor to pay every such judgment. They are only held for a breach' of their own obligations. It is a general principle, that no party can be so held without an opportunity to be- heard in defense. This right is not divested by the fact, that another party has defended on the cause of action and been unsuccessful. As the sureties did not stipulate that they would abide by the judg- ment against the principal, or permit him to conduct the defense, and be themselves responsible for the result of it, the fact that the principal has unsuccessfully defended, has no effect on their rights. They have a right to contest with the plaintiff the ques- tion of their liability, for, to hold that they are concluded from this contestation by the suit against the Sheriff, is to hold that they undertook for him that they would be responsible for any judg- SEC. 8.1 PICO V. WEBSTEE. 409 ment against him, whicli might be rendered by accident, negli- gence, or error, instead of merely stipulating that they would be responsible for his official conduct. The authorities which sustain this view are numerous. In McKellar v. Barrell (4 Hawks, N. C. 34) , a decree against the administrator of a guardian, was held not to be evidence against the sureties of the guardian to charge them with the amount which was recovered against the estate for un- faithful administration of the trust. Munford v. Overseers of the Poor (2 Randolph 313), went a little further, holding, that a judgment against the Sheriff was no estoppel against him in an action on the bond against him and his sureties. It seems to be held there, that no recovery could be had against the principal, because he was not liable jointly with the sureties, and that the record of the judgment would be only prima facie evidence against the sureties. Beal v. Beck (3 Harris & McHenry), is to the same effect. Douglass v. Howland (34 Wend. 35), is a leading case. The authorities are reviewed by Mr. Justice Cowen with his usual learning. That case was covenant, brought by the plaintiff against the surety on an obligation by the principal, to account and pay over such sum as shall be found to be owing by him, and the- surety covenanted that the party thus agreeing " shall perform the agreement." A decree in chancery against the principal was offered. The decree was on a bill filed to compel an account; held, that it was no evidence against the surety, unless he had notice of the suit and an opportunity to defend, in the name of the principal. Many authorities are cited by the learned judge, who concludes, that the surety's obligation was to pay over a balance due, not that he should abide by a judgment at law, or a decree in chancery, for not accounting. ^^^.^^^^.^ This precise question arose in the case of Carmichael, appellant, V. The Governor (3 How. Miss. 236). Mr. C. J. Sharkey deliv- ered the opinion, holding that a judgment against the Sheriff on motion to pay over money, is not evidence in an action against the sureties on the Sheriff's bond, to establish the breach thereof in failing to pay over money. The Court cite the case in 5 Binney as authority; also, 1 Starkie on Ev. 182, 189, and place its rea- soning upon the same grounds as those we have before assumed; and it adds, " that if the judgment was admissible in evidence, it was certainly conclusive unless it was fraudulent, and the con- sequences would be, that Carmichael would be bound by a judg- ment to which he was no party, and had no opportunity of making a defense, and which might have been sufScient if he had been 410 If PICO v. WEBSTER. [ CHAP. VI. permitted to defend." Lucas v. The Governor (6 Ala. 826), is to the same purpose. We cannot see how, if the judgment be evidence at all, it is less than conclusive in the absence of fraud or collusion. The reason which admits it must be broad enough to give it conclusive effect. Nor is there anything in the point that these defendants had notice. They must have had legal notice, which we have held to be that required by statute, or make voluntary appearance as parties to the record. According to common law rules, a plaintiff cannot bring in parties not sued in an action of trespass by mere notice, when there is no pretense that they were trespassers. A judgment is always admissible as proof of its rendition when that fact is important or relevant, but not proof to charge a stranger directly by its operation. It follows that the judgment must be reversed, and cause re- manded for a new trial. ACCOKD. — Bailey v. Butterfield, 14 Me. 112; People v. Bussell, 25 Hun 524; People v. Zingraf, 43 111. App. 337; Rodini v. Lytle, 17 Mont. 448; State V. Leeds, 31 N. J. L. 185. The following cases hold that a judgnlent against a public officer for defaults is prima fame evidence, against the surety. Beauchaine v. McKinnon, 55 Minn. 318; Moses v. United States, 166 U. S. 571; Norris v. Mersereau, 74 Mich. 687; Dane v. Gilmore, 5l Me. 544; Carr v. Meade, 77 Va. 142; State v. Jen- nings, 14 O. S. 73; State v. Cason, 11 S. C. 392; Heath v. Shrempp, 22 La. An. 167; De Greif v; Wilson, 30 N. J. Eq. 435; Connor v. Corson, 13 S. D. 550; Stephens v. Shafer, 48 Wis. 54. In the case last cited the Court says: "The nature of the contract in official bonds is that of a bond of indemnity, to those who may suffer damages by reason of the neglect, fraud or misconduct of the officer. The bond is made with the full knowledge and understanding that in md.ny cases such damages must be ascertained and liquidated by an action against the officer for whose acts the sureties make themselves liable; and the fair construction of the contract of the sureties is, that they will pay all damages so ascertained and liquidated in an action against their prin- cipal. This construction of the contract is most reasonable, and works no hardship against the sureties. . . . The principal is the one who ought to be at the expense of the litigation, and who ought to pay the damages. He is also the one who has the knowledge of the facts, and is certainly better prepared to litigate the matter than the sureties, who are not sup- posed to have any knowledge of the transaction. Certainly the defense is likely to be properly made by the principal, who has full knowledge of the facts, and who is to suffer most severely in case of a decision adverse to him. In most cases of this kind, if the sure1:ie3 were sued in the first instance, with their principal, the defense of the action would be made by such principal; and yet the judgment in such an action would necessarily be conclusive upon all. Holding the judgment against the principal alone presumptive evidence, as SEC. 8.] PICO V. WEBSTEE. 411 against the sureties, of the facts established by such judgment, can fvork no hardship so long as the right is reserved to them of showing that the defense in such action was not made in good faith, was fraudulent, collusive, or suf- fered to be obtained through mistake as to the facts." Some cases hold that judgment against the officer is conclusive against his surety. Masser v. Stickland, 17 Serg. & E. 354; McMieken v. Comm., 58 Pa. 214; Thomas v. Markman, 43 Neb. 823; Chamberlain v. Godfrey, 36 Vt. 380. In Ames v. Maclay, 14 Iowa 281, judgment was first obtained against the surety and in a subsequent action against the principal the judgment was for the defendant, and the holding is that the surety is entitled to an injunction perpetually enjoining the collection of the judgment against him. 412 MUEDOCK V. BROOKS. [CHAP. VD. CHAPTER VII. JUDICIAL BONDS. Sec. 1. Statutory requirements and other formalities affecting ral' idity of bond. EGBERT MUEDOCK v. EOBEET C. BEOOKS. 38 Cal. 596 (1869). E. A. Lawrence, for appellants. P. G. Buchan, for respondent. Sanderson, J., delivered the opinion of the Court : This is an action upon an undertaking given on an appeal from a district court. The judgment in the court below was for the plaintiff. It appears that the undertaking was given in an action in which one Calderwood was plaintiff, and the defendant, Brooks, and others, were defendants. The action was to recover the pos- session of real estate. Calderwood obtained a judgment, and Brooks, desiring to appeal and to stay proceedings, gave the un- dertaking in question for costs and damages, and for the value of the use and occupation of the premises, pending the appeal, with his co-defendants as sureties. The judgment in favor of Calder- wood for the possession of the premises was affirmed, with costs to the amount of $41. Calderwood thereafter assigned the imder- taking to the plaintiff. The complaint counts upon both promises — the promise to pay costs and damages, and the promise to pay the value of the use and occupation of the premises. The defendants demurred to the complaint as a whole, and not to the counts separately. The ob- jections taken by the demurrer were: **#**$*♦ Second — The objection that it does not appear that the under- taking had the effect to stay execution is grounded upon the idea that an undertaking on appeal is of no effect, unless accom- panied by the affidavit of the sureties that they are each worth the amount specified therein, etc., as provided in the three hundred SEC. 1.] MUEDOCK V. BROOKS. 413 and fifty-fifth section of the, Practice Act. Whether the under- taking was accompanied by the affidavit of the sureties does not appear upon the face of the complaint, but it does appear from the facts there stated that further proceedings were never taken upon the judgment, and that Brooks had the full benefit of a stay pending his appeal. Such being the case, can he or his sureties be heard to say that the undertaking is void because all the forms 6t the statute, through their omission, were not complied with. It seems to be settled that the failure of the sureties to justify, if such was the case, constitutes no defense. This rule is deduced from the proposition, which no one disputes, that a party may waive a compliance with statutory conditions which are merely directory and intended solely for his benefit. The provisions of the statute which require the residence and occupation of the sureties to be stated, the penalty of the undertaking to be double the amount of the judgment, and the affidavit of the sureties that they are worth the amount specified in the undertaking over and above all their just debts and liabilities, exclusive of property exempt from execution, are directory, and a compliance therewith may be waived by the respondent, either expressly or impliedly, by failing to take any advantage of their non-observance, and treating and accepting the undertaking as sulBcient. In Dore v. Covey (13 Cal. 502), the residence and occupation of the sureties had been omit- ted, yet the undertaking was declared sufficient in an action upon it against the sureties. Justice Baldwin, speaking for the Court, said: " The respondent's argument, that the undertaking shall not stay execution, unless made in precise conformity with the statutory rules, is answered by the authorities cited, which hold, in effect, that these provisions are intended for the benefit of the other party, and that he may waive them, just as if the statute declared that no judgment should be rendered without service of process; but the defendant might waive the process or service. This waiver was made by the plaintiff below. He considered the appeal as regularly made, made no motion to dismiss, issued no execution and suffered the undertaking to have the full effect of a regularly executed instrument. In Blair v. Hamilton (32 Cal. 50), there had been an express waiver of justification, and for that reason the undertaking, without a justification, was held suf- ficient on a motion to dismiss the appeal. In the. case of the People V. Carpenter (7 Cal. 402) and the People v. Shirley (18 Cal. 121), the justification of the sureties was insufficient, but that fact was held to be no defense to an action upon a recognizance 414 ALLEN V. KELLAM. [ CHAP. TO. for the appearance of a party charged with crimb. In the latter case, Chief Justice Field said : ' ' The justification forms no part of the defendants' contract and in no manner affects their lia- bility. The insufSciency of the amounts would have been good ground for the County Judge to refuse his approval of the in- strument, but it does not lie in the mouth of the sureties to object, when the approval is given. " In this matter there is no distinction between bailbonds and undertakings of the character of the one in suit. Here, as well as there, " the justification forms no part of the defendants' contract and in no manner affects their liability." The insufficiency of the amounts would have been good ground for the County Judge to refuse his approval of the instrument, but it does not lie in the mouth of the sureties to object, when the ap- proval is given. ' ' In this matter there is no distinction between bailbonds and undertakings of the character of the one in suit. Here, as well as there, " the justification forms no part of the defendant's contract and in no manner affects their liability." Ward V. "Whitney (3 Sandf. S. C. 399) and Gibbons v. Berhard (3 Bosw. 635) are to the same effect. In the latter it was directly ruled that a eonaplaint upon an undertaking on an appeal 'is not, for the reasons above stated, bad on demurrer, because it omits to state that the undertaking was accompanied by the affidavit of the sureties that they are worth double the sum specified therein. Judgment and order affirmed. ALLEN V. KELLAM. 94 Pa. 253 (1880). Before Shaeswood, C. J., Mercur, Gordon, Paxson, Tbunket and Steeeett, J. J. Geeen, J., absent. Scire facias sur recognizance of bail in error by Peter Kellam against Martin B. Allen. H. M. Seely, H. Wilson and George 8. Purdy, for plaintiff in error. George G. Waller, for defendant in error. Me. Justice Steeeett delivered the opinion of the court, May 3d, 1880. The Act of 1836, relating to bail in error, provides that execu- tion shall not be stayed unless the plaintiff in such writ, or some SBC. 1.] ALLEN V. KELLAM. 415 one on his tehalf with sufficient sureties, shall become bound by recognizance with condition to prosecute the writ of error with effect, &c. A recognizance with a single surety is not a super- sedeas by mere operation of law, and the party in whose favor judgment has been entered in the court below may disregard it and proceed with his execution as though no recognizance had been given: Eheem v. Naugatuck Wheel Co., 9 Casey 356. But a recognizance defective in form may derive validity from the con- sent, express or implied, , of the parties intended to be affected by it. It is tendered to the defendant in error as security in con- sideration of the delay and risk to which he may be subjected, and if he elects to accept and treat it as valid, and for this reason forbears to proceed by execution pending the writ of error, neither the principal nor the surety can evade liability on the ground of non-epnformity to the requirements of the statute. The recog- nizance may be sustained as a voluntary personal contract based ou sufficient consideration. But such a state -of facts is not presented in this case. The plaintiff in error in his affidavit of defence, which was adjudged insufficient by the court below, says, among other things, that he was the only surety in the recognizance ; that after it was filed, and pending the writ of error, the plaintiff below treated it as a nullity, issued execution, and proceeded as though no recognizance had been given; that having so proceeded he lost no right or security by reason of the writ of error. The' facts thus alleged, if true, constitute a good defence; and for the pur- poses of the present inquiry we must assume that every all^gatioii contained in the affidavit of defence is strictly true. It may be that on the trial of the case the plaintiff below will be able to show what he now alleges — that execution was stayed and by com- mon consent the recognizance was treated as valid and binding. This may become a question of fact for the jury, but, in passing upon the sufficiency of the affidavit of defence, we cannot under- take to determine disputed questions of fact. The only pertinent inquiry in a case like this is whether the allegations of fact con- tained in the affidavit of defence, assuming them to be true, con- stitute a defence. The recognizance in this case was so defective in form that the defendant in error had a right to treat it as a nullity; and the allegation is that he did so treat it, " issued execu- tion, and proceeded therewith, peiiding the writ of error, as though no recognizance has been given." This, if true, is a good defense to the scire facias on the recognizance. Judgment reversed and a procedendo awarded. 416 CHESTEB V. BEODEEICK. [CHAP. Vn. ACOOED.— (Cochran v. Wood, 29 N. C. 215; B. & O. Ky. Oa v. Vanderwarker, 19 W. Va. 265; Jones v. Dorenbeiger, 23 Ind. 74. Although an appeal is executed by sureties whom the law prolulbits to act as securities, yet they will be held liable if the appeal is prosecuted. Johnson V. Noonan, 16 Wis. 687; Coughran v. Sundbaek, 13 S. D. 115; Braithwaite v. Jordan, 5 N. D. 196. Failure to comply with the statutory requirement for the justification of the secureties will not exonerate the sureties. Hill v. Burke, 62 N. Y. 111. If the bond lacks formalities required by the law such as the omission of the defeasance clause it can not be enforced. Waller v. Pittman, 1 N. 0. 237. Bond executed without requirement of the law will not be binding on the sureties, as where an administrator gives a bond in appeal who is exempted from giving bond by reason of having already given an adequate administra- tion bond. Such an undertaking is void for want of consideration. Buttlar V. Davis, 52 Tex. 74. See also Powers v. Chabot, 93 Cal. 266; Steele v. Crider, 61 fed. Eep. 484; Brounty v. Daniels, 23 Neb. 162; Hessey v. Heitkamp, 9 Mo. App. 36. It has been held that the exaction of a bond in appeal which contains con- ditions more onerous than the law requires, renders the bond wholly void. Newcomb v. Worster, 7 Allen, 198; Comm. v. Wistar, 142 Pa. 373; Dennison V. Mason, 36 Me. 431. Recitals in the bond that it has been perfected according to law will estop the obligors from claiming otherwise. Thalheimer v. Crow, 13 Colo. 397; Mix V. People, 86 111. 329; Meserve v. Clark, 115 111. 580; Fearous v. Wright, 6 Ky. L. Rep. 747. Sec. 2. Successive appeal bonds. JANE A. CHESTER, ET AL., v. LUCY BRODERICK, ET AL. 131 N. Y. 549 (1892). Appeal from judgment of the General Term of the Supreme Court. The claim was upon an undertaking executed by said Broderick as surety upon an appeal in an action for the foreclosure of a mortgage. Louis Marshall, for appellants. S. P. Babcock, for respondents. Peckham, tj". The general doctrine of subrogation may be as- sumed to be correctly stated by the counsel for, the appellants, but the doctrine itself has no application to the present case. The judgment creditor, having obtained the decree of foreclos- ure, had a right under it to sell the land described in the decree. The defendants' testator became one of the sureties on the appeal bond given by the judgment debtor to stay proceedings pending SEC. 2.] CHESTER V. BEODEEICK. '417 the appeal, and thereupon the right of the creditor to enforce her judgment was temporarily suspended. Upon the affirmance of the judgment of the General Term, the defendant in the judgment took a further appeal to the Court of Appeals, and upon that appeal two other persons became sureties to stay proceedings on the judgment appealed from. The bonds were given pursuant to section 1331 of the Code, under "which the amount is fixed by the court. In the bond given upon appeal to the General Term that amount was fixed at $7,000, and upon appeal to the Court of Appeals it was fixed at $9,000. After the final affirmance of the decree for a foreclosure, the land was sold, and there resulted a deficiency of between $11,000 and $12,000. The plaintiffs, in order to obtain payment of such deficiency, collected from the sureties on the second, or Court of Appeals, bond the full amount thereof, viz., $9,000, and novi^ a:lr to recover from the sureties on the first, or General Term, bond the balance of the deficiency, being about $2,500, and they have ob- tained a judgment for that sum, which the defendants seek to re- verse on this appeal. The position of the counsel for the defendants h that the plain- tiffs, by collecting the full amount of' the bond on appeal to the Court of Appeals, exhausted the liability of the sureties on that instrument, who were primarily liable for the debt secured by both bonds, and the plaintiffs thereby discharged the sureties on the first bond, because such sureties were in that way deprived of the right of subrogation against the sureties on the Court of Appeals bond. Upon the facts herein, there was no such right of subro- gation. In Hinckley v. Kreitz (58 N. Y. 583,) it was simply held in a case of this kind, where there are two bonds on appeal, one to the General Term and one to the Court of Appeals, and when each con- tains an agreement to pay the amount directed to be paid by the judgment if affirmed, the primary liability in the event of affirm- ance rests upon the sureties to the bond on appeal to this court, and that their release by the judgment-creditor without payment in full discharges the sureties in the General Term bond. This is no such case. There has been no release, but on the contrary, the sureties on the second bond have paid- its full amount to the very last penny. The counsel for the appellant claims that the first sureties were only secondarily liable, and yet upon his doctrine their liability amounts to nothing. The effect of his argument is to deprive the plaintiffs of all benefit of the first bond. If the sureties in the sec- ond one are first proceeded against and a full recovery against them 15 418 CHESTER V. BEODEEICK. [CHAP. W. to the amount of their bond is obtained, and a deficiency still exists the sureties in the first bond are not liable according to defendants' argument on the ground above stated. If on the contrary they are first proceeded against and a recovery to the full amount of their bond ($7,000) obtained, they are in that event entitled to be sub- rogated to the plaintiffs' rights in the second bond to the extent of such payment, and the plaintiffs can have only the balance of $2,000, making the $9,000 of the second bond. In this way the first sureties are in effect completely exonerated, for although they have paid the $7,000 of their bond, yet they are entitled to recover it all back from the sureties on the Court of Appeals bond, leaving only the balance of $2,000 on that bond for the judgment creditor. Such contention prevents the use of the first bond for the pur- pose of recovering any part of a deficiency which exceeds the amount of the second. The creditor has simply a double security for $7,000, and the single security of the second bond for $2,000 in addition, being the full amount of the second bond. This is not the real condition of the parties. The creditor has the security of the second bond and the sureties thereon are primarily liable. But the creditor has also the security of the first bond for the payment of the deficiency if it exceed the amount of the second bond, and, therefore, when such excess in fafet exists, no injury is done the first sureties by obtaining the full payment of the second bond, and resorting to them for the balance up to the amount of their own bond. There is in such event no right of subrogation, because the security to which under other circumstances the first sureties might have had the right to resort has been satisfied by the full pay- ment thereof and the apiplication of the proceeds to the payment of the liability! for which it was originally executed. It cannot be said that in enforcing the obligation of the sureties in the second bond, the icreditor has done any act which has in- jured the rights of the sureties in the first bond. The defendants have, therefore, shown no defense to this action, and the judgment must be affirmed, with costs. ^ ! : .il AH concur. Judgment affirmed. Accord. — Church v. Simmons, 83 N. Y. 261; Shannon v. Dodge, 18 Col. 164; Becker v. People, 164 111. 267; Boaz v. Milliken, 4 ICy. L. Rep. 700 Coonradt v. Campbell, 29 Kan. 391 ; Moore v. Lassiter, 16 Lea (Tenn.) 630 Howard Ins. Co. v. Silverberg, 89 Fed. Rep. 168; Babbitt v. Finn,' 101 U. S. 7. In .the case last cited the Court says : " Where the bond is given in a subordi- nate court to prosecute an appeal to effect in a superior, court, the sure- SEC. 3.] C, H. V. & T. RY. CO. V. BUKKE. 419 ties become liable if the judgment is affirmed in the superior court; nor are they discharged in case the judgment of the superior court is removed into a higher court for re-examination and a new bond is given to prosecute the second appeal, if the judgment is affirmed in the court of last resort. Noth- ing will discharge the sureties given to prosecute the appeal from the court of original jurisdiction, but the reversal of the judgment in some court having jurisdiction to correct, the alleged error." Where the judgment is reversed upon appeal and upon further appeal the judgment of reversal is reversed and the original judgment is affirmed the first bond is liable. Carroll v. McGee, 25 N. C. 13; Kobinson v. Plymton, 25 N. Y. 484; Crane v. Weymouth, 54 Cal. 476. In Stoll v. Padley, 100 Mich. 404 the bond was conditioned to pay such judgment as should be rendered in the court to which the appeal was first taken. The judgment was reversed in the intermediate court and subsequently affirmed in the higher court. It was held that the first bond was exonerated. See also Nofsinger v. Hartnett, 84 Mo. 549. Sec. 3. Bonds to procure injunctions. THE COLUMBUS, HOCKING VALLEY & TOLEDO RY. CO., ET AL., V. BURKE, ET AL. 54 0. S. 98 (1896). Error to the Circuit Court of Lucas County. The action below was cdmnlenced in the Court of Common Pleas of Lucas county upon two injunction undertakings. The undertak- ings were given in a suit brought by the Columbus, Hocking Valley & Toledo Railway Company against Stevenson Burke, et al., in the Court of Common Pleas of Franklin county; claiming to be the owner of certain stocks and bonds as against the defendants; and asking that the defendants be restrained from disposing of them until the further order of the court. A temporary injunction was allowed on the giving of one of the undertakings mentioned, which, after reciting the making of the order and its terms, is as follows: "Now, therefore, we, the Columbus, Hocking Valley & Toledo Railway Company by J. W. Shaw, president, P. W. Huntington and Walter Crafts, hereby undertake to the said Stevenson Burke, Charles Hickox and others in the sum of one hundred thousand dol- lars that the said plaintiff; the said The Columbus, Hocking Valley & Toledo Railway Company, shall pay to the said Stevenson Burke, Charles Hickox and others all damages which they, the said 'de- fendants may sustain by reason of the issuing of said injunction if 420 C, H. V. & T. RT. GO. V. BURKE. [CHAP. VH. it should be finally decided that the said injunction ought not to have been granted. ' ' (Signed,) ' ' The Columbus, Hocking Valley & Toledo Railway CoMPA^fY, by "J. W. Shaw, President. " P. W. Huntington. " Walter Crafts." On motion of the defendants the venue of the action was changed to Licking County, where, upon their application, an additional undertaking in the sum of $100,000, was required and given. Its terms were similar to the first, being conditioned for the payment of all damages the defendants may have sustained, " in case it be finally decided that the injunction ought not to have been granted." Afterwards the parties entered into an agreement of arbitration in which all the issues of law and fact were referred to three ar- bitrators, in which it was stipulated that the award of the arbi- trators should be final and conclusive upon all parties, and that the submission to arbitration should not in any way impair the liability of the plaintiff upon the bonds executed in the procuring! of the injunction. Upon the hearing the arbitrators f o\md in favor of the defendants and thereafter the plaintiffs, in pursuance of the terms of the award caused a dismissal of the action to be entered upon the Journal of the Court, and upon motion of the de- fendanti? the injunction was vacated and the plaintiffs adjudged to, pay the costs. The Journal recited that the dismissal was with the " consent " of the defendants. J. B. Foraker; J. K. Richards; Elihu Root; Thomas McDougall; C. 0. Saunter; S. B. Clarke; Bissell & Corrill and E. A. Guthrie, fqr plaintiffs in error. Stevenson Burke and Doyle, Scott & Lewis, for defendants in error. MiNSHALL, C. J. The case gives rise to the following questionst. and, if any of them, cannot be answered in the negative, the judg- ment must be affirmed : 1. Is the award of the arbitrators the decision contemplated by the undertakings? 2. Did the dismissal of the action by the consent of the parties estop the defendants from insisting on the terms of their under- takings ? 3. Does the provision in the agreement of submission, that its SEC. 3.] 0., H. V. & T. EY. CO. V. BUEKB. 421 execution should not impair the liability of the defendants on either of the undertakings, preclude them fropa insisting that it has not been judicially decided that the injunction ought not to have been granted? 4. Was the dissolution of the injunction after the award and the dismissal of the action, such a decision? We will consider these questions in their order; and shall, hereafter, speak of these undertakings as bonds, and for con- venience, use the singular, as what is true of one is true as to both. 1. No action can be maintained on the bond except in accordance with its terms. The liability of the principal and sureties is the same — it is on the bond; and no action on it will lie against the principal where it would not lie against the sureties. This may be regarded as settled law. In Bien v. Heath, 12 How. U. S. 168, it is said by Taney, C. J., that, " In a proceeding upon a bond, the liability of the principal cannot be extended beyond that of the sureties," and the bond there under consideration was an in- junction bond. This case was followed and approved by this court in Krug v. Bishop, 44 Ohio St. 221. See, also, in this connection, the cases of Palmer v. Foley, 71 N. Y. 106, and Johnson v. Elwood, 82 N. T. 362, 365. As observed by counsel this is conceded by the form of the present action. It is on the bond and the conten- tion of the plaintiffs is, that the terms of the bond have been com- plied with. No action can be maintained on, the bond without a decision that the injunction ought not to have been granted. And this presents the question whether the award of the arbi- trators is the decision required by the terms of the bond, in an ac- tion on it for damages. We think it is not. The decision contem- plated by the bond, without doubt, had reference to a decision by the court on the merits of the ease, in which the action was pend-r ing. It was required and given in pursuance of the statute, section 5576, Eevised Statutes, and could have had reference to no other decision by any known rule of construction. There is a marked difference, as we shall presently show, between such a decision and the award of the arbitrators in this case. There has been much dis- cussion, as to whether the arbitration had, was a common law or statutory one. If it were material to decide this we should be compelled to hold that it was a common law arbitration, n, ^ ^ But the question here is, not what the arbitration had should be ealled, but whether the decision by the arbitrators is the decision, or its, equivalent, required by the bond in an action on it. In' a decision by the court the law requires that it shall conform to the 422 C, H. V. & T. EY. CO. V. BUEKE. [CHAP. TO. law and the facts of the ease, if it do not, by taking the proper steps, its judgment may be reversed by the proper tribunal ax the suit of the party aggrieved. But such is not the case as to the award made by the arbitrators in this instance, under the agreement of submission between the parties. It is true that the issues of law and fact between the parties in the case were referred to the arbitrators to be heard and determined as a court. But whether they so heard the case or not, whether they erred both as to the law and the facts, no remedy was provided, and none could be had, however erroneous, their award might be in point of law and fact. They heard the case as a quasi court at most, not as the ministers of justice appointed by the law ; and their judgment was to be, and is, final and irreversible by any tribunal. If there had been a pro- vision that the award ghould be made a rule of court, and subject to be set aside or confirmed by it on a review of the law and facts on which it was made to rest, there would be some ground for the argument, that it is the equivalent of the decision required by the bond. !|:««4!***««***4:***** 2. It is, however, claimed that the plaintiff, after obtaining the injunction, voluntarily dismissed its action, and is thereby estopped from insisting on the terms of the bond ; and a large number of authorities are cited in support of this proposition. We have care- fully examined these cases, and see no reason to question the de- cision in any of them. When a plaintiff obtains an injunction by giving a bond to answer for such damages as may be caused the de- fendant by its allowance, and, afterward voluntarily and without the consent of the defendant, dismisses his action, there is much reason for holding that he should be estopped to say, in an action on the bond, for the recovery of damages, that it has not been decided that the injunction ought not to have been granted. For, in such case, he, by his own act, has prevented the defendant from having such a decision. And such is the substance of the holding in the various cases cited by counsel for the defendant in error. But none are cited, and we have found none, that the same rule ap- plies, where the dismissal is with the consent of the defendant. And there is not the same reason for holding that it should. In such case the defendant has an opportunity to insist that, before the dismissal is had, the court determine whether the injunction ought to have been granted, so that an action may be prosecuted on the bond, if such is his purpose. If he fails to do this, and consents to the dismissal of the action, his conduct is consistent with the in- ference that he intends to waive any right he may have on the bond. SEC. 3.] C, H. V. & T. BY. CO. V. BURKE. 423 It may be, and no doubt frequently happens, that, in such case, the defendant is content to be left with a recognition of his right by the plaintiff to the subject of dispute, without further litigation; and consents to the dismissal for such reason. But whether such be his intention or not, in such case, he cannot, for want of a predi- cate maintain an action on the bond : For it has not been determined that the injunction was wrongfully granted and the defendant is not estopped from insisting on the fact. The dismissal in this case, as shown by the record, was by consent of the parties. The effect of the entry so made, is not varied by the fact that the entry shows that the plaintiff dismissed its action because it had been awarded that it had no cause of action, and should dismiss its case ; for if the award had not the effect of a judicial determination of that fact, such effect was not imparted to it by stating it as the reason for dismissing the action, unless it may be claimed that, by doing this, the plaintiff admitted that the award is right. There is no such express admission nor can this be inferred from the entry. All the entry admits is that such award had been made, not that it is right, and that by it he is required to. dismiss the action; and, if he does not, the defendant can, by pleading the award in a supple- mentary answer, cause tJie suit to be dismissed, because he had made a binding agreement to dismiss it, if it should be so awarded. And if the latter course had been pursued, it would then be quite clear, that the dismissal by the defendants would not have availed them in an action on the bond, unless the award of itself would be a sufiScient predicate; which we have shown it is not. The entry only conformed to the agreement, and relieved the defendants from the necessity of filing a supplementary answer, and causing the action to be dismissed on the award made in pursuance of the ar- bitration agreement. It is the substance of the thing done, and not its form, that is to be considered and have effect. In all the cases with which we are familiar, or that have been cited in argument, the courts have required, as a necessary predicate, in an action on the bond, a judicial determination of the merits of the case in favor of the defendant in the action in which the bond was given, either in a trial on the merits or on a motion to dissolve the injunction, except those where the plaintiff dismisses his action without the consent of the defendant. ************ 3. The defendants in error also rely on the provision in the agreement of submission, that its execution should not " in any wise impair the liability " of the obligors on the bond. But this stipulation cannot be so construed as to impair any of the rights 424 C., H. V. & T. RT. CO. V. BUKKE. [CHAP. TO. of the obligors. To insist on the terms of the bond is one of their fights and does not impair their liability. It was wisely inserted, as without this provision it might have been contended, and in fact has been, that the submission to arbitration of itself worked a dis- continuance of the actioUi This has been held by many respectable courts, in the case of a common law submission. Morse on Arbitra- tion, 267; Mooers v. Allen, 35 Maine, 276 ; Bigelow v. Goss, 5 Wis. 421 ; Larkin v. Bobbins, 2 Wend. 503 ; Green v. Patcheh, 13 Wend. 293. 4. As to the dissolution of the injunction, this we think, is of no ayail to the plaintiffs, in their action on the bond, for several rea- sons: (1) It was a useless act and determined nothing. The temporary injunction perished with the dismissal of the action, so that there was nothing to dissolve. It was a mere incident to the action and could not survive it. ********** Judgments of the circuit court and of the common pleas, reversed and judgment for the defendants below upon the pleadings and the admitted facts in the case. BuRKET, J. (dissenting). I concede that under the conditions of the bonds, it was the right of the railway company to have the question as to whether or not the injunction ought to have been granted, decided by the court, and that this right would continue until waived by agreement of the parties. The right to have the court decide whether the injunction ought to have been granted or not, is a right which may be waived by the parties and changed by contract. In civil cases any right may usually be waived unless otherwise provided by statute. A party whose insured property is destroyed by fire has a right to have the value thereof ascertained by a court and jury, yet this right may be waived by agreement of the parties in the policy, to the effect that such value shall he fixed by appraisers or arbitrators, and such agreements are held valid and conclusive. Hamilton v. Insurance Company, 136 U. S. 242. The right to a trial by jury may be waived, and even the uncon- stitutionality of statute may be waived. Tone v. Columbus, 39 Ohio St., 281. In this case the parties, by their agreement, submitted all the issues of law and fact to the arbitrators for their decision and determination, and bound themselves to stand by and perform their award, and agree that the submission award and its performance should not in any way impair the liability of the railway company SEC. 3.] C, H. V. & T. EY. CO. V. BURKE. 425 upon the bond, and thereby the parties waived a decision of the merits of the case by the court, and agreed that the decision should be by the arbitrators. > A decision of. the merits of the case is necessarily a decision as to whether the injunction ought to have been granted or not, be- cause injunctions ought to be granted only in ca?es wherein the plaintiff succeeds on the merits. A decision on the merits in favor of the defendant, is a decision that the injunction ought not to have been granted. An injunction is always granted to remain in force until otherwise ordered, and when the case is decided in favor of the defendant it is by force of the judgment of its own vigor other- wise ordered, without saying anything about the injunction or the dissolution thereof, although the usual and better practice is to dissolve the injunction by specific order in the judgment entry. So that while the submission says nothing about submitting to the arbitrators the question as to whether or not the injunction ought to have been granted, that question was necessarily included within the merits of the case — " the issues of law and fact " — and was necessarily submitted therewith and was necessarily passed upon and decided by the award. The rule that the greater includes the less, is here applicable. An injunction is one of the provisional remedies provided for in division six of the Practice Act in the Re- vised Statutes, and such provisional remedies are incidents to ac- tions in which they are allowed, and a disposition of the action on its merits necessarily disposes of the merits of the incident, because the incident can not survive the final disposition of its principal, unless by special order, as is sometimes done, some question of the iQcident is retained for future disposition and decision, as in the ease of the final distribution of funds in the hands of a receiver. But the usual and better practice is to dispose of the merits of the provisional remedy in the same entry with the final judgment on the merits and as a part thereof, as is usually done in cases of at- tachment. When the incident is disposed of with the principal in the same entry, the judgment as to the incident is of as much bind- ing force as the judgment as to the principal. The submission was in writing, and the question as to whether thereby the matter of the injunction was submitted to the arbitrators was a question of law to be determined by a construction of the legal effect of the submission itself, and this construction could not be varied, altered or changed by the averments or admissions of the parties in their pleadings. Properly construed the submission car- 426 C, H. V. & T. KT. CO. V. BUEKE. [CHAP, va. ried the merits of the whole controversy to the arbitrators, which ;neeessarily included the merits of the injunction; and the award when it decided the merits of the case, necessarily decided the merits of the injunction included therein. And this result was not -and cotdd not be changed by the averment on one side, and the admission on the other, that the question as to whether the injtme- tion ought or ought not to have been granted, was not submitted to, or decided by the arbitrators. Turner's Appeal, 48 Mich., 369; S. C. 12 N. W. Rep., 493. This averment and admission contradict the legal effect of the submission and award, and cannot be true, and should be disregarded. A decision by a court having been thus waived, and a final decision procured by a board of arbitrators agreed upon, it can not be fairly said that the question as to whether the injunction should have been granted or not is still open and undecided. The eon- tracts contained in the bond and in. the submission, were as to the principals, two written contracts as to the same case and same sub- ject matter, and should be construed together, and when so con- istrued the submission modified the conditions of the bond, to the «xtent that the whole merits of the case, including the injunction, should be decided by the arbitrators, and by the award this ques- tion was fully decided,, and it matters not to this court whether it was decided right or wrong. It was just as competent for the parties to stop with the decision of the question by the arbitrators, as to stop with the decision of the Common Pleas Court. A judg- ment need not be reviewed and passed upon by a higher court to make it binding. A release of errors and the right of appeal, while it cuts off the right of review in a higher court, does not invalidate or weaken the force of the judgment, even though it should appear upon looking into the judgment in a collateral proceeding^' that there was error therein. The conditions of the bond have therefore been broken, and the contingency upon which the damages were to be paid has arisen. By the court agreed upon and selected by the parties — the arbitrators -- it has been decided that the plaintiff had no cause of action against the defendant, and therein was in- cluded a decision that the injunction ought not to have been granted. This decision the railway company bound itself to stand to and perform, and it can not now be heard to say, or even sug- gest, that there was error in that decision. As between the parties that decision is conclusive, and is a final determination of all their rights. *********:^„,^^,„„,,^#« There are many cases which hold that if the case is settled or difr SBC. 3.] C, H. V. & T. ET. CO. V. BUKKE. 427 posed of by agreement of the parties, that an action on the in- junction bond cannot be sustained ; and a dismissal of the action by mutual consent of both parties jnay be included in the principle of such cases, but I doubt it. By the dismissal, the plaintiff con- cedes that he has no cause of action against the defendant, and where there is no cause of action there can be no cause for an in- junction. The defendant, by consenting, agrees with the plaintiff that there is no cause of action or cause for injunction in favor of the plaintiff against the defendant. The legal effect of such dis- missal is, therefore, the equivalent of a determination by the court, upon the confession of the parties, that there existed no cause of action and that the injunction ought not to have been granted. To shield a plaintiff from an action on the bond, the dismissal must be in the nature of a compromise, and that fact must appear of record. I think that when closely examined, none of the cases conflict with this theory, and if any of them do, I should refuse to follow them because they cannbt be sustained on principle. * • * * Shauck, J., concurs in this dissenting opinion. A dismissal of an injunqtion proceeding without prejudice because some of the defendants were not served creates no liability on the bond. Krug v. Bishop 44 0. S. 221. A dismissal by the Court for want of prosecution is considered a final determination that the injunction ought not to have been granted. Penniman V. Richardson, 3 La. 101; Manufacturers' & Traders' Bank v. Dave, 67 Hun 44; Kane v. Casgrain, 69 Wis. 430; Dowling v. Polaek, 18 Cal. 625. A voluntary dismissal by the plaintiff is deemed equivalent to a judgment, being an admission that the injunction ought not to have been allowed. Frahm v. Walton, 130 Cal. 396; Alliance Trust Co. v. Stewart, 115 Mo. 236; Pacific Mail S. S. Co. v. Toel, 85 N. Y. 646; Roach v. Gardner, 9 Gratt. 89; Gyger v. Courtney, 59 Neb. 555; Tulloek v. Mulvane, 61 Kan. 650; Pugh v. W^iite, 78 Ky. 210; Yale v. Baum, 70 Miss. 225. If the action of the Court dissolving the injunction is based upon facts arising after the allowance of the writ, it is not a judicial determination that the injunction was wrongfully issued and does not amount to a breach of the bond. Apollinaris Co. v. Venable, 136 N. Y. 46; Scott v. Frank, 121 Iowa, 218; Yarwood v. Cedar Co., 37 Wash. 56. In Betts v. Mougin, 15 La. An. 52 the injunction was^ dissolved because the plaintiff had furnished an insufficient bond — this was held to constitute a breach of the bond. See also Bently v. Harris, 2 Gratt. 357. It is held that the dissolution of the injunction as to a part of the relief prayed for or as to one of several parties enjoined, does not constitute a breach of the bond. Walker v. Pritchard, 34 111. App. 65; Ovimgton v. Smith, 78 111. 250; Penny v. Holberg, S3 Miss. 567. CoNTBA.i— Pierson v. Ells, 46 Hun. 336; Rice v. Cook, 92 Cal. 144. 428 ROBERTSON V. SMITH. [CHAP. VH. ROBERT S. ROBERTSON v. ALONZO G. SMITH. 129 Ind. 422 (1891). Messrs. Winter & Elam, for appellant. Messrs. Aquilla Q. Jones and Addison C. Harris, for appellees. MiULiER, J., delivered the opinion of the Court : The appellee Smith brought an action against the appellant in the Marion Circuit Court in which he asked an injunction. In connection with the conaplaint a bond was filed by the appellees, by which they obligated themselves to the defendant in the action for the payment of all damages and costs which might accrue by reason of the injunction or restraining order prayed for. Upon a hearing the court awarded an injunction until the further order of the court. The cause was appealed to this court, thg judgment re- versed, and cause remanded, with instructions to the Circuit Court to dissolve the restraining order. Robertson v. State, 109 Ind. 79, 7 West Rep. 481. This action is upon the injunction bond to re- cover attorney's fees and other expenses incident to resisting the application for the injunction and procuring its dissolution. The sole question in the case arises out of the ruling of the court in overruling the demurrer to the third and fourth para- graphs of the answer. The fourth paragraph of answer is as fol- lows: " Fourth paragraph: The defendants, for a further an- swer to plaintiff's complaint herein, say that they admit the execu- tion of the bond or undertaking sued on in this cause, and the grant- ing of the injunction by said Circuit Court as set out in said com- plaint ; but defendants say that said Circuit Court had no jurisdic- tion over the person of said Robertson in said suit of Smith v. Rob- ertson, and that the granting of said injunction was void, and that by reason thereof said bond or undertaking now sued on herein be- came and was wholly invalid." The third paragraph is in sub- stance the same, except that, in addition to the facts set out in the fourth paragraph, it avers that the sole object of the suit was not for the purpose of obtaining an injunction, but was for that and other relief, and that the expenses and attorney's fees were in part incurred on account of the other relief sought in the action, and therefore not recoverable in this action. The position of the appellee, who executed the injunction bond upon which the order was obtained, is that the bond is invalid, and that no recovery can be had upon it by the party against whom the injunction was granted, because the court had no jurisdiction over SEC. 3.] ROBERTSON V. SMITH. 429 the person of the defendant; while the appellant claims that, hav- ing been brought into court, and an injunction obtained wrongfully against him, he had a right to have it dissolved by the court, and that for his attorney's fees and other necessary expenses in so do- ing he has a cause of action upon the bond. As the positions as- sumed by the counsel for both parties are in harmony upon the question of the want of jurisdiction in the Circuit Court to grant the injuetion, and that the defendant in that action might have dis- regarded and treated it as absolutely void, we need not stop to dis- cuss these matters. The question we must determine is whether the defendant in such action had the right to resist the making of the order, and to apply to the courts for its dissolution, and, after having successfully done so, hold the plaintiff upon his bond for the necessary expense incurred in the proceeding. If the conten- tion of the appellees is the correct one, the position of a party against whom an injunction has been granted by a court of general jurisdiction is an embarrassing one. He must determine for him- self whether the court has jurisdiction to make the order. If in addition to the propositions of law involved, there are disputes con- cerning the place of his domicil, he must at his peril determine how that question of law and fact will ultimately be decided. If he concludes that the court has not jurisdiction, and disobeys its order he will be fined and imprisoned for contempt. If, on the other hand, he concludes to obey the order, and leave it to the court to determine the question of its validity, then however much he may be injured by it, he has no remedy. We have arrived at the conclusion that neither reason nor the weight of authority will compel a party litigant to occupy this anomalous position. An injunction cannot be granted without a bond. The agreement in the bond to pay damages resulting from it is clear and explicit. Damages must, from the nature of the case, result if the defendant is restrained from doing that which he has a right to do. He must resist the order, and must, by himself or counsel, defend him- self against proceedings for contempt. He cannot go his way as ^though no such order had been granted, however invalid and un- authorized it may be. It cannot fairly be said that he has an election to disregard the order, for he is put in a position where he must vindicate his rights, one way or another, before a court. This being true, it would seem remarkable that he should be re- quired to do this at his own expense, when there is a bond given for the very purpose of protecting; him from the wrongful action of the 430 RUSSELL V. FARLEY. [CHAP. VH. The cause is therefore reversed, and remanded for further pro- beedings in accordatice with this opinion. Accx)BD. — Cumberland Coal & Iron Co. v. Hoffman, 39 Barb. 16; Walton V. Beveling, 61 111. 201; Hanna v. McKenzie, 5 B. Hon. 314; Adams v. Olive, 57 Ala. 249. CoNTBA; — Browne v. Edwards, 44 Neb. 361. RUSSELL V. PARLEY. 105 U. S. 433 (1881). Mr. Richard L. Ashurst and Mr. Thomas E. Eubbard, for the appellant. Mr. Henry J. Horn, for the appellee. Me. Justice Bradley delivered the opinion of the court. This case comes before us by appeal from a decree in a case in equity wherein Jesse P. Farley, as receiver of certain branch lines of the St. Paul and Pacific Railroad Company, and of all lands and other property appurtenant thereto, was complainant^ and the firm of De Graff & Co., the Northern Pacific Railroad Company, the Lake Superior and Mississippi Railroad Company, B. S. Russell, G. W. Cass receiver of the Northern Pacific Railroad Company, and C. W. Mead, general, manager of said company, were defend- ants. ifitHiiiiit^if.ilfitiii** ******* The bill in this case was filed by the receiver in the State District Court for the county of Ramsey on the 21st of June, 1875, seeking to set aside the respective transfers of iron by virtue of which De Graff & Co. and Russell claimed to hold it, and for an injunction to restrain them from removing it, or taking it from the custom-house. ******************* On filing the bill in this cause, the complainant (the said re- ceiver) obtained a temporary injunction upon giving to the de- fendants a bond in the penalty of $10,000, with the following con- dition, to-wit: " Whereas the said plaintiff is about to apply *o this court for a temporary injunction enjoining and restraining the defendants, and each of them from shipping, removing^ selling, hypothecating, transporting, interfering, or intermeddling with 4,560 tons of iron rails now lying at Glyndon and Duluth, Minne- sota, or any part thereof : Now, therefore, if the plaintiff will paj the parties enjoined by such writ, or retained thereby, such damages as they or either or any of them may sustain by reason of the writ, SEC. 3.] EUSSELL V. PARLEY. 431 if the court finally decide that the party was not entitled thereto, the above obligation shall be void, else of full force and virtue." De Graff & Co. having by consent rebonded 1,000 tons of the iron claimed by them, the court, on the 11th of August, 1875, re- quired a further bond from the complainant in the sum of $79,000, the condition of which was as follows, to-wit: " Whereas an in- junction has heretofore been granted in this court enjoining and restraining the said defendants, and each of them, from shipping, removing, selling, hypothecating, transferring, or interfering, or intermeddling with 4,500 tons of iron rails now lying at Glyndon and Duluth, Minnesota, or any part thereof ; and whereas said in- jmiction is still in force and effect except as to one thousand tons of said iron, claimed by said De Graff & Co., at Duluth, aforesaid ; and whereas the said court has ordered, as a condition for the con- tinuance of said injunction, that the plaintiff execute to the de- fendants herein a bond in the sum of seventy-nine thousand dollars, in addition to the bond for ten thousand dollars heretofore given by the plaintiff on the issuance of the injunction : Now, therefore, if the plaintiff will pay the parties enjoined by such injunction, or detained thereby, such damages as they, or either or any of them, may sustain by reason of such injunction, if the court finally de- cide that the party was not entitled thereto, the above obligation shall be void, else of full force and virtue. " ******* Had the cause remained in the State. Court, there can be no doubt that that court, under the Minnesota statute which required an injunction bond to be given, could have determined the question ' of damages. The statute expressly declares that ' ' the damages may be ascertained by a reference, or otherwise, as the court shall direct." But the Circuit Court of the United States is not gov- erned in its practice in equity by the laws of the State in which it sits, but by the rules of practice prescribed by this court and by the Circuit Court not inconsistent therewith; and, when these are silent, by the practice of the High Court of Chancery in England «"|i!fevailing when the equity rules were adopted, so far as the same may reasonably be applied. Equity Eule 90. The injunction bond taken by the State Court, it is true, comes into the Circuit Court with the other proceedings in full force ; but the power of the Cir- cuit Court to deal with it depends upon the principles which govern the practice of that court, the same as if it had been originally taken by its direction. The question then arises whether the Circuit Courts have any power to make a decree on the subject of damages arising from an 432 RUSSELL V. FAELET. [CHAP.TO. injunetion, where an injunction bond has been required. Where no bond or undertaking has been required, it is clear that the court has no power to award damages sustained by either party in conse- quence of the litigation, except by making such a decree in reference to the costs of the suit, as it may deem equitable and just. Has it any such power, or any power over the subject, where such a bond has been given ? For a solution of this question it will be proper to advert briefly to the history and object of his kind of obligations. It is a settled rule of the Court of Chancery, in acting on appli- cations for injunctions, to regard the comparative injury which would be sustained by the defendant, if an injxmction were granted, and by the complainant, if it were refused. Kerr on Injunctions, 209, 210. And if the legal right is doubtful, either in point of law or of fact, the court is always reluctant, to take a course whiel may result in material injury to either party; for the damage arising from the act of the court itself is damnum absque injuria, for which there is no redress except a decree for the costs of the suit, or, in a proper case, an action for malicious prosecution. To remedy this difficulty, the court, in the exercise of its discretion, frequently resorts to the expedient of imposing terms and condi- tions upon the party at whose instance it proposes to act. The power to impose such conditions is founded upon, and arises from, the discretion which the court has in suCh cases, to grant, or not to grant, the injunction applied for. It is a power inherent in the court, as a court of equity, and has been exercised from time immemorial. The older authorities refer to numerous instances in which it has been exercised. Chief Baron Gilbert in his Pomm Eomanum, p. 196 (repeated in Bacon's Abridgment, title Injimc- tion, C), speaking of the course where an answer is put in, denying the equity of the bill, followed by a rule wm to dissolve the injunc- tion, says : ' ' The plaintiff must show cause either upon the merits, or upon filing of exceptions; if upon the merits, the court may put what terms they please upon him, as bringing in the money, or paying it to the party, subject to the order of the court, or giving judgment with a release of errors and consenting to bring no writ of error, or to give security to abide the order on hearing, or the imc. ****************** The same practice has prevailed in this county, in some cases in pursuance of statute, and in others, by the action of the court it- self. As early as 1723 a law was passed in Maryland, that any person desiring to proceed in equity against a verdict or judgment rendered against him in the County Court, should be required to SBC. 3.] RUSSELL V. PARLEY. 433 give security in double the amount of the debt for the prosecu- tion cf the injunction and payment of debt and all costs and damages that should accrue in the Chancery Court, or should be occasioned by the delay unless the Court of Chancery should decree to the contrary, and in all things obey such order and decree as the court should make. In 1793 an additional law was passed, to the effect that whenever application should be made for an injunc- tion to stay proceedings at law, the Chancellor should have power and discretion to require the applicant to give a bond to the plain- tiff at law, with condition to perform such order or decree as the Chancellor should finally pass in the cause. Similar laws were passed in Virginia in 1787, and in New Jersey in 1799, and no doubt in other States at an early date. Their ob- ject was, where an adjudication had already been had at law, to make it compulsory on the Chancellor to require security before granting an injunction. The jealousy of the courts of law at the in- terference of the Court of Chancery with their judgments is a matter of historical notoriety. But these laws did not interfere with the Chancellor's discretionary power to require a bond in all other cases. Regidations substantially similar to those above adverted to were prescribed by general rule of the Court of Chancery of New York prior to the adoption of the Eevised Statutes. In 1828 they were codified, with amendments, in that revision. But the rule, as well as the statute, only related to injunctions for staying proceedings at law. In 1830, the Chancellor of New York, for the first time, made a general rule (No. 31), that where no special provision was made by law as to security, the vice-chancellor, or master, who allowed an injunction out of court, should take from the complainant, or his agent, a bond to the party enjoined, either with or without sureties in the discretion of the officer, in such sums as might be deemed sufficient, not less than $500, conditioned to pay such party all damages he might sustain by reason of such injunction if the court should decide that the complainant was not entitled to the same; and that the damages might be ascertained by a reference or other- wise, as the court should direct. ********** ; But no act of Congress or rule of this court has ever been passed or adopted on this subject. The courts of the United States, there- fore, must still be governed in the matter by the general principles and usages of equity. To these we have already adverted so far as concerns the power to require security or impose terms before 16 434 EUSSELL V. FAELET. [CHAP. Vn. granting an injunction. It remains to notice the control which a Court of Chancery may exercise in relieving from or modifying siich terms during the progress or at the termination of the cause, and of enforcing and carrying out the conditions imposed or the undertakings entered into. ************ But then arises the question (not essential, however, to be de- cided in this case), how the damages should be assessed, and on this point different opinions have been entertained. Sometimes the form of the bond itself, or the order requiring it, or the statute or rule of court under which it is given, prescribes the mode of assessment, as by a reference, or otherwise, as the court shall direct. This is the ordinary course in England, and is that prescribed in Chancellor Walworth's order, which, as before stated, is followed in several State statutes, and, amongst others, in the statute of , Minnesota. In such case no question can arise as to the authorilf of the Court of Chancery to cause the damages to be assessed under its own direction. But where, as in the present case, no specific provision is made either in the bond, or by any statute or rule of court, and the con- dition of the bond is simply to pay such damages as the parties en- joined may sustain by reason of the injunction if the court finally decide that the party was not entitled thereto, as before stated some difference of opinion exists as to the power of the Court of Chancery to assess the damages, and whether the only proper method is not an action at law on the bond. The appellants insist that the latter is the only proper and legal course. In the case of Bein v. Heath (12 How. 168, i'79), Mr. Chief Justice Taney made this remark : "A court proceeding according to the rules of equity cannot give a judgment against the obligors in an injunction bond when it dissolves the injunction. It merely orders the disso- lution, leaving the obligee to proceed at law against the sureties, if he sustains damage from the delay occasioned by the injunction." In that case, an injunction bond had been given to stay proceeding on an executory process in the Circuit Court for the District of Louisiana, and, in an action on the bond, that court had given judgment against the sureties, not merely for the damages arising from the delay caused by the injunction, but for the whole debt, interest and costs, in accordance with the law of Louisiana, where injunction bonds are binding to that extent, and where judgment is usually given against the sureties as parties to the cause. On dismissing the injunction, similar to the proceeding against stipu- lators in admiralty. This court held that the circuit courts sitting BEC. 3.] RUSSELL V. PARLEY. 435 in equity could not take such a bond, or give it such effect, and reversed the judgment. The remark that the bond must be prose- cuted at law was a mere passing remark; it was so prosecuted in that ease; but from the great experience of the Chief Justice, it undoubtedly expressed the prevailing practice with regard to ordinary injunction bonds given under the Maryland statute in cases of injunctions to stay proceedings at law. Whether the remark can be understood as having a wider scope is doubtful. ^^ ^ 4, 4, Other cases are referred to by the counsel of the appellants to sustain their position; but upon a careful examination we are not satisfied that they furnish any good authority for disaffirming the power of the court having possession of the case, in the absence of any statute to the contrary, to have the damages assessed under its own direction. This is the ordinary course in the Court of Chancery in England, by whose practice the courts of the United States are governed, and seems to be in accordance with sound principle. The imposition of terms and conditions upon the parties before the court is an incident to its jurisdiction over the case ; and having possession of the principal case, it is fitting that it should have power to dispose of the incidents arising therein, and thus do complete justice, and put an end to further litigation. We are inclined to think that the court has this power; and that it is an inherent power, which does not depend on any provision in the bond that the party shall abide by such order as the court may make as to damages (which is the usual formula in England) ; nor on the existence of an express law or rule or court (as adopted in some of the States) that the damages may be ascertained by reference or otherwise, as the court may direct ; this being a mere appendage to the principal provision requiring a bond to be taken, and not conferring the power to take one, or to deal with it after it has been taken. But whilst the court may have (we do not now un- dertake to decide that it has) the power to assess the damages, yet if it has that power, it is in its discretion to exercise it, or to leave the parties to an action at law. No doubt in many cases the latter course would be the more suitable and convenient one. * * # * Decree affirmed. The rule of the Federal Court under which the court dissolving the injunc- tion summarily assesses damages against the sureties upon the bond, has been followed in Meyers v. Block, 120 U. S. 207; Tyler Min. Co. v. Last Chance Min. Co., 90 Fed. Eep. 15; Leslie v. Brown, 90 Fed. Rep. 171; St. Louis v. St. Louis Gas Light Co., 82 Mo. 355; Howell v. Cronan, 31 La. An. 247; White V. Brown, 10 Lea. (Tcun.) 685. 436 COOK V. CHAPMAN. [CHAP. VH. ANDREW D. COOK v. GEORGE M. CHAPMAN. 41 N. J. Eq. 152 (1886). Mr. J. Henry Stone, for complainant. Mr. William 8. Gummere and Mr. Oscar Keen, for defendant. Van Fleet, V. C. The questions now before the court for decision arise on excep- tions to a master's report. When the bill in this ease was filed, the complainant obtained an order requiring the defendant to show cause why an injunction should not issue against him. Sub- sequently, an injunction was granted conditionally, the condition being that the complainant should execute a bond, with sureties, to the defendant, conditioned to pay him such damages as he should sustain by reason of the injunction, in case it should finally be decided that he was not equitably entitled to the injunction. The bond was executed, arid subsequently and after the dissolution of the injunction, was declared by the court to be forfeited, and a reference ordered to a master to ascertain and report the damages the defendant had sustained. The questions now before the court arise on the master's report made under this order. The exceptions taken to the report are so comprehensive as to render a reconsideration of the case, in all its branches, necessary. While the exceptions on the part of the complainant challenge each allowance made to the defendant, the argument of his counsel, on the hearing, was mainly directed against two items: First, the allowance made to the defendant for his time and services in pro- curing a dissolution of the injunction, and for the mental strain and anxiety he suffered in consequence of the injunction. The master has allowed for counsel fees a little over $4,300. The com- plainant denies the right of the defendant to recover counsel fees at all, but says that if they are recoverable in cases of this kind the amount allowed to the defendant is unreasonable and excessive. Judicial opinion on the question whether or not counsel fees should be allowed as damages in such cases, is not uniform in this country. The Supreme Court of the United States holds that they should not be allowed. The reason assigned for this view is that theii" allowance is forbidden by the analogies of the law, and by sound public policy. It is said that they are allowable in no other case in equity, that all that a successful complainant in any other equity case can recover are his taxable costs, and that a successful defendant's right to be re-imbursed for the expenses of litigation SEC. 3.] COOK V. CHAPMAN. 437 is subject to the same limitation, no matter how groundless and unjust the suit against him may have been, nor how much he may have been compelled to spend in resisting it. And it is likewise said that, were it once known that one party might be obliged to pay the counsel fees of the other, there would be great danger of abuse; more counsel would be employed than were necessary; the difficulties of the case would, in many instances, be magnified, and a great deal of unnecessary work done ; suitors would pay much more liberally out of the pockets of their adversaries than they would out of their own, and thus, in a matter entirely outside of the issues presented by the pleadings, a litigation might arise which would impose upon the court a task of greater difficulty and delicacy than that which the decision of the main case imposed, and this in- cidental or engrafted litigation would, in many cases, be more protracted and expensive than that in the original case. Oelrichs V. Spain, 15 Wall. 211. The course of decision, however, in many of the States is the other way. It is there held that a reasonable amount qi counsel fees, necessarily expended in getting rid of an injunction unfairly obtained, may be recovered uoder a bond or undertaking similar in its provisions to the terms of the bond on which this proceeding IS lOUndeQ. :!;#:{i^:};Hs$Hc:H4:#:&:!!4e:):4; It has been held in New York that even where an unsuccessful motion to dissolve has been made — the court refusing to dissolve because it deems it more advisable to defer inquiry into the merits until the final hearing — that if, on final hearing, it appears the complainant obtained the injunction unfairly, the counsel fees on final hearing, as well as those incurred in making the unsuccessful motion are recoverable as a part of the damages which the de- fendant has sustained by reason of the injunction. The counsel fees on the final hearing are allowed in such cases on the ground that the complainant, by resisting the defendant's motion and in- ducing the court to deny it, has compelled the defendant to incur the expense of trying the case on its merits in order to get rid of the injunction. Andrews v. Glenville Woolen Co., 50 N. T. 282; Hovey v. Rubber Tip Pencil Co., lb. 335. But a later case seems to hold that the counsel fees of the final hearing are not recoverable in such cases, unless the sole or main question to be determined on the final hearing is whether or not the injunction shall be con- tinued. Disbrow v. Garcia, 52 N. Y. 654.. This rule expresses, in substance, the Ohio doctrine. It is there held that a reasonable amount of counsel fees, necessarily incurred in procuring the dis- 438 COOK V. CHAPMAN. [CHAP. VH. solution of an injunction unfairly obtained, may be recovered under a contract of indemnity similar in its terms to the bond given in this case, but the rule is subject to this limitation : where the in- junction is merely auxiliary to the main object sought to be at- tained by the action, and no effort is made to get rid of the injunc- tion before final hearing, and the injunction is dissolved on final hearing because the complaiiiant fails in his action, no counsel fees whatever are recoverable. The limitation rests upon this reasoning: it is said that if no injunction had been granted, the defendant, in resisting the action, would have been compelled to make precisely the same expenditure that he has in resisting the action with an injunction, and therefore it cannot be said that such expenditure was caused by the injunction. Noble v. Arnold, 23 Ohio St. 264; Riddle v. Cheadle, 25 Ohio St. 278. The courts of this State are, so far as I am aware, entirely un- committed on this question, and they are therefore at liberty to adopt any rule which may seem to them best calculated to prevent wrong and to promote justice. It is a cardinal rule of the law of damages that whenever loss results to one person naturally and directly from the illegal act of another, such loss is the proper sub- ject of judicial relief by compensation in damages. Now, whenever an injunction is unfairly obtained, the defendant is put under a restraint which he ought not, in justice, to have been required to bear ; in other words, the complainant procures the court to restrain him from doing something, which the complainant has no right, according to the truth and right of the case, to have him restrained from doing. In this condition of affairs, the defendant must sub- mit to a deprivation of his rights, or take the necessary steps to have himself relieved from the restraint. To get rid of the in- junction, he must have the aid of counsel. Such are the means usually, if not universally, resorted to to obtain relief in such cases, and no prudent suitor would think of having recourse to any other. The defendant's outlay, then, for counsel fees is the direct consequence of the complainant's act — the immediate effect of a cause created by the complainant. The outlay is one which the complainant knows, when he gives his bond, that the defendant must make or suffer himself to be deprived of his rights. The complainant's obligation is to pay the defendant any damages which he may sustain by reason of the injunction. Now, if the complainant, when he obtains an injunction, has no right to it, and that fact cannot be demonstrated to the agency having power to continue or dissolve the injxmction without an expenditure of SEC. 3.] * COOK V. CHAPMAN. 439 money by the defendant, it would seem to be tolerably clear, as a matter of logic, that the moneys expended by the defendant for that purpose would constitute a part of the loss he would sustain by reason of the injunction. Indeed, that part of his loss could, in most instances, be traced to the injunction with more absolute certainty than any other. Where the act of a complainant makes it necessary for a de- fendant to expend his money to rid himself of an illegal or unjust restraint, the loss thus suffered is an actual damage which the de- fendant has sustained by reason of the restraint. There is a wide distinction between the rights of a defendant under a contract of this kind and those of a successful defendant without such con- tract. The latter, as a general rule, is not entitled to recover counsel fees. The law gives him no such right. But here the rights ;0f the parties are regulated by contract. The contract is free from the least obscurity and its meaning perfectly plain. Eead according to the plain sense of its language, it is manifest that it was intended to embrace any outlay which the defendant should be compelled to make to get rid of a restraint which the court refused to lay upon the defendant except upon condition that the complainant should agree to make good to him any damages he should sustain in consequence of the restraint, if it should ulti- mately turn out that the complainant was not entitled to have him restrained. Under euch circumstances the court cannot allow itself to be controlled by legal analogies, but is bound to enforce the contract according to its terms, regardless of the difSculties which may attend the discharge of that duty. It is obvious that the court does not require that a bond shall be given in such cases merely to secure the payment of taxed costs. They are always under the control of the court, and the court has ample power to enforce any order it may deem proper to make in respect to them. My conclusion is that the defendant is entitled to re- cover such sum as he was necessarily obliged to pay for counsel fees in procuring a dissolution of the injunction. « « « ^c « « The master allowed the defendant $2,500 as compensation for his time, and services in procuring the dissolution of the injunction, and for the mental strain and anxiety he suffered in consequence of the injunction. This allowance is contrary, I think, to both prec- edent and principle. An attempt was made, in Edwards v. Bodine, to induce the court to make a similar allowance. The claim made in that case was for compensation for time spent in going to counsel and consulting with him. Both the vice-chancellor ^■^^ COOK V. CHAPMAN. * [CHAP. VH. and the chancellor rejected the claim, declaring that such loss was not a damage. 4 Edw. Ch. 292 ; 11 Paige 227. There is such a thing known to the law as damage without injuiy, and this oc- curs where damage results from an act or omission which the law does not esteem an injury. Human tribunals administer justice imperfectly; even when they do their best, the results obtained, as a general rule, are only approximations to perfect justice. There are wrongs and misfortunes, arising from casualties and the imper- fections of human institutions, against which no human law can give protection. " The best cause," says the chancellor, in New York and Long Branch R. R. Co. v. Dennis, 11 Vr. 340, 369, " may fee eventually lost by the death or absence of one of the complain- ant's witnesses, or other like accident. Indeed, it may be lost by the death or even absence of the complainant himself or his agent. There are many casualties which may deprive a worthy complainant of relief in a most meritorious cause, and insure to a defendant a most unrighteous triumph. The uncertainty of the law is not eon- fined to the results of the deliberations of petit juries, but it not unfrequently arises from radical differences of opinion and views between courts equally learned, wise, painstaking and conscien- tious, the final settlement of the question involved, one way or the other, depending in such cases merely on the order in which the different tribunals pass upon it." It is even possible far wrong to triumph over the right by perjury. When legal contro- versies arise, the courts, in order to ascertain the truth, must af- ford both parties a full and fair opportunity to show what the truth is. This is their right, and in no other way can the truth be discovered. It is a right manifestly indispensable to the ef- fectual administration of justice, and yet there is no doubt that an unjust man may, in its exercise, make a protracted and bitter resistance to a perfectly honest claim; he may give his adversary infinite trouble ; he may constrain him, by the desperate character of his resistance, to give much more time and attention to the litigation than it would otherwise require; indeed, it may be that he ought not, in conscience, to resist the suit at all; but what if he does; the law not only gives him the right to make defence, but allows him to exercise it in his own wAy. It is a right that the courts have no authority to aibridge. It could not be abridged without seriously endangering the safe administration of justice. What is true of the right to make defence is equally so of the right to main- tain a suit. They are both free and unrestricted. Every litiga- tion requires more or less time and trouble. The law makes it SEO. 3.] COOK V. CHAPMAN. '441 the duty of litigants to be diligent and vigilant, but it has never been understood that a successful litigant was entitled, as against his adversary, to compensation for the time and attention which it was necessary for him to bestow upon the litigation. Time and attention thus bestowed the law has always regarded as having been given by the litigant to his own business, and that if he sustained loss in consequence thereof, it must be esteemed damnum absque injuria. The common law did not even allow a successful litigant to recover costs. The word ' ' damages ' ' in this contract embraces nothing, in my judgment, but such injuries as, according to es- tablished principles, are the proper subjects of judicial redress by compensation in money. The defendant's claim is not recognized by the law of damages, and must be disallowed. I shall not discuss the other exceptions. All of them have been carefully considered, and such consideration has led me to the conclusion that none pf them are well taken, and they must there- fore be overruled. Accord. — Riggs v. Bell, 42 La. An. 37. Attorney fees in procuring a dissolution of an Injunction are recoverable as damages on the bond. Bustamente v. Stewart, 55 Cal. 115; Lambert v. Has- kell, 80 Cal. 611; Belmont Min. & Mil. Co. v. Costigan, 21 Col. 465; Thomas V. McDonald, 77 Iowa 299; Colby v. Meservey, 85 Iowa 555; Neiser v. Thomas, 46 Mo. App. 47; Binford v. Grimes, 26 Ind. App. 481; Nimocks v. Welles, 42 I Kan. 39; City of Helena v. Burle, 15 Mont. 429; New National Turnpike Co. v. Dulaney, E3 Ky. 516; Helmkamp v. Wood, 85 Mo. App. 227; Gibson v. Eeed, 54 Neb. 309; State v. Corvin, 51 W. Va. 19. CoHTBA. — Oliphant v. Mansfield, 36 Ark. 191; Sensenig v. Parry, 113 Pa. iiS; Jones v. Eosedale St. Ey., 75 Tex. 382; M. K. & T. By. v. Elliott, 184 U. S. 530; Prantz v. Saylor, 12 Okla. 39. Although attorney .fees are not recoverable as damages in an action upon an injunction bond in the Federal Court, yet it was held that recovery is allowed in the State Courts upon a bond given in a Federal action. Mitchell V. Hawley, 79 Cal. 301; Hannibal St. J. Ey. Co. v. Shepley, 1 Mo. App. 254; Wash V. Lackland, 8 Mo. App. 122; Aiken v. Leathers, 37 La. An. 482; Cor- coran v. Judson, 24 N. Y. 106; Mulvane v. Tullock, 58 Kan. 622. The Federal Supreme Court having in review this question, held that the claim of immunity from liability for attorney fees as one of the elements of damage under an injunction bond given in a Federal action, was a Federal question, and reversed the Court of Appeals in Missouri and the Supreme Court of Kansas: M. K. & T. Ey. Co. v. Elliott, 184 U. S. 530; Tullock v. Mulvane, 184 U. S. 497. In the case last cited three of the Supreme Court justices dissent from the proposition that the appeal to that tribunal involves any Federal question. Mr. Justice Harlan, one of the dissenting justices, says: " Let is be observed that the jurisdiction of the state court, as between the parties and as to the subject matter, is not disputed. The question before it was as to the extent of the liability of the sureties in the injunction bond. '-12 COOK V. CHAPMAN. [ CHAP. TO. The decision of tliat question did not depend, in any degree, upon the Con- stitution or statutes of the United States. It depended entirely upon the meaning of the words of the bond, and the principles of law applicable to such an instrument. It was manifestly, therefore, a question of general law as distinguished from Federal law. Upon such a question the state court was entitled to give effect to its own views. The question could not become a question of Federal law by reason alone of the fact that he bond was executed under tne authority of the Circuit Court; for, as already said, neither the other under which the bond was taken, the validity of the bond nor the authority of the court was disputed. Nor could it become a Federal question because of any decision by this court in cases theretofore decided between other parties. Suppose this court had not, prior to the trial of this case, expressed any opinion upon that question of general law. Could it then have been contended that the judgment complained of denied any Federal immunity! If not, then the Federal immunity now claimed arises entirely from the failure of the state court to take the same view of a question of general law which this court took in prior cases between other parties. There has been a wide difference of opinion between this court and some of the state courts upon cer- tain questions of general law. But it has never been supposed that any one has such a vested interest in the views of this court upon questions of gen- eral law that he may complain of the refusal of a state court to accept those views as denying him an "immunity" existing or belonging to him, in virtue of an "authority exercised under the United States." In Winona & St. Peter Railroad v. Plainview, 143 U. S. 371, 390, which came to this court from the highest court of Minnesota, it was said : " The fact that the Supreme Court of Minnesota, in the present cases, did not acquiesce in the correctness of the decision of the Circuit Court of the United States, did not constitute a Federal question. Neither the .Constitution of the United States nor any act of Congress guarantees to a suitor that the same rule of law shall be applied to him by a state court which would be applied if his citizenship were such that his suit might be brought in a Federal court." Or, suppose two actions were brought in the Federal Court (there being diversity of citizenship iii each case) one on an injunction bond executed in a circuit court of the United States and the other upon a. like bond executed in a state court. What would be the ruling as to the measure of damages! Would the court disallow counsel fees in the first ease and allow them in the second case where the highest court of the State had established the prin- ciple that counsel fees could be recovered? Each branch of the latter question must, upon the principles of the opinion just delivered, be answered in the affirmative. But they cannot be so answered without placing the decisions of the courts upon a question of general law, on the same basis as a legisla- tive enactment prescribing the measure of damages in suits on injunction bonds. > Being unable to assent to the principle that a, Federal immunity arises , when a state court, in determining a question not involving the Constitution or laws of the United States nor the validity of an authority exercised under the United States, reaches a conclusion upon a question of general law differ- ent from that announced in prior cases by this court, and denying our author- ity to compel a state court to disregard its own views upon a question of general law, I am constrained to dissent from the opinion and judgment." SBC. 4.] PETIT V. MEECEE. 443 If the motion to dissolve the injunction is unsuccessful, attorney fees and other expenses are not recoverable on the bond even though on final hearing the injunction is vacated. Curtiss v. Bachman, 110 Cal. 433; Lyon v. Hersey, 22 Hun 253, affirmed 100 N. Y. 641. It is not necessary that the attorney fees be actually paid, if they vrere contracted for and a liability created for the fees, they may be recovered on the bond. Holthaus v. Hart, 9 Mo. App. 1; Wittich v. O'Neal, 22 Fla. 592; Underbill v. Spencer, 25 Kan. 71; Meaux v. Pittman, 35 La. An. 360; Gar- rett V. Logan, 19 Ala. 344; Lansley v. Nietert, 78 Iowa 758; Noble v. Arnold, 23 0. S. 264. CoNTBA.— Wilson V. McEvoy, 25 Cal. 169. Services rendered by counsel in resisting the allowance of an iiljunctionj being incurred before the bond is executed, are not recoverable. Kandall v. Carpenter, 88 N. Y. 293. The bond to procure an injunction must respond to all damages which result directly from the restraining order if it is finally determined that the writ was wrongful. This will include such items as the depreciation of property withdrawn from the market in consequence of the injunction. Meysenburg v. Schlieper, 48 Mo. 426 ;, Dougherty v. Dore, 63 Cal. 170; Loss of time in wages, MuUer v. Fern, 35 Iowa, 420; Wood v. State, 66 Md. 61: Loss arising from the operation of statutes of limitations while the injunction is pending. Terrell v. IngersoU, 78 Tcnn. 77: The value of the use and occupation of land of which the party is deprived by reason of the injunction, Wadsworth V. O'Donnell, 7 Ky. L. Eep. 837; Holloway v. Holloway, 103 Mo. 274; Interest on money detained or upon judgment enjoined is recoverable on the bond. Heyman V. Landers, 12 Cal. 107; Weatherby v. Shackleford, 37 Miss. 559. Sec. 4. Attachment bonds. PETIT, ET AL. v. MERCER. 8 B. Mon. (Ky.) 51 (1847). Judge Simpson delivered the opinion of the court. Pettit brought a suit in chancery, and obtained an attachment against Mercer. The debt, to secure the payment of which the at- tachment had been sued out, having been arranged after the in- stitution of the suit, it was dismissed by the complainant. This suit is brought on the bond executed by the complainant, upon suing out the attachment, which is conditioned substantially as required by the statute under which the proceeding in chancery was had, for the payment of all costs and damages sustained by the defendant in the suit by reason of the wrongful issuing of the order. Has the defendant in the chancery suit, a right of action on the 444 PETIT V. MEECER. [CHAP. vn. bond/in consequence, merely, bf the dismissal of the suit by the complainant ? The bond is not conditioned for the successful prose- cution of the suit, but that the order for the attachment has not been wrongfully obtained. Unless, therefore, the order was procured wrongfully and without just cause, there is no breach of the condition of the bond, and no foundation for any action thereon ; although the complainant may have abandoned the prose- cution of the suit, after it has been instituted. In the progress of the trial in the Circuit Court, a question was raised, both in the pleas offered, and instructions asked, in regard to the validity of a defence, based on the fact, that the attachment had been sued out in good faith, and without malice, the defendant haying probable cause to believe the truth of the matters changed in his bill, upon which the order for the attachment was procured. The condition of the bond, according to its terms, is violated, if the complainant has obtained the order wrongfully. If the causes alleged did not in fact exist, although he may have believed in their existence, there was no actual foundation for the proceeding, and the act of procuring the order for the attachment was wrongs ful. To make the breach of the bond depend upon the belief of the complainant, as to the truth of the alleged causes, would be to establish a very uncertain standard by which to determine the right of the injured party to maintain his action. We think the terms of the bond would be more faithfully regarded, and the in- tention of the Legislature more effectually sustained, by requiring the defendant in making a defence to the action, to establish by proof, the existence of the grounds charged in the bill, and con- templated by the statute as authorizing this mode of proceeding by the creditor. The extent, however, to which the plaintiff has a right to re- cover in a suit of this kind, or in other words, his right to dam- ages commensurate to the injury sustained by him in consequence of the suit in chancery ana the extraordinary proceeding by at- tachment, forms the chief subject of inquiry in this case. Has he a right to show that his credit has been seriously affected, his sensi- bilities wounded, and his business operations materially deranged, in consequence of the attachment having been sued out ; and to rely upon t;hese matters to enhance the amount of damages? Or is he to be confined to the costs and expenses incurred by him, and sueh damages as he may have sustained by a deprivation of the use of his property, or any injury thereto, or loss or destruction thereof, by the act of the complainant in suing out the attachment? SEC. 4.] PETIT V. MEECEB. 445 The defendant in the chancery suit has a right to bring an action on the case against the complainant for a vexatious and malicious proceeding of this kind. In such a suit, damages may be claimed for every injury to credit, business, or feelings. But to sustain such a suit, and enable the plaintiff to succeed, malice upon the part of the defendant, and the want of probable cause, are both re- quisite.' In a suit on the bond, the plaintiff is not bound to show malice, nor can the defendant rely, by way of defence, upon prob- able cause. It would seem, therefore, to follow, that such injuries as he is entitled to redress for, only where malice exists, and prob- able cause is wanting, could not, with any propriety, be estimated or taken into consideration in a suit on the bond. To allow it to be done, would be inconsistent with all the analogies of the law, which should not be violated, unless it be imperiously required by the terms of the bond, or the presumed intention of the Legislature. If an order has been obtained without just cause, and an at- tachment has been issued, and acted on in pursuance of the order, the terms of the bond secure to the defendant in the attachment all costs and damages that he has sustained in consequence thereof. The condition of the bond is satisfied, and its terms substantially complied with by securing to him damages adequate to the injury to the property attached, and the loss arising from the depriva- tion of its use, together with the actual costs and expenses in- curred. It cannot be rationally presumed that the Legislature designed to impose on the security in the bond a more extensive liability. The statute is remedial in its character, and should be expounded so as to advance the object contemplated. To impose an almost un- limited liability on the security in the bond, sufSeient to embrace every possible injury that the defendant might sustain, would be in effect, to defeat in a great measure, the object of the statute, by rendering it difficult, if not impracticable, for the complainant to execute the necessary bond. The statute of 1837, to amend the act regulating proceedings against absent and non-resident defendants (3 Stat. Law, 13), au- thorizes the complainant, in certain cases, to make the attachment effectual, by notifying the defendant of the object and intention of the suit, without any order for the purpose, or the execution of a bond of any description. If the Legislature contemplated secur- ing the defendant in the attachment by the execution of the bond to the extent contended for on behalf of the plaintiff in the court below, it is hardly probable a statute would have been enacted, 446 PETIT V. MERCER. [CHAP. vn. authorizing proceedings evidently designed to operate with similar effect on his property, and dispensing with the execution of a bond altogether. We have come to the conclusion, therefore, although to defeat the action when brought on the bond, the defendant must show the existence of the causes, which under the statute, are suflBcient to authorize the attachment to issue, or such of them as were alleged and relied on by the complainant as the foundation of the order; yet the plaintiff, if he succeed, can only recover damages for the injury he may have sustained, by being deprived of the use of his property, or its loss, destruction or deterioration, together with the costs and expenses incurred by him in the defence of the suit; and for all other injuries he may have sustained, he has to resort to his action on the case against the complainant, in which action his right to a recovery will be governed and determined by the principles of law applicable to such cases. On the trial of the cause, the plaintiff having introduced evi- dence conducing to prove a loss of credit, produced by the issuing of the attachment against him, and other injuries resulting from such loss of credit, the jury returned a verdict in his favor for five hundred dollars in damages. The verdict is not sustained by the law of the case, and a new trial should have been granted. Wherefore, the judgment is reversed, and cause remanded for a new trial, and further proceedings consistent with this opinion. Harlan & Craddock, for appellants. Moorehead & Beed, for appellee. AcooKD. — McClendon v. Welles, 20 S. C. 514; Commonwealth v. Magnolia Villa Land Co., 163 Pa. 99; State v. Thomas, 19 Mo. 613; Thompson v. Web- ber, 4 Dak. 240; Elder v. Kutner, 97 Cal. 490. Contra.. — ^Holding that damages for malicious prosecution may be recovered upon an attachment bond. Nicaragua Transit Co. v. McCerren, 13 La. An. 214; Smith v. Eakin, 2 Sneed (Tenn.)456; Rcnkert v. Elliott, 79 Tenn. 235; Wallace v. Finberg, 46 Tex. 35; Mayer v. Duke, 72 Tex. 445; Seattle Crockery Co. V. Haley, 6 Wash. 302; Baldwin v. Walker, 94 Ala. 514. (In Alabama and Washington the Code now provides that exemplary dam' ages may be recovered where attachment is sued out maliciously.) SEC. 4.] TUCKER V. WHITE. 447 ALFRED TUCKER v. GEORGE W. WHITE. 5 Allen 322 (1862). J. C. Dodge, for the defendant. D. E. Ware, for the plaintiff. 'i MiJRKiCK, J. There has been no breech of the condition of the bond declared on. It was given to the plaintiff, under the pro- visions of Gen. Sts., c. 123, § 104, to dissolve an attachment of property made on a writ in his favor against S. H. Stinson and T. H. Haskell, copartners under the firm of Stinson & Co., and was executed by them as principals and by the defendant as their surety. The condition of the bond is, that the obligors shall pay to him the amount of the judgment which he shall recover in that suit. The true meaning and effect of this contract, upon a just _ epBstruetion of the terms in which it is expressed, and in reference to the object and purpose for which it was made, are to bind the obligors to pay to the plaintiff whatever sum he should recover against the principals in the bond, who were then the only de- fendants in the action. No recovery has been had against them, and consequently the plaintiff can have no claim against the present defendant for the non-performance of his contract. , After the bond was given, and the action had been entered in court, Stinson pleaded in abatement the non-joinder of one Charles J. Broekway, and Haskell pleaded his mis-joinder of himself. The plaintiff thereupon discontinued his action against Haskell. Sub- ■ 'iBequently to this, and upon due proceedings being first had. Brock- way was brought in and made a joint defendant with Stinson, and the plaintiff ultimately recovered judgment against them . It is the amount of this judgment which he now seeks to recover of this defendant upon an alleged breach of the condition of his bond. But he never took upon himself any such obligation. By executing the bond he became the surety of Stinson and Haskell, but not of Broekway, and he could not without his own consent be placed in such relation to the latter, or held to the alleged liability by any writ or proceeding on the part of the plaintiff alone. The amendments of the writ, by the discontinuance of the suit against Haskell and by making Broekway a defendant, which were allowed by the court, were fully authorized. Rev. Sts., c. 100, §§ 1-7; St. 1852, c. 312, §§ 32, 33; Gen. Sts., c. 129, §§ 41, 82. But it is expressly provided in each of the two last cited statutes, that no person, other than the parties to the suit, shall be bound by any 448 PACIFIC BANK V. MIXTEE. [CHAP. VII, adjudication respecting such amendments, unless he shall have had due notice of the application for leave to amend, and oppor- tunity to be heard thereon ; that is, in other words, according to the true interpretation of the statute, that he shall not be injuriously affected, or subjected to any liability not already existing, by force of any adjudication in any proceeding to vrhich he was not, in some legal manner, himself made a party. This is a just and reasonable as well as a positive provision of law. It is not pre- tended that the present defendant was ever legally notified of the application for leave to make the amendment by which the plain- tiff was allowed, upon the discontinuance of his suit against Has- kell, to bring in and make Brockway a party, and therefore he can- not be bound or affected by it, or by any of the proceedings which afterwards took place, or by the judgment which was recovered against Stinson and Brockway. Ne never assumed and the law has not imposed upon him any obligation to pay the amount of that judgment. Judgment for the defendant. Accord. — Richards v. Storer, 114 Mass. 101; Fumess v. Head, 63 Md. 1. The bond will not be exonerated because the form prescribed by statute or other statutory requirements are not followed. Sheppard v. Collins, 12 Iowa, 570; Wright v. Keyes, 103 Pa. 567; Ward v. Whitney, 8 N. Y. 442; Gibbs T. Johnson, 63 Mich. 6Y1. PACIFIC NATIONAL BANK v. MIXTER. 124 U. S. 721 (1888). Creditors of the Pacific National Bank began suits in the Uniteu States Circuit Court and secured writs of attachment against the property of the Bank. Bonds were executed with sureties to dissolve the attachments conditioned to be void " If the Pacific National Bank of Boston shall, within thirty days after, the final judgment in the aforesaid action, pay to the plaintiff therein named the amount, if any, which he shall recover in such action." Judgments were thereafter rendered against the . Bank for the amount of the creditors' claims and were not paid. The Federal Statutes provide that no attachment shall be issued against a National Bank and the question of the ease is whether the bonds to procure the attachments are valid and may be enforced, SEC. 4.] PACIFIC BANK V. MIXTEE. ^49 notwithstanding the attachments were illegal and void, because without authority of law. Mr. A. A. Eanney, for Butler, receiver. Mr. Joshua D. Ball, for Mixter. Me. Chief Justice Waite, after stating the case, delivered the opinion of the court. In the view we take of the case, the most important question to be considered is whether an attachment can issue against a national bank before judgment in a suit begun in the Circuit Court of the United States. Section 5242 of the Revised Statutes of the United States contains this provision. " No attachment, injunction, or execution shall be issued against such association or its property before final judgment in any suit, action, or proceeding, in any state, county, or municipal court. ' ' The original national bank act contained nothing of this kind, but the prohibition first appeared in the act of March 3, 1873, 17 Stat. 603, c. 269, § 2 ; 13 Stat. 116, c. 106, as a new proviso added to § 57 of the act of June 3, 1864. That section was originally as follows : "That suits, actions, and proceedings against, any association Tinder this act, may be had in any circuit, district, or territorial court of the United States held within the district in which such association may be established, or in any state, county, or municipal court in the county or city in which said association is located, having jurisdiction in similar cases: Provided, however. That all proceedings to enjoin the comptroller under this act shall be had in a circuit, district, or territorial coUrt of the United States, held in the district in which the association is located. ' ' The amending act was as follows : * That section fifty-seven ... be amended by adding thereto the following: ' And provided further, That no attach- ment, injunction or execution shall be issued against such associa- tion, or its property, before final judgment in any such suit, action, orproceeding in any state, -county, or municipal court.' " * * * The; prohibition does not in express terms refer to attachments in suits begun in the Circuit Courts of the United States, but as by § 915 of the Revised Statutes those courts are not authorized to issue attachments in common law causes against the property of a defendant, except as " provided by the laws of the State in which such court is held for the courts thereof," it follows that, as by the amendatory act of 1873, now part of § 5242 of the Revised 17 450 PACIFIC BANK V. MIXTEB. [CHAP. Vn. Statutes, all power of issuing attachments against national banks before judgment has been eliminated from state statutes, there cannot be any laws of the State providing for such a remedy on which the Circuit Courts may act. The law in this respect stands precisely as it would if there were no State law providing for such a remedy m any case, iii^iii^it:**^):***^* We are, therefore, of opinion that the attachments in all the suits were illegal and void, because issued without any authority of law. But it is insisted that notwithstanding this the bonds are valid and may be enforced. It is undoubtedly true that the sureties on a bond of this kind are estopped from setting up, as a defence to an action for a breach of its condition, any irregularities in the form of proceeding to obtain an attachment authorized by law which would warrant its discharge upon a proper application made therefor. As the pur- pose of the bond is to dissolve an attachment its due execution im- plies a waiver both by the defendant and his sureties of all mere irregularities. So, too, it is no defence that the property. attached did not belong to the defendant, or that it was exempt, or that the defendant has become bankrupt or is dead. In all such cases, where there was lawful authority for the attachment, the simple question is, whether the condition of the bond has been broken; that is to say, whether there has been a judgment in the action against the defendant for the payment of money which he has neg- lected for thirty days afterwards to make., In the present case, however, the question is whether the bond creates a liability when the attachnient on which, it is predicated was actually prohibited by law. In other words, whether an illegal and therefore a void attachment is sufficient to lay the foundation for a valid bond to secure its formal dissolution. The bond is a substitute for the attachment, although not affected by all the con- tingencies which might, have discharged the attachment itself. Carpenter v. Turrell,' 100 Mass. 450, 452; Tapley v. Goodsell, 122 Mass. 176, 182. Such being the case, it necessarily follows that if there was no authority in law for the attachment there could be none for taking the bond. If the attachment itself is illegal and there- fore void, so also must be the bond which takes its place. Objec- tions can be made to an attachment issued on proper legal authority, which cannot be used as a defence to a bond taken under the statute for its dissolution ; but if there can be no lawful attachment there can be no valid bond for its dissolution. The case is to be con- sidered as though there was no law whatever for the seizure of SEC. 4.] PACIFIC BANK V. MIXTEE. property by attachment before judgment in any case. As the tak- ing of the property under such circumstances would be unlawful, so also would be the act of the magistrate in accepting the bond. Neither is the bond binding as a common law bond. If the attachment had been valid, and the bond taken had not been in all respects such as the statute had required, it could nevertheless have been enforced as a common law bond, because it was executed for a good consideration, and the object for which it was given had been accomplished. But here the difficulty is that there was no lawful attachment, and therefore no lawful authority for taking any bond whatever. The bond is consequently neither good under the statute nor at common law, because there is no sufficient foun- dation to support it. Objection is made to the relief which is sought in equity, be- cause if the attachment bonds are void there is an adequate remedy at law in the suits that may be brought for their enforcement. If the suit in equity had been brought by the sureties to get rid of their obligation, this objection might be good; but such is not its character. The sureties have in their hands assets of the bank which the receiver seeks to reduce to his possession, and which they claim the right to hold until they have been fully indemnified against or discharged from liability on the bonds. The receiver says there is no liability, because the bonds are invalid ; and to have that question settled once for all he has brought the persons inter- ested, creditors as well as sureties, before the court in order that it may be conclusively adjudicated between them. Such a suit is clearly cognizable in equity. The sureties are in a sense stake- holders. They do not claim the securities unless they are liable on the bonds, and the suit, although not brought by them, is in the nature of an interpleader to save them " from the vexation of two proceedings on a matter which may be settled in a single suit." The decree will bind all alike, and if the sureties are held not to be liable it will conclude the creditors from all further proceedings against them on the bonds, and leave them free to surrender the securities to the receiver. This will not affect the judgments that tie creditors have recovered, any further than to limit their opera- tion, so far as the receiver and the sureties on the attachment bonds are concerned, to the adjudication of the debts as claims entitled to dividends from the proceeds of the assets of the bank. To that extent, certainly, the court had jurisdiction in each of the suits after the insolvency; but as the attachments were void the judg- ments are inoperative as a basis of recovery upon the bonds. 452 LOBENSTEINU. HTMSON. [CHAP. VD. The judgment in each of the suits at law is afSnned, but the decree in the suit in equity is reversed, and the cause remanded with instructions to enter a decree setting aside and annulling the bonds which were given to dissolve the attachments, and enjoining each and all of the creditors, and those claiming under them, from proceeding in any manner to enforce the same against the sureties, and directing the sureties to surrender to the receiver the securities they hold for thair indemnity. Accord. — Planters Loan & Savings Bank v. Berry, 91 Ga. 264. If the bond is to discharge the attachment the sureties will be liable even though the attachment was not valid. Hazelriggv. Donaldson, 59 Ky. 445; McMillan y.Dana, 18 Cal. 339; Bowers v. Beck, 2 Nev. 139; Ferguson v. Glidewell, 48 Ark. 195; Smith v. U. S. Express Co., 135 lU. 279; Schuyler v. Sylvester, 28 N. J. L. 487. CoNTEA.— Shevlin v. Whelen, 41 Wis. 88. LOBENSTEIN v. HTMSON. 90 Tenn. 606 (1891). Henderson <& Jourolmon and Wat. M. Cocke, for Lobenstein. B. A. Cawood and W. L. W'elcker, for Hymson. TuRNEY, Ch. J. On June 27, 1889, plaintiffs in error sued out an original attachment from the oflSce of a Justice of the Peace, re- turnable to the Circuit Court. The attachment was levied on the goods of Hymson. The attachment was discharged because the affidavit was defec- tive. A new suit by attachment was commenced, the same goods levied upon, and the suit successfully prosecuted. The present suit is to recover on the first bond damages for wrongfully suing out the attachment. There was judgment for Hymson, and appeal to this Court. One of the errors assigned is said to be in the failure of the court to charge, as requested, " that the plaintiff would not be entitled to recover if the defendants, in suing out the original attachment, had reason to believe, and did, upon sufficient ground, believe that the defendant therein had committed, or was about to commit, a viola- tion of the grounds of the attachment under the statute, and grounds for the attachment did exist at the time the same was sued out. In other words, the plaintiff could not recover if Seasongood, SEC. 4.] DOGGETT V. BLACK. 453 Henderson & Co. had grounds to swear out said attachment not- withstanding the fact that said affidavit was improperly worded by the draughtsman." The refusal was proper. The fact that there may have been suf- ficient grounds for the attachment does not do away with the duty to state them that the Court may have jurisdiction. A right to sue in a given form of action does not confer a right to trespass upon or convert the property of a debtor by a seizure by force or other- wise. A creditor has no authority to collect a debt by force, nor to impound property to secure its collection without due process of law. As the recovery sought and had in this case was merely com- pelisatory, and confined to the injury done to the goods or their value, the existence of a legal right to attach unemployed cannot be looked to in mitigation of damages. It was not error to say to the jury : ' ' The plaintiff must show by a preponderance of proof such as is satisfactory to your minds," etc. The effect of the charge is that there must be preponderance in plaintiff's favor, and it follows, of course, that such preponder- ance must satisfy, else the case is left in equipoise, and the verdict should be for defendants. If this charge were erroneous, it is not for appellants to com- plain, as it was in their interest and against the defendant in error. Affirmed. , AccoBD. — Holding that the dismissal of the attachment upon grounds not .'involving the merits of the plaintiff's right to sue out the writ, creates a liability on the bond. Steinhardt v. Lemon, 41 La. An. 835; Jerman v. Stew- art, 12 Fed. Eep. 266; Dean v. Stephenson, 61 Miss. 175. CoNTKA. — ■ Sharpe v. Hunter, 16 Ala. 765 ; Calhoun v. Hannan, 87 Ala. 277 ; Petty V. Lang, 81 Tex. 238 ; Blanchard v. Brown, 42 Mich. 46 ; Boatwright v. Stewart, 37 Ark. 614; Noekles v. Eggspieler, 47 Iowa, 400; Bachelman v. Skin- ner, 46 Minn. 196; Storrs v. Finklestein, 48 Neb. 27. DOGGETT, BASSETT & HILLS CO. v. BLACK, ET AL. 40 Fed. Eep. 439 (1889). Morris, Newhurger & Curtis, for plaintiff. Claypool & Keieham, for defendants. Geesham, J. The plaintiff, the Doggett, Bassett & Hills Com- pany, brought a suit in attachment in this court against the defend- ant, William D. Black, to recover a debt, and on the 1st day of 454 DOGGETT V. BLACK. [CHAP. TO. November, 1883, the marshal, under the writ which had issued to him in the suit, seized a stock of dry goods, the property of Black. Black executed a delivery bond, in which his co-defendant in this suit joined as surety, and the goods remained in Black's possession. The obligation of the bond was that the attached property " shall be delivered up to said marshal . . . upon demand, when said officer may be ready to receive the same, in as good condition as the same is at this date, to be sold by said marshal by virtue of any execution or judgment which may be rendered in said action against said Black. . Further, that said Black may sell said prop- erty at private sale, and when so sold shall pay the cash value thereof to said marshal, to be applied on said execution." The goods were afterwards destroyed by fire, without fault or negligence on Black's part, and on the trial of the suit the plaintiff obtained judgment for $2,222, and the attachment was sustained. Not being able to get the attached goods or other property on demand to satisfy the execution that had issued to the marshal, he returned it unsatisfied, and this suit was brought on the bond against the prin- cipal and surety. The latter answered in several paragraphs, in the second of which he averred the loss of the property, as already stated, to which the plaintiff demurred. Section 924 of the Revised Statutes of Indiana provides that " the defendant or other person having possession of property at- tached may have the same, or any part thereof, delivered to him by executing ... a written undertaking, . . . payable to the plaintiff, to the effect, that such property shall be properly kept and taken care of, and shall be delivered to the sheriff on demand, . . . to satisfy any judgment which may be recovered against him in the action, or that he will pay the appraised value of the property." The defendants were not prevented from fulfilling their obligation by the act of God, or the conduct of the plaintiff; its fulfilment was not made impossible by law; and the attach- ment was not dissolved. The sole ground of defense set up in the paragraph of the answer demurred to it that the attached property was destroyed by accidental fire. That was not an act of God, and the court is not called upon to decide what the effect would have been had the fire started by lightning or by some other super- human agency. The defendants* counsel insists that a deliveiy bond, executed in an attachment suit, is not an absolute contract for the return of the property on de;nand or the payment of its value; but that the purpose of the statute is that the defendant shall be permitted to retain possession of the property by giving a SEC. 4.} DOGGETT V. BLACK. 455 bond with surety that he will care for and keep it just as the officer would be required to care for and keep it if it remained in his possession, and that the liability of the latter is that of a bailee for hire only. If property in the custody of an officer under a writ of execution or attachment is lost or damaged while he is exercising that degree of care over it which is required of a bailee for hirCj he is not liable. Authorities need not be cited in support of this proposition. But the relation that an afficer sustains to . property, thus in his custody, is not the relation that a defendant in attachment sustains to his own property after the execution of a delivery bond., The officer simply holds the property of the defendant to satisfy any judgment that may be obtained by the plaintiff, while the defendant retains possession of his own prop- erty for his own benefit, with the same power and dominion over it, including the right to sell, that he had before the levy of the at- tachment. The obligation of a delivery bond is that the de- fendant, the owner of the property, will properly keep and take care of it, and deliver it to the officer on demand, or pay its value at the time the bond is executed. If only part of the attached property is delivered to the officer, or if it is all delivered, but in a damaged or depreciated condition, the defendant and his surety in the bond are liable for the loss. If the property had remained in the custody of the marshal, and the attachment had failed, it would have been no defence, to an action on the attachment bond executed by the plaintiff, to have' averred that the property had been destroyed by accidental fire while in the custody of the marshal, and it is equally clear that the averments contained in the second paragraph of the answer constitute no defence to the action. There is a wide difference between the possession of an officer, who levies on property under a writ of attachment and holds it for a particular purpose, and the possession of a defendant in an attachment suit of his own property after the execution of a de- livery bond, and it does not follow that because the possession and liability of the former is that of a bailee for hire only the liability of the latter is the same. If the defendants' counsel are correct, a delivery bond is a mere contract of bailment, and the defendant in the action becomes bailee of his own property. Demurrer sustained. If the condition of the forthcoming bond is impossible because of the inter- vention of some superior right created by law, or because of some act of the plaintiff, the bond is exonerated. Floyd v. Cook, 118 Ga. 526; Jaeger v. Stoelting, 30 Ind. 341; Bell v. Pearee, 1 B. Mon. (Ky.) 73; Schneider v. Wallingford, 4 Colo. App. 150. 456 BANK V. BECKER. [CHAP. VD. No action accrues upon a forthcoming bond until the final disposition of the case, even though the attachment in the meantime was sustained. Hans- ford V. Perrin, 6 B. Mon. (Ky.) 595. THE SECOND NATIONAL BANK OF SANDUSKY v. BECKER, ET AL. 62 0. S. 289 (1900). The Second National Bank of Sandusky, Ohio, commenced an action in the Court of Common Pleas of Erie county, against "Wil- liam Becker, on two notes made by him amounting to nearly nine hundred dollars, and at the same time sued out an attachment against his propei-ty. The writ was levied on certain chattel property of the defendant which was inventoried and appraised at $1,585.00. After the levy and appraisement, the property was delivered by the sheriff to the defendant, when W. W. Woodward and John Diest as his sureties, executed and gave to the sheriff the following undertaking : " Know all Men by these Presents, That we, "W. "W- "Woodward and John Diest, are held and firmly bound unto the said The Second National Bank of Sandusky, Ohio, plaintiff, in the sum of three thousand dollars ($3,000.00), to the payment of which well and truly to be made, we do hereby jointly and severally bind ourselves, our heirs, executors and administrators. Signed by us and dated this 19th day of January, A. D. 1895. " The condition of the above obligation is such: That, whereas, A. A. Magill, sheriff of Erie County, Ohio, has this day attached the following goods and chattels found in the possession of William Becker, on an order of attachment issued from the Court of Com- mon Pleas for said county of Erie, in an action wherein the said the Second National Bank of Sandusky is plaintiff, and the said William Becker defendant, as the property of the said William Becker, to-wit: 2 wine presses, $1C0 each, $200; 11 wine casks, 1,300 gallons each, $350; 4 wine filters, $75; 19 wine casks, 2,000 gallons each, $960 ; total, $1,585. " And whatever goods are contained in premises hereinafter de- scribed in said premises, are situated in Kelly's Island, county of Erie, and State of Ohio, and known as the property of William Becker. For a true inventory and appraisal of the within-described property, see Schedule ' A,' case No. 7122, Robert Hamilton v. SEC. 4.] BANK V. BECKER. 457 William Becker, whicli is made part of this bond. Which said property has been duly, appraised at the sum of $1,585. And, whereas, the said sheriff has delivered the said property to the said William Becker. Now if the said property so attached, or its appraised value in money, shall be forthcoming to answer the judgment of the court in said action, then, this obligation to be void; otherwise to remain in full force and virtue in law. " W. W. Woodward, " John Diest. " Signed in my presence and approved by me this 19th day of January, A. D. 1895. "A. A. Magill, Sheriff." In that action, at the November term of the court in 1895, the plaintiff recovered a judgment against Becker for the amount of the debt, and obtained an order against him and the sureties on the undertaking, for the redelivery of the attached property to the sheriff for sale. This order required the parties against whom it was directed to make the redelivery within three days after its service upon them, and in default thereof to " forthwith pay to the sheriff the amount of the plaintiff's judgment with interest, and costs." The parties having failed to comply with the order, the plaintiff instituted a proceeding in contempt against them, and obtained a rule requiring them, on a day therein named, to show cause " why they and each of them should not be punished as for contempt for disobedience and failure to comply with said order." This contempt proceeding came to a hearing at the April term, 1899, and, at the conclusion of the hearing, the court found the parties guilty of the contempt charged, and made and rendered against them the following judgment and order : " It is therefore ordered, considered and adjudged that the said plaintiff recover from said defendants, William Becker, W. W. Woodward and John Deist, the sum of $867.92, with interest at 5 per cent, on $247.06 from the 4th day of November, 1895, and interest on $620.86 from the 4th day of November, 1895, being the amount of said judg- ment and interest and the costs of this action, together with all increase costs, to which defendants except. It is further ordered and adjudged that the said defendants pay or cause to be paid said judgment against said William Becker, with interest thereon, as aforesaid, and the costs of this action, to the clerk of this court, within twenty-four hours from and after the date of this order, and execution is awarded therefor, and that in default thereof they and 458 BANK V. BECKER. [CHAP. VD. each one of tliem be committed to and imprisoned in the county jail of Erie county until said order is complied with, and that a warrant issue from the clerk of this court to the sheriff of Erie county, Ohio, for said commitment and imprisonment." King & Guerin, for plaintiff in error. E. L. Peake, and George E. Beiter,iov defendants in error. Williams, J. The principal question which the record brings before us, is whether the judgment and order of the Court of Com- mon Pleas here under review are incompatible with section 15 of the Bill of Rights. The Circuit Court held them to be so, and on that ground, reversed them. That section of the constitution pro- vides that: " No person, shall be imprisoned for debt in any civil action, on mesne or final process, unless in case of fraud." The question here is not embarrassed by any feature of fraud, for it is disclaimed there was any fraud on the part of Becker in obtaining the delivery of the attached property to him by the sheriff, or any on the part of either of the defendants in error in incurring the obligation upon which the judgment and order in question were founded. The property was delivered by the sheriff in pursuance of a provision of the statute, upon the acceptance by hitn of the proper undertaking with sufSeient sureties, as therein provided. No bad faith or fraud is imputed to any of the parties in the trans- action. Nor, is it disputed that the judgment and order were rendered in a civil action. Imprisonment thereunder would be im- prisonment on process in such action. The constitutional provision is not to be construed as confined to arrests upon writs. White v. Gates, 42 Ohio St., 109-110. The point in controversy is whether imprisonment under the order would be imprisonment for debt, within the purview of the constitutional provision referred to. The proceeding in contempt was founded on the order of the court en- tered as part of the judgment recovered by the bank in its action against Becker on his two notes; and the primary object of that order was to procure the redelivery of the property attached in that action, to the sheriff for sale for the satisfaction of the bank's judgmeiit. Notwithstanding the sureties on the undertaking given by Becker for the redelivery of the property were not parties to that action, the order ran against thein as well as Becker. It directed that they all should " within three days from the service of the order redeliver to the sheriff all of said property," or in default thereof that they should ' ' forthwith pay to the sheriff the judgment recovered by the bank against Becker, with interest and costs." Upon the hearing on the rule issued in the contempt pro- SEC. 4.] BANK V. BECKEE. 459 ceeding for failure to comply 'yith that order, the court, presum- ably, was satisfied, as indicated in the bill of exceptions, that the parties were unable to comply with that part of the order which required the redelivery of the property, for it simply rendered a general judgment against all of the parties for the amount of the judgment which the bank had theretofore recovered against Becker, and entered an order against all of them, that if they did not pay the judgment within twenty-four hours, they should " be committed to, and imprisoned in, the county jail," until they should pay it. It is this judgment and order which the Circuit Court reversed. It seems indisputable that the money due the bank on its judg- ment against Becker, is a debt. Payment of that debt was the ouly means, under the order complained of, by which the defendants in error could escape imprisonment in the county jail. The end sought by the order, and its Sole purpose, was to coerce payment bysimprisonment. The first judgment against Becker acquired no additional force by the rendition of the second one against him for the same debt, nor any additional means or remedy for the en- forcement of its collection, except by his imprisonment for its non-payment ; and the order against his sureties had no other object than to enforce performance by them of their obligation for the principal, by subjecting them to imprisonment for the principal's default in making payment of the judgment against him. The observation is pertinent here that the obligation of the sureties on the undertaking is not to redeliver the attached property to the sheriff, nor that Becker should redeliver it. By its terms the un- dertaking binds the obligors for the payment of a sum of money to the sheriff, and the forthcoming of the property, according to its Condition, to answer the judgment that should be recovered in the action, is merely a mode provided for discharging the money obliga- tion. It is clear the sureties did not contract to undergo incarcera- tion ill prison for any default of the principal in the performance of the condition of the undertaking, and that their liability upon it is a debt arising upon contract. The constitutions of most of the states contain a prohibition against inprisonment for debt, substan- tially like that in ours, and the authorities hold with general unanimity that the word debt, within the constitutional inhibition, includes not only debts of record, judgments, and specialties, but generally all obligations arising upon contract, express or implied ; and some of the courts give the word a still larger meaning. The real contention of counsel for the plaintiff in error is, that the judgment and order under consideration are justified by section 460 '■' ^ BANK V. BECKER. [ CHAP. TO. 5556 of the Revised Statutes, and other statutory provisions therein referred to. That section provides that " The court may compel the delivery to the sheriff for sale of any of the attached property for which an undertaking has heen given, and may proceed sum- marily on such undertaking to enforce the delivery of the property or the payment of the money due upon the undertaking by rules and attachment as in cases of contempt." And it is provided by sections 5640 and 5646, which relate to proceedings in contempt, that disobedience of, or resistance to, an ordfer or judgment of a court may be punished as for a contempt; and that when the con- tempt consists in the omission to do an act which is yet in the power of the accused to perform, he may be imprisoned until he performs it. It is unnecessary in this case to hold these statutory provisions, or any of them, unconstitutional; but to avoid that result, they should be so construed and restrained in their operation as not to bring them in conflict with the inhibition of the constitution; and their provisions, so far as they interfere with personal libertyj must receive a strict construction. Spice v. Steinruck, 14 Ohio St. 213. White V. Gates, 42 Ohio St. 109, 112. It is not in every case of contempt that imprisonment may be imposed as a punishment. There are many orders and commands of courts, other than those for the payment of a debt, or the enforcement of a judgment upon a money obligation, to which the statutes may have appropriate application. Of this class, it has been held, are orders to deliver property in the possession of a party, or turn over moneys in his hands, to a receiver. Re Milburn, 59 Wis. 24-31 ; orders not to transfer or dispose of property pending a litigation ; Re Perry, 30 Wis. 269 ; and others of a like nature. But the order complained of in this case was not of that character. It was not to deliver any of the attached property then in the possession of the defendants; they had none in their possession. Nor was it to turn over any money in their hands belonging to the plaintiff; they were not the custodians of any fund. It was strictly an order for the payment of a debt, namely, for the payment of a specified amount of money in satisfaction of a judgment rendered against them, and, in default of such payment, to stand committed. This order was therefore erroneous, and was properly reversed. And, we think, the judg- ment rendered against the sureties was also. As has already been noticed, they were not parties to the original action against Becker, nor before the court, either by process or appearance, when the order was entered in that action requiring them to redeliver the attached property to the sheriff or pay the judgment then rendered SEC. 5.] BIDDINGEE V. PEATT. 461 in favor of the bank against Becker. The court was therefore with- out jurisdiction to make the order that was then entered against them. That order was the foundation of the subsequent proceeding for contempt. In that proceeding they were only notified to show cause why they had not redelivered the property in compliance with the previous order. No suit was brought against them on the un- dertaking, nor opportunity given them to plead or make defense to any claim of liability thereon or be heard according to the usual course of legal proceedings. It can scarcely be claimed that this was due process of law Judgment affirmed. Sec. 5. Beplevin bonds. BIDDINGEE, ET AL. v. PRATT. 50 0. S. 719 (1893). On August 20, 1888, a judgment was rendered in favor of one Metier, for $224, against T. J. Biddinger. , An execution issued to Jeremiah Pratt, constable, who levied upon certain goods. Bid- dinger brought replevin against Pratt before a justice of the peace of Cincinnati township, claiming that he was not the owner of a homestead, and was entitled to the- goods in lieu thereof. The constable took possession of the property and delivered it to Bid- dinger, who executed a replevin undertaking, with sureties. Pratt filed a motion to dismiss the replevin suit, for the reason that the justice had not jurisdiction, as both parties and subject-matter were within the jurisdiction of Harrison tovraship, which motion was sustained, and the cause dismissed. No other judgment was ren- dered by the justice, nor was any execution issued. The goods remained in the possession of Biddinger. Suit was thereupon instituted before a justice by Pratt against Biddinger, and his sureties on the undertaking, which was appealed to the Common Pleas, where the case was submitted on an agreed statement of facts. The court charged the jury that, on the agreed facts, Biddinger was the owner of a homestead, and not entitled to the property levied upon in lieu thereof, to which defendant ex- cepted. Verdict followed for Pratt, and judgment upon it, which waS'aflBrmed by the Circuit Court. David Davis, for plaintiffs in error. T. C. Gaymond and Geo. B. Goodhart, for defendant in error. 462 MCKET V. LAUFUN. [ CHAP. TO. By the Cou?t. 1. One of the stipulations of the undertaking was that the plaintiff "would duly prosecute the action," and this means prosecute it to effect. This he failed to do. True, the action was dismissed for want of jurisdiction in the justice to try it, and on the motion of the defendant. But the plaintiff cannot be heard to complain of that because he elected to bring his action in that court, and used its process to obtain possession of the property in dispute, which he still retained ; neither can his sureties, because, by signing the undertaking they agreed to make good the default of the principal, and whatever liability attaches to him by reason of the obligation, must equally bind them. The defendant is not at fault. He was given the choice either to challenge the jurisdic- tion, or, by silence, consent to have his rights adjudicated by a court which was without jurisdiction. He should not be prejudice by this effort to vindicate his rights. 2. The agreed statement of facts shows that the plaintiff had been the legal owner of a life estate in 142 acres of land, on which, with his family, he resided. He had no other real estate. Prior to the beginning of the suit in replevin, he had made a deed of this parcel of land to a creditor as security for a debt, with an agree- ment that when the debt should be paid the grantee would deed it back. In other words, Biddinger's deed was but an equitable mort- gage. Under the principle laid down in Bartram v. McCracken, 41 Ohio St. 377, he was the owner of a homestead, and therefore not entitled to hold exempt from execution personal property in lieu of a homestead. There is no error in the charge. Judgment affirmed. Accord. — Pierce v. King, 14 R. I. 611. If the action is abated without fault of the plaintiff or by operation of law, such as the absence of the court at the time and place appointed for trial, or the death of a party, the condition of the bond is not broken. Pierce V. Hardee, 1 Thomp. & Cook, (N. Y.) 557; Burkle v. Luce, 1 N. Y. 163. G. W. McKEY, ET AL. v. WILLIAM LAUPLIN. 48 Kan. 581 (1892). The opinion states the case. Doiithitt.dt Ayres, for plaintiffs in error. Opinion by Green, C. William Stow, one of the plaintiffs in error, brought an action in replevin in the District Court of Elk county to recover the possession of a mule, which he alleged was SEC. 5.] MO KEY V. LAUFLIN. 463 worth $70; hie gave an undertaking, as required by the statute, obtained an order of delivery and through it secured the possession of the mule, and then dismissed his action without prejudice. The defendant in error commenced this action in the district court of Elk county upon the replevin bond, alleging the institution of the replevin action, the giving of the bond, the obtaining possession of the mule, and the dismissal of the action ; that the mule was woi-th $75; that the value of the mule as a work animal was 50 cents a day ; that Stow, one of the defendants, had had the use of the mule for 408 days, and asked damages on the bond in the sum of $279, and for attorney's fees. The plaintiff did not allege that he was the owner of the mule. William Stow, one of the defendants, answered that he was the owner of the property replevied, under and by virtue of a chattel mortgage, and was entitled to the posses- sion of the same; and further alleged, that the plaintiff was not the owner of the property in controversy. A jury was waived, and the court found that the value of the property replevied was $40, and gave judgment for that amount against the defendants upon the bond, i It is urged by the plaintiffs in error, that because the plaintiff below did not allege in his petition that he was the owner of the mule the evidence offered as to the value of the mule was irrelevant and inunaterial, and that he could not, under the averments of his petition, recover the value of the animal. The sufficiency of the petition was not challenged ; the parties went to trial and introduced evidence as to the title and value of the mule, without objection. The pleadings were treated as if the issues had been properly made, and we do not think the plaintiffs in error can now object to the petition. It is true that the defendant in the original replevin suit had a right to have his title to the property tried, notwithstanding the dismissal by the plaintiff. (McVey v. Bums, 14 Kas 291.) But if he does not exercise such right, he is not precluded from his remedy on the bond. " One of the conditions of the bond is that the plaintiff shall duly prosecute his action. That is a separate and independent con- dition. Upon breach of that condition the defendant is entitled to recover all damages he has sustained thereby. The fact that he had not pursued one remedy given by the statute does not deprive him of the general remedy upon the bond; and as the bond was con- ditioned that the plaintiff should prosecute the action, and as by the dismissal thereof plaintiff has so failed to prosecute, and as by means of the bond the plaintiff has obtained possession of the 464 SUPPIGER V. GEAUZ. [CHAP. VH. property apparently belonging to the defendant, the defendant is, prima facie at least, entitled to recovery of the sureties, the value of the property thus taken from him." Manning y. Manning, 26 Kas. 101. We recommend an affirmance of the judgment. By the Cpurt : It is so ordered. All the Justices concurring. Accord. — Wiseman v. Lynn, 39 Ind. 250; Waddell v. Bradway, 84 Ind. 537; Berghoff V. Hackwolf,' 26 Mo. 511; Manning v. Manning, 29 Kan. 98; Parrott V. Scott, 6 Mont. 340; Meigs v. Keach, 1 Wash. T. 305. Dismissal by the court for want of prosecution has the same effect as a voluntary dismissal by the plaintiff. Little v. Bliss, 55 Kan. 94. Dismissal by the court because pf some defect in the process constitutes a breach of the bond. Wood v. Coman, 56 Ala. 283; Smith v. Whiting, 100 Mass. 122; Boonn v. St. Paul, etc., 33 Minn. 253; Elliott v. Black, 45 Mo. 372; Persse v. Watrous, 30 Conn. 139. FREDERICK B. SUPPIGER, ET AL. v. TIMOTHY GEAUZ. 137 111. 2l6 (1891). Messrs. Krome & Hadley, for the plaintiffs in error. Messrs. Wise & Davis, for the defendant in error. Mk. Justice Ckaig delivered the opinion of the court : Plaintiffs in error rely upon two grounds to reverse the judg- ment of the Appellate Court : First, that the claim is barred by section 10 of the Assignment Act; and second, that the property replevied was leased by Ryhiner & Co. to Ellison & Son, and was destroyed by fire while in their possession, without the fault or negligence of Ryhiner & Co. *»*#****„,** As to the second point relied upon but little need be said. Ryhiner & Co. took the property under a writ of replevin. They kept the action pending in court several years, and then dismissed their action, and a writ or retorno habendo was awarded by the judgment of the court. By the judgment of the court the taking and detention of the property was wrongful, and we are aware of no principle under which a wrongful taker of property can shield himself from liability on the ground that after the wrongful taking the property has been destroyed by accident. In Suydam v. Jen- kins, 3 Sandf. 644, in discussing this question, it is said: "We have seen the defendant in trover or trespass is in all cases re- sponsible for the value of the property when taken or eopverted, and SEC. 5.] SUPPIGEB V. GEAUZ. 465 certainly it has never been supposed that he can discharge himself from this responsibility, in whole or in part, by showing that the property has been destroyed or injured by inevitable accident after he had obtained possession. A plaintiff who, without right or title, has seized the property of another by writ of replevin, is as much a wrongdoer as a defendant in trover. No reason can be given why his liability should be less extensive; and, in fact, where the replevin suit is terminated, although he can not be treated as a trespasser, he may be sued in trover, at the election of the defend- ant.''' (See, also, Carrol v. Early, 4 Bibb, 270; Welch v. Stiles, 47 Iowa, 167; Scott v. Hughes, 9 B. Moo. 104; Yates v. Fassett, 5 Denio 21.) In Scott v. Hughes supra, it is said : " We are unable to perceive any good reason why a party, who, of his own mere will, avails himself of the authority of law to seize and detain the and duties assigned to the ofScer and covered by the bond are duly property of another, should not be held to the same responsibility as a bailee who comes rightfully into possession, but wrongfully detains." Plaintiffs in error have cited Babo v. Patton, 6 Heisk. 172, and Mosby V. Baker, 2 Sneed 367 (decisions of the Supreme Court of Tennessee), which seem to hold a contrary doctrine. But these cases are opposed to the current of authority in the different states, and we are not inclined to follow the rule there established. Eyhiner & Co. took and detained the property without a valid claim, and in doing so they acted at their peril, and the destruction of the property by fire while in the possession of Ellison & Son, to whom it was leased by Ryhiner & Co., does not release them from the liability they assumed to return the property or respond in 'damages for a failure to do so. ' The judgment of the Appellate Court will be affirmed. Judgment affirmed. Accord. — Capeu v. Bartlett, 153 Mass. 346; Barry v. Frayser, 57 Tenn. 206. It is held that a subsequent seizure of the property under a process of law exonerates tne sureties on the replevin bond. Caldwell v. Oans, I Mont. 570. IS 466 BELLINGER V. THOMPSON. [CHAP. VH. Sec. 6. Bonds given in the course of the administration of the es> tates of deceased persons. BELLINGER v. THOMPSON. 26 Oregon, 320 (1894). This is an action brought by Chas. Byron Bellinger, as guardian of Linda and Ben Campbell Holladay, minor children of Esther HoUaday, deceased, against David P. Thompson, Frank Dekuni, and Wm. W. Spaulding, as sureties on official bonds of Rufus Ingalls, executor of the will of said Esther Holladay, to recover the sum of twelve thousand five hundred and fifty-eight dollars and nine cents, ascertained and found to be due to his wards from said executor on final settlement. Messrs. James Finley Watson and Edward B. Watson {Mr. Benjamin B. Beekm^n on the brief), for Appellants Thompson and Dekum. Messrs. Geo. E. Williams and Ghas. J. MacDougall (Messrs. Chas. E. S. Wood, Stewart B. Linthicum, J. Couch Flanders, Schuyler C. Spencer, and Wm. A. M. Jones on the brief):, for Appellant W. W. Spaulding. Messrs. Chas. B. Bellinger in pro. per., and Bufus Mallory and Albert H. Tanner, for respondent. Opinion by Mr. Chief Justice Bean. 1. The defendants contend that because Mrs. Holladay expressly declared in her will that no bonds or security should be required of Ingalls as the executor thereof, the county court had no authority to require him to give bonds, and, this being so, no liability exists upon the bonds in question. Under the early English law the spiritual courts, which had jurisdiction in the settlement of es- tates, exerted so little authority over an executor, who was sup- posed to derive his powers from the testator and not from the grant of the ordinary, that they refused to require bonds of him, even though he should become insolvent, or misappropriate and squander the assets of the estate. But the consequence of this doctrine was such that the courts of chancery were early com- pelled, in order to protect widows and orphans, to assume a new jurisdiction; and it became a rule of that court that an insolvent and bankrupt executor, or one who was unfaithful to his trust, would be compelled to give security for the faithful performance of the duties of his office: Schouler on Executors and Adminis- SEC. 6.] BELLINGER V. THOMPSON. 467 trators, § 137. In this country the duties of the spiritual court and of the court of chancery in this respect are exercised by courts having probate jurisdiction. The English rule permitting an ex- ecutor to administer upon the estate of his intestate without giving bonds in the first instance prevails in many States, but in a major- ity of them including Oregon, the privilege is given only when the will expressly so directs: Hill's Code, § 1088; 1 Woemer on Law of Administration, 250. In the latter case the will simply operates to place the executor in the same position in which he is placed in those States which have adopted the English rule. The exemption which the will makes under the sanction of law in the one case is of no more authority than the exemption which the law makes with- outreferenee to the will in the other. ********* 2. But if, in view of the provisions of the will, the county court had no authority to require Ingalls to give bonds as executor, the bonds upon which this action is brought are nevertheless valid as common-law obligations. They were given voluntarily, contain no conditions unauthorized by law, and are not against public policy. So far as the record discloses, the parties interested in the estate were fully satisfied with the Loewenberg bond, but these defend- ants seem to have been -quite willing to substitute their bond in place of one already satisfactory to the parties, and, having done so, the law will hold them to the obligations they have thus voluntarily assumed. " Because a bond is a voluntary one," says Sherwood, C. J., " Its binding and obligatory force is by no means lessened " : State V. Creusbauer, 68 Mo. 254. The facts as stated in the opinion from which the above quotation is made are that prior to the ex- ecution of the bond sued on the administrator had given another bond, sufficient in all respects, which had been approved by the Probate Court, and on which letters were granted, but afterward, on his own motion, without any order of the Court or request of the sureties on the original bond, he procured the defendants to sign the bond sued on, signed it himself, and handed it to the clerk of the Probate Court, who filed it, but never called the attention of the .Court thereto, and it was held that the bond was good as a vol- untary bond, though not approved by the Probate Court, and that the party injured had his option tO' sue upon either bond. And in Folkes V. Doeminiquie, 2 Strange, 1137, a voluntary bond given by an administrator in the spiritual court was held to be valid, though the Court had no authority to take it. So also in McChord v. Fisher's Heirs, 13 B. Mon. 194, it was held that although the ap- pointment of an administrator was void for want of jurisdiction in 468 ! BELLINGER V. THOMPSOJSr. [CHAP.TO. the court, a bond given by him as such administrator was binding not as a statutory but as a common-law bond, being upon good con- sideration, and not against the policy of the law. And, again under a statute authorizing the judge of probate to order a new bond to be given in place of an old one,, on the petition of a surety seeking a discharge, a person who was not, but erroneously sup- posed himself to be, surety upon an executor's bond, filed a peti- tion to be relieved from further liability on such bond. Acting upon this petition, and under the same error as the petitioner, the judge of probate ordered a new bond, and entered a decree dis- charging the petitioner ; whereupon the principal on the old bond, acting under the same mistaken idea, filed a new one, which was approved by the judge of probate. In an action against the sure- ties on the second bond, it was held that, although it may have been given under a mistake of fact, it was nevertheless valid, as having been voluntarily given. Brooks v. Whitmore, 142 Mass. 39.9, 8 N. E. 117. And in United States v. Eogers, 28 Fed. 607, it was held that it is sufScient to make a bond given by an officer of the gov- ernment, although not expressly required by law, valid as a com- mon-law obligation, that it is voluntarily given, and that the oiBce and duties assigned to the officer and covered by the bond are duly authorized by law. Now, in this case the bonds on which this action was brought were authorized by law, voluntarily given, and the duties of the executor covered by them provided by law, and they are, therefore, binding obligationSj whether the county court had authority to require a bond from Ingalls or not. ****** 4. It is next contended that because Ingalls had, prior to the order requiring him to give bonds, paid two thousand nine hundred and thirty-seven dollars and eight cents on claims against the estate in favor of third persons, and applied the sum of five thousand nine hundred and seventy dollars on a claim in his own favor, for which he was not allowed credit on final settlement, the sureties on the bond in action are not liable for the money so applied. la other words, the contention for the defendants is that such applica- tion was a conversion of the funds belonging to the estate, and that they are only liable on their bonds for assets converted and mis- applied after the execution thereof. It is undoubtedly the general rule that sureties on official bonds are only liable for defaults oc- curring after the commencement of the term of office for which they become responsible, and such is the purport of the authorities cited by defendants. But this rule has no application to an admin- istrator 's or executor's bond, because the law under which and the SEC. 6.] BELLINGER V. THOMPSON. 469 purposes for which they are given are different. There are no terms of ofSee of an executor or administrator. It is a continuous employment from the date of appointment until the close of the administration. If during such time an administrator or executor should for any sufficient reason give a bond, he wouH not thereby be entitled to a new commitment of the estate to his hands, nor would it result in any settlement or rest in his accounts. And, again, the condition of an official bond is that the principal shall faithfully perform the duties of the office to which he has been elected or appointed, and it would be an unwarranted construction of the terms of such bond to hold the sureties liable for any default occurring prior to the commencement, of the term ; but an admin- istrator 's or executor's bond is conditioned " that he shall faith- fully perform the duties of his trust according to law ": Hill's Code, § 1088. A failure to pay over to the heir or kgatee the amount ascertained on final settlement to be due such heir or lega- tee, and ordered paid to him, is a breach of such bond and condition (Gerould v. Wilson, 81 N. Y. 573) ; and the sureties thereon at the time of such breach are liable for such default, no matter when the bond may have been executed, or when the funds were actually misapplied or lost to the estate. The executor or administrator, from the moment he becomes such, is entitled to the possession and control of all the property of the estate, but he is not required to pay or account for any money or property coming into his pos- session, until ordered to do so by the county court. In every case, therefore, where a bond is given by an executor during the progress of administration, the sureties assume liability thereunder upon the assumption that he is in possession at the time the bond is given of all the assets of the estate which have been received by him and are unaccounted for, and they in effect agree that he will execute his trust by faithfully administering upon and accounting for such assets. The bond is security against a breach of duty, and there is no such breach until there is a failure to account or pay over the money, as ordered by the county court. * * * * It follows, therefore, that the plaintiff is entitled to a judgment against the defendant for the amount claimed, less an admitted credit of six hundred and fifty-eight dollars and fifty cents, to wit, for the sum of eleven thousand eight hundred and ninety-eight dollars and fifty-nine cents, with interest thereon from the four- teenth day of December, eighteen hundred and ninety-two, at the rate of eight per cent, per annum, and for his costs and disburse- ments, and it is so ordered. 470 HOWELL V. ANDERSON. [CHAP. VH, Accord. — Holding the sureties upon administration bond liable for all the assets of the estate whether they come into the hands of the officer before or after the execution of the bond. Choate v. Arrington, 116 Mass. 552; State v. James, 82 Mo. 509; Foster, Admx. v. Wise, 46 O. S. 26; Pinkstaff v. The People, 59 111. 148; Schofield v. Churchill, 72 N. Y. 565 j Greer v. McNeal, U Okla. 519; EUyson v. Lord, 124 Iowa 125. SAEAH M. I-IOWELL, ET AL., v. PETER ANDERSON, ET AL. 66 .Neb. 575 (1902). Mr. V. L. Hawthorne, for plaintiffs in error. Messrs. E. E. Good and G. W. Simpson, for defendants in error. Barnes, C, filed the following opinion: On the 28th day of March, 1899, one Daniel Howell, a resident of Saunders county, died intestate, and on the 1st day of June of the said year Peter Anderson, the defendant in error, was duly- appointed administrator of his estate, gave his bond, was duly qualified, and entered upon the performance of his duties as such administrator. It appears that, at the time Howell died, Anderson owed him $700, which was evidenced by an interest-bearing note executed some time before that date. When Anderson took charge of the estate as administrator, he scheduled and listed his note as a debt due to the estate. After he had collected and disbursed to the several heirs nearly $4,000 belonging to the estate, a petition was filed by the widow of the deceased with the county judge of Saunders county, asking for his removal. Anderson appeared in answer to a citation based upon the petition and was allowed to file his report. He thereupon tendered hi::; resignation, and asked leave to turn over to the court all the money and property in his hands belonging to the estate, together with his own note, and prayed for an order relieving him from his said trust. Anderson also filed an answer in which it appeared that at the time he was appointed administrator of the estate he was insolvent; that he remained in that condition during all of the time he acted as such administrator, and was still insolvent and entirely unable to pay the note in question, or any part thereof, at the time of his prof- fered settlement. He also asked that the fees which were due him for the performance of his duties, as administrator, amounting to about $134, be applied upon his note, and that the court receive said note, with its unpaid balance, and credit him with it as an uncollectible debt due the estate. The fact of Anderson's insolv- SEC. 6.] HOWELL V. ANDERSON. 471 ency was fully established, and is now conceded by all parties to this controversy. The county court held against Anderson on his petition for a discharge, and found that the note in question was cash in the hands of the administrator, and made his order accord- ingly. From this judgment or order Anderson appealed to the district court of Saunders county, where the matter was tried de novo, the order of the county court was reversed, a judgment ren- dered ia favor of Anderson, permitting him to turn over to his successor, or to the county judge, his note, after crediting thereon the amount of his fees, as a part of the uncollectible debts due the estate, and an order was entered discharging him from his trust as administrator. From that judgment the widow and heirs of the deceased prosecute error to this court. Plaintiffs contend that the district court erred in its findings and judgment, in this : That, when a debtor is appointed adminis- trator of his creditor's estate, the debt owing by him to the de- ceased becomes assets in his hands as administrator; that the debt is considered paid, and he is chargeable with the amount thereof in the settlement of his accounts, without any regard to his financial condition before and during the time he acted as such adminis- trator. They thus seek, not only to charge Anderson with the amount of his debt to the estate, as for so much cash in his hands, but, by obtaining an order to that effect, to fix beyond question the liability of his bondsmen to pay that amount to the estate. On the other hand, the defendant contends that where an insolvent debtor is appointed administrator of his creditor's estate, and is at all times unable to pay his debt, by reason of his insolvency, his debt should be considered as uncollcQtible in his hands, the same as though it were the debt of a third person, and that his bondsmen are not liable to the estate for the payment of such antecedent debt. Upon this question the authorities are very much divided. In an early day the courts of Massachusetts laid down the rule con- tended for by the plaintiffs in error, and since then have steadily adhered to it. A few of the other States, including Ohio, New Hampshire, and some other of the southern States, have adopted this view of the law. ************* The " Massachusetts rule," as we will call it for convenience, is based on a legal fiction, and the presumption that all men are solv- ent and able to pay their obligations. It was but a short cut to say that one who was an administrator could not sue himself, and therefore he would be required to account to the estate for his individual debt as so much cash. It was an easy way of solving a 472 HOWELL V. ANDERSON. [CHAP.VH. diiScult problem, and one which we fully approve of, where the fact of insolvency is not satisfactorily made to appear. In case the administrator was solvent at the time of his appointment, or any time during the administration of his ofSee, and before his final settlement and discharge, he should be required to pay over in cash the amount of his antecedent debt. In such a ease the rule contended for by plaintiffs is a salutary one. It results in no hard- ship to anyone, and for that reason should be invoked and en- forced. But it seems to ns that this rule should have no applica- tion where it is made to appear that the administrator was wholly insolvent when appointed, while acting, and at the time of settle- ment. The defendant in this case filed his report in response to "the citation, and brought his individual note into court, together with the other uncollectible claims due the estate, and turned them • over to the county judge. As the estate had not been fully admin- istered, it was the duty of the county judge to appoint an admin- istrator de bonis non, into whose hands the administrator's note, as well as the others uncollected and unconverted, would go. The result to the estate would have been the same had another' person' than the defendant been appointed administrator. The estate has in no wise suffered by any act of his subsequent to his appointment. It appears beyond question that, at the time the defendant was appointed administrator of Howell's estate he was wholly insolv- ent; that he remained in such insolvent condition during the entire time that he served as such administrator, and was insolvent at the time of his resignation and proposed settlement ; that by reason of his condition it was at all times impossible for him to pay the ante- cedent debt he owed to the estate. Section 279, chap. 23, Comp. Stat., provides that " no executor or administrator shall be ac- countable for any debts due to the estate if it shall appear that they remain uncollected without his fault." There is no reason why the antecedent debt of the administrator, where it is at all times uncollectible, and it is impossible for him to pay it, should be treated any different from any other uncollectible debt due the estate. The defendant in this case delivered up to the court his own uncollectible note, which came into his possession as adminis- trator of the estate, and asked to have credited thereupon his com- missions, amounting to $134.07. If he had not owed the estate this antecedent debt, he would have been entitled to withdraw from the assets thereof the amount above stated. It follows that his ap- pointment, instead of reducing the available assets of the estate, resulted in their increase by the full amount of his commission. SEC. 6.] HOWELL V. ANDERSON. 473 Instead of taking anything from the estate, he contributed his services to its gratuitously, and it was saved the expense that would otherwise have been paid to another administrator. It is unfortunate that the estate should lose the balance due upon Anderson's note, but if we should hold that this balance should be treated as cash in his hands, and make an order requiring, him to pay it over, the result of such order would be to require Ander- son's sureties to pay the antecedent debt he owed Howell, which could not be collected at any time during Howell's lifetime, and has at all times since that date remained absolutely uncollectible. By adhering to this legal fiction, we would require Anderson's sureties to take $700 from their pockets and pay it over to Howell's heirs on account of an unfortunate investment made by him in his hfetime, and impose upon them a liability upon their bond which they never contracted. Their agreement was that Anderson was. an honest, capable, and upright man, and would discharge his duties as administrator of Howell 's estate properly ; in other words, that he would account for all of the assets thereof that came into his hands, and pay over all the moneys collected for and on behalf of the estate to his successor, or other proper authority. They never covenanted that Anderson was solvent and able to pay his antecedent debts. The sureties on his bond did not aeree to con- vert Anderson 's worthless note into cash, or create something out of nothing. Legal fictions should only be resorted to for the pur- pose of preventing a failure of justice, and when they would result in an unjust and inequitable judgment they should never be in- voked. The later cases hold that where the administrator or executor is shown to have been insolvent at the time of his appointment, during the incumbency of his ofSce, and at the time of his dis- charge, his bondsmen are not liable for his individual debt. * :,, In State ex rel. McClamrock v. Gregory, 119 Ind. 503, 22 N. E. 1, the Court uses the following language: " One question which seems to have been overlooked on the trial of the cause was the financial condition of Levin T. Miller, the administrator, during the period of his administration. The money collected by him while professing to act as the agent of the administrator in Missouri, and for which he had not accounted when he became administrator, was a claim in favor of his trust, which he should have inventoried and charged himself with ; and if, by the use of due diligence, all or any part of the claim could have been saved to the estate, his sure- ties are therewith chargeable, but, if he was hopelessly insolvent. 474 t HOWELL V. ANDERSON. [CHAP. vn. they do not become liable therefor, the burden as to the question of insolvency being on the administrator and his sureties." Fur- ther on in the opinion the Court says : ' ' The debt of the adminis- trator is to be accounted for as other debts or assets, and he may show his insolvency during the period of administration in dis- charge of his official liability; "********** There being no direct statutory provision upon the question in this State, there seems to be no reason why the above rule should not be adopted. The recent text-writers recognize this rule to be in force generally at this time. Croswell, Exrs. & Admrs. p. 243, says: " In most States, however, by statutory provision, it is enacted that the appointment of a debtor as executor or adminis- trator does not operate as an extinguishment of the debt, but it is treated as any other debt owing to the estate, and, if it can be col- lected, (i. e., if the executor or administrator is solvent), then he is held to account for it as part of the assets. In other States the statutes, while not extinguishing the debt, treat it as cash in the hands of the executor or administrator, just as the equitable rule above stated does. In such a case, if the executor or administrator is insolvent during the period of administration, the debt is not charged as assets, but considered as an ordinary uncollectible debt." In Dame, Administration, § 189, we find the following: " It is a well-established rule of law, running back even before the Revolu- tion, that an executor or administrator is considered as having paid the debts due from him to the estate, and as actually having in his possession that much more cash. If the personal representa- tive is insolvent, the courts, in the interests of all concerned, modify this rule somewhat. He still charges himself with the amount of his debt; but it does not make it actually money. The law does not require impossibilities, and there is no more reason why he should be considered as having paid" what he was utterly unable to pay, than any other creditor. He is held liable to the estate to the extent of his ability to pay the same at any time during adminis- tration." The text above quoted is supported by the case of Lyon v. Osgood, 58 Vt. 707, 7 Atl. 5. We think this is the better rule, and we therefore hold that where one is indebted to a deceased person, and is afterwards appointed administrator of his estate, and the fact is shown that when so appointed he was hopelessly insolvent, was so during all of the time of his administration, and remained in that condition up to and including the date of his settlement as administrator, he should be permitted to turn over the evidence of his uncollectible debt to his successor, or other SEC. 6.] BASSETT V. FIDELITY CO. 475 proper authority, and be discharged from his official liability therefor. For these reasons, we hold that the judgment of the district court was right, and we recommend that it be affirmed. Oldham and Pound, CO., concur. Per Curiam: For the reasons given in the foregoing opinion, the judgment of the District Court is affirmed. Accord. — Holding that where the executor or administrator is a debtor of the estate the amount of his debt does not become an asset in his hands for which his bond is liable, providing the officer is insolvent. Condit v. Wins- low, 106 Ind. 142; Sanchez v. Forster, 133 Cal. 614; Baueus v. Barr, 56 Hun. 582 (affirmed 107 N. Y. 624) ; McCarty v. Frazer, 62 Mo. 263; Barker V. Irick, 10 N. J. Eq. 269; Rader v. Yeargin, 85 Tenn. 486; Buckle v. Smith, 26 Ky. L. Eep. 991 ; Sanders v. Dodge, 140 Mich. 236. BASSETT V. FIDELITY & DEPOSIT CO. 184 Mass. 210 (1903). John C. Hammond and Henry P. Field, for plaintiff. Peabody & Arnold, for defendant. LoKiNG, J. The principal exception of, the defendant corpora- tion is to the refusal of the Court to recommit the ease to the as- sessor to take evidence as to the insolvency of the executor and of the firm of which he was a member at the date of the testatrix's decease. The contention which has been made in support of this exception is that the obligation of a surety on an executor's bond goes no farther than to guaranty that the executor will lawfully administer the assets of the testatrix which had an existence in fact, and which came to his hands or knowledge, and that it is be- yond the scope of such a bond to crealte assets which the testatrix never had, by making the surety guaranty debts due from insolv- ent creditors ; and for that reason it cannot be made liable for the full amount of the notes held by the testatrix made by the execu- tor's insolvent firm. But there is another side to the case. An executor or administrator is appointed for the sole purpose of enforcing in behalf of those interested in the estate the rights of the estate against others. When the estate has a claim against the executor or administrator himself, he is incapacitated from per- forming that duty and taking to himself that office. For that rea- son, on broad principles of policy, it was laid down by the common 476 BASSETT V. FIDELITY CO. [ CHAP. VII. law of England that lie must yield all controversy as to the debt due from himself, and treat it as an asset of the estate. No one is bound to accept the office, and if he elects to do so he hereby tacitly assents to this condition. The common law did not allow him to accept the office and keep his rights in a controversy when his duty and his personal interest were in a direct conflict. To allow him to accept the office and then to settle the amount which the creditors and others interested in the estate would have got had he not taken the office but had allowed some disinterested per- son to be appointed tp enforce these rights, would not be doing justice to those whose rights the law undertakes to preserve. Take the case at bar for an example. The executor's firm was going on with its business when the testatrix died, and went on in business for some 14 mbnths after that time. The law could hardly be said to have fully preserved the rights of those interested in the estate if it allowed this creditor of the estate to accept an ofSoe where it became his duty to collect the amount due from his own firm by pressing for payment, and after 14 months of inaction on his part to settle the rights of the beneficiaries by a judicial in- quiry as to what would have happened had a disinterested person been appointed to perform the duty owed to these beneficiaries. But it is not necessary to discuss the question further; It is con- cluded by authority in this commonwealth. The rule was origin- ally laid down in 1814 in Stevens v. Gaylord, 11 Mass. 256. The history of the rule and the cases, both in England and in this country, are given in Winship v. Bass, 12 Mass. 199, and in Tarbell V. Jewett, 129 Mass. 457. The rule is one of general application, and has been held to be applicable not only in case of executors and administrators, but also in ease of assignees in insolvency (Benchley v. Chapin, 10 Gush. 173), guardians (Mattoon v. Cow- ing, 13 Gray, 387), and receivers appointed to wind up insolvent corporations (Commonwealth v. Gkiuld, 118 Mass. 300). « « * And, finally, it was held in Leland v. Pelton, 1 Allen, 531, that an executor should be charged with the full amount of notes be- longing to the testator made by a firm of which he was a partner^ although it was insolvent when the testator died, as well as with the full amount due on notes made by himself, who also was in- solvent at that time. The defendant in the case at bar asks us to hold that, although an insolvent executor is to be charged with the debt due from him, the sureties on his bond are not to be held liable therefor. But that is out of the question. That contention flies directly in the face of the elementary principles governing the SEC. 6.] BASSETT V. FIDELITY CO. 477 effect of a decree allowing a probate account and the elementary principles as to the obligation of a surety on a probate bond. In the first place, a decree of a Probate Court allowing an account of an executor or other official is binding on all interested in the estate, including sureties on the bond of the accountant. If there is error, the error must be corrected in the Probate Court, as it may be if there was fraud, or if the party in question had not such notice as to be concluded by the decree. Jennison v. Hapgood, 7 Pick. 1, 19 Am. Dec. 258 ; Sever v. Russell, 4 Cush. 513, 50 Am. Dec. 811; Parcher v. Bussell, 11 Cush. 107. It is settled that a surety on a probate bond is a party interested in the accounts of the principal, and for that reason has a right of appeal to the Supreme Judicial Court. Parrar v. Parker, 3 Alien, 556. In the second place, the obligation of a surety on a probate bond is the obligation of the principal. The bond is a joint bond, and the judgment necessarily must be the same against both. This is more than a technical rule of law ; it is a place where the true character of a surety's liability comes to the surface. The ground on which it was held that a surety has a right of appeal in such a case was that the decree settling the account of the principal, " if once properly established, fixes the amount of liability of the sureties on their bond. ' ' Farrar v. Parker, 3 Allen, 556, 558. And Endi- cott, J., in Tarbell v. Jewett, 129 Mass. 457, 468, speaking of Leland v. Pelton, 1 Allen, 531, said that it was held that the executor would be charged for his own notes and for the notes of his firm held by the testator, although both he and the firm were insolvent, " which, of course, rendered his sureties liable." Again, in Choate v. Arrington, 116 Mass. 552, 556, "Wells, J., said: " The surety is liable for whatever is properly chargeable to his principal in the official capacity on account of which the bond was given." To the same effect, see Ames, J., in Chapin v. Waters, 110 Mass. 195, 197. It is apparent that this was assumed to be the case in Leland v. Felton. In that case the executor had resigned, and the plaintiff, Leland, had been appointed administrator with the will annexed de bonis non. The main contention of the defendant, Pelton (the executor who had resigned), was that the debt due the testator was suspended, not extinguished, by his being execu- tor ; that it was revived by his resignation ; and that the remedy of the administrator was an action on the notes against him and his •partners, in which he could recover a personal judgment, but that he would not be charged with the amount by the Probate Court in his executor's account. If the liability of the surety was different 478 BASSETT V. FIDEUTY CO. [ CHAP. TO. from that of the executor, there wag no possible object in this de- fense. The sole purpose of the defense was to protect the sureties and from an examination of the court records it appears that after the decision in Leiand v. Felton, 1 Allen, 531, judgment was re- covered in an action brought against the principal and sureties in the Supreme Judicial Court in the October Term, 1863, no defense being interposed by the sureties. It further appears from an in- spection of the records of the Probate Court that several payments were made on account of that judgment by one of the sureties. The defendant's request, therefore, is a request that we overrule the case of Leiand v. Felton, 1 Allen, 531. ******* We are of opinion that, for the reasons given, the true rule was laid down in Leiand v. Felton, and that it is now too late to ques- tion the practice which was then adopted, and has been in force for over 40 years. * ************** Exceptions overruled. AccoKD, — I Holding that where the executor or administrator is a debtor of the estate the amount of his debt becomes an asset in his hands for which his bond is liable even though the officer is insolvent. Lambrecht v. State, 57 Md. 240; Wright v. Lang, 66 Ala. 389; Twitty v. Hauser, 7 S. C. 153; Bacon v. Fairman, 6 Conn. 121; Potter v. Titcomb, 7 Me. 302. The statutes in Ohio provide that the naming in a will of a debtor as executor does not discharge the debt, and that the executor shall be liable for the debt as for so much money in his hands at the maturity of tjie debt. In construing this statute in McGaughey, Admr. v. Jacoby, 54 O. S. 498, the court says: " The indebtedness of the executor to the testator beiiig regarded by the law as so much money in his hands, and assets in that form, with which he is chargeable in the administration of his trust, its proper applica^ioni and distribution by him to the parties entitled thereto, is a duty coming within the conditions of the bond which the executor is required to give, and for the performance of which the sureties undertake to be responsible; so that their liability for his failure to make faithful administration of that fund is within the express terms of their obligation. That this is so as a general rule is not disputed; but it is claimed an exception exists, or should be made, where the executor is insolvent at the time of his appointment and continues to be so until the final settlement of the estate, for the reason, as it is said, that it would be a hardship on the sureties in such a case, to hold them for the executor's individual debt to the testator, when they contemplated and intend- ed no further responsibility by their obligation of suretyship than that for the performance of his duties in the administration of the actual assets which are within his control ; and in that respect, his indebtedness to the tes- tator is, or should be, on no different footing from that of other debtors. • # * " The statute declares, in explicit terms, that in the administration of his trust the executor shall be liable for any indebtedness of his to the testator, 'as for so much money in his hands' at the time it becomes due, and 'shall SEC. 6.] NANZ V. OAKLEY. 479 apply and distribute the same in the payment of debts and legacies, and among the next of kin as part of the personal estate of the deceased.' The language includes all executors indebted to their testator, imposes the same duties upon all alike, and applies the same rule to all without distinction* between those that are solvent and those that are insolvent, or on account of any circumstance or condition whatever." The Massachusetts rule is followed in the construction of a similar statute in New Hampshire. Probate Judge v. SuUoway, 68 N. H. 511, AUGUST C. NANZ v. JESSE OAKLEY. 120 N. Y. 84 (1890). Wm. H. Arnoux, for appellant. David Thornton, for respondent. Haight, J. One Eliza Munday, as the present owner of the claim in suit, joins with the plaintiff in this appeal. The action was brought against the defendant, as surety, upon an adminis- trator's bond to recover the amount adjudged by the surrogate to be due and owing by the administrator, and which he was ordered to pay to Cornelius W. Depew, as administrator of Rachel Depew, .deceased. It appears that one Mary Ann Sehultz died in the city of New York intestate, and that Rachel Depew was her only heir at law and next of kin. That on her petition Bomt P. Winant and herself were appointed administrator and administratrix of the estate, and the defendant and one Peter Cortelyou executed the usual bond, which was joint and several, as sureties. It further appears that Winant alone administered the estate, and that on a final account- ing before the surrogate it was adjudged and decreed that there was in his hands, as such administrator, the sum of $1,930, which with the interest, costs and disbursements of the proceedings to cpmpel him to account, amounted in the aggregate to $4,017.57, which sum he was ordered to pay over to Cornelius W. Depew, as administrator of Rachel Depew, she having died in the meantime. Winant having converted the money to his own use, failed to make payment and the decree was duly docketed, execution issued and returned unsatisfied, and thereupon this action was brought against the defendant, the sole surviving surety upon the administrator's bond, Depew as such administrator having assigned the claim to the plaintiff. The trial court held that the plaintiff was not entitled to re- 480 NANZ V. OAKLET. [CHAP.VD. cover, for the reason that Kachel Depew was a co-administratrix with Winant; that she was one of the principals in the bond of • which the defendant was surety, and that she could not maintain an action against her own surety for the wrongful acts of her eo- principal. This would be so if by executing the bond she became liable as surety for the devastavit of Winant, her co-principal This question has received attention in numerous reported eases in the different States, in some of which it has been held that one executing a bond is liable for the default of his co-principal. ^ ^ * * * * In our own State but one case has been found in which the question appears to have been considered, and that was the case of Kirby v. Taylor, first reported in 6 Johnson's Chancery, 242-253, wherein Chancellor Kent remarks that " it was probably not the intention of the bond that Thompson should himself be con- sidered as a surety for his co-guardian." The same case was again reported in Hopkin's Chancery, 309-331, in which Chancellor San- ford considers the question in an elaborate opinion, reaching the conclusion that a principal in a guardian's bond is not liable to the sureties for the default of his co-principal. *#***» The question in reference to the liability of executors and ad- ministrators for the default of each other, independent of any bond, is well settled by the authorities. Each of several executors or administrators has the power to reduce to possession the assets and collect all the debts due the estate, and is responsible for all that he receives. The payment of money or delivery of assets to a co-executor or co-administrator will not discharge him from lia- bility ; for having received the assets in his official capacity, he can discharge himself only by a due administration thereof in accord- ance with the requirements of the law. Consequently one joint executor or administrator is not liable for the assets which come into the hands of the other, nor for the laches, waste devastavit or mismanagement of his co-exeeutoi or co-administrator, unless he consents to or joins in an act resulting in loss to the estate, in which event he will become liable. In other words, co-executolr^ and co-administrators may act either separately or in conjunctioin.* They are jointly responsible for joint acts, and each is separately answerable for his separate acts and defaults. It is not claimed that any of the estate came into the hands of Rachel Depew, as administratrix, or that she as such committed any act or default that would make her liable for the devastavit of Winant, unless she may be liable therefor upon the bond ex- ecuted by her. The bond thus executed was in the form required SEC. 6.] NANZ V. OAKLEY. 481 by the statute, conditioned that they should faithfully execute the trust reposed in them as such administratrix and administrator, and that they shall obey all orders of the surrogate touching the administration of the estate committed to them. The statute pro- vides that every person appointed administrator shall, before re- ceiving letters execute a bond to the people of the State, with two or more competent sureties, to be approved by the surrogate and to be jointly and severally bound. (3 R. S. (6th ed.) 82, 56.) So that, before receiving letters, she was required to execute the statutory bond, and having been associated with Winant as co- administratrix, she joined with him in executing the bond in which they each undertook to faithfully execute the trust reposed in them as administratrix and administrator. What was the trust reposed in her as administratrix? It was to administer upon the money and assets coming into her hands, and for which she became per- sonally liable, and for such assets as came into their joint pos- session in which they became jointly liable to administer and ac- count, and not to execute the trust as to money and assets which came into the exclusive control and management of her co-prin- cipal, over which she had no jurisdiction or control. They were to obey all orders of the surrogate touching the administration of the estate committed to them. What orders was she to obey? Those that were addressed to her, not those that were addressed to her co-administrator. The object of an administrator's bond is to enforce or insure the discharge of the duty reposed in the per- sons 'appointed. It was not intended in requiring such a bond to be executed, to change the liability or duties of the persons ap- pointed from that which existed under the provisions of the statute independent of the bond. The bond is not intended to vary their obligation or their rights and duties as are defined by law. Their duties were the same after, the bond had been given as they would have been had no bond been required or executed.^ They were consequently jointly liable for joint acts, and severally liable for their own acts. Rachel Depew and Winant each signed the bond as principal. Neither signed it as surety. The defendant signed as surety, and as such she became liable for the joint acts of the principals and for the individual defaults of each. It is true they joined in executing a single bond jointly with sureties. They doubtless had the right to execute and file separate bonds ; but this was unnecessary, for their act in executing the one instrument should be construed as if they had executed separate bonds. Joint administrators may be willing to undertake the 19 482 / NANZ V. OAKLEY. [CHAP.VH. trust reposed in them when each knows that he is responsible only for his own acts and those in which he joins with his associate, when he would not be willing to become surety for the separate acts of his colleague. The claim that joint liability for the acts of each other under the bond will promote diligence on the part of the principals, does not appear to us to be well founded. It may be true that sureties are at times without power by timely interven- tion to prevent waste by one of several administrators, but such want of power may be equally true in reference to the other joint administrators. As we have seen, one may collect a debt or take into his possession an c::set, and having reduced it to possession, he must be responsible for the proper administration of it. His associate cannot demand or recover it from him, and should he see fit to abscond or commit waste without the knowledge of his associate, such aE:;Dciate would have no other, further or greater power to prevent it than the surety. ****#**», For the reasons already- stated, the judgment should be reversed and a new trial granted, with costs to abide the event. All concur, except Follett, Ch. J., and Vann, J., dissenting. Judgment reversed. For other cases holding that co-administrators are jointly liable op their bond for joint acts and separately liable for separate acts, see: Briien v. Gillet, 11.5 N. Y. 110; Croft v. Williams, 88 N. Y. 384; Ormiston v. Olcott, 84 N. Y. 339; Adair v. Brimmer, 74 N. Y. 539; Turner v. Wllkins, 56 Ala. 173; Van Pelt V. Veghte, 14 N. J. L. 207; Kerr v. Kirkpatrick, 43 N. C. 137. A co-administrator is liable for the devastavit or default of his associate if by the exercise of reasonable care he might have prevented it. English v. Newell, 42 N. J. Eq. 76; Whiddon v. Williams, 98 Ga. 310; Insley v. Shire, 54 Kan. 793; Earle v. Earle, 93 N. Y. 104; In re Niles, 113 N. Y. 547; Wil- merding v. McKesson, 103 N. Y. 329. In the case last cited the court says; " If the executor is merely passive, and simply does not obstruct the col- lection or receipt of assets by his associate, he is not liable for the latter's waste; but where he knows and assents to such misapplication, or negligently suffers his co-executor to receive and waste the estate when he has the means of preveiitihg it by proper care, he becomes liable for a resulting loss." SEC. 7.] STATE V. PECKHAM. 483 Sec. 7. Bonds of guardians. THE STATE, EX EEL. COLEMAN v. PECKHAM, ET AL. 136 Ind. 198 (1893). B. W. Irvin, J. V. Kent and S. Try on, for appellant. F. W. Chase, for appellees. Howard, C. J. This was a suit brought by the relatrix, in the name of the State, against the appellees, being her former guardian and the sureties on his bond, charging fraud in said guardian's settlement account, asking that said account be set aside, and that she be awarded judgment in the sum of twelve thousand dollars. 4, :» « 4c * * From the allegations of the complaint, it ap- pears, amongst other things, that in March, 1872, the appellee William S. Peckham was duly appointed guardian of the relatrix, then a minor ; that he executed the bond set out with the complaint, on which his co-appellees are also liable ; that he continued to act as such guardian until the 1st day of February, 1875,' during which time he received, as such guardian, the sum of seven thou- sand dollars, the property of his ward; that on June 22, 1872, he loaned to a copartnership, known as the Lafayette Paper Company, the sum of five thousand dollars out of his said ward's funds, with- out authority of law and without an order of court, but solely upon his own motion, and took from said borrowers for such loan their note, signed only by said firm and by the individual members thereof, payable in twelve months, and without any security what- ever; that from time to time, as the loans matured, the said guar- dian renewed the same, and took in like manner notes therefor, "Mthout security, until the 15th day of December, 1874, when he again renewed the loan for six months, taking a note signed by the copartnership and its members, as before, payable to himself, as guardian, without security, and due in six months. It is averred that during the time these loans and renewals were made the money could have been readily loaned in the city of Lafayette, where said guardian and ward resided, at ten per cent, interest, and upon good first-mortgage real estate security. ■ It is further alleged, that on said 1st day of February, 1875, said guardian filed in the Tippecanoe Circuit Court his report as guardian, representing, amongst other things, that part of his ward's estate consisted " of a note for $5,000 signed by Lafayette Paper Mill Company, W. A. Potter, Samuel Favorite, H. T. Sam- 484 ] STATE V. PECKHAM. [CHAP. TO. pie and Fred Geiger, dated December 15, 1874, and that it would be adverse to the interest of his word to disturb the investment made by him; " that in said report he tendered his resignation as such guardian, and asked the court to approve said investment; that the court did accept and approve said report, and also ac- cepted the resignation of said guardian, and ordered that he should be discharged from all further liability on account of his said trust. The complaint further avers, that said report was false and mis- leading in this, that it was not adverse to the interest of said ward, that said investment of $5,000 upon the unsecured note of said copartnership should be undisturbed; but, on the contrary, at the time of making said report, and also on said 15th day of December, 1874, when said note was made, and for a long time before, the said firm and each member thereof were insolvent, which fact the said guardian well knew, but failed and omitted to inform the court of said fact ; and failed and omitted to inform the Court that said paper mill company was unincorporated, and was only a private copartnership, composed only of the signers of said note, and that the safety of said assets of said ward required that prompt steps should be taken to collect or secure the same, which fact was true and well known to said guardian, because of which insolvency said sum of money has become wholly lost ; that said guardian in and by said report and resignation did not inform the Court that said note of said firm was for moneys of said ward theretofore loaned by him as such guardian to said firm; that said report was filed and said order of Court was made ex parte and without the knowledge or consent of said ward, and is wrongful and oppressive; that on the day of his said discharge said guardian assigned, without re- course on himself, said note to his successor. It is first contended by counsel, that the order of the Tippecanoe Circuit Court approving the final report and accepting the resig- nation of the guardian was an adjudication of the claim here made by the relatrix. In Wainwright v. Smith, 106 Ind. 239, it was held that it is not necessary that the approval of a guardian's report in final settle- ment should be set aside in order to maintain an action against the guardian for negligence, unless the approval of the report was in some way an adjudication of the matters of which complaint is made ; that the approval of such settlement report is an adjudica- tion of all matters involved in, or which properly belong to, the proper accounting of moneys with which the guardian was chargea- SEC. 7.] STATE V. PBCKHAM. 485 ble: but that such approval does not adjudicate the subject of the guardian's negligence in the management of the ward's estate, anless that subject is embraced in the report. See, also, Naugle v. State, ex rel., 101 Ind. 284. The rule thus laid down as to final settlement reports, and when the ward has arrived at full age, must prevail even more strongly in case of ex parte orders made from time to time during the pendency of the guardianship, and while the ward is yet incapable ol acting for himself. Of such ex parte orders, it is said, in the case of State, ex rel., T. Wheeler, 127 Ind. 451, that whether made by the court by way of direction to the guardian, or of approval of action theretofore taken by him, they are, like those made in the settlement of an est-ate, to be regarded as prima facie correct, but are, as a rule, within the control of the court making them until final settlement of the guardianship ; and that such orders may, at all times before final settlement and discharge of the guardian, be set aside, cor- rected, or modified, if the requirements of justice demand it. Because the guardian in this case, on making the report in ques- tion, resigned his trust and was discharged by the Court, it is con- tended that the settlement thus made was a final settlement. This can not be correct. It is true that the guardian thus withdrew himself from his trust, and was relieved as to all subsequent lia- bility therein; but the guardianship itself continued, and, as to that, the settlement made was only partial and its approval ex parte. As to estates, it has been expressly decided by this Court that the final report of an outgoing administrator or executor, resign- ing his trust before settlement of the estate, and the approval of such report, followed by his discharge by the Court, do not consti- tute the " final report " contemplated by the statute, and there- fore, are no bar to an action on the bond of such administrator or executor. Parsons, Admr., v. Milford, Admr., 67 Ind. 489. While such settlement and resignation are binding on all persons interested in the estate, as to matters properly embraced in the i^eport and its approval by the Court, yet it is not final, and is no bar to a suit on the bond of the administrator or executor for mat- ters not properly embraced in the adjudication. Lang v. State, ex rel., 67 Ind. 577. In the complaint in the case at bar, it is alleged that the report made to the court by the guardian was false and misleading in Several respects; that it was not true, as stated in the report, that 486 STATE V. PECKHAM. [CHAP.VH. it was to the interest of said ward that the investment of $5,000 upon the unsecured note of said co-partnership should be left un- disturbed; but that, on the contrary, at the time of making said report, and also at the date when said note was taken, and for a long time before, the said firm, and each member thereof, were insolvent, which fact the said guardian well knew, but failed and omitted to inform the Court thereof, and failed and omitted to inform the Court that said paper mill company was only a private co-partnership, composed only of the signers of the note; and failed to inform the Court that the safety of said assets required that immediate steps should be taken to collect or secure the same, which fact was true and well known to said guardian; that said loan was made without the order of court, on the sole motion of the guardian, and in said report the guardian did not inform the Court that said note was for moneys of his ward theretofore loaned by him as such guardian to said firm ; that said money has become wholly lost by reason of the insolvency of said firm. We think the matters thus alleged were not adjudicated by the order of the Court. The Court could not act upon what it did not know. ifHf, ******* ********* In Line v. Lawder, 122 Ind. 548, it was said by the Court that " the burden rests upon the guardian to show . . that he exer- cised the required degree of care in taking securities, . . that they were good beyond peradventure, and that they will be col- lectible when they fall due. Before such a settlement shall be an exoneration, he is also bound to make full disclosure to the Court of the settlement, and manner of payment, without any conceal- ment or misrepresentation. ' ' It should appear, if notes were taken for loans, that the loans were prudently made upon collateral, or other adequate security that " loans made on the credit of indi- viduals or firms, without security, or with doubtful security, are ordinarily at the risk of the guardian. ******** That while it is true that a guardian " is not an insurer of the safety of the investments made by him, ' ' and is not to be held to an extraordinary degree of care, yet " in order that he may be exonerated from loss on account of insolvent securities taken in the course of the guardianship, it is his duty to act in good faith, and observe that sound discretion and prudence usually exercised by diligent men about their own business. In making loans of the trust funds it is his duty to take security. ' ' From the facts pleaded in the case at bar, and from the authori- ties cited, we think it very dear that the report of the guardian SEC. 7.] PEOPLE V. SEELYE. ^^^ and the order of the Court discharging him from his trust consti- tute no bar to an action like this. The matters complained of by the relatrix are not those that were disclosed in the report and adjudicated by the Court, but rather the matters that were con- cealed from the knowledge of the Court, and were not passed upon, in the Order of approval; that order was therefore no bar to an action on the bond. *«*****##*#,,#* We think the order was not an adjudication of the matters here in controversy, which have to do with the negligence of the guar- dian ; but even if that order were such adjudication, this complaint is good for the setting aside of that order and the collection of the amount, if any, due on the guardian's bond. In either case, the complaint was not subject to the demurrer. The judgment is reversed, with instructions to overrule the de- murrer to the complaint, and for further proceedings. In the absence of fraud the settlement of the final account of the guardian is conclusive against his sureties, although they have no actual notice of the filing of the account. Kattleman v. Guthrie's Estate, 142 111. 357; State v. Slaughter, 80 Ind. 597; Knepper v. Glenn, 73 Iowa, 730; Braiden v. Mercer, 44 0. S. 339; Commonwealth v. Julius, 173 Pa. 322; Sheppard v. Pebbles, 38 Wis. 373. THE PEOPLE FOR THE USE OP STANLEY B. SEXTON v. HENRY E. SEELYE. 146 111. 189 (1892). This was an action of debt, brought by the People of the State of Illinois against Henry E. Seelye, upon a guardian's bond, of which the following is a copy: " Know all men by these presents, that we, Henry M. Curtis, George F. Bissell, of the county of Cook and State of Illinois, are held and firmly bound unto the People of the State of Illinois, for the use of Stanley B. Sexton, minor, in the penal sum of one hun- dred and twenty thousand dollars, current money of the United States, which payment, well and truly to be made and performed, we bind ourselves, our heirs, executors and administrators, jointly, severally and firmly, by these presents. Witness our hands and spals, this 3d day of January, A. D. 1873. " The condition of this obligation is such, that, if the above bounden Henry M. Curtis, who has been appointed guardian of Stanley M. Sexton, shall faithfully discharge the office and trust 488 PEOPLE V. SEBLYB. [ CHAP. TO. of such guardian according to law, and shall make a true inventory of all the real and personal estate of the ward that shall come to his possession or knowledge, and return the same into the County Court at the time required by law, and manage and dispose of all such estate according to law, and for the best interest of said ward, and faithfully discharge his trust in relation thereto, and to the custody, nurture and education of said ward, and render an ac- count on oath of the property in his hands, including the proceeds of all real estate that may be sold by him, if any, and the manage- ment and disposition of all such estate, within one year after his appointment, and- at such pther time as shall be required by law or directed by the Court, and upon removal from office, or at the expiration of his trust, settle his accounts in said court, or with the ward, or his legal representative, and pay and deliver all the estate, title papers and effects remaining in his hands, or due from him on such settlement, to the person or persons lawfully entitled thereto, then this obligation shall be void, otherwise to remain in full force and virtue. Henry M. Curtis, (seal). George F. Bissell, (seal). J. P. Brooks, (seal). H. E. Seelye, (seal)." Messrs. Quigg & Bentley, for the appellant. Messrs. Swift, Campiell & Jones, for the appellee. Mr. Chief Justice Bailey delivered the opinion of the Court: The remaining question arises upon tte decision of the Circuit Court sustaining a demurrer to the defendant's fourth plea. That plea alleged, in substance, that after the execution of said guar- dian's bond by the defendant, as surety, and after Sexton, the ward, had become of age, and before Curtis, the guardian, had rendered his account in said Probate Court, said Curtis and Sexton entered into a secret agreement, without the knowledge or consent of the defendant, by means of which the funds and estate of said Sexton in the hands of said Curtis, as guardian, and belonging to said Sexton, were withdrawn from the guardianship, and were, by the mutual agreement of said Curtis and Sexton invested in their private business, and thereby became lost, whereby the defendant ceased to be a surety for said funds so held by said Curtis as such guardian, and became from thenceforth wholly released and dis- charged from any and all liability as surety upon said bond. SEC. 7.] PEOPLE V. SEELYE. 489 It is a general rule, that any agreement between the creditor and the principal, which varies assentially the terms of the contract by which the surety is bound, without the consent of the surety, will release the surety from liability. ********* . ' And if the duties which the principal is to perform are varied by agreement between the principal and obligee, after the surety for the conduct of the principal has become bound, such surety will generally be thereby discharged. ********* So also, any dealings with the principal by the creditor, which amount to a departure from the contract by which the surety is bound, and which by possibility might materially vary or enlarge the latter 's liability, without his consent, generally operate as a discharge of the surety. ************ Among the legal duties of the guardian for the performance of which the defendant, by executing the guardian's bond, became surety, was that of accounting to his ward when the latter became of age, and of surrendering and delivering over to his ward such property and estate as should then be in his custody and pos- session, as guardian. An agreement between the guardian "and ward that such property and estate, instead of being delivered over to the ward, might i be retained by the guardian and used in his business, or used in the joint business of the guardian and ward, would clearly be such a modification of or departure from the legal duty for the performance of which the defendant had become surety, as to be sufficient, upon the principles above set forth, if valid and binding on the ward, to discharge the defendant from his obligation as surety. It would constitute a broad and palpable change in the obligations of the principal, by giving him the tight to retain and use, and subject to the hazards of loss in a business enterprise, the funds and property which by the condition of his bond, he had obligated himself to deliver over to his ward at the termination of the guardianship. Sexton, at the time of the agreement between him and Curtis alleged in said plea, and at the time his estate was embarked in business in pursuance of said agreement and lost, was of full age and therefore sui juris. Said agreement was not void, but at most only voidable at his instance. True, as between the parties to it, it was presumptively fraudulent. Having been entered into while the ward's property was still in his guardian's hands, and while dependence on one side and influence on the other presumptively continued, the burden would no doubt rest heavily on the guar- dian, in any controversy between him and his ward involving its 490 PEOPLE V. SEEL*TE. [CHAP. VH. validity, to prove all circumstances of knowledge, free consent good faith, and absence of influence, to overcome the prima facie presumption that it was fraudulent. 2 Pomeroy's Equity Juris, see. 961. Doubtless if the guardian were setting up such agree- ment as against his ward, he would be compelled, in the first in- stance, to allege and prove all those circumstances of good faith, absence of influence, free consent, etc., necessary to render the agreement valid. "Where, however, such agreement is sought to be availed of by one not a party to it, as, in this case, by the surety on the guardian's bond, we think a different rule applies. He is a stranger to the contract, and presumably not in a position to be able to establish affirmatively the circumstances under which it was entered into, or whether the guardian had exhibited the uber- rima fides which must be shown in order to render his dealings with his ward valid and binding. "We are of the opinion that, as to him, the invalidity of such agreement is matter to be set up by the other side by way of replication. We are of the opinion, there- fore, that the demurrer to said fourth plea should have been over- ruled, and that the plaintiff should have been left to the necessity of setting up the circumstances which would render said agreement invalid, as against the ward, by an afSrmative pleading. For the reasons above' stated, the judgment of the Appellate Court reversing the judgment of the Circuit Court will be af- firmed, but the Appellate Court erred in refusing to remand the cause to the Circuit Court for further proceedings, and in that respect its judgment will be modified, and the cause will be re- manded to the Circuit Court. Judgment reversed. AccoKD. — Holding that a eettlement in good faith between guardian and ward after the ward becomes of age, exonerates the sureties. Smith y. Me- Kee, 67 Iowa 161; Hardin v. Taylor, 78 Ky. 593; McKinnon v. McKinnon, 81 N. C, 201; Davenport v. Olmsted, 43 Com. 67; Hart v. Stribling, 25 Fla. 433. If the settlement with the ward is fraudulent the sureties remain liable. Douglass V. Ferris, ^38 N. Y. 192 ; Carter v. Tice, 120 111. 277 ; Parr v. State, 71 Md. 220. The fact that ward while, a minor, assisted the guardian in wasting tbe estate and consented to it, does not release the sureties. Probate Jvige v. Cook, 57 N. H. 450. SEC. 7.] STATE V. BRANCH. 491 THE STATE, EX EEL. HOSPES, ET AL. v. BRANCH, ET AL. ' 134 Mo. 592 (1896). I B. 8. MacDonald and E. C. Eehr, for appellant. B. Schnurmacher and Jos. 8. Laurie and Valle Beybum, for re- spondents. Macpaelane, J. Alice Crbokes, while yet a minor, received a legacy under her father's will. Defendant, Joseph W. Branch, was duly appointed her guardian, gave bond as such and received the legacy, in April, 1875. The said Alice attained her majority February 25, 1882. Branch made final settlement of his curator- ship in the Probate Court on July 19, 1884, in which there was found to be due his ward the sum of $19,832.14, which was ordered paid to the trustee of the said ward when appointed. In January, 1885, the said Alice Crookes filed her petition in the Circuit Court, reciting the foregoing facts, and stating that Branch then held in his hands, ready to be paid over, the said sum, and praying an order appointing the said Branch her trustee to receive and hold said sum for her use. The Court found the facts as staited, and ordered that " Joseph W. Branch be, and he is hereby, appointed trustee, with all the powers and authority in and by said will vested in her, the said Alice Crookes; and the said Joseph Branch here, in open court, accepts said trust, and files his bond in the sum of $40,000, with Charles P. Chouteau and R. M. Parks as securities, and conditioned for the faithful discharge of the trust, which bond the Court now approves." On June 16, 1885, Branch presented to the Probate Court a copy of the order, and submitted his receipt as follows : j, "St. Louis, Mo., June 1, 1885. ' " Received this day of Joseph W. Branch, curator of the estate of Alice Crookes, the sum of nineteen thousand, eight hundred and thirty-two and 15/100 dollars, in full payment of the balance found due from him at the final settlement of her estate in the Probate Court of St. Louis City, July 18, 1884. Evidence of my appointment as trustee by the Circuit Court of St. Louis City is herewith submitted. " Joseph "W. Branch, Trustee." Thereupon the Court made this order: " Now comes Alice Crookes, late a minor, by Joseph W. Branch, her trustee, and acknowledges in open court full and entire pay- 492 STATE V. BRANCH. [CHAP.Tn. ment and satisfaction of the balance ordered to be paid and de- livered to her upon the final settlement of said Joseph W. Brancli, curator of her estate heretofore made herein. It is thereupofi' or- dered by the Court that said Joseph W. Branch be, and he is hereby, finally discharged as such curator. Keceipt filed." This suit is against Branch and his securities upon his curator's bond, and charges a conversion of the funds prior to his appoint- ment as trustee, ^j.^^^^^^^^^^^^^.^ Upon the trial, the foregoing facts were shown by the records of the Court, and other evidence. Plaintiffs offered evidence, in rebuttal, tending to prove that the information upon which the for- former proceedings were prosecuted was obtained from Branch himself, by which they were misled and deceived into making the declarations and admissions therein contained. It was further shown on the trial that prior to his settlement as curator. Branch had used the funds of his ward in his private business, and that they were being so used at the time the settlement was made, sand, as a matter of fact, the money was not in his hands, and never was transferred, but was continued in his private business as before, The evidence also tended to prove that at the time Branch, as trus- tee, filed in the Probate Court the receipt from himself as curator, he was possessed of sufficient property, subject to execution, out of which the balance due his ward could have been collected by process OI law. 4s4;:|;4i^:(:4:#^««:i:l|:4ct III. But it is insisted that plaintiff Alice, by her conduct and declarations, is now, in equity, estopped, as against, the sureties on the guardian's bond, to deny that Branch received the funds as trustee. It stands established by the records and judgments of the Circuit Court in the former proceedings that the said plaintiff, in the most solemn manner, declared that Branch had taken the funds into his hands as trustee. The records of the Probate Court show that she was duly notified that Branch, as curator, would make his final settlement. The records of said court also show that the funds were transferred to Branch, as trustee. Branch was appointed trustee upon the petition of said plaintiff, in which it was sol- emnly stated that he held the funds in his hands ready to be trans- ferred, 'the order was made appointing Branch trustee, and he was ordered to transfer the funds to himself as trustee. A receipt was duly filed in the Probate Court showing that the transfer had been made, and Branch, as curator, was, so far as the Probate Court could act, discharged as curator. Every act was done by SEC. 7.] STATE V. BRANCH.. 493 plaintiff, that it was possible for her to do in ratification of the acts of her curator, and in afBrmanee of the records of the Probate Court. The matter was allowed to stand in that condition for about two years, said plaintiff continuing to reafSrm the truth of the records by receipting for money from Branch in his capacity of trustee. Under all principles of equity and good conscience, plaintiff should not be allowed to deny the truth of what the record shows, if, by doing so, others will suffer loss or injury. The sureties on Branch's bond as guardian obligated themselves to answer for any default of their principal. They had the right to protect or secure themselves against liability in case the misconduct of their prin- cipal became manifest. Upon the settlement of the curator in the Probate Court, they became prima facie responsible for the amount found due, if it was not properly accounted for, and paid over according to the orders of the court. They had the right to see that the orders of the court were obeyed, and, if not to take steps to relieve themselves of their obligations, or to secure themselves against loss. The orders of the Probate Court were only evidence of their discharge. How could they determine the absolute truth except by inquiry of the trustee and the cestui que trust f An ex- amination of the records will show that both these, equivocally and in the most solemn manner, afSrm their truth. The securities had a right to rely in absolute confidence on the record and the judicial declarations of plaintiff afBrming' its truth. „, ^ ^^ ^i It will not do to say that Miss Crookes was misled and deceived by Branch as to the facts, and that the declarations were made in ignorance of the true facts. She was of age, and was represented by counsel. If she were ignorant of the facts, it was on account of her own inexcusable negligence, which she can not allege. * * ) If, therefore. Branch, when he made his settlement as curator, was possessed of property out of which, by proper diligence, he could have transferred the trust funds to himself as trustee, then plaintiffs, by their conduct, admissions, and declarations, are es- topped to deny that he did his duty. The judgment is reversed, and the cause remanded. ^||Beace, C. J., absent. Barclay, J., did not sit. The other judges concur. 494 TAYLOR V. TAINTOR. [CHAP.VH. Sec. 8. Bail bonds. TAYLOR V. TAINTOR, Tbeas. 16 Wall. 366 (18T2). Mr. M. W. Seymour, for the plaintiff in error. Messrs. 8. B. Beardsley and N. L. White, contra. Me. Justice Swayne stated the facts of the case and delivered the opinion of the court. This is a writ of error, issued under the 25th section of the Judiciary Act of 1789, to the Supreme Court of Errors of the State of Connecticut. The attorney of the State for the county of Fairfield presented to the Superior Court for that county, at the August term, 1866, an information charging Edward McGuire with the crime of grand larceny. A bench warrant, returnable to the same term, was there- upon issued. McGuire was arrested and held in custody. The Court fixed the amount of bail to be given at $8,000. On the 24th of September, 1866, McGuire and the other plaintiffs in error en- tered into a recognizance to the defendant in error in that sum, conditioned that McGuire should appear before the Superior Court, to be held at Danbury, in Fairfield county, on the third Tuesday of October, 1866, to answer to the information before mentioned, and abide the order and judgment of the Court. McGuire was there- upon released from custody. He failed to appear according to the condition of the recognizance, and it was duly forfeited on the 16th of October, 1866. The suit was thereupon instituted in the Superior Court of Fair- field County to recover the amount of the obligation. The facta developed at the trial, and relied upon by the defendants to defeat the action were, according to the practice in that State, found and certified by the Court, and became a part of the record. So far as it is necessary to state them, they are as follows : After the recognizance was entered into McGuire went into the State of New Tork, where he belonged. While there, upon a requisition from the governor of Maine upon the governor of New York, he was seized by the legal officers of New York, and was by them forthwith, on the 19th of October, 1866, delivered over to the proper officers of the State of Maine, by whom he was immediately and against his will removed to that State. The requisition charged a burglary alleged to have been committed by McGuire SEC. 8.] TAYLOK V. TAINTOR. 495 in Maine before the recognizance in question in this case was taken. At the time of the forfeiture of the recognizance McGuire was, and he has been ever since legally imprisoned in Maine. In June; 1867, he was tried there for the burglary charged in the requisi- tion, and convicted and sentenced to confinement in the peniten- tiary for fifteen years, and was, at the time of the trial of this case in the court below, serving out his time under that sentence. Neither of the sureties knew, when they entered into the recogni- zance, that there was any charge of crime against McGuire other than the one alleged in the information in Connecticut. If the tes- timony were admissible, the plaintiff proved that the sum of $8,000 was placed in the hands of the sureties to indemnify them against the liability they assumed, and if the testimony were admissible, the sureties proved that the money was not placed in their hands by McGuire, nor by any one in his behalf ; and that, so far as the wreties knew, it was done without his knowledge. The Superior Court gave judgment for the plaintiff. The de- fendants thereupon removed the case to the Supreme Court of Errors for Fairfield County. That court affirmed the judgment, and the defendants thereupon brought this writ of error. ' The fact that the sureties were indemnified was proper to be considered by the Superior Court upon an application for time to produce the body of McGuire. But it could have no effect upon the rights of the parties in this action, and may therefore be laid .out of view. It is the settled law of this class of cases that the bail will be exonerated where the performance of the condition is rendered impossible by the act of God, tbe act of the obligee, or the act of the law. Where the principal dies before the day of performance, the case is within the first category. Where the court before which the principal is bound to appear is abolished without qualification, the case is within the second. If, the principal is arrested in the State where the obligation is given and sent out of the State by the governor, upon the requisition of the governor of another State, it is within the third. In such cases the governor acts in his official character, and represents the sovereignty of the State in giving efficacy to the Constitution of the United States and the law of Congress. If he refuse, there is no means of compulsion. But if he act, and the fugitive is surrendered, the State whence he is removed can no longer require his appearance before her tribunals, , and all obligations which, she has taken to secure that result thereupon at once, ipso facto, lose their binding effe,et. 496 TATLOK V. TAINTOK. [CHAP. vn. It is equally well settled that if the impossibility be created by the obligor or a stranger, the rights of the obligee will be in nowise affected. And there is " a distinction between the act of the law proper and the act of the obligor, which exposes him to the control and action of the law." While the former exonerates, the latter gives no immnnity. It is the willing act of the obligor which creates the obstacle, and the legal effect is the same as of any other act of his, which puts performance out of his power. This applies only where the accused has been convicted and sen- tenced. 'Before judgment — non constat ■'-^ hut that he may be innocent. Where a State court and a court of the United States may each tate jurisdiction, the tribunal which first gets it holds it to the exclusion of the other, until its duty is fully performed and the jurisdiction invoked is exhausted; and this rule applies alike in both civil and criminal cases. It is indeed a principle of uni- versal jurisprudence that where jurisdiction has attached to per- son or thing, it is — unless there is some provision to the contrary ■ — exclusive in effect until it has wrought its function. Where a demand is properly made by the governor of one State upon the governor of another, the duty to surrender is not absolute and unqualified. It depends upon the circumstances of the ease. If the laws of the latter State have been put in force against the fugitive, and he is imprisoned there, the demands of those laws may first be satisfied. The duty of obedience then arises, and not belOre. :^ji:|:4c;|::!:;i:«;!:$#HsHc4:4:4:4:* The law which renders the performance impossible, and there- fore excuses failure, must be a law operative in the State where the obligation was assumed, and obligatory in its effect upon her authorities. If, after the instrument is executed, the principal is imprisoned in another State for the violation of a criminal law of that State, it will not avail to protect him or his sureties. Such is now the settled rule. When bail is given, the principal is regarded as delivered to the custody of his sureties. Their dominion is a, continuance of the original imprisonment. Whenever they choose to do so, they may seize him and deliver him up in their discharge ; and if that cannot be done at once, they may imprison him until it can be done. They may exercise their rights in person or by agent. They may pursue him into another State; may arrest him on the Sabbath; and, if necessary, may break and enter his house for that purpose. The seizure is not made by virtue of new process. None SEC. 8.] TAYLOR V. TAINTOE. 497 is needed. It is likened to the rearrest by the sheriff of an e»- caping prisoner. **##***jis|.*j:#*** The plaintiffs in error were not entitled to be exonerated for several reasons: When the recognizance was forfeited for the non-appearance of MoGuire, the action of the governor of New York, pursuant to the requisition of the governor of Maine, had spent its force and had come to an end. McGuire was then held in custody under the law of Maine to answer to a criminal charge pending there against him. This, as already stated, cannot avail the plaintiffs in error. The shortness of the time that intervened between the arrest in New York and the imprisonment in Maine on the one hand, and the failure and forfeiture in Connecticut on the other, are entirely immaterial. Whether the time were longer or shorter — one year or one day — the legal principal involved is the same, and the legal result must be the same. If McGuire had remained in Connecticut he would probably not have been delivered over to the authorities of Maine, and would not, therefore, have been disabled to fulfil the condition of his obligation. If the demand had been made upon the governor of Connecticut, he might properly have declined to comply until the criminal justice of his own State had been satisfied. This right, it is not to be doubted, he would have exercised. Had he failed to do so, the obligation of the recognizance would have been re- leased. The plaintiffs in error are in fault for the departure from Connecticut, and they must take the consequences. But their fault reached further. Having permitted their principal to go to New York, it was their duty to be aware of his arrest when it oc- curred, and to interpose their claim to his custody. We have shown that when McGuire was arrested in New York the original imprisonment, under the information in Connecticut, was continued; that the bail had a right to seize him wherever they could find him ; that the prosecution in Connecticut was stiU pending, and that the Superior Court having acquired jurisdic- tion, it could neither be arrested nor suspended in invitum by any other tribunal. Though beyond the jurisdiction of Connecti- cut, he was still through his bail in the hands of the law of that State, and held to answer there for the offence with which he was charged. Had the facts been made known to the executive of New York by the sureties at the proper time, it is to be presumed he would have ordered McGuire to be delivered to them and not ta the authorities of Maine. The result is due, not to the Constitu- 20 498 TATLOE V. TAINTOB. [CHAP. vn. tion and law of the United States, but to their own supineness and neglect. Under the circumstances they can have no standing in court to maintain this objection. The act of the governor of New York, in making the surrender, was not " the act of the law " within the legal meaning of those terms; but in the view of the law was the act of McGuire him- self. He violated the law of Maine, and thus put in motion the machinery provided to bring him within the reach of the punish- ment denounced for his offence. But for this that machinpry, so far as he was concerned, would have remained dormant. To hold that the surrender was the act of the law, in the sense contended for, would be as illogical as to insist that the blow of an instru- nient used in the commission of a crime of violence, is the act of the instrument and not of the criminal. It is true that in one case there would be a will and purpose as to the result in question, which would be wanting in the other, but there would be in both, the relation of cause and effect, and that. is sufficient for the pur- poses of the analogy. The principal in the ease before us cannot be allowed to avail himself of an impossibility of performance thus created ; and what will not avail him cannot avail his sureties. His contract is identical with theirs. They undertook for him what he undertook for himself. ^^sf,^^^t^i^^^ ' A different doctrine would be fraught with mischief. It could hardly fail, by friaud and connivance, to lead frequently to abuses, involving the escape of offenders of a high grade, with pecuniary immunity to themselves and their sureties. Every violation of the criminal laws of a State is within the meaning of the Consti. tution, and may be made the foundation of a requisition. Hence the facility of escape if this instrumentality could be used to effect that object. The rule we have announced guards against such results. The supposed analogy' between a surrender under a treaty pro- viding for extradition and the surrender here in question has been earnestly pressed upon our attention. There, the act is done by the authorities of the nation — in behalf of the nation — pursuant to a National obligation. That obligatioii rests alike upon the people of all the States. A National exigency might require prompt affirmative action. In making the order of surrender, all the States, through their constituted agent, the General Govern- ment, are represented and concur, and it may well be said to be the act of each and all of them. Not so here. SEC. 8.] TAYLOR V. TAINTOR. 499 ,, The judgment of the Supreme Court of Errors of Connecticut is Affirmed. Mr. Justice Field (with whom concurred Mr. Justice Clipfobd and Mr. Justice Miller),, dissenting. I am unable to concur in the judgment rendered by the ma- jority of the court in this case. I agree with them that sureties on a reco^izance . can only be discharged from liability by the performance of the condition stipulated, Tinless that become im- possible by the act of God, or of the law, or of the obligee. But I differ from them in the application of their term act of the law. If I understand correctly their opinion they limit the term to a proceeding authorized by a law enacted by the State where the recognizance was , executed. I am of opinion , that the term will also embrace a proceeding authorized by any law of the United States. A proceeding sanctioned by such law, which renders the performance of the condition of the recognizance impossible, ought, in my judgment^ upon plain principle sof justice and according to the authorities, to release the, sureties. The Constitution of the United States declares its own su- premacy, and that of the laws made in pursuance to it, and of treaties contracted under the authority of the United States. As the supreme law of the land they are, of course, to be enforced and obeyed, however much they may interfere with the law or constitution of any State. Now the Constitution provides that " a person charged in any State with treason, felony, or other crime, who shall flee from justice and be found in another State, shall, on demand of the executive authority of the State from which he fled, be delivered up to be removed to the State having jurisdiction of the crime." The act of Congress of February 12th, 1793, was passed to carry into effect this provision, and has made it the duty of the executive of the State or Territory to which a person charged with one of the crimes mentioned has fled, upon proper demand to cause the fugitive to be arrested and delivered up. In pursuance of this act the principal on the recognizance in suit was arrested by order of the governor of New York, and delivered up as a fugitive from justice to the officers of the State of Maine. By them he was taken to that State, and having been previously indicted for a felony, was there tried, convicted, and sentenced to the penitentiary for fifteen years. Thus in execution of a valid law of the United States, passed to carry out an express constitutional provision, the prisoner was taken against his will from the custody of his bail, 500 TAYLOR V. TAINTOH. [ CHAP. TO. and placed in the custody of officers of another State, from whom the bail could not recover him to make a surrender pursuant to the condition of their recognizance. It is no answer to say that the prisoner, when called in Connecticut, was detained by the State of Maine, and not by any proceeding or order under an act of Congress, because that proceeding or order had been executed, and was no longer operative. He was taken out of the custody and placed beyond the reach of his bail by a proceeding under the act, and therefore to such proceeding their inability to sur- render him must be attributed. ********** It seems to me that it would be a more just rule to hold, that whenever sureties on a recognizance are rendered unable to sur- render their principal, because he has been taken from their custody without their assent, in the regular execution of a law or treaty of the United States, their inability thus created should constitute for their default a good and sufficient excuse. The execution of the laws and treaties of the United States should never be allowed in the courts of the United States to work oppression to any one. Accord. — In re Fitton, 55 Fed. Rep. 272; United States v. McGIashen, 66 Fed Rep. 538; King v. State, 18 Neb. 390; Steelman v. Mattix, 38 N. J. L. 249; Ingram v. State, 27 Ala. 17; State v. Crosby, 114 Ala. 11; State v. Horn, 70 Mo. 466; Yarbrough v. Coram. 89 Ky. 151; Hartley v. Colquitt, 72 Ga. 351. The death of the principal releases the sureties on the bail bond. Paynes V. State, 45 Ala. 52; Connor v. State, 30 Tex. 94; State v. Cone, 32 Ga. 063; State V. Traphagen, 45 N. J. L. 134; Woolfolk v. State, 10 Ind. 532; Mather V. People, 12 111. 9. If the principal is adjudged a lunatic and confined in an asylum the sure- ties will De exonerated. Comm. v. Fleming, 15 Ky. L. Rep. 491; Fuller v. Davis, 1 Gray. 612. Contra. — Adler v. State, 35 Ark. 517. Where no authority exists to admit to bail the sureties are not bound. United States v. Hudson, 65 Fed. Rep. C8; State v. Caldwell, 124 Mo. 609; Dugan V. Commonwealth, 69 Ky. 305; Pace v. Mississippi, 25 Miss. 64; Rupert V. People 20 Colo. 424. i If no time is fixed for the appearance of the principal the bond is void for uncertainty. Coleman v. State, 10 Md. 168; United States v. Keiver, 56 Fed. Rep. 422. It is held that the continuance of the trial to an indefinite date discharges the sureties. Reese v. United States, 9 Wall. 13. Field, J. — " If, now, we apply the ordinary and settled doctrine, which controls the liabilities of sureties, it must follow that the sureties on the recognizance in the suit are discharged. The stipulation, made without their consent or knowledge, between the principal and the government, has changed the char- acter of his obligation; it has released him from the obligation which they covenanted, that he should comply, and substituted another in its place. It SEC. 8.] TAYLOE V. TAINTOE. 501 is true, the rights and liabilities of sureties on a recognizance, are in many respects different from those of sureties on ordinary bonds or commercial contracts. The former can at any time discharge themselves from liability by surrendering their principal, and they are discharged by his death. The latter can only be released by payment of the debt or performance of the act stipulated. But in respect to the limitations of their liability to the precise terms of their contract, and the effect upon such liability of any change of the terms without their consent, their positions are similar. And the law upon these matters is perfectly' well settled. Any change in the contract, on which they are sureties, made by the principal parties to it without their assent, discharges them, and for obvious reasons. When the change is made they are not bound by the contract in its original form, for that has ceased torexist. They are not bound by the contract in its altered form, for to that they have never assented. Nor does it matter how trivial the change, or even that it may be of advantage to the sureties. They have a right to stand upon the very terms of their undertaking." The place of appearance must be definitely stated in the bond, or the sure- ties will be discharged. Barnes v. State, 36 Tex. 332; Pil v. State, 43 Neb. 23; Hutchinson v. State, 43 Tem. 95; State v. Allen, 33 Ala. 422. The removal of the prosecution from the State to tho Federal Court in accordance with the provisions of the law does not affect the lia:bility of the sureties on the bail bond. Davis v. South Carolina, 107 U. S. 597. The change of venue from one court to another in the same State leaves the bond in full force and the sureties are liable for the non-appearance of the accused in the new jurisdiction. State v. Brown, 16 Iowa, 314; Eamey V. Comm. 83 Ky. 534. 502 QUAEANTY CO. V. BANK. [CHAP.VH. CHAPTEE VIII. CORPORATE SURETYSHIP Sec. 1. Compensated suretyship is a contract of insurance. THE UNITED STATES FIDELITY AND GUARANTY COM- PANY, V. THE FIRST NATIONAL BANK OF DUNDEE. 233 IlL 47&, 84 N. E. 670 (190S). Appeal from the Branch Appellate Court for the First Dis- trict; — ^heard in that court on appeal from the Circuit Court of Cook county ; the Hon. G. A. Carpenter, Judge, presiding. This is a proceeding in chancery brought by the United States Fidelity and Guaranty Company (hereinafter called the company) against the First National Bank of Dundee (which we will herein- after call the bank) for the purpose of procuring the cancellation of two certificates renewing and extending the term of a fidelity bond issued by the company February 4, 1901, guaranteeing the bank against any loss it might sustain between January 25, 1901, and January 25, 1902, dn consequence of the infidelity of Francis B. "Wright, who was employed by the bank as cashier. The com- pany asks for the cancellation of the renewal certificates upon the ground that each of them was procured by the false and fraud- ulent representations of the president of the bank. The bill also prayed for an injunction to restrain the bank from prosecuting a suit at law upon the bond and renewal certificates. The answer of the bank specifically denies the charge of false representations con- tained in the bill. In its answer the bank shows that Wright em- •bezzled $3000 during the first year the bond was in force, $24,513.75 during the second year, and $36,050 during the third year covered by the bond and renewal certificates. The bank filed a cross-bill setting up the bond and the renewal certificates, and prayed for a decree against the company for the amount due the bank. The com- pany, in its answer to the cross-bill, reiterated the claim that the renewal certificates were procured through false representations and denied the right of the bank to recover more than $3000. The SEC. 7.] GUARANTY CO. V. BANK. 503 cause was heard in open court before Judge Tuley, but before the case was decided Judge Tuley died, and the cause was submitted to Judge Carpenter upon the evidence previously taken before Judge Tuley. The court found against the company upon the charge of misrepresentation and for the bank on its cross-bill, and rendered a decree against the company for the full amount of the bond, and interest thereon, being $11,256.94. This decree has been af&rmed by the Appellate Court for the First District, and the company has appealed to this court. By its amended cross-bill the bank asked to recover $20,000, basing its claim thereto' upon the ground that each renewal cer- tificate constituted a new and independent contract, upon which $10,000 is recoverable, provided the embezzlements during the time covered by such renewals amounted to such sum. Both the cir- cuit and Appellate Courts held against the bank upon this ques- tion, and it has assigned cross-errors upon the refusal of the court to grant it a decree for $20,000. We adopt the following statement made by Mr. Justice Freeman in' the Appellate Court : • "The bond in question is known as 'an employer's schedule bond.' In it the guaranty company covenanted and agreed with the bank, in respect to those of the bank's employees 'whose name or names appear in the schedule hereto attached (which is hereby referred to and made a part of this bond) in respect to whom the employer requires indemnity of the kind and nature hereinafter provided, * # • ^hat it will, at the expiration of three months after proofs of loss shall have been furnished to the com- pany, pay to the employer the amount of any loss or damage that shall happen to the employer in respect of any funds, property or estate belonging to or in custody of the employer through the dishonesty of any of the employees or through any act of omission or commission of any of the employees done or omitted in bsid faith, and not through mere negligence, incompetency or any error of judgment, and whether such dishonesty or such act of omission or commission occurs in the performance of any duty or trust specially assigned to such employee or occurs otherwise. ' The liability, under the terms of the original bond, began Jan- uary 25, 1901, and terminated one year thereafter unless renewed. It is provided in the bond, among other things, that in case the (employer be a corporation, 'the knowledge of its board of directors or trustees, or of any executive officers, such as president, vice- 504 GUARANTY CO. V. BANK. [CHAP. Vm. president, cashier or assistant cashier of a 'bank,' shall be deemed the knowledge of the employer, 'unless such officer be in collusion with the employee through whom the loss occurs.' The bond was subject to renewal from year to year by agreement. The schedule attached to the bond contained the name of the cashier of the bank one Francis B. Wright, on account of whose defalcation the hank is seeking to recover on the bond. "When the term of the original bond was about to expire at the end of the first year the guaranty company notified the bank, requesting it to fill in, sign and forward a form of certificate which accompanied the letter, and stating that thereupon 'a renewal receipt will be sent to you and remittance for premium can then be I made.' The certificate which was so signed and forwarded by the bank was as follows: " 'To the Umted States Fidelity and Guaranty Compamy — This is to certify that the books and accounts! of the persons in our em- ploy, as per schedule attached, were examined by us from time to time in the regular course of business, and we found them correct in every respect, all moneys handled by' them being accounted for. They have performed their duties in an acceptable and satisfactory manner, and we know of no reason why the guarantee bond should not be continued. First National Bank, Delos Dunton, Fres., Employer. Dated at Dundee, 111., Jan'y 22, 1902.' "A renewal receipt or agreement was thereupon executed by the guaranty company and forwarded to the bank, which contin- ued in force from January 25, 1902, to January 25, 1903. "When, at the end of the second year, the bond, so renewed was about to expire, the bank was again notified, again executed a certificate as before, and again received a renewal agreement continuing the bond in force until January 25, 1904, 'subject to all the covenants and conditions set forth and expressed in said schedule bond here- tofore issued on the 25th day of January, 1901. ' "It appears from the evidence, and is not disputed, that the cashier, Wright, named in the schedule of the bond^ embezzled the sum of $3000 belonging to the bank during the first year, while the original bond was in force. During the second year the sum embezzled was $24,513.75, and the third year, up to the time of the discovery, the sums misappropriated aggregated $36,050, BEC. 1.] GUARANTY CO. V. BANK. 505 making, according to these figures, a total during the three years of at least $63,563. The discovery was made in November, 1903, and in August, 1904, the bank brought suit against the guaranty company, seeking to recover as' much of the defalcation as was covered by the bond, the penalty of which was $10,000. In April, 1905, while that suit was pending; the guaranty company filed its bill of complaint now under consideration, on the ground that its defense to the suit of the bank was not available at law. Ap- pellee answered and filed a cross-bill, praying that the amount due it on the bond be ascertained and for judgment or decree for such amount. The guaranty company offers to pay for so much of the defalcation as occured the first year, while the original bond was in force, but it seeks to avoid liability for losses which occurred during the two subsequent years covered by renewals." Judah, Willard, Wolf & Beichmann, for appellant. Newman, Northrup, Levinson & Becker, and Chester E. Cleve- land, for appellee. Mk. Justice Vickers delivered the opinion of the court: Appellant contends that the two certificates made by the bank to obtain a renewal contain false representations which render the certificates void, and that therefore the bond was' not in force ex- cept for the first year. The charge of false representations raises an issue of fact. The burden of proof upon that issue is upon ap- pellant. In the two renewal certificates in question, both of which were alike in form, the president of the bank certifies to the company that the books and accounts of the cashier "were examined by us from time to time in the regular course of business, and we found them correct in every respect, all moneys handled by them (him) being accounted for." Appellant's contention is, that the statement that the books and accounts of "Wright had been examined was not true; that if an examination had been made the embezzlements of the cashier would have been discovered, and that the fact that they were not discovered is proof that no examinations were made. Appellant further contends that the renewal certificates extending the original bond for the seccnd and , subsequently for a third year were issued by appellant in reliance upon the representations contained in the certificates in question. The bond in question must, we think, be regarded as an insurance contract, and as such subject to the rules of construction applicable to insurance policies generally, and not the rules applied to ordi- 506 QUAEANTY CO. V. BANK. [ CHAP. VIII. nary sureties for accommodations {People v. Bose, 174 111. 310). lu this case this court, on page 313, said: "Guaranty insurance is, in its practical sense, a guaranty or insurance against loss in ease a person named shall make a designated default or be guilty of specified conduct. It is usually against the misconduct or dis- honesty of an employee or officer, though sometimes against the breach of a contract. This branch of insurance is so much more modem in origin and development than fire, marine, life and ac- cident insurance that there are few decisions upon the subject, but the business is gradually increasing and is doubtless destined to take an important place in the commercial world. It may be con- fidently stated, notwithstanding the comparative absence of specific decisions, that the general principles applicable to other classes of insurance are applicable here as well. . Thus, the general doctrine of warranty, representation and concealment, as applied to fire, life and marine insurance, is applicable also to the subject of guar- anty insurance." Contracts of guaranty insurance are made for the purpose of furnishing indemnity to the assured, and they should be liberally construed to accomplish the purpose for which they were made. (American Surety Co. v. Pwuly, 170 U. S. 133 : Guaranty Co. v. Mechanics' Savings Banlc and Trust Co. 80 Fed. Rep. 766.) The law ia well settled, in its application to insurance contracts, that a misrepresentation of a material , fact, in reliance upon which a contract of insurance is issued, will avoid the contract, and it is not essential, in equity, that such a misrepresentation should be knovm to be false. A material misrepresentation, whether made Snten'tionally and knowingly or through mistake and in good faith, will avoid the policy. (May on Insurance, sec. 181.) We think there can be no doubt that the representations upon which appellant relies were material. The points covered by tlpe certificate of the president were particularly required by appellant's letter. The request of appellant for information upon these points makes the answer material. (May on Insurance, sec. 185.) The rights of the parties therefore depend upon whether the representations \vere true or false. ***' We therefore agree with the conclusion of the trial court and the appellate court that the certificate of January 22, 1902, was substamtially true. It results from this conclusion that the decree below and the judgment of the appellate court should be afiirmed unless the court erred in not awarding appellee a decree for $20,000. * * * We do not think the cross-errors can be sus-. SEC. 2.] GUARANTY CO. V. POETKBR. 507 tained. In our opinion the appellee is precluded from recovering more than the face value of the original bond, together with the iatereat thereon. Judgment affirmed. AccoBD. — City ci Philadelphia v. Fidelity & Deposit Co. of Maryland, 231 Pa. 208, 80 Atl. 62, Ann. Cas. 1912B, lOSSn. Sec. 2. Liability of surety company as distinifuished from that of gratuitous surety. THE UNITED STATES FIDELITY AND GUAEANTY COM- PANY ET AL. V. POETKER,, RECEIVER. 180 Ind. 2515, 102 N. E. 372 (1013). Action by Fred H. Poetker, receiver of the Peoples State Bank of Huntingburg, Indiana, against The United States Fidelity and Guaranty Company of Baltimore, Maryland, and another. From a judgment for plaintiff, the defendants appeal. Affirmed. Charles Mdrtihdale, for appellants. Leo H. Fisher, Robert W. Armstrong, E. A. Ely, Baby t& Watson and Salsiury & Esarey^, for appellee. Cox, J. — ^Appellee as receiver of the Peoples State Bank of Hun- tingburg, Indiana, sued Charles Behrens, as principal, and the United States Fidelity and Guaranty Company of Baltimore, , Maryland, as surety, to recover for a breach of the ofSeial bond of Behrens as cashier of the bank. A trial by jury resulted in a verdict against both defendants for the full penalty of the bond together with interest for delay in payment after demand, amount- ing in all to $28,500. From a judgment on this verdict the surety company appeals and presents numerous specifications of alleged errors in support of its claim that the judgment as to it is erro- neous. ' The Peoples State Bank was a banking corporation organized under the laws of this State and appellant was a foreign surety company which qualified and had been authorized io transact busi- ness in this State. It appears from the application for the bond that Behrens at that time was and hiad been cashier of the bank; that he had theretofore given a personal bond ; that he had been ordered by the board of directors to procure a surety company bond ; that his iapplication was for a surety bond of $25,000 as cashier of the Peoples State Bank of Huntingburg, Indiana. The president of ■the bank was required in the application to answer numerous ques- 508 GITABANTY CO. V. POETKEE. [CHAP. Vm. tions whicli answers the application stated were to be tlie basis of the bond applied for and renewals thereof. The bond was issued for a premium of $62.50 from March 1, 1902 to March 1, 1903, and provided that the representations and promises relative to the duties and accounts of the employe and other matters contained in the application and any subsequent representations or promises of the employer, thereafter required or, lodged with the. company, should constitute part of the basis and consideration of the con- tract. It was then provided: "That foi; the consideration of the premises, the company shall, during the term above mentioned or any substantial renewal of such term, and subject to the condi- tions and provisions herein contained, at the expiration of three months next, after proofs satisfactory to the company, as herein- after mentioned, make good and reimburse to the said employer such pecuniary loss as may be sustained by the employer by reason of the fraud or di.shonesty of the said employee in connection with) the duties of his office or position, amounting t-o embezzlement or larceny and which shall have hpeji committed during the contin- uance of said term, or of any renewal thereof, and discovered during said continuance or of any renewal thereof or withiii six months thereafter, or within six months from the death or dismissal or re- tirement of said employee from the service of the employer within the period of this bond whichever of these eventsi shall first happen ; the company's total liability on, account of said employee under this bond or any renewal thereof, not to exceed the sum of twenty- five thousand dollars." Following this, the prime condition of the bond, there follow many provisos tending to limit and guard the liability of the surety, requiring the employer to give notice to the surety, "at the earliest practical moment" of the 'discovery of any act capable of giving rise to a claim hereunder"; requiring the claim for loss to be in writing; providing that any wilful misstatement or sup- pression of f apt in any claim should render the bond void from the beginning; that it should have a right to ratable contribution with cosureties ; that it should have a right to rescind under certain conditions and escape liability for. subsequent acts of the cashier ; that no suit should be brought on the bond for any loss after twelve months from the discovery of the loss ; and numerous other provisions for the, purpose of qualifying and avoiding liability. Following these there is a provision that none of the conditions or provisions of the bond shall be deemed waived unless such waiver is clearly expressed in writing ; and a covenant on the part SEC. 2.] GUARANTY CO. V. POETKEE. 509 of the principal to save the surety harmless. The bond was signed by the principal and surety and accepted and approved in writing by the directora of the bank, and was subsequently filed in the office of the Secretary of State as required by law. Behrens con- tinued as cashier and the bond was renewed annually for the years 1903, 1904, 1905 and 1906, and during this period of time there was lost to the bank through the unfaithfulness of Behrens in the discharge of hisi duties as cashier a sum far in excess of the pen- alty of the bond, and this resulted in its insolvency. In the main the questions raised by appellant surety company are based upon the assumption that the bond which it executed for Behrens to secure to the bank the faithful discharge of his duties as its cashier is a common-law undertaking and that a recovery on it can be sustained only according to the numerous and intricate provisions and conditions contained in it, and the written application for it. In behalf of appellee it is claimed that the bond must be held to be a statutory official bond legally of a character and with such conditions only as the statute provides. It must fairly follow, therefore, that if this underlying question is determined favorably to the contention of appellee most of the questions presented by appellant become immaterial and require no consideration. The statute fixes upon surety companies the character of lawful sureties upon statutory bonds, but it gives them no authority to change the character or legal effect of the bonds which the statute exacts. Such a company could not enter into a recognizance bond and by adding to the ordinary condition for the appearance of the defendant the proviso that it would not answer for the default of " the principal, if the sheriff failed to keep him under constant sur- veillance, and thereby escape liability by showing, the defendant's failure to appear was due to the sheriff 's neglect. When appellant was requested to furnish a bond to the bank for its cashier it was bound to know the nature of the condition it would become liable upon if broken. It is, of course, to be conceded that a surety company may, in dealing with a private citizen, with a free hand, unhampered by statutory restrictions, make such a contract of suretyship as it chooses and guard and limit its liability by as many provisions as it pleases and if the one for whose benefit it is given accepts it in good faith, the surety is bound only according to the terms of the bond. But even in such a case the rule of strictissimi juris, which has been invoked for the benefit of private individual sureties who sign for accomodation and not for compen- 510 COWLES V. GUARANTY CO. [CHAP.Vm. sation, and which requires a strict construction of the contract in their favor and a resolution of all doubts in their favor, does not apply to the involved contract of a surety company which becomes surety for profit. In the latter case the rule is reversed and the contract; when there is room for construction, is to be construed most strongly against the surety and in favor of the in- demnity which the obligee had reasonable ground to expect. Bank of Tarhoroy. Fidelity, etc., Go. (1900), 125 N. C. 320, 83 Am. St. 682, 35 S. E. 588 ; Geo. A. Hormel & Co. v. American Bonding Co. (1910), 112 Minn. 288, 128 N. W. 12, 33 L. R. A. (N. S.) 513, and many cases cited in note ; Philadelphia v. Fidelity ^ etc., Gd (1911), 231 Pa. St. 208, 80 Atl. 62, Ann. Cas. 1912 B 1085, note; Brown v. Title Guaranty, etc., Ga. (1911), 232 Pa. St. 337, 81 Atl. 410, 38 L. R. A. (N. S.) 698; 82 Cyc. 306. AccoBD. — Federal Union Surety Co. v. Maguire, 111 Ark. 373, 18S S. W. 1171; Amerioam Surety Co. v. Pangburn, 182 Ind. 116, 103 N. E. 769; Hilemian V. Faus, 78 Iowa 644, 158 N. W. 597; American Surety Co. v. Pauly, 170 U. S. 133; Guaranty Co. v. Pressed Brick Co., 191 U. S. 416; Royal Indemnity Co. V. Northern Granite & S. Co., 100 O. S. 373, 126 N. E. 405 (1919); re- ported also in 12 A. L. R. 378; at pp. 382 to 390, infra, will be found fully annotated note. Sec. 3. Compensated surety is no favorite of the law — Can not invoke rule of strictissimi juris. W. H. COWLES, APPELLANT, v. UNITED STATES FIDEL- ITY AND GUARANTY COMPANY, RESPONDENT. 32 Wash. 120, 73 Pac. 1032, 98 Ain. St. Rep. 838 (1903). Stephens & Bunn, for appellant. Damson & Huneke, for respondent. Dunbar, J. The defendant Creutzer entered into a contract in writing with appellant, whereby Creutzer agreed to construct a dwelling for appellant. The contract provided that Creutzer should give a surety bond in the sum of $3,000 to secure the per- formance of all the terms of the contract. Respondent became surety on the bond so required. Creutzer failed to comply with the contract. Appellant completed the work and brought this action to recover $3,000, which amount he alleges he paid, to complete the dwelling in excess of the contract price. At the SEC. 3.] COWLES V. GDAHANTT CO, 511 close of the evidence on the part of appellant (plaintiff below), the respondent surety company challenged the sufBeieney of the evidence, and moved the court to discharge the jury from further consideration of the case, and direct what judgment should be entered, upon the following grounds: (1) That the evidence for the plaintiff shows that there are numerous alterations made in the contract and in the work, other than upon the written order of the architect ; (2) that the value of these changes and altera- tions is not computed by the architects, as required by the con- tract, and the value thereof either added to or deducted from the contract price; (3) that the evidence shows that plaintiff and the contractor, Creutzer, entered into a distinct and separate agreement as to his compensation for all alterations other and distinct from the provisions of the contract; (4) that the evidence of the plaintiff shows that plaintiff released the contractor, Creutzer, from all liability on this bond; (5) that the evidence shows that, contrary to the provisions of the bond, plaintiff and the contractor made an agreement whereby certain grading was included and work provided in the contract, and it was not pro- vided for therein; (6) that the evidence of plaintiff shows that a payment, to-wit, that of $35, on account of the bond in this case, was made by the plaintiff and certified by the architect as a proper charge under the contract. The court sustained the motion, on the ground that the changes were not ordered in writing, holding that as against the surety company the parties could not waive the provision of the contract which provided that all changes should be ordered by the architect in writing, and that the provision was manifestly made for the benefit of the surety company. Appellant excepted to the ruling of the court granting the motion and making the order in accordance therewith. The contract is too long to be set forth in detail, but it is the ordinary building contract in its general scope, and the bond is in form the ordinary surety bond given in such cases. The section of the contract which is the subject upon which the main controversy in this case arises is as follows : "No alterations shall be made in the work shown or described by the drawings and specifications, except upon a written order of the architects, and, when so made, the value of the work added or omitted shall be computed by the architects, and the amount so ascertained shall be added to or deducted from the contract price. In case of dissent from such award by either party hereto, the valuation of the work added or omitted shall be referred to 512 COWLES V. GUABANTT CO. [CHAP.vm. three disinterested arbitrators, one to be appointed by each of the parties to this contract, and the third by the two thus chosen the decision of any two of whom shall be final and binding, and each of the parties hereto shall pay one-half of the expense of such reference." This provision of the contract was waived by the contractor and the owner and the architect. Subsequently, however, the architect audited and certified the amount which should be paid for changes, extras, and alterations, and it is the contention of the appellant that such an act on the part of the contractor and principal in the bond was binding upon the respondent surety company, and a neglect or a default of any of the requirement of the written order of the architect can not be taken advantage of by the respondent surety company; that the contractor was the general agent and representative of the surety, to act for it, and to waive, if he saw proper, on behalf of the surety com- pany, anything within the purview of his agency. There are no material contested questions of fact so far in this case, and its proper determination hinges upon the legal proposi- tion announced above. It is contended by the appellant that a dis- tinction exists between the liability of a non-compensated surely and that of a compensated surety; that the doctrine of strictissmi juris, which has been invoked successfully by accommodation bonds- men, should not apply to parties who furnish bonds for compensa- tion*. We have not been able to obtain any light from the cases cited from this court, any further than that they discountenance the old rule that there should be a difference in construction between bonds and other contracts, even in eases where the bonds were given purely as a matter of accommodation. We think, however, on general authority, that, while this class of suretyships is comparatively new, a distinction has been clearly announced by the courts, and that this character of suretyship is governed by the rules govern- ing insurance Contracts. Guaranty insurance is thus defined by Mr. Frost in his work on The Law of Guaranty Insurance, § 2, as follows: "For purposes of classification and treatment herein, guaranty insurance contracts may be divided into three general classes,-r-those of fidelity, commercial, and judicial insurance. Commercial insurance is defined as having reference to indemnity agreements issued in the. form of insurance bonds or policies, whereby parties to commercial contracts are to a designated SEC. 3.] COWLES V. GUARANTY CO. 513 extent guarantied against loss by reason of a breach of eon- tfactual obligations on the part of the other contracting party. To this class belong policies of contract, credit, and title insurance. Then follows a definition of fidelity insurance and judicial in- Burance, distinguishing them from commercial insurance. In his criticism of courts which have insisted on following the old rule, Ihe author pertinently remarks : "It is but natural that courts, so long accustomed to extend- ing the 'rule of favoritism' towards the surety in the old-time private bonds, should be slow to recognize that with the passing away of the reason for the existence of the rule by the advent of the compensated surety, the rule itself should pass away. The conti'act of guaranty insurance is invariably entered into for a compensation, and usually after the fullest investigation, and frequently under stipiilations largely technical in character, based upon written representations relative to the nature and extent of the risk. The policy is written by a company incorporated for the express purpose of furnishing guaranty bonds as a means of revenue to the corporation and its stockholders." This class of insurance can not be distinguished in principle from what is called guaranty insurance, where the guaranty company guaranties the honesty and efficiency of employees. Such a bond was construed by this court in Eemington v. Fidelity & Deposit Co., 27 Wash. 429 (67 Pae. 989), as follows: ^ "Bonds of this character are, in theii: nature, insurance con- tracts, to indemnify the employer against the dishonesty of employees. They are issued for profit, and the same rules of construction must apjply thereto as apply to other insurance contracts. If, looking at all its provisions, the contract is fairly and reasonably susceptible of two constructions, one favorable and the other unfavorable to the insurance company, the latter, if .consistent with the object for which the contract was made, must be adopted, for the reason that the instrument which the court is required to interpret was prepared by the attorneys, officers, or agents of the insurance company." citing many cases. As to the right of the parties to the original contract to vary the terms of the contract, see 1 Joyce on In- liirance, §273. Also Grafton v. Hinckley, 111 Wis. 46 (86 N. w. 859), where a contract for the construction of a building pro- vided that the contractors should be bound to perform a certain J)ortion of the work, and that they might become bound to per- form additional work and to complete the building on the owner's 514 COWLES V. GUAEANTT CO. [CHAP.Vm. giving a written notice, prior to a certain date, of his election to have such contractors continue the work. The contractors executed a bond for the faithful fulfillment of the contract on which defendants were sureties. The owners served no written notice directing the contractors to continue work, but they did continue, and accepted a parol notice. It was held that the work subsequently done was done under the original contract, and that no new contract was entered into between the parties so as to release the sureties from liability for the contractors' failure to complete the building. The court quoted the following* lan- guage from Benjamin v. Hillard, 23 How. 149 : "It is clear that the mere prolongation of the term of payment of the principal debtor, or of the. time for the performance of his duty, will not discharge a surety or guarantor. There, must be another contract sul)stitiited for the original contract, or some alteration in a point so material as in effect to make a new con- tract, without the surety's consent to produce that result. But when essential features of the contract and its objects are pre- served, and the parties, without objection from the surety, and without any legal constraint on themselves, mutually accommo- date each other, so as better to arrive at theit end, we can find no ground for the surety to complain." In this case we think it may be well said that no other contract was substituted for the original contract, and that the alterations in the contract were not so material as to make a new contract; but that there was simply an undertaking on the part of the parties to the original contract to mutually accommodate each other; so, applying the laiiguage just above quoted, as "better to arrive at their end," the thing provided for in this contract was done, and the divergence from the strict terms of the con- tract was merely a matter of detail. The agreement for the alterations was made by all the parties who were entitled under the contract to make it. The consent was given by the party who was authorized to give consent; not, it is true, in the form pre- scribed, viz., in writing, but that goes more to form than to substance, and, in the absence of a showing of some damage, should not be allowed to avoid the contract, or the policy of insurance which became a part of it. The bond is subject to the contract, and was made after the contract. It is the contract instead of the bond which is primarily to be construed, and the eonstrudtion of the contract can not be affected by the fact that a bond is given for its performance. It must be construed with SEC. 3.] COWLES V. GUAEANrsr CO. 515. reference to the gathered intention of the parties to the contract, and whatever is binding upon them is binding upou the surety, who becomes a party to the contract, identified with the con- tractor. In Smith v. MoUeson, 148 N. Y. 241 (42 N. B. 669), it was held that, where a building contract provided that plaintiff was to make payments to the contractors upon certificates furnished by plaintiff's superintendent, the mere fact that such payments were made without such certificates was not such a departure as would relieve the contractor's sureties from liability, where they were no greater in amount than they would have been if such estimates had been exacted by plaintiff; which is a case, we think, exactly in point with the ease at bar. That case went further than it is necessary to go to reverse the judgment in this case, and held that a surety on a contractor's bond was not released by reason of the fact that, after the contractors failed to complete the work and plaintiff gave the notice required by the contract in order to terminate it, he subsequently recalled the notice and allowed the contractor to proceed with the work, during which time the loss for which the surety was held liable b'eeurred. It is true that there is a conflict of authority on this proposition, but we are inclined to follow the authorities cited', and hold that this guaranty company, being' a company which is doing business for compensation, ought to be bound by the la'vfr governing fidelity guaranty companies and insurance contracts. It not appearing that any damage was dOne by the slight variance in the terms of the contract, or that any collusion or fraud was attempted on the part of the contractor and the owner, we con- clude that the court erred in sustaining the motion challeEtging the sufficiency of the testimony. The same reasoning will apply to the other grounds of the motion. The judgment will be reversed, and the lower court instructed to proceed with the trial of the cause. FuLtEETON, C. J., and Mount, Hadlet and Anders, JJ., concur. Accord.— Oostellk) v. Bn.dges, 81 Wash. 192, 142 Vaxt. 687, L. R. A. (1915) A. 853; United States Fidelity & Guaranty Co, v. First Nat. Bank, 233 HI. i1&, 84 ST. E. '670; Royal Indemiiiity Oo. v. NorthCTDi Granite & S. Co., 100 0. S. 379, li26 N. E. 405, 1-2 A. L. ,R. 37S, note (fully annotated) (1919); Vietoria Lumber Co. v. Wells, 130 La. 500, 7'1 So. 781; Ohio Oounity v. Clemens, 86 W. Va, 11, 100 S. E. '680; Optaey v. United Surety Co., 217 N. Y. 2681, HI N. E. 832; Wasco County v. N. E. Equitable Insurance Co., 88 Oregon toSi 172 Pa«. 126. 516 AMERICAN SUKETT CO. V. FAULT. [CHAP.Vm. Sec. 4. Where susceptible of two constructions, one favorable to the creditor and the other favorable to the surety, the former will be adopted. AMERICAN SURETY COMPANY v. PAULY (No. 1). , 170 U. S. 133 (1S98). Mr. Henry C. Wilcox and Mr. Walter D. Davidge for plaintiff in error. Mr. Walter D. Davidge, Jr., was on their brief. Mr. Edward Winslow Paige for defendant in error. Mb. Justice Haelan delivered the opinion of the court. The defendant in error as receiver of the California National Bank of San Diego, California, brought this action against the plaintiff in error, a corporation of New York, upon a bond of the latter itxr $15,000 guaranteeing or insuring the bank, subject to certain conditions, against any act of fraud or dishonesty committed by George N. O'Brien in his position as cashier of that institution. This bond was based upon an application by O'Brien to the Surety Company accompanied by written declarations and answers to questions relating to his age, history, habits, financial condi- tion, etc. He presented with the application the following certi- ficate, signed by J. W. Collins as president of the bank: "I have read the foregoing declarations and answers made by George N. 'Brien, and believe them to be true. He has been in the employ of this bank during three years; and to the best of my knowledge has always performed his duties in a faithful and satisfactory manner. His accounts were last examined on the 28th day of March, 1891, and found correct in every respect. He is not to my knowledge, at present, in arrears or in default. I know nothing of his habits or antecedents affecting his title tO' general confidencej or why the bond he applies for should not be granted to him." The bond was executed July 1, 1891. After reciting that the employe, O'Brien, had been appointed in the service of the em- ployer, the bank, had been assigned to the office or position of cashier, and had applied to the American Surety Company of New York for a bond, it provided: "Now, therefore, in consideration of the sum of seventy-five dollars, lawful money of the United States of America, in hand paid to the company, as a premium for the term of twelve months SEC. 4.] AMERICAN SURETY CO. V. FAULT. 517 ending on, the first day of July, one thousand eight hundred and ninety-two, at 12 o'clock noon, it is hereby declared and agreed that, subject to the provision herein contained, the company shall, within three months next after notice, accompanied by satisfactory proof, of a loss, as hereinafter mentioned, has been given to the company, make good and reimburse to the employer all and any pecuniary loss sustained by the employer, of moneys, securities or other persional property in the possession of the employe, or for the possession of which he is responsible, by any act of fraud, or dis- honesty, on the part of the employe, in connection with the duties of the ofSce or position hereinbefore referred to, or the duties to which in thei employer's service he may be subsequently appointed, and occurring during the continuance of this bond, and discovered during said continuance, or within six months thereafter, and within six months from the death or dismissal, or retirement of the employe, from the service of the employer. It being understood that a written statement of such loss, certified by the duly author- ized officer or representative of the employer, and based upon the accounts of the employer, shall be prima facie evidence thereof. Provided always, that the company shall not be liable, by virtue of this bond, for any mere error of judgment or injudicious exercise of discretion on the part of the employe, in and about all or any matters, wherein he shall have been vested with discretion, either by instruction, or rules and regulations of the employer. And it is expressly understood and agreed that the company shall in no way be held liable hereunder to make good any loss which may accrue to the employer by reason of any act or thing done, or left undone, by the employe^ in obedience to, or in pursuance of, any direction, insitruction or authorization conveyed to and received by him from the employer or its duly authorized ofScer in that behalf ; and it is expressly understood and agreed that the company shall in no way be held liable hereunder to make good any loss, by robbery or otherwise, thait the employer may sustain, except by the direct act or connivance of the employe. "The following provisions are to be observed and binding as a part of this bond : "That the company shall be notified in writing, at its office in ithe city of New York, of any act on the part of the employe, which may involve a loss for which, the company is responsible hereunder, as soon as practicable after the occurrence of such act shall have 518 AMERICAN SDEETT CO. V. PATJIiT. [CHAP.Vm. come to the knowledge of the employer. That any claim made in respect of this hond shall be in writing addressed to the company, as aforesaid, as soon as practicable after the discovery of any loss for which the company is responsible hereunder, and within six months after the expiration or cancellation of this bond as afore- said. And upon the making of such claim, this bond shall wholly cease and determine as regards any liability for any act or omission of the employe committed subsequent to the making of such claim, and shall be surrendered to the company on 'layment of such claim." "That if the company shall so elect, this bond may be cancelled at any time by giving one month's notice to the employer, and refunding the premium paid, less a pro rata part thereof for the time said bond shall have been in force, remaining liable for all or any default covered by this bond, which may have been com- mitted by the employe, up to the date of such determination, and discovered and notified to the company within the limit of time hereinbefore provided for. "That the employer shall, if required by the company, and as soon thereafter as it can reasonably be done, give all such aid and information as may be possible (at the cost and expense of the ©ompany) , for the purpose of prosecuting and bringing the em- ploye to justice, or for aiding the company in suing for and making effort to obtain reimbursement by the employe or his estate, of any moneys which the company shall have paid or become liable to pay by virtue of this bond. "That no suit or proceeding at law or in equity shall be brought to recover any sum hereby insured, unless the same is commenced within one year from the time of the making of any claim on the company." "It is further agreed that this bond may at the option of the employer be continued in force from year to year at the same premium rate as long as the company shall consent to receive the same, in which case the company shall remain liable for any dis- honest act of the employe occurring between the original date of this bond and the time to which it shall have been continued." The complaint set out certain acts of fraud and dishonesty by O'Brien in his office of cashier whereby, it was alleged, the bank lost an amount in excess of that named in the bond. All the mate- rial allegations of the complaint were denied by the answer. The SEC. 4] AMERICAN SURETY CO. V. FAULT. 519 result of the trial was a judgment in favor of the plaintiff for $16,847.50, which was the amount of the bond with interest; also for $385.73 costs and $202.16 interest on the verdict; in all, $17,435.39. That judgment was affirmed in the Circuit Court of Appeals. 38 U. S. App. 254. * * * ' In the light of the facts, as above stated, we come to the consid- eration of the controlling CLuestions of law presented for determin- ation. These questions depend largely upon the interpretation to be given to the ptovisions of the bond in suit. If, looking at all its provisions, the bond is fairly and reasonably susceptible of two constructions, on'e favorable to the bank and the other favorable to the Surety Company, the former, if consistent with the objects for which the bond was given, must be adopted, and this for the reason that the instrument which the court is in- vited to interpret was drawn by the attorneys, officers or agents of the Surety Company. This is a well established rule in the law of insurance. National Bank v. Insurance Co., 95 TJ. S. 673; Western Ins. Co. v. Cropper, 32 Penn. St. 351, 355; Reynolds v. Commerce Fire Ins. Co., 47 N. Y. 597, 604; Travellers' Ins. Co. V. McConJcey, 127 U. S. 661, 666 ; Fowkes v. Manchester &c. Life Ass'n, 3 Best <& Smith, 917, 925. As said by Lord St. Leonards in Anderson v. Fitzgerald, 4 H. L. Cas. *484, *507, "it [a life policy] is of course prepared by the company, and if therefore there should be any ambiguity in it, must be taken, according to law, most strongly against the person who prepared it." There is no sound reason why this rule should not be applied in the present case. The object of the bond in suit was to indemnify or insure the bank against loss arising from any act of fraud or dishonesty on the part of O'Brien in connection with his duties as cashier, or with the duties to which in the employer's service he might be subse- quently appointed. That object should not be defeated by any narrow interpretation of its provisions, nor by adopting a con- struction favorable to the company if there be another construction equally admissible under the terms of the instrument executed for the protection of the bank. * * * Affirmed. Accord.— U. S. F. & G. Co. v. Golden Pressed Brick Co., 191 TJ. S. 416; CJty of Topeka v. Fedteral TJnion Surety Co., 213 Fed. SSS; Hormel v. American Bonding Co., 112 Mimn. 288, 128 N. W. 12, 33 L. R. A. (HT.S.) SIS. 520 YOUNG V. AMEEICAN BONDING CO. [CHAP. Vm. Sec. 5. Measure of liability — Corporate surety can be relieved from its obligation only where departure is material and prejudicial. YOUNG, APPELLANT, v. AMERICAN BONDING COMPANY OF BALTIMORE 228i Pa. (St. 373, 77 Atl. 623 (1910). ElUs Ames Ballard & Boyd Le& Spahr & Leo Belmont, for appellants. Francis B. Bracken, for appellee. Opinion by Mr. Justice Stewart. A recital, of the facts is necessary to an understanding of the questions involved. The action was against principal and surety in a bond of $25,000 conditioned on the completion of certain build- ings and improvements within a stipulated time. The plaintiffs be- ing the owners of certain real estate at Atlantic City contracted by written article of agreement dated February 26, 1906, to sell and convey the same to Norman Kellogg, one of the appellants. The agreement provided that the consideration should be a purchase- money mortgage for $500,000 to secure an issue of first-mortgage gold bonds of like amount bearing interest at the rate of six per cent., payable semi-annually, with a sinking fund provision of $10,000 yearly, the whole issue of bonds to be redeemable at any understood period after three years, and to become due and payable at the expiration of iten years, the mortgage to be held by the Land Title & Trust Company of Philadelphia as trustee for the bond- holders. It was further stipulated that of the bonds $400,000 were to be forthwith issued to the vendors, and the remaining $100,000 ■were to be held by the trusitee, to be paid over upon the order of Kellogg upon the completion by him or his assigns of certain build- ings and improvements which he had covenanted to make on the purchased premises, as part of the consideration, at an aotual cost of. not less than $350,000. Another provision in the contract was that in case the vendees should organize a corporation for ithe pur- pose of improving the property and conveyed the title to such cor- poration, the corporation should at the request of the grantor exe- cute its bonds to the amount of $500,000 to be secured by the pur- chase money mortgage above provided for, thereby making them a SEC. 5.] TOUNQ V. AMERICAN BONDING CO. 521 first lien. Still ano'ther was that inasmuch as no cash consideration was being paid on the purchase, in order to indemnify the vendors iagainst loss of rentals in ease of failure of the vendee to make the improvements stipulated for within the required time, the latter should furnish a bond with security in the sum of $75,000 (after- ward reduced to $25,000) to protect againsit such contingency. The contract was to take effect and become binding on the parties only upon the execution and delivery of this bond. In compliance witb this stipulation the bond here sued on was furnished and accepted March 9, 1906. It recites the fact of agreement of sale and pur- chase, the consideration, and the reason and purpose in requiring the bond, followed by this condition : "Now therefore the condition of this obligation is such that if the said principals shall well and faithfully oonstruot and complete said improvements of the value of three hundred and fifty thousand dollars ($350,000) upon said property, as provided in said agreement, on or before the 31st day of December, 1916, then this obligation to be null and void; other- wise ift shall remain in full force and effect." The obligorsi were Kellogg and two others who sdgned as principals, and the American Bonding Company as surety. Kellogg and the bonding company were the only parties served, and the case proceeded against them. The facts as developed on the trial showed entire failure on the part of Kellogg to make the improvementsi stipulated for, although a corporation organized by him to accomplish this undertaking had expended in the attempt before its abandonment upward of $60,000. A verdict was rendered for the plaintffs, which upon a point re- served, affecting only the bonding company, was set aside as to the bonding company by the court, and judgment entered for the latter non obstante. This appeal is from the judgment so entered. Upou the admitted facts the learned trial judge held that, in the course of settlement between the plaintiffs and Kellogg, there had been such a departure from the terms of the original contract as relieved the surety. The variance was in connection with the purehase- money mortgage. Upon the acceptance by plaintiffs of the bond in suit, March 13, 1906, the transaction between plaintiffs and Kel- logg was completed, the former executing and delivering their deed of conveyance, and the latter a purchase-money mortgage. This mortgage contained none of the special provisions set out in the contract. By its terms it was given to secure, not an issue of $500,000 of first mortgage bonds, with the incidents which acooird- ing to the provisions of the contract were to attach to such bonds, 522 YOUNG V. AMERICAN BONDING CO. [CHAP. Vm. but to secure one certain bond given by Kellogg in the sum of $500,000 payable to the plaintiffs' representative or his assigns on or before March 1, 1916, with interest payable semiannually. In neither bond nor mortgage is there any reference to the special provisions which were to govern, nor does either contain any ref- erence to the rights of Kellogg. The learned trial judge held that this constituted a variance in substantial and material respects from what was required by, the agreement, and operated to release the surety in the bond. ****** This brings us to the second contention of appellants, viz., that the settlement of March 13 involved no material departure from the contract of February 26, 1906. In all essential particulars the ap- pellee here is an insurance company, and its obligation in this par- ticular instance was that of an insurer. It was paid for its under- taking; the amount of its compensation being based on the calcula- tion of risk assumed. The trend of all our modern decisions, fed- eral and state, is to distinguish between individual and corporate fiuretyship where' the latter is an undertaking for money considerar tion by a company chartered for the conduct of such business. In the one case the rule of strictissimi juris prevails, as it always has; with respect to the other, because it is essentially an insurance Egainst risk, underwritten for a money consideration by a corpora- tion adopting such business for its own profit, the courts generally hold that such a company can be relieved from its obligation for suretyship only where a departure from the contract is shown to be a material variance. "The doctrine that a surety is a favorite of the law, and that a claim against him is strictissimmi juris does not apply where the bond or undertaking is executed upon a considera- tion by a corporation organized to make such bonds or undertakings for profit. While such corporations may call themselves 'surety companies, ' their business is in all essential particulars that of in- surance. Their contracts are usually in the terms prescribed by themselves, and should be construed most strictly in favor of the obligee." 32 Cyc, p. 306, and the authorities there cited in sup- port. Having regard to this particular contract before us, and in- terpreting it according to its own terms, we have said that it is essentially a contract of insurance. It follows that there is but one way by which it is to be determined whether the variance com- plained of was a material variance. The test is to be found in the ■answer to the quesition whether it substantially increased the SEC. 5.] TOUNG V. AMERICAN BONDING CO. 523 chances of ihe loss insured against: If such were the result, it would have been fair reason for demanding a higher premium than was paid, and the materiality is thus made apparent. Hartman v. Insurance Co., 21 Pa. 466 ; Murphy v. Insurance Co., 205 Pa. 444. It is not a question whether the variance actually caused the breach -of the bond; but whether it was such a variance as a reasonaWy careful and prudent person undertaking the risk would have re- garded as substantially increasing the chances of loss. To this, as it seems to us, there can be but one answer. Under the contract $100,000 of bonds of a certain description were to be available to Kellogg on completion of the improvements. These bonds were to be secured by a mortgage on the property containing certain defi- nite provisions as to their redemption; when issued they were to be on a parity with the bonds which the vendors were to receive, and were to rest on the same security. If the property conveyed had a value of $400,000— the amount the vendors were to receive — it is safe to assume that any considerable expenditure in improve- ments thereon as the work progressed would give to the bonds held in res>erve for Kellogg, and which were to be issued only on com- pletion of these improvements, a corresponding value as an asset which could, by way of anticipation, be made available in aiding him in the completion of the work by assignment or otherwise. Would such fact be likely to occur to any one in calculating the risk assumed in underwriting, Kellogg's performance? If so, here was a material departure from the contract.^ The settlement as made contained no provision for Kellogg's bonds; indeed, it pre- cluded the possibility of their issue at least on the basis originally provided. It gave the vendors one bond for $500,000, $100,000 in excess of the price stipulated for ; it showed no interest in Kellogg in the security ; but on the other hand increased his liability. To that extent it increased the hazard of his accomplishing what he had undertaken to do, and correspondingly increased the risk the ap- pellee had underwritten. It is not an answer to this to say that it was but a temporary arrangement; that what was contemplated was that the improvements were to be made by a corporation to be organized for that purpose, and that the bonds were to be issued by such corporation. True, the contract contemplated the contingency of Kellogg organizing a corporation to take over the property and make the required improvements; but the corporation ■was to acquire the property through a conveyance from Kellogg, and the bonds to be issued by it were to conform to the bonds pre- viously provided for, that is to say, "to be a first lien upon all its 524 PHILADELPHIA V. F. & DEPOSIT CO. [CHAP.vm. property and assets, being further secured by the purchase-money . mortgage already provided for." The essential fact is that the mortgage given by Kellogg was not the mortgage "already pro- vided for," and could not be made to secure bonds with the inci- dents that were to attach under the original contract. That- the settlement was a contemplated temporary expedient is nothing more i,han a suggestion ; but if it were a fact established in the case, it rendered impracticable the original scheme. The third position advanced by appellants is, that whatever departure there was from the contract was with the knowledge and approval of the surety. It is not pretended that the surety was. consulted as to the mort- gage which was accepted, or had any knowledge as to its contents. It was acquainted with the fact that Kellogg had organizglifa corporation to make the improvements, but its knowledge extendei no further. It had a rig'ht to assume that notwithstanding this arrangement the terms of the original contract would be obserVfifjil for it was so stipulated. The ease was properly ruled by the learned trial judge. The assignments of error in this appeal are overruled. The judgment is affirmed. Accord. — ^Amerioan Surety Co. v. Pauly, 170 XJ. S. 133, 42 L. ed. 977'; M. E. Ohuroh of Franklin v. Equitable Surety Co. (1921), 269 Pa. 411, 112 Atl 031; New Ha veil v. National Steam Econoimizer Co., TO Conn. 482; Guaranty Co. V. BresHed Brick Co., 191 U. S. 416. Contra. — First CJhuroh in Ooroma v. Lowery, 171 Cal.. 124, 165 Pac. 440 (1917) ; H. & S'. Engineering Co. v. Turney, 101 Texas 148, 216 S. W. 621. PHILADELPHIA TO USE v. FIDELITY & DEPOSIT COM- PANY OF MARYLAND, APPELLANT 231 Pa. St. 268, 80 Atl. 62, Ami Cas. 1912B, lOSSn (1911). William A. Glasgow^ Jr., for appellant. Frank P. Prichard, for appellee. Opinion by Mb. Justice Mosohziskee. ^ On December 11, 1907, the firm of Lynch Brothers contracted to erect a schoolhouse for the city of Philadelphia, to be finished by August 1, 1908. A percentage of the contract price was to be re- tained by the city until the acceptance of the building, and the sum SEC. 5.] PHILADELPHIA V. F. & DEPOSIT CO. 525 of $3,723.58 for a period of twelve months after comp'ktion, as a guarantee for the sufBciency of the work. The Fidelity and Deposit Company of Maryland, the defendant, became surety on a bond given by the contractors under the city ordinance, of March 30, 1896, to secure the payment to subcontractors and others for labor and materials supplied in the prosecution of the work. On No- vember 14, 1907, the firm of Thompson Brothers, the use plaintiffs, contracted with Lynch Brothers to furnish labor and materials for certain portions of the work, and on May 14, 1908, they entered into an additional contract. At or before the time when the debt to Thompson Brothers became due and payable, they accepted a note from Lynch Brothers, dated December 2; 1908, for an amount sufficient to cover the balance now claimed, and with an express agreement that an extension of time should be granted until the maturity of the note. This note was renewed on four occasions, with like agreements for extensions till November 19, 1909 ; aU of the renewals and extensions were without the knowledge or con- sent of the surety. There was a sufficient consideration tO' support the several extensions, and there is no claim that the notes were taken ia payment of the debt. On or before November 18, 1900, the moneys retained by the city were paid to Lynch Brothers, who became insolvent before November 19, 1909, and on November 24, 1909, were adjudged bankrupts. On February 11, 1910, this suit was instituted against the defendant company as surety on the bond, claiming a balance due and unpaid for work and material furnished by the use plaintiffs, with interest "from October 19, 1908, the date when the work * * # y^^^, completed. ' ' Affi- davits of defense were filed averring the facts substantially as above set forth ; the court entered judgment for want of a sufficient affi- davit of defense, and the defendant has taken this appeal. |, The appellant contendsi that the extensions of time granted by Ithe use plaintiffs' to the contractors, without notice to or consent from the surety, released the latter from its liability on the bond. This. would be true if the bond were an ordinary contract or surety- ^ip with an individual as surety. But, as we said in the recent case of Young v. American Bonding Company, 228 Pa. 873: J "The trend of all our modem decisions, federal and state, is to ^distinguish between individual and corporate suretyship where the Hatter is an undertaking for money consideration by a company '■c||irtered for the conduct of such business. In the one case the rule toi strictissimi juris prevails, as it always has; with respect to the 526 PHILADELPHIA V. P. & DEPOSIT CO. [CHAP.ym. other, because it is essentially an insurance against risk, under- written for a money consideration by a corporation adopting sueh business for ita own profit, the courts generally hold that such a company can be relieved from its obligation for suretyship only where a departure from the contract is shown to be a material variance. • « # While such corporations may call them- selves surety companies, their business is in all essential particulars that of insurance. Their contracts are usually in the terms, pre- scribed by themselves, and should be construed most strictly in favor of the obligee." Here the bond was for the protection of subcontractors and others in the construction of a public building. It differs from the ordinary suretyship, in that it is not an obligation Jor the perform? ance of any particular contract. It was given for the benefit of all persons who might furnish labor or material in the course of the work, whether the contracts for such labor and material were in existence at the time the bond was executed or not, and without regard to the terms of purchase, whether for cash or on credit. In its nature the obligation was more of a contract of insurance than of suretyship ; so long as the extensions of credit did not go beyond the two-year limit for suit fixed in the bond, and in the ab- sence of fraud or unfair dealing on the part of the subcontractors to the prejudice of the surety, or of material harm actually suffered, the surety was not released. The surety does not aver any of these elements, but relies upon a presumption of injury because the moneys retained by the city were paid over before the expiration of the extensions. These moneys were not retained for the benefit of the surety, but in the words of the contract, "as- a guarantee that * * # (^-ije contractors) * * * shall keep all of said work done by them in good order and repair for said period of twelve months;" nor could the subcontractors have enforced their claim against this fund: Lesley v. Kite. 192 Pa. 268. "We find no direct averment in the pffidavits of defense that the surety was actually harmed by the extensions granted to the con- tractors, and the facts as stated therein are not sufScient in them- selves to raise such a presumption. For all that appears, the con- tractor may have paid every cent of the cash received to other materialmen or mechanics who did work upon the building. In a case of this kind, there is no presumption that the surety company is harmed, the prejudice must be made to appear, and the suggestion of mere contingencies or possibilities is not enough. The assignments of error are overruled and the judgment is affirmed. SEC. 5.] CONTEACTING CO. V. SURETY CO. 527 AcoORD.-^uaraiity Co. v. Pressed Brick Co., 191 U. S. 416, 48 L. ©d. 442; United States Fidelity, etc., Co. v. United Sta,tcs, 17» Fed. '602; Brown v. Title Guaranty & Surety Co., 232 Pa. St. 337, 38 L. E. A. (N.S.) 698; Hormel & Co. V. American Bonding Co., 112 Minn. 288, 33 L. R. A. (NvS^) 513, and numerous cases cited in note; Board of Commissioners of Ohio County v. CHemens, 85 W. Va. 11, 100 S. E. 680, 7 A. L. R. 373. JAMES BLACK MASONRY AND CONTRACTING COMPANY, RESPONDENT, v. NATIONAL SURETY COMPANY, APPELLANT 61 Wash. 471, 112 Pac. 517 (1911). Roberts, Battle, Hulhert and Tennant, for appellant. Arthur E. Griffin, for respondent. Chadwick, J. : Respondent took a contract for the erection of the Leary Building, in the city of Seattle. He let a suhcontract to the Ellis Granite Company, to cut and place all the stone in the first two stories of the building. It was agreed that the entire work should be finished within one hundred and twenty-five days from the date of the contract, which was December 12, 1908. The work was delayed, through no fault of the Ellis Company, for about sixty days, but was finally finished without any changes or alterations material ito this inquiry. The aontract price wias $16,500, to be paid as follows: "On the 1st day of each month the contractor shall render to the general contractor an itemized statement of the work placed in the building during the preceding month, which statement shall be verified by the architects, and upon the certificate of the archi- tects there shall immediately be paid to the contractor by the gen- eral contractor eighty-five (85) per cent, of the amount of work finished. On the final completion of .the work and the acceptance thereof by the architects, as evidenced by their certificate, the re- mainder of the contract price, together with the percentage re- tained, shall be immediately payable." The contract provided that, "the contractor shall furnish a bond in the amount of $5,000, for the proper performance of the terms of this agreement." Appellant furnished this bond,, which by its terms provided that the contractor should be a part of its contract of indemnity. The bond contained the usual provisions with ref- erence to notice to the surety of any material alterations or changes in the contract. 528 CONTRACTING CO. V. SURETY CO. [CHAP. vm. On February 3, 1909, the Ellis Company gave notice that it was ready to begin the work of installing the stone^ but owing to some delay on the part of the general contractors, it was not permitted to begin work of placing the stone at the time provided in the eon- tract. The delay continued for sixty days. The Ellis Company, having no other immediate source of income, was unable to meet its pay rolls, and accordingly called upon respondent to make some advances. Eespondent, in conjunction with and by the direction of the Leary Company, and having satisfied itself that a considerable quantity of the stone — 'about $7,000 worth — ^had been cut and was in the yards of the Ellis Company, ready for delivery, did make the following advances: February 11, 1909, $500; February 17, 1909, $2,000 ; March 6, 1909, $1,000. It being apparent to respond- ent and the Leary Company that additional advances would have to be made, their respective superintendents went to the local agent of the appellant, and asked him to approve in writing of the pay- ments already made, and give his indorsement to the payment of such additional sums as were necessary to meet the expense ac- count of the Ellis Company. This request was referred by the agent of appellant to its attorneys, and on the next day respondent and the Leary Company were informed that appellant conceived the contract to have been broken, and that it was no longer liable on its bond, and accordingly refused to approve the payments that had been made or to give its indorsement to the additional pay- ments required. On March 26, respondent notified the Ellis Company to forth- with proceed with the erection of the granite for the Leary Build- ing, "under and pursuant to your contract dated December 12, 1908," and on March 30, 1909, respondent notified the appellant that the Ellis Company had "defaulted in the performance of its contract and has refused to proceed therewith, and further that the wages of the employes of said company for the week ending March 20, 1909, were due and had not been paid, and no work has been done under said contract since that date." This notice was of date May 25, and repudiated by appellant, on the theory that, by the advancements referred to and other advancements made thereafter, it was no longer liable, and refused to recognize any further liability on the bond. The court found that, when the Ellis Company made default in payment of its workmen and failed to proceed with the work of installing the stone in the building, it was impossible for the te- SEC. 5.] CONTRACTING CO. V. SUEETT CO. 529 spondent to procure the stone elsewhere without great delay, which would have been disastrous to respondent and subjected it to great loss. At or about March 26, and prior to the notice given by the respondent to the appellant that the Ellis Company had abandoned its contract, its president and secretary went to respondent and to the Leary Company and told them that the Ellis Company would not be able to carry out its contract, that it was without funds, and that the party who had been financing it had refused to make any further aldvances, and thereupon offered to respondent and to the Leary Company the inaterial in its yards, and the use of its yards and appfiances, in the event that they desired to perform the work upion their own account. Whereupon the Ellis Company discharged its bookkeeper, took out its telephone, and from that time on did nothing in the way of performance of its contract. The Leary Company and respondent put their own man in charge of the yard as timekeeper and bookkeeper, and employed the president of the Ellis Company as superintendent at a salary of $50 a week, and at eaich week end the Leary Company drew a check to cover the pay rolls and necessary expenses. This check was drawn in favor of Mr. Sayre, the superintendent, and by him converted into cash which was paid over to the laborers. It does not appear in evidence that anything was paid by the Leary Company or the respondent over and above the actual cost of labor and material, unless it be some charges for the timekeeper, telephone, and other items which might be deducted without affecting the real question before us. The trial court found : "That the defendant National Surety Company was not preju- diced, injured or damaged in any way or to any extent whatsoever either by the first three payments made February 11, 1909, Feb- ruary 17, 1909, or March 6, 1909, aggregating $3,500, and that said defendant was not prejudiced, injured or damaged in any way whatsoever by the subsequent payments made by the plaintiff to the defendant Ellis Granite Company to secure the completion of the contract of said Ellis Granite Company." The court concluded: "That the plaintiff is entitled to a judgment against the defend- ant National Surety Company for the full sum of $5,000, together with interest thereon at the rate of six per cent, per annum from the 24th day of November, 1909." Appellant relies upon five propositions' to sustain its appeal : "First — The advancement of $3,500 before any work whatever was done. 530 CONTEACTING CO. V. SURETY CO. [CHAP. VHI. "Second — Payment of $6,632.46 before any material was deliv- ered upon the grounds. "Third — Payment of $9,571.19 before any payment was due. "Fourth — Advancements and payments at all tinies over and be- yond the 85 per cent. • 'Fifth — Making final payment without notice and without hold- ing back reserve fund as stipulated.'' The contentions of respondent are suiBciently indicated by the statement of the facts and the findings which we have quoted or summarized. This court has held, and it is a doctrine from which we are not inclined to depart, that a epmpensated surety will not be, relieved of his obligation unless it be shown that he has been in fact preju- diced by a breach of the contract ; that is to say, the breach must not have been technical but substantial, working a pecuniary dis- advantage to the surety, or depriving him of some protection or privilege reserved in the bond. Beebe v. Eedward, 35 Wash. 615, 77 Pac. 1052; Cowles v. United States Fidelity and Guaranty Co., 32 Wash. 120, 72 Pac. 1032, 98 Am. St. 888 ; Title Guaranty and Trust Co. V. Murphy, 52 Wash. 190, 100 Pac. 315 ; Denny v. Spurr, 38 Wash. 347, 80 Pac. 541 ; Heffernan y. United States Fidelity and Casualty Co., 37 Wash. 477, 79 Pac. 1095; Monro v, National Surety Co., 47 Wash. 488, 92 Pac. 280; Leghorn v. Nydell, 39 Wash. 17, 80 Pac. 833. Respondent relies principally upon Leghorn v. Nydell, and Monro v. National Surety Co., supra. These were casesi holding that payments advanced to a contractor before the time stipulated in the contract would not exonerate the bond, in the absience of a positive showing of prejudice. In each of these cases, as in others of a like nature, tliere was a substantial compliance with the terms of the contract by the contractor. The payment was made in accordance with the terms of the bond, and having there- after become due by reason of a performance of the contract, it was held that the objection was technical, and the surety was held to its obligation. As was said in Cowles v. United States Fidelity and Guaranty Co., supra, the bond is subject to the contract, and was made after the contract. It is the contract instead of the bond which is primarily to be construed. And, as there suggested, the inquiry should be whether another or a new contract has been sub- stituted for the old one. We think that in this ea se there was not only a substantial departure, but a clear abandonment of the original SEC. 5.] CONTRACTING CO. V. SURETY CO. 531 contract, and a new contract whereby resf)ondent and the Leary Company undertook to do the work upon their own account and for their own. benefit. The contract provided that payment should only be made when the stone has been placed in the building, and then upon the certificate of the architect ; but without notice to the surety, payments aggregating $3,500 were made upon a $16,500 con- tract, before they became due and without any certification on the part of the architect. There is evidence to the effect that, but for the delay occasioned by the Leary Construction Company, amounting to nearly SLKty days, the Ellis Company could have performed its contract. It was because of the act of the Leary Company then, rather than because of the fault of the Ellis Company, that it was put in default and compelled to abandon its work. The work being taken over by the respondent and the Leary Company, the situation made by them can not be evaded by showing that accounts were kept with the Ellis Granite Company ; that Sayre had been and was in name still its president, and like circumstances. Facts and legal conclu- sions can not be overcome by mere bookkeeping. The whole rec- ord shows that the Ellisi Company never performed, nor attempted to perform, any part of its contract, and that the $3,500 or any part thereof never became due it, as was so in the cases relied upon by respondent. No obligee should assume to pay a substan- tial part of the contract price — as counsel for respondent contend and as it seems probable, a sum equal to or greater than the profit on the job — without notice to the surety. Advances or overpay- ments are allowed and held to be without prejudice where, under the facts of the particular case, they afterwards become due to the party to whom they have been paid. But here, not only was the time and manner of the payment changed, but more than one- half of the contract price was paid before it was due under the contract. It was never paid under the contract or to the contract- ing party. It was paid for the actual cost of material and labor, to, those who had furnished these items for the benefit of the re- spondent. The general rule is, if the building owner advances to the builder more than he is entitled to under the contract, the surety will be released. The rule rests UDOn two reasons. The one is that such advance deprives the surety of the security which the owner oi; principal contractor has agreed to hold for his benefit, and the loss of the inducement which otherwise would have operated on *he contractor's mind to induce him to finish the work in accord- 532 CONTRACTING CO. V. SURETY CO. [CHAP.Vm. ance witli the terms of" his obligation, Hudson, Building and En- gineering Contracts, 694 ; Pringrey, Suretyship and Guaranty, pp. 103, 138; 27 Am. & Bng. Ency. Law (2d ed.), p. 496; Peters v, Maekay, 20 Wash. 172, 54 Pae. 1122; Calvert v. London Dock Co., 2 Keen 638; Wehrung v. Denham, 42 Ore. 386, 71 Pac. 133; Glenn County v. Jones, 146 Cal. 518, 80 Pac. 695 ; Leiendeeker v. Aetna Indfemnity Co., 52 Wash. 603, 101 Pac. 219. The case of Glenn County v. Jones, supra, is directly in point. Upon a $5,580 contract, $1,860 was paid prematurely, without the consent of the sureties, although $1,900 worth of the material had been put on the ground. The motive was, as in this case, to help the contractor along with his work, and, as here, the board satis- fied itself that enough material was on the ground to cover the payment. The court said: "In our opinion the obligation of the principal was altered in a material respect without the consent of the sureties. The contractor was under the obligation of placing all the materials on the build- dng-site before he was entitled to any money under the terms of his contract. By the payment to him before he had done so, he secured the money before performing his obligation. The pressure which would have been exerted upon him to continue in the per- formance of his contract and place all the materials on the site, was removed when he received the money. He received it before he was entitled to it, without the consent of the sureties. The sure- ties had bound themselves* upon the assumption that the plaintiff would keep its contract in good faith. We can see no difference in principle if the whole of the contract price had been paid before any of the materials were placed on the ground. In such case could any one doubt that the sureties would have been exonerated? The rit,k of guaranteeing the construction of a building to be paid for when completed and accepted, is quite different from the risk of guaranteeing its construction, if the whole contract price should be paid in advance. In the one case the contractor can only get the money by performing his contract, while in the other he would •only pay out the money already received, in performing it. In this »case the sureties agreed and guaranteed that Jones would place ■all the materials on the building-site, on condition that he was to receive no money until he had done so ; they did not agree that if paid in advance he would place such materials on the site. By the payment, the hope of reward for further performance was lost, the temptation to act dishonestly was increased." Counsel for respondent seeks to distinguish this case, because the oooxtractor pocketed the money and then abandoned the eon- tract. But the legal principle involved rests, not upon the fact that SEC. 5.] CONTKACTING CO. V. SUEETT CO. 533 the contractor took the money and appropriated it to his own use, but upon a breach of the contract by the obligee. Where the money went is immaterial to the surety. If the owner could pay a part when nothing was due, and recover when nothing ever became due under the contract to the principal of the bond, he could then pay all, and upon abandonment hold the surety upon the plea of good motive, and that the payment was made for the benefit of the obligor. In all the eases decided' by this court, and by all other courts holding that payment by the owner would not discharge the principal, the facts have been such that no prejudice resulted by reason of such payments to the surety. But in this case the surety was prejudiced, in the two essentials noticed and indorsed as suf- ificient by all the books; that is, that they were deprived of that ■security which their contract gave them, and furthermore, the con- tractor was relieved of the inducement to perform the labor and ;furnish the material stipulated in his contract. ' The case most relied upon by respondent is Smith v. MoUeson, 148 N. Y. 241, 42 N. B. 669. There the contract was "to furnish, cut, set and clean" all the granite work for a building; and pro- vided for payments in installments not to exceed a certain per cent, "of the estimated value of the work performed on the build- ing." It was properly decided that the contract should not turn on the words "on the building," so as to render payments made on the estimates of the work done elsewhere a departure available as a defense to the surety, it being evident from the situation of the parties, the nature of the work, and other provisions of the contract, that the intentioru was to make the payments as the work progressed. In so holding, however, the court expressly affirmed the rule as we have announced it and as that court had previously declared it to be. The object of the courts should be to ascertain and enforce the contract as made, and not to hold the surety to a condition not within the fair contemplation of the parties. Here the contract was to pay for the work placed "in the building" during the preceding month. We have held that compensated sure- ties would not be heard to invoke the rule of strictissima juris, hut our holdings have gone no further than to hold that such sure- ties could not claim the same rule of strict construction available to non-compensated or voluntary sureties or guarantors. When the contract is plain and unambiguousi, or when its doubtful terms have been reconciled, whether by the one rule or the other, this coiirt has, like all others, held the parties to their contract; for. 534 CONTRACTING CO. V. SURETY CO. [CHAP.Vin. as is said ia the books, "a surety is bound by the contract he made, and not by some contract which he did not make, even though the latter may be more favorable to him than the former." SuretifS and guarantors are not to be made beyond the express terms of their contract. The only question open in such cases it to de- termine what the contract is and enforce it. "It is unquestionably the well-settled rule of law that a surety is entitled to a somewhat rigid construction of his contract; but before this rule is applied, his contract is subjected to the same con- struction as any other contract, in order to ascertain and give ef- fect to the intent of the parties, and it is not until this is ascertained that its language is to be regarded as strictissimi juris." Pingrey, Suretyship and Guaranty, p. 67 ; citing Bellom v. Freeborn, 63 N. Y. 383; People V. Backus, 117 N. Y. 196, 22 N. E. 759; Locke V. McVean, 33 Mich. 473; Shreffler v. NadelhofEer, 133 111. 536, 25 N. B. 630, 23 Am; St. 626. The rule is stated in the last case as follows: "The rule of strict construction, as applied to the contracts of sureties and guarantors, in no way interferes with the use of the ordinary tests by which the actual meaning and intention of con- tracting parties are ordinarily determined, but merely limits their liability strictly to the term^ of their contract when those terms are ascertained, and forbids any extension of such liability by implica- tion beyond the strict letter of those terms." Here the contract is plain. It was agreed that no payment should be made until the first day of the month following the installation of the stone. The conduct of respondent and the Leary Com- pany shows that they so understood it. The payment of $3,500 was made in defiance of the terms of the contract, and, under the authorities cited, operates to the legal prejudice of appellant. That this court has never held that l;he obligee of a bond was not bound to observe the terms of his contract, or that the surety was bound in any event, it is only necessary to refer to the ease of Leiendecker V. Aetna Indemnity Co., supra, which is in line with an unbroken current of authority flowing from the leading case of Calvert v. London Dock Co., supra, and all holding that, when ascertained, the stipulations of the contract were binding on both parties. In the Leiendecker case, after setting out the specification that the last payment should be reserved for the protection of the surely, Judge Dunbar said: "There was a contraotufll relation existing by reason of this bond between the indemnity pompany end file appellant. This SEC. 6.] UVINQSTON, ETC. V. F. & DEPOSIT CO. 535 provision was accepted by the appellant when he accepted the bond as a specification of his. duties in the premises; and it seems to us that it was a fraud upon the indemnity company to neglect to no- tify it that a payment had been made which was not disclosed in the contract upon which the bond was given, and the making of which rendered unavailing the provision in the bond just quoted. Having accepted the bond with a provision of this kind, we think the .appellant is bound by such provision." Judgment reversed, with instructions to the lower court to enter a decree in favor of appellant. Rudkin, C. J., and Morris, J., concur. V Dunbar, J. (dissenting) — I dissent. The whole record convinces me that the court was justified in finding that the surety company was not prejudiced to any extent, or in any way, by the payments! made, and this under our uniform holdings is the test of whether the deviation is material. In the Leiendecker case, cited above, it was apparent that the payments out of order were made to the detriment of the surety company. So that the case is in no wise in point. Crow, J., concurs with Dunbar, J. Accord.— H. & S. Engmeeping Co. v. Tumey, 101 Tex. 148, 216 S. W. 621; First Congregational Church of Christ in Corona v. Lowery, 171 Oal. 124, 1©5 Pac. 440. Sec. 6. When are statements made in application, representa- tions and when are they warranties? LIVINGSTON AND TAFT, TRUSTEES v. THE FIDELITY & DEPOSIT COMPANY, OF MARYLAND. 76 Ohio St. 253, SI N. E. 330 (1007). f Error to the Grcuit Court of Cuyahoga county. J. B. Livingston and Frederick L. Taft, as trustees of The Guarantee Savings & Loan Company, were the plaintiffs in the action below out of which this error proceeding arises, and are plaintiffs in error here, qnd The Fidelity & Deposit Company, of Maryland, was the defendant in the action and is the defend- ant in error here. 533 UVINGSTON, ETC. V. F. & DEPOSIT CO. [CHAP.Vm. It appears from the record that The Guarantee Savings & Loan Company was a corporation, organized long prior to October 8, 1901, under the laws of Ohio, having its principal place of busi- ness in the city of Cleveland, and that by quo warranto proceed- ings in this court the Company was, on the above date, ousted from its right to be a corporation, and the plaintiffs in error were appointed trustees to wind up its business concerns. The Fidehty & Deposit Company is a Maryland corporation authorized to do business in Ohio, having an office at Cleveland, for the purpose of executing bonds guaranteeing the fidelity of employes. The action of the trustees was based upon one of these guar- antee bonds executed by the defendant to the Loan Company June 1, 1896, for a consideration in money then paid, under- taking to guarantee the fidelity of certain employes of the Loaa Company. The bond was continued in force from year to year based upon written applications which had attached certificates and schedules enumerating the officers whose honesty was to be guaranteed and indicating their duties, the purpose of each of which was to obtain a continuance of the obligation of the bond. Eecovery was sought for alleged embezzlement and lar- ceny by one Jacob A. Blodt, secretary of the Loan Company, in the sum of ten thousand dollars. Issue was taken by the de- fendant by answer, a jiumber of separate defenses being pleaded, and liability being denied. By reply plaintiffs took issue as to the new matter. Further facts are stated in the opinion. At the trial of the cause at January term, 1906, of the common pleas of Cuyahoga, upon conclusion of the testimony offered by plaintiffs, a motion was interposed by defendant to the court to direct a verdict for defendant, and the court being of opinion that the evidence. adduced by the plaintiffs had, under the law applicable to the facts shown, entirely failed to make a case against defendant, sustained the motion. A verdict was rendered accordingly, and judgment for defendant entered thereon, which on error to the circuit court was affirmed. Mr. Smith W. Bennett and Messrs. Smith, Taft and Arter, for plaintififs in error. Mr. Horace Andrews; Mr. H. H. McKeehan and Messrs. Hoyi, Busiin <& Kelley, for defendant in error. Speae, J. The length of the bond of June 1, 1806, and of the several applications and continuation certificates tiien and there- SEC. 6.] LIVINGSTON, ETC. V. F. & DEPOSIT CO, 537 after given, introduced as exhibits, render it impracticable to re- produce them here in haec verba, but their salient features will be referred to. By the terms of the bond certain answers and rep- resentations and promises, and any subsequent representations and promises of the Loan Company, were made the basis of the contract denominated the bond, the language being that it is "understood and agreed that those representations and such promises, and any subsequent representations or promises of the employer, hereafter required by or lodged with the Compaoiy, shall constitute part of the basis and consideration of thei contract hereinafter expressed." The loss insured against was such as might be sustained by reason of the fraud or dishonesty of the employe "in connection with his duties as specified on said schedule amounting to embezzlement or larceny," and the time limit as to liability for such dishonesty was twelve months next before the discovery. Eespecting the promises referred to, the bond provided this: "This bond is entered into) on the condition that the business of the employer shall be continued to be conducted and the duties and remuneration of the employes shall remain in accordance with the statements hereinbefore referred to." As qualifying the above it was also provided in, the bond that the Loan Company should have the right, on giving written notice, to make interchanges or substitutions as to employes upon terms mentioned in the bond. Respecting this feature the further pro- vision is: "And the Company shall not be liable for other than the personal acts of the employe within the direct scope of his duties named in said schedule or in said noticesi." Desiring to substitute another person as secretary, the Loan Com- pany made written application January 25, 1897, and in that paper defined the duties of that officer thus: "Receive and de- posit all moneys received by the Company and acting as secre- tary in general, having custody of cash, likely not more than $1,500, and of that only about twenty-four hours. Not authorized to pay out cash on account, but required to make deposit in the authorized depository, The National Park bank. Allowed, in con- junction with the president and treasurer, to indorse checks, but for deposit only, and not authorized to sign checks nor accept drafts." The representations respecting the powers and duties of the secretary were not subsequently changed. This application con- tained the agreement that the answers were to be taken as con- ditions precedent, and as the basis of the bond. 538 IiIVINGSTON, ETC. V. P. & DEPOSIT CO. [OHAP.Vm. At the expiration of the year, viz. : June 1, 1897, application in writing was made by the Loan Company for a renewal and the Company certified that each of its employes named in the aceoin- panying list had faithfully and satisfactorily performed his duties and promptly and correctly rendered his accounts during the pre- ceding year, In this application Blodt, the defaulting employe, is classed as general manager and. the oihligatiom as: to him is five thousand dollars. Again, at the expiration of the year, application was made for a renewal and in that application Blodt was named as secretary with the same amount as guarantee. The Kime certificate as to faithful performance of duties as in the one preceding accompanied this application. IJike application, with like certificate as to performance of duties, was made in each of the three years following, Blodt being con- tinued as secretary. He resigned August 8, 1901, and then the crash came. The obligatory portion of the last continuation certificate was in form following: "In consideration of the sum of one hundred and fifteen and 00-100 dollai^, the Fidelity and Deposit Company of Maryland hereby oontinuesi in force schedule bond No. 175, in favor of The Guarantee Savings and Loan Company, Cleveland, Ohio, on behalf of the persons named in the annexed; schedule, in the positions and for the sums therein specified, for the period beginning the first day of June, 1901, and ending the first day of June, 1902, subject to all the covenants and conditions set forth and expressed in said schedule bond, heretofore issued on the fir^ day of June, 1896. "Provided the aggregate liability of the Fidelity and Depoat Company of Maryland, from the date of the issuance of said original schedule bond, to the date of the expiration of this certi- ficate, for or on account of any act or acts of any one of said per- sons, shall not exceed the sum written opposite that per- son's name upon the attached schedule. "Witness the signatures of the president and secretary this fifth, dayof June, 1901." In the schedule attached to the application for this certificate Blodt, was again named as secretajy, and the sum written opposite his name was ten thousand dollars. Blodt 's scheme of fraud was substantially this: He would pur- chase a cheap vacant lot taking title in the name of a fictitious per- SEC. 6.] UVINGSTON, ETC. V. F. & DEPOSIT CO. 539 son, and then cause an application to the Loan Company for a loan to be made on one of its blanks in the name of the fictitious person, accompanied, by a deed and abstract of title. The loan was to be used for the apparent purpose of erecting a building on the lot payable as the sitructure progressed. The borrower was described as a German, unacquainted with the Bnglisih language, and for that reason wished Blodt to act for him. From time to time checks were thus secured in the name of the borrower, which Blodt would use in procuring the money, acting on his pretended authority to represent the borrower, and forging the name of the fictitious payee, at the same time lodging with the Company a fraudulent insurance policy, he being an insurance agent. This simple scheme was made possible of accomplishment by the neglect of the other officers of the Company. No board of directors, nor any committee, ac!ted upon these loans or the checks. Nor did any appraisal or other committee inspect these imaginary buildings, or the lots on which it was represented they were to be eonsitructed. In no instance had any such building a real existence. Checks drawn by officers who were authorized to sign checks were signed up in blank and left in the custody of Blodt, the signers being absent, one of them continuously absent from the state. The money of the Company instead of being deposited wholly in the authorized depository, the Park bank, as the agreement required, was distrib- uted around in several banking institutions, and the manipulation of the funds by Blodt thus made easier. Blodt 's fraudulent scheme commenced by an application presented October 12, 1896, by which he secured $800, and continued through all the years until August 7, 1901, the number of such fictitious applications reaching 129, the amounts ranging from $150 to $1,620, and amounting in the aggregate to $209,100. Nor were examinations made of Blodt's accounts within the spirit of the contract June 1, 1900, nor in the year 1901. It appears that one Diehm made some examinations prior to June 1, 1900, and that an alleged expert examiner, employed by the Company but directed by Blodt, made an examination shortly prior to December, 1900, and reported the accounts correct. No accounts were in fact ren- dered, nor examinations had June 1, 1900, as stated in the Loan Company's last certificate. And it is entirely apparent that the examinations which were made, although probably conducted in good faith, were really surface and perfunctory examinations, and entirely untrustworthy. It is equally apparent that had the Com- 540 LIVINGSTON, ETC. V. F. & DEPOSIT CO. [CHAP. VUl. pany exercised ordinary dUigence, or a real efPor't to comply with ita oomtract with, tke Fidelity Company, the crdminally loose methods of Blodt and the grossly negligent metlLods' of the other officers having duties in the management to perform, and which the spirit of the contract with tlie defendant Company required that they should perform, would have been exposed years before the final catastrophe, and before the certificate on which liability is claimed by plaintiffs was issued. In fact, the active management appears to have been turned over to Blodt, who conducted affairs as he pleased without control, cheek, or efficient supervision by anyone. Much of the time the vice-president was out of the state, he and ike treasurer having signed and left with Blodt blank checks, and all of the amounts he converted were obtained by using these checks. The other officers seem to have been equally negligent. The vigilant supervision which the Company, as well by its by-laws, the statutes of the state, and its contract with de-' fendant, was required to exercise, was wholly wanting. The certificate for continuation accompanying the last applica- tion is in the terms following: "Certificate.-^!, Arthur L. Mix, Prest. Guarantee Savings and Loan Co., hereby certify that each of the employes named in the accompanying list has faithfully and satisfactorily performed his duties and promptly and correctly rendered his accounts during the year ending June 1st, 1901 ; and that to the best of my knowl- edge and belief, neither of them has been, nor is now, in arrears or default ; that at the date of the last examination of their respec- tive accounts the same were found, in each, ease, correct, and I know of no reason why the guarantee on behalf of each should not be continued. "Dated at Cleveland, O., June 1st, 1901. "(Signed) Arthur L. Mix, Prest., "The Guarantee Savings and Loan Co." Two questions oidy seem to need attention. "What is the nature, , and the effect in law, of the representations and promises made by the Loan Company to the Fidelity Company to induce the bonding contract, and were the defaults of Blodt "within the direct scope* of his duties named in said schedule," that is, his duties as secre- tary? As to the first question. It is assumed that the bonding con- tract, with the continuation certificates, are in the nature of insur- amee contracts rather than surety contracts, and it is contended SBC. 6.J LIVINGSTON-, ETC. V. F. & DEPOSIT CO. 541 that the effect of the statements denominated representations an(i promises are not to be treated as warranties, but are merely rep- resentations, and to be determined by the rules applicable to in- surance contracts. Tha4 is, unless the sitatements are known to be untrue when made, their actual falsity does not prejudice the rights of the insured. An exten^ve array of authorities is pro- duced to show that the language of such contracts should be con- strued most strongly against the insurer, since the terms are spec- ified by the company and not by the policy-holder. It is perhaps not necessary to look beyond our own state to ascertain the correct rule. Being contracts of indemnity against loss such contracts should be liberally construed in favor of the object sought to be attained, and where a clause is susceptible of two interpretations which seem equally fair, that should be preferred which affords the greater indemnity, but, like other contracts^ they should receive a reasonable construction in order to carry out the presumed in- tention of the parties as expressed by the language used. West et al V. Ins. Co., 27 Ohio St., 1; Travelers' Ins. Go. v. Myers & Co., 62 Ohio St., 529 ; Germania Fire Ins. Co. v. SchUd, 69 Ohio St., 136. The question of what name shall be given to the representa- tions and promises of the Loan Company seems to us unimportant. The certificate of Mix, the president, attested postively that each of the employes, which included Blodt, had "faithfully and satis- factorily performed his duties and correctly rendered his accounts during the year ending June 1, 1901." and at the date of the last exaniination of the respective accounts the same were found in each case correct, both of which statements also included the treasurer, Wunderlich. These stateihents, relating as they did tO' past tran's- actions and existing conditions, and the promises as to future con- duet of employes, entered into the contract and were at least in part the inducement which led to it, and oonstituted the basis of liability on the part of the Fidelity Company, and, although the term warranty is not used, yet they in law had the full effect of warranties. So that their falsity in any material particular is fatal to any action on the bond. That the statements were both false and material admits of no rational dispute. That Mix, the president, had no personal knowledge of their falsity is immaterial. They were the representations of the Company, and that they were grossly false was well known to those who were in active manage- ment of the Company's affairs. This condition brings the case within the ruling in Orme <& Ohey, Beers., v. Baker, 74 Ohio St, 542 UVINGSTON, ETC. V. P. & DEPOSIT CO. (.CHAP.Vm, 337, where the knowledge of those actively participating in^ th« management of a bank is held to be in law the knowledge of the bank itself. But proof of such knowledge is not essential to the responsibility of the Company for the truth of the statements made. The statements were conditional to the taking effect of the stipulatio:^, for liability on the part of the Fidelity Company ; were statements that certain facts were true, and that certain acts re- specting the performance of duties should thereafter be done by officers of the Loan Company. These statements, however ex- pressed, are of the very essence of warranties. The promises were to be observed in good faith; the representations as to the conduct of the employes and the condition of their accounts and transactions with the Company could not be truthfully made unless they were the result of a reasonably vigilant examination and supervision O'f the conduct of such . employes; and their dealings which affected the business of the Company. As before stated, m> real effort to control or supervise Blodt was attempted, and he was allowed to manage the whole affair to suit himself. The duties of other officers were defined in the Company's statements accom- panying their several applications, aaid it was part of the contract that these duties should not be changed without notice to the Fidelity Company. No such notice was given. On the contrary, the last statement of the president implies that the concerns are being managed by the several officers in accordance with the pre- vious stipulation. It does more than this. We emphasize the' fact that it contains a positive statement that each of the employes named bias faithfully and satisfactorily performed his duties. In fact, some had utterly abandoned their duties. It stated pos- itively that they had pnomptly and correctly rendered accounts during the year ending June 1, 1901. Some of them had rendered no accounts whatever during that year. The examination of the alleged expert was made the December before. The foregoing are positive statements. The eertifioate does say that to the best of the president's knowledge and belief neither of the employes had been or was in arrears or defeiult. At the trial. Mix, the pres- ident, was al)sent from the state and could not be produced im person. He seems to have been generally absent so far as the performance of duties was concerned. It was stipulated by counsel that if present he would testify that he executed the certificates signed by him qnd had no knowledge of the untruthfulness of any matter herein contained. Very likely. But his certificate was the SBC. 6.] USINGSTON, ETC. V. F. & DEPOSIT CO, 543' oertifioate of the Company as regards the rights and obligations of the Fidelity Company, and his personal belief, entertained in a distant state, and. with no previous intelligent effort on his part to ascertain the truthfulness of the statements, when taken with the real facts as they existed, shows not only a failure on the part of the Company to perform its part of the contract, but a blind, reckless disregard of contract obligations. Can any intelligent person suppose that if the method of management had been dis- closed as fully as it was concealed, that the bond would ever have been renewed by the defendant Company? We think not. It appears to us clear that the representations and promises were in law warranties, and the falsity of the former and the disregard by the Loan Company of the latter constitute a complete defense. Lest the foregoing comment respecting the negligence of the Loan Company be misconstrued as indicating that negligence is the basis of our judgment, we add that negligence is but an inci- dent. It is not intended to hold that mere negligence on the part of the guarantee may afford a defense but to hold that a war- ranty binds the warrantor, and that the breach on his part con- stitutes a defense to an action on the bond. • * • Affirmed. AccoBD. — The phraseology of the application plays an important part in the construction to be given. Legler v. Guaranty Co., 88 Ohio St. 336, 103 N. E. 897. 544 MATHEWS V. AIKIN. [CHAP. K. CHAPTER IX. THE RIGHTS AND REMEDIES OF THE PROMISOE AFTER PAYMENT Sec. 1. Equitable subrogation rests upon natural justice and is in- dependent of contract. MATHEWS, ET AL. v. AIKIN. 1 N. Y. 595 (1848). Appeal from the Supreme Court in equity. Abraham Aikin filed his bill in th,e Court of Chancery before the vice chancellor of the seventh circuit, against John Mathews and Oliver Orcutt, who appeared and defended, and against Edward Aikin, who suf- fered the bill to be taken as confessed. The case, so far as mate- rial to be stated, upon pleadipgs and proofs, was as follows: On or before the 22d of November, 1837, Edward Aikin, who was the son of the complainant, executed to James Hasbrook a bond secured by mortgage on certain real estate, bearing date December 6, 1856, conditioned for the payment of $1300 in six equal annual instalments. At the time of the execution of the bond and mort- gage, Edward Aikin was indebted to one Theodore Wood in the amount thereof, and Wood being also indebted to Hasbrook, pro- cured the bond and mortgage to be executed directly to him. At the time or soon after the bond and mortgage were given, the com- plainant, at the solicitation, of said Wood and Hasbrook, executed upon the bond a sealed guaranty of the payment thereof. There was no evidencf, that the complainant executed the guaranty at the desire or request of Edward Aikin, the mortgagor. Edward Aikin was examined as a witness for the complainant, and on cross-examination testified that he advised his father not to sign the guaranty, informing him that he was under no obligation to Jffocure a guaranty. Edward Aikin was insolvent. The complainant claimed by the bill to be subrogated to the rights of Orcutt or Mathews as the holder of the bond and mortgage for the purpose of reimbursing to himself the sum collected of him by suit on the guaranty; SEC. 1.] MATHEWS V. AIKIN. 545 and the prayer of the bill was that such right of subrogation might be declared, and that the premises might be sold, &c. The vice chancellor decreed in favor of the complainant accord- ing to the prayer of the bill. The defendants appealed to this court. B. D. Noxon, for the appellants. Geo. F. Gomstock, for the respondent. The complainant as a mere surety is entitled to be substituted to all the rights of the holder of the bond and mortgage, for the pur- pose of enforcing the mortgage lien for the sum collected of him, in the same manner that the "holder of the bond and mortgage might have done. Johnson, J. It is a general and well established principle of equity, that a surety, or a party who stands in the situation of a surety, is entitled to be subrogated to all the rights and remedies of the creditor whose debt he is compelled to pay, as to any fund, lien, of- equity which the creditor had against any other person or property on account of such debt. The general doctrine, as a rule of equity, is not controverted on the part of the appellants, but is fully conceded. It is insisted, however, by their counsel, that the guarantor in this instance did not become such at the request of the debtor ; that as to the debtor, he was a mere volunteer, having no remedy over against him, and never acquiring the character of a surety so'as to be entitled to subrogation to the rights and remedies of the creditor. The objection seems somewhat narrow and technical when ad- dressed to a court of equity whose peculiar province is to mete out substantial justice where the more restricted powers of the com- mon law fail in its administration. But it leads us to examine carefully into the grounds and principles upon which the right of subrogation rests. Does it rest upon the foundation of a con- tract binding in a court of law between the debtor and his surety? In other words, does it turn substantially upon the question whether, or not the surety who has paid the debt to the creditor has a remedy over, on his contract, against the principal debtor for money paid in an action at law ? or does it not rest rather upon the broader and deeper foundations of natural justice and moral obligation? Chancellor Kent says, in Hays v. Ward (4 John. Ch. 130), " This doctrine does not belong merely to the civil law system. It is equally a well settled principle in the English law that a surety will be entitled to every remedy which the principal debtor has, to enforce every security, and to stand in the place of the creditor, 546 . MATHEWS V. ATKTN. [CHAP. E. aad iiave those securities transferred to him, and to avail himself of those securities against the debtor. This right stands not upon (Contract, but upon the same principle of natural justice upon which one surety is entitled to contribution against another." Lord Brougham, in Hodson v. Shaw (3 Mylne & Keene, 183), said: " The rule here is undoubted, and if founded on the plainest prin- ciples of natural reason and justice, that the surety paying off a debt shall stand in the place of the creditor, and have all the rights which he has for the purpose of obtaining his reimbursement. It is scarcely possible to put this right of substitution too high ; and the right results more from equity than from contract or quasi contract unless in so far as the known equity may be supposed to be im- ported into any transaction, and so to raise a contract by implica- tion." Sir Samuel Bomilly, in his argument in Craythomev. Swinborne (14 Ves. 159), stated the rule to be, that " a surety will be entitled to every remedy which the creditor has against the principal debtor to enforce every security by all means of payment, to stand in the place of the creditor not only through the medium of contract but even by means of securities entered into without the knowledge of the surety, having a right to have those securities transferred to him, though there was no stipulation for that, and to avail himself of all those securities against the debtor." And this exposition of the rule was fully sanctioned by Lord Eldon in givmg judgment in that case. The equity is certainly as strong, and it seems to me somewhat stronger in favor of substitution, as against the creditor at least, than it is between sureties for contribution where one has paid the whole debt, and it has been likened to the case of contribution be- tween sureties. As between them the rule in equity is clear that the ground of relief does not stand upon any notion of mutual con- tract express or implied, but arises from principles of equity in- dependent of contract. Story's Eq. § 493, and notes, where the authorities are all collected. This is also substantially the rule in courts of law. (Norton v. Coons, 3 Denio, 130.) In that case the circumstances under which the defendant became co-surety were such as to repel the presumption of any promise to make contribu- tion. But the court held that his being a surety on the same con- tract without qualification in terms was sufficient to fix his obliga- tion to contribute, and that for the purposes of giving the plaintiffs a remedy the court would presume a promise. A promise was therefore imputed where none confessedly existed, in order to pro- vide a remedy for the party where there was no doubt as to the SEC. 1.] MATHEWS V, AIKIN. 547 legal liability ; and the legal liability in such eases springs from the equitable obligation; the law courts having borrowed their juris- diction in these particular cases from the courts of equity. In the present case it seems to me, if it were necessary, a court of equity ought to imply a promise on the part of the creditor to subrogate the surety to all his rights and remedies, in case he resorted to the latter for payment of the debt upon his guarantee. The equitable obligation resting upon him to do so seems to me most manifest. It is true, the case shows that the principal debtor informed the guarantor that he was under no promise or obligation to give security, which seems to have been insisted upon by the creditor, and that he advised his father not to give the guaranty. There is nothing, however, in the case to show that the debtor did not sub- sequently assent to it, even at the time the guaranty was executed, or that the money was not paid at his express request afterwards. But the case does show that the guaranty was executed at the re- peated and urgent solicitations of Wood, the original creditor, and of Hasbrook, to whom Wood proposed to transfer the debt, and to whom, by arrangement between them, the bond and mortgage w^re executed. As, to the creditor Mathews, therefore, who now stands in the place of Hasbrook, Abraham Aikin was not a voluntary surety for the debt of his son, but became so at his express request, or that of the mortgagee under whom he claims, and it seems to me, after Mathews has pursued Abraham Aikin to judgment and fixed his liability as surety for his son in a court of law, it does not lie with him to turn around and say he is a mere volunteer in assum- ing the obligation and paying the money, and therefore not entitled to the rights and privileges of a surety. The creditor should not be permitted in a court of equity to question the rights of the surety after the obligation has been incurred at his request, and he has fixed the character upon him by suit and judgment in a court of law. As to him at least, Aikin, the father, was surety for the debt of the son, and was compelled to pay that debt, or a portion of it; and it is immaterial as to the creditor what the state of the case is, or the legal rights are, as between the principal debtor and the surety. There is no reason why the creditor should set up a defense for the debtor. It is sufficient for him that he has re- ceived his debt of the surety to create the obligation on his part to surrender to the. surety the securities in his hands. He is not to litigate the rights of the debtor, and set up defenses for the latter which he, peradventure, might be too honest and conscientious to 548 MATHEWS V. AIKIN. [CHAP. IX. set up against the securities in the hands of a surety who had paid his debt for him. It might be different if the debtor himself was here urging this defense, and especially if he was able to show that the surety entered into the obligation, not only against his wish or request, but for some purpose of fraud or oppression, or to make him his debtor against his will, or, as suggested by the appellant's counsel, to compel him to pay a debt to which, as between him and the creditor he had a good defense at law. In such cases a court of equity would not leUd the surety its aid, as he would not come before it with clean hands. But this is no such case. The principal debtor is here made a party, and suffers the bill to be taken as confessed- against him. He sets up no such defense, nor does he pretend that he is not liable, or that he is not under both a legal and a moral obligation to his surety to repay the money which the latter has advanced for him. Indeed, he expressly swears that his father was a mere security for him for the payment of the bond, without receiv- ing any consideration for becoming such surety. It is true he also testifies that he advised his father not to sign the guaranty, but it is obvious to my mind that this was in reference to a claim made by the creditor upon the debtor, that he was under some obligation to give some additional security. This appears to me quite evident from the appellant's answer and the course of the examination. It is sufficient, however, as I apprehend, that the debtor sets up no defense of the kind, and, although a party, admits the validity of the respondent's claim and would not afterwards be heard to allege it was illegal or invalid. Could the appellant Mathews be per- mitted to set up a defense so ungracious as against a surety whom he has compelled to pay his debt, he would be bound in order to make it complete to show, as I think, that the principal debtor resisted the surety's claim, and that the securities in the hands of the latter would be worthless, inasmuch as he could never enforce them against such principal. Otherwise the court would intend that the princi- pal was willing to do what equity required him to perform. :,: * But upon the general doctrine of subrogation, I agree fully with the learned judge who delivered the opinion of the Supreme Court, that the right of the surety to demand of the creditor whose debt he has paid, the securities he holds against the prinicpal debtor and to stand in his shoes, does not depend at all upon any request or contract on the part of the debtor with the surety, but grows rather out of the relations existing between the surety and the cred- fiEC. 1.] FOX & CO. V. WALES BANK. 549 itor, and is founded not upon any contract, express or implied, but (springs from the most obvious principles of natural justice. And if it vere true that the surety in such a case as this could maintain no action at law against his principal for the money paid, I agree with the Supreme Court that it would furnish a still stronger case for subrogation. A court of equity would never presume that the principal would interpose such a defense. If the creditor has in- sisted upon the surety's discharging his obligations and liabilities as such, and fastened the character upon him by a judgment, he can- not, after receiving from him his debt, turn round and deny him the rights of a surety. The creditor must then fulfil his obligation to the surety, and leave the latter and his principal to adjust or litigate their rights or claims as they may see fit. There is no hardship in this. The surety might have filed his bill and com- pelled Mathews to collect the debt out of his principal through the mortgage before resorting to him. And in such a proceeding Mathews might with the same propriety have set up as a defense that the surety was a mere volunteer and could have no redress against his principal, and ought not to insist upon his proceeding against the principal in the first instance. The injustice of the de- fense might be a little more apparent in that case, but none the more real. Decree affirmed. The right of " subrogation arises whether the securities come into the possession of the creditor before or after the execution of the original con- tract. Havens v. Willis, 100 N. Y. 482; Brandon v. Brandon, i De G. & J. 524. DUNCAN FOX & CO., ET AL. v. NORTH AND SOUTH WALES BANK, ET AL. 6 Appeal Cases, 1 (18S0). The two firms of the appellants carried on business at Liverpool as merchants. They were not connected together in business, but thp transactions of both with the Eadfords were exactly of the sanie kind. It will be sufficient to refer to one alone. Eadford & Sons were millers and corn dealers at Liverpool, the firm consisting really of Samuel Collins Radford and James Rad- ford. The Radfords were not strictly the customers of the North and South Wales-Bank, but had opened a discount aecoimt with it, and 32 550 FOX & CO. V. WALES BANK. [CHAP. K. ■were indebted to it in respect of discounts of bills of exchange. This discount account was considerable. On the 1st of December, 1874, Samuel Collins Radford deposited with the bank certain deeds of freehold property belonging to him- self, for the purpose of securing payment of the amount then duei, and to become due, on discounts, from his firm to the bank. The deposit was effected by two memorandums, one of which, executed by Mr. S. Collins Eadford alone, stated that the deposit was made ' ' in pledge to secure to the said bank the balance, for the time be- ing, owing to the said bank by my firm of Samuel Radford & Sons for discounts and advances, and for all other moneys in or for which the said firm, whether alone, or jointly with any other person or persons were or might, from time to time thereafter, be or become indebted or liable on their account, or which the said bank might at any time claim against the said firm." The second memorandum relating to other property of S. C. Radford was in a similar form. In November, 1875, Duncan & Co., through their brokers, Maxwell & Co., sold to S. C. Radford & Co. a cargo of wheat ex Rima for cash after delivery. Part of the price was paid in cash, but James Radford applied to Mr. Duncan to take the acceptances of Radford & Sons for the residue. Duncan at first declined to do so, on which James Radford said, " You bank with the North and South Wales Bank, if you go there you will find it will be all right with our bills," to which Duncan answered, " If the bank will accept those bills without our indorsement, then I can oblige you." Mr. Duncan went to the bank and saw the manager, who declined to discount the. bills without the indorsement of Duncan & Co., stating that it was contrary to all banking customs to discount bills for any one who did not indorse them; he added that he did not think that Duncan & Co., would incur more than a mere nominal responsibility by making the indorsement, or something to that effect. Mr. Dun- can thereon informed Radford that he would consent to take the bills, which he did, and then indorsed them and handed them to the bankers, who discounted them, placing the amount to the credit of Duncan & Co. At that time Duncan & Co. had no knowledge that the bankers held any securities from Radford. In January, 1876, before any of the bills became due, Radford & Sons stopped pay- ment. When the bills became due they were presented for pay- ment ; they were dishonored, and Duncan & Co. became liable to the bankers for the amounts. They received formal notice of the dishonor, and a demand of payment. There were other bills of Badford & Co. held by the bankers under similar circJumstances on SEC. 1.] • FOX & CO. V. WALES BANK. 551 which Eobinson & Oo. were indorsers, all of which became due be- tween the 22d of February and the 27th of March. On the 24th of February^ 1876, Radford & Co. executed a deed of inspectorship, The bankers made the property deposited with them available for the purpose of covering their claims, and if the bills in question were not included in the general balance, that balance would be satisfied, but if they were included in it, the bankers would still be creditors of Radford & Co. upon the bills. Messrs. Duncan & Pox admitted their liability on the bills; but (having in the mean- time heard of the securities held by the bankers) contended that they were entitled, in calculating the amount due upon the bills, to the benefit of these securities, for that they, Duncan & Fox, being jiierely as between themselves and the bankers, sureties on the bills, they were entitled to an indemnity afforded by the securities which the principals on the bills, Radford & Co., had placed in the hands of the bankers. The appellants, after coming to a .knowledge that the bankers held securities to cover discount and balances, applied to them to realize these securities and apply the proceeds in payment of the founts due on the bills, or to render to the appellants an account of what was due from Radford & Sons, and, on payment of the same by the appellants, to transfer to them the securities for the same amount remaining in their hands. Balfoiir, Williamson, & Co., and the other unsecured creditors, claimed to have the securities paid over to the inspectors for general distribution under the deed. The bankers declined of themselves to adopt either claim, and re- quired the direction of a Court. An action was thereupon brought by Duncan & Co. in the Chan- cery Court of the County Palatine of Lancaster, to determine this question. Messrs. Balfour, Williamson, & Co., creditors of the Eiadfords, were joined as defendants representing the creditors in general. The Vice-Chaneellor (Mr. Little), on the 10th of May, 1878, decided in favor of the claim made by Duncan & Co. The decree, dated the 28th of May, 1878, declared that the appellants were sureties for the payment by the Radf ords of the balance due in respect of the bills held by the bankers, and that the equitable mort- gage of the 1st of December, 1874, extended to such bills of ex- change and to all other acceptances of the Radfords held by the bankers, whether discounted by the Radfords or for third parties, and relief was given to Duncan & Co. upon the principle that they were entitled to the benefit of the securities so deposited with the bankers. On appeal, this decree was ordered to be reversed and 552 FOX & CO. V. WALES BANK. [OHAP. IX. the action dismissed with costs. This appeal was then brought. Mr. E. E. Kay, Q. C, Mr. W. F. Robinson, Q. C, Mr. Ralph Neville, for the appellants. Mr. Benjamin, Q. C, Mr. A. G. Marten. Q. C, Mr. F. Thompson, for the respondents. The Lord Chancellor (Lord Selbome') : My Lords, the appel- lants, Duncan, Fox & Co., are liable as indorsers of three bills of ex- change dated the 25th of November. 1875. drawn upon and accepted by a firm of Samuel Radford & Sons, for the total amount of £8,920 15s. 3d., and given to Duncan, Fox & Co., in part payment for what sold by them to Samuel Radford & Sons. The other appellants, Jonathan Robinson & Co., are liable as drawers and indorsers of two other bills, also drawn upon and accepted by Samuel Radford & Sons, under dates the 19th of November and the 14th of Decem- ber, 1875, for the total amount of £5,432 7s. 6d., on account of other wheat sold to Samuel Radford & Sons. All these bills were dis- counted, in the usual course of business, with the North and South Wales Bank, without any special agreement ; and the bank has never parted with and still holds them. Samuel Radford & Sons stopped payment in January, 1876, and on the 24th of February following executed a deed of inspectorship, under which their joint and sepa- rate estates are applicable for the benefit of their creditors, parties thereto, who were represented by the respondents. Neither the ap- pellants nor the bankers are parties to that deed. The first of the five bills in question became due on the 22d of February, three others on the 28th of February, and the last on the 17th of March, 1876. They were all duly presented for payment, and dis- honored, and notice was duly given of dishonor. Some payments have been made by the acceptors on account ; and the amount now remaining due upon them is claimed by the bank, as to three from Duncan, Fox & Co., and, as to two from the other appellants. The appellants are ready and willing to meet their liabilities on these bills, but they insist that a sum of £5,921 19s. 6d. now in the hands of the bank, which has been realized from securities held by the bank under a certain memorandum of deposit, dated the 1st of December, 1874, ought to be applied to relieve them as far as it will extend, and also that the securities vet remaining unrealized under the same memorandum (valued at about 362,000) , ought to be handed over to them, on payment of the balance which, after the application of the £5,921 19s. Gd., will remain aue apon the bills. This claim is resisted by the respondents,, who. for this purpose, may be re- SEC. 1.] FOX & CO. V. WALES BANK. 553 garded as standing in the shoes of Samuel Collins Radfprd, one of the partners in the firm of Samuel Radford & Sons. The deposit consisted of the title deeds of certain real estate at Liverpool, belonging absolutely to Samuel Collins Radford. which, by the memorandum of the 1st of December, 1874. were pledged to secure to the bank (whose customers Samuel Radford & Sons were), " the balance for the time being owing to the said bank by Samuel Radford & Sons for discounts and advances, and for aii other moneys in or for which the said firm, whether. alone or jointly with any other person or persons, were or might, from time to time thereafter, be or become indebted or liable on their account, or which the said bank might at any time claim against the said firm. " At the time when the present question arose all dealings and ac- counts between the bank and Samuel Radford & Sons had been closed, and nothing remained due to the bank, under the memo- randum of deposit, except the balance then unpaid upon those bills. The property from which the sum of £5,921 19s. 6d. was realized was sold by the bank after the commencement of the action. The bank is before the Court (subject of its right to receive payment of the balance due on the bills and of its costs) merely as a stake- holder. In its answer it professes to be " Desirous of acting with entire impartiality, and holding an even hand between the plain- tiffs and the defendants, and of dealing with the securities and the proceeds thereof under the direction of the Court;" and it offers on receiving payment of what is due to it, to pay over a surplus, and to assign any property comprised in its security which may remain unsold, to such persons as the Court may consider entitled. The question, therefore, as to the proper appropriation of the £5,921 19s. 6d. and the remaining securities, is between the re- spondents, claiming in right of Samuel Collins Radford (one of the acceptors), and the appellants, the indorsers of the bills of ex- change; and it ought, I conceive, to be determined upon the same principles as if the appellants had actually paid the bills, and as if the bank had paid the proceeds of the securities either to the appellante or into Court in this action. If, in either of thos^ events, Samuel Collins Radford would have been entitled to an or- der against the appellants for repayment, or for payment out or court of such proceeds, to be applied as part of his estate under the inspectorship deed, your Lordships' judgment ought now to d.° for the respondents; if not, the appellants are right. The v ice- Chancellor of the Palatine Court of Lancaster thought that tb* appellants were right; and, with the utmost respect to the uour« 554 FOX & CO. V. WALES BANK. [OHAP. IX of Appeal (which thought otherwise), I am of the same opinion. In examining the principles and authorities applicable fo this question, it seems to me to be important to distinguish between three kinds of eases : (1) Those in which there is an agreement to constitute, for a particular .purpose, the relation of principal and surety, to which agreement the creditor thereby secured is a party, (2) Those in which there is a similar agreement between the prin- cipal and surety only, to which the creditor is a stranger; and (3) Those in which, without any such contract of suretyship, there is a primary and a secondary liability of two persons for one and the same debt, the debt being, as between the two, that of one of those persons only and not equally of both, so that the other, if he should be compelled to pay it, would be entitled to reimbursement from the person by whom (as between the two) it ought to have been paid. It is, I conceive, to the first of these classes of cases, and to that class only, that the doctrines laid down in such authorities as Owen V. Homan, 3 Mac. & G. 378, Newton v. Chorlton, 10 Hare, 646, and Pearl v. Deacon, apply in their full extent. If, so far as the creditor is concerned, there is no contract for suretyship, if the person who has (in fact) made himself answerable for another man 's debt is, towards the creditor, no surety, but a principal, then I think that the creditor would not be subject to those special obli- gations which were described by Lord Truro in Owen v. Homan, and would not, generally, have his powers of dealing with securities circumscribed and restricted in the manner described by Vice-Chan- cellor Wood in Newton v. Chorlton, and by Lord Romilly and the Lords Justices in Pearl v. Deacon. If, for example, in Pearl v. Deacon the contract of suretyship had been only between Pearl and Pearson inter se, Messrs. Deacon dealing with them both as princi- pals, and not with Pearl as surety, I should take it to be clear that Messrs. Deacon might have distrained upon goods comprised in their security for the rent due to them from Pearson, without losing (as they did in the actual case) their remedy against Pearl. The diffi- culties, therefore, which in the present case appear to have weighed most upon the minds of the judges in the Court of Appeal, would not ordinarily arise, unless there was a contract of suretyship prop- erly so-called, not between the two debtors only but between them and the creditor also. It is, however, consistent with this that the person who, as between himself and another debtor, is in fact a surety (though the creditor is no party to that contract of suretyship), has, against that other debtor, the rights of a surety; and that the creditor, SEC. 1.] POX & 00. V. WALES BANK. 555 receiving notice of his claim to those rights, will not be at liberty just claims are satisfied) to give effect to them. The judgment of, to do anything to their prejudice, or to refuse (when all his own Lord Justice Turner, in Davies v. Stainbank, 6 D. M. & G. 694, and the cases of Ex parte Hippins & Harrison, 2 Glyn & Jameson, 93, and Liquidators of Overend, Gurney & Co. v. Liquidators of Orien- tal Financial Corporation, Law Rep. 7 H. L. 348, are founded, as I understand them, on this view of the law. In such cases the equity is direct in favor oJE the surety-debtor against the principal debtor; but it aft'ects the creditor towards whom they are both principals only as a man who has notice of the obligations of one of his own debtors towards the other. As between the two debtors, the " es- tablished principles of a Court of Equity," to which Sir Samuel Romilly referred in his argument in Craythorne v. Swinburne, ju- dicially approved by Lord Eldon, are fully applicable. " Natural justice "(it waa there argued) " requires that the surety shall not have the whole thrown upon him, but the choice of the creditor not to resort to remedies in his power." In Aldrich v. Cooper, 8 Ves. 382, 389, Lord Eldon cpeaks of a surety's equity as resting upon the same principlea with that of marshalling, when one credi- tor of the came debtor h able to resort to either of two funds, and another creditor to only one. " It is not " (he says) " by force of the contract, but that equity, upon which it is considered against conscience that the holder of the securities should use them to the prejudice of the surety ; and therefore there is nothing hard in the act of the Court placing the surety exactly in the situation of the creditor." And soon afterwards (where he speaks of marshalling), " The principle, in some degree, is that it shall not depend upon the will of one creditor to disappoint another ; ' ' and, ' ' The Court has said that if a creditor has two funds, the interest of the debtor shall not be regarded, but the creditor having two funds shall take to that which, paying him, will leave another fund for another cred- itor." And in Young v. Eeynell, 9 Hare. 819, Viee-Chancellor Turner said : ' ' When Lord Eldon says it is against conscience to sue the surety, it must be considered what is the meaning of that expression, and why this Court considers it against conscience that the surety should be sued ; and I take it to be because, as between the principal and surety, the principal is under an obligation to in- demnify the surety ; and it is, I conceive, from this obligation that the right of the surety to the benefit of the securities held by the creditor is derived. The principle is not, I think, much dissimilar to that which applies where a man directs part of his estate to bo 556 FOX & CO. V. WALES BANK. [CHAP. IX. employed in carrying on a trade, in which case the creditors of the trade have a right to resort to that part of the estate, because the trustees have a right to be indemnified out of it." It appears to me that these principles of equity are not less applicable to cases of the third class, — cases in which there is, strictly speaking, no contract of suretyship, but in which there is a primary and secondary liability of two persons for one and the same debt, by virtue of which, if it is paid by the person who is not primarily liable, he has a right to reimbursement or indemnity from the other, — than to those of the second class, in which there is a contract of suretyship to which the creditor is not a party. To this third class of cases, the rights of an indorser against an acceptor of a bill of exchange may most properly be referred. The liability of the indorser to the holder is, by the law merchant, con- ditional, and (as was said by Mr. Justice BuUer, in Tindal v. Brown, 1 T. R. 170) " only secondary;" but, when the conditions required by that law are fulfilled, it becomes absolute, and is that of a principal; and the indorser 's right, if he pays the holder, to recover over against the acceptor is not founded on any agreement between him and the acceptor (who is as likely as not to be a stranger without any communication with him before the indorse- ment), but is established by the same law. But contracts of this kind, as well as suretyships proper, are entered into, by all the par- ties to them, with a knowledge and in view of the law by which they are governed. The acceptor, though he may know nothing of any particular indorser, knows that by his acceptance he does an act which will make him liable to indemnify any person who may in- dorse, and may afterwards pay the bills ; and he knowingly and in- tentionally undertakes that liability, as much as if the indorsement were the result of direct communication between himself and that person. Lord Eldon, in Ex parte Younge, 3 V. & B. 40, said with his usual accuracy (his language being as applicable to an indorser as to a drawer) : " The drawer, of a bill of exchange is not strictly a surety for the acceptor. In general eases, the acceptor is prima- rily liable upon the bill, and the drawer may be in the nature of a surety." The statement in Smith's mercantile Law (3d edition, p. 253) is also correct, and is established by many authorities, that " in the contract by bill or note, the maker or acceptor is considered the principal, and the indorsers as his sureties; and consequently, if the holder either discharge or suspend his remedy against the former, the latter, unless they have previously consented to it, or aft- erwards promised to pay with knowledge of it, are all immediately SEO. 1.] POX & CO. V. WALES BANK. 557 discharged." Mr. Smith uses, in this passage, the language of Mr. Justice Chambre in Clark v. Devlin, 3 B. & P. 366, who stated that the case of Darley v. English was decided by Lord Eldon (in the Common Pleas) on that principle. I am unable to conceive any ground on which the principle which prevails in cases of suretyship should go so far as this, in favor of the drawer or the indorser, and not also extend (when the indorser is compelled to pay the bill, and when the question arises between him and the acceptor only) to securities deposited by the acceptor with the holder. In the present case the holder has actually in his hands a large sum of money, realized by him from such securities. It is very difl&eult, on any rational principle, to distinguish the receipt of such a sum, under such circumstances, from an actual payment on account by the acceptor. Of the creditor's right, if he pleases, to apply it in payment of the bills there can be no possible question ; yet it is con- tended that he may, at his option, give the money back to the ac- ceptor, and sue the indorser on the bills ; nay, more, that if he does Gompel the indorser to pay the bills, without applying that money to them, a court of inquiry is bound to leave the burden on the in- dorser, and restore to an insolvent acceptor the money which has been so realized from the' securities. I cannot reconcile such a deci- sion with the doctrines of Lord Eldon and Lord Justice Turner. No case before the present has been cited, in which the right of a drawer or indorser to the benefit of such securities, as between him- self and the acceptor, has ever been denied or doubted. The opinion of Sir John Byles, in his very learned Treatise on Bills, is (no doubt) no authority; and I will not lay stress upon the case of Praed v. Gardiner, 2 Cox, 86, because, as was observed by Mr. Marten, what was really done in that case was to marshal securities held. by the creditor according to the equities of the different per- sons entitled to redeem them, and the exact grounds of the judg- ment do not appear. But I think that the principles deducible from all the authorities lead, necessarily, to the conclusion that, tinder circumstances like the present, the equity between the in- dorser and the acceptor is the same as that between a surety and a principal debtor when the creditor is not a party to the contract of suretyship. That equity, according to my view of it, need not interfere with the ordinary operation of such a general covering security as that given by Samuel Collins Radford to the North and South Wales Bank, during the continuance of the dealings be- tween the secured creditor and the acceptor of bills not overdue, which the creditor may hold or part with as he pleases. It will not 558 FOX & CO. V. WALES BANK. [CHAP. IX. incapacitate bankers who may hold such a bill, accepted by a customer and indorsed by a third party, from carrying on their dealings with that customer, by varying the securities received from him according to the ordinary course of those dealings, as long as he remains solvent and before the acceptance has been dishon- ored. It will not, ii\. my opinion, tend to paralyze the business of discounting bills of exchange. But it is an equity which, in my judgment, does certainly attach, when the billsj overdue and dis- honored, and the securities, are found together in the hands of the secured creditor, at the time when he requires payment from the indorser ; when the creditor has no other transactions then depend* ing with the customer, and no claim upon the securities except for the bills themselves. And when the competition is between the in- dorser and the acceptor only. For these reasons, I think that the judgment under appeal is erroneous, unless it can be supported on the ground that the security in this case was given by one only of the partners in the firm by which the bills were accepted. But it appears to me that it can make no difference whether the security was given by all the ac- ceptors or by one of them. In each case alike the person giving the security is principal debtor as between the indorser and himself; and the interest, whether of a sole debtor or of one of two or more joint debtors, is not (in my opinion) to be regarded in competition with the equity of any one who is in the nature of a surety for him, and whom he is bound to indemnify. I therefore propose to your Lordships to reverse the decree appealed from, and to restore that of the Vice-Chancellor of the County Palatine of Lancaster. The bankers will take their costs here and below out of the fund arising from the securities; and the appellants must have their costs here and below out of any surplus remaining from the securities in the first instance, and (so far as the securities may not be sufficient to pay them) from the respondent Lord Blackburn. My Lords, the North and South "Wales Bank had, amongst its customers, a firm of Samuel Radford & Sons. The bank had taken from Samuel Collins Radford, one of the partners in that firm, the title deeds of some property belonging to him with two memorandums, by which he acknowledged to have delivered the title deeds in pledge to secure to the bank whatever might be owing from the firm to the bank. I do not think it either necessary or desirable to inquire what might have been the rights of the various parties under all the com- plicated state of things which might have arisen diu-ing the wind- SEC. 1.] ' POX & 00. V. WALES BANK. 559 ing up of the transactions between the bank and Samuel Eadf ord & Sons. It is enough to consider the state of facts which has in this case actually occurred. ************* The Vice-Chancellor held that the appellants were entitled to what they claim. The Lords Justices reversed his decision, and the substantial question before the house is, whether the indorsers of the bills have such a right. rthink it is clear that they have no such right by contract. They did not at the time when they got the bills discounted at the bank- ers so much as know that the bank held any security from Samuel Radford & Sons, and of course, that being the case, made no express Btipulation about it; and there is nothing in the nature of an in- dorsement for value to give the indorser any right, during the currency of the bill, to any security which either his immediate indorsee, or any other holder of the bill, may have from any party to the bill. The indorser, by the law merchant, is liable, on hav- ing due notice of dishonor, to pay the amount of the bill to the holder for the time being, on having the bill restored to him; but till the bill is dishonored there is nothing to prevent the party who may be the holder for the time being indorsing it, even without recourse, so as to make it impossible that he can ever be the person to whom the prior indorser will have to pay the bill. I think, therefore, with the Lords Justices, that there is neither principle nor authority for saying that the indorsers are, during the currency of the bill, sureties, or in the nature of sureties to the indorsee, or that they have any equity to prevent the indorsee from dealing as it may seem to him most desirable, with any other parties unless thereby he prevents himself from giving notice of dishonor, so as to give them their remedy against prior parties to the bill ; and I agree with them in thinking that any contrary decision would be very mischievous. But though the indorsers had no such right by contract, yet after the bills were dishonored and notice of dishonor had been given to the indorsers, the position of the parties is altered. Though the indorser is primarily liable as principal on the bill, and is not strictly a surety for the acceptor, he has this in common with a surety for the acceptor, that he is entitled to the benefit of all payments made by the acceptor, and is entitled, on paying the holder, to be put in a situation to have a right to sue the acceptor. And now the state of affairs is so far cleared up, that the bank had, besides the right to come upon the indorsers, a right to come upon the security pledged to the bank by Samuel Collins Radford. 560 FOX & CO. V. WALES BANK. [CHAP. IX. I think it is established by the case of Deering v. Lord Winchel- sea, and the observations on that case by Lord Eldon in Cray- thome V. Swinburne, and Lord Redesdale in Stirling v. Forrester, 3 Bli. 575, that where a creditor has a right to come upon more than One person or fund for the payment of a; debt, there is an equity between the persons interested in the different funds that eaeh shall bear no more than its due proportion. This is quite independent of any contract between the parties thus liable. Lord Eldon, in Cray- thorne v. Swinburne, says of Deering v. Lord Winchelsea: " That 6ase also established that though one persons becomes a surety with- out the knowledge of another surety, that circumstance introduees no distinction." And Lord Kedesdale, in Stirling v. Forrester, says : ' ' The principle established in the case of Deering v. Lord Winchelsea is universal, that the right and duty of contribution is founded upon doctrines of equity, it does not depend upon contract If several persons are indebted, and one makes the payment the creditor is bound in conscience (if not by contract) to give to the party paying the debt all his remedies against the other debtors. . . . He (the creditor) is bound, seldom by contract, ' but al- ways in conscience, as far as he is able, to put the party paying the debt upon the same footing as with those who are equally bound. That was the principle of decision in Deering v. Lord Winchelsea, and in that ease there was no evidence of contract. ' ' And this last principle, that the person making payment of more than his due proportion is entitled to have assigned to him all rights and securi- ties of the creditor for the purpose of, by means thereof,' obtaining contribution, is recognized and enacted by the 19 & 20 Vict., c. 97, §5. I think that though the indorser of the bill is not exactly a surety for the acceptor, or a co-surety with those who are sureties for the acceptor, yet he stands in a position sufficiently analogous to tbat of a surety to bring him within the principle of Deering v. Lord Winchelsea. If this be correct, it seems to me that the question in the pres- ent case is reduced to this ; what are the due proportions as between the indorsers and the security created by one of the acceptors on his separate estate ? If a third person, not a member of the firm or liable for its engagements, had become surety or pledged his estate as security to the bank for the general balance due to it from the firm, it might be contended, at least plausibly, that he became only surety for the balance after all indorsers had paid, and was therefore entitled to say that, as between him and the indorser, the SEC. 1.] ! FOX & CO. V. WALES BANK. 561 indorser should pay all before the surety paid anything. I do not express any opinion how that would be. But the owner of the pledged, estate in this case was himself one of the firm and an ac- ceptor of the bill, and as such liable to the indorser. And if the bank had applied the whole of the proceeds of the security, as far as they went, to the payment of these bills, it seems quite clear that Samuel Collins Radford could not have come on the indorsers to re- pay him part of the debt which he had thus paid. The answer would have been that he was, as between him and the indorsers, bound to pay the whole. And it follows, that if the bank comes upon the indorsers first, they must have the right to be recouped out of the security, unless the bank had an option to favor which- ever set of those liable it pleased, which the reasoning of Lord Bldon seems to me to treat as manifestly inconsistent with the doc- trine of equity. I have, therefore, come to the conclusion that the decision be- low ought to be reversed. , I have not done so without some hesitation. For it is not to be denied that the result is that the indorsers of bills who happen to have discounted them with other banks are worse off than the ap- pellants, who, by what as regards them is a lucky chance, have got the benefit of this security. 1 am afraid to question the justice of a rule approved by such great lawyers as Lords Eldon and Redesdale though Lord Elldon does not seem at first to have ap- proved of Leering v. Lord Winchelsea; but if it were res Integra I am by no means sure that it would not have been better to say that every one should have the full extent of his i;ights given by contract, express or implied, and no more. But I think the un- broken current of authority from Leering v. Lord "Winchelsea, de- cided in 1787, very nearly a century since, renders it impossible now to indulge in such speculations. I agree to the order as to costs which has been proposed by the noble and learned Lord on the woolsack. The surety is entitled to subrogation even though he made his contract without knowledge that the creditor holds any securities. Dempsey v. Bush, 18 0. S. 376; Hevener v. Berry, 17 W. Va. 474; Mayhew v. Cricket, 2 Swanst. 185; Forbes v. Jackson, 19 Ch. D. 615; Lake v. Brutton, 8 De G. M. & G. 440. 562 SHBEVE V. HANKINSON. [OHAP. K. Sec. 2. CouTentional subrogation. MAEY H. SHREVE v. JOHN B. HANKINSON, ET AL. 34 N. J. Eq.,76 (1881). Bill to foreclose and cross-bill. On final hearing on pleadings and proofs. Mr. J. C. Ten Eyck, for complainant. Mr. W. A. Barrows, for Risdon Hankinson. Mr. F. Voorhees, for Abraham Vanderbeck. The Chancellor: The only litigation in this cause is that which arises out of the cross-bill filed by Risdon Hankinson to establish his claim to the security of the complainant's mortgage to the amount of $2,500 and interest, after the complainant's claim under the mortgage shall have been paid. The mortgage was originally for $13,700 and interest. It was given by John B. Hankinson and wife to John Fairbairn, March 25th, 1870, and was payable in four years. At Fairbairn's death it came into the hands of Joseph Becher, his exec- utor. There were then due upon it $11,500 of principal; besides interest. August 5th, 1876, there were paid to Becher $1,000 on account of the principal, and on the 24th of April following, $1,500 on the same account. The money for those payments was fur- nished by Risdon Hankinson, the complainant in the cross-bill, brother of the mortgagor, John B. Hankinson, at the request of the latter, and on an agreement between them (and they insist Becher so agreed also), that the former should have an interest ia the mort- gage to the amount of those advances, and interest for his security. On June 11th, 1877, Becher assigned the mortgage to Annie H. and Fannie S. Fairbairn, and they, March 25th, 1878, assigned it to the complainant. Risdon Hankinson 's claim to subrogation is eon- tested by Abraham Vanderbeck only. He is the holder of a subse- quent mortgage given to him by John B. Hankinson on the premises. It was subsequently canceled of record, but Vanderbeck, in another suit in this court, seeks to set aside the cancellation. Both the pay- ments made with the money advanced by Risdon Hankinson were made after Vanderbeck 's mortgage was given, which was Novem- ber 8th, 1875. That they were made by John B. Hankinson with money borrowed from his brother Risdon for the purpose, and lent by the latter to him on the agreement that the lender should have the benefit of the mortgage for his security for the repayment thereof, with interest, there is no room to doubt. And it seems SKC. 2.] SHREVE V. HANKINSON. 563 quite clear, also, that Becher, to whom the payments were made, was a party to the agreement. *********** It is urged, on behalf of Vanderbeck, that the rule which de- nies subrogation in case of merely partial payment is fatal to that ^laim. But that rule is not applicable to this case. Eisdon Han- kinson's claim is for conventional, not legal, subrogation. A stranger, who, by the authority and consent of the debtor, and on his agreement that he shall be subrogated to the rights of the creditor, makes payment for the debtor, will be subrogated if the payment is made with the express declaration of the subrogation in the release made by the creditor. Dixon on Subr., 164. The debtor and creditor in this case expressly agreed with Eisdon Hankinson that if he would furnish the $2,500 he should have an assignment of the mortgage pro tanto to secure the repayment of the money. It would be against equity to deny Eisdon Hankinson the benefit of that agreement. The fact that Becher did not fulfill his promise to, assign could not, of course, avail him. If he were still the holder of the mortgage, he could not successfully resist the claim. No right of the complainant claiming under assignment through him will be affected by accoi-diag it. Nor will any injustice be done to Vanderbeck in allowing it if he succeeds in re-instating his mort- gage, for the payments in question were made after he took his mortgage. There will be a decree directing that the property be sold to raise, in the first place, the amount due the complainant, with her costs; and, in the next place, the $2,500 and interest due Risdon Hankinson, with his costs. AccoKD. — Sandford v. McLean, 3 Paige, 122; Receivers v. Wortentyke, 27 N. J. Eq. 660; Brice's Appeail, 95 Penn. 145; Morrow, et al. v. United States Mortg. Co., 96 Ind. 21; Loeb v. Fleming; 15 111. App. 503, McAllister, J.: "It is well settled that a surety can neither at law nor in equity call for an assignment of the claim of tlie creditor against his principal, or be clothed, by the mere operation of law, and upon principles of equity, with rights of an assignee of such claim, unless he has paid the entire debt of the creditor. • » » xhe Courts have sometimes recognized what has been called a conventional subrogation, resulting from an express agreement with the creditor to the effect that the security held by him shall be assigned to the person paying, or kept on foot for his benefit. When the right of fiibrogation is the result of an express agreement, it is no objection that it extends only to a part of the mortgage or other security." 564 AMES V. HUSE. [ CHAP. IX. Sec. 3. Subrogation arises only when claim is paid in fnlL HENRY AMES v. WM. L. HUSE, ET AL. 55 Mo. 422 (1893). Hiram J. Grover, for appellant. Lionberger & Shepley, Walter B. Douglas and Wm. H. Scudder, for respondents. Biggs, J. The plaintiff has appealed from a final judgment on a demurrer to his petition. In the opinion of the Circuit Court,, it failed to state a cause of action. As no point is made on the form of the petition, it is unnecessary to set it out in full. A brief state- ment of the facts upon which the supposed right of action is based will suffice. In 1884 the Lindell Hotel Association executed several notes, amounting to about $20,000. Plaintiff and Charles Scudder were accommodation indorsers thereon. The notes were transferred for value before maturity to the defendant bank, and were by it pre- sented for payment at maturity, and were protested for nonpay- ment, of which the plaintiff, as indorser,,was duly notified. In the meantime the hotel association had made a general assignment for the benefit of its creditors. The assignee allowed the notes in favor of the bank for their full value, to-wit, $21,408.70. Afterwards the bank sued the plaintiff as indorser on the notes, and recovered judgment against him for the full amount, which judgment he set- tled and compromised for $1,105.40, leaving a like amount of the original debt due from the hotel association and Scudder. Several years afterward, to-wit, in October, 1891, the assignee declared a dividend out of the money of the assigned estate of twelve per cent, on the amounts of all allowed claims, and the share of the state bank, computed on the full amount allowed, was $2,578.96, which amount the plaintiff alleged the assignee was about to pay to the bank,. Upon the foregoing state of facts the plaintiff claims that, having paid fifty per cent, of the amount of the notes, he is entitled to equity to be subrogated to fifty per cent, of the dividend. The law of subrogation or substitution has no application in this case for the reason that, at the time the dividend was declared, one- half of the original debt due to the defendant bank remained un- paid. The general rule is well understood that, when a surety pays the debt of his principal, he may for his indemnity be sub- rogated into the place of the creditor as to all collaterals or funds SEC. 3.] AMES V. HUSE. held by the creditor, and applicable to the payment of the debt. But it is equally well established that this right does not exist until the whole debt is paid, upon the idea that the creditor has the right to the full benefit of all securities held by him until his debt is fully satisfied. In the ease of Matthews v. Switzler, 46 Mo. 301, the plaintiff held three notes against a third party, maturing iat successive periods, which were secured by a deed of trust on land. After the notes had all matured a sale was had under the deed of trust> and the proceeds applied to the payment of the notes last maturing, there being nothing left to apply on the first. The defendant was surety on the note first maturing, and the suit was brought against him on that note. The defense was that he was entitled to have the proceeds of the sale applied to the payment of the note first falling due. The Court held that this position was untenable, and, in de- ciding the case, said : ' ' The substantial question here is, shall the original creditor, who holds all the notes, have the full benefit of all the securities which he took for his own protection? He was not satisfied with the security of the deed of trust, and therefore required an additional name upon one of the notes. ... In the meantime he has surrendered no security, and done nothing to prejudice the right of the surety upon the note. And since his debt is not paid, he now calls upon the surety to make good the unpaid balance," etc. It was suggested in the argument, that, if Switzler, prior to the trust sale, had paid the note on which he was surety, he would then have had the right to be subrogated and to be in- demnified first out of the mortgaged property, upon the idea that he would have occupied the position of an independent holder of the note, first maturing. In answer to this suggestion it was said: "The doctrine of subrogation or substitution has no application to the case. The creditor has not been paid, and, until he is either paid or secured, the surety has no right to be substituted in his place. 4::!:^:!:H:^^*#HiH:H:*4:i:#« In Gannett v. Blodgett, 39 N. H. 150, it was decided substantially that a surety cannot, either in law or equity, call for an assignment of the claim of the creditor against his principal, or be clothed by operation of law on principles of equity with the rights of an assignee of such claim, unless he has paid the entire claim of the creditor; that a pro tanto assignment by way of substitution or subrogation is not known or allowed. 'In Magee v. Leggett, 48 Miss. 139, it was decided that a surety who pays the judgment debt of his principal, or who pays part of it 33 566 COPK V. MIDDLETON. [CHAP, IZ, and the principal the balance, will be subrogated to all the bene- fits which the creditor had by means of the judgment against the principal. But the Court said that the rule was otherwise, "if the surety has made only part payment and any balance remains un- paid, because, in that case, the surety has not entirely divested the rights of the creditor. ' ' We can find no authority declaring a contrary doctrine, nor can we conceive how any such could exist and be applicable to the facts stated in the petition. «i|c4:sii4:iii*]|:**«* For the reasons stated we are of the opinion that the ruling of the Circuit Court on the demurrer was proper, and its judgment is, therefore, afSrmed. All the judges concur. Accord. — Musgrave v. Dickson, 172 Pa. 629; Commonwealth v. Ches. t Ohio Canal Co., 32 Md. 501; Brough's Est. 71 Pa. 460; Barton v. Brent, 87 Va. 385; Covey v. NefF, 63 Ind. 391; Vert v. Voss, 74 Ind. 566; Bartholmew V. First Nat. Bank, 57 Kan. 594; Conwell v. McCowan, 53 111. 363; Coe v. N. J. Midland By. Co., 31 N. J. Eq. 106; Rice v. Downing, 12 B. Mon. (Ky.) 44; City of Keokuk v. Love, 31 Iowa, 119; Schoonover v. AUen, 40 Ark. 132; Bank v. Benedict, 15 Conn. 437. Sec. 4. Exting^shment of the principal debt-effect of payment by the surety. COPIS V. MIDDLETON. Turner & Eussell, 224 (1823). This suit was instituted by creditors for the administration of the estate of John Knott, who died on the 28th of December, 1792, and by the decree made upon the hearing of the cause, dated the 25th of November, 1796, it was referred to the Master to take an account of the debts of the said John Knott, and it was ordered,, that the Master should inquire and state to the court, whether the defendant Newman Knott had paid any and what debts of the said John Knott, as surety for him, or any and what money in respect of any such debts, and whether the said Newman Knott received, any and what consideration, satisfaction or indemnity in respect of any or either of the said debts, and to what extent, together with the nature of such security, satisfaction or indemnity. The MasttT by his report, dated the 20th of May, 1815, certi- fied that the specialty debts of the said John Knott amounted to £16,085, and he further certified, that it appeared by the evidence BEC. 4.] COPIS V. MIDDLETON. 567 brought before him, that the said Newman Knott became surety for the said John Knott to a considerable amount, and paid various sums of money on account of such suretyship, and that he did not find that the said Newman Knott received any consideration, satis- faction or indemnity in respect of any of such debts. In the sched- ule to his report, the Master included the representatives of the said Newman Knott, and one John Martin, as specialty creditors of the said John Knott, in respect of sums paid by the said Newman Knott and John Martin respectively, in discharge of the principal and in- terest of certain bonds entered into by them as sureties for the said John Knott, and he allowed interest upon such principal sums. The bonds in which Newman Knott was surety, were dated re- spectively the 8th of August, 1781, and the 10th of January, 1792, and were joint bonds, executed by him and the said John Knott, to Richard , Fogden and Thomas Turgis respectively, and were con- ditioned for securing the respective sums of £800 and £300. The principal and interest remaining due upon these bonds was paid by Newman Knott after the death ^of John Knott. The bond in which John Martin was surety, was dated the 8th of October, 1791, and was also a joint bond, executed by him and the said John Knott to John Boniface, aid conditioned for securing the sum of £250. The principal and interest due upon this bond was paid by Martin in the lifetime of John Knott, and the bond was assigned to Martin. These facts were brought before the court by two exceptions taken by the plaintiffs to the Master's report, by which it was ■insisted that the Master, under the circumstances, ought not to have considered as specialty debts the sums paid by the said New- man Knott and John Martin in respect of the specialty debts of the said John Knott, but ought to have considered such sums as simple contract debts only, and ought not to have allowed interest thereon, i;iasmuch as the said Newman Knott and John Martin, in making such payments, did, as the plaintiffs submitted, virtually cancel the bonds and specialties, and put themselves in the situation of simple contract creditors of the said John Knott. . The cause now came on upon the exceptions. Mr. Martin, Mr. Wingfield and Mr. Pepys, in support of the ex- ceptions: Where a bond is executed by principal and surety, it is quite clear that the surety paying off the debt becomes at law a simple contract creditor of the principal. His remedy against the principal is by an indebitatus assumpsit, or an action on the case, and he cannot declare upon the bond. Upon what principle then can the surety be converted into a specialty creditor in equity, 568 COPIS V. MIDDLETON. [ CHAP. IX. where there is no contract between the parties that he shall be so considered. The utmost remedy which courts of equity have af- forded to sureties has been, to give them the benefit of all the con- tinuing securities entered into by the principal for the payment of the debt, but when a bond is paid off, all remedy upon it is at an end; the surety cannot even compel an assignment of the bond Mr. Shadwell, in support of the Master's report: The Lord Chancellor : The facts of this case are simply thescj two individuals gave a bond, the one as principal, and the other as surety; no other assurance was executed at the time, no mort- gage was made to secure the debt, no counter-bond was given by the principal to the surety; and the question to be decided is, whether the surety, having paid the bond after it was due, is a sim- ple contract, or a specialty creditor. I understand it to have been the opinion of the Master, an opinion founded on one or two cases which have been stated, that the surety was to be considered as a specialty creditor to stand in the place of the person whom he paid ; that doctrine appears to me to be contrary to all that has been set- tled during the whole tiine I have been in this court ; everything that was arranged in bankruptcy before the late statute enabling the surety to prove, everything determined before appears to me to have authorized the court to consider it quite clear, that if there was nothing in the case beyond what I have stated, the surety, hav- ing paid the bond, could be nothing more than a simple contract creditor in respect of that payment ; the bond was not assigned to anybody in consideration of a sum of money paid, which was one way we used to manage these things ; there was no counter-bomt given, which was another way in which we used to manage these things, so that if the surety paid one bond he became instantly a specialty creditor by virtue of the other bond. If any suit was now instituted; I apprehend the payment of the bond would show that the bond was gone. There has been a case cited where, upon the general ground that a surety is entitled to the benefit of all se- curities which the creditor has against the principal, it seems to have been thought that the surety was entitled to be as it were a bond creditor by virtue of the bond; I take it to be exceedingly clear if, at the time a bond is given, a mortgage is also made for securing the debt, the surety, if he pays the bond, has a right to stand in the place of the mortgagee, and as the mortgagor cannot get back his estate again without a conveyance, that security re- mains a valid and effectual security, notwithstanding the bond debt is paid ; but if there is nothing but the bond, my notion is, SEC. 4.] HODGSON V. SHAW. ^69 that as the law says that bond is discharged by the payment of what was due upon it, the bond is gone, and cannot be set up. That is the opinion which I have formed of this case. Exceptions allowed. Accord.— Lilies v. Rogers, 113 N. C. 197; Pierson v. Catlin, 18 Vt. 77; Faires v. Cbckerall, 88 Tex. 428; Jones v. Davids, 4 Kuss. Ch. 277. HODGSON V. SIIAW. 3 Myl. & K. 183 (1834). On the 14th of February, 1812, a joint and several bond to se- cure a sum of £2,220 and interest, with a penalty of double the amount, was executed by Richard Shaw and Henry Shaw as prin- cipals to one Wilkinson. On the 17th of March, 1813, Wilkinson died, and the death of Richard Shaw took place in the month of August following. In January, 1816, a sum of £2,523 was due to the estate of Wilkinson for principal and interest upon the bond; and applications having been then made by Wilkinson's executors for payment of that sum, Henry Shaw prevailed upon John Whaley to join with him in excuting to the executors, on the 22d of the same month, another bond for the sum of £2,420, being part of the said sum of £2,523, due on the bond of February, 1812, and in which new bond Henry Shaw was the principal debtor, and John Whaley a surety. Whaley died in July, 1818, having pre- viously made some payments on account of the bond of January, 1816, to the executors of Wilkinson; and, after his decease, other payments were, from time to time, made by his representatives out of his estate, in further discharge of what was due in respect of that bond ; and in consideration of those payments, which amounted in the whole to the sum of £2,937, the executors of Wilkinson, by an indenture dated the 24th of June, 1830, reciting, that they had received from Whaley and his estate the sum of £2,937, in part dis- charge of the moneys due on the bond of January, 1816, and that no payment had ever been made by Richard Shaw and Henry Shaw, or either of them, on account of the bond of February, 1812, and that the same was still subsisting, and an available security at law for the full amount of principal and interest expressed to be thereby secured ; and further reciting, that the parties thereto were advised that the estate of Whaley was entitled to the benefit of the bond of February, 1812, for recovering the sum of £2,937, so 570 ' HODGSON V. SHAW, [ CHAP. IX. paid by or by the estate of Whaley, as such surety for Richard Shaw and. Henry Shaw as aforesaid, but subject, in the first place, to the right of the said executors to recover, by means thereof, so much money as was the difference between the said sum of £2,937 and the full amount of principal and interest secured by the bond of February, 1812, and that it had been therefore agreed that the said executors should assign the last-mentioned bond in manner and for the purposes thereinafter expressed; they, the said ex- ecutors, did thereby assign and transfer unto John Harrison, his executors, administrators and assigns, the said bond of February, 1812, and all the sums of money thereby secured, upon trust, in the first place, to pay to them two sums of £94 10s. and £325 10s. with interest and costs as therein mentioned; and upon further trust to pay to Whaley 's widow a sum which she had advanced to the said executors out of her. own moneys, as therein mentioned; and as to the residue or surplus thereof, upon trust for the per- sonal representatives of Whaley, for their own use and benefit. Under the decree, which was made in a creditor's suit for the administration of the estate of Richard Shaw, the Master found the facts before mentioned with respect to these two bonds ; and the report having been confirmed, one of the questions discussed at the Rolls upon furthet direction was, whether the personal repre- sentatives of John Whaley were entitled, by virtue of the assign- ment which had been made of Wilkinson's bond to a trustee, for them to rank as specialty creditors against Richard Shaw's estate, to the amount of the sums found due to their testator's estate, in respect of payments made on account of the bond of January, 1816, in which he had been surety for Henry Shaw. The Master of the Rolls, having decided (among other things) that the personal representatives of John Whaley were not en- titled to rank as specialty creditors against the estate of Richard Shaw , for any of such sums, a petition of appeal was presented against his decision. The Solicitor-General (Sir C. Pepys), Mr. Spence and Mr. J. Russell, in support of the appeal. Sir W. Home and Mr. Drackworth, contra. The Lord Chancellor, after stating the circumstances out of which the question arose, gave judgment as follows: The prin- ciples upon which Copis v. Middleton rests are sound and unques- tionable ; and it is only upon a narrow and superficial view of the subject, that the decision has ever been charged with refinement or subtlety. The ground of the determination was clear; it was SEC. 4.] HODGSON V. SHAW. 571 founded in the known rules of law, and determined in strict con- formity with the doctrines of this court. The only case in the books really inconsistent with it was Parsons V. Briddock, 2 Vern. ^08, where Lord Cowper decreed, that a judg- ment which had been entered up against the bail should be as- signed to the sureties of the bail, to reimburse them what they had paid on account of their obligation ; and this case is recognized, but to a certain extent only, by Sir William Grant in Wright v. Morley, 11 Ves. 12. The other cases were either wide of the point, or not finally determined. Thus Gaynor v. Royner, before Sir T. Sewell, though considered by Sir Thomas Plumer, in Robinson v. Wilson, 2 Mad. 434, as ruling that a surety paying off a specialty debt is a specialty creditor of the principal, decides no such point; for that was the case of an assignment decreed to be made of a mortgage, which had been given by the principal debtor as a collateral se- curity for a portion of the debt, and which plainly continued, and was a subsisting security after payment of the bond. Then Hotham V. Stone, 1 T. & Russ. 226, note, decided at the Rolls in 1810, and not reported, was appealed, and apparently never finally deter- mined ; and Sir Thomas Plumer desired Robinson v. Wilson to stand over until the result of the appeal should be known.. Although, therefore, the way could not be said to have been prepared for Copis V. Middleton by any former decision, there was no body of authority against it, and the prinpiples on which it was decided appear to be clear. When a person pays off a bond in which he is either co-obligor or bound subsidiarily, he has at law an action against the principal for money paid to his use, and he can have nothing more. The joint obligation towards the creditor is held to give to the principal notice of the payment, and also to prove his consent or authority to the making that payment. This is necessary for enabling any man who pays another's debt to come against that other, because a person cannot make himself the creditor of another by volunteer- ing to discharge his obligations. But beyond this claim, which is on' simple contract merely, there exists none against the principal by the surety who pays his debt ; nor, when the matter is closely viewed, ought there to exist any other. The obligation by specialty is incurred not towards the surety, even in the event of his paying, but only towards the obligee; and there is no natural reason why, because I bind myself under seal to pay another person's debt, the Creditor requiring a security of that high nature, I should therefore have as high a security against the principal debtor. 5'^2 HODGSON V. SHAW. [ CHAP. IX. If I had chosen to demand it, I might have taken a similar obliga- tion when 1 became so bound ; and if I omitted to do so, I can only be considered as possessing the rights which arise from having paid money for him which I had voluntarily, and without consid- eration, undertaken to pay. The case standing thus at law, do considerations of equity make any alteration in its aspect? The rule here is undoubted, and it is one founded on the plainest principles of natural reason and justice, that the surety paying off a debt shall stand in the place of the creditor, and have all the rights which he has, for the pur- pose of obtaining his reimbursetaent. It is hardly possible to put this right of substitution too high, and the right results more from equity than from contract or quasi contract; unless in so far as the known equity may be supposed to be imported into any trans- action, and so to raise a contract by implication. The doctrine of the court in this respect was luminously expounded in the argu- ment of Sir Samuel Romilly in Craythorne v. Swinburne, 14 Ves. 160 ; and_ Lord Eldon, in giving judgment in that case, sanctioned the exposition by his full approval. "A surety," to use the lan- guage of Sir S. Romilly 's reply, "will be entitled to every remedy which the creditor has against the principal debtor, to enforce every security and all means of payment; to stand in the place of the creditor, not only through the medium of contract, but even by means of securities entered into without the knowledge of the surety; having a right to have those securities transferred to him, though there was no stipulation for that; and to avail himself of all those securities against the debtor." I have purposely taken this statement of the right, because it is there placed as high as it ever can be placed, and yet is quite consistent with the principle of Copis V. Middleton. Thus the surety paying is entitled to every remedy which the creditor has. But can the creditor be said to have any specialty, or any remedy on any specialty, after the bond is gone by pay- ment? The surety may enforce any security against the debtor which the creditor has ; but, by the supposition, there is no security to enforce, for the payment has extinguished it. He has a right to have all the securities transferred to him ; but there are, in the case supposed, none to transfer; they are absolutely gone. He may avail himself of all those securities against the debtor, but his own act of payment has left none of which he can take advantage. Liv- ing the principal debtor, the surety could only bring indebitatus assumpsit for the money he had paid to that principal 's use. The SEC. 4.] HODGSON V. SHAW. 573 death of that debtor cannot clothe him with a higher title. Liv- ing the debtor, the creditor could not have assigned the bond on payment by the surety; for there was no longer anything to as- sign. The death of the debtor cannot surely operate a receiver of the specialty, enable the creditor to assign it, or the court to hold it assigned in equity, and empower the surety to sue upon it the executors or administrators of him who, had he chanced to survive, never could have been sued, except upon the money counts in an action of assumpsit. Observe the consequence that would have followed from any other principles, while the law of debtor and creditor continued as it was till the recent alteration, and when landed estates were not real assets for payment of simple contract debts. If the principal debtor continued alive, the surety could not in any way touch his real estates, except through the medium of a judgment; but if he happened to die, his real estates became assets, although the law had never been changed. There can be no doubt, therefore, with respect to the principle of Copis v. Middleton; and Lord Eldon expressed himself without any hesitation in that case, though pressed with the authority of Sir William Grant in Hotham v. Stone, upon which he remarked that the czzs had been appealed and compromised without coming to an argument. But it is most material to the question now before the court, to mark and keep distinctly in mind the grounds of the decision in Copis V. Middleton ; and it is for this reason that I have deemed it necessary to state them so particularly ; for they are such as do not exist at all in the case at present under consideration. Suppose that the debt in Copis v. Middleton had been paid, not by the surety bond in the same obligation with the principal, but by a third party, who had by a separate instrument made himself Uable for the same debt; it is clear that the reason upon which the decision rested, would have failed altogether, while every one of the general arguments drawn, from the rights of a surety to stand in the shoes of the creditor, would have risen upon against the deci- sion with a force not to be resisted. Now, that is the present case. John Whaley became bound in the year 1816, with Henry, Shaw, as the surety of Richard Shaw, the principal debtor. In the obliga- tion entered into in that year, he became bound by an instrument executed separately from the original bond ; and he and his repre- sentatives subsequently paid off the debt which he had then in- curred, and paid it off in discharge of his own obligation. The debt on the original bond being thus satisfied as far as the creditor 574 HODGSON V. SHAW. [ CHAP. IX. was concerned by the second bond being paid off, the original bond of 1812 was assigned in trust for the estate of John "Whaley, which had thus discharged the debt. It cannot in this case be contended that the specialty was gone, that the bond of 1812 was paid off and at an end, and that in the year 1830, there remained nothing to be assigned. The bond of 1812 subsisted to the effect of being assignable ; the bond of 1816, indeed was paid by John Whaiey, and could not be assigned to him or his representatives, so as to give him a claim as a specialty creditor against Henry Shaw's estate. As against that estate, Whaiey could only claim on the indebitatus assumpsit at law, and in equity, he could only stand as a simple contract creditor ; for there was no longer anything capable of assignment ; the security was gone by being paid off, but the security of 1812, in which the transaction had its origin, remained; the payment, which of ne- cessity, must be attributed to the bond in which John Whaiey was an obligor; could not extinguish that to which he was a stranger; there was something consequently to assign, and an assignment was in fact executed. Cop is v. Middleton was the case of John Whaiey or his representatives claiming as specialty creditors against Henry Shaw or his estate; and according to the rule in that case, they would have claimed in vain. Copis v. Middleton was not the case of John Whaiey, or his estate paying his separate bond, and tak- ing an assignment of a formerly executed, and still subsisting se- curity, viz., the bond of 1812, and no one of the reasons which de- cided that is applicable to this case. Thus, to try how far these reasons apply, a surety. has a right to all the securities in force against the principal debtor. John Whaiey or his representatives, therefore, have a right to the bene- fit of the bbnd given by Eiehard Shaw, because that is still in force. In Copis V. Middleton, the court admitted the surety's right, as against the principal debtor, to stand in the shoes of the creditor, but said there were no shoes for him to stand in, because the bond, having been paid off by a party to it, was gone at law. Here there are such shoes; the bond of 1812 is not paid off, and it has been formally assigned by the creditor to John Whaiey 's representa- tives. ^:i!^^it! ********. ***** In deciding Copis v. Middleton, Lord Eldon expressly admitted, that where a mortgage has been given in further security for the same debt, the surety who paid off the specialty was entitled to an assignment of the mortgage ; and so if there was but one specialty, viz. : the mortgage, because there the payment did not, as in the SEC. 4.] HODGSON V. SHAW. 575 case of a bond, extinguish the security without a reconveyance, and there was something to assign or transfer. It is impossible, in principle, to distinguish the case so put from the present; the ground of debt is the same in the mortgage and the bond, as it is the same here in the bond of 1812, and the bond of 1816. Paying off the mortgage debt would have effectually excluded the mortgagee from any recourse against the estate in equity; and so would pay- ing the bond of 1816 have prevented in equity, the obligee from su- ing on the bond of 1812, and might possibly have called from the court of common law in which any such action was brought, an order to stay proceeding on it. Yet the original security subsisted, as the mortgage subsisted, notwithstanding the discharge of the second security, and the inability of the creditor to avail himself of it in an equitable point of view, so as to have double satisfac- tion of his debt. It subsisted, as the mortgage did, only to the ef- fect of clothing the surety with that creditor's rights against the principal debtor. Upon the whole, I am clearly of opinion that this decree cannot stand, and it must, therefore, be reversed as far as regards the rights of Whaley's representatives. The Mercantile Law Amendment Statutes 19 and 20, Vic. c. 97 s. 5, has now superseded the common-law rule in England. The statute reads as follows: " Every person . who, being surety for the debt or duty of another, or being liable with another for any debt or duty, shall pay such debt or perform Buch duty, shall be entitled to have assigned to him, or to a trustee for him, every judgment, specialty, or other security which shall be held by the creditor in respect of such debt or duty, whether such judgment, specialty, or other security shall or shall not be deemed at law to, have been satisfied by the payment of the debt, or performance of the duty, and such person shall be entitled to stand in the place of the creditor and to use all the remedies, and, if need be, and upon a proper indemnity, to use the name of the creditor, in any action, or other proceeding, at law or in equity, in order to obtain from the principal debtor, or any co-surety, co-contractor, or co- debtor, as the case may be, indemnification for the advances made and loss sustained, by the person who shall have so paid such debt or performed such duty, and such payment or performance so made by such surety shall not be pleadable in bar of any such action or other proceeding by him: Provided always, that no co-surety, co-contractor, or co-debtor shall be entitled to recover from any other co-surety, co-contactor, or co-debtor, by the means aforesaid, more than the just proportion to which, as between those parties themselves, such last-mentioned person shall be justly liable." 576 LUMPKIN V. MILLS. [ CHAP. IX. JOHN H. LUMPKIN, ADM., v. AMBROSE MILLS. 4 Ga. 343 (1848). Shackelford & Hooper, for plaintiff in error. Wm. H. Underwood & Trippe, for defendant. By the Court. Nisbet, J., delivering the opinion. This was a Bill filed by the plaintiff in error, as Administrator, to marshal the assets of his intestate. The defendant in his an- swer, set forth that as surety for the plaintiff's intestate upon a note of hand under seal, he had paid the debt of his principal, and therefore claim,ed in equity, to be subrogated to the rights of the creditor, and to come in, in the marshalling of the assets, as a bond creditor. The plaintiff in error claims that he is only an open account creditor. The question, therefore, and the only ques- tion made upon this record, is this : Can a surety, in Equity, upon the settlement of an insolvent estate, who has paid a debt of his principal due upon an instrument under seal, be subrogated to the rights and substituted to the position of the creditor, so as to come in as a creditor under that instrument, or is he entitled only as a creditor by open account? (1) It is conceded in the outset, that the authorities upon this subject do not run a uniform course. The early English cases are with the defendant, and recognize the right of subrogation. Cases of the very highest authority in Great Britain, decided since our revolution, settle the rule differently, and deny his right to be paid, otherwise, than as a creditor by open account. The Ameri- can authorities are also in conflict, but we think their preponder- ance is in favor of the early British rule. The Civil Law also sus- tains that rule, and so do the authorities in those countries where the Civil Law is recognized. We think, upon principle, the rule of the British Courts, anterior to our revolution, right. If it was not, it is obligatory upon us as law. The Civil Law is the parent of that rule — as it is, in truth, of many, very many of the prin- ciples of Equity, which obtain in the English Chancery Courts. That code is not of binding authority upon us, but I recognise in it, in reference to many titles of the law, and among them that of principal and surety, the very best systSm extant. Its broader, and more reasonable, and less fettered equity, is gradually being transferred into the American Jurisprudence. And where authori- ties are in eonfliet and principles doubtful, a court does well to allow the Roman Law to quiet the conflict and dispel the doubt. SEC. 4.] l,UMPKIN V. MILLS. 57^ We have no difficulty, either upon authority or principle, in settling, as the rule of this court, that a surety, who has paid the debt of his principal, is, in a Court of Equity, entitled, in all respects, to occupy, in the distribution of his estate, the place of the creditor. It is a well settled doctrine of the Common Law, that a surety -upon payment of the debt of his principal, is entitled to an assign- ment of all the independent securities in the hands of the creditor, with all the remedies which he had to enforce them against the principal. The Roman Law goes farther. By that law, not only is he entitled to these securities, but he is also entitled to be sub- stituted as to the very debt itself, to the creditor, by way of ces- sion or assignment. The debt in favor of the surety is treated, not as a paid, extinguished debt, biit as sold to him — all its original obligatory force continuing against the principal. The surety is viewed in the light of a purchaser. ********* The courts of Great Britain, in some of the earlier cases, en- larged the rule that I stated was settled — to-wit : that a surety is entitled to the independent collateral securities, with all the cred- itor's remedies to enforce them against the principal; and held that the surety should be also entitled to an assignment of the very debt itself; thus going the full length of the Civil Law, and subrogating him fully to the rights of the creditor. The rule thus enlarged, we recognise as the Common Law rule, at the time we adopted it. In Ex parte Crisp, Lord Hardwick said, that where a surety paid off a debt, he was entitled to have from the creditor, an assignment of the security, to enable him to obtain satisfaction for what he had paid beyond his proportion. 1 Atkins, 133. In Morgan v. Seymour, the court decreed that the creditor should as- sign over his bond to the two sureties, to ena,ble them to help them- selves against the principal debtor. 1 Ch. E. 64. The principle was applied in a very strong case in Vernon. The principal had given bail in an action, and judgment was recovered against the bail. Afterwards the surety to the original debt was called upon and paid it, and it was held that he was entitled to an assignment of the judgment against the bail. So that, although the bail was but a surety, as between him and the principal debtor, yet coming in the room of the principal, as to the creditor, it was held that he likewise came in the room of the principal debtor, as to the surety. This ease establishes that the surety has precisely the same rights that the creditor had, and shall stand in his place — a case of entire subroga- tion. Parsons v. Briddock, 2 Vernon, 608. These three cases are anterior to the era of the revolution, and demonstrate how the law 578 LUMPKIN V. MILLS. [ CHAP. IX. stood at that time ; and considering that we are not at liberty to depart from the Common Law, as it then stood, and that up to that time the rule was not seriously questioned, we might stop the re- view here. It may, however, be more satisfactory to press the dis- cussion through the course of this question, down to the present moment, and to look into the reasonableness of the modern Eng- lish rule. Other cases siiice that era, recognize the doctrine as held in the three cases referred to. It is nevertheless true, as Mr. Story states, that the rule is now different in England. Without following the authorities minutely through, it may be stated that the late rule, which denies the right of the surety to a cession of the debt itself, and to a perfect sub- stitution for the creditor^ rests chiefly upon two comparatively re- cent cases, determined by two of the ablest Chancellors of Eng- land. I allude to the case of Copis v. Middleton, 1 Turner & Russ. 224, determined by Lord Eldon, and Hodgson v. Shaw, 3 Mylne & Keene, 183, determined by Lord Brougham. These are names of pre-eminent authority, and their weight settles all controversy about the matter at this moment in England. It is not a little remarkable, that names of authority equally conclusive, on this side of the water, are arrayed against these potent chiefs of the English Chancery, to-wit: Marshall and Kent. Neither Lord Eldon nor Lord Brougham questions the rule, that a surety is entitled to an assignment of the collateral securities. The former said, "It is a general rule in Equity, that the surety is entitled to the benefit of all the securities which the creditor has against the principal. But then the nature of those securities must be considered. When there is a bond merely, if an action was brought upon the bond, it would appear upon oyer of the bond, that the debt was extinguished.' The general rule must be' qualified, therefore, by considering it to apply to such securities as continue to exist and do not get back upon payment to the person of the principal debter." Lord Brougham says: " Thus the surety paying is entitled to every remedy which the creditor has. But can the creditor be said to have any specialty, or any remedy on any specialty, after the bond is gone by payment? The surety may enforce any security which the creditor has, but by the supposition, there is no security to enforce, for the payment has extinguished it. " The whole of this reasoning is founded Upon the technical idea, that payment by the surety, is an extinguishment of the debt; and being so extin- guished, if the evidence of it were assigned to the surety, it will avail him nothing. It may be true, that in a suit on the bond in SEC. 4.] LUMPKIN V. MILLS. 579 the case at this bar, by the surety, he might be met and defeated by a plea of payment. Be it sO. We are not in a Court of Law. And really, it would seem that the reasoning of these great Chan- cellors would rather fall appropriately from the lips of Lord Ken- yon or Mansfield in a Court of Law, than from theirs in a Court of Equity. For it will be seen, that the rights of the surety in this matter, depend upon no such subtle technicality, but upon an equity, which springs out of the fact of payment, and out of his relation to the principal debtor. It may be well questioned whether upon principles of common sense and common equity, the payment by a surety out of his own funds, of the debt of another, in the consideration of which he was not at all interested, ought to be coiisidered, as to the surety, an extinguishment. Upon a question as to the right of subrogation, a Chancellor ought' not so to hold it. These eases go upon the fact, that the debt is in law extinguished. The Civil Law, addressing itself to the equity of the transaction, will not admit that it is extinguished, but bought by the surety. A purchaser of a negotiable security for value, would, upon the in- strument, acquire the rights of the original creditor. How can he occupy a position in a Court of Equity, more favorable than a surety! The equities are stronger in favor of the surety. Whilst upon this phase of the argument, it may be well to say, that it is quite immaterial whether there is in point of fact an assignment of the debt or not; for if upon equitable principles the surety is en- titled to it, Chancery will consider that as done, which ought to have been done. 12 Wheat. 596. And if necessary, would decree an assignment to be made. Equity will not permit the creditor to prejudice the rights of the surety, by a refusal to make an assign- ment. Upon what principle is it that the surety is entitled to the collateral securities in the hands of the creditor ? It is not by virtue of a contract between him and the principal, The only contract between them, is the implied contract which results from- the relation of principal and surety. And that is, that if the surety is compelled to pay the debt, the principal will reimburse him. It is upon this implied contract that the surety is entitled to his action for money paid to the use of his principal. This contract does not give him the right to the collateral securities. How then do Lords Eldon and Brougham arrive at the right of the surety to the col- lateral securities! It is by invoking the equity which flows neces- sarily out of the payraent and relationship of the parties. Hear what Lord Brougham says : ' ' The rule here is undoubted, and it is 580 LUMPKIN V. MILLS. [CHAP. ES. founded upon the plainest principles of natural reason and justice, that a surety paying off a debt, shall stand in the place of the creditor, and have all the rights which he has, for the purpose of obtaining reimbursement. It is hardly possible to put this right of substitution too high, and the right results more from equity, than contract or quasi contract, unless, in so far as the known equity may be supposed to be imputed into a transaction, and so to raise a contract by implication." Now, what I have to say in ref- erence to this reason, is this — it applies with equal force in favor the surety's right to a transfer of the debt itself, as in favor of •his right to a transfer of the collateral securities. He is entitled to the latter, not by contract, but according to principles of natural reason and justice. By these principles, he is made to stand in the place of the creditor. And so standing, the right to the collateral securities follows. Here is the doctrine of substitution recognized, and the powers of a Court of Chancery are invoked to give it effect. The doctrine once admitted, and it seems to me impossible to escape from the conclusion, that whatever are the rights of the creditor, anterior to the payment, and subsisting at the time, they devolve upon the surety. The principles of natural reason and justice pass them to him. And one of these rights, in the case before us, is to be let in, in the distribution of the estate of the debtor, as a specialty creditor, if the debt had not been paid by the surety. He paying it, is subrogated to that right. He is clearly as much subrogated to that right as he can be to the right of enforcing a mortgage or any other collateral security. I can not, I do not recognize the conclusiveness of the reason, that the bond is paid, and therefore, as to that, the substitution cannot take place. The substitution of the surety is not for the creditor as he stands related to the principal after the payment, but as he stood related to him before the payment. He is subrogated to such rights as the creditor then had against the principal. One of which unquestionably was, to enforce his bond against the principal, and if he was insolvent, to be let in as a bond creditor. What dif- ference is there between permitting a surety to reimburse himself out of a mortgage lien held by the creditor, and permitting him to take out of the estate generally of the principal, the amount he has paid? If he realizes upon the mortgage, he abstracts the amount which he has paid from the estate of the principal — if he realizes on the bond, the mortgaged property goes back into the common fund, and the result to him and to other creditors is the same. The very fact, that the surety could not enforce the bond at SEC. 4.] LUMPKIN V. MILLS. 581' law, is a reason, in Equity, why he should be allowed to come into the distribution as a bond creditor. ********* In the New York Chancery, it may be assumed as an incontro- vertible fact, that the rule of the Civil Law prevails. There a, surety who has paid the debt is Qonsidered as a purchaser of the se- curity upon which it is founded. Chancellor Kent, in Chees- borough V. Millard, says, "if a creditor to a bond exacts his whole demand of one of the sureties, that surety is entitled to be substir tuted in his place, and to a cession of his rights and securities, as if he was a purchaser, either against the principal debtor or the co-sureties." 1 Johns. Ch. R. 413. Now this dictum asserts more than l^at the surety is entitled to a cession of the collateral se- curities and to the rights of the creditor thereon — it declares the principle of the Civil Law, that he is to be considered as a pur- chaser from the creditor of the debt. It therefore denies the po- Bition of Lord Eldon, that the payment by the surety is an en- tinguishment of the debt, and of course all the conclusions drawn We are the better satisfied with our judgment in this case, for the reason that the substitution does injustice to no one. The creditor, of course, has nothing to do with it — he is satisfied, and if the representatives of the principal, if he be dead, or if the principal debtor himself, being in life, can be presumed to, be un- affected by the paramount equity of his sureties' claim, he and they must be presumed to be indifferent, whether it is allowed to him, or is reserved for creditors of a lower grade. Let the amount of the claim go either way, no injustice can be done to him. In any event, it goes in payment of his debts. If any body is entitled to complain, it is the creditor, who, holding a lower grade of claim, is excluded by the substitution of the surety. But, really, no in- justice is done to him. The surety, by paying the debt to the creditor, abstracts from the assets of the principal debtor, just that sunount which the creditor himself would have abstracted, if he had not ,paid it. The surety could compel the creditor indeed to go upon that fund before resorting to him. Story's Com., Vol. 1, 592 ; 1 Vem, 1, 89; 6 Vesey, 734; 2 John. Cr. r. 561, 562. So the creditor, by claim ot\owQv grade, is in no worse condition than he would be if the security had not paid the debt. jOur judgment, too, derives support from the obvious policy of all our own legislation, relative to the substitution of sureties. That policy is to place the surety in the place of the creditor. Witness the several Acts pf the Legislature giving to sureties the control of 34 582 HIDL V. KING. [chap. IX. executions against their principals, when paid by them. Coiuiael for the plaintiff in error have sought to draw from these Acts the contrary inference. The right of substitution being given by express Act of the Legislature, the inference, say they, is, that in the judgment of the Legislature,, it did not before exist. But we think the legislation of Georgia upon this subject, is in affirm- ance of the right as it existed upon general equitable principles before, and is only intended to cumulate and simplify the remedy by which it is enforced. ' Let the judgment of the Court below be affirmed. Accord. — ^Lidderdale v. Eobinson, 12 Wheat. 593; Orem v. Wriglitson, SI Md. 34; Crisfield v. State, 55 Md. 192; Powell v. White, 11 Leigh. 309; Smith V. Eumsey, 33 Mich. 183. Sec. 5. Judgment against the principal not eztingnished by pay- ment by the surety. HILL V. KING, EXR. 48 O. S. 75 (1891). Powell, Owen, Eicketts & Black, with H. T. Van Fleet, for plain- tiff in error. McNeal & Wolford, for defendants in error. MiNSHALL, C. J. Robert Hill, the plaintiff in error, was, with others, a surety upon certain bonds given by B. F. Stahl as ad- ministrator of the estate of Henry Deibert, deceased. Stahl be- coming insolvent, suit was brought upon the bonds by the several beneficiaries, who, at the October term, 1881, of the Court of Com- mon Pleas, recovered judgments against him and his sureties for the several amounts due them, amounting in all to some $1,200. Executions were at once issued, but were returned January 11, 1882, without levy, by reason of the commencement of proceedings in error in the District Court. The judgments having been af- firmed, exectitions were again issued, April, 1885, whereupon Hill, to avoid the sale of his own property, paid one-half of the judg- ments, $906.03, Waddle, a co-surety, paying the other half. The lands of Stahl, owned by him at the recovery of the judg- ments and subject to their liens, were conveyed by him on July 29, 1882, to one Thomas O'Day, who executed a mortgage on them to secure the notes given to Stahl for the purchase-money. The mort- SEC. 5.} HILL V. KING. 583 gage was duly recorded at the time. Afterwards Stahl sold and transferred the notes and mortgage to one Hopkins, who sold and transferred them to Julia King. Julia King having died, suit was brought by her administrator in 1886 to foreclose the mortgage. To this suit Hill was made a party ; and answered, setting up by way of cross-petition, the recovery of the judgments against him as before stated in 1881, the payment made by him on the judg- ments in April, 1885, and claiming the right to be subrogated to the liens of the judgments so paid as against the mortgage held by the plfintiifs' decedent. The case was tried in the Circuit Court on appeal, which found that, as a matter of fact King was the surety of Stahl on the bond, but that he had not been certified as such in the record of the judgmepts, and dismissed his answer and cross-petition. ■ The only question in the case is, whether the amission of the fact of his suretyship in the record of the judgment, deprived Hill of the right to be regarded as subrogated to the place of the judg- ment creditors, for the amount paid by him upon the judgment against him and his principal. And unless, as seems to be claimed, the right of the surety on payment of the judgment to the place and remedies of the creditor, is, by the provisions of 5836, Revised Statutes, made to depend upon his being certified as such in the record of the judgment, there can be no doubt that, according to the settled rules of equity and the decisions of this court, it does not. The rule is that so soon as the surety pays the debt of his prin- cipal there arises in his favor an equity to be subrogated to all the rights, remedies and securities of the creditor, and has the right to enforce them against the principal for the purpose of his indemr nification. Whilst payment by the surety discharged the debt and extinguishes all the securities so far as concerns the creditor, such is not its effect as between the principal and the surety and all who stand in the shoes of the former ; as to these, it is in the nature of a purchase by the surety from the creditor, and operates as an assignment of the debt and securities to the surety. And, if a question is made whether the acts of the surety have been such as to keep the security on foot, the court, in the absence of evidence to the contrary, will presume that they were done with that inten- tion which is most for the benefit of the party doing them. The doctrine, in its application to the relation of principal and surety, is so equitable and just, that there seems to be an entire consensus in the views of authors and courts upon the subject. And in no court has it been more fully recognized and applied than 584 HILL V. KING. [CHAP.ix. in our own. Neilson v. Fry, 16 Ohio St. 552; Dempsey v. Bush, 18 Ohio St. 376 ; Neal v. Nash, 23 Ohio St. 483. In Dempsey v. Bush, it is announced in the syllabus that, " A surety against whom and his principal judgment has been recov- ered, has the right, in equity, on paying the amount due on the judgment, to be subrogated to the rights of the judgment creditor in the judgment ; and this right of the surety will not be defeated by the fact that there was no stipulation therefor by the surety at the time of making the payment, nor by the fact that he was at the time ignorant of the existence of such right." The case is yery much like the present one. The judgment to which the sureties vrere subrogated by payments made in 1864 and 1865, was obtained against them and their principal by the executors of Ross in 1859. And, the mortgage, against which they were given priority by sub- rogation to the rights of the judgment creditor, was executed in 1861; that is after the recovery of the judgment, but before its payment by the sureties. And it is said in the statement of the case, that the payments were made without any agreement between the executors and the sureties, except that they were in full of the judgment ; and without any intent on the part of the sureties either to assert or to abandon any supposed right of subrogation, and without any knowledge on their part of the existence of such right, although intending to assert all their rights in the premises. Whether the sureties had been certified as such in the judgment is not stated ; it is probable they were not ; but if they were, no promi- nence was given to the fact in the opinion of the court. The right of the sureties to be subrogated was placed on the ground that they had paid the judgment. Tlie claim, based upon the language of 5836, Revised Statutes, that unless the surety is certified as such in the judgment, its pay- ment by him cannot avail to keep it on foot for the purpose of his indemnity, is, we think, a misapprehension of the purpose and ob- ject of the section. The provisions of this section were first intro- duced into our statutes in 1868, and with some slight modifications have continued in force to this time. A study of its language and history will show, that the object of its enactment was, not to limit or modify any of the existing rights of a surety against his prin- cipal, on paying the judgment against both of them, but rather to add to and enlarge those that he had. Before the enactment of this statute the only proceeding the surety had for reviving a dormant judginent to which by reason of payment he was entitled to be sub- rogated, was by action^ as was done in the case of Neal v. Nash. SEO. 5.] HILL V. KING. 585 But under the provisions of the above section, by taking the pre- caution to be certified as such in the record of the judgment, the surety may, in his own name, on payment of the judgment, cause it to be revived by a conditional order under the provisions of sec- tion 5367, Revised Statutes ; and, it would seem, from the generalty of the language employed, he may for his own indemnity keep it alive against the principal by causing an execution to issue ; because the creditor, in whose place he stands, might have done so — the language of the section being, " shall have all the rights and rem- edies against the principal debtor that the plaintiff had at the time of such payment." These are some of the advantages conferred on the surety by being certified as such in the judgment, and of which he could not have availed himself prior to the adoption of the provisions con- tained in section 5836, Revised Statutes, without first having ob- tained the judgment of a court in a proper action, subrogating him to the place of the creditor. It may be regarded as a statutory mode of subrogation, acting upon the facts of a case without the aid of a court; and furnishing to the surety a summary remedy by which he may not only revive the judgment but keep it alive, on inaking payment to the creditor. The remedy is cumulative to the rights of the surety, but, upon well settled principles of construc- tion, is not exclusive pf others which the law had given him for his indemnity against his principal. Where he has failed to be certified in the judgment, he may, as before, bring an action and cause it to be revived by judgment ; and, in any proceeding, may be regarded as subrogated where, as in Dempsey v. Bush, as also in this ease, an actual judgment of subrogation is not required in order to do justice between the parties. That is to say, in suits brought to sell the subject of the lien and distribute the proceeds, the court, being in the exercise of its equitable jurisdiction, considers that as done, which, upon the facts of the case, the party had a right to have done, and distributes the proceeds without any formal judg- ment of subrogation. No injustice is done to the holder of the mortgage in this case by keeping the judgments in force for the benefit of the surety. When the mortgage was made and delivered, the judgments of the fleiberts were liens on the land. It was the duty of Stahl to have protected his surety by paying these judgments ; but, instead of so doing, he sold the land, took a mortgage to himself for the purchase iponey, and left the judgments to be discharged by the surety. Hence the mortgage being subsequent in time to the judgments, is 586 TOWNSEND V. WHITNEY. [ CHAP. IX. in no way impaired by paying to the surety, from the proceeds aris- ing from the sale of the land, the amount due him on the judgments instead of to the creditor. The interest in the land covered by the mortgage remains the same in either case. Judgment reversed, and judgment for Hill on his cross-petition. Accord. — Benne v. Schnecko, 100 Mo. 250; Harper v. Rosenberger, 56 Mo. App. 388; Cauthorn v. Berry, 69 Mo. App. 404; McNairy v. Eastland, 10 Yerg. (Tenn.) 310; Swan v. Smith, 57 Miss. 548 (Statutory); Bragg V. Patterson, 85 Ala. 233 (Statutory) ; Thomason v. Wade, 72 Ga. 160 (Statutory) ; Hevener v. Berry, 17 W. Va. 474; Dodd v. Wilson, 4 Del. Ch. 399; Folsom v. Carli, 5 Minn. 333; Schoonover v. Allen, 40 Ark. 132; Connelly v. Bourg, 16 La. Ann. 108 (Statutory) ; Potvin v. Meyers, 27 Neb. 749; Gerber v. Sharp, 72 Ind. 553; Braught v. Griffith, 16 Iowa 26; Searing v. Berry, 58 Iowa, 20; Sehleissman v.' Kallenberg, 72 Iowa, 338; Edgerly v. Emerson, 23 N. H. 555; Harris v. Frank, 29 Kan. 200 (Statu- tory) ; Allen V. Powell, 108 111. 584; Chandler v. Higgins, 109 111. 602; Kinard v. Baird, 20 S. C. 377; Sotheren v. Reed, 4 Harr. & J. (Md.) 307; Gifford V. Eising, 12 N. Y. Supp. 430; Hinckley v, Kreitz, 58 N. Y. 583. Sec. 6. Surety paying judgment against the principal entitled to have an assignment of the judgment. THEOPHELIA G. TOWNSEND v. OLIVER B. WHITNEY. 75 N. Y. 425 (1878). John J. Linson, for appellant. J. Newton Fiero, for respondent. Eael, J. The defendant and Solomon A. Ferris were appointed by the surrogate of Ulster county administrators of the estate of John J. Ferris, deceased; and upon such appointment, they gave the bond required by law, signed by them and by William H. Townsend and another who is now dead, as suireties. Subsequently the ad- ministrators accounted before the surrogate, and he made a decree by which he ordered them to pay certain sums to Mrs. Love, Mrs. Ferris, and Mrs. Elting respectively as their distributive shares of the estate. These sums not having been paid, subsequently a cer- tificate of the decree was obtained from the surrogate, and the de- cree was docketed in the clerk's office of Ulster county, under the provisions of chapter 460 of the Laws of 1837, as amended by chap- ter 104 of the Laws of 1844. The decree did not become merged by docketing the same. The docket did not make it a judgment, but simply made it a lien upon real estate for the amounts shown SEC. 6.] . TOWNSEND V. WHITNEY. 587 in the certificate; and executions could thereafter be issued to en- force the same, as upon judgments recovered in the county court. After the decree was thus docketed, the persons in whose favor it was docketed had two remedies to enforce payment of the money due them ; one by attachment against the administrators in the Sur- rogate 's Court, and another by executions based upon the docket. The two remedies are not inconsistent, but concurrent or cumula- tive ; and they may both be pursued until the decree has been com- plied with. Executions were issued and returned unsatisfied, and then, upon application, the surrogate assigned the bond to the persons in whose favor the decree was made, for the purpose of prosecution by them. Mrs. Love, Mrs. Ferris, and Mrs. Elting then commenced actions upon the bond against the administrators and Townsend, the surviv- ing surety, and recovered each a judgment for the amount due her. Then Townsend, the surety, with his own money paid the amounts of the judgments to Mrs. Love, Ferris, and Elting, and procured them to assign the judgments and also the decree of the surrogate to the present respondent; his wife. This he did for the purpose of enabling her to proceed by attachment against the administra- tors to compel payment by them. She then applied to the surro- gate for an attachment against the administi-ators for not paying the money as directed by the decree, and he denied the remedy on the ground that the payment of the judgments by the surety, in the manner above mentioned, discharged both the decree and the judgments. But his decision was upon appeal reversed by the Su- preme Court, and the administrator, Whitney, has appealed to this court. 4:«4s:(;««4:s|s«:!:4c4:^«:i:4::|ci|s It is also contended, on behalf of the appellant, that the pay- ment of the judgments by Townsend, in the manner above men- tioned, satisfied both the decree and the judgments. It is probably true that the ease is not altered by the assignment to Mrs. Towns- send. She had no separate estate, and no means. Her husband furnished the money to pay the judgments, and the assignments to her were merely formal, to enable him, in her name, to enforce the decree. This case may therefore be treated as if the surety had paid the judgments, and then taken an assignment of them, and also of the decree, for the purpose of enforcing them against the principal debtors. Where one of two joint debtors, both of whom are principals, pays a joint judgment, the judgment becomes extinguished, what- ever may have been the intention of the parties to the transaction ; 588 TOWNSEND V. WHITNEY. [CHAP. IX. and it is not in their power, by any arrangement between them, to keep the judgment on foot for the benefit of the party making the payment. The remedy of the party thus paying is by an action against his co-debtor for contribution. But a different rule prevails where one of the joint judgment debtors is a surety upon the obligation put into judgment. Under the civil law, a surety paying the joint obligation is entitled not only to be subrogated to all the securities which the creditor holds for the payment of the debt ; but he is entitled to be substituted, as to the very debt itself, to the creditor, hy way of cession or assign- ment. It treats the transaction between the surety and the cred- itor, according to the presumed intention of the parties, to be not so much a payment, as a sale of the debt. But this broad rule of equity has not been fully adopted in England. There, it seems to be the general rule, that a payment of a joint obligation by a surety extinguishes the obligation both at law and in equity, and that it cannot be kept on foot for his benefit. But a surety thus paying is entitled to all the collateral securities held by the cred- itor for the payment of the debt; (Copis v. Middleton, 1 Turn. & Russ. 224 ; Reed v. Norris, 2 Milne & Craig 361 ; Hodgson v. Shaw, 3 Mylne & Keene 183.) It is there held that the surety cannot, be subrogated to the very obligation paid because it does not survive payment, and there is nothing, left to which he can be subrogated ; and that he can be subrogated only as to such securities and rem- edies as survive the payment of the principal obligation. But it has not always been easy to define the cases in which subrogatiop could be had ; and the English authorities are not all consistent. It would be useless to criticize and attempt to reconcile or distinguish them. The general American doctrine in favor of sureties is more lib- eral than that of the English courts. ********* It is not necessary to hold, in this ease, as many authorities in this country, as well as the civil law, would warrant, that the judgments paid by Townsend survived, so as to be the subject of subrogation. If the judgments were completely extinguished by the payment, it is because they were joint judgments against the principals and the surety. But the creditors had two remedies; one upon the judgments, and another upon the decree which could be enforced by attachments ; and these two may be treated as secur- ities for the payment ,of the same debt. The surety was not a party to the decree, and that could not be enforced against him. The creditors had independent remedies upon the decree ; and when SEC. 6.] TOWNSEND V. WHITNEY. 589 the surety paid the judgments, he took the place of the creditors as to such decree, and was subrogated thereto. It matters not that payment of the judgments also paid the decree. Payment of a bond also discharges the mortgage collateral thereto, and yet, as shown above, the mortgage, for the purpose of subrogation, survives. I am, therefore, of opinion that upon the payment made by the surety, he became subrogated to this decree, and he had the right to have the same assigned to himself or to some other person desig- nated by him. It is also said that the assignee, Mrs. Townsend, cannot enforce this decree in her own name by attachment. This is a mere tech- nical objection, and not one of substance. The surety could, if necessary, have used the names of the original creditors in the en- forcement of the decree. Such is always the right of a surety in such cases, if his interests require it. But by this assignment the whole legal title to the decree was vested in the assignee. She is entitled to the moneys due thereon. The duty, which was before due from the administrators to the original creditors, is now due to her, to the same extent. She has become a party to the decree, and can invoke every remedy for its enforcement. Every sale of a judgment, decree, or other obligation carries with it every remedy which the law gives the seller to enforce payment. The remedy at- taches to and inheres in the obligation, and does not pertain to the person of the owner. The order of the Supreme Court must be affirmed, with costs. All concur. Order affirmed. It has been held that the payment of the judgment against the principal by the surety, of itself, in equity, operates as an assignment of the judg- ment to the surety, so as to enable him to have execution for his own bene- fit. Crisfield v. State, 55 Md. 192; Potvin v. Meyers, 27 Neb. 749; Burke V. Lee, 59 6a. 165. If the judgment is assigned to the surety he may have execution thereon for his own benefit. Harper v. Kemble, 65 Mo. App. 514; Watts v. Kinney, 3 Leigh. (Va.) 272; Eidson v. Hufl', 29 Gratt. 338; Des Moines Sav. Bank V. Colfax Hotel Co., 79 Iowa, 497; Anglo American Co. v. Bush, 84 Iowa, 272; Morrison v. Page, 9 Dana 428; Harper v. Rosenberg, 56 Mo. App. 388; Edgerly v. Emerson, 23 N. H. 555; Cottrell's Appeal, 23 Pa. 294; Clason v. Morris, 10 Johns. 524; Kimmel v. Lowe, 28 Minn. 265; Garvin v. Garvin, 27 S. C. 472; Turner v. Teague, 73 Ala. 554; Schilb v. Moon, 50 W. Va. 47; German Am. Sav. Bank v. Fritz, 68 Wis. 390; Hollimon v. Karger, 30 Tex. Civ. App. 558; Drexel v. Pusey, 57 Neb. 30. 590 DOWBIGGEN V. BOURNE. [CHAP. IX. DOWBIGGEN v. BOURNE. 2 Younge & CoUyer, 462 (1837). Cawthome as principal and Dowbiggen as surety executed a joint and several note to Bourne upon -which Bourne obtained separate judgments against the principal and surety. Thereafter by execu- tion against the surety the latter was compelled to pay the judg- ment and costs. Subsequently the executors of the surety filed a bill in equity to obtain an assignment of the judgment against the principal. To this bill the principal filed a general demurrer. James Bussell, for the plaintiff. Mr. Simpkinson and Mr. G. Richards, for the defendant. AiiDERSON, B. I expressed my opinion on the hearing of this case, that the plaintiff could not derive any benefit from the as- signment of the judgment against Cawthome ; and that, supposing that to be the case, there was not any ground for the interference of a court of equity to decree that assignment. The question I desired an opportunity to consider was, whether under the eircum^ stances there would be any remedy at law, supposing an assignment of the judgment were actually, executed to the executors of Mr. Dowbiggen. It is quite clear from the authorities, that a surety who pays the debt of the principal debtor is entitled to the benefit of all those securities which the creditor himself could render avail- able against the principal debtor. That point was in effect deter- mined by Chief Baron Alexander, on the argument of the demurrer in this case ; and I cannot help regretting that he did not then dis- pose of the question of law which is now raised, and which was as ripe for discussion seven years ago as it is at the present time. In this case the assignee, if he obtain an assignment of the judg- ment, must necessarily proceed in the name of the assignor, to en- force that judgment. Now, what are the facts of the ease ? A joint and several promissory note was entered into by Cawthome and Dowbiggen as his surety. The note when due was not paid, and the payee of the promissory note brought an action, and obtained judgment for the full amount of the note and interest against Caw- thome, the principal debtor. For I think it is fully established that Cawthome was the principal debtor. The holder of the note, having obtained this judgment against Cawthome, finding that it was not likely to be made available, brought another action, as he was entitled to do, against Dowbiggen the surety, and recovered judgment against Dowbiggen for the amount of the note and inter- SEC. 7.] PIERCE V. HOLZEE. 591 est. Dowbiggen paid the amount of the principal money and in- terest due on the note, and the costs of the action against him, and the holder of the note, having been thus satisfied the whole of the principal money and interest, had no further claim, except perhaps in respect of the costs of the action against Cawthome ; and if he had afterwards venturjed to proceed on the judgment against Caw- thome,, the Court of King's Bench, in which the judgment was recovered, would have interfered in a summary manner to stay proceedings on the judgment, except for these costs. The whole effect, therefore, of assigning the judgment to the plaintiff would be to give her that which would be wholly useless, except for the purpose of recovering the costs of the action against Cawthorne, and to which, as administratrix of Dowbiggen, she could not possi- bly have any right. And that it had been felt that she had no such right, was evident from the tender to the defendants, the Bournes, of those costs. The case in substance is not distinguish- able from the case before Lord Eldpn, in which he says, that if a bond is given by principal and surety, and at the same time a mort- gage is made for securing the debt, the surety paying the bond has a right to stand in the place of the mortgagee ; but that if there is nothing but the bond, the surety, after discharging it, cannot set it up against the principal debtor. It appears to me that any assignment of the judgment would be entirely useless; and, therefore, under the whole of the circum- stances, I think the bill must be dismissed; but as the Bournes might, I think, readily have given to Mrs. Dowbiggen what she re- quired, though it was perfectly useless, I think the bill must be dismissed against them without costs. There is no ground or pre- text for making the surety pay the costs of the principal ; the bill must, therefore, also be dismissed without costs against the defend- ant Cawthorne. Sec. 7. Surety entitled to all the rights and remedies of the creditor against the principal. WALTER PIEECE v. ANNIE E. HOLZEE. 65 Mich. 263 (1887). E. 8. Eggleston, for complainant. J. W. Bansonn, for defendant. Champlin, J. Complainant is surety upon the bond of defend- ant, given to the judge of probate of Kent county, as administra- trix of the estate of Edward Welsh, deceased. ****** 592 PIERCE V. HOLZEB. [C5AP. IX. After making all allowances, the judge of probate found that the administratrix had in her hands belonging to the estate, subject to distribution among the creditors, the sum of $755.71. He also found that the unpaid indebtedness amounted to $2,082.75, and that she should pay to each creditor 36.28 per cent, of his claim; and thereupon, on the thirtieth day of December, 1876, made an order that the $755.71 should be distributed to the creditors within sixty days from that date. The administratrix having neglected to make the distribution or- dered, A. R. and W. F. Linn, as creditors entitled to a distributive share, applied to and obtained leave from the judge of probate, on the eighteenth of March, 1878, to sue her bond, which was done, and judgment recovered against the administratrix and the sureties in the bond on the fourteenth day of June, 1879, for $296.30 dam- ages, and costs taxed at $28. The defendant was appointed administratrix on the tenth of March, 1873. On or about the twenty-eighth day of August, 1873, she purchased of George W. Griggs, lot No. 4, block 6, Wenham's addition to the city of Grand Eapids, for $2,500, and paid $1,200 down, and gave back a mortgage to secure the payment of the bal- ance of $1,300. She took the deed from Griggs in her individual name. The bill of complaint alleges, and the answer denies, — " That she took of the money of the estate, realized by her as such administratrix, from the sales of the property of said estate, the sum of $1,200, which ought to have been applied and used in the payment of the debts owing by the estate, and paid the same to George W. Griggs to apply upon the said purchase price of said lot." She immediately after the purchase went into the possession of this property, and has ever since used and occupied it as her home- stead. She neglected to pay the judgment obtained against her and her sureties, and, the other surety being pecuniarily irresponsible, the complainant made arrangements whereby the sheriff levied the exe- cution issued upon the judgment upon the lot above described, and advertised and sold the same to satisfy such judgment. Complain- ant obtained Moses V. Aldrieh to bid the property off, and hold it for complainant's benefit, which he did, and complainant refunded to him the money therefor, and obtained an assignment of the sher- iff's certificate of sale, and, after the time of redemption expired, received from the sheriff a deed of the premises. Complainant then broiight ejectment against defendant, and was defeated in the SEC. 7.] PIERCE V. HOLZEK. 593 suit, upon the ground that the premises were defendant's home- stead, and not liable to be sold upon the execution issued upon said judgment. 4:4ii|s4siK!is:|:s|s«4:4c«:is«4:ilsi|: Counsel for complainant contends that the money in the hands of the administratrix was a trust fund for the payment of the debts of the estate, and that, wherever the property of a party has been wrongfully misapplied,, or a trust fund has been wrongfully con- verted into another species of property, if its identity can be traced, it will be held in its new form liable to the rights of the original owner ; and if an executor or administrator purchase property with money belonging to the estate, a trust in the property will result to the persons entitled to the beneficial interests in the estate. And the complainant asks to have this property sold to satisfy him for the amount he has been obliged to pay to the creditors of the estate of Edward Welsh; in other words, to be subrogated to the rights of the creditors against this property; that the complainant occu- pies the position of surety to defendant, and, by performing the contract of suretyship, the principal obligation is discharged against the debtor, and is kept alive between the creditor, the debtor, and the surety for the purpose of enforcing the last. ****** The counsel for defendant insists that the complainant is not en- titled to the relief prayed lor. 1. The house and lot is the homestead of defendant, recognized and treated by complainant as her individual property. 2. The complainant is not a creditor of the estate; that the case made by the bill shows simply a contract relation between com- plainant and defendant, and, as such, his remedies for enforcing contract obligations in this case are no broader and are of no dif- ferent character than those provided in ordinary cases. The second reason will be considered first ; for, if complainant is not entitled to be subrogated to the rights of the creditors to whom he has paid the debt of defendant, it is an end of his case. The relation between complainant and defendant was not that of a surety to an ordinary debto^. He was the surety to a trustee. He undertook in behalf of defendant that she should faithfully execute her trusts as administratrix, and among others, that she would faithfully collect the assets, and apply them to the payment of the debts of the deceased. The administrator of an estate stands in the relation of a trus- tee to all those interested in the estate. Eights and remedies against him are not more restricted than in the case of any other trustee intrusted with the care, management, or disposition of prop- 594 PIERCE V. HOLZER. [CHAP. tX. erty ; and it is well settled that when property held upon any trust to keep, use, disburse, or invest in a particular way, or to or for par- ticular persons, is misapplied by the trustee, and converted into dif- ferent property, or is sold and the proceeds are thus misapplied, the property can be followed wherever it can be traced through its transformations, and will be subject when found in its new form to the rights of the original owner or cestui que trust. Cook v. Tullis, 18 Wall. 341. When an administrator misapplies the assets in his hands, to the injury of the creditors of the estate to whom distribution has been ordered, they have a choice of remedies. They may obtain per- mission and sue the bond, or they may pursue the fund, if they are able to trace and identify it ; and no more than proof of substan- tial identity is required. Neely v. Eood, 54 Mich. 134. These rem- edies are concurrent, and the election of one does not preclude resort to the other. A suit upon the bond does not ratify the mis- application, and a pursuit of the fund does not preclude a suit upon the bond. It would be to the benefit of the sureties if the creditor should first proceed to recover and apply the fund mis- appropriated. But if he should proceed in the first instance, and enforce payment by the sureties, I can see no good reason why the sureties may not be subrogated to his rights and remedies to en- force payment out of the fund to the same extent the creditor could have done. The law subjects the assets of a deceased person to the payment of his debts, and for this reason the creditor has an equitable lien thereon, which he can enforce through the administrator in a proper case for equitable interference. The misapplication of the assets to the injury of the creditors, and neglect to pay after an order of distribution, is such a case. In such case the creditor can fol- low the fund, if he can trace it in its changed form, in the hands of the trustee or purchaser with notice, and, upon a familiar prin- ciple, the surety who satisfied the debt is entitled to the securities against the principal debtor that the creditor has for reimburse- ment. The first reason above stated why the complainant is not entitled to relief is equally without merit. A trustee cannot escape mak- ing reparation, nor discharge property from its trust character, by transforming it into a homestead. A homestead is not an asylum for fraud ; and trust moneys invested in it do not exempt the prop- erty from the established doctrine of being subject to the trust. It is further insisted that the complainant, having treated the SEC. 7.] PIERCE V. HOLZER. 595 premises as the property of the defendant ever since she purchased them, and caused the same to be levied on and sold under the exe- cution, and procured a deed from the sheriff, brought ejectment based upon such deed, is bound by the result of that judgment. I can see nothing in these facts that affects the equities of complain- ant's case. They do not constitute an estoppel as between these parties. They disclose an effort to obtain satisfaction at law of the obligation due to him as surety from defendant as principal, and the result merely shows that the law is inadequate to afford relief. The complainant is entitled to a decree subrogating him to the rights and remedies of the creditors of the estate whose judgments he had paid, as Against defendant, and the estate in her hands, de- claring a lien on the premises described in the bill of complaint in his favor to the amount of $755.71, and interest thereon from the thirtieth day of December, 1876. The lien thus declared is sub- ject to all legal incumbrances which, in good faith and without notice of the trust character of the funds invested by defendant, have been placed thereon by her prior to the filing of the bill of complaint. The defendant must pay the amount of $755.71, and interest and costs awarded against her, in sixty days from the entry of the de- cree in this court, and, in default thereof, the premises are to be sold in the same manner as sales of lands upon the foreclosure of mortgages; such sale to bar defendant, and those claiming under her since the filing of this bill, of all equity of redemption; the complainant to be permitted to bid at the sale. The ordering part of the decree appealed from, modified as above indicated, will be aflSrmed. Neither party to recover costs in this court. The record and decree will be remanded to the court below for execution. The other justices concurred. AccoED. — Clark v. First Nat. Bank, 57 Mo. App. 277; Blake v. Traders Nat. Bank, 145 Mass. 13; Wheeler v. Hawkins, 116 Ind. 515; Scott v. Patehin, 54 Vt. 251; Stetson v. Moulton, 140 Mass. 597; Gilbert v. Neely, 35 Ark. 25; Harris v. Harrison, 78 N. C. 202; Rice v. Rice, 108 111. 199; Farmers & Traders Bank v. Fidelity & Deposit Co., 22 Ky. L. Rep. 22; Skip- with V. Hurt, 94 Tex. 322. In Fulkerson v. Brownlee, 69 Mo. 371 it was held that the surety upon a bond to secure the purchase price of land, the vendor reserving title, a payment by the surety subrogated him to the right of the vendor to main- tain ejectment against the purchaser. A surety for the purchase price of land has a right of subrogation to the vendor's lien. Ballew v. Roler, 124 Ind. 557; Tuck v. Calvert, 33 Md. 209; Stenhouse v. Davis, 82 N. C. 432; Myres v. Vaple, 60 Mich. 339; Torp V. Gulseth, 37 Minn. 135. 596 FOEBES V. JACKSON. ^ [ CHAP. IX. A surety may pursue a remedy by creditors bill in equity and recover any fund which the creditor might have recovered from the principal. Bittick v. Wilkins, 7 Heisk (Tenn.) 307; Sweet v. Jeffries, 48 Mo. 279; or maintain an action to set aside a fraudulent conveyance by paying the debt of the fraudulent grantor. Tatum v. Tatum, 1 Ired. Eq. (N. C.) 113; Hatfield v. Merod, 82 III. 113; Keel v. Larkln, 72 Ala. 493; Loughridge v. Bowland, 52 Miss. 546; Sargent v. Salmond, 27 Me. 539. If the debt paid by the surety is entitled to a priority the creditor's claim to priority inures to the surety. Hunter v. United States, 6 Peters, 173; Boltz Estate, 133 Pa. 77; Whitbeck v. Ramsay's Est. 74 111. App. 524; Eicheson v. Crawford, 94 111. 165; Stokes v. Little, 65 111. App. 255; Irby v. Livingston, 81 Ga. 281; Orem v. Wrightson, 51 Md. 34. Brent, J.: "We think the doctrine is well established by a decided preponderance of the cases, that a surety who has paid the debt of his principal obligor, is sub- rogated In equity by the act of payment, not only to the securities of the creditor, but to all his rights of priority. If therefore the creditor could have rightfully claimed a preference in the distribution of assets, the same preference will be upheld by way of subrogation for the benefit of the surety. * * • While this view of the law will do no wrong to any one, it will add facilities in securing and collecting the revenue of the State. If sureties know that they can be subrogated to the priority of the State, less apprehension will be felt in joining in the bonds of collectors, and less delay in 'payment by solvent sureties, other creditors are not injured, for if the State has the first claim upon the fund, it does them no wrong whether its claim is enforced by the State, or by those standing in its stead." Sec. 8. The right of the creditor to " tack " to the original security the security taken for subsequent advancements. FORBES V. JACKSON. 19 Ch. Div. 615 (1882). The plaintiff was surety upon an indenture of mortgage executed December 28th, 1854, by Wm. Spence to A. Weir in the sum of £200. Subsequently, in 1856, and at three later dates and prior to 1867 Wm. Spence borrowed from A. Weir additional sums of money ag- gregating £530, executing as security therefor four mortgages upon the same property. The plaintiff had no knowledge of these subsequent advancements till November, 1875. Weir died in 1878 and the defendants are executors under his will. The plaintiff tendered payment of the principal and interest of the debt secured by him and requested a transfer of the mortgaged premises. SEC. 8.] FORBES V. JACKSON. ^^'^ The defendants claimed the right to retain the premises as a se- curity for the other sums advanced. Kekewich, Q. C, and Hornell, for plaintiffs. W. Pearson, Q. C, and L. Field, for defendants. Hall, V. C. The arguments which have been submitted on be- half of the executors do not affect the conclusion which I, in the course of time, intimated that I had come to; nor do they affect the principle laid down in the case of Newton v. Chorlton, 10 Hare 646, to which I referred on Thursday last. I consider that the de- cision in that case is perfectly good law, subject to this observation that Vice-Chancellor Sir "W. Page Wood expressed an opinion that where an additional security is taken by the creditor after the orig- inal security was given, and the contract of suretyship entered into, the right of the surety as regards the securities given to the prin- cipal creditor did not extend to the additional securities. The Vice-Chancellor did not think that the cases went so far as to give a surety the benefit of the security subsequently taken by the cred- itor. But that is a view which never commended itself to me, and it was certainly not adopted by Lord Justice Knight Bruce and Lord Justice Turner in a case before them of Lake v. Brutton, 8 D. N. & G. 441, and I may observe that Vice-Chancellor Sir "W. Page Wood himself, in a case afterwards before him of Pledge v. Buss, stated that his judgment in that case had been disapproved of by those Lord Justices, although not absolutely overruled. The Vice- Chancellor added : "I am as much bound to submit to their opin- ion as if the decision had been reversed on appeal before them. The Vice-Chancellor did not mention the names of the cases to which he referred, but I may state that some twenty years ago in my copy of Mr. Johnson's reports, I noted against Pledge v. Buss the case of Lake v. Bruttoin as being the one which the Vice-Chan- eellor had in his mind, and there is also another case flf Pearl v. Deacon, 1 De G. & J. 461, which I thought was referred to by him. That was an appeal from a decision of the late Master of the Rolls (Sir John Eomilly). It was a case of a subsequent security; but it is not material for my purpose to consider the general question whether there has been a release, or what is the effect of taking an additional security, and then whether that additional security should be held available for the benefit of the surety. There has never been, so far as I know, any disapproval of the general prin- ciple which was laid down by the Vice-Chancellor in Newton v. Chorlton, except so far, if at all, as the Master of the Rolls may have dealt with it in Farebrother v. Wodehouse, 23 Beav. 18, where 35 598 FOEBES V. JACKSON. [ CHAP. IX. he seems to have followed the case relied upon here of Williams v. Owen, which certainly, if it were law, would be an authority in favor of the executors. In the case of Newton v. Chorlton the prin- ciple laid down by Vice-Chancellor Sir W. Page Wood was that a surety was to have the benefit of all securities, ' ' whether by way of suretyship or mortgage," and he afterwards added: "The surety has a right at any moment to every security held by the cred- itor at the date of the contract — it has never yet gone beyond that; and he has further a right to say, you must always hold your- self in a position to be put in motion, at my request, against the principal debtor." I consider that the decision in Newton v. Chorlton was carried higher by the decision of the Lord Justices in Lake v. Brutton, which, as I have said, the Vice-Chancellor him- self recognized in Pledge v. Buss, 6 John. 663, 668, and I consider the decision must be applicable to securities taken subsequently to the original mortgage. The Master of the EoUs in Farebrother V. Wodehouse appears to have followed Williams v. Owen, as it ap- plied to a subsequent security taken by the original creditor — that he could make advances to the debtor, and that they would pre- vail over the right of the surety. That principle is entirely at variance with the decision in Newton v. Chorlton, and it is a singu- lar circumstance that in a subsequent case of Drew v. Loekett be- fore him, although he had followed William v. Owen, Lord Romilly said: " I am of opinion that a surety who pays off the debt for which he became surety must be entitled to ^11 the equities which the creditor whose debts he paid off, could have enforced, not merely against the principal debtor, but also as against all persons claim- ing under him." It was odd that Lord Romilly should agree with the principle laid down in Newton v. Chorlton, and yet come to a conclusion in Farebrother v. Wodehouse which seems to be at variance with it. The principle on which Vice-Chancellor Sir W. Page Wood proceeded was the same as laid down by Lord Eldon in the case of Mayhew v. Crickett, 2 Sw. 185, which I consider a leading authority, and also laid down in earlier' cases, — that the surety is entitled to have all the securities preserved for him, which were taken at the time of the suretyship, or, as I think it is now set- tled, subsequently. Nor does it matter at all in principle, whether the creditor takes a further security for further advances made prior to the time when the surety makes payment of the debt. They have nothing to do with the surety. He is entiled to the benefit of the securities, though his payment be not made until after the time when the further advances were made by the creditor. Tha SEC. 8.] rOEBES V. JACKSON. 599 principle is that the surety in effect bargains that the securities which the creditor takes shall be for him, if and when he shall be called upon to make any payment, and it is the duty of the cred- itor to keep the securities intact ; not to give them up or to burthen them with further advances. The same principle was enunciated in the ease of Duncan, Pox, & Co. v. North and South Wales Bank, 11 Ch. D. 88, where the Master of the Rolls on the hearing upon appeal from the judgment of Viee-Chancellor Little, said: " It cannot be said that in every instance a surety is entitled to stand in the place of the principal creditor as regards other securities. That is true as regards securities given by the debtor, but is not true as regards securities given by co-sureties." But here I have nothing to do with the question which was decided in that case — a question between persons alleged to be co-sureties. That case was carried to the House of Lords, and is reported in 6 App. Cas. 1. The House of Lords, though they reversed the judgment of the Court of Appeal, did not say anything which affected the principle referred to by the Master of the Rolls, and which is all that I de- sire to notice. I consider that the principle laid down in that case is perfectly plain and right ; and also that the decision in Williams V. Owen is not law now, and cannot after the cases to which I have referred be followed. I decline to recognize it. There is another case to which I- desire to refer, that of Green v. Wynn, Law Rep. 4 Ch. 204, in which there was a surety, and Lord Hatherley said, " But where there is a mortgage, of course any person under a liability to pay the interest would be at liberty to redeem." I am of opinion, therefore, that the plaintiff was right in his offer to pay off the debt, and that he is entitled to have the securities, and to say that the further charges for the sums subsequently ad- vanced are inoperative as against him. The defendants, the execu- tors, having refused the offer made, and being wrong in insisting on reta,ining the securities for the subsequent advances, must pay the costs of the action. The declaration will be that on payment to the executors of what shall be found due for principal, interests, and costs in respect of the mortgage of the 28th of December, 1854, the plaintiff is enti- tled to have the securities comprised in the deed transferred to him, and to hold them as securities for the repayment to him of the sums which may be paid to the executors by him. The costs of the plaintiff will be deducted from the sum which he may be required to pay, as in Wheaton v. Graham, 24 Beav. 483 ; but the interest will 600 FAEEBEOTHER V. WODEHOUSE. [ CHAP. IX. not be slopped as from the date when the offer of payment was made. AccoKD. — City Bank v. Dudgeon, 65 111. H; Drew v. Lockett, 32 Beay. 499; Nat. Exchange Bank v. Silliman, 65 N. Y. 475. CoNTKA. — Williams v. Owen, 13 Sim. 597. FAKEBROTHER v. WODEHOUSE. 23 Beay. 18 (1856). In 1841, the Rev. Robert Croughton, the vicar of Melton Mow- bray, applied to the Norwich Union Life Insurance Company for a loan of £5,000, and it was finally agreed between them, that this should be accomplished by two separate and distinct loans, one for £2,000, and the other for £3,000. It was agreed that the £2,000 should be advanced to Mr. Crough- ton, on the security of his bond and warrant of attorney, and the assignment of a policy in the National Loan Fund Assurance Of- fice, effected on the life of Mr. Croughton, but standing in the names of the plaintiff and Mr. Broadhurst, and also on the further secur- ity of a demise of the vicarage of Melton Mowbray, and provided the plaintiff would become bound as security to the Norwich Union Company for the due payment of the £2,000 and interest, and for the keeping on foot the policy of insurance. It was also, at the same time, agreed, that the £3,000 (the residue of the £5,000) should be advanced on other securities, wholly dis- tinct and separate from the securities provided for the repayment of the £2,000. This arrangement was carried into effect, and the £5,000 was advanced accordingly; £2,000 on the security already referred to and the suretyship of the plaintiff, and the £3,000 on other and dis- tinct securities. In order to effect this arrangement and com- plete the suretyship of the plaintiff, he executed a bond on the 7th of May, 1841, in a penal sum of £4,000, to which a condition was annexed, that the bond was to become void if Mr. Croughton paid the interest and premiums, and if the plaintiff indemnified the defendant against all loss in respect of the defaults or neglect of Mr. Croughton, or the insufiSciency of the securities. Mr. Croughton failed to pay the interest. In November, 1842, a sequestration was issued by the Norwich Union Company against the living of Melton Mowbray under which a considerable part of SEC. 8.] FAREBROTHEB V. WODEHOUSE. .601 what was due to them, in respect of the £2,000 was paid. Some por- tion, however (about £900), remaining still unpaid, the Norwich Union Company, on 29th November, 1854, sued the plaintiff at law on his bond. The plaintiff was willing to pay the amount claimed, provided the securities held by the Norwich Union Com- pany for the £2,000 were handed over to him, but this they de- clined to do. The plaintiff endeavoured, in the action, to plead the case made by him in this suit, but that failed, and thereupon, in June, 1855, he filed the present bill, praying for an injunction to restrain the further proceedings in the action, and offering to pay all that was due from him in the action, on having the securities, on which the £2,000 was advanced, delivered up and assigned over to him. The right to the possession of these securities was the only question in this cause. The case came before the Viee-Chancellor Wood in July, 1855, on a motion for an injunction. Mr. Roupell and Mr. Giffard, for the plaintiff. Mr. B. Palmer and Mr. Baggalay, for the defendants. The Master of the Rolls. This cause involves a question of very great importance, on which I felt considerable doubt, as it appeared to me, at first, to bring two principles of equity into direct conflict. Practically, the question before the court has resolved itself into a question of costs, because the Norwich Union Company, in conse- quence of the improvement, pending the suit, of the value of one of the securities on which the £3,000 was advanced, have found that those other securities are sufficient to protect them in respect of the sum of £3,000 and are therefore willing to deliver up to the plaintiff the securities on which the £2,000 was advanced. At first sight, therefore, it appeared that it would be unnecessary to decide this question, if it should appear, as it was contended, that this was a suit to redeem an incumbrance, and that, therefore, in any event, the costs of the suit must be paid by the plaintiff. But the answer to this was, that though this might be so up to the time of the payment of the money due, under the Vice-Chan- cellor Wood's order, yet, that upon payment of that sum, the de- fendants ought to have delivered up the securities, unless they were entitled to retain possession of them, and that, therefore, from that period at least, it was merely a suit or proceedings by a mortgagor, tc recover from a mortgagee, who had been paid m full, the title deeds of securities improperly retained. As I concurred in that view of the nature of the suit, upon the assumption of the plaintiff being right, it became necessary for me 602 FABEBEOTHEE V. WODEHOUSE. [ CHAP. IX. to determine the question raised in the suit, for the purpose of de- ciding how these subsequent costs should be borne. It is neces- sary in order to arrive at the solution of this question, to consider whether the contract, express or implied, between these parties gov- erns the case, and if not, what, in the absence of contract, is the rule which must prevail. Before I proceed to consider the con- tract in this case, I think it desirable to examine how the matter would stand, if it were not affected by any contract. In the ab- sence of contract, it is clear, that, as against Mr. Croughton, the defendants were entitled to tack their debts; Mr. Croughton, un- doubtedly, could not have redeemed the securities, on the strength of which the £2,000 was advanced by the Norwich Bank, without also paying what was due to them in respect of the £3,000 ; and it is settled by numerous authorities, that imtil the bank had been paid the whole that was due to them, they could not have been compelled by Mr. Croughton, or by any person claiming under him, to deliver up the securities relating to any portion of the debt se- cured, though it were by separate and distinct securities. The question which then presents itself is this : — If a third per- son become surety to the mortgagee, for the payment by the mort- gagor of one of these debts, will this, so far as he is concerned, affect this rule, and deprive the mortgagee of the right, which he would otherwise have possessed, of tacking his debts together, and making the property mortgaged available for both, in the absence of express contract for it. It is clear that the mortgagee may con- tract with the mortgagor, or with his surety, that this right of separate redemption shall exist in either or both of them. In the absence of contract, I think, that the fact, that a third person has become surety for one oif the debts, does not deprive the mortgagee of his right to tack. If it did, it would, in most cases, enable the mortgagor to do, in the name of his surety, what he is not able to do in his own name. I am, therefore, of opinion, that the surety, by offering to pay or by voluntarily paying to the creditor the debt for which he has become surety, could not redeem the particular property which was made the subject of that mortgage, without also paying the other debt due from the mortgagor to the mortgagee, and thus redeeming the whole property. In other words, I am of opinion, that, in this respect, he can do no more than the mortgagor himself could do. The next question is this: — Is the case altered by the fact, that the surety does not initiate the proceedings, but that the mort- gagee sues the surety for the amount for which he has become SEC. 8.] FAREBROTHEE V. WODEHOUSB. 603 surety. It is to be observed, that the right of the mortgagee, who seeks to foreclose the mortgagor, is not the same as when the mort- gagor seeks to redeem the mortgagee. If the mortgagee file a bill to foreclose either or both properties mortgaged, the mortgagor may redeem one, and allow the other to be foreclosed ; still it ap- pears to me, that the suit by the creditor against the surety is not analogous to a proceeding by the mortgagee to foreclose the mort- gagor and that, so far as regards the proceedings between the surety and creditor, their right, in this respect, must stand much on the same footing, whether it be that the surety is compelled by the creditor to pay the debt, or whether he voluntarily comes for- ward to do so. In this latter respect, it appears to me that the two proceedings are analogous, and that the rights, as between the parties, must be the same, whether the proceedings originate with the surety against the mortgagee, or with the mortgagee against the surety. It is, no doubt, the right of the surety to have the benefit of every security which the creditor had against the principal debtor ; but I think that this means when the creditor is paid in full, and that, unless he has contracted to do so, the creditor is not bound to give up to the surety securities which, by law, he is entitled to make available against the principal creditor. I consider it clear, for instance, that if a man advance £5,000 to the mortgagor on the security of his estate, and that a third person became surety for the payment of £2,000, part of that debt, he cannot, on pay- ment of the £2,000, require the mortgage deed and title deeds to the estate to be delivered up to him. If this be so, it shews, that the rule, that the surety is entitled to the benefit of all the secur- ities held by the creditor, is subject to this qualification : — That this right may be subject to prior rights in the creditor. If the rule be as I have stated it, in the case of a single debt and a surety for a part of it, is the case varied by the circumstance, that the debts are separate, and the securities distinct as between the mort- gagor, the principal debtor and the creditor? In other words, does the mortgagee, by obtaining a third person to become surety for one debt, relinquish the right he would otherwise have to tack. Upon the best consideration that I have been able to give to this case, I have come to the conclusion, that in an ordinary case, not governed by contract, and not affected by concealment or by mis- representation, the creditor does not lose this right, by the fact that he has obtained a third person to become surety for one of the debts due by the principal creditor. Neither concealment nor mis- 604 PAEEBEOTHER V. WCDEHOUSE. [ CHAP. IX. representation form any element in this case. The whole transac- tion was well known to all the parties to it; the plaintiff, in fact, negotiated the whole transaction with the bank, and he knew that two sxmis, amounting together to £5,000, were to be advanced at the same time to Mr. Croughton on separate securities, and that he was to become surety for one of these sums. The remaining question, then, is, how far is the case affected by the contract between the parties? There certainly is no express contract, that the plaintiff shall be allowed to redeem the property included in the mortgage debt for which he became surety, distinct from the other. Is such a contract to be inferred from the dealings of the parties? It is contended, on the part of the plaintiff, that the fact of his becoming surety for the £2,000 only, and his refus- ing to become surety for the other debt, implies that he contracted for all the rights and benefits of a surety belonging to that loan, exactly as if it were a single transaction, and that no other ad- vance was to be made, and, consequently, that if he were compelled to pay the amount, he was to be entitled to a transfer of the secur- ities. But after much consideration, I have not come to that con- clusion. It is to be observed, that mutatis mutandis, the same argu- ment lies in the mouth of the mortgagee, who says, " that by ad- vancing two sums on separate securities, I am to have the right of tacking inseparable from such a transaction^ " ^ ^ ^ ^ :„ » It is urged, no doubt, on the other side, that it is also an univer- sally-acknowledged principle of equity, that the surety, who has been compelled to pay the debt of the principal debtor, is entitled to the benefit of all the securities which the creditor has against the principal debtor; but if I am right in the observations I have already made, this is stating the principle of equity too broadly. The surety is undoubtedly so entitled, provided the creditor has no lien upon them, or right to make them available against the principal creditor, to enforce the payment of a debt different from that which the surety has paid. But if the creditor has such a right, and one arising out of the transaction itself, of which the suretyship forms a part, then the right of the surety to the benefit of these securities is subordinate to the right of the creditor to make them available for the payment of his other claims, and can only be made available after the paramount right is satisfied. « * The case, as I have stated, has become of comparative unimpor- tance to the parties, as it affects only the costs of a portion of the suit, but for this purpose, I have been compelled to examine it, SEC. 9.] SANDS V. DURHAM. 605 exactly as I should have done if the original point had remained at issue between the parties. My decision will, in fact, only regulate the costs, as, by consent, a decree will be made, directing these de- fendants to deliver up to the plaintiff the securities on which the £2,000, was advanced, and without any consent, direct the plaintiff to pay to the defendants their costs of the suit. ACCOBD. — Grubbs v. Wysor, 32 Gratt, 127; Eiee v. Morris, 82 Ind. 204. Sec. 9. Subrogation as applied to one in the situation of a surety. ANN J. SANDS, Admx. ET AL. v. JOHN H. DURHAM. 98 Va. 392 (1900). Messrs. Wysor & Gardner, for appellants. Messrs. W. J. Hanson and 8. W. Williams, for appellee. . Caedwell, J., delivered the opinion of the court : In the year 1886, John H. Durham, D. L. Whittaker, and D. A. Early formed a partnership for conducting a mercantile business in Giles county, under the style and firm name of D. L. Whittaker & Co. Whittaker furnished the capital of a stock of goods amount- ing to $3,000, which he was to get back out of the concern, and they were to be equal partners, dividing equally the profits and losses. The firm after doing an unsuccessful business, dissolved in October, 1897, by selling out their stock of goods to one G. L. Bane. Judg- ments had been obtained against the firm, which were unpaid, and there were also many outstanding claims not in judgment against the firm. The accounts, notes, etc., were turned over J. H. Dur- ham for collection. He collected all he could, and applied the col- lections to the firm debts, and the residue of the judgments against the firm he paid out of his own means. These judgments were duly docketed on the lien docket of Giles County Court, and were not marked satisfied. Durham brought this suit in October, 1895, for a settlement of the partnership accounts, and not only to have contribution from his partners, Whittaker and Early, but to be subrogated to the lien of the judgments which he had paid out of his private means to the extent his partners might fall in arrears to him on settlement, and to subject the lands owned by Early at the time of the rendition and docketing of the judgments against the firm to the extent that Early might be indebted to him on the settlement. Early and wife having on the 5th of March, 1890, sold 606 SANDS V. DURHAM. [ CHAP. IX. and conveyed to Mrs. Ann J. Sands three small tracts of land in Giles county, five-eighths of which belonged to Early, and the re- maining three-eighths to his wife, complainant claimed the right by subrogation to subject the five-eighths interest in those lands, for- merly owned by Early, to the payment of one-half of the judg- ments against the firm discharged by complainant out of his private means, amounting to $4,574.87 ; the other partner, Whittaker, being insolvent. The Circuit Court decreed that Durham was entitled by subroga- tion to the rights of the judgment creditors whose judgments he had paid off, and subjected, not only the property owned by Early, at the time of his death, but the five-eighths interest in the land which he had conveyed to Mrs. Sands in March, 1890, to, the pay- ment of one-half of the judgments paid by Durham. From this decree the administrator and heirs of Mrs. Sands, who had died, ob- tained an appeal to this court. It is well settled that one partner who has paid out of his own means debts of a partnership of which he is a member may, upon a settlement of the partnership accounts, have contribution from the other partners of their due proportion of the debts so paid. It is also well settled that, where one in the situation of surety pays the debt of him who is primarily liable, equity will put him in the place of the creditor whose debt he had discharged, and give him the benefit of the securities which the creditor has obtained from the principal debtor, and, though no assignment is actually made, equity treats it as having been done. Grubbs v. Wysors, 32 Gratt. 129. Subrogation is the equity by which a person who is secondarily liable for a debt, and has paid the same, is put in the place of the creditor, so as to entitle him to make use of all the securities and remedies possessed by the creditor, in order to enforce the right of exoneration as against the principal debtor in the same rank with himself. To entitle a party to subrogation, his equity must be strong and his case clear. It is an equity called into existence for the purpose of enabling a party secondarily liable, but who has paid the debt, to reap the benefit of any securities which the cred-^ itor may hold against the principal debtor, and by the use of which the party paying may then be made wbole. Bispham, Eq. 393: But says this learned author (p. 396) : " The principle of subro- gation is a general one, and will apply to every instance (except in the case of a mere stranger) where one man has paid a debt for which another is primarily liable. The right will not, however, SEC. 9.] SANDS V. DURHAM. "^^ exist between parties who are equally bound ; as, for example, co- partners, coobligors, and cocontractors, except, of course, by virtue of a special contract. Such special contract may exist, for example, where an out-going partner takes a covenant from the remaining members of the firm to pay the partnership debts and save him harmless. He stands, under these circumstances, in the position of a surety, and may be subrogated to the remedies of the creditor, if the covenant be not fulfilled." A partner who retires from the firm, and for a valuable consid- eration is indemnified by the remaining partners against all debts arid liabilities of the firm, will in equity be considered a surety for them, and subrogated to the rights of the creditor to whom he has been compelled to pay a firm debt. ********* The ground upon which some of the adjudicated eases hold that a partner of a losing concern, paying a debt of a lien creditor of the firm, cannot have subrogation to the rights of the creditor, is that pajTnent by a co-principal extinguishes the debt, and leaves no right of subrogation. It is more accurately stated by Strong, J., in the well-considered case of McCormick v. Irwin, 35 Pa. Ill, thus : ' ' The reason why subrogation is not allowed to one partner as against his copartner, or to one merely a joint debtor as against his codebtor, is because, as between them, there is no obligation to pay the debt resting upon one superior to that which rests upon lllC 0X1X6 IT* ^•|jj|j4;4;^^>lg4;d;l;>fc4;^>le To entitle a partner, paying out of his private means debts against the firm, to be subrogated to the rights of the creditors whose debts he has so paid, the relations ordinarily existing be- tween copartners must have been changed by an agreement between them whereby they assumed the relation of principal and surety. There was no such agreement in the case at bar, and appellee was therefore not entitled to be subrogated to the rights of the judg- ment creditors whose judgments against the firm of D. L. Whittaker & Co. he paid. Therefore the decree appealed from, in so far as it holds the contrary, is erroneous, and will be reversed and annulled, and the cause remanded to the Circuit Court for such further proceedings therein as may appear proper, in accordance with the views ex- pressed in this opinion. Riely, J., absent. A petition for rehearing having been granted, Whittle, J., on March, 14, 1901, handed down the following additional opinion: An opinion was handed down in this case in June, 1900, but, 608 ' SANDS V. DXJEHAM. [CHAP. IX. this court not being satisfied with the conclusion then reached a rehearing was granted. There is but this single question presented for decision: Where a partnership has been dissolved, and the social assets ex- hausted, and judgments subsequently recovered against the mem- bers of the firm on partnership debts have been paid by one of the partners, who is not in arrears to the firm, out of his individual means, and this is shown by a settlement of the partnership ac- counts, is the partner who has paid the judgments entitled to be subrogated to the rights of the creditors whose judgments he has satisfied against the real estate of his copartner, in the hands of a subsequent purchaser, to the extent to which his payments ex- ceed his proportional part of the liability ? The doctrine of subrogation is independent of any mere con- tractual relations existing between the parties to be affected by it, and involves the equitable principle that where one who is second- arily liable has paid the debt of another, who is primarily liable therefor, he will, in equity, be- substituted to all the rights and remedies of the creditor against the party whose share of the joint liability he has been compelled to discharge. Sheldon, in his work on Subrogation, states the doctrine thus: " The usual rule is that one of several joint debtors will, as against his codebtors, ordinarily be subrogated to the securities and means of payment of the common creditor whom he has satisfied, so as to enable him to recover from his co-debtors, by means thereof, their proportional shares of the indebtedness which he has dis- charged; and this, as in other cases of subrogation, arises rather from natural justice than from contract. Each joint debtor is regarded as a principal debtor for that part of the debt which he ought to pay, and as a surety for his codebtors as to that part of the debt which ought to be discharged by them. Subrogation has been denominated as one of the benevolences of the law, created, fostered, and enforced in the interest and for the promotion of justice. In England, and in a few of the States of the Union which have adopted the English rule, the application of the doctrine is very much restricted. Indeed, prior to an act of Parliament (Stat. 19 & 20 Vict. chap. 97), the courts have held that even a surety who satisfied a judgment against himself and his principal was not en- titled to be subrogated to the rights of the creditor, and to have the judgment kept alive for his benefit (Copis v. Middleton, Turn. & E. 229 ; Hodgson v. Shaw, 3 Myl. & K. 190) ; but, by the SEC. 9.] SANDS V. DURHAM. 609 act of Parliament aforesaid, the doctrine was extended to sureties. With the exception of the courts of Alabama, Vermont, and North Carolina, the English rule has not been followed in this country. In most of the other States it has been extended until, in its practical application, it has been deemed broad enough to cover every instance in which one party has been required to pay a debt for which another is primarily answerable, and which in equity and good conscience ought to be discharged by the latter. In no other jurisdiction has the doctrine been more firmly ad- hered to, or more liberally expounded and applied, to meet the exigencies of particular cases, than in Virginia. ***** In Sells V. Hubbell, 2 Johns. Ch. 394, Chancellor Kent said: " The debt of Sells was the debt of the copartnership of Bedient & Hubbell. It was the common equal debt of both partners, and the consideration for which it was created is presumed to have inured equally to the benefit of both, and the contribution ought to be equal. The estate of each partner ought to be charged with the debt in equal portions, provided their interests in the co- partnership were equal, and their accounts as between each other were equal. This is the intendment, in the first instance, and it would be a thing almost of course for equity to allow the repre- sentatives of a deceased partner, who had to pay the whole debt, to be substituted in the place of the creditor, in order to recover, from the surviving partner or his estate, a moiety of what they had paid. Nothing could stay this proceeding but the allegation of the surviving partner that he was the creditor partner, and that the estate of the deceased partner owed him a balance as much or more than it had been obliged to pay. This would render it necessary to take and state an account between the partners be- fore this court could interfere in any way to enforce the claim for contribution. ' ' In the case under consideration, the partnership had been dis- solved, the social assets had been exhausted in the payment of partnership debts, and a settlement of the partnership accounts had been made, from which it appeared that the appellee, J. H. Durham, was in advance to the firm, and with his individual means had paid the judgments against it. Under these circum- stances, the circuit court was of opinion and decreed that appellee was entitled to be subrogated to the rights of the judgment credi- tors whose lien he had discharged, and to subject the real estate 610 RAEDWELIi V. LYDELL. [ CHAP. IK. otnied by this co-partner, D. A. Early, at the date of the re- covery and docketing of said judgments, to their satisfaction. This court is of opinion there is no error in said decree, and that it ought to affirmed. Accord.— Conwell v. McCowan, 81 111. 285; Shinn v. Shinn, 91 111. 477; Chandler v. Hlggins, 100 111. 602; Aetna Ins. Co. v. Wires, 28 Vt. 93; Scott's Appeal, 88 Pa. 173; Laylin v. Knox, 41 Mich. 40; Swan v. Smith, 67 Miss. 548; Johnson v. Zink, 51 N. Y. 333; Ayres v. Dixon, 78 N. Y. 318; Orrick v. Durham, 79 Mo. 174. Sec. 10. Surety entitled to subrogation to a pro-rata share of any dividend derived from the assets of the principal. BARDWELL v. LYDELL. 7 Bing. 489 (1831). Assumpsit upon a guaranty contained in a letter addressed by the defendant to the plaintiffs in the following terms: " In con- sideration of your giving credit in the way of your trade to Lionel Mayhew, I guarantee to you the payment of any debt which he may contract with you from time to time, as a running balance of account to any amount not exceeding £400." It appears at the trial that the plaintiffs, on the faith of that guaranty, had furnished Mayhew with goods to an amount far exceeding the £400; and that Mayhew becoming embarrassed, assigned his effects to trustees for the payment of his creditors, pro rata, when the plaintiffs claimed a debt of £265 against his estate, and received from the trustees in common with the rest of the creditors, a dividend of 8s., 7d. in the pound, on the whole debt. This dividend amounted to £268, 6s., 4d., leaving £356, due from Mayhew to the plaintiffs. The present action was brought to recover that sum, being the difference between the dividend and the wholei debt. On the part of the defendant it was contended, that the plain- tiffs had no right to deduct the whole sum received as a dividend from the gross amount of the debt, and to hold the defendant liable on the guaranty for the residue of the demand, up to the extent of the guaranty ; but that the dividend received by the plain, tiffs was to be applied rateably to the whole debt; as well the part covered by the guaranty as the part which was left uncovered; SEC. 10.] BAKDWELL V. LYDELL. 611 and consequently a rateable deduction was to be made for tbe sum covered by the guaranty. Russell Serjt, for the defendant. Taddy Serjt, for the plaintiff. TiNDAL, C. J. This was an action upon a guaranty, contained in a letter addressed by the defendant to the plaintiffs in these terms: " In consideration of your giving credit in the way of your trade to Lionel Mayhew, I guarantee to you the payment of any debt which he may contract with you from time to tim'e as a runniag balance of account, to any amount not exceeding £400." It appeared at the trial that the plaintiffs, on the faith of this guaranty, had furnished Mayhew with goods to an amount far exceeding the £400; and that Mayhew becoming embarrassed as- signed his effects to trustees for the payment of his creditors, pro fata, when the plaintiffs claimed a debt of £625 against his es- tate, and received from the trustees, in common with the rest of his creditors, a dividend of 8s., 7d. in the pound on the whole debt. The present action was brought to recover the difference be- tween the dividend and the whole debt, being a sum less than the £400 secured by guaranty. On the part of the defendant it was contended, that the Plaintiffs had no right to deduct the whole sum received as a dividend from the gross amount of the debt, and to hold the de- fendant liable on the guaranty for the residue of the demand, up to the extent of the guaranty; but that the dividend received by the plaintiffs was to be applied rateably to the whole debt, as well the part covered by the guaranty as the part which was left un- covered, and consequently a 'rateable deduction was to be made for the sum recovered by the guaranty. The defendant had paid into court the sum of £118, and the jury found a verdict for the plaintiffs, with £238, 18s., damages, being the full amount of the debt remaining due to them ; leave being reserved to the defendant to move to reduce the damages, if the court should be of opinion that the rateable deduction was to be made on the principle^ con- tended for by him. And upon consideration, we are of opinion that such deduction ■ ought to be made. If the whole amount of the debt from Mayhew had not exceeded the £400, it is clear that the defendant would have received the full benefit of the dividend of 8s., 7d. in the pound, as he could not have been answierable under the guaranty for more than the remainder, after the deduction of such dividend ; 612 ' KAEDWELL V. LYDELL. [ CHAP. IX, and although the amount of the debt does in this case exceed the £400, and thereby the position of the creditor is so far altered, that one part of the debt, viz., to the extent of £400, is guaranteed, and the remained not, still there seems no reason why the applica- tion of a payment of so much in the pound upon the whole debt should in any way be affected by the collateral circumstances of the guaranty; or why such payment should not be applicable as well to the £400, guaranteed as to the part uncovered by the guaranty. For, suppose the sum which exceeds the £400, had been covered by the guaranty of another person, could it be contended that the plaintiffs might have applied the whole of the dividends to either part of the demand at their own, election, and thus have varied, at their own pleasure, the extent of the responsibility of the two sureties? In the case supposed, we think each of the sureties might have claimed a rateable deduction, out of each pound of the amount of debt to which their respective guaranties extended. And if so, the same result appears to us to follow, whether the excess beyond the £400 is covered by the guaranty of a stranger, or the creditor is contented to become his own surety for the residue, etc., and to look for payment of it to the principal debtor alone. Again, suppose in the principal case the defendant had paid the £400 to the plaintiffs before the plaintiffs had made their claim against Mayhew's estate. There could be no doubt, in that case, that if they proved the whole demand, they would have been trustees for the defendant for the dividend on the £400; or, if they had declined to prove, that the defendant might have re- ceived the dividend on that sum, if the trust-deed admitted of such an arrangement. And what difference can it make in the equitable rights of the defendant, whether such payment is made before, or is sought to be enforced against him after, the pajnnent pro rata out of the estate of the principal ? Indeed, the case seems to be decided as to the right of the surety to claim the benefit of the deduction now contended for, in a court of equity, by the case of Paley v. Field, which is in sub- stance and effect the same as the present. The Court there held, that the dividend was received on each portion of the debt, and that as to the portion of the debt covered by the guaranty, the creditor was a trustee for the surety. The Master of the Rolls there observing: " That unless this were so, it would follow that the guaranty would operate to compel the surety to contribute, in ef- fect, to indemnify Field against a loss, against which it was SEC. 11.] SHAEFFEE V. CLENDENIN. 613 expressly provided that he should not be indemnified, viz: a losa occasioned by his advancing more than the sum of £1500," the extent of the guaranty limited by the bond. The argument on the part of the plaintiffs proceeds on the ground, that they may treat the payment as a payment in gross of part of the debt ; and, consequently, have the right to deduct it, and to claim the remainder under the guaranty. And, further, it is urged that whatever may be the decision or doctrine of a court of equity, this is a question in a court of law, and the deduction cannot be supported upon any legal ground. It appears to us, however, that both these objections are an- swered by adverting to the evidence given in the cause. The pay- ment was not a payment in gross, but a payment specifically made by the trustees, and specifically received by the plaintiffs, as so much in each and every pound of the whole amount of the debt; so that there is a specified appropriation of payment to each and every part of the demand, which apears to us, in law, to operate as a !part-payment of the £400, as well as a part-payment of the residue. Upon this short ground, we think, in the present case, the same deduction may be made in law, to which the defendants appear entitled in reason and good sense, without compelling them to have recourse to a court of equity, and, accordingly, we think the pres- ent rule should be made absolute. Bute absolute. AocoBD. — Gray v. Seckham, L. R. Ch. App. 680 ; In re Baxter & Ralston, 18 N. B. R. 497 ; Pace v. Pace, 95 Va. 792. In Chemical Bank v. Armstrong, 69 Fed. Rep. 372, it was held that when an insolvent dies or his assets are administered through insolvency pro- ceedings, and the creditor holds collateral security upon which he realizes less than the amount of the debt, that he may prove his entire claim against the decedent or insolvent and apply the dividend upon the deficiency. Sec. 11. Subrogation among co-sureties. SHABFFER v. CLENDENIN. 100 Pa. 565 (1882). iSi. Hepburn, Jr., for plaintiff in error. W. F. Sadler Cwith him John Cornman), for defendant in error. Mr. Justice Sterrett delivered the opinion of the court, Oc tober 4th, 1882: 36 614 SHAEPPER V. CLEVDENIN. [ CHAP. IX. The parties to this suit were aecoininodation indorsers of a note made by Ephraim Cornman for $1,010.78. After it had been re- duced by him to $524.30, they contributed equally to the payment of that balance and lifted the note. About the time it was in- dorsed, Mrs. Corjiman, wife of the maker, united with her husband in assigning to the defendant, Clendenin, $1,200 of a judgmenf which she then held against her husband. There was a conflict of testimony as to whether the assignment was intended to in- demnify both sureties or only the one to whom it was made. Corn- man and his wife both testified it was for the benefit of both sureties, but Clendenin swore that it was for the benefit of himself alone. The question of fact thus raised was submitted to the jury, and they found that the judgment was assigned for the benefit of Clendenin alone, to secure him against loss as indorser of the Cornman note. After the note was lifted, Clendenin demanded and received from the assigned estate of Cornman a dividend of $247.75, on the portion of the judgment assigned to him as above stated. This suit was then brought by Shaeffer, his co-surety, for half of that sum, and on the trial a verdict was taken for the amount claimed, subject to the opinion of the court on the ques- tion of law raised by the points presented by both parties. Judg- ment was afterward entered for the defendant nonobstarlte vere- dicto; and thus arises the question involved in this contention. The relation of co-sureties is one of mutual trust and confidence, and from it springs their liability to contribute equally to the payment of their principal's debt, as well as their right to equally participate in any indemnity that may be obtained from him, directly or indirectly, by either or all of them. The principal is equally bound to indemnify all his sureties alike, and each of them has an equal and just claim upon him for that purpose. In every point of view it would be grossly unjust and inequitable for one surety without the consent of the others to derive any exclusive benefit from the act of their principal in providing any kind of indemnity which he might and ought to have provided for the com- mon benefit of all. This principle is clearly ruled in Agnew v. Bell, 4 Wattes 31. It may well be, that where a stranger to the trans- action, gratuitously and of his own accord, reimburses or imdemni- fies one of several sureties, the others have no equitable claim on the gratuity thus bestowed for his individual benefit without the aid or procurement of their principal; but that is not the case before us. Cornman proposed to obtain and did procure from hia wife the security that was assigned to the defendant. If the latter SEC. 12.] BKANDENBUKG V. PLYNN'S ADM. 615 had collected the dividend on the judgment before the note was paid he would have been bound to apply the amount so received to the note, and thus it would have inured to the benefit of both sureties. He was liable to his wife to the extent that the proceeds of her judgment were used in paying his debt. In the absence of anything to show that the portion of the judgment assigned was intended as a mere gratuity, we cannot presume it was a gift. On the contrary, the presumption is that he was accoimtable to her for so much at leaist of her security as, at his request, was applied to his use. If Cornman had borrowed $247.75 from his wife, or from a stranger, to reimburse Clendenin for his loss, the transac- tion, in principle, would have been precisely the same. He satis- fied part of his indebtedness to Clendenin, and at the same time incurred a corresponding liability to his wife. Practically the in- demnity in which plaintiff claims to participate was furnished to one of the sureties by their principal, and just to that extent was the liability of the latter to reimburse the other surety lessened. The plaintiff was entitled to an unqualified affirmance of his point. Judgment reversed, and judgment is now entered dn the verdict in favor of the plaintiff for one hundred and twenty-seven dollars and fifty-six cente, with interest from Oct. 6th, 1881, the date of the verdict. Accord.^ — Lidderdale v. Robinson, 2 Brock. 159; Nally v. Long, 56 Md. 567; Fishback v. Weaver, 34 Ark. 569; Hartwell v. Whitman, 36 Ala. 712; Scribner v. Adams, 73 Me. 541; Fuller v. Hapgood, 39 Vt. 617; Reinhart V. Johnson, 62 Iowa, 155; Neely v. Bee, 32 W. Va. 519; German Amer. Savings Bank v. Fritz, 68 Wis. 390; Carpenter v. Kelly, 9 0. 106; Sanders V. Weelburg, 107 Ind. 266; Owen v. MeGehee, 61 Ala. 440. If the indemnity comes from a third person the rule does not apply and such indemnity need not be shared with other sureties. Leggett v, Mc- Clelland, 39 O. S. 624. Sec. 12. Subrogatiou between successive sureties. BRANDENBURG v. FLYNN'S Adm. 12 B. Mon. (Ky.) 397 (1851). Judge Marshall delivered the opinion of the Court : An execution in favor of David Brandenburg against O. Tracy having been replevied by Tracy, with Hulseand Joseph Branden- burg as his sureties, was afterwards enjoined by Tracy on a bill 616(1 BRANDENBURG V. PLTNN'S ADM. [ CHAP. EC. in equity, in which he made his two replevin sureties defendants. M. Flynn was the surety in the injianction bond. The injunction was dissolved with damages, and Tracy in the meantime having be come insolvent and conveyed his property to be applied to pay- ment of his debts, M. Flynn or his administrator was compelled to pay the judgment on the injunction bond, including the amount due on the replevy bond with costs and damages. The present bill, filed by Flynn 's administrator, seeks to make the sureties in the replevy bond, of whom Joseph Brandenburg alone is now solvent, reimburse him, or contribute to his reimbursement for the pay- ment thus made. The bill also alleges that the executors of David Brandenburg the original creditor, had received more than $100 under a decree distributing the proceeds of Tracy's property con- veyed as above mentioned, and that said sum should go, or should have gone, to the credit of the debt on the replevy bond; and he prays a decree for the amount against said executors who are made parties. It appears, however, that within two months after the bill was filed, and before the executors were served, with process the sum referred to which had not actually come to the hands of the executors, but had been : received by another for them, was paid to the complainant and it does not appear that it ever was refused. Before the injunction was obtained by Tracy an execution on the replevy bond had been levied on his land and other property, the sale of which was directed by the creditor to be postponed until further order, and in two months afterward, and before a sale was made, the execution was stayed by the injunction. It was agreed as a fact in this case, that at the date of the injunction Tracey's property was sufficient to pay the debt. On the hearing, the Court decreed that Joseph Brandenburg should pay the complainant $74 with interest, and the costs of the suit, and there was no decree against Hulse. To reverse this decree, Joseph Brandenburg prosecutes a writ of error, claiming that the bill should have been dismissed as to him, and the com- plainant by cross error complains that the decree is erroneous in not fully reimbursing his payment of the replevy bond, etc., and also in not decreeing costs against the executors of David Branden- burg. The complainant's claim seems to be based upon a wrong ap- plication or improper extension of the principle that when a surety pays the debt he is entitled to the benefit of such securities for it as the creditor held, or else upon the principle that the surety in SEC. 12.] BBANDENBUEG V. FLYNN'S ADM. "^' the injunction bond was substantially but a co-surety with the sureties in the replevin bond, which was enjoined and entitled to contribution from them, or upon the idea that the injunction surety was the surety not only of principal but also of the sureties in the replevy bond. The decree was probably founded upon the idea that, all being substantially sureties for the same debt, all should be regarded as co-sureties, and therefore that any one who, by the insolvency of the principal, has been compelled to pay, may require the others, or such as are solvent, to contribute so as to equalize the loss. It is not even alleged that Flynn became bound in the injunction bond at the request of either of the sureties in the replevy bond, or that the injunction was obtained at their instance or with their assent. And it is certain that it operated to their injury by pro- longing their responsibility and subjecting them to hazard from which they would otherwise have been relieved by the sale of the property of their principal, then under levy for the purpose. There is no pretense for saying that Flynn was surety for them. And although he made himself conditionally responsible for the same debt for which they were bound, yet, as his obligation is con- ditional, while theirs is direct, as his obligaton is more extensive than theirs, as it was entered into not only after the date of theirs but obviously in aid of the principal alone, for a purpose in which they did not concur, and with the probable effect of injury to them, he can not, as we think, be regarded in any just sense as a co-surety with them. It is for the purpose of doing equity that the chancellor regards all persons who are bound, though by different instruments executed at different times, for the same debt or duty of the same individuals, as co-sureties bound to contribute to any loss which either may sustain. The facts of this case prove that the application of the principle here would be inequitable. But the particular facts of this case are not necessary to take it out of a rule which might otherwise embrace it. We know of no case in Which, on the ground either of contribution among co-sureties or of substitution to the securities of the creditor, a subsequent surety coming in aid of the debtor alone, without the request or concur- rence of the original sureties, and in the regular course of the remedy for coercing the debt from him alone, or for the purpose of obstructing its collection by his own separate proceeding and for his own benefit, has obtained in equity either partial or full reimbursement from the prior sureties. On the contrary, the doctrine established by the adjudged cases, 618 BEANDENBUE6 V. PLYNN'S ADM. [ CHAP. IX. and as we think in conformity with the true principles of equity, is that, if under such circumstances the prior surety is compelled to pay the debts, he thereby becomes entitled by substitution to the rights of the creditor against the subsequent surety to the whole extent of the payment made and of the obligation of the subsequent surety; which precludes all right on the part of the subsequent surety, should the debts be coerced from him, to claim reimburse- ment from the prior surety. The . cases of Parsons v. Briddoek (2 Vernon, 603) ; Patterson v. Pope (5 Dana, 244) ; Kouns v. Baiik of Kentucky (2 B. Monroe, 305) ; Bohannon v. Combs (12 B. Monroe) ; and other cases, establish or recognize the doctrine above stated, and sufficiently illustrate the principles on which it rests, and its applicability to the present case. We content our- selves, therefore, with the conclusion, that on principle and on the authority of the cases referred to, the complainant was entitled to nothing against either of the sureties in the replevy bond, but the bill as to them should have been dismissed. And, as there ap- pears to have been no necessity for bringing the executors of David Brandetiburg before the Court for the purpose of compelling pay- ment of the sum received from the assets of Tracy on account of this debt, and which the complainant received before service of process, the cross errors assigned by Flynn's administrator are wholly unavailable. Wherefore, on the writ of error of Joseph Brandenburg, the decree is reversed, and the cause remanded, with directions to •dismiss the bill with costs. Huston & Hanson, for plaintiff. Smith, for defendant. The successive surety in legal proceedings by prolonging the litigation makes himself an obstacle to a prior promisor and prevents an adjustment of the controversy and on this account is not entitled to share the in- demnity with the prior surety. Fitzpatrick's Admr. v. Hill, 9 Ala. 783; Dent V. Wait, 9 W. Va. 41; Kellar v. Williams, 10 Bush (Ky.) 217; Win- chester v. Beardin, 10 Humph. (Tenn.) 247; Moore v. Lassiter, 16 Lea (Tenn.) 630; Pierson v. Catlin, 18 Vt. 77; Fletcher v. Menken, 37 Ark. 206; McCormick v. Irwin, 35 Pa. 111. 0pp. V. Ward, 125 Ind. 241. In this case the first suretyship was that of a guaranty upon a lease, and the second was an appeal from a judgment against the lessee for rent. The Court applies the rule and urges two grounds, first, that of a possible injury to the guarantor by reason of the stay of execution, and second, a somewhat novel and exceedingly doubtful ground that the last surety is a, " volunteer " and so not entitled to subro- gation. When the prior surety consents to a stay of execution the subsequent SEC. 13.] MAURE V. HARBISON. 619 surety is entitled to share in the indemnity. Hartwell v. Smith, IS 0. S. 200 ; Scott, J. : " In regard to this question of superiority of equities, which is liable to arise in the case of prior and subsequent bonds, executed by different sureties, for distinct purposes, and both constituting securities in the hands of the creditor for the same debt, it is well settled that if the interposition of the second party, is for the benefit of the principal alone, without the sanction or assent of the first surety, who may be prejudiced thereby; as when the effect of the second bond is to prevent the enforcement of present payment from the principal, and thus to prolong the responsibility of the first surety; in such a case the equity of the first surety is superior, and he is entitled to be subrogated to the rights of the creditor as against the second. And this doctrine seems to be entirely equitable, for it is but reasonable that the benefit intended for ^he prin- cipal alone, by the second surety, should be conferred, if at all, at his own risk, and not at the risk or to the prejudice of other parties whose wishes were not consulted in the transaction. " But the rule is otherwise, where the surety in the second bond becomes bound for a purpose in which both the principal and the prior surety con- cur, in which they both have an interest, and where the assent of the prior surety is expressly given, or is clearly to be inferred from the circum- stances of the case. In such a case the last surety has a right to look for his indemnity, not only to his principal, but to such fixed securities as had been given to the creditor, when his engagement was entered into, and in the faith of which he may be presumed to -have incurred his obliga- tion. * * * By the execution of the first bond, Smith procured for his principal the discharge of the order of attachment. The creditor was thus prevented from securing his claim by a levy upon his debtor's prop- erty; the bond of Smith being substituted for such security. By the subsequent judgment against the debtor this security became fixed. It was for the interest of Smith, as well as for that of his principal that this judgment should be reversed." Sec. 13. Subrogation in favor of the creditor to securities held by the surety. MAURE V. HARRISON. 1 Eq. Cases, Abridgment, 93 (pi. 5) 1692. A bond creditor shall, in this court, have the benefit of all counter bonds or collateral security given by the principal to the surety ; as if A owes B money, and he and C are bound for it, and A gives C a mortgage or bond to indemnify him, B shall have the benefit of it to recover his debt. Accord. — Curtis v. Tyler, 9 Paige 432; Owens v. Miller, 29 Md. 144- Barton v. Croyden, 63 N. H. 417; Loehr v. Colborn, 92 Ind. 24; Selbert v. True, 8 Kas. 52; Pendery v. Allen, 50 0. S. 120; Coons v. Clifford 58 620 EX PARTE WARING. [CHAP. IX. O. S. 480; Union Nat. Bank v. Rich, 106 Mich. 319; First Nat. Bank. v. Wheeler, 12 Tex. Civ. App. 489; New London Bank v. Lee, 11 Conn. 112; Stearns v. Bates, 46 Conn. 306; Alabama Ins. Co. v. Anderson, 67 Ala. 425; Saffold v. Wade, 51 Ala. 214; Cooper v. Middleton, 94 N. G. 86; Pratt V. Thornton, 28 Me. 355; Steward v. Welch, 84 Me. 308; Price v. Trusdell, 28 N. J. Eq. 200; Tompkins v. Catawba Mills, 82 Fed. Eep. 780; Kelly v. Herrick, 131 Mass. 373; Mifflin's Appeal, 98 Pa. 150; Vail v. Foster, 4 N. Y. 312. The creditor will be subrogated notwithstanding the surety has been dis- charged by the statute of limitations, or by some act of the creditor. Helm's Adm. v. Young, 9 B. Mon. (Ky.) 94; Eastman v. Foster, 8 Met. 19; Cowan v. Telford, 5 Lea (Tenn.) 449; Long v. Miller, 93 N. C. 227; Jack V. Morrison, 48 Pa. 113. A conveyance of land encumbered by an indemnity mortgage to a bona fide purchaser without notice actual or constructive, will defeat the right of the creditor to subrogation. Carpenter v. Brown, 42 Miss. 28. In Ten Eyck v. Holmes, 3 Sandf. Ch. 428, it was held that where a surety holds a mortgage for his indemnity on the suretyship contract, and also to secure a debt owing him by the principal, that the creditor will have pri- ority in the proceeds of the mortgage. EX PARTE WARING AND INGLIS. 2 Glyn. & Jameson, 404 (1815). Bracken & Co. were manufacturers in Lancashire. Birekwood & Co., bankers in London, were the bankers of Bracken & Co. Bracken & Co. opened their account with Birekwood & Co. upon an agreement that Bracken & Co. should deposit with Birekwood & Co. such bills of exchange and notes as they, Bracken & Co., should receive in the course of their dealings; and should be at liberty to draw upon Birekwood & Co., from time to time, as their occasions might require; Bracken & Co. always leaving a surplus in the hands of Birekwood & Co., and paying a commission to Birekwood & Co. on their acceptances. Bracken & Co. also deposited with Birekwood & Co. some title-deeds of an estate, as a collateral se- curity for any advances made, or to be made, by them. On the 7th of July, 1810, a commission of bankruptcy issued against Birekwood & Co. At the time of this bankruptcy Birekwood & Co. had acceptances outstanding to the amount of £23,600; they were indebted to Bracken & Co. for cash, £6,776 ; they held short bills of Bracken & Co. to the amount of £23,800, and the title-deeds of an estate worth £2,961 ; so that the account between Bracken & Co. and Birekwood & Co. was as follows: SEC. 13.] EX PARTE WARING. 621 Birckwood & Co., Dr. £ s. d. Cash 6,776 Short bills 23,800 Title-deeds 2,961 Cr. £ s. d. Acceptance 23,600 On the 2d of August, 1810, a commission of bankruptcy issued against Bracken & Co. Birckwood 's acceptances were proved under both commissions. The bill-holders presented a petition, insisting that they were entitled to have the cash, the short bills, and the produce of the title-deeds^ applied in liquidation of their bills. The assignees of Bracken & Co. presented a petition, praying that the assignees of Brickwood & Co. should deliver to the as- signees of Bracken & Co. the short bills, and £2,961. the produce of the title-deeds, upon the assignees of Bracken & Co. indemni- fying the assignees of Brickwood & Co. against any dividends which they might be liable to pay upon the outstanding accept- ances to the amount of £16,824, the difference between the whole amount of the acceptances and the cash balance. Mr. Leach and Mr. Cooke, for the bill-holders. Sir Samuel BonHilly and Mr. Tower, for the assignees of Brick- wood & Co. The Lord Chancellor, after stating the petitions, said : The relief prayed by the bill-holders is on this alleged ground, that the short bills and the mortgages (I leave the cash out of the question for a moment), having been paid into the hands of Brickwood & Co. as a security against their acceptances, the hold- ers of such acceptances have an equity to insist that the short bills and the mortgage shall be applied specifically to the purpose of discharging these acceptances, upon the supposition that, in a transaction of this nature, the bill-holders have a right to the benefit of a contract between the party indemnifying and the party indemnified, although no parties themselves to the con- tract; or, in other words, that they who have contracted out of these deposits to pay certain debts, are liable in equity to the de- mands of the persons to whom payment is to be made ; and there is a ease in equity which goes this length. It will be sufficient for me to say, that, supposing a commission not to have issued, I do not see anything in this transaction, between persons thus dealing with their bankers, and making a deposit of this sort, which would entitle the creditors to say that they have an equity attaching on these effects ; that is to say, that, the moment a pledge 622 EX PARTE WAKING. [ CHAP. IX. is put into the hands of the banker, he becomes a surety for them to whom his acceptances are delivered. If there were such an equity, the consequences must be, that the banker and the person whose depositary he is could come to no new arangement without the consent of the creditors. It is enough for me to say, that the petition cannot be supported upon this ground. Whether there is any other ground upon which it may be supported, will depend upon the view which J have taken of this case, and the opinion which I have formed, after much thought, although not with much confidence. My view is this: On the 7th July, 1810, Brickwood & Co. became bankrupts. Bracken & Co. remained out of a state of bankruptcy until the 2d day of August, 1810. The first ques- tion then is, " What was the nature of the demand which Bracken & Co. had on Brickwood & Co. from the 7th of July to the 2d of August. Now it is impossible to deny that, if Bracken & Co. had relieved Brickwood & Co. from their acceptances, the short bills and the mortgage must have been restored to Bracken & Co. On the other hand, I take it to be equally clear that Bracken & Co. never could have any demand on the estate of Brickwood & Co. for the short bills and mortgage, without bringing into the estate of Brickwood & Co. funds equal to the claim which Brickwood & Co. had on the short bills and the deeds, not for the security of the bill-holders, but from the relative situations of Bracken & Co. and Brickwood & Co. The next question is, whether the nature of the case is in any and what respect altered by the bankruptcy? I cannot discover any difference. It appears to me that the assignees of Bracken & Co. are bound to leave the estate of Brickwood & Co. in the same situation as Bracken & Co. were themselves bound before the bank- ruptcy. On the best consideration I have been able to give to the ques- tion, with reference to the rights of all the creditors under the commission, and with regard to the bankrupts themselves, it does appear to me, that in this circuitous way the persons holding the aeeptances must be paid, not because they are demands, but be- cause it is the true way of clearing the estates. I do not know that I am clearly stating what I mean, but I think the principle on which I go is right ; and which brings me back to the opinion of Mr. Cook, on a former occasion expressed by him, though, at that time, somewhat different from mine. After this, perhaps, you will have no great difficulty in drawing out minutes that will apply to these different petitions. SEC. 13.] HAMPTON, ADM., V. PHIPPS. 623 An order was made, by which the payment was made to the bill-holders. The modification of the early English rule as shown in Ex parte Waring & Inglis (supra) has been followed in Powles v. Hargreaves, 3 De G. M. & G. 430; City Bank v. Luokie, 5 Ch. App. 773; Vaughn v. Hailiday, 9 Ch. App. 561. In re Walker, L. E. 1 Ch. 621 (1892), holds that the early case of Maure V. Harrison, (supra) is probably erroneously reported and the case con- cludes as follows : — " Under these circumstances it seems to me that there is no real authority for the proposition in question; and upon principle, I cannot see why a surety who takes from the principal debtor, a bond or indemnity at once becomes a trustee of that for the principal creditor." HAMPTON, Adm. ET AL. v. PHIPPS. 108 U. S. 260. Bill in equity by a creditor to obtain the benefit of securities held by sureties of the principal debtor. The appellee, who was complainant below, was the holder, and filed his bill in equity, on behalf of himself and the other holders of bonds, executed and delivered by Theodore D. Wagner and tors in settlement of the liabilities of two insolvent firms in which they were two of the co-partners. These bonds were dated January William L. Trenholm, to the amount of $710,000, and paid to credi- 1st, 1868. The payment of the principal . and interest of each of these bonds was guaranteed, by writing indorsed thereon, by George A. Trenholm and James T. Welsman, who were sureties merely. These sureties entered into a written agreement each with the other, dated May 3d, 1869, in which it was recited that, in becoming parties to said guaranty, they had agreed between themselves that he said George A. Trenholm should be liable for the sum ofj $400,000, and the said Jas. T. Welsman for the sum of $310,000, of the aggregate amount of the bonds, and no more, and that each would be respectively liable to the other for the full discharge of the said sum and proportion by them respectively undertaken, and that each would save and keep harmless and in- demnify the other from all claim, by reason of the said guaranty, beyond the amount or proportion respectively assumed, as stated; and it was thereby further agreed that, at any time when either of them should so require, each should, by mortgage of real estate, secure to the other more perfect indemnity, because of the said 624 HAMPTON, ADM., V. PHIPPS. [ CHAP. IX. guaranty. Thereupon, and on the same date, each executed to the other a mortgage upon real estate of which they were re- spectively the owners, the condition of which was that the mortgagor should perform on his part the said agreement of that date. The guarantors, as well as the principal obligors, had be- come insolvent before the bill was filed. -h It also appeared that, of the sum of $573,300 due on account of outstanding bonds, ■ George A. Trenholm, one of the guarantors, had paid $108,454, leaving still due from his estate to make good the proportion assumed by him, $214,532; and that the proportion for which the estate of James T. Welsman, the other guarantor, was liable, . was $250,314, of which nothing had been paid. The appellees claimed that the mortgages interchanged between the guarantors inured to their benefit as securities for the payment of the principal debt, and prayed for a foreclosure and sale for that purpose. Mr. Theodore G. Barker and Mr. W. G. De Saussure, for ap- pellants. Mr. James Lowndes, for appellee. Mr. Justice Matthews delivered the opinion of the court. After reciting the facts in the above language, he continued: The ground on which the court below proceeded seems to have been that the mortgages given by the co-sureties, each to the other, were in equity securities for the payment of the principal (iebt, which inured to the benefit of the creditors upon the principle of subrogation. The application of the principle of subrogation in favor of creditors and of sureties, has undoubtedly been frequent in the courts of equity in England and the United States, and is an ancient and familiar head of their jurisdiction. ***** And it applies equally between sureties, so that securities placed by the principal in the hands of one, to operate as an indemnity by payment of the debt, shall inure to the benefit of all. Many sufficient maxims of the law conspire to justify the rule. To avoid circuity and multiplicity of actions; to prevent the exercise of one's right from interfering with the rights of others; to treat that as done which ought to be done; to require that the burden shall be borne by him for whose advantage it has been as- sumed; and to secure equality among those equally obliged and benefited, are perhaps not all the familiar adages which may legit- imately be assigned in support of it. It is, in fact, a natural and necessary equity which flows from the relation of the parties, and SEC. 13.] HAMPTON, ADM., V. PHIPPS. 625 though not the result of contract, is nevertheless the execution of their intentions. For, when a debtor, who has given personal guaranties for the performance of his obligation, has further se- cured it by a pledge in the hands of his creditor, or an indemnity in those of his surety, it is conformable to the presumed intent of all the parties to the arrangement, that the fund so appropriated shall be administered as a trust for all the purposes, which a pay- ment of the debt will accomplish; and a court of equity accord- ingly will give to it this effect. All this, it is to be observed, as the rule verbally requires presupposes that the fund specifically pledged and sought to be primarily applied, is the property of the debtor, primarily liable for the payment of the debt; and it is because it is so, that equity impresses upon it the trust, which requires that it shall be appropriated to the satisfaction of the creditor, the exoneration of the surety, and the discharge of the debtor. The implication is, that a pledge made expressly to one is in trust for another, because the relation between the parties is such that that construction of the transaction best effectuates the express purpose for which it was made. It follows that the present case cannot be brought within either the terms or the reason of the rule; for, as the property, in re- spect to which the creditors assert a lien, was not the property of the principal debtor, and has never been expressly pledged to pay- ment of the debt, so no equitable construction can convert it by implication into a security for the creditor. It is urged that the logic of the rule would extend it so as to cover the case of all securities held by sureties for purposes of indemnity of whatsoever character and by whomsoever given. But this suggestion is founded on a misconception of the scope of the rule and the rational grounds on which it is established. Of course, if an express trust is created, no matter by whom, nor of what, for the payment of the debt, equity will enforce it, according to its terms, for the benefit of the creditor, as a cestui que trust; but the question concerns the creation of a trust, by operation of law, in favor of a creditor, in a case where there was no duty owing to him, and no intention of bounty. A stranger might well choose to bestow upon a surety a benefit and a preference, from consid- erations purely personal, in order to make good to him exclusively any loss to which he might be subjected in consequence of his suretyship for another. In such a case, neither co-surety nor cred- itor could upon any ground of privity in interest, claim to share in the benefit of such a benevolence. ********* 626 HAMPTON, ADM., V. PHIPPS. [ CHAP. IX. We are referred by counsel to the case of Curtis v. Tyler, 9 Paige 432, as an instance in which the rule has been extended to securities in the hands of a surety not derived from the principal debtor. But the fact in that case is otherwise. The question was as to the right of an assignee of a mortgage to the benefit of the guaranty of one Allen to make good any deficiency in the mort-- gaged property to pay the mortgage debt. This bond had been given to one Murray, a prior holder of the mortgage, who had as- signed it to the complainant. The court say, in the opinion, p. 436: ' ' In the case under consideration, Murray had assigned the bond and mortgage given to him, and had guaranteed the payment there- of to the assignee. He, therefore, stood in the situation of a surety for the mortgagor, when the latter procured the bond of Allen as a collateral security, or as a guaranty of the payment of his original bond and mortgage. The present holders are, there- fore, in equity entitled to the benefit of this collateral bond, in the same manner and to the same extent as if it had been given to Murray before he assigned his bond and mortgage, and had been expressly assigned by him to Beers, and by Beers to the complain- ants. " It thus distinctly appears that the bond of Allen, which was the collateral security in controversy, was procured by and de- rived from the original mortgagor, the principal debtor. We have been referred to no case which forms an exception to the rule as we have stated it. But the claim of the complainants fails for another reason. The right of subrogation, on which they rest it, is merely a right to be substituted in place of each of the co-sureties in respect to the other, in order to enforce the mortgages given by them respectively according to their terms. But the conditions of those mortgages have not been broken, and the very fact, which is supposed to con- fer the right upon the creditor to interpose — the insolvency of the sureties — has rendered it impossible for either to fasten upon the other a breach of the condition of his mortgage. As neither can pay his own proportion of the liability they agreed to divide, neither can claim indemnity against the other for an over-payment. It is entirely clear, therefore, that neither of the sureties could be, under the circumstances as they appear, entitled, as mortgagee, to foreclose the mortgage against the other. The condition of each mortgage was, that the mortgagor would perform his part of the agreement and indemnify the • mortgagee against the conse- SEC. 13.] HAMPTON, ADM., V. PHIPPS. 627 quences of a failure to do so. Unless one of them had been com- pelled to pay, and had in fact paid, an excess beyond his agreed share of the debt, there could have been no breach of the conditions of the mortgage, and consequently no right to a foreclosure and sale of the mortgaged premises. And the amount which the mort- gagor could be required to pay, as a condition of redeeming the mortgaged premises, in case of foreclosure, would be, not the amount which the mortgagee, as between himself and the common creditor, was bound to pay on account of the debt, but the amount which, as between himself and his co-surety, the mortgagor, he had paid beyond the proportion which, by the terms of the agreement between them, was the limit of his liability. The mortgages were not created for the security of the principal debt, but as security for a debt possibly to arise from one surety to the other. As to which of them has there been as yet any default? Plainly none as to either. And yet the complainants assert the right to fore- close them both — a claim that is self-contradictory, for, by the very nature of the arrangement, it is impossible that there should be a default as to both. The fact that one mortgagor had failed to perform his part of the agreement could only be on the suppo- sition that the other had not only fully performed it on his part, but had paid that excess against which his co-surety had agreed to indemnify them. There is, therefore, no right to the subroga- tion insisted on, because there is nothing to which it can apply. It results, therefore, that the complainants were not entitled to participate in the benefit of the mortgages in question, nor to share in the proceeds of the sale of the mortgaged premises; but that the same should have been applied to the payment of the other judgment and mortgage liens upon the premises, in the order of their priority. The decree of May 29th, 1879, therefore, being the one from which the appeal was taken, is reversed, and the cause remanded with directions to take such further proceedings therein, not inconsistent with this opinion, as justice and equity require. Decree reversed. 628 CHESTER V. BANK OF KINGSTON. [ CHAP. IX. Sec. 14. Eemedies of the surety in cases where he is deprived of subrogation by act of the creditor. CHESTER, ET AL. v. THE BANK OP KINGSTON. 16 N. Y. 336 (1857). Appeal from the Supreme Court. Marcus . "Wilbur, being in- debted to the Kingston Bank, procured the plaintiffs to make for his accommodation, and without any consideration, their promis- sory notes, one for $1,500, payable ninety days from the 11th of May, 1837, the other for $1,231.15, payable ninety days from April 28, 1837, which he indorsed, and delivered, before their maturity, to the bank, to hold as collateral security for his liabilities to it, whether primarily or as an indorser, informing the bank, at the time, of the character of the notes. "Wilbur was then indebted to the bank in the sum of $945, for which it held his promissory note, and was also contingently liable as the indorser of a business note for $1,530.34, made by "W. & D. Swift, payable to the order of and indorsed by Pierson & Co., and to become due November 25, 1837, which had been discounted for him. This note bore the indorsement of other persons, subsequelit to that of "Wilbur, and which he had procured for the greater security of the bank. In January, 1838, the bank commenced a suit against the maker and indorsers of the Swift note, to enforce its payment. They having interposed a defence, the bank, in September, 1838, commenced a suit against the plaintiffs in this action upon their accommoda- tion notes. In November, 1838, the defendants in the suit upon the Swift note agreed to withdraw their defence, and three of them executed a bond to the bank, conditioned to pay $1,729.35, the amount due upon that note, with the costs of the action, in eight months. This bond was given under a secret parol agreement be- tween the bank and the obligors, that the former would endeavor to collect the amount secured thereby from the makers of the ac- commodation paper, held by the bank as collateral security for "Wilbur's indebtedness, and that if it should be successful in so doing, the bond should be returned to the obligors. In January, 1842, the bank recovered judgment against the plaintiffs in this action for the amount of their notes, with inter- est and costs, and claimed to hold the judgment for the amount of Wilbur's individual note, before mentioned, with interest, and of the Swift i;ote, with interest and the costs of the suit upon it. On the 25th May, 1842, the plaintiffs satisfied the judgments by pay- SEC. 14.] CHESTER V. BANK OF KINGSTON. 629 ing $3,936 of which $2,133 was on account of the Swift note), and thereupon the bank transferred to them the Swift note and the bond given for it, as before mentioned. The plaintiffs commenced suits upon, and attempted to collect, first the bond and then the Swift note ; but having become satisfied that they could not recover, by reason of the arrangement entered into by the bank on the taking of the bond, and which, so far as the proofs showed, then first became known to them, they abandoned the suits, and filed their bill in the late Court of Chancery to recover back from the bank the amount they had paid on account of the Swift note. The cause, on the dissolution of the Court of Chancery, was tried in the Supreme Court, which, at general term in the first district, rendered judgment for the plaintiffs for the amount paid by them on accoimt of the Swift note, with interest. The defendant ap- pealed to this court. William C. Noyes, for the appellant. Samuel A. Foot, for the respondent. CoMSTOCK, J. When the bank had discounted the Swift note for Wilbur, the situation of the parties was this: Wilbur still owed the bank $945, and he was liable as indorser on that note. The bank held the respondent's accommodation notes as collateral merely to the remaining debt of Wilbur and to his indorsement of the Swift note. As to the $945, the primary fund was the liability of Wilbur. As to the sum represented in the Swift note, the lia- bility of the makers, and of Wilbur as indorser, were both primary in respect to the respondents. If immediately after the dishonor of the Swift note the respondents had paid the amount of it to the bank, they would have been entitled to subrogation, and to pro- ceed at once against makers and indorsers for their reimbursement. Prom these relations of the parties it results that the bank had no right so to deal with the Swift note as to postpone the remedies to which the respondents were entitled on being subrogated to that security. If they did so deal without the assent of the plain- tiffs, the latter were, to the amount of the note, discharged in equity if not at law. If, however, they assented to the dealing, jor have placed themselves in a situation where they cannot object, then their liability still remains unless they have some other an- swer to it. The transaction between the bank and the parties to the Swift note probably postponed the collection of the money, which that security represented, for eight months. The bank had sued the note, arid a defence had been interposed. The suit was compro- 37 630 CHESTER V. BANK OP KINGSTON. [ CHAP. IX. mised by taking a bond for the alleged debt and costs, payable in eight months, made by the same persons who were parties to the note, except D. D. Smith, one of the makers. The proof also tends to show that the bond was intended as an extinguishment of the note. Upon these facts, the bank having put it out of its power to proceed upon the primary liability until the period of extension should expire, the plaintiffs, whose liability was secondary and collateral, might have insisted that they were discharged in equity to that extent. But instead of doing so, they, in May, 1842, paid the bank in full, and took an assignment of the Swift note and the bond. After this, they cannot, in my judgment, complain that the bank thus dealt with parties to that note. I lay out of view the force of the judgments recovered against them, and on which they paid the money. It is extremely doubtful whether the facts stated would have been a defence at law. Be that as it may, it appears that the plaintiffs suffered the judgments in ignorance of the trans- action, and therefore I concede that, notwithstanding the judg- ments, they might insist in equity that they were exonerated. But, instead of taking that ground, they paid. up the bank, and took from it the primary fund in the condition it then was, and they still hold it. It is not preten Lutes <& Lutes, for defendants in error. MiNSHALL, J. The action below was a suit for contribution by one, who, as surety, claimed to have paid the debt of the principal, against two others claimed to have been co-sureties. The case was submitted in the Common Pleas on the pleadings. The court ren- dei:ed judgment in favor of the defendants, which, on error was reversed by the Circuit Court, and judgment rendered in favor of the plaintiff against one of the defendants, plaintiff in error, the other being found insolvent; and this proceeding is prosecuted to reverse the judgment of the Circuit Court. The questions arise upon the averments of the petition, which are not controverted by the answer of either defendant, except as will be presently noted. It appears from the petition that Estella Everett was in April 1879, a non-resident minor possessed of property in this State- that James T. Boyd was then appointed her trustee of the property by the Probate Court of Seneca county, and that he with J. T. Eobinson and W. H. Free, sureties, gave bond according to law for 638 ROBINSON V. BOYD. [CHAP. IX. the faithful performance of his duties; that he entered upon the performance of his trust, and there came into his hands a large amount of property; and having filed his final account, the same was settled in the Probate Court June 5, 1888, by which there was found in his hands the sum of $2,304 — which he was ordered to pay over according to law. That after the account had been filed, Boyd in August, 1887, made and delivered to Robinson, one of the sureties, a mortgage of indemnity on certain real estate; and that afterwards, on December 29, 1888, the plaintiff, Virginia E. Boyd, to further secure the payment of the amount found due Estella Everett, who was then of age, and at the request of Boyd, who was her husband, and of Estella Everett and Robinson, assigned and delivered a policy of life insurance she then owned upon the life of her husband, to be held as collateral security for the sum due on the bond. That she received no consideration for the assign- ment, and that the policy was simply pledged as surety of her hus- band. That in June, 1889, the mortgage given Robinson was foreclosed, and the sum realized, $1,236.95, was applied in part payment of the indebtedness, leaving a balance of some $1,278, still due. Boyd died insolvent in September, 1889. Afterwards Miss Everett collected the full amount of the insurance, amount- ing to $1,559, and applied the sum of $1,311 to the payment of the balance due her, including interest. The plaintiff then avers the insolvency of Free ; a demand on Robinson made August 5, 1895, for contribution, and his refusal to contribute. Robinson, by answer, denied that the policy of insurance was assigned at his request or with his knowledge. Free made a like answer; neither, however, denying any other averment of the peti- tion. Two questions arise upon the case made by the pleadings: 1. Whether there was any consideration for the pledge by the plaintiff of her policy of insurance as security for the debt of her husband, principal on the bond. 2. If so, whether she is entitled to contribution from the sureties on the bond. ****** 2. As to the second question, the claim of the defendant below is, that the plaintiff is not entitled to contribution, because there is no privity of contract between them, and that the pledge was made without his procurement or assent, and after the bond had been executed and accepted. We do not find the doctrine of con- tribution so limited, nor is it required by the principle on which it rests. It is not founded on contract, but arises from the equitable consideration that persons subject to a common duty or debtj should contribute equally to the discharge of the duty or SEC. 16.] ROBINSON V. EOTD. '' 639 debt; and so where one performs the whole duty or pays the debt, or more than this aliquot part, each of the others should contribute to him, so as to equalize the discharge of what was a common burthen. Lord Redesdale in Stirling v. Forrester, 3 Bligh 575, 596, comprises the whole reason and extent of the doctrine in the following language. " At the bar it was contended, that the rights and obligations of co-sureties are founded on a supposed contract betweeii them; and that in this transaction they entered into the obligation without communication with each other. The question depends upon equity, not upon contract; and in this case a contract is to be implied. The decision in Deering v. Winchelsea, 1 Cox. 318, proceed upon a principle of law which must prevail in all countries, that where several persons are debtors, all shall be equal. The doctrine is illustrated in that case by the practice in questions of average, etc., where there is no express contract, but equity distributes the loss equally. On the prisage of wines, it is immaterial whose wines are taken ; all must contribute equally. So it is where goods are thrown overboard for the safety of the ship; the owners of the goods saved by that act must contribute proportionally to the loss. The duty of contribution extends to all persons who are within the scope of the equitable obligation." In the application of this doctrine it is said (2 Waite's Actions and Defenses, 297 ) , " If several persons, or several sets of persons, become sureties for the same duty or debt, of, to and for the same persons, though by different instruments, at different times, and without knowledge of the obligations of each other, they will be bound to mutual contribution." ********* So that, where two or more persons are bound as sureties for the discharge of the same debt, though by different modes, its dis- charge by one, conferring a benefit on the others, raises a right in his favor for contribution. It is also suggested that there was no mutuality —^ that if Rob- inson had paid, he could not have compelled contribution on the part of the plaintiff. This we think is a misapprehension; if it were so, it would be an anomaly in the doctrine. His right to contribution against her, had he paid the debt, would have rested upon precisely the same principle of equity as does her right against him — his payment would have relieved her property from the pledge, or, what is the same thing, would have relieved her of a burthen, that was common to both of them.' The right does not depend upon the order in which each party became liable, the com- mon liability is the crucial test. The case of Monson v. Drakeley, 640 KOBINSON V. BOYD. [CHAP. IX. 40 Conn. 552. seems directly in point. There A as principal and B and C as sureties signed a note, but the fact of suretyship did not appear therefrom. The holder afterwards became dissatisfied with the solvency of the signers of the note, and the debtor. A, procured D, a third person, to sign the note under the names of the other signers, upon a consideration moving from A to D. Afterwards A became insolvent, and C was obliged to pay the note. Held, he was entitled to contribution from D. The court said, that " the right to contribution exists only among those sureties, who are liable for the same thing. But equity looks at substance more than form, and if several persons enter in to contracts of suretyship, which are the same in their legal character and opera- tion, though by different instruments, at different times, and with- out the knowledge of each other, they will be bound to mutual con- tribution." See also Whitehouse v. Hanson, 42 N. H. 9. Hence it cannot be said that there was a want of mutuality be- tween the plaintiff and Robinson — the right of either against the other, on paying the debt, was the same. It is also claimed that the plaintiff by simply pledging her prop- erty made no promise of payment, and cannot for this reason claim contribution. This, we think, is also a misapprehension. It seems to assume that there is no promise connected with a pledge; but in every pledge there is an implied promise that the property pledged may be sold and the proceeds applied in payment of the debt; and this, in substance and effect, is as much a promise of payment as that made by a surety in signing a bond, payment in any event can only be made by the payor applying his money or property to the debt. Judgment affirmed. S'PEAB, J., dissents. AccoED.^ Holding that the right of contribution depends upon principles of equity rather than implied contract. Wells v. Miller, 66 N. Y. 255; Klepper V. Borchsenius, 13 111. App. 318; Dennis v. Gillespie, 24 Miss. 581; Smith's Executors v. Anderson, 18 Md. 520; Allen v. Wood, 3 Ired. Eq. (N. C.) 386; Aldrich v. Aldrioh, 56 Vt. 324; White v. Banks, 21 Ala. 705. In the case last cited the Court says : — " Sureties have the right to claim con- tribution from each other, in proportion to the amount paid by each upon the common debt; and this right is the result, not of any implied contract between the parties, but of an acknowledged principle of natural justice, which requires that those who voluntarily assume a common burden should bear it in equal proportions." The question as to what is the basis of the liability in contribution has frequently arisen where the co-sureties are liable upon different instru- ments relating to the same transaction — and where each becomes surety SEC. 17.] MC BRIDE V. POTTER-LOVELL CO. 641 without the knowledge of the other — thus precluding all presumption of privity of contract between the co-sureties. Sehram v. Werner, 85 Hun 293. In which case it is held : — " The obligation of co-sureties to contribute to each other has grown out of that- favorite rule of equity that equality is equity. It is not at all founded upon the idea of contract between sure- ties, and may be invoked by the one against the other when he has been compelled to pay for the principal debtor, although' without any knowledge down to the time of payment or later that his co-surety has also obligated himself to pay the same debt. Nor will their becoming sureties at different times and by different instruments without the knowledge of each other affect their liability to contribute one to the other as co-sureties.'' The doctrine of contribution applies although the sureties are bound upon different instruments and in different amounts — their liability for contri- bution being in proportion to their respective liability. Armitage v. Pulver, 37 N. Y. 494; Jones v. Blanton, 6 Ired. Eq. (N. C.) 115; Young v. Shunk, 30 Minn. 503; EUesmere Brewing Co. v. Cooper, 1 Q. B. L. R. 75; Ketler v. Thompson, 13 Bush (Ky.) 287; Dugger v. Wright, 51 Ark. 232; Powell v. Powell, 48 Cal. 234. Sec. 17. Contribution between persons in the situation of a surety. McBRIDE, ET AL., v. POTTER-LOVELL CO., ET AL. 169 Mass. 7 (1897). Eutchins & Wheeler and B. L. M. Towner, for plaintiffs. Nichols i& Cobb, for defendants. Allen, J. The Potter-Lovell Company, a corporation, held cer- tain notes of the plaintiffs for sale, and it was to remit to them the proceeds, less its commissions, for selling the same. The Potter- Lovell Company also held notes of others of the defendants, which it had received from them for sale. Instead of selling the above- mentioned notes for the benefit of the several makers, the company at different times wrongfully and fraudulently pledged all of them to the Second National Bank as security for its own debts to said bank, all the notes being pledged for the same debts. The bank, being a bona fide holder for value, without notice, collected enough of these notes from time to time as they fell due, including the notes of the plaintiffs and some others, to satisfy its claims against the Potter-Lovell Company. All of the various parties whose notes were thus fraudulently pledged stood on the same footing, except that the notes were pledged at different times, and fell due and were collected at different times; and except that one of the parties — the North Star Boot & Shoe Company — demanded the return of its note from the Potter-Lovell Company before the same 642 MCBEiDE i;. pottee-lovell'co. [chap. IX. was pledged, and has never paid the same, in whole or in part, to the bank. These differences do not vary the equitable rights and liabilities of the parties as among themselves. The liability to con- tribute does not depend on a contract between the parties who are held liable to contribute, and is not affected by the fact that notes were pledged and fell due and were paid at different times, or that some of them were paid only in part, or not at all. The notes were all pledged to secure the same indebtedness. The fact that some of them fell due at earlier dates than others creates no equity in favor of those which fell due last. See American Loan & Trust Co. V. Northwestern Guaranty Loan Co., 166 Mass. 337, 44 N. E. 340. The various parties selected a common agent, and this agent used its power to place them all under a common liabil- ity, thus virtually making them all sureties for itself. It may be that under such circumstances the pledgee would prefer to hold one and exonerate another, and it would have power to do so in the first instance by proceeding to collect of one, but not of another. But where several different parties have thus been exposed to loss by the fraud of their common agent, it is more equitable that the burden of the loss should be shared pro rata. Under such circum-. stances equality is equity, without respect to the time of the ma- turity of the notes. The demand by the North Star Boot & Shoe Company for the return of its note was also immaterial. It was no more fraudulent to pledge this note after such demand than it would have been to pledge it before a demand. All the notes being pledged as security for the same indebtedness, the whole loss in consequence thereof is to be borne by all the makers in propor- tion to the amounts of the notes so pledged. Gould v. Trust Co., 6 Abb. N. C. 381 ; New England Trust Co. v. New York Belting & Packing Co., 166 Mass. 42, 43 N. E. 928, and cases there cited; "Wiggin V. Insurance Co., 18 Pick. 145, 153 ; Warner v. Morrison, 3 Allen 566 ; 1 Story Eq Jur. 493. The assignees in insolvency of the Potter-Lovell Company have no interest in the case. They have no claim arising upon any of these notes, and no duty in re- spect to the settlement of the questions involved in this suit. De- cree for the plaintiffs. In those states where stockholders of a corporation are individually liable to assessment for the payment of the corporate debts, they are deemed to be in the situation of a surety and one stockholder paying more than his proportionate share is entitled to contribution. Umsted v. Buskirk, 17 O. S. 114; Buchanan v. Meisser, 105 111. 638; Wolters v. Henningson, 114 Cal. 433. SEC. 18.] BULKELET V. HOUSE. 643 Sec. 18 A surety for a surety not liable in contribution. WILLIAM H. BULKELBY v. WILLIAM W. HOUSE. 62 Conn. 459 (1893). G. E. Perkins, with whom was J. L. Barhour, for the appellant. /. B. Buck, for the appellee. J. M. Hall, J. From the finding in this ease it appears that in 1871 John K. Williams and a son of the defendant were partners in business in the city of Hartford. They desired to increase their capital $6,000. The defendant advanced $3,000 for his son. Williams, in order to raise his share, procured the plaintiff Bulke- ley, and D. A. Rood, to execute with him a joint and several note for $3,000, payable to the Society for Savings of Hartford. Wil- liams then took the note to the Society for Savings for the purpose of obtaining the money on it. The Savings Society objected to loaning the money, on the ground that the principals of the note were all engaged in active business, and insisted that some person of means who had retired from active business should sign the note as surety for Williams, Bulkeley and Rood. Williams then left the note with the savings bank, and the next day applied to the defendant, and told him that he (Williams), Bulkeley and Rood had made a joint and several note for $3,000, which was at the Society for Savings, and that the money could not be obtained on the note without a satisfactory Surety to the principals, and re- quested the defendant to go to the savings bank, examine the note, and sign it as surety for the principals. This information by Williams was the first knowledge the defendant had, that such a note had been contemplated or executed. On the same or the following day, pursuant to Williams's re- quest, the defendant went to the savings bank, examined the note, and, being further requested by the savings bank to sign as a sur- ety for Williams, the plaintiff and Rood, and believing the state- ment of the note itself .to be true and that Williams, Bulkeley and Rood were joint and several makers and principals thereof, signed the note as surety for the apparent principals. He affixed his signature several lines below their signatures, and prefixed to his name the word " Surety." The note as formally signed was as follows : — " $3,000— Haktfohd, Feby. 21st, 1871. " On demand for value received we jointly and severally promise 644 BULKELEY V. HOUSK [ CHAP. IX. to pay to the Society for Savings, at the office of said Society in Hartford, three thousand dollars, with interest semi-annually. " John K. Williams, " William H. Bulkeley, " D. A. EooD. " Surety, Wm. W. House." Williams obtained and used tne money in his business, became bankrupt, and obtained a discharge in bankruptcy. The sum of , $400 was realized from his bankrupt estate on the note, and the balance was paid in equal shares by the plaintiff and Rood on a judgment obtained against them and the defendant by the bank. The plaintiff brings this action to compel contribution from the defendant. Upon the trial of the action in the court below the plaintiff of- fered parol evidence to prove that, although his name appeared on the note as a principal, yet he had an understanding with Williams, the first signer of the note, that he should be a surety for him. To the introduction of this evidence the defendant objected, on the ground that it did not appear that the defendant had any knowledge that either of the signers of the note had signed it, or agreed to sign it, in any other capacity than that indicated by the note itself at the time he (the defendant) signed it. The court sustained this objection and rejected the testimony, but offered to admit the same if the plaintiff could show that the defendant, had knowledge when he signed the note that either the plaintiff or Eood had in fact signed the note as surety for Williams, or that there was any agreement or understanding between the defendant and either the plaintiff or Eood that they or either of them were to sign the note as surety for Williams. The record shows that the plaintiff attempted to prove such knowledge, agreement or understanding on the part of the defend- ant, but failed, and the court expressly finds " that from all the evidence in the case the defendant had no knowledge that the plain- tiff and Rood, or either of them, had signed the note in any other capacity than as joint and several makers with Williams." The action of the court in rejecting the evidence offered by the plaintiff, and in rendering judgment for the defendant upon the facts found, are the errors assigned in the reasons for appeal. In considering the questions involved it should be borne in mind that this is an action for contribution. Contribution does not rest upon contract, but on the broad equitable principle that equality SEC. 18. J BULKELEY V. HOUSE. 645 is equity. Justice and fair dealing deinand that where one or more parties sign the same obligation and become equally obligated in precisely the same degree thereby, and stand upon the same footing as to their liabilities thereunder, one of the number shall not be compelled to assume the whole burden for his associates, but may compel them to share equally with him any loss that may occur as the result of their joint liability. In actions for contribution therefore, the principle seems now to be well established, that parol evidence is admissible to show the true relations existing be- tween the several parties bound by a written obligation. Under this rule some of the apparent principals may be shown to be sure- ties, and all apparent sureties may be shown to be principals. ;„ Such evidence is not offered to contradict or vary the contract contained in the writing, but simply to show the actual relations subsisting between the joint makers of the note and the real nature of the contract between them. Such facts are not a part of the contract and do not affect its terms, but are wholly collateral to it. To support his claim for contribution therefore, the plaintiff clearly had the right to show his true relations to the note, and this, without regard to the knowledge of the defendant, and in rejecting this evidence the court below erred. We are satisfied however, from the other facts found by that court, that the exclu- sion of this evidence did the plaintiff no harm. For, in order to hold the defendant liable for contribution, it was incumbent on the plaintiff to prove not only that he was a surety for Williams as he claimed, but also the further fact that the defendant was a co- surety with him for Williams. This latter proposition the finding of the court below distinctly negatives. If the plaintiff, was unable to prove that the defendant had agreed to become a surety for Williams only, upon what theory of justice or morals can the plaintiff demand that the defendant share with him a liability which he never assumed ? It is an unyielding principle of equity that the action of contribu- tion shall never be used to enforce an unjust and inequitable de- mand. But the plaintiff claims that the defendant, by his act of sign- ing the note as he did, legally bound himself for the same obliga- tion and to the same extent and degree that he was obligated, and that it is of no consequence, as affecting the defendant's liability in this action, whether he knew that the plaintiff was a surety for Williams or not. We are aware that it is laid down in the books 38 646 BULKELEY V. HOUSE. [OHAP. IX. that the right of contribution is not affected by the fact that the surety seeking contribution, or from whom it is sought, had no knowledge that the other had assumed the obligation of a surety for the same thing. This is undoubtedly good law. But can it be seriously contended that the facts in this case show that the de- fendant's contract and undertaking was the same as that of the plaintiff, even if it be assumed that the plaintiff's claim as to his being a surety only for "Williams is correct? Let us see what the record discloses. That the defendant in this action had no knowledge of the execution of the note in question until informed by Williams is expressly found. That he was in- formed and believed the note to be the joint and several note of Williams, Bulkeley and Rood, as it appeared to be on its face, is also found. Under such circumstances and with such information and belief he was asked by the bank to sign the note as surety for Williams, the plaintiff and Rood, the apparent joint and several makers of the note, and did so, prefixing the word " surety " to his signature. That the defendant never agreed to become a surety for Williams alone appears conclusively from the facts found by the court below. The three other parties had signeld the note and assumed the whole liability incurred by that act, without his knowledge and without any expectation on their part that he was to share their responsi- bility. Although he went to the bank at Williams's request, yet his undertaking was with the bank alone and not with Williams or the plaintiff. He did not assume the same degree of obl'j^ation that the plaintiff had assumed. The fallacy of the plaintiff's claim is in the assumption that the defendant had agreed to become a surety for the debt of Williams only. He was careful not to do this. In other words, he intended to become, and did in fact be- come, a surety for a surety, an undertaking by no means rare or infrequent in commercial dealings. As such a surety. he is not liable to contribution. " A supplemental surety for all the prior parties, including the principal as well as sureties, has entered into a still different engagement. His liability is to the holder in case of the default of all those parties. Like a guarantor he is not liable to contribute to the other sureties, because his engagement extends to their responsibility as well as to that of the maker. As between himself and the other sureties there is mutuality, and if he is subjected his only remedy is indemnity. A co-surety under- takes with another to be responsible for the debt or duty of a third person. Their obligation though several is not collateral, but SEC. 19.] . TURNER V. DAVIES. 647 is for tlie same thing." Monson v. Drakeley, 40 Conn. 559. ^, i^ As against the demand for contribution the defendant mani- festly has the same right to show his relation to the makers of the note that the plaintiff has. Both principle and precedent sanc- tion this right. Exercising this privilege, the defendant has con- clusively proved that he signed the note with the express under- standing and agreement with the payee and holder that he was to be a surety for all whose signatures preceded his own, and there- upon the court below held, properly as we think, that as to him and for the purposes of obtaining contribution from him the plain- tift' is to be treated as a principal, as he appears to be on the note itSell. :|c4!#^4e:ic^*i|i4e«:|:i|<««*«« There is no error in the judgment appealed frqm. In this opinion Fenn and Robinson, Js., concurred. Carpenter, J., dissenting. Accord. — Mulkey v. Templeton, 60 S. W. (Tex. Civ. App.) 439; Schram V. Werner, 85 Hun 293; 32 N. Y. S. 995; Hamilton v. Johnston, 82 111. 39; Adams v. Flanagan, 36 Vt. 400; Boulware v. Hartsook, 83 Va. 679; Baldwin v. Fleming, 90 Ind. 177; Hanish v. Kennedy, 106 Mich. 455; Singer Mfg. Co. v. Bennett, 28 W. Va. 16. Where a eo-surety claims that his contract is anything else than what it purports to be on its face, such as that he is a surety for and not with another, the burden is on him to show such fact. Carr v. Smith, 129 K. C. 232. It is held that where the last one of a series of accommodation indorsers adds the word " surety " to his name, the others being signed in blank, the presumption arises that the last signer is surety for the others. Sayles v. Sims, 73 N. Y. 551. Sec. 19. Contribution against one who became surety at the request of a co-surety. TURNER V. DAVIES. 2 Espinasse, 478 (1796). This was an action of assumpsit for money paid, laid out, and expended to the use of the defendant. Plea of non-assumpsit. The action was brought to recover from the defendant a moiety of the sum of £23 paid by Turner, the plaintiff, on account of the debt of one Evans, and arose under the following circumstances : — There being an execution in Evans's house, at the suit of 648 BAGOTT V. MULLEN. [CHAP. IX. Brough; to induce Brough to withdraw it, and to secure the debt Turner, the plaintiff, and Davies, the defendant, joined in a war- rant of attorney to Brough ; but Davies had joined in consequence of having been applied to by Turner, and Brough who required an additional security. Turner, the plaintiff, took a bill of sale from Evans for his own security, dated 20th January, 1796 ; and an indorsement was made on it, declaring the purpose for which it was given. Another execution having issued against Evans, the goods were taken in execution, and Turner the plaintiff had paid the whole of Brough 's demand, and now brought this actioii against the de- fendant for contribution of the moeity. Lord Kenyois'. I have no doubt, that where two parties became joint sureties fori a third person, if one is called upon and forced to pay the whole of the money, he has a right to call on his co- security for contribution: but where one has been induced so to become surety at the instance of the other, though he thereby renders himself liable to the person to whom the security is given, there is no pretence for saying that he shall be liable to be called upon by the person at whose request he entered into the security. This is the case here; Davies, the defendant, becaine security, at the instance of Turner, the plaintiff, to Brovfgh; and there is still less pretext for Turner to call on the defendant in this' action, as he took the precaution to secure himself by a bill of sale. I am of opinion the defendant ought to have a verdict. The jury found for the defendant. Gibbs and Marryat, for the plaintiff. Garrow and Barrow, for the defendant. In Hendrick v. Whittemore, 105 Mass. 23, the Court holds that "If the jury were satisfied that the defendant signed the bond as surety, at the request of or being induced thereto by the plaintiff, then the plaintiff could not recover, but if he signed at the request of the principal, though the request of the plaintiff was coupled with it, that would not be defense in this action.'' BAGOTT, ET AL. v. MULLEN. 32 Ind, 332 (1869). Ray J. Complaint against appellants, charging that. In 1864, the State, on relation of Hasselman and another, recovered a judg- ment against ohe Vandever, as sheriff, and the appellee, and the appellants, upon an official bond, a copy of which judgment is SKC. 19.] BAGOTT V. MULLEN. 649 filed with the complaint; that said Vandever is notoriously in- solvent; and that appellee has been compelled to pay said judg- ment in full, and demands contribution from the appellants. A sixth paragraph of answer was filed, which averred that process was not served personally on the appellants in the suit upon which the judgment was rendered, and that neither of the appel- lants appeared to the action; but that the appellee, without au- thority, appeared for them and suffered judgment to be entered against them, to defraud them, and entered into a special contract with the relators to pay the said judgment with funds belonging to the said defendant Vandever, then in the hands of the said ap- pellee, and, in consideration of said agreement, received an ex- tension of time for one year on said judgment; that but for such extension of time, the sum named in said judgment could have been made out of the property of said Vandever; and that said ex- tension of time was given without the knowledge of said appellants. It. is also alleged, that the appellants signed the official bond of Vandever from which the liability arose, at the request of the appellee. ■ A demurrer was sustained to this paragraph. ****** There remains, then, the averment that the appellants signed the bond of Vendever, as sheriff, at the request of the appellee. It is stated in Chitty on Contracts, that if the surety from whom contribution is claimed, became bound at the request of the surety who seeks to recover it, he is not liable; for in such a case the promise to contribute implied in law is negatived. 10th Am. Ed. 669. The cases cited as sustaining this rule, are Turner v. Davies, 2 Esp. 478 ; Thomas v. Cook, 8 B. & C. 728 ; Apgar v. Hiler, 4 Zabr. 812. In the case first cited. Turner sued Davies to recover a moiety of a sum paid by him on account of the debt of one Evans. The foundation for the claim to contribution against Davies was this: There being an execution in Evans' house, at the suit of one Brough, to induce the execution plaintiff to withdraw it. Turner and Davies joined in a warrant of attorney to Brough, but Davies joined in consequence of having been applied to by Turner, and also by Brough, who required an additional security. Turner, the plaintiff, at the time, took a bill of sale from Evans for his in- demnity. It was held, that Davies was not bound to contribute, Turner having been compelled to discharge to debt of Evans. Lord Kenyon, while resting this case specially on the ground that Turner had secured himself by a bill of sale, declared, that where 850 BAGOTT V. MULLEN. [OHAP. IX. «iie has been induced to become security at the instance of another, though he thereby renders himself liable to the person to whom the security is given, there is no pretense for saying that he shall be liable to be called upon by the person at whose request he entered into the security. The case of Thomas v. Cook, was where one signed as co-surety, at the request of a surety who agreed to save him harmless. It was held, that the promise to save harmless was a good defense to an action by the promisor. ^^^„.„,„.^;^,^^„, In Apgar v. Hiler, it was held, that where one of two sureties becomes such at the request of his co-surety and upon his promise that he will be put to no loss, he may recover the whole of what he may have been compelled to pay of his co-surety. ***** In all these cases there was something more than a mere request by one surety to another to execute the note or paper as co-surety. There was either a promise written or verbal to indemnify, or a taking of security from the principal, and from either of these cir- cumstances the courts hold such surety released from contribution. Are we, then, to follow the broad doctrine declared by Lord Kenyon, and the application of which was, in fact, uncalled for in the case before him — a case decided at nisi prius — and never here- tofore applied by any court, and hold the surety discharged by the simple request of his co-surety to sign the obligation? If a surety making the request, receive any personal benefit from the execution of the obligation — as where the money raised thereon goes into his hands, or where he has already incurred a liability upon an instrument completed by delivery — we can see a propriety in the court treating the person thus benefited and mak- ing the request, as a principal, and the person signing at such re- quest as his surety only and not liable to contribute for his benefit. So, where the signature is upon an express contract to indemnify, the consideration suports the promise and discharges the surety from the legal obligation otherwise resting upon him. But where parties standing in an equal relation to the principal sign as sureties for that principal, the one at the request of the other, we are not satisfied that any sound principle of law or equity will discharge either from the legal obligation he assumes on the face of the instrument to contribute his proportion on default of the chief obligor. Indeed, the adoption of such a rule would be, in this State, contrary to the prevailing practice and understanding of parties to such contracts and most disastrous in its consequences. SEC. 2tf.] ' ESHLEMAN V. BOLENIUS. 651 Pew officials present their bonds in person for execution by their friends as their sureties ; but the bond is executed at the request of a mutual friend; and no one has supposed that in case of loss the liability, as between the sureties, must rest upon that friend, who has simply been most active in the promotion of a common object. In our opinion, therefore, the averments of the sixth paragraph of the answer were not sufficient to constitute a defense to the action, and the demurrer was properly sustained. Judgment affirmed, with two per cent, damages and costs. E. W. Harrington and M. K. Bosehrough, for appellants. AccoBD. — McKee t. Campbell, 27 Mich. 497; Surnett v. Millsaps, 59 Miss. 333. Sec. 20. One who aids in the commissioii of the default is barred from contribution. D. G. ESHLEMAN v. E. M. BOLENIUS. 144 Pa. 269 (1891). The plaintiff brought assumpsit against his co-surety upon an administrator's bond. The defendant filed an affidavit of defense averring that the plaintiff as attorney for the administrator deposited the funds of the estate in an insolvent bank whereby the money was lost to the estate ; that the plaintiff did not exercise due care in depositing the money in this bank. A rule to show cause why judgment should not be entered for want of sufficient affidavit of defense was argued. Mr. B. Frank Eshleman, for the appellant. Mr. G. Boss Eshleman and Mr. Charles L. Landis, for appellee. Mr. Justice Green. The affidavit of defence contains a positive averment that the money received by the plaintiff for Daniel M. Harman, administrator, etc., was deposited by the plaintiff in Hen- derson's bank, and that he took therefor a certificate of deposit payable twelve months after date, with interest at four per cent. This certificate we held, in Baer's App., 127 Pa. 360, to be a loan not authorized by law, for which the administrator was personally liable. It seems now that Mr. Eshleman, who was attorney for the administrator, was also one of the sureties on his bond, and paid the loss himself. He seeks to recover in the present action one half 652 DAVIES V. HUMPHRIES. [CHAP. IX. the loss from the defendant, who was his co-surety. The defendant alleges in his affidavit of defence that the loan made to the Hender- son bank by the plaintiff was made without this knowledge or con- cSent, and that he never ratified the action of the plaintiff in mak- ing the loan. The loss of the money was the result exclusively of the unauthorized loan made by the plaintiff to the Henderson bank, and it is difficult to understand upon what principle the defendant can be held responsible for any part of the loss as between him and the plaintiff. The facts set forth in the affidavit of defence must be accepted as verity for the purposes of the case as it is now pre- sented, and upon these facts the plaintiff's own action was the sole cause of the loss. Had (the loan been made by the administrator, a different question would have arisen. But, as it is, conceding the entire good faith of the plaintiff, the case must be determined by the very familiar principle, that, where one or two innocent persons must suffer, he must bear the loss whose act or neglect has been the occasion of the suffering. Jeffers v. Gill, 91 Pa. 290. It was the plaintiff himself whose act occasioned the loss, according to the facts stated in the affidavit of defence, and therefore he can- not recover against the defendant, who was entirely innocent of any participation in the act. Judgment reversed, and procedendo awarded. In Block V. Estes, 92 Mo. 318, a deputy sheriff was surety upon the bond of the sheriff — and it was held that the deputy could not recover in con- tribution from his co-surety for defaults resulting from his own wrongful act as deputy. See also Sehofield v. Gaskill, 60 Ga. 277; Simmons v. Camp, 71 Ga. 54; Pile v. McCoy, 99 Tenn. 367. Sec. 21. When contribution may be enforced. DAVIES V. EVAN HUMPHRIES. 6 M, & W. 153 (1840). Chilton and Evans, for the plaintiff. E. V. Williams and Nicholl, for the defendant. Paeke, B. This was an action by the plaintiff against the de- fendant, his co-surety on a promissory note, dated the 27th of Oc- tober, 1827, for the sum of £300, with interest, to recover a moiety of the whole amount which he had paid to the payee. A rule granted in this case, as well as one which was granted in another action on same note against the principal, was argued in the Sittings SEC. 21.] DAVIES V. HUMPHRIES. 653 after Trinity Term. In the course of the last Term, the Court disposed of the rule in the latter action, and one of the questions in this ; having reserved for further consideration the question, at what time the right of one co-surety to sue the other for contribution arises. This right is founded not originally upon contract, but upon a principle of equity, though it is now established to be the founda- tion of an action, as appears by the cases of Cowell v. Edward, 2 B. & P. 269, and Craythorne v. Swinburne, 14 Ves. 164; though Lord Eldon has, and not without reason, intimated some regret that the Courts of law have asumed a jurisdiction on this subject, on account of the difficulties in doing full justice between tho parties. What then is the nature of the equity upon which the right of action depends? Is it that when one surety has paid any part of the debt, he shall have a right to call on his co-surety or co-sure- ties to bear a proportion of the burden, or that, when he has paid more than his share, he shall have a right to be reimbursed whatever he has paid beyond it ? or must the whole of the debt be paid by him or some one liable, before he has a right to sue for contribution at all? We are not without authority on this subject, and it is in favour of the second of these propositions. Lord Eldon, in the case of Ex parte Gifford, 6 Ves. 805, states, that sureties stand with regard to each other in a relation which gives rise to this right amongst others, that if one pays more than his proportion, there shall be a contribution for a proportion of the excess beyond the proportion which, in all events, he is to pay : and he expressly says, " that unless one surety should pay more than his moiety, he would not pay enough to bring an assumpsit against the other." And this apears to us to be very reasonable : for, if a surety pays a part of the debt only, and less than his moeity, he cannot be en- titled to call on his co-surety, who might himself subsequently pay an equal or greater portion of the debt; in the former of which cases, such co-surety would have no contribution to pay, and in the latter he would have one to receive. In truth, therefore, until the one has paid more than his proportion, either of the whole debt, or of that part of the debt which remains unpaid by the principal, it is not clear that he ever will be entitled to demand anything from the other; and before that, he has no equity to receive a contribution, and consequently no right of action, which is founded on the equity to receive it. Thus, if the surety, more than six years before the action, have paid a portion of the debt, and the principal has paid the residue within six years, the Statute of 654 DAVIES V. HUMPHRIES. [ CHAP. IX. Limitations will not run from the payment by the surety, but from the payment of the residue by the principal, for until the latter date it does not appear that the surety has paid more than his share. The practical advantage of the rule above stated is considerable, as it would tend to multiplicity of suits, and to a great inconvenience, if each surety might sue all the others for a ratable proportion of what he had paid, the instant he had paid any part of the debt. But, whenver it apears that one has paid more than his proportion of what the sureties can ever be called upon to pay, then, and not till then, it is also clear that such part ought to be repaid by the others, and the action will lie for it. It might, indeed, be more convenient to require that the whole amount should be settled before the sureties should be permitted to call upon each other, in order to prevent multiplicity of suits; indeed, convenience seems to require that Courts of equity alone should deal with the subject ; but the right of action having been once established, it seems clear that when a surety has paid more than his share, every such pay- ment ought to be reimbursed by those who have not paid theirs, in order to place him on the same footing. If we adopt this rule, the result will be, that here, the whole of what the plaintiff has paid within six years will be recoverable against the defendant, as the plaintiff had paid more than his moiety in the year 1831 ; and con- sequently the rule must be absolute to increase the amount of the verdict from £15 to £30. Bule accordingly. Accord. — Wallis v. Swinburne, 1 Welsh. H. & G. 203; Ex parte Snowden, In re Snowden, 17 Ch. Div. 44; Morgan v. Smith, 70 N. Y. 537; Camp v. Bostwiek, 20 O. S. 337; Smith v. State, 46 Md. 617; Pegram v. Riley, 88 Ala. 399; Washington v. Norwood, 128 Ala. 383; Weldemeyer v.. LandOn, 66 Mo. App. 520; Durbin v. Kuney, 19 Oregon, 71; Glasscock v. Hamilton, 62 Tex. 143; Bushnell v. Bushnell, 77 Wis. 435; Backus v. Coyne, 45 Mich. 584; Gordon v. Eixey, 86 Va. 853. If payment by a surety of his moiety extinguishes the entire debt the right of contribution arises. Stallworth v. Preslar, 34 Ala. 505; Boutin v. Etseil, 110 Wis. 276. The acceptance of the note of the surety in payment gives immediate right of contribution even though the note is unpaid. Smith v. Mason, 44 Neb. 610; Sloan v. Gibbes, 56 S. C. 480; Ryan v. Krusor, 76 Mo. App. 496; Nixon V. Beard, 111 Ind. 137. Even though the maker of the note is in- solvent. Owen V. McGehee, 61 Ala. 440. SEC. 22.] WOLMERHAUSEN V. GULLICK. 655 Sec. 22. Equitable contribution before payment, WOLMERHAUSEN v. GULLICK. L. E. 2 Ch. 514 (1893). Haldane, Q. C, and Curtis Price, for defendant, GuUick. Whitehorne, Q. C, and T. L. Wilkinson, for defendant Patton. Weight, J. This ease raises an important question with respect to which there is a remarkable absence of express authority. The plaintiff is the executrix of a person who became surety with four others for a large sum of money advanced by a bank to a company. The surety's estate is being administered in the court, and the bank- ers put in a claim as creditors for the whole amount of the guaran- tee. The plaintiff resisted the claim and succeeded in reducing it from £6,000, but it has been finally allowed for a sum of about £4,500. The plaintiff is now called upon to pay that sum, and brings this action against co-sureties for contribution. The plain- tiff has not yet paid anything. One defendant I have dismissed from the action on the ground that he is discharged by a composi- tion under sect. 18 of the Bankruptcy Act, 1883, inasmuch as it appears to me that his liability to contribute, although not ascer- tained at the time of the bankruptcy proceedings, nor included in his schedule of liabilities or in the claim or proofs, and not a debt in respect of which an adjudication of bankruptcy could have been sustained, was a liability within the meaning of sect. 37 of the act, and therefore a debt provable in the bankruptcy. Hardy v. Fothergill, 13 App. cas. 351. The principal defence of the other defendant is that the plain- tiff is not entitled to maintain this action until she has paid more than her proportion, or at any rate until she has paid her .pro- portion. The -plaintiff is willing to pay her proportion, but she insists that the actual payment of it is not a condition precedent to her right to sue, and says that at any rate she is not obliged to pay the whole in the first instance and then sue for reimburse- ment. If she is obliged to pay the whole before the actual contribu- tion from the co-surety, the business in which the testator's assets are invested will be embarrassed by the withdrawal of so much of the capital even for a short time. Obviously if a man were surety with nine others for £10,000, it might be a ruinous hardship if he were compelled to raise the whole £10,000 at once and perhaps to pay interest on the £9,000 until he could recover the £9,000 by actions or debtor summonses against his co-sureties. ^56 WOLMERHAUSEN V. GULLICIt. [dsHAP. IX. The questions are whether the action can be maintained, and what is the precise extent of he relief (if any) which can be given. By the Roman law, as it stood in the time of Justinian, sureties had, generally speaking, a right to compel the creditor to enforce payment against them pro rata only; The Superior Courts of common law in this country have never entertained any action for contribution by a surety against his co-surety, except the action for money paid, and' from the time of Davies v. Humphreys, which was decided in the year 1840, it has been treated as settled law that the surety cannot maintain this action until he has actually paid more than his own proportion, bec9,use this action assumes a debt due and payable to the plaintiff, and there is no legal debt due and pay- able, and the creditor may yet enforce payment of the whole balance from the co-surety. Nor did the courts of common law ever give in the case of co-sureties the equitable relief which they were accus- tomed to give in many other cases of joint or common liability, by compelling contribution after judgment and before execution by means of a writ of audita querela or scire facias to limit the creditor's execution to the proper share payable by the particular defendant. The following are, I believe, the only reported cases which throw any light on the subject. I begin with two, which are not cases of suretyship, but which illustrate a principle of equity apparently established in other cases of contribution and applicable to this. They are cited in Vin. Abr., tit. Contribution, from Cary's Re- ports. " (27). If a man grants a rent-charge out of all his lands, afterwards sells his lands by parcels to divers persons, and the grantee of the rent will from time to time levy the whole rent upon one of the purchasers only, he shall be eased in Chancery by a con- tribution from the rest of the purchasers, and the grantee shall be restrained by order to charge the same upon him only." " (28). Sir Edmund Morgan married the widow of Fortescue, he had his wife's lands distrained alone by the grantee of a rent- charge from the former husband, and therefore sued the grantee in Chancery, to take a rateable part of the rent, according to the lands he held subject to the distress, and notwithstanding the Lord Chief Justice Popham's Report, who thought this reasonable, the Lord Chancellor Egerton would give him on this bill no relief, but ordered that he should exhibit his bill against the rest of the tenants and grantee both, the one to show cause why they should not contribute, the other why he should not accept of the rent equally; otherwise, SEC. 22.] WOLMEBHAUSEN V. GULLICK. 657 it was no reason to take away the benefit of distress from the grantee, which the law gave him. ' ' Three eases of contribution between sureties in the time of Charles I. are reported. In Peter v. Rich, the principle was es- tablished that in equity, if one of several co-sureties is insolvent, the others contribute as if he had not been a surety. There the plaintiff had paid the whole. In Morgan v. Seymour, the principle upon which the above-cited cases from Gary, and the subsequent leading case of Dcering v. Earl of Winchelsea, were decided seems to be applied in the fullest extent to the case of co-sureties, the prin- cipal creditor being made a party to the suit and the co-surety being ordered to pay direct to the creditor. The report is as fol- lows: " The plaintiff, with Sir Edward Seymour, the defendant, being bound with Sir William St. Johns for the proper debt of the said St. Johns, to the defendant Rowland in a bond of £200 for the pay- ment of £100, and the said Rowland sued the plaintiff only on the said bond, the plaintiff seeks to have the said Seymour contribute and pay his part of the said debt and damages, the said St. Johns being insolvent. The Court was of opinion that the said Seymour ought to contribute and pay one moiety to the said Rowland, and decreed Rowland to assign over the said bond to the plaintiff and Seymour, to help themselves against the said St. Johns for the said In 1787 the leading case of Deering v. Earl of Winchelsea was decided in the Exchequer as a court of equity by Lord Chief Baron Eyre. There a surety by bond for £4,000 to the Crown had had judgment against him at the suit of the Crown for nearly the whole amount and he filed his bill for contribution against sureties bound by distinct bonds to the same creditor to secure the same liability of the same debtor, and the only point reported as argued or decided was whether there should be contribution between sureties bound under distinct contracts of suretyship without privity of contract between themselves. After deciding that the right to contribution depends primarily, not upon contract, but upon the equitable prin- ciple that " in equali jure the law requires equality — the charging one surety discharges the other, and each therefore ought to con- tribute to the onus," the Court proceeded to declare the plaintiff's right to contribution, and ordered the other sureties to pay their shares to the creditor. No similar order is to be found in any other case of sureties except Morgan v. Seymour. But it is in strict accordance with the principle of the cases cited from Cary, and it 658 WOLMERHAUSEN V. GULUCK. [OHAP. IX. is hardly possible to suppose that so obvious and important a mat- ter as the jurisdiction to make such an order could have been over- looked. It appears, from the report of the case in 2 Bos. & P., though not from the report in 1 Cox, that the Crown as creditor was made a defendant to the bill under the name of the Attorney-Gen- eral; and there could not have been any object in this except that the Crown should be controlled and prevented from enforcing its legal right inequitably against one alone of the sureties. That noth- ing so important was overlooked may be inferred from the re- markable observations of Lord Eldon, who had himself argued the case, and who said, in Craythorne v. Swinburne, (1807) : "In the case of Deering v. Earl of Winchelsea, which,! recol- lect, was argued with great perseverance, ****** it is decided that, whether they are bound by several instruments, or Hot, whether the fact is or is not known, whether the number is more or less, the principle of equity operates in both cases; upon the maxim, that equality is equity : the creditor, who can call upon all, shall not be at liberty to fix one with payment of the whole debt ; and upon the principle, requiring him to do justice, if he will not, the Court will do it for him. ****** I argued that case ; and was much dissatisfied with the whole proceeding, and with the judgment; but I have been since convinced that the decision was upon right principles. Lord Chief Justice Eyre in that case decided that this obligation of co-sureties is not founded in contract : but stands upon a principle of equity ; and Sir S. Eomilly has very ably put, what is consistent with every idea, that, after that princi- ple of equity has been universally acknowledged, then persons, acting under circumstances to which it applies, may properly be said to act under the head of contract, implied from the universality of that principle. Upon that ground stands the jurisdiction assumed by courts of law. ****** The doctrine of contribu- tion ****** stands upon this; that all sureties are equally liable to the creditor; and it does not rest with him to determine upon whom the burden shall be thrown exclusively ; that equality is equity; and, if he will not make them contribute equally, this Court will finally, by arrangement, secure that ob- ject." Several other cases of contribution between sureties occur in the books in Lord Eldon 's time, but in none of them is there any reference to the point in question. In Ex parte Gifford (1802) Lord Eldon said : *' The principal is to discharge all the obligations of all the SEC. 22.] WOIiMERHAUSEN V. GULLICK. 659 sureties : but they stand with regard to each other in a relation, which gives rise to this right among others ; that, if one pays more than his proportion, there shall be a contribution for a proportion of the excess beyond the proportion, which in all events he is to pay." " In Craythorne v. Swinburne, already cited, Lord Eldon states the right of the surety in these terms: " It has been long settled, that, if there are co-sureties by the same instrument, and the creditor calls upon either of them to pay the principal debt, or any part of it, that surety has a right in this Court, either upon a principle of equity, or upon contract, to call upon his co-surety for contribution. ' ' In Antrobus v. Davidson (1817), 3 Mer. 569, it was held that the creditor cannot bring an action quia timet against a surety to force him to set apart money to provide for the possibility of a debt becoming due from the principal debtor. In 1821, in Sterling v. Forrester, 3 Bli. 575, 590, 596, in the House of Lords, Lord Redesdale said : ' ' The principle established in the case of Deering v. Lord Winchelsea is universal, that the right and duty of contribution is founded in doctrines of equity ; it does not depend upon contract. If several persons are indebted, and one makes the payment, the creditor is bound in conscience, if not by contract, to give to the party paying the debt all his remedies against the other debtors. The cases of average in equity rest upon the same principle- It would be against equity for the creditor to exact or receive payment from one, and to permit, or by his conduct to cause, the other debtors to be exempt from payment. He is bound, seldom by contract, but always in conscience, so far as he is able, to put the party paying the debt upon the same footing with those who are equally bound. That was the principle of de- cision in Deering v. Lord Winchelsea. ****** The question depends upon equity, not upon contract; and in this case a contract is to be implied. The decision in Deering v. Lord Winchelsea proceeded on a principle of law whuch must exist in all countries, that where several persons are debtors, all shall be equal." In 1861, in Reynolds, v. Wheeler, which was an action for money paid, Erie, C. J., said : "If one surety is called on to pay the whole debt he is entitled to have contribution from his co-surety," and Williams, J., said: " It is now well established by many cases that where two parties stand in the relation of co-sureties, and one of them is applied to for more than his share, he is entitled to. call 660 WOLMEKHAUSEN V. GULLICK. [CHAP. IX, upon his companion for reimbursement." But having regard to the common law, as settled by Davies v. Humphreys, it seems plain that these "expressions must be understood as assuming actual pay- ment by the plaintiff of more than his share. ^ ^ ^^ :^ :„ ^ In 1883, in Macdonald v. Whitefield-, 8 App. Cas. 733, 750, Lord Watson, pfo cur., declared the right to contribution of a surety who had not paid, but had had judgment against him, in this form, " Entitled and liable to equal contribution inter se." In Lord Justice Lindley's work on Partnership, it is observed that " before the passing of the Judicature Acts, a right to contribution or in- demnity, arising otherwise than by special agreement, was only en- forceable at law by a person who could prove that he had already sustained a loss. But in equity it was very reasonably held, that even in the absence of any special agreement, a person who was en- titled to contribution or indemnity from another could enforce his right before he had sustained actual loss, provided loss was im- minent and this principle will now prevail in all divisions of the High Court. Therefore a person who is entitled to be thus in- demnified against loss is not obliged to wait until he has suffered, and perhaps been ruined, before having recourse to judicial aid. Thus, in the ordinary case of principal and surety, as soon as the creditor has acquired a right to immediate payment from the surety, the latter is entitled to call upon the principal debtor to pay the amount of the debt guaranteed, so as to relieve the surety from his obligation; and where one person has covenan|;ed to indemnify another, an action for specific performance may be sustained before the plaintiff has actually been damnified ; and the limit of the de- fendant's liability to the plaintiff is the full amount for which he is liable; or if he is dead or insolvent the full amount provable against his estate; and not only the amount of dividend which such estate can pay. In strict conformity with these principles, partners and directors who are individually liable to be sued on bonds and notes, which as between them and their copartners are to be re- garded as the bonds and notes of the firm or company, are entitled to call for contribution before these bonds or notes have been actually paid. So a trustee of shares liable to calls is entitled to be indemnified by his cestui que trust against them before they are paid." This statement of the law is an authority in favor of the view that some relief can be given, but it does not specify the form or limit of the relief; nor do any of the authorities cited in the notes throw any further light on the matter. Nor have I been able to obtain assistance from English or American writers on equity or SEC. 22.] WOLMERHAUSEN V. 6ULLICK. 661 on the law of suretyship. The plaintiff's difficulties have been in- creased by this, that an application by i her for leave to use the third party procedure ordinarily applicable in eases of contribu- tion or indemnity was refused in the administration action on the ground that the procedure is not available in an administration action. And even if the question had arisen upon third party procedure, nearly the same difficulties would have occurred. In this state of the authorities I think that, if the planitiff had made the creditor a defendant to the present action, I ought to have held that the allowance of the principal creditor's claim in the administration action was equivalent to a judgment against the plaintiff for the whole amount of the guarantee, and that on the precedents of Morgan v. Seymour and Deering v. Earl of Winchel- sea, the plaintiff would have been entitled to a declaration of her right to contribution and to an order upon the solvent co-surety to pay his proportion, to the principal creditor. The principal credi- tor not being a party, I think that I cannot order payment to him or directly prevent him from enforcing his judgment against the plain- tiff alone. Nor can I at present order the co-surety to pay his half to the plaintiff, for the plaintiff cannot give him a dis- charge as against the principal creditor, and this ease is not like the case of a plaintiff who merely claims indemnity, as in the cases referred to by Jessel, M. E., in Lacey v. Hill, Law Rep. 18 Eq. 182, 191, in which no question arises as to any other party. But I think that I can declare the plaintiff's right, and make a prospec- tive order under which, whenever she has paid any sum beyond her share she can get it back, and I therefore declare the plaintiff's right to contribution, and direct that, upon the plaintiff paying her own share, the defendant Gulick is to indemnify her against further payment or liability, and is, by payment to her or to the principal creditor or otherwise, to exonerate the plaintiff from liability be- yond the extent of her own share. The plaintiff must have liberty to apply in chambers and generally to apply. A point was made as to the Statutes of Limitation. The princi- pal creditor's claim was put in in 1879. But I think that I must hold that, even if the statute can begin to run before the surety has paid mo^e than his proportion, at any rate it does not run until his liability i^ ascertained, and that did not occur until 1890. There was another point made that the plaintiff ought to have proved against the estate of the co-surety Patton, but if that were so, so might the defendant Gullick. It is agreed that, if such proof could have been and had been made, it is to be taken that £200 would 39 662 tilDDELIi V. WISELL. [CHAP. IX, have been received. I think that the plaintiff and defendant should each bear half of this, and the defendant's liability to the plaintiff will be reduced accordingly by £100. I think that the plaintiff acted reasonably and in the interest of all parties in resisting and reducing the principal creditor's claim, and that the defendant ought in equity to contribute half the costs of those proceedings. I therefore give judgment in that form in favor of the plaintiff, with costs. AccoKD. — Hodgson v. Baldwin, 65 111. 532; Bowen v. Hoskins, 45 Miss. 183; Smith v. Bumsey, 33 Mich. 183; Fashby v. Mandigo, 42 Mich. 172. Sec. 23. Contrlbation as affected by the insolvency of one or more co-sureties. EDWARD W. LIDDELL v. JAMES S. WISELL. 59 Vt. 365 (1887). Bromley & Clark, for the defendant. Henry A. Harman, for the plaintiff. Ross, J. There were nine signers to the note of April 1, 1872. Between themselves each signer was principal, for the payment of one-ninth of the note, was surety to each other signer for the payment of one other ninth, and co-surety for the payment of the other seven-ninths. These relations the plaintiff had to each of the other signers. He has been compelled to pay the whole note, with an accumulation of interest and costs. He seeks contribution from the defendant. The defendant has interposed his discharge in bankruptcy, obtained before the plaintiff was compelled to make payment. As to the ninth of the note for the payment of which the plaintiff was principal, he has no right of contribution from any one, regardless of the defendant's discharge in bankruptcy. To the ninth of the note for the payment of which the defendant was principal and the plaintiff his surety, we think the discharge in bankruptcy is a bar. ************* The plaintiff and defendant were co-sureties for the payment of the other seven-ninths of the note. When the defendant obtained his discharge no contingent liability for contribution existed in favor of the plaintiff, only a contingency that such a liability might thereafter arise if the plaintiff should ultimately be obliged to bear more than his proportionate share of the common burden SEC. 24.] STEEL V. DJXON. 663 that might be cast upon him in the payment of that part of the note for which they were co-securities. The implied obligation of the de- fendant to bear his proportionate share of the common burden rest- ing on all the co-sureties is not regarded as arising from contract, but from an equitable duty which the sureties are supposed to be cognizant of, and assent to, at the time they enter into the contract of suretyship. 1 Lead. Cas. Eq. notes to Deering v. Earl of Winchelsea, 84, and cases there cited. In Mason v. Lord, 20 Pick. 447, Shaw, C. J., says: " The action of assumpsit for contribution is founded purely on equitable principles. It proceeds upon the broad ground that when two or more are subject to a loss or burden common to all, and one bears the whole or a disproportionate part, it lays an equitable claim for contribution from those who are thereby proportionably relieved. It is held in this State, and generally, that insolvency of one or more of the co-sureties is regarded in actions at law for contribu- tion, that the share to be recovered by one who has paid the whole debt is determined by the number of solvent sureties; and it has been held by other courts that removal from the State is for this purpose equivalent to insolvency. 1 Lead. cas. Eq., supra; Board- man v. Paige, 11 N. H. 431. The pro forma judgment of the County Court is reversed, and judgment rendered for the plaintiff to recover one-third of seven- ninths of the debt and costs paid by him August 6, 1885, with in- terest thereon since August 6, 1885, and his costs. Accord. — Burroughs y. Lott, 19 Cal. 125; Newton v. Pence, 10 Ind. App. 072; Sloan v. Gibb'es, 56 S. C. 480; Smith v. Mason, 44 Neb. 610. ' If some of the co-sureties are absent from the jurisdiction, they will be excluded in the contribution and the entire burden laid upon the remaining sureties. Security Ins. Co. v. St. Paul Ins. Co., 50 Conn. 233; Faurot v. Gates, 86 Wis. 569; Stewart v. Goulden, 52 Mich. 143; Currier v. Baker, 51 N. H. 613. Sec. 94. Surety seeking contribution must account to his co-sureties for indemnity furnished him by the principal. STEEL V. DIXON. 17 Ch. Div. 825 (1881). In October, 1878, William Robinson applied to his bankers for an advance of £800. The bankers consented to make the advance .864 STEEL V. DIXON. [CHAP. IX. upon the security of a joint and several promissory note for £800 signed by Robinson and four sureties. Robinson applied to G. W. Dixon and Jason Gurnej^ to become two of the sureties, and they consented to do so upon the terms of his securing them, by means of an assignment or transfer of sufficient property of his own, from any liability upon the note. The note was dated the 28th of Oc- tober, 1878, and was signed by Dixon on the 27th of October, and by Gurney on the 28th October, and was payable on the 30th of April, 1879. Afterwards Robinson procured T. A. Steel and W. Chater to act as the other sureties. Steel signed the note on the 15th of November, 1878, and Chater a day or two before. Neither Steel nor Chater when they signed the note had any knowledge of the agreement between Robinson and Dixon a'ud Gurney that he should give them security. On the 24th of February, 1879, Robin- son executed a bill of sale of his furniture to Dixon and Gurney as security for their liability on the note. The deed contained a power of sale, and it was declared that the grantees should apply the proceeds of sale in the first place in the payment of expenses, and in the second place in or towards payment of the share or shares of the moneys which should or might become payable upon or in respect of the promissory note, and which share or shares Dixon and Gurney should or might, as between themselves and Steel and Chater, be liable to pay or contribute in the event of default being made by Robinson in the payment of all or any part of the moneys due under the promissory note; and in the third place towards payment of the residue of the moneys which should or might become payable upon or in respect of the promissory note, and which residue Steel and Chater would upon default of Robin- son be primarily liable to pay or contribute, but so that Steel and Chater or either of them should have no right or power to interfere or claim any benefit in the provisions of the security; and lastly, to pay any surplus of the proceeds to Robinson. This deed was registered under the Bills of Sale Act. On the 18th of March, Robinson filed a liquidation petition. The promissory note was paid to the bankers at maturity by the four sureties, each of them contributing £200. Dixon and Gurney afterwards sold the furni- ture comprised in the deed of the 24th of February, 1879, realizing thereby about £500. This action was brought by Steel and Chater against Dixon and Gurney, claiming a declaration that Dixon and Gurney were bound to account to the plaintiifs, as co-sureties of the promissory note, for the sums received by them by the sale of the furniture; that an account might be taken of the moneys so ro- SEC. 24.] STEEL V. DIXON. 665 i ceived ; and payment to each of the plaintiffs of one-fourth part of what should appear on the taking of the account to have been re- ceived by Dixon and Gurney. The trustee in the liquidation of Robinson disputed the validity of the deed of the 24:th of February, 1879, alleging that its execu- tion by Robinson was an act of bankruptcy, and that it was void in toto, as against the trustee. The trustee was afterwards made a defendant to the action, and he delivered a statement of defence. An order was subsequently made by Fry, J., on the application of Dixon and Gurney, giving them leave to serve a notice, under rule 17 of Order XVI., of the Rules of Court, 1875, on the trustee, for the purpose of raising as between them and him the question of the validity of the deed. A notice was accordingly served by Dixon and Gurney on the trustee, and he delivered a reply, allleging the total invalidity of the deed. The plaintiffs by their reply to the trustee's defence said that they did not claim any interest in the proceeds of sale of the furniture so far as those .proceeds exceeded the £400 secured by the deed of the 24th of February, 1879, to Dixon and Gurney. It was arranged that the question should first be tried whether assuming that the bill of sale created a valid security as between Robinson and his trustee and Dixon and Gurney for £400 in favor of Dixon and Gurney, but that it did not create any security in favor of Steel and Chater, Steel and Chater were, as between them- selves and Dixon and Gurney, entitled to share in the benefit of the security. Cookson, Q. C, and Warmington, for the plaintiffs. North, Q. C. and C. Lyttleton Chubb, for Dixon and Gurney. There was nothing on the face of the promissory note to show how many persons were to sign it; Dixon and Gurney signed it before the plaintiffs. The plaintiffs knew nothing about the agreement for security when they signed the note. Dixon and Gurney expressly stipulated for the security before they signed the note. Why should not one surety be entitled to contract with the principal debtor for a benefit? Does equity require that there should be equality be- tween co-sureties when some of them take care to agree that they shall be specially favored and the others do not? (Fry, J. That would equally apply to a surety obtaining a pay- ment of money from the principal debtor). If, after each of the four sureties had paid his £200, one of them had received something from the principal debtor, could he have been compelled to bring the same into hotchpot ? If two of the eo- 666 STEEL V. DIXON. [CHAP. IX. sureties, after paying their proportion, sue the principal debtor and the other refuse to join, and the two who sue recover some- thing from the principal debtor by means either of execution .upon a judgment in the action, or by his paying after action brought, or even if he pays upon a threat of proceedings, could they be com- pelled to share the amount thus recovered with their co-sureties? Fry, J., after stating the facts, continued : The plaintiffs, by their reply to the trustee in the liquidation of Robinson, make no claim under the deed, except to the extent of the £400 which has been raised under it for the defendants Dixon and Gurney, and therefore the question on which I have now to ex- press my opinion is this, assuming that the deed created a valid security in favor of Dixon and Gurney, must it not have created a like valid security in favor of the plaintiffs, and are not the plaintiffs, as between themselves and Dixon and Gurney, entitled to share in the security? In my opinion the plaintiffs are entitled to share in the benefits secured by the deed to the defendants. In coming to that con- clusion, I base myself on the generral principle applicable to co- sureties, as established by the well-known and often-cited case of Deering v. Earl of Winchelsea, the short effect of which I take to be that, as between co-sureties, there is to be equality of the burden and of the benefit. When I say equality I do not mean necessarily equality in its simplest form, but what has been some- times called proportionable equality. The result of that case was expressed by Baron Alderson in Pendlebury v. Walker, 4 Y. & C. Ex. p. 441, in these terms, that " where the same default of the principal renders all the co-sureties responsible, all are to con- tribute ; and then the law superadds that which is not only the principle but the equitable mode of applying the principle, that they should all contribute equally, if each is a surety to an equal amount ; and if not equally, then proportionably to the amount for which 'each is a surety. " I hold, therefore, that the result of Deer- ing V. Earl of Winchelsea is to require that the ultimate burden, whatever it may be, is, as between the co-sureties to be borne by them in proportion to the shares of the debt for which they have made themselves responsible. If that be the case, it follows that each surety must bring into hotchpot every benefit which he has received in respect of the sure- tyship which he undertook, and if he has received a benefit by way of indemnity from the principal debtor, it appears to me that he is bound, as between' himself and his co-sureties, to bring that into SBC. 24.] STEEL V. DIXON. ^ 667 hotchpot, in order that it may be ascertained what is the ultimate burden which the co-sureties have to bear, so that that ultimate burden may be distributed between them, equally or proportionably, as the case may require. In coming to that conclusion, as I do upon principle, I am much strengthened by the American authorities to which my attention has been called by Mr. Cookson. Mr. Justice Story, in his Equity Juris- prudence, asserts the principle in these terms: " Sureties are not only entitled to contribution from each other for moneys paid in discharge of their joint liabilities for the principal, but they are also entitled to the benefit of all securities which have been taken by any one of them to indemnify himself against such liabili- ties." And in the case of 'Miller v. Sawyer, 30 Vt. 412, which was before the Court of Chancery in the State of Vermont, the principle is stated thus by Mr. Justice Barrett, the learned judge who deliverd the judgment of the Court. Having referred to Deering v. Earl of Winchelsea, he said: " For present purposes it is needless to cite and discuss the books and cases to any considerable extent, in which this subject is treated, and the leading principles of it applied in settling the rights and duties of parties. It may be comprehensively stated, that persons subject to a common burden stand in their relation to each other upon a common ground of interest and of right, and whatever relief, by way of indemnity, is furnished to either by him for whom the burden is assumed, enures equally to the lelief of all the common associates;" and in the course of his judgment he refers, among other cases, to that of Hall V. Robinson, 8 Iredell, 56, in which Chief Justice Euffin said : " The relief between co-sureties in equity proceeds upon the maxim that equality is equity, and that maxim is but a principle of the sim- plest natural justice. It is a plain corollary from it that, when two or more embark in the common risk of being sureties for another, and one of them subsequently obtains from the principal an in- demnity or counter-security to any extent, it enures to the benefit of all. The risk and the relief ought to be coextensive." These American decisions are, as it seems to me, exactly in point. Mr. North has urged that a difference may arise where the security taken by one co-surety is taken by virtue of a bargain entered into between him and the principal debtor at the time of his becoming surety. In my judgment that is immaterial. I think it does not affect the principle of equity to which I have referred whether the security is the result of a contract with the debtor at the time when the co-surety becomes a surety, or is voluntarily '668 STEEL V. DIXON. [CHAP. IX. given subsequently or arises in any other manner whatever, I re- peat that whatever goes to diminish the total amount of the burden must, in my judgment, be brought into hotchpot. In saying that, however, I wish to guard myself against its being supposed that this equity may not in any case be varied or departed from. Those to whose benefit the security enures may, of course, contract themselves out of the benefit, and the question may therefore well have to be considered in each case whether there has been such a contract between the co-sureties. But a contract between one surety and the debtor is not to be confounded with a contract between the co-sureties — a contract by which one co- surety renounces his equity in favor of another. In the next place, cases may arise in which one co-surety, by reason of his default in performing his duty towards the other, may estop himself from as- serting the equity which he would otherwise have had against him. Some such cases have been suggested by Mr. North in the course of his argimient. But neither of those principles appears to me to apply in the present case, because here the contract upon which the security was given was made between the debtor and two of the co- sureties, and was not communicated at the time of their contract of suretyship to the other co-sureties, and there appears to me to be nothing in the conduct of the plaintiffs (upon the assumption on which I am now proceeding) which can deprive them of the benefit ~ of their right against the co-sureties. Therefore, on this assump- tion I hold that the plaintiffs would be entitled to the benefit which they claim. Accord. — Berridge v. Berridge, 44 Ch. Div. 168; Vandiver v. Pollak, 107 Ala. 547; Simmons v. Cam.p, 71 Ga. 54; Keiser v. Beam, 117 Ind. 31; Neely v. Bee, 32 W. Va. 519; Barge v. Van Der Horck, 57 Minn. 4P7; Hoover v. Movvrer, 84 Iowa, 43; Fuller v. Hapgood, 39 Vt. C17; Teeter v. Pierce, 11 B. Mon. 399; Seribner v. Adams, 73 Me. 541; Smith v. Conrad, 15 La. Ann. 579; Sanders v. Weelburg, 107 Ind. 2G6. If the surety holds indemnity from the principal to secure his liability in suretyship, and also to secure a debt owing him by the principal, the equity of the co-surety in the indemnity is superior, and he can not apply the security to his own debt without waiving his right of contribu*-ion. Sherman v. Foster, 158 N. Y. 587. I SEC. 25.] liADD V. CHAMBER OP COMMERCE. 669 Sec. 25. Surety voluntarily paying to prevent default by principal can not recover in contribution. LADD V. CHAMBER OF COMMERCE. 37 Oreg. 49 (1900). A loan of a large sum was made by The Chamber of Commerce of Portland to enable it to erect a building; thirteen members of the organization guaranteed the repayment of the loan in the form of a bond to the creditor conditioned that the building would be com- pleted according to plans, and all liens and other claims paid, and a sinking fund created and maintained sufScient to retire the loan as it matured. To prevent default in the terms of this bond certain of the sureties advanced money borrowed from banks on their personal indorsement, and thereafter brought this action in contri- bution against the other co-sureties. For appellant there was a brief over the names of Ellis G. Hughes, in proper, and B. & E. B. Williams, with an oral argument by Messers. Hughes and Richard Williams. For respondents there was a brief over the name of Williams, Wood & Linthicum, with an oral argument by Messrs. George H. Williams and Stewart B. Linthicum. Me. Justice Bean delivered the opinion. Although the record and briefs are voluminous, and the argu- ment of counsel has taken a wide range, the real merits of the controversy lie within a narrow compass. The plaintiff's claim against Hughes is predicated upon the bond to the New York Life Insurance Co., which he, W. S. Ladd and others executed as sure- ties for the Chamber of Commerce on May, 16, 1891. The con- tention is that the sureties on such bond, in effect, undertook and agreed that they would, if their principal did not, complete, or cause to be completed, within two years, a stone building for its use and benefit, to cost not less than $480,000, according to certain plans and specifications, and, therefore, to use the language of counsel, they were " bound to procure, and, if necessary, to borrow, the money to complete this building within the time specified ; and, if a part of the sureties paid out money in the performance of this obligation, the other sureties are liable for contribution." In short, the position of the plaintiffs is that by signing the bond the sureties entered into an independent obligation upon their part to procure and furnish the necessary funds to erect and complete the building within two years from the date thereof. But we do not so under- 670 liADTl V. CHAMBER OP COMMERCE. [CHAP. IX. stand the contract of the sureties. The obligation is an ordinary penal bond, with the Chamber of Commerce as principal and certain persons as sureties, to be void in case the obligor and" principal thereof shall erect and construct a certain building on property belonging to it, at a cost of not less than $480,000, within a certain time, and pay all liens or claims which might become liens thereon. The only independent covenant on the part of the sureties is that, in case liens of any nature shall be filed against the property dur- ing the construction of the building, of after its completion, " upon notice thereof, and the request by the attorney of the said New York Life Insurance Co., ' ' they will ' ' deposit with the County Clerk of Multnomah County, Oregon, the amount of such liens and accrued costs thpreon, with ten days from the date of such notice and demand upon them," It is not pretended that there was any breach of this stipulation, and it need not be further considered in the case. 1. As to the other conditions of the bond, the agreement of the sureties is, in legal effect, to pay to the insurance company such damages as it might sustain in case of a breach thereof by their principal. They did not obligate themselves to perform such con- ditions. That was tlie contract and duty of the principal alone, and the sureties were only liable to the obligee in case it failed to per- form them. Nor did they undertake or agree to erect the building, or to pay the contractors or material men, but only to answer to the insurance company for such damages as it might sustain if the Chamber of Commerce failed to do so. Their liability was to the insurance company alone, and there is neither allegation nor proof that it ever made or had any claim for damages under the bond. But it is argued a breach of bond and consequent damages to the insurance company would have occurred if certain of the sureties had not pledged their individual credit for money with which to complete the building. This may be true, although it dpes not ap- pear, except inferentially, that the Chamber of Commerce could not have provided sufficient funds for that purpose on its own credit if it had , been requested to do so. The finance committee, composed principally of sureties on the bond, seems to have voluntarily bor-' rowed the money, and paid the obligations of the Chamber of Com merce upon their own responsibility, and without consulting their principal. But, assuming that, if they had not done so, there would have been a breach of bond, it does not follow that the action of a part of the sureties in borrowing money for the Chamber of Com- merce to use in the construction of the building would bind a nou* SEC. 25.] LADD V. CHAMBER OP COMMERCE. 671 participating surety. The borrowing sureties could determine for themselves the necessity or desirability of doing so, but they had no authority to determine that question for Hughes, and bind him by their acts. There was no agreement between the sureties by or under which such authority was granted, nor anything in the bond authorizing one surety to act in this regard for another, or the ma- jority for all. Each surety had a right to stand upon the letter of his contract, and, in case of a breach or threatened breach of the bond, to exercise his own judgement as to whether it was better for him to suffer default and answer in damages to the obligee in the bond, or to become liable on a new obligation. His cosureties could not determine that question for him. They were not his agents in any sense of the word. By signing the bond, he became liable, as before stated, to the New York Life Insurance Co. in case of a breach thereof, and not to the cosureties, except under the doctrine of contribution. Neither the obligee nor the obligor in the bond could vary or enlarge the liability of a surety; and there is cer- tainly nothing in the relation of cosureties, one to the other, which to any extent, or on any ground, authorizes one to act for or bind the other. Where one surety is compelled, by the maturity of an obligation and the failure of the principal to perform, to pay or discharge a common debt he has a right of contribution from his cosurety ; but this right rest on principles of natural justice, and not contract. There is no contractual relation between sureties enabling one to discharge a common obligation at his own pleasure and in his own way, and thereby bind the other. The whole right of contribution rests upon the doctrine of compulsory payment. Where one surety is compelled to pay, the nonpaying surety is required to contribute in proportion to the benefit received by him. But this obligation is raised by the necessity which the paying surety was under of making the payment, and therefore he can have no contribution unless his payment was compulsory. In making the payment, or otherwise assuming to discharge the common obligation, a surety acts for himself alone, and at his own risk. If his payments are made under certain eircumtances and conditions, a court of equity will require his cosurety to contribute his proportionate share of the amount of such payment. But, be- fore the right of contribution arises, the cosureties are mere stran- gers, one to the other, and one has no right or authority to make con- tracts for another. Now, in this case, there was no breach of the bond, and no claim for damages thereunder was ever made by the 672 LADD V. CHAMBER OF COMMERCE. [CHAP. IX. insurance company. Had a claim matured on the bond in favor of the insurance company, and been paid by part of the sureties; they might, perhaps, compel coutribution from the nonpaying sureties without the recovery of a judgment for breach of the bond, by making'it appear that they had no means of preventing a judgment against them. But they could not voluntarily borrow money for their principal, and bind a nonparticipating surety. .* * , * It follows that there is no ground for the interposition of a court of equity at the suit of the plaintiffs, so far as the Green and Breek notes are concerned. The decree of the coUrt below must, therefore, be reversed, and the complaint, as to the appellant, Hughes, dis- missed, and it is so ordered. Reversed. A surety may enforce contribution even though payment by him was with- out compulsion. Martin v. EUerbe's Adm., 70 Ala. 326; Bradley v. Bur- well, 3 Denio (N. Y.) 61; Hiehborn v. Fletcher, 66 Me. 209; Skrainka v. Eoham, 1^ Mo. App. 341; Hardwell v. Carroll, 90 Wis. 350; XJlasscock T. Hamilton, 62 Tex. 143. If the claim against the surety is barred by the statute of limitations, its payment will be voluntary, and recovery can not be had against the co-surety. Dussol v. Bruguiere, 50 Cal. 456; Machado v. Fernandez, 74 Cal. 362; Hatchett v. Pegram, 21 La. Ann. 722; Turner v. Thorn, 89 Va. 745; Hooper v. Hooper, 81 Md. 155; Godfrey v. Eice, 59 Me. 308; Green v. Mil- bank, 50 How. Pr. 382. SEC. 26.} SCOT V. STEPHENSON. 673 Sec. 26. Promise to indemnify surety is implied. SCOT V. STEPHENSON. 1 Levinz, 71 (1662). Assumpsit, that whereas Sanders was indebted to divers persons, and the plaintiff obliged for him, and forced to pay them ; the de- fendant being Sanders's executor, in consideration the plaintiff would forbear to sue him for the money, promised to pay him. After a verdict for the plaintiff on the issue non-assumsit, it was moved in arrest of judgment, that here was no consideration; for it does not appear that Sanders had promised or was obliged to save him harmless, and Borden and Thyn's ease in Yelverton, 40, and Smith and John's case, Owen, 132, were cited. But by the Court there was equity, that Sanders should save the plaintiff harm- less, and a suit in equity is a suit, or perhaps he migth be charged by (a writ) de plegiis acquietandis, and therefore they held the con- sideration good, and gave judgment for the plaintiff, except cause (shown to the contrary) on Monday next, &c. ISAAC APPLETON, ET AL. v. TIMOTHY BASCOM, ET AL. 3 Met. 109 (1841). This was an action of debt on a bond for the liberty of the prison limits, and was submitted to the court on the following facts : Tim- othy Baseom, one of the defendants, was administrator of the estate of Clement Baseom, and the plaintiffs were his sureties on his ad- ministration bond, which they executed with him on the 3d of No- vember; 1835. On the 21st of April, 1840, the plaintiffs jointly paid $230 for said Timothy's default, which they were bound to pay by reason of having been his sureties on said bond. 674 APPLETON V. BASCOM. [CHAP. IX. At the December term 1840, of the Court of Common Pleas, the plaintiffs recovered judgement ^gainst said Timothy, in an action for money paid, the amount which they had paid, as aforesaid, by reason of his default. In that action, they filed a specification of their claims, setting forth that they demanded $230 paid by them on account of their having signed a bond as sureties of the said Timothy as administrator of Clement Bascom. Execution issued on said judgment, and said Timothy was committed to the jail at Lowell, on the 23d of February, 1841, and on the same day he, and the other defendants, as his sureties, executed the bond on which the present action was brought. Immediately after the execution of the bond, said Timothy went without the exterior limits of the city of Lowell, without the consent of the plaintiffs, and without being dis- charged by law. He afterwards took the poor debtors' oath. J. G. Abbott, for plaintiffs. L. Williamis, for defendants. Wild, J. This is an action of debt on a bond given for the liberty of the prison limits, and the question is, whether the principal in the bond, after the giving of said bond, comcmitted an escape by going without the prison limits. And this depends on ascertaining the time when the contract was made, on which the judgment was recovered, upon which the execution issued, by virtue of which the said principal in the bond was committed to prison. The said judgment was recovered in an action for money paid by the plain- tiffs, and which they were obliged to pay,, for said principal, by reason of his breach of the condition of an administration bond, which they had executed as his sureties. The action was founded on an implied promise ; and the question is reduced to this, whether the promise was implied by law at the time wh^n the plaintiffs became sureties, or not until they paid the money, when their right of action against the defendant first ac- crued. And we think it is well settled, that when a surety becomes bound for his principal and at his request, the law implies a prom- ise of indemnity by the principal to the surety to repay the latter all the money he may be compelled to pay the creditor in consequence of his assumed liability. So the law is laid down in Wood v. Leland, 1 Met. 389, and so it was decided in Gibbs v. Bryant, 1 Pick. 121, in Howe, V. Ward, 4 Greenl. 200, and in many other cases. In Gibbs V. Bryant there had been given a written promise of indemnity, and the court say that ' ' the written contract produced contained nothing more than what the law would imply." And so the law has been well settled for a long time, although in ancient times no SEC. 26.] APPLETON V. BASCOM. 615 action at law could be maintained where a surety had paid the debt of his principal; the only remedy being to be had in a court of equity. But very many equity principles have been adopted by courts of law in modern times, allowing actions to be maintained on implied promises by the party to do what justice and equity require to be done, where there is no express contract. And the implied promise of indemnity in the present case must be con- sidered as made at the time when the plaintiifs became responsible to the creditor on the bond. The plaintiffs' liability was the consideration of the principal's implied promise of indemnity, and the promise must be considered as made at the time when that liability was assumed. And the plaintiffs, when they paid the money, might have declared on said implied promise, or for money paid, in common form, as the dec- laration was. The time of making the contract is not to be de- termined by the form of the action. The other objection made by the defendants' counsel is, that the law does not imply a promise to the plaintiffs jointly ; and the case of Gould V. Gould, 8 Cow. 168 seems to contenance this objection. But a more reasonable doctrine is maintained in other cases. Os- borne V. Harper, 5 East. 225; Pearson v. Parker, 3 N. H. 366; Jewett V. Cornforth, 3 Greenl. 107. According to the decisions in these cases, when money is paid by two or more sureties jointly for the principal, or when the money paid is raised on their joint credit, their proper remedy for reimbursement is a joint action; but if they pay separately, then their proper remedy is by separate action, and a joint action can not be maintained. In either case, however, the action, whether joint or several, is founded on the^ promise of indemnity expressly or impliedly made at the time when the sureties first became bound. When a promise is implied by law, such a promise is implied as will give to the party who may suffer damage by the breach of it a suitable and proper remedy. We consider, therefore, the promise of Bascom, to indemnify his sureties, as made to, them jointly and severally; and as it appears that they paid the money, which they became liable to pay, jointly, they were well entitled to a joint action against him for reim- bursement. Judgment for the plaintiffs. Accord. — Toussaint v. Martinnant, 2 T. E. 100; Konitzky v. Meyer, 49 N. Y. 571; Clay v. Severence, 55 Vt. 300; Katz v. Moessinger, 110 111. 372 Martin v. Ellerbe's Admr., 70 Ala. 326 ; Smith v. Sayward, 5 Me. 504 Laughridge v. Bowland, 52, Miss. 546; Cotton v. Alexander, 32 Kan. 339 676 JONES V. ORCHARD. [ CHAP. IX. Hazleton v. Valentine, 113 Mass. 472; Blake v. Downey, 51 Mo. 437; Hel- lams V. Abercrombie, 15 S. C. 110; Boyd v. Brooks, 34 Beav. 7; Badeley t. Consolidated Bank, 34 Ch. Div. 536. If the principal makes an express contract of indemnity at the time the surety enters into the undertaking, the promise implied by law will be merged in the express agreement, and recovery will be limited to the terms of the latter. Roosevelt v. Mark, 6 Johns. Ch. 266. But a special indemnity contract given by a stranger will not merge the contract implied by law. Wesley Church v. Moore, 10 Pa. 273. Sec. 27. Indemnity not available to surety upon bail bond. JONES V. ORCHARD. 16 C. B. 614 (1855). A rule nisi to reduce damages having been obtained. Finlason showed cause. G. Francis in support of rule. Jeevis, C. J., now delivered the judgment of the Court. The Court desired time to consider one point in this ease. It was an action upon certain bills of exchange, with counts for money paid and upon an account stated. A verdict having been found for the plaintiff, a rule was obtained, pursuant to leave reserved at the trial, to enter a verdict for the defendant on the last two counts, and to reduce the damages by the sum of £40, on the groimd that no implied indemnity arose out of the transaction giving rise to the' action so far as related to those counts, inasmuch as it would be contrary to public policy. We are all of opinion that the rule should be discharged. We are relieved from considering whether, if the recognizance had been estreated for the non-appearance of Orchard, the plaintiff would have had a good cause of action against him upon an implied contract of indemnity, because that question does not occur in this case. The action arises out of these circum- stances: Jones became bail for Orchard, who had been indicted at the Central Criminal Court for a conspiracy. The recognizance was conditioned that Orchard should appear in the Court of Queen's Bench on a given day, and plead to the indictment, and at his own proper costs and charges cause and procure the issue or issues that might be joined thereon to be tried, and should appear on the trial, and not. depart until he should be discharged by the Court. Or- chard (did duly appear and plead to the indictment, which was afterwards tried in his absence ; and he was convicted. By force of SEC. 27.] JONES V. ORCHARD. 677 the statute 5 & 6 W. & M. c. 1 s. 3, Orchard and his bail became liable for the cost of the prosecution. The costs were accordingly taxed, but not paid, and thereupon the recognizance was estreated, and Jones was compelled to pay the amount, £40; and he now brings this action upon an implied undertaking on the part of Orchard to indemnify him against the consequences of the obliga- tion entered into by him on his behalf. The rule was moved on the ground that a contract, in a criminal case, to indemnify the bail against the the consequences of a def aul t of the principal's appearance on the trial of the indictment, is con- trary to public policy, and therefore that the law will not presume any such contract. It is unnecessary to decide that point on the present occasion, although we are inclined to think the objection well founded, and that such a contract would be contrary to pub lie policy, inasmuch as it would be in effect giving the public the security of one person only, instead of two. But as it is admitted that there is nothing illegal or contrary to public policy in the other alternative, viz., the contract to indemnify the bail against the prosecutor's costs, we need not embrass ourselves with the consideration of whether or not the law would infer an indemnity as to the rest. An express contract to indemnify against costs would not be illegal ; and consequently there can be no reason why the law should not imply an indemnity under the circumstances. It is said that this is an action of contract, and that the con- tract, being void in part, is void altogether. The obvious answer to that argument is this — if it would be illegal to enter into such a contract as above supposed, the law will not infer that the parties have entered into an illegal contract ; and, on the other hand, if the contract to indemnify the plaintiff against the payment of costs was legal; and the plaintiff in consequence of entering into the recog- nizance was obliged to pay these costs, the law will infer a contract to indemnify to that extent. Upon the whole, we are of opinion that there is no illegality in the contract on which the plaintiff" relies, and that he is entitled to re- cover. The rule, therefpre, will be discharged. Bule Discharged. Accord. — Chipp v. Hartnoll, 4 B. & S. 414; United States v. Ryder, UO U. S. 729; Herman v. Jeuchner, 15 Q. B. Div, 561. Brett, J.: "It is illegal, because it takes away the protection which the law affords for securing the good behavior of the plaintiff. When a man is ordered to find bail, and a surety becomes responsible for him, the surety is bound at his peril to see that his principal obeys the order of the court; at least 40 678 TOM V. GOODRICH. [ CHAP. IX. this is the rule in the criminal law; but if money to the amount for which the surety is bound is deposited with him as indemnity against any loss which he may sustain by reason of his principal's conduct, the surety has no interest in taking care that the condition of the recognizance is performed." Sec. 28. No implied promise of indemnity arises against those having the benefit of the principal contract, unless such parties were originally bound in the main contract. TOM V. O. GOODRICH, ET AL. , 2 Johns. 213 (1807). This was an action of assumpsit. The declaration contained three counts : 1st. For money paid, laid out, and expended by the plaintiff for the use of 0. Barber, O. Goodrich, A, Hosford, A. Hos- ford, Jr., and G. W. Barber, in the life time of the deceased part- ners. 2d. For money had and received by the same persons to the use of the plaintiff. 3d. For money lent and advanced. The de- fendant pleaded the general issue, and gave notice that he should offer in evidence that, being a citizen of Connecticut, and residing in that State, he was discharged by the general assembly of that State in October, 1799, from all the debts owing by him individually, and as one of the said copartnership. The cause was tried at the New York sittings, the 19th of June, 1806, before Mr. Justice Thompson. From the evidence produced at the trial it appeared that the above-mentioned partners carried on business in New York, as mer- chants, under the firm of George W. Barber & Co., from June, 1796, till some time in the year 1799. During that period Oliver Barber and George W. Barber were the active partners, and conducted all the business in the city of New York, where they resided. The other partners resided in Connecticut. On the 8th of July, the 2d of August, and 22d October, 1796, the said copartnership imported goods, the property of the copartner- ship, into the city of New York, on which duties were payable to the United States, and which were regularly entered by George W. Barber, in the name of the copartnership, at the custom-house, in New York. On the 8th July, the 2d August, and the 22d October, 1796, George W. Barber as principal, and the plaintiff as his surety, executed four several bonds to the United States for the payment of the duties on the goods so imported, for George W. Barber & Co. SEC. 28.). TOM V. GOODRICH. 679 George W. Barber died in January, 1799, and A. Hosford, the 7th April, 1804. The plaintiff, as surety, paid to the United States; in February, 1800, five hundred and one dollars and seventy cents, and in August, 1804, three thousand three hundred and thirty dollars and seventy-one cents, on account of the said bonds. On the evidence of these facts, the defendants' counsel moved for a nonsuit, which was overruled by the judge and the jury found a verdict for the plaintiff. A motion was made on behalf of the defendants to set aside the verdict, and for a new trial. Hoffman, for defendant. P. Edwards, in reply. Tompkins, J. In this case two questions arise for our determina- tion. 1. Whether the promise in the declaration ought to have been stated to have been made by those partners only who were liv- ing at the time the plaintiff paid the custom-house bond? 2. Whether the defendants are at all liable to the plaintiff in this action ? There can be little doubt, that no right of action, for money paid> laid out, and expended, arises in favor of a surety, against the principal, until the former has actually paid the debt, or his body has been taken in executiouy upon a judgment therefor. Chilton v. Whiffin and Cromwell, 3 Wilson, 13. Before the plaintiff paid the first custom-house bond (at which time if ever, his right of action against the partnership accrued), George W. Barber died; and previous to the second payment, as surety for the said George W. Barber, Aaron Hosford also died. The declaration is upon the assumpsit of all the partners living at the time the bonds were executed. In the ease of Spalding and Another v. Muse and Others, 6 Term. Eep. 363, it was decided that in an action for money had and received, to the use of the plaintiffs, by three defendants, the former could not give evidence of money had and received to their use by the three defendants and another person who had since died. This doctrine proceeded upon the un- deniable principle, that to entitle himself to recover upon a promise, the plaintiff must prove a promise, either express or implied, by the parties who are alleged in the declaration to have made it. The same doctrine has been recognized in this Court, in the case of Holmes & Drake, v. De Camp, 1 Johns. 34. There can be no sub- stantial reason for applying a different principle in the action for money paid, laid out, and expended, or in a case where the promise proved is by three persons only, when the promise laid in the declar- 680 TOM V. GOODRICH. [ CHAP. IX. ation is bj- those three persons and others whom they have survived. A plea in abatement is not necessary, where the contract is stated to have been jointly made by more persons than are proved, upon the trial, to have assumed ; but the plaintiff, in such case, must fail upon the general issue of non assumpsit simul cum. As the objection to the plaintiff's right to retain the verdict, upon the ground of a variance between the contract proved and the one statetj in the declaration, might be obviated by an amendment, it be- comes necessary to decide whether the defendants are at all liable to the plaintiff for the money paid by him as security for George W. Barber, one of the partners. In my opinion they are not. The law does not imply a promise by all the persons who may be bene- fited, in consequence of payment by a surety, but only by the person whose debt is thereby discharged. In this case, upon the accep- tance by the custom-house officer of the bond of the plaintiff and Barber, the claim of the United States for the duties secued thereby became confined to that bond, and the debt, if any pre- viously existed in favor of the United States against all the part- ners for those duties, was extinguished. The previous debt to the United States then became the debt of Barber only; and when the plaintiff became his surety, the promise of indemnity and the promise upon the payment of the money were implied against Barber only. I am, therefore, of opinion, that the motion for a new trial ought to be granted; but that liberty be given to the plaintiff to amend his declaration upon payment of the costs subsequent to the de- claration. Thompson, J., was of the same opinion. Kent, C. J. I am of the same opinion, and would only add, on the merits of the case, that, as George Barber gave the bond to the United States, and became thereby responsible to the exclusion of his partners, the United States could look only to him; The plain- tiff executed the bond as his surety, and cannot charge any other person as principal. There is no privity between the parties but what arises from the bond. It would be refining upon the doctrine of implied assumpsits, and going beyond every case, to consider the surety in a bond, as having, by that act, a remedy at law against other persons, for whom the principal in the bond may have acted as trustee. George Barber, the principal here, was, as it is stated, a surety for the debt of his firm, and that debt might per- haps have arisen by their being sureties for other persons still be- hind them. We can only look to the principal and surety in the SEC. 29.] ■ CARTER V. BLACK. 681 bond to the United States, and to the obligations resulting from that relation, because the money was paid by the plaintiff in dis-, charge of that bond, and in exoneration of the personal represent- atives of George Barber, who alone were legally responsible for that debt. It may be that George Barber had received a full in- demnity from his partner when he gave the bond. We cannot, in this action, unravel the accounts, between George Barber and his partners; and to push the implied assumpsit beyond the party to the bond may lead to great difficulties and produce injustice. New trial granted. Accord. — Moore v. Stevens, 60 Miss. 809; Krafts v. Creighton, 3 Rich L. (S. C.) 273. It is held that where one member of a partnership executes his individual obligation for the benefit of the firm and represents to the surety that it is a, firm debt, the payment by the surety raise an implied promise against all the members of the firm. Purvianee v. Sutherland, 2 0. S. 478; McKee v. Hamilton, 33 O. S. 7; Burns v. Parish, 3 B. Men. (Ky.) 8; Springs v. McCoy, 122 N. C. 628; Garner v. Hudgins, 46 Mo. 399. Sec. 29t Siiretysliip contract executed without request of principal. MITCHELL CARTER v. PLEASANT BLACK. 4 Dev. & Bat. Law (N. C.) 425 (1839). This was an action of assumpsit, in which the plaintiff declared in the several money counts. Plea — the general issue; and on the trial at Rockingham, on the last circuit, before his honor Judge Bailey, the jury found the following special verdict to-wit: " that Pendleton Jones executed his bond to Thomas Smith, with the defendant his security, in the town of Madison, in this State, on the 4th of November, 1837, payable on the 15th of January, 1838, for the sum of $700 ; that said Smith resided in the county of Wythe, Virginia, and took with him the said bond to his resi- dence, and offered the same to the Sheriff of Wythe county, in part satisfaction of two executions which were then in his hands against said Smith, in favor of one Thomas J Boyd, which the plaintiff refused to receive, without the name of some responsible person who lived in the same county; that the sheriff of Wythe county made known this fact to Carter, the plaintiff, who stated that to accommodate Smith, he would join in said paper, as he knew there was no danger — that Black was good; that the plaiin- 682 CARTER V. BLACK. [ CHAP. IX. tiff then made this endorsement on said bond, to-witt This is a good bond, (signed) Mitchell Carter; which bond was then as- signed by Smith to Boyd, and received by Boyd in part satisfac- tion of the executions in his favor. They further find that said bond was lost or destroyed, and that the same was paid by the plaintiff to Boyd under an execution, on the 11th of February, 1839, against the plaintiff Carter ; and that the plaintiff commenced this suit without calling on the defendant for payment, or giving him notice thereof. " The jury further finds that by the laws of Virginia, bonds and notes are negotiable and transferable by endorsement, and that at the time of the endorsement by the plaintiff, the defendant was not present, and knew nothing of it; and that there was no ex- press request by the defendant to make such endorsement. " The jury further find, that if the law upon this statement of facts be with the plaintiff, they find all the issues in favor of the plaintiff, and assess his damages to eight hundred and ten dollars and seventy-one cents, of which sum seven hundred and seventy- seven dollars is principal money." His Honor being of opinion, upon this special verdict, that the plaintiff was not entitled to recover, gave judgment of non-suit; from which the plaintiff appealed. J. T. Moreherd, fcr the plaintiff. No Counsel appeared for the defendant in this court. Daniel, J. In the ease of Osborne v. Cunningham, decided at this term, we have said that assumpsit for money paid will not lie, where one person pays the debt of another without his request, express or implied. In the case before us, the jury have found that there was no express request. The question then is, will the law imply a request. The counsel for the plaintiff assimilates the case to that of an endorser on a bill of exchange or promissory note, who has paid all and token up the paper, or who has paid part ; he may maintain assumpsit for money paid to the use of the (acceptor of the bill or drawer of the note. Pownall v. Perrand, 113 Engl. C- L. 230. The answer to this argument is, that the en- dorser of a bill or note is considered in law a surety. A bill is an undertaking by the acceptor, and a note by the drawer, to pay the sum named at all events and each subsequent party by his in- dorsement, undertakes to pay it upon the default of any prior party. Hence by the nature of these instruments, each subse- quent party is a surety for every prior one, Theobald on Princi- pal and Surety, 180. Fell on Guarantees, 203. But the plaintiff SEC. 30.] RICE V. SOUTHGATE. 683 was not a regular indorser — he was a mere volunteer, or placed his name on the bond only at the instance of the agent of the then holder. As to compulsion of law in paying the debt, it was a compulsion of the plaintiff's own seeking, which arose out of his own voluntary act, and the case is noti like Bxall v. Partridge, 8 T. R. 308, when the money was paid. by the party under com- pulsion of law, to redeem his property from a distress not of his own creation, Gumming v. Forrester, 1 Maul. & Selw. 494. The defendant has derived no benefit from the act of the plaintiff; the bond is not extinguished, and although said to be lost, a court of law cannot take an indemnity from the plaintiff. We think, in this case, the law does not imply a request , to pay ; and the judgment must be affirmed. Judgment affirmed. AccoBD. — Executors of White, 30 Vt. 336; McPherson v. Meek, 30 Mo. 345. Contra. — Hecker v. Mahler, 64 O. S. 398. Sec. 30. When right of indemnity arises. WM. W. RICE V. JOHN P. SOUTHGATE. 16 Gray 142 (1860). The case was submitted to the judgment of the court upon the following facts: The lot was bought by the tenant in 1846, and has been since occupied by him with his family as a residence, and is worth at least two thousand dollars above a mortgage thereon. On the 16th of May 1853, the tenant, with Charles White and Eli Thayer, made a joint and several promissory note for $1,000, which was paid by White, on the 14th of May 1859; and on the 16th of November 1854 made a note for $1,166.66, which was signed by White and Thayer as sureties, and paid, with interest, by White on the 21st of July 1859; and White proved the sums so paid, amounting to $1,821.94, against the tenant's estate in in- solvency. T. L. Nelson, for the demandant. P. C. Bacon, for the tenant. BiGELOW, C. J. The question in this case is, whether, on the facts stated, there are any debts proved against the estate of the tenant in insolvency to the amount of eight hundred dollars, which 684 EICE V. SOUTHGATE. [CHAP. IX. were contracted prior to the passage of St. 1855, c. 238, under which he claims to hold the demanded premises as a homestead. If there are, then it is clear that he cannot avail himself of the ex- emption secured by that statute ; because by the third section it is provided that no property shall be exempted from levy on execu- tion for a debt contracted previously to the passage of the act ; and all the estate of the debtor, which might have been taken on ex- ecution against him at the time of the commencement of the pro- ceedings in insolvency, vested in his assignee under St. 1838, c. 163, § 5. Woods V. Sandford, 9 Gray, 16. Upon well settled principles, it is clear that the contract of a principal with his surety to indemnify him for any payment which the latter may make to the creditor in consequence of the liability assumed takes eifect from the time when the surety becomes re- sponsible for the debt of the principal. It is then that the law raises the implied contract or promise of indemnity. No new con- tract is made when the money is paid by the surety, but the pay- ment relates back to the time when the contract was entered into by which the liability to pay was incurred. The payment only fixes the amount of damages for which the principal is liable under his original agreement to indemnify the surety. Gibbs v. Bryant, 1 Pick. 121. Appleton v. Baseom, 3 Met. 169. The same prin- ciple is adopted in our insolvent law, in which it is provided that, in case of the payment of any sum by any surety of a debtor in any contract whatsoever, the debt shall be considered as contracted at the time when the contract on which such payment has been made was originally entered into. St. 1838, c. 163, § 3. Gen. Sts. c. 118 § 25. It follows that the real estate occupied by the insolvent debtor was not exempted from levy on execution at the suit of his surety who entered into the contract on which he has been held liable to an amount exceeding eight hundred dollars prior to the passage of the act under which the tenant now claims a homestead right. It therefore vests in his assignee. Judgment for the demandant. Accord. — Martin v. EUerbe's Adm., 70 Ala. 326; Harper v. McVeigh, 82 Va. 751; Polhill v. Brown, 84 Ga. 338; ZoUiekoffer v. Seth, 44 Md. 359; Child v. Powder Works, 44 N. H. 354; Hook v. Richeson, 115 HI. 431; Davis V. Hoopes, 33 Miss. 173; In re Stout, 109 Fed. Eep. 794. SEC. 31.] BARCLAY V. GOOCH. 685 Sec. 31. Pi-yment ty tte surety or transactions equivalent to pay- ment BAECLAY, ET AL. v. GOOCH. 2 Espinasse, 571 (1797). This was an action ot assumpsit brought to recover the sum of £50 on the ground of its being money paid to the use of the de- fendant. The plaintiffs were brewers, and the defendant was a publican, who rented one of their houses, at which a benefit club was held; the members of the club distrusting the credit of Gooch (the then landlord) the plaintiffs became his security for the amount of the subscription-money contained in the box: this amounted to £50. Gooch became insolvent, and the club called upon the plaintiffs for the money as his security, and took their note of hand for it, payable with interest. The question was, Whether this was a payment of money to the use of the defendant, on which the plaintiffs could recover, on that count of the declaration? Mingay for the defendant contended, that the giving a note for money due by the defendant to third persons, was not sufS- cient to maintain an action for money paid, laid out, and expended to the defendant's use. < Lord Kenyon held, that the club having consented to take the, note from the plaintiffs, it was as payment to them of the money due by the defendant ; it was payment of money to his use, and so the action was maintainable. The plaintiffs accordingly had a verdict. Erskine and Praed, for the plaintiffs. Mingay, for the defendant. In the next term Mingay moved for a new trial ; but the Court agreed with his Lordship, and refused a rule. AccoKD.— Howe v. Buffalo, N. Y. & Erie E. R. Co., 37 N. Y. 297; Stub- bins V. Mitchell, 82 Ky. 535; Knighton v. Curry, 62 Ala. 404; Rizer v. Callen, 27 Kan. 339; Bausman v. Credit Guarantee Co., 47 Minn. 377; Stan- ley V. McElrath, 86 Cal. 449; Kellar v. Boatman, 49 Ind. 104; Sapp v. Aiken, 68 Iowa, 699. No cause of action arises till the promisor either makes payment or does some act equivalent to payment. Stearns v. Irwin, 62 Ind. 558; Barth v. Graf, 101 Wis. 27; Minich v. Huff, 41 Neb. 516; Nally v. Long, 56 Md, 567. 686 EEED V. NORRIS. [ CHAP. IX. It is not necessary that the surety pay the entire debt, but he may en- force his right of indemnity upon a part payment to the extent of the amount paid. Bullock v. Campbell, 9 Gill (Md.) 182; Hall v. Hall, 10 Humph. (Tenn.) 352; Wilson v. Crawford, 47 Iowa, 409. Sec. 32. Surety can recover only the amount actually paid. REED V. NORRIS. 2 Mylne & Craig 362 (1837). Richard Bevan the younger, being indebted to his father, Richard Bevan the elder, in the sum of £1,000, gave to his father a bond in the penal sum of £2,000, dated the 22d of April, 1797, and conditioned to be void upon payment of the sum of £,1000 with interest at 5 per cent. Richard Bevan the elder being, at a subsequent period, indebted to Lord Vernon, in the sum of £500, prevailed upon his son, Richard Bevan the younger, to join him, as his surety, in a bond to Lord Vernon in the penal sum of £1,000, dated the 24th of August, 1801, and conditioned to be void upon payment of £500, and interest. Upon that occasion, the following endorsement was made upon the bond for £1,000, and signed by both father and son: "Whereas the within bounden Richard Bevan hath, on the 24th of August 1801, become jointly and severally bound, in a certain bond or writing obligatory, to the Right Honorable Lord Vernon, in the penal sum of £1,000, conditioned for the payment of £500 with interest ; and whereas the said sum of £500 is the proper debt of the said Richard Bevan the elder, and the said Richard Bevan the younger is the surety of the said Richard Bevan the elder : it is, in consideration thereof, agreed that the said Richard Bevan the younger shall not be called upon to pay the within mentioned principal sum of £1,000, until the said Richard Bevan the elder shall have paid and satisfied all principal money and interest due on the said bond so given to Lord Vernon and delivered the said bond, cancelled, to the said Richard Bevan the younger; as witness our hands this 24th of August, 1801." Mr. Wigram and Mr. Teed, for the plaintiff. Mr. Wakefield and Mr. Lovat, for the defendant John Norris. The Lord Chancellor: In this case the object is to obtain payment, on the part of an obligee in a bond for £1,000, of what is due for principal and interest upon that bond. The demand SEC. 32.] REED V. NORRIS. 687 is resisted on various grounds. It appears that there being a bond for £1,000 in which the son was obligor, and which was given to the father as obligee, a debt arose between the father and Lord Vernon, and the father became indebted to Lord Vernon in £500 secured by bond, and the son became surety in that bond; and then this memorandum of an agreement between the father and son, was endorsed on the bond for £1,000. (His Lordship read the memorandum.) ************ * The other question is, how far the representatives of the son, the surety, having come to an arrangement with Lord Vernon's executors, by which the bond for £500 has been got rid of and discharged, are entitled, as against the father's estate, to demand more than they have actually paid to Lord Vernon's executors in exoneration of the liability of the son's estate upon the bond for £500. Now, if there had been no authority upon this subject, I should have found very little difficulty in making a precedent for de- ciding that, under these circumstances, the surety is not entitled to demand more than he has actually paid. I take the case of an agent. Why is an agent precluded from taking the benefit of purchasing a debt which his principal was liable to discharge? Because it is his duty on behalf of hs employer, to settle the debt upon the best terms he can obtain ; and if he is employed for that purpose, and is enabled to procure a settlement of the debt for any thing less than the whole amount, it would be a violation of his duty to his employer, or, at least, would hold out a temptation to violate that duty, if he might take an assignment of the debt, and so make himself a creditor of his employer to the full amount of the debt which he was employed to settle. Does not the same duty devolve on a surety? He enters into an obligation and be- comes ■ subject to a liability, upon a contract of indemnity. The contract between him and his principal is, that the principal shall indemnify him from whatever loss he may sustain by reason c% incurring an obligation together with the principal. It is on a contract for indemnity that the surety becomes liable for the debt. It is by virtue of that situation, and, because he is under an obli- gation as between himself and the creditor of his principal, that he is enabled to make the arrangement with that creditor. It is his duty to make the best terms he can for the person in whose behalf he is acting. His contract with the principal is indemnity. Can the surety, then, settle with the obligee, and instead of treat- that settlement as payment of the debt, treat it as an assignment 688 \. REED V. NOEBIS. [ CHAP. IX. of the whole debt to himself, and claim the benefit of it, as such, to the full amount; thus relieving himself from the situation in which he stands with his principal, and keeping alive the whole debt? As I have said, I would make a precedent if there were none; but it is very satisfactory to me to find that the question came before Lord Eldon, and that he decided it in the cases which have been cited, viz.. Ex Parte Rushforth, 10 Ves. 420, and Butcher v. Churchill, 14 Ves. 567. Lord Eldon did not decide those cases upon particular grounds of equity between the parties ; but he lays it down as what he considered to be the rule of this Court, that where a surety gets rid of and discharges an obligation at a less sum than its full amount, he cannot, as against his principal, make himself a creditor for the whole amount ; but can only claim, as against his principal, what he has actually paid in discharge of the common obligation. I am clearly of opinion, therefore, that the representatives of Richard Bevan the younger can in this case claim only the amount which was actually paid in satisfaction of the bond given to Lord Vernon. AccoED.^ Stanford v. Connery, 84 Ga. 731; Waldrip v. Black, 74 Cal. 409; Child v. Eureka Powder Works, 44 N. H. 354; Coggeshall v. Euggles, 62 111. 401; Delaware L. & W. R. R. Co. v. Oxford Iron Co., 38 N. J. Eq. 151; Prlee v. Horton, 4 Tex. Civ. App. 526; Martin v. Ellerbe's Admr., 70 Als,. 326; Martindale v. Brock, 41 Md. 571; Thomas v. Carter, 63 Vt. 609; Cranmer v. McSwords, 26 W. Va. 412. If the surety turns out property to the creditor in settlement of the debt he can recover as indemnity only the actual value of the property. Bonney v. Seely, 2 Wend. 481; Feamster v. Withrow, 12 W. Va. 611; Ken- drick v. Forney, 22 Gratt. 748; Jordan v. Adams, 7 Ark. 348. The promisor may recover from the principal his necessary expenses in- curred in the collection. Thompson v. Taylor, 72 N. Y. 32. If surety has been sued by the creditor he may recover the costs of the litigation from the principal. Hulett v. SouUard, 26 Vt. 295; Downer v. Baxter, 30 Vt. 467; Backus v. Coyne, 45 Mich. 584; Gross v. Davis, 87 Tenn. 266. If judgment is obtained against the surety and execution levied upon his property, he can not recover the costs of the execution, since it is his duty to pay the judgment and the execution results from his own neglect. Pierce v. Williams, L. J. Ex. 322; Newcomb v. Gibson, 127 Maes. 396; Van Petten v. Richardson, 68 Mo. 379; Beckley v. Munson, 22 Conn. 299. 8EC. 33.] ' SIBLEY V. MC ALIiASTER. 689 Sec. 33. Right of indemnity as affected by tlie non-liability of tbe principal. STEPHEN SIBLEY v. HUGH McALLASTEB. 8 N. H. 389 (1836). This was an action of assumpsit, for $750 money paid, laid out, and expended. . The cause was tried at February term, 1835, on the general issue and a verdict taken, by consent, for the plaintiff, subject to the opinion of the Court upon the following case. Ebenezer Lerned, the defendant's testator, on the 25th July, 1827, gave to the Hopkinton Academy his note of hand for $500, which was signed by the plaintiff as Lerned 's surety. Lerned died on the 6th October, 1831, having made his will and appointed the defendant executor. The will was duly proved and allowed, and the defendant took upon himself the burden of ex- ecuting it, on the 25th October, in the same year. In April, 1832, the secretary of the Hopkinton Academy spoke of the note to the executor, who said that he understood there was such a note. It did not appear that the note was exhibited to the defendant at any time within two years after the will was proved and allowed. On the 25th of March, 1834, the plaintiff paid the note, and on the 27th of the same month demanded the amount thus paid, of the defendant. H. Chase and /. Bartlett, for the plaintiff. J. Harris, for the defendant. EiCHAEDSON, C. J., delivered the opinion of the Court. Conceding, for the present, that the note not having been pre- sented to the executor within two years after the grant of ad- ministration, no action could have been maintained against him upon the note, we shall proceed to consider whether, notwithstand- ing this, the surety still remained liable? It is well settled that a discharge of the principal under a bankrupt law does not discharge the surety. Flagg v. Tyler, 6 Mass. R. 33; Welsh v. Welsh, 4 M. & S. 334; Martin v. Brecknell, 2 M. & S. 39; The London Assurance Company v. Buckle, J. B. Moore, 153. And a creditor is under no obligation to prove his debt under a commission of bankruptcy of the principal, unless the surety 690 SIBLEY V. MCALDASTEE. [CHAP. IX, gives to the creditor an indemnity for the expense. 4 Johns. C. E. 132 ; 10 Vesey, 414 ; 6 id., 734 ; 2 Johns. C. K. 562. The surety is the person who trusts the principal, and it is his business to see that the principal pays. A creditor is in no case bound to give notice to the surety that the debt is not paid. Hunt V. Brigham, 2 Pick. 585; Sailly v. Elmore, 2 Paige's R. 500; Wright V. Simpson, 6 Vessey, 734 ; King v. Baldwin. Such being the general rules of law, it is very apparent that if the principal die, and his estate be administered in the in? solvent course, the creditor is under no obligation to present his claim to the commissioners, and procure what he may from that estate. He has a right, in such a case, to look to the surety for the whole amount. It is the business of the surety to procure the creditor to lay his claim before the commissioners, or to pay the claim and then lay his own claim, before the commissioners for the money he may have paid to the creditor. In England and New York a surety may, upon certain terms, compel a creditor to proceed against the principal. The law is otherwise here. Bvit this circumstance is immaterial in this case. In this State the surety may pay the debt when he pleases, and proceed against the principal himself. We are, therefore, of opinion that although no action could have been maintained against the executor upon the note at the time the plaintiff paid it, still the plaintiff remained liable upon the note, and that he is entitled to recover in this case whatever he paid to discharge himself from that liability. Judgment on the verdict. If the non-liability of the principal arises from causes which do not afford a defense to the promisor, the latter may recover from the principal. Gieseke v. Johnson, 115 Ind. 308; Hooks v. Branch Bank, 8 Ala. S80; Marshall v. Hudson, Adm., 9 Yerg. (Tenn.) 57; Miller v. Woodward, Adm., 8 Mo- 169; Braught V. Griffith, 16 Iowa, 26; Godfrey v. Eice, 59 Me. 308; Keid V. Flippen, 47 Ga. 273;. Norton v. Hall, 41 Vt. 471. If the same defense is also open to the surety and he voluntarily pays the debt he can not recover of the principal. Hatchett v. Pegran, 21 La. Ann. 722; HoUinsbee v. Ritchey, 49 Ind. 261; Roe v. Kiser, 64 Ark. 92; Spon- haur V. Malloy, 21 Ind. App. 287. If the principal was without legal capacity to make the contract the surety paying can not recover. In Davis v. Board of Commissioners, 72 N. C. 441, it was held: "There is no doubt of the rule, that the principalis responsible to the surety for any liability incurred by the surety at the request of the principal. But that rule is subject to exceptions. A surety for an idiot, infant, femme covert, etc., may be liable when the principals SEC. 34.] MC CLATCHIE V. DURHAM. ' 691 are not liable either to the obligee or to him. So a surety for a corporation in a transaction where the corporation has not the power to contract, may be liable when the corporation is not. And a corporation may exceed its powers when there is no moral turpitude; as a Board of County Commis- sioners contracting a debt to build a church, » very praiseworthy object; but still, it is beyond their power; and they would not be bound while their surety would be." Sec. 34. Biglit of indemnity as affected by the non-liability of the promisor. GEOEGE C. McCLATCHIE v. JEHIEL V. DURHAM. '44 Mich. 435 (1880). Assumpsit. Defendant brings error. Affirmed. Wheeler & Bishop, for plaintiff in error. White & McMahon, for defendant in error. CooLEY, J. Durham sued McClatchie in Justice's Court, de- claring generally on the common counts in assumpsit and on the following promissory note: Pentwatee, February 11, 1871. $64.00. " For value received I promise to pay to E. Stanhope or bearer the sum of sixty-four dollars on or before the first day of June next. " George C. McClatchie. " Jehiel V. Durham." The peculiarity of the claim upon this note is seen to be that de- fendant was joint maker with plaintiff. The suit was instituted on the fifth day of July, 1879, so that all remedy upon the note would then have been barred for more than two years but for payments which McClatchie had made upon it, and which had satisfied more than one-half of it. There was no showing that Durham had anything to do vith these payments, and therefore the note could not have been enforced against him by any holder. On the trial Durham established an account against McClatchie to the amount of four dollars. He also showed that he signed the note as surety merely for McClatchie, and that in March, 1878, after the note had ceased to be an obligation against himself, he purchased it, giving his own note for twenty dollars in payment. The defendant then produced and offered the twenty-dollar note as a set-off. The Justice disallowed the claim of the plaintiff on 692 MOCLATCHIE V. DURHAM. [ CHAP. IX. the first note, on the ground, apparently, that one could not sue on a note of which he was a joint maker. He then allowed the defendant's set-off, deducting therefrom the account of four dol- lars, and rendered judgment for the balance in favor of defendant. The plaintiff removed the case by certiorari to the Circuit Court, where the judgment of the Justice was reversed. The defendant then brought the ease here. We do not think the question whether the plaintiff could sue on the note he had signed for MeClatchie was a vital one in the case. He certainly had a right to take up the note, and then to sue MeClatchie for the amount paid as money paid to his use. His declaration was suited to the case, and the fact that he had de- clared specially on the note was immaterial. It is true that he may have had a good defense to the note before he purchased it, but he was under no obligation to plead the statute of limitation^ and MeClatchie could not complain of his paying the note since MeClatchie indisputably was still liable upon it. Plaintiff there- fore made out a clear right of recovery for the two sums of four dollars and twenty dollars. But the defendant by producing and tendering as an offset the note of twenty dollars given in purchase of the other, reduced the amount plaintiff was entitled to recover to four dollars. For this he should have had judgment. On certiorari the Circuit Court is required to give judgment " as the right of the matter may appear, without regarding tech- nical omissions, imperfections, or defects in the proceedings be- fore the justice, which did not affect the merits." Com^. L., 5477. It should therefore have reversed the judgment the justice had rendered in favor of the defendant, and given one for the plain- tiff for the amount he had established. If Durham had brought the case here we might have given him the proper judgment, but as he does not complain of the judgment in the Circuit Court, and it was only too favorable to MeClatchie, we have only to affirm it. Durham will recover costs of all the courts. The other Justices concurred. AccoKD. — Stanley v. McElrath, 86 Cal. 449. Contra. — Sleigh v. Sleigh, 5 Ex. 514 Parke, B.: — ^"Now there is no doubt, that, if » person lends his name to another for his acconiniodation, the party accominodated undertakes to pay the bill at maturity, and further, to indemnify the person accommodating him, in case that person is com- pelled to pay the bill for him; and this, no doubt, is an implied authority to such person to pay it, if he be in that situation that he may be compelled by law to pay the bill, though the holder do not actually compel him to do so; and after payment he may sue the party accommodated for money paid SEC. 35.] MACE V. WELLS. (>93 on his account; for i.uii payment is, in truth, under the implied authority given by the contract of accommodation between the parties; and whether this be a payment of the whole bill, or of only a part of it, makes no dif- ference. But the defendant, as the person accommodated, has pot, we think, undertaken to indemnify the plaintiff against the consequences of any pay- ment which the plaintiff may voluntarily make with knowledge of the cir- cumstances. Whether it is so in cases in which the legal obligation has been discharged by circumstances unknown to him, as for instance, by the creditor having given time to the principal debtor without his knowledge, it is unnecessary to determine; but where a payment is made, as in this case, with the knowledge on the part of the plaintiff that he was not bound to pay, for the want of a notice of dishonor, to which he was unquestion- ably entitled, we think the payment is not made with the implied authority of the defendant." Sec. 35. Surety paying after discharge of principal in bankruptcy can not recover indemnity. TIMOTHY L. MACE v. JARED WELLS. 7 How. 272 (1848). Collamer, for the plaintiff. No counsel contra. M'Lean, J., delivered the opinion of the court. This ease is brought before the court by a writ of error to the Supreme Court of the State of Vermont, under the 25th section of the judiciary act of 1789. Wells, as the surety of Mace, became bound in two joint and several notes, both of which were due before the passage of the bankrupt law, in August, 1841. In July, 1841, Wells paid one of these notes. Mace was discharged, under the bankruptcy law, on the 22d of March, 1843. In March, 1844, Wells paid the other note, and then sued Mace for the recovery of the money on both notes. The facts being submitted to the county court, judgment was entered for the plaintiff for the amount of the note last paid ; which judgment was affirmed by the Supreme Court of the State. The 4th section of the bankrupt law provides that a " discharge and certificate, when duly granted, shall in all courts of justice be deemed a full and complete discharge of all debts, contracts, and other engagements of such bankrupt which are provable under this act &c. By the 5th section of the act, it is provided that " all creditors whose debts are not due and payable until a future day, all an- nuitants, holders of bottomry and respondentia bonds, holders of 41 694 HARE V. GRANT, ADM. [CHAP. IX. policies of insurance, sureties, indorsers, bail, or other persons having uncertain or contingent demands against such bankrupt, shall be permitted to come in and prove such debts or claims under this act, and shall have a right, when their debts and claims be- come absolute, to have the same allowed them," &c. Wells, as surety, was within this section, and might have proved his demand against the bankrupt. He had not paid the last note, but he was liable to pay it, as surety, and that gave him a right to prove the claim under the 5th section. And the 4th section de- clares, that from all such demands the bankrupt shall be dis- charged. This is the whole case. It seems to be clear of doubt. The judgment of the State court is reversed. AccoKD. — Liebke v. Thomas, 116 U. S. 605; Lipscomb v. Grace, 36 Ark. 231; Noland v. Wayne, 31 La. Ann. 401; Hunt v. Taylor, 108 Mass. 508. Sec. 36. When judgment against the surety is conclusive as to the right to recover indemnity. JACKSON B. HARE v. JAMES W. GRANT, Adm. 77 N. C. 203 (1877). Civil action tried at Spring Term, 1877, of Northampton Supe- rior Court, before Buxton, J. James Clark, the intestate of defendant, was the guardian of one James P. Harrell, and the plaintiff was surety on his guardian bond. The plaintiff alleged that in an action brought on this bond by Harrell, he was compelled to pay the amount demanded as due to the ward, as appeared by a return of said guardian made in 1851. At the trial term of said action, a nolle prosequi was entered as to the administrator of the deceased guardian, and judgment rendered against this plaintiff. This action was brought to recover back the money paid by the surety for his principal, and when the case was called for trial, the defendant's counsel moved for a continuance on the ground that the defendant was absent, and that he, the counsel, was informed that defendant had in his possession vouchers showing payments made by said guardian to his ward after the guardian's last return, which was made on the 23d of May, 1859. The Court refused the motion to continue and the defendant excepted. The plaintiff introduced the transcript of certain court records, execution, &c., showing that he had paid SEC. 37.] FIDELITY -CO. V. EICKHOFP. 695 the debt, and under the instructions of his Honor the jury rend- ered a verdict for plaintiff. Judgment. Appeal by defendant. Messrs. D. A. Barnes and W. N. H. Smith, for plaintiff. Messrs. B. B. Peebles and W. W. Peebles, for defendant. Eeade, J. Where a surety is sued with his principal, or where he is sued alone and notifies his prineipalj so as to enable him to defend, or to furnish the surety with a defense, the recovery against the surety is the measure of his damages against his prin- cipal. And in an action, as this is, to recover of his principal money paid to his use, the record of the recovery against the surety is conclusive evidence. It would be iniquitous for the principal to stand by and see an excessive recovery against his surety, which he alone could pre- vent, and then set up the defense when his surety sues him. Of course this principal would not apply where there was fraud or collusion between the surety and creditor. And probably it would not apply where there had been negligence on the part of the surety in using the defenses within his power, or which were furnished him by the principal. In this case no fault attaches to the surety. Lewis v. Fort, 75 N. Ca. 251. There is no error. Per Curiam. Judgment affirmed. AccOKD. — Littleton v. Richardsoiij 34 N. H. 179; Rice v. Bice^ 14 B. Mou, (Ky.) 335; Konitzky v^ Meyer, 49 N. Y. 571. Sec. 37. Stipulation that amount paid by surety shall be conclnsiTe against the principal. t'IDELITY & CASUALTY CO. v. WILLIAM EICKHOFF. 63 Minn. 170 (1895). Messrs. Van Fossen, Frost, & Brown, for appellant. Mr. Halvor Steenerson, for respondent. Mitchell, J., delivered the opinion of the Court: The plaintiff, a foreign corporation, is what is termed a " guar- anty insurance company," engaged in the business of guaranteeing to employers the fidelity of their employees. This action was brought to recover money alleged to have been paid to the Bed River Elevator Company, defendant's employer, upon a bond by which the plaintiff obligated itself to make good and reimburse to 696 ''^|f|i FIDELITY CO. V. EICKHOPP. [CHAP. IX. the elevator company such pecuniary loss as it might sustain by reason of the infidelity of the defendant as its receiving agent in one of its grain elevators, ^^ati:^!!:!):^!:****** 3. The third objection is that the stipulation between the plain- tiff and defendant that the voucher, or other evidence of pay- ment by plaintiff to the elevator company, should be conclusive evidence against the defendant as to the fact and extent of his liability to the plaintiff, is void as being against public policy. This question is not really involved in this appeal, but, as it is one which will necessarily arise at the very threshold of the trial of the action, it may properly be considered now. The right of a party to waive the protection of the law is subject to the control of public policy, which cannot be set aside or contravened by any arrangement or agreement of the parties, however expressed. Thus, an agreement to waive the defense of usury is void. So, also, according to the weight of authority, is an agreement, made at the time of contracting a debt, to waive the prospective right of exemption. The agreement under consideration is more than a mere enlargement of contractual rights, or the establishment of a rule of evidence. It provides that the plaintiff may, by his own ex parte acts, conclusively establish and determine the existence of his own cause of action. In short, he is made the supreme judge of his own case. The case is not at all analogous to the common provisions in building and construction contracts, by which the determination of some third person, such as the architect or engineer, as to the amount or character of the work, is made conclusive between the parties, in the absence of fraud or mistake. Nor is it at all analogous to a provision in an executory contract for the sale or manufacture of an article to the satisfaction of the buyer, where, if the article is declined, the parties are, in contem- plation of law, left in statu quo. In the present case the attempt is to provide that, after the alleged cause of action has accrued, the plaintiff shall be the sole and conclusive judge of both its ex- istence and extent. Such an agreement is clearly against public policy. If the provision had been that the voucher or other evi- dence of payment, should be merely prima facie evidence of the fact and extent of defendant's liability, — thus merely shifting the burden of proof, but leaving the defendant at liberty to rebut this prima facie evidence, — although even then a somewhat dras- tic provision, we do not think that it could be held to contravene public policy. To that extent we think this provision is valid. BEC. 37.] LONDON CO. V. BAILEY. 697 but, in so far as it assumes to make the voucher of payment by plaintiff conclusive of defendant's liability, it is void. # (, * Order reversed. Accord. — Fidelity & Casualty Co. v. Crays, 76 Minn. 450. LONDON TRAMWAYS CO., LTD. v. BAILEY. 3 Q. B. Div. 217 (1877). The complainant became conductor of a tramway company under an agreement by which he was to pay them £5., to be retained, together with his wages for the current week, as security for the discharge of his duties and the observance of the rules of the com- pany, &e. ; the company to have power, in case of any breach by the conductor of the rules, to retain the £5 and his wages for the current week as liquidated damages for such breach; and it was provided that " the manager of the company should be the sole judge between the company and the conductor whether the com- pany was entitled to retain the whole or any part of the £5 and wages for the current week as liquidated damages; and that the certificate should be binding and conclusive evidence in all courts of justice, civil and criminal, and before all stipendiary and police magistrates, &c., that the amount thereby certified as the amount to be retained was the true amount to be retained, and should bar the conductor of all right to recover it. ' ' Melloe, J. Our judgment must be for the appellants. In the first place, it must be taken that the man could read and write, and we cannot listen to his statement that he never understood what he was signing, as, for anything that appears, he had every opportunity of making himself acquainted with it. The next ob- jection is that the provision making the certificate conclusive is an attempt to deprive the magistrate of his jurisdiction. But this is not so. If two persons choose to agree that, neither of them shall have any right of action under an agreement until a third person has given his decision upon the matter in question, as in the case of a wager, &c., the agreement is binding. It is quite reasonable that people should endeavour as far as possible to avoid the necessity of having recourse to courts of law. The present agreement is very like the stipulation that the certificate of an architect or engineer shall be conclusive; the only difference is that, with regard to the £5 claimed by the conductor, the company 698 LONDON CO. V. BAILEY. [CHAP. IX. have the further security of the money being kept with them as a deposit. Making the manager sole judge of what is due from the company is not contrary to the policy of the law, and if the parties choose to make an agreement containing such a provision, they must be bound by it. Lush, J. I am entirely of the same opinion. We are called upon to interpret this agreement in the same manner as if the complainant had brought an action upon it instead of going before a magistrate, and we have only to inquire what was the bargain which the parties made. There can be no doubt that the com- plainant signed the agreement, and probably had a copy- of it in his possession, so that he had every opportunity of reading and understanding it. Secondly, it cannot be denied that, under the agreement, he has consented to submit entirely to the rules of the company. It has been said that this clause is harsh and unjust, but it was a matter for his consideration before he gave his consent. In the case of building contracts, I have often been surprised that as regards extras the builder should agree to be wholly bound by the certificate of an architect retained by his employer. But this isevery-day practice, and I see no greater injustice in the present case. Though made before a police magistrate, the complaint is practically a civil proceeding. Judgment for the appellants. Solicitor for appellants : H. C. Godfray. Solicitor for respondent: T. H. Moss. INDEX (References are to pages.) ABSENCE FEOM JUElSDICTIOiN'. as affecting righit of contribution between co^suTeities, 663ii. ABSOLUTE GUARANTY, defined, 119 distinguished from guaranty of collectibility, 120. not niecesBary to pursue amd exhaust the principal before proceeding against an absolute gu^airantor, 119n. noitice of acceptance, not required if guaranty is absolute, 127n, ACSCEPTANCE. suretyship undertaking not binding until accepted by the obldgee, 323. retention of bond by obligee prima facie evidence of acceptance, 325, 326n. Notice of acceptance of gimranty, 123. when necessary to charge the guarantor, 127n. whether oomtract of guaranty in respect to notice of acceptance is different from any other conitraot, 127. Federal Court rute as to notice of acceptance of guaranty, 128m. not required if the guaranty is absolute, 127n. view that a letter of credit for future advances is a mere offer to oonitract which requires an acceptance to become bindingj « 124. ACTIONS. When cause of action a/rises upon a suretyship undertaking. Umitatioms upon actions against sureties upon bonds, 302. not necessary to exhaust the principal before beginning action against guarantor, 119n. injunction bonds, 419. iwhen contribution between co-sureties may be enforced, 652. action for indemndity, 683. Parties to actions upon tonds. oo-administnator may maintain action on tx>nd for oonversiona of his associate, 479, 482n. ADMINISTRATORS (See EXBCUTOElS AND ADMINISTRATORS). ADMISSIONS. of principal, not competent against sureties, to establish default, 310. entries in books of pidnioipial, competent as admissions, 315. 699 700 INDEX. (References are to pages.) ADMISSIONS— CoTCtimted. contemporaneous declarations admissible as part of the res gestae, 312n. if principal and surety are sued jointly, admissions of principal are competent, 312n. AGENTS. creditor n'ot bound by uniajuthorized representataons by agent as to facts materially affecting the risk, 217. AGREEMENT. meaning and scope of the word as used in the Sitatuite of Frauds, 5S. view that the Statute of Frauds requires the emitire agreement to pay ithe debit of another to be set out in ifche writing, 57. view that the agreement need not be in writing, 61n. the Statute in terms merely requires a "memorandum" of the agree- ment to be in writing, and not the entire contract, 57. ALTERATION. promisor discharged by material alterations of the principal contract, even though such alterations are beneficial to pramisoir, 161. changing date of maturity is material, 140. changing the date of appearance in a bail bond, 38. as affected by the absence of fraudulent intent, 149n. addition of a new party as a, principal maimer is a material altera- tion, 151, 157n. addition of new party as surety or guarantor not a material altera^ tion, 155, 157ni., 250. change in the duties of the principal, 157, 159n. change in the duties of public officers by subsequent legislation, 159 n., 366. change or enlargement of the business of creditor as a defense to promisor, 160ni. (agreement to extend tune ol the main contract, is a. material al- teration, 166n. chajige in^ the amount of compensation of principal, noit a material alteration, 371n. AMBIGUOUS WORDS. view that ambiguities should be construed most strongly against the promisor, 43. view that ambiguous words should be construed moat strongly in favor of the promisoir, 48. construction given by ithe parties themselves, 47n. construction as affected by the faict that the oonitract ia drawn by the surety, 47n. APPEAL AND STAY BONDS. Statutory requirements as to appeal, justification of sureties, 412, 41'6n. giving bond for smaller sum than ie required by law, 413. giving bond for larger sums than is required by law, 416n. staitutory proviisdon as to residence of surety, 413. persons prohibited by law or rules of court from' becoming surety, 416n. INDEX. 701 (References are to pages.) APPEAL AND STAY BONDS— Continued. regulation by statute ag to the number of sureties, 414. Consideration, bond for which there is no requirement of law, void for want of consideration, 416ni. bond by administrator in appeal who is exempt by reason of hav- ing given adminiistration bond, without consideration, 416n. Successive appeal bonds, axe cumulative, 416. last sureties are principal oMigors and the first, sureties for them, 416. subrogation between successive appeal bonds, 416. APPEAKANCE, time and plaice of Appearance must be definiitely stated in bail bonds, 500n., 50 In. APPLICATION OF PAYMENTS. a bank holding note of depositor, not under oMigatiom to surety to apply deposits of principal in payment of note, 190ni. if a note is payable at the bank, a failure to apply deposits in pay- ment will disxsharge the surety, 190n. in the absence of stiipulaition promisor has no right to control appli- cation of eoiUateral in the hands of creditor, 269. APPEOVAL. of bond, will be presxuned from its acceptance and retention, 325. ARBITRATION. su'bmdssfon to arbitration resulting in dissolving injunction, does not \ consbitute breach, of the bond, 419, 421. ASSIGNEE. surety of insolvent not discharged by failure of creditor to present claimi against assignee, 172ni. ASSIGNMENT. a general guaranty is asBigna;ble, 104n. a Bpecaal guaranty is not assignable until right of aotion. arises thereon, 106ni. surety paying debt of another, entitled to have securities held by creditor assigned to him, 586. view that payment by the surety, of itself, operates as an equitable assignment of the security, 589u. ASSUMPTION. of mortgage by purchaser of land, places vendor in the situation of a surety, 98. ATTACHMENT. bonds not forfeited for irregularities of execution or defects in form, 448n, want of jurisdiotioni resulting from defects in affidavit, a defense to sureties, 452. good faith, or probable cause for attachment, not a defense to action upon bond, 444. Bureties estopped from questioning the regularity of proceedings out of which their liability arises, 450. 702 INDEX. (References are to pages.) ATTAOHMWiT— Continued. as affected by judgment against some and in favor of some de- fendants, 447. Bond to procure attachment, 443. malice need not be shown as a basis of recovery, 445. whether damages for malicious prosecution are recoverable, 445. voluntary dismissal of atta/chment, am admission thait it is wrong- ful, 443, 453.n-. attachment upon defective affidavit is wrongful, 452. Bond to discharge attachment. if aittaohmenit is void by reaaoni of prohibition of law, bond to dis- solve is void, 450. Bond to release attached property, 448, 452, 456. promisor on redelivery bond liable although property is destroyed by accidental flre, 453. no action can' be maintained on redelivery bond un.til fimal dispora- tion of the case, 456ii. Ecconeration of sureties. if condition of redelivery is impossible because of some act of the plaintiff, 455n. Measure of damages upon attachment bonds. actual damage of defendant from depreciation and loss of use of property ■ reeoverabte, 446. ATTORNEY. not a juBtifica.tion to public officer that he was advised by his at- torney to do a wrongful act, 377n. ATTORNEY FEES. in procuring dissolution of injunction, recoverable on the bond, 428, 436. if injunction dissotlved in the final hearing of the case, attorney fees not recoverable, 437. df motion to dissolve injunction unsuccessful, attorney fees not al'- lowed, although injunction is dissolved on final hearing, 437, 443n. services in resisting allowance of injunction, not recoverable as damages, 443n. contracted for, but not paid, recoverable, 443n. AUDITING AC!0OUNTS. promisor not discharged by failure of creditor to audit the accounts of principal, 214. B BAIL BONDS. bail ordered by officer without authority, a nullity, 500n. surety ujjon hail bond has no right of indemnity against principal for amount paid upon a forfeited recognizance, 676. Conditions in hail bonds. bond must stipulate a fixed time for appearance, SOOn. place of appearance must be definitely specified, 501n. change of venue does not release sureties, 501n. INDEX. 703 (References are to p'ages.) BAIL BONDS— Continued. Exoneration of hail. death of the accused releases sureties, 500n. confinement in the penitenibiary of anotter State will not exonerate bail, 494. delivery of the accused to authorities of another State upon requisi- tion, exonerates bail, 497. bail exonerated by the accused being adjured a lunaitic, 500n. change in the date of appearance by alteration of the bond renders the bond void, 38i BANK. national bank cannot generally contract in suretyship, 20n. a ibank holding note of depositor is under no obligations to the surety to apply deposits of principal to the payment of note, 190^. if note is payable at the bank a failure to apply dejKJSit in pay- ment will disciharge surety, 190n. Bureties of puWie officer liable for loss of public funds by failure of bank, 399, 404. BANK CASHIER. surety for fidelity of cashier held to be discharged where bank directors by exercise of diligence might have discovered a prior default, before accepting bond, 206. BANKRUPTCY. disciharge of principal debtor in' bankruptcy does not discbarge the promisor, 257n. right of indemnity a provable claim in bankruptcy, 693. BILLS AND NOTES (See PROMISSORY NOTE). BONDS. form and execution of, 321. delivery and acceptance are necessary to the validity of a bond, 323. possession of bond by obligee prima facie evidence of delivery and acceptance, 325. incorporation of other instruments by reference, 326. bonds obtained by fraud and misrepresentations, 197, 206. commencement and duration of liability upon a bond, 329. alteration of principal contract as a defense to sureties upon a bond, 157. to induce violation of the law, 359. to prevent performance of public duty, 359, 361n. judicial bonds, 412. successive appeal bonds, 416. bonds to procure injunction, 4:19. attachment bonds, 443. replevin bonds, 461. administration bonds, 466. given vvithcut requirement of law, 466. guardian's bonds, 483. bail bonds, 494. Official lands, .362. valid although not conforming to statute, -413. 704 INDEX. (References are to pages.) BONDS — Continued. Prwate ohligations, hands to secure, 321. will cover the office or employment bo long as itihe teniire is oani- tinuous, unless limited by recibails in the instrument, 338. bonds to secure building contracts, with oovemants to pay labor and material claims, 338, 343, 349, 352. change in- the amount of compenaaition of printnpal, will not dis- charge isuxety, 371n. measure of damages, 356. BOOKS OF ACCOUNT. entries in books of principal competent as admissioms, to es>t)ablish default, 312. surih enitriea are only prima facie evidence agaiiist the surety, 315n. ehaigea made by a vendor in his books against a person to whom he delivers property will estop him from claiming a sale on the credit of a third person, 77ni. BUILDING CONTRACTS. incorporation of tihe terms of a building contract into a bond to secure its performance, by reference, 326. surety upon building contract containing covenant to pay labor and material claimis will be liable for siuch claims at the suit of labor and material men, 338. a municipality has power to require contractor to fumiali bond conditional upom the payment of labor and- material claime^ 341, 342. BY-LAWS. incorporation of the by-laws of ai corporation inibo a bond, by ref- erence, 329iL CAUSE OF ACTION (See ACTIONS). CLERK OF COURT. sureties of, liaJble for loss for improiperly keeping court records, 375. COLLATERAL SECURITIES. contract of extension, not implied from giving collateral maturing at a later date, 171n. creditor is under no obligation to the promisor to sell collateral held as additional security, 268. promisor not subrogated to collateral in hands of creditor until all the debts covered by the collateral have been saitisfied, 564. promisor paying dcfljt of anotiher entitled to have collateral held by creditor assigned to him, 586. creditor may have -dividends from estate of insolvent debtor up n full amount of claim withouit first accounting for collateral, 613. creditor entitled to subrt^ation to securities held by surety, 586, 619. INDEX. 705 (References are to pages.) COLLECTIBILITY. guaranty of collectibility, distinguished from a guaranty of pay- ment, 120. guaranty of collectibility, conditional upon the exercise of diligence in trying to coliect from the principal, 121. conflicting views as to whether execution and return; of nulla bona is necessary in establishing non-coUectibillty a& against the prin- cipal, 122n. COLORE OFFICII. conflicting views as to whether sheriff or constable is liable upon his bond for wrongs committed, colore officii, 389, 396. CXJMMERCIAL GUARAJTTIES. guarantor for joint principals caji not be held for advancements made to one, 106n. advances made upon a partnership letter oi credit after dissolution of the flrm, without knowledge of the dissolution, 289. retrospective guaranities, 106. Construction of the contract. tquivoeali or amibiguous words, 43, 47n, 48. General guaranty. may be enforced by any one who acts upon it, 100. miay be assigned, 104n. of negotiable paper, held not equivalent to an indorsemenit, IMn. Special guaranty. can only be enforced by the one to whom it is addressed, 104. not assiignable until a right of action arises thereon, 106n. addressed to two persons can not be acted upon by one, lOGni. Continuing guaranties, 111. conflicting views as to whether a guaranty without express Umltar tions is continuing or temporary, 117n. A.bsolute guaranties, 117. defined, 119. distinguished from guaranty of collectibility, 120. creditor not obliged to make demand of debtor and give notice of default, 118. not necessary to pursue and exhaust the principal before proceed- ing against guarantor, 119n. notice of acceptance of, not required, 127n. Collectibility, guaranty of. distinguished from guaranty of payment, 120. conditional upon the exerei'se of diligence in trying to oolleot from the principal, 121. conflicting views as to whether execution and return of nulla bona ia necessary in establishing non-collectibility, 122n. Consideration. will not be binding without a consideration, 24. may be supported by the same consideration as the principal con- tract, 25. agreement to forbear suit sufficient consideration, 28n. 706 INDEX. (References are to pages.) CJOMMEECIAL GUAEANHES— CowtMwerf. Notice of accepta/noe of giiarcmty, 123. as affected hy the fact tlhiat the amount of the debts and time of payment are indefinite, 127b. ntot necessary to the inception, of the contract of guaranty, 128n. Federal count rule, 128n. not required if guaranty is absolute, 127n. Noitice of defwult of principal, 130, 132. where performance is at -a definite time, not required, 130, 134. required, where the facts upon which guarantor's liability rest are not within his knowledge, 132. guarantor discharged by lack of notice only to the exitent of his damage, 1360'. Revocation of gua/ranty, 136. death of guiarantor operates as revrgcation in all cases where the guarantor if living mdght have revtdied by notice, 139n. knowledge of death must be brought home to creditor in order that it shall operate aa a revocation, 139n. COMPENSATION. change in compensation of principal not a material alteration, of principal contract such as will discharge surety, 371n. OONOEALMENT. " withholding information as to misconduct of principal, although not epecificaliy inquired about considered' fraudulent, 199. duty of creditor to disolpse facts coming to his knowledge after exetU'tioD of the contract, 229. fraudulent concealment of misconduct aa ailecting the operation of statutes of limitation, 302. CONDITION. liability of surety who signs upon condition that another signs as co-surety, 245, 249. promisor ©stopped from setting up a non-cmnplianoe with conditions not communicated to .creditor, 245. doctrine of special agency as applied to delivery of suretyship con- tracts witfhout complying with conditions, 249m. constructive notice to creditor of condition, 249n. promisor discharged if contract contains conditiona not complied with, 239n. distinction between conditions precedent and subsequent, 249. imposing limitations upon the liability of corporate surety, 234, 274, 277. " ■'■■ -,^ discharging surety of claim is not made within a designated time, 274. OaNiSIDEEATlON. essential to suretyship contract, 24. consideration of the principal contract will support suretyship, 25. extension of time to the principal is sufficient consideration, 28n. need not be adequate or compensatory, 27n. detriment to the creditor a sufficient consideration, 34. past transaction will not suppiort a suretyship, 34, 35n. INDEX. 707, (References are to pages.) CON'SlDlERATIO'aJ^— Continued. where principal comtract is eixeouted relying upon promise of another *o sign as surety there is a sufficient consideration, for the suretyship, 26. view that the statute of frauds requires the consideration to bo expressed in the writing, 57. ■view that the consideration need not be expressed in writing, Bin. agreement to forbear suit a sufficient consideration, 28n, agreement to extend time to the prinoipial, not binding unless baaed upon a consideration, 170n. payment of legal rate of interest in advance is an adequate con- sideration for extension, ITOn. a, promise to pay legal rate of interest is a consideration for an extension, 170n. payment of usurious interest in advance as a consideration for an extension,. 170n. failure of consideration may he shown by parol, 296. a seal imports a consideration, 323n. appeal bond given without requirement of law, void for wiant of consideration, 416n. an illegal consideration to a surety will deprive him of his implied equity of indemnity against the principal, 28, 31. CONSTABLE (See SHERIFF). OONSTRUCTION. strict construction of suretyship contracts, 51,. comijensated, or corporate, surety's contract liberallly construed, 5-10, 516. ■view that suretyship contract should be construed most strongly against the promisor, 43i. view that a suretyship contract is 'to be construed most strongly in favor of the promisor, 48. commercial guaranties, how construed, 43, 47n, 48. when terms of bond are douibtful, proof on construction given by the parties themselves is admissible, 47n. as affected by the fact that the contract is dTawnj by the agent of the surety, 47n. CWNTINUING GUARANTY. conflicting ■views as whether guaranty ■without express limitation is continuing or limited, 117n. CONTRACT OF INDEMNITY. not within the statute of frauds, 66, 70, 72, 90. the doctrine of Thomas v. Cook as to a verbal promise of indemnity against a liability as surety, 66. American decisions as to whether a contract of indemnity is within the statute of frauds, 67n, 70n. CONTRACT OF SURETYSHIP, nature of the contract, 1. does not arise by implication, 53. must be for a consideration, 24. not binding unless between parties competent to ooniriaiot, 8. must be in writing, 90. 708 INDEX. (References are to pages.) COiNTBACT OF SURETYSHIP— Contimtetf. must be entered into without fraud or duress, 21. incompleted contract not binding, 38. CONTRIBUTION. basis oi the doctrine, 632. origin of the right, 632. does not arise upon implied contract, 637, 637n, 640n. arises although promiisois are bound by different instruments, 632. if liaiMlity of several promisors is in different amounts, contribution will be in proportion, 641n. between persons in the situation; of a surety, 641. stoekiholders paying asses^nents for corporate debts, entitled to con- tribution from other stockholders> 64211. one becoming surety at the request of another party, 647, 648. not available to one who aids in the commission of the default, 651. does not arise until co-surety pays more than his ratable share, 652. if co-surety paying less than his moiety thereby extinguishes the entire debt, he may have contribution, 654n. surety for a surety not liable in contribution, 643. aocepitance of note of surety as payment gives right of recovery in contribution, 654n. equitaible contribution, 655. may be enforced although surety pays without compulsion, 672n'. payment by surety of claim barred by statute of limitations deprives him of contribution, 672n. payment to prevent default, bars recovesry in contribution, 669. as affected by the release of one of several co-sureties, 257n. release of co-surety as to the creditor by operation of law, does not bar right of contribution against him, 257n. as affected by insolvency of a co-surety, 662i. as affected 'by the absence from the jurisdiction of one or more co- sureties, 663n. Indemnity furnished by prineipal. , held in trust for equal benefit of all> co-sureties, 663. if surety iholda indemnity covering both the liability in surety-ship and debt owing him by principal, the equity of co-surety in the indemnity is superior, 668n. CONVENTIONAL SUBROGATION, 562. CORPORATE SURETYSHIP. as affected by the fact that the contract is drawn by the agents and officers of the Surety Co., 47n. stipulation that obligee shall notify the surety of act of principal that "may" involve loss on the bond, 234. stipulations discharging surety if claim is not made within a. desng- nated time, 274. stipulation that amount paid by surety shall be conclusive against the principal, 695, 697. corporate surety is insurer, 502. liability of surety company, 507, 510. how corporate surety contracts are construed, 510, 616. measure of liability — corporate surety cannot be relieved from ita obligation only where departure is material and preiudidal. 520. INDEX. 709 (References are to pages.) COEPORATION. may bind itself ia suretyship if done in the regular course ol it» business, 17, 20n. if the suretyship contract is necessary to carry out a power ex- presaliy conferred it will bind the corporation, 20n. officer of corporation cannot bind the corporation by representations in a suretyship engagement unless in pursuance of a direct author- ity, 217. national hanking corporation cannot contract generally in surety- ship, 20n. national bank may enter into such engagement in suretyship as ia necessary to transfer commercial paper by indorsement, 200!. COSTS. surety may recover costs of litigation from principal, 688n. 00-SXXRETIES. discharge of co-surety, 255. subrogation between co-sureties, 615. contribution between co-sureties, 632. when sureties upon saiccessive undertakings are not co-sureties, 416. contri'boition as ailected by the insolvency of one or more oo-suretiea, 662. oonitribution aa affected by the absence from the jurisdiction of one or more co-sureties, 663n. CREDIT. promise to pay for advancement made to another is not within the Statute of Frauds if credit is given wholly to the promisor, 74, 75. charges made by a vendor in his books against the principal will estop him from claiming a sale on the credit of the promisor, 77n. CREDITOR. under no obligation to promisor to acquire lien upon property of principal, 186n. if security or liens held by creditor are released, the promisor ia discharged pro tanto, 182. negligence or misconduct of creditor resulting in loss of seouritiea will discharge promisor, 186n. failure of creditor to sue principal when requested, not a defense, 263. not required to resort to collateral in. his hands before proceeding ^ against the promisor, 268. may have dividends from estate of insolvent principal upon full amount of claim without first accounting for collateral, 613n. right of subrogation to securities held by surety, 586, 619. indemnity furnished surety by a stranger does not create a trust in favor of creditor, 623. view of the English courts as to creditors' right of subrogation, 620. ri^t of fiuhrogation, as affected by the bankruptcy of both prin- cipal and surety, 620. • CREDITOR'S BILL. right of judgment creditor to subject assets by creditors' bill, trans- ferred by sulbrogaition to surety who pays, 596n. 710 INDEX. (References are to pases.) ORIMmAL PROCEEDINGS. stipulation requiring creddtor to inetitute, 279. CUMULATIVE BONDS. second bond given in. same term of public officer, cumulative, 375n. euccessive appeal bonds, cumulative, 416. D DATE. changing the date of maturity of the principal contract is a material alteration, 140. bond reciting a liability from its date will be held for defaults oc- curring before delivery of bond, 32S. illustrative cases as to the date when liability upon bond commences, 329, 333. DEATH. when death of guarantor operates as a revocation of the oontraxit, 139n. oply funds of principal on deposit to the payment of note, 190n. DILIGHNTCE OF THE CREDITOR. conflicting views as to whether execution and return of nulla bona is necessary in establishing the non-oollectibility as against the principal, 122n. creditor not required to exercise diligence in wa;tching the affairs of the principal, 234n. INDEX. 711 (References are to pages.) DISABILITY. persons under, cannot become promisors in suretyship, 8. if substituted contract void by reason of disability of partieSj credi- tor will be restored U> rights under original oentract, IVte. if principal is insane at the tune of the execution of the main con- tract, such defense is not available to the promisor, 8. . if principal' incapacitated by insanity after execution of contract and before default, . held a defense to the promisor, 9n. the defense of infancy can only be set up by the infant, 13n. DISCHARGE OF PROMISOR. if main contract is void by reason of prohibition of statute, 194n. duress of the principal will discharge the promisor except where he signs with knowledge of the duress, 21, 194n. discharge of guarantor pro tanto by failure to give notice of de- fault or acceptance in certain eases, 2, 123, 127n, 130, 132. release of co-promisor by the creditor discharges surety or guarantor in part, 256. release of co-promisor by operation of law, not a defense, 257n. incapacity of principal by insanity, after execution of contract, but before default, as a defense, 9n. eeeret sitipulatdona between creditor and principal affecting main contract, as a defense, 197, 191hi. promisor not bound if contract contains conditions not complied with, 274, 277, 279. failure by creditor to sue principal upon request of promisor, 261, 263. Alteration of the principal contract, 140. constitutes a defense, even though such alterations are beneficial to promisor, 161. change in the date of maturity of principal contract, 140. changing the date of appearance in a bail bond, 38. the addition of a new party as a principal maker, 151. the addition of a. new party as surety or guarantor, 155, 250. change in the duties of the principal, 157, 160n. subsequent legislation, as affecting liability of surety upon bond of public officers, 159n, 366. defense of alteration, as affected by the absence of fraudulent inteat, 150n. enlargement of the business of the employer increasing the risk, 160n. Extension of time to the principal, 164. is a substitution of a new oonti-act, 16i6n. must be for a consideration, 170n. legislative action, extending time of settlement of public officers, 171n. persons in the situation of a surety, discharged by extension, 40. Fraud as a defense to promisor. practiced by the creditor upon the principal, 197. withholdipg information from promisor known to the creditor, mar terially affecting the risk, 199. yi2 INDEX. (References are to pages.) IMBOHARGB OP PROMISOR— CoBfmwerf. creditor not bound by unauthorized representations by agent as to facta materially affecting the risk, 217. recitals in the bond that representations affecting the risk have been, made bind the creditor, although recitals unauthorized, 221. prior default of princii>al', not known to the creditor, but wihach ■might have been discovered by exercise of diligence, 20&, 214. failure to disclose facts which materially affect the risk, coming to the knowledge of the creditor after the execution of the contract^ 229, 234. Xelease of secmrities held by creditor, 182. loss of securities resulting from negligence, 1S6il failure to file mortgage for record, 186n. Release of principal by creditor, 190. reserving rights against proimisor, not a defense, 194n. if proimisor fully indemnifled, not discharged by lel'easo of prilli- cipal, 194n. where release of principal by operation of law ia not the result of the fault of creditor, 195. DISOLOSURE. failure to disclose facts known to creditor, materially affecting tiie risk as a defense to promisor, 199. duty of creditor to disclose .facts coming to his knowlei^e after execution of the contract, 229. creditor not bound to disclose to promisor his knowledge of the insolvency of principal, 205n. DIS!MISSAL. of injunction proceeding without prejudice for want of service, not a breach of bond, 427m. voluntary dismissal of injunction by plaintiff, equivalent to dia- allowance by court, 427n. of attachment, a breach of the bond, 443, 453n'. of attachment by reason of defective affidavit, a. breadh ot the bond, 452. of replevin, renders the bond liable, 461, 462, 464n. DISSOLUTION OF ATTACHMENT. if attachment is void, bond to dissolve will be void, 450. DIVIDENDiS. surety paying entitled to pro rata share of dividend derived from assets of principal, 610. creditor may have dividends upon full amount of claim, wiiihout de- ducting collateral, 613n. DURESS. suretyship contract must not be induced by duress, 20. promisor not bound, if principal entered into the contract under duress, 21, 194n. MUTIBS. change in the duties of the principal as a defense to the promisor, 157n, 169u. INDEX. 713 (References are to pages.) DUTIES— Oo»*MM»e(f. surety upon bond of public oBicer as affected by subsequent l^slation changing the duties of the oifice, 366. duties of public oflScers distinguiehed from private obligations, 362. E EJBOTMBNT. surety upon bond to secure purohase price at land, may maintain ejectment in the right of the vendor, 595n. EQUITy. promisor may maintain bill in equity to compel creditor to sue princi- pal, 268n, 319. ■equitable exoneration of sureties before payment, 316. ERROR PROCEEDINGS (See APPEAL AND STAY BONDS). ESTATE. surety not dlsclrarged by failure of creditor to present claim, against estate of principal, 172. ESTOPPEL. persons prohibited by statute from, becoming promisors in suretyship are estopped from evading liability on the ground of such prohibi- tion, 413. promisor estopped from denying the recitals of the contract, 416n. charges made by a vendor in his books against a person to whom he delivers i>roperty will estop him from claiming a sale on the credit of a third person, 77n. promisor estopped from showing conditions agreed to by principal but not communicated to creditor, 245. creditor estopped from enforcing contract which he has declared to be at an end, 253. extent to which creditor is estopped who has the means of knowing facts materially affecting the risk, 206, 214. sureties upon attachment bonds, estopped from questioning the regu- larity of the proceedings, 450. EVIDENCE. possession and retention of bond by obligee, prima facie evidence ci delivery and acceptance, 325, 326n. evidence against sureties wpon bonds, 310. admissions of principal, not competent against sureties to establish default, 310. contemporaneous declarations admissible as part of the res gestae, 312li. eitries in books of principal, competent as admissions, 312. entries in books of principal only prim,a fade evidence, 315n:. if principal and surety are sued jointly, admissions of principal are competent, 310. view that judgment against the principal is prima facie evidence against the surety, 407, 410n. view that judgment against the principal is conclusive against surety, 41 In. EXEC?UTION. conflicting views as to whether execution and return of nvila iona 714 INDEX. (References are to pages.) EXECUTION— Conftnuerf. is necessary in establishing itihe non-collectibility as against tho principa.1, 122n. release of levy of execution upon property of principal will) discharge promisor, 186n,. default of sheriff in not paying over money collected in his second term upon execution levied in first term, a liability upon the first term sureties, 374n. «ost5 of execution against promisor can not be recovered in action for indemnity against principal, 68Sn. EXECUTORS AND AD'MINISTRATORS. sureties upon bond liable although bond is given without requirement of law, 466. sureties of, may follow ^d subject trust funds in the hands of third parties, 593. Scope of Administration bond, 468, 470, 475, 479. covers aU assets whether coming into the hands of the officer before or after the execution of the bond, 468. liability of co-administrators for the defaults of each other, 479, 4S2n. if administrator is debtor of the estate, 470, 475. EXONERATION OF SURETIES. if condition of redelivery bond is impossiible because of some act of the plaintiff, 455n. fiubmi'ssion of case to arbitration, 419, 421. upon bail bonds, 494, 497, 500n, equitable exoneration before payment, 316, 319. EXTENBION OF TIME. is a suflicient consideration to smpport a suretyship contract, 28ni agreement to extend time on main contract discharges promisor w(ho does not consent, 164, 183. piiomisor discharged by extension even though no damage to promisor, 166n. promisor not discharged by an s^reement with a stranger for esten- sion, 166. agreement for extension, not binding unless based upon a considexar tion, 170n. acquiescence in default of principal, not an extension of time, 171. payment of legal rate of interest in advance, an adequate consideration for an extension, 170n. a promise to pay legal rate of interest is a consideration for an ex- tension of time, 170n. payment of usurious interest in advance as a consideration for an extension, 170n. giving collateral securities maturing at a later date does not operate to extend the time on the debt, 171n. promisor discharged by extension of time resulting from act of Legis- lature, 171n. persons in the situation of a surety, discharge by extension of time, 40. if surety is fully indemnified he is not discharged by extenaiom ot time, 173. INDEX. 715 (References are to pages.) P FAVORITE OV THE LAW. surety a favored debtor, SSn. FOBBEAKANCE TO SUE. is a sufficient consideration for a suretyship contract, 28n. FORGERY. if note given in renewal is forged, the old note, though surrendered, •is revived, 176. liability of surety where name of co-surety is forged; 2fl9'. FORTHCOMING BOND (See ATTACHMENT). FRAUD (See STATUTE OF FRAUDS). practiced by the creditor upon the principal will discharge the prom- isor, 197. fraud of the creditor, or of the principal with knowledge of the creditor against the promisor will discharge the promisor, 197. creditor not bound by unauthorized representations by agent as to facts materially affecting the risk, 217. recitals in the bond that representations affecting the risk have been made, bind the creditor, although recitals unauthorized, 221. withholding information from the promisor known to the creditor, materially affecting the risk, held to amount to fraud, 199. concealment of previous misconduct of principal occupying position of trust is constructive fraud, 199. failure to disclose facts coming to the knovfledge of the creditor after the execution of the contract, 229. practiced by principal on the promisor without knowledge of the creditor, will not discharge the promisor, 239. promisor liable, although fraudulently induced to sign while intoxi- cated, 245n. secret stipulations between creditor and principal affecting character of main contract, a fraud upon the promisor, 197, 199ni conflicting views whether fraud will be imputed because the creditor by reason of inattention to his own affairs does not know of facts materially affecting risk of promisor, 206, 214. fraud can; not be predicated upon a promise, only present or past trans- actions the subject of misrepresentation, 249n. as to whether a fraudulent concealment by the principal of default prevents the operation of the statute of limitations asr to the surety, 302. FRAUDULENT CONVEYANCE. surety paying, may maintain action to set aside conveyance in right of creditor, 596n. FRAUDULENT INTENT. alterations of suretyship contract as affected by absence of ^audulent intent, 150n. G GENERAL GUARANTY. may be enforced by any one to whom it is presenifced, who acts upoo it, 100. a general guaranty is assignable, 104% 716 INDEX. (References are to pages.) GIVING TIME (See EXTENSION OF TIME). GRANTOR. of land subject to mortgage, in the situation of a surety, 41. GUARANTOR. defined, 6. distinguished from surety, 1, 3, 4, 6. entitlled to notice, 2, 127n. entitled to notice of default in certain cases, 130, 132. when notice of 371n. liable for neglligence and want of capacity, 375. not protected by advice of counsel, 377. liable for interest collected upon public funds, 378. cases holding tbe officer not liable to account for interest on public funds, 384. liable for loss of public money by failure of bank used as public depository, SBff, 404. loss of public money by theft or robbery, 403n. Defenses of sureties. addition of new name as surety not a material alteration, 155. an increase or diminution of the compensation of public officers and a defense, 371n. bond of indemnity to officer to prevent performance of duty, does not bind surety, 359. Evidenoe against sureties upon official hands. admissions of principal, not competent against sureties, to estab- lish default, 310. contemporaneous declarations admissible as part of the res gestae, 312n. entries in books of principal, competent as admissions. 312. if principal and surety are sued jointly, admissions of principal are competent, 310. view that judgment against the principal is prima facie evidence against the surety, 407, 410n. INDEX. 727 (References are to pages.) OFFICIAL "BCfiinyS— Continued. view that judgment against the principal ia conoliisive against the surety, 41 In. BOtroactwe liability upon bonds, 371. liability of sureties where officer holds office several terms, 374ii. presumption that liability arose in the last term, 3T4n. Sheriff and constable bonds. trepass and other wrongs committed colore officii, 389. levying upon property of a stranger to the writ, 389, 396. use of unnecessary force in making arrest or preventing escape, 395n. acting upon a void, 395n. cases holding that sureties are not liaible for wrongs committed colore offlcU, 396. P PAEOL EVIDElSrCE. competent to show the character in which -accommiodation/ parties sign negotiable instruments, 254. when the consideration of suretyship may 'be shown by parol, 296. the agreement to pay the debt of another may be shown by parol if the preliminary memorandum is in writing, 62. failure of consideration may be shown by parol, 296. PAHTIES TO AOTIOKe. if principal and promisor are both parties to action by the creditor, equitable ■aet-oS against the creditor in the right of the principal ■accrues to the promisor, 289n. PARTIES TO SURETYSHIP CONTRACT, mjust be under no disability, 8. corporation may become a promisor in suretyship if the transaction is in the regular course of its business, 17, 20n. tihe addition of a new party asi a principal maker as a defense to the promisor, 151, 157n. PAHTNER (See PARTISTEESHIP). retiring partner, is placed in the situation of a surety, where the remaining partner assumes the firm debts, 40, 607. retiring partner, after dissolution, discharged from partnership debts by extension of time to remaining partner, 40. PARTNERSHIP (See PARTNER). advances made upon a partnership letter of credit after dissolution of the firm will not bind the guarantor, even though the creditor had no knowledge of the dissolution, 289. retiring partner after dissolution, in situation of a surety, 40. PAST TRANSACTION. not a sufficient consideration to support a suretyship, 34, 35n. PAYMENT. guaranty of payment distinguished from a guaranty of collectibility, 120. if payment by principal is void, liability i« revived against promisor, 174. aiseharge of promisor by acts equivalent to payment, 685. 728 INDEX, (HefereaQes are to paeea.) VAYMENT— Continued. Wli^n the note of the principal is equivalent to payment, 685. in full, must be made before the equity of subrogation prises, 564, by persons in the situation of a surety, right of subrogation, 605. surety may enforce contribution, although paynient was without com- pulsion, 67?n. surety may enforce indemnity against principal for part payiqent, 686n. acceptance by creditor of negotiable note of promisor, equivalent to payment, 685. PENALTY. if penalty of a bond is left blank the omission can not be supplied without the consent of the obligor, 37. PRINCIPAL. guaranty for joint principals not held for advancements made to one, 106n, 289. jraud practiced by the principal on the promisor without knowledge of the creditor will not discharge the promisor, 239. change in amount of compensation of principal, not a material al- teration of main contract, 179n. release or extingui^ing of liability of principal, 190, 194n, 195. PRIORITY. surety paying debt of another, entitled to the priority held by the creditor, 596n. creditor will have priority in proceeds of mortgage given to surety, over debts due the surety secured by same mortgage, 620n. PRIVATE OBLIGATIONS. distinguished from official duty, 362. PROHIBITION BY STATUTE (See STATUTES RELATING TO SURETY- SHIP). PSJOMISE. meaning of the words "promise" and "agreement" as used in the statute of frauds, 58. oral promise to pay the delbt of another will be binding if the promisor signs a "memorandum" or "note" of the promise, 62. promise of indemnity not within the statute of frauds, 66, 70, 72. verbal promise to indemnify as surety, not an undertalcing within. the statute of frauds, 66. the doctrine of Thomas v. Cock, 66. the doctrine of Green v. Oesswell, 68. pRoansoR. who may become promisor in a suretyship contract, 8. release of promisor by creditor, 253. paying debt, entitled to indemnify from principal, 673. PROMISSORY NOTE. if note given in renewal is invalid, the old note, though surrendered, is revived, 176i). when note of principal to creditor is a payment, 685. surety on note as affected by the Uniform Negotiable .Instrument Acts or Codes, l^Tn. (References are to paeea.) PROMISSORY NOTE— Continued. payment by surety with note gives immediate right of contributicmi from co-surety, 654n. acceptance by creditor of n^otiable note of promisor, equivalent to payment, 685. PUBLIC MOJSTEY. lialbility of public officers to iiccount for interest upon public funds, 378, 384. lost by failure ot bank, liability of sureties of officer, 399. liP^t by theft or robbery, 403n. PUBUC OFFICERS (See OFFICIAiL BOiNDS). who are public officers, 362. franchise of public office is not contractual, 366. distinctions between contractual and official relations, 362. sureties upon official bonds contract with reference to reserved power of the sovereign to control the tenure and duties of the office, 368. official oath is a distinguishing characteristic of public office, 366n. notary public is a public officer, 366n. test of public office, 366n. change in the duties of public officers by subsequent legislation, 366, 368. sureties not discharged by change in the compensation of public officer, 371n. extension of tenure of office by legislative act, 37in. bonds of, not retroactive, 371. sureties of, liable for failure to ^.ccount for the use of public funds, 378, cases holding the officer not liable to account for interest on public funds, 384. trespass and other wrongs committed by sheriff or constable colore ■oijicii, 389, 396. liable for loss of public funds by failure of bank used as public depository, 399, 404. loss of public money by theft or robbery, 403n. not liable for non-performance of duty if prevented by circumstances beyond their control from exercising their functions, 403n. PUBLIC POLICY. stipulation that amount paid by siirety is conclusive against pr^ci- pal, void as against puhlic policy, 695, 697. against public policy to imply a promise of indemnity in favor of surety upon bail bond, 676. Q QUALIFICATION OF SURETIES, 412, 416n. B RATIFICATION. suretyship contract by infant becomes valid only when ratified by him after reaching majority, 11, 13. 730 INDEX (References are to pages.) RECOGNIZANCE (See BAIL BONDS). EBDELIVERY BOiNB. no action upon forthcoming bond until' a final disposition of the case, 456n.. EECORDING MORTGAGE, failure of creditor to record mortgage held as additional security will discharge promisor, I86n. REFERENCE TO OTHER IiXISTRUMENTS. incorporation of other instruments into a bond by reference, 326. by-laws of a corporation incorporated into a bond by reference, 329n. RELEASE. whatever releases principal will release promisor, 190, 193n. release of co-promisor by the creditor,, 255. release of co-promisor reserving rights against remaining promisors, 258. release of principal without fault of creditor, 195. RELEASE OF SECURITY HELD BY CREDITOR discharges promisor pro tqmto, 182. release of securities having no value does not discharge the sureties, I86n. substitution of other securities of equal value will not release promi- ' sor, 186n. promisor discharge by loss of security resulting from the negligence of creditor, 186n. release of property of principal in possession of the creditor, but not held as security, not a defense to promisor, 187. release of levy of execution upon property of principal wiU dis^ charge promisor, 186n. REPLEVIN. Breach of bond, 461. failure to prosecute without delay, 461. voluntary dismissal of action, 462. dismissal by court for want of jurisdiction, 461. dismissal for want of prosecution, 464n. dismissal by operation of law or because of the death of party not a breach, 462n. dismissal for defect of process, 464n. Defenses in action on hand. no defense that property was destroyed by unavoidable casualty pend- ing final action, 464. subsequent seizure under process of law a defense. 465n. REQUEST TO SUE. failure of creditor to sue prineipal'*when requested, not a defense, 263. doctrine of Pain v. Packard, 261. RES ADJUDICATA. when judgment against creditor In action against principal conclusive in favor of promisor, 694. View that judgment against the principal upon official bond is con- clusive against the surety, 411n. INDEX. 731 ! (References are to pages.) BBS ADJUDICATA— Coniraueti. judgment against plaintiff in replevin dismiSBing action, concluBive against sureties, 461, 462. adjudication against a guardian conclusive against his sureties, 487n. RKS GESTAE. contemporaneous declarations of principal, admissible against surety as part of the res gestae, 312n. RBSEKVATION OF REMEDIES. promisor not discharged by release of principal if remedies are re- served against the promisor in the contract of release, 194n. release of one, of several co-promisors reserving rights against re- maining promisors will not discharge those remaining, 258. EETBOSPECTIVE CONTEAOTS. guaranty will not be given retrospective effect, 106. REVIVAL OF OBLIGATION. if payment or substituted security is void, liability against promisor is revived, 174, 177. REVOCATION. executory contract of guaranty when arid how it may be revoked, 136. death of guarantor as a revocation, 139n. RIGHTS AND REMEDIES, subrogation, 591. contribution between co-sureties, 632. the right of indemnity against the principal, 673. . promisor who pays the debt of another entitled to enforce all the remedies of the creditor, 5S3, 591. ROBBERY. liability of sureties of public o£Scers for loss of public funds by theft or ' robbery, 403n. riot liable for robbery by a public enemy, 403n. SALARY (See C!0MI*EN6ATION) . SEAL. one seal suflScient for several signers, 321. imports a consideration, 323n. SECURITIES (See COLLATERAL SECURITIES). SET-OFF. principal's right of set-off against the creditor as a defense to the surety, 285. insolvency of the creditor as a basis of equitable set-off in favor of promisor, 2S8n. where all parties are before the court the right of equitable set-off accrues to the promisor, 289n. SHERIFF AND CONSTABLE. bond of indemnity to sheriff to prevent performance of duty doea not bind surety, 361. default of, in not paying over money collected in second term upon 732 INDEX. ' (References are to pagres.) SHERIFF AND CCMSTAB'LE— Continued. execution levied in first term, a liability upon the first term sure- ties, 374. trespass, and other wrongs committed colore offldi, 389. I'evying upon property of a stranger to the writ, 389, 396. use of unnecessary force in making arrest or preventing escape, 395n'. acting upon void writ, 395n. cases holding that sureties are not liable for wrongs committed coZdre offleii, 396. SITUATION OP A SURETY (See INVOLUNTAEY SURETYSHIP). eiGNATURE. a printed signature, if affixed by authority, is sufficient compliance with the statute, 323n. SPECIALTY. payment by surety of a specialty debt mates of the surety a, specisilty creditor, S76. SPECIAL AGENCY. doctrine of special agency as applied to promisor wiho signs upon condition and entrusts delivery to principal, 249n. SBBGIAL GUARANTY. can only be enforced by the one to whom it is addressed, 104. not assignable until right of action arises thereon, 106n. STATUTE OF FRAUDS. text of the English statute relating- to suretyship, 57. authorship of the English statute, 57. meaning and scope of the word "agreement" as used in the statute, 58. view that the entire agreement including a statement of the Cca- sideration i» required by the statute to be in writing, 57. view that the statute does not require the "agreement" to be ia writing, 61n, the statute requires merely that a "memorandum or note" be in writing and not the agreement itself, 62. not necessary that the "memorandum or note" should be all upon one paper, 338. a printed signature, if affixed by authority, is a sufficient compliianee with the statute, 323n. contract of indemnity is not within the statute, 66, 70, 72, 90. view that contract of indemnity must be in writing, 68. the doctrine of Thomas v. Cook as to a verbal) promise of indemni^' against liability aft surety, 66. the doctrine of Green v. Cresswell, 68. promises to pay the defet of another based Upoir solme Special benefit to the promisor, not within the statute, 8S, if credit is given wholly to the promisor the transactidtt is not within the statute although the advances are made to another, 74, 75. if promisor is jointly liable for the debt with the principal his con- tract to pay ia not within the statute, 77. promise to pay the debt of another on condition of the discharge of the orSgiinal debtor, not within the statute, 83. INDEX. 733 (References are to pages.) STATUTE OF ¥RAXJT)S^Contimied. prtanise to pay the debt of another out of property of debtor in promisor's hands need not be in writing 91. IBMmise to pay a pre-existing liability of the promisor — not within the statute although its perforraanoe extinguishes the liability of another, 93. the guaranty of the note of a third party in payment of a debt is within the statute, 97n. assumption of a vendor's debt by the vendee as a part of the purchase price is not within the statute, 98. STATUTE OF LIMITATIONS (See LIMITATION OF ACTIONS). STATUTES RELATING TO SURETYSHIP. persons proMbited by statute from becoming promisors in suretyship will be bound notwithstanding the prohibition, 416n. statutory provisions regulating form and requisites of bonds are- directory merely and the omission does not invalidate the contract, 413. where penalty named is greater than required by statute, 416n. aa to whether the consideration of a suretyship contract need be expressed in the writing, 57, ftln. proimisor upon bond of public officers discharged by subsequent statutes changing the duties of the officer or extending time of settle- ments, 366, 371n. if main contract void by reason of prohibition of statute the surety is discharged, 194n. STAY OF EXECUTION. Statutory requirements as to stay of execwtion, requirements for approval, 416n. failure to approve bo4d, not a defense to the surety, 416n. justification of sureties, 412, 416n. giving bond for smaller sum than is required by law, 413. giving bond for larger sum than is required by law, 4l6n. persons prohibited, by law or rules of court from becoming Surety, 416n. regulation by statute as to the number of sureties, 414. Consideration. bond foi* which there is no requirement of law, void for want of consideration, 416n. bond given by administrator who is not required to give bond by reason of having given adoninistration bond without consideration, 416n. Successive stay or appeal ionds. are cumulative^ 416. last sureties are principal obligors and the first, sureties for them, 416. where new trial is granted and same judgment remdered upon, retrial upon which error is prosecuted, the first bond remains liable, 419n. STOCKHOLDEEiS. who pay assessments for debts of corporation, in situation of sureties and entitled to contribution from those who do not pay, 642. 734 INDEX. (References are to pages.) STRANGER. promisor not discharged 'by an agreement ■with a stranger for ess- tension, 166. indemnity furnished a surety by a stranger need not be accounted for to co-surety, 615n. creditor not subrogated to indemnity furnished surety by stranger, 623. SUBROGATION. d«finltion, 606. scope of the right, 545. is independent of any agreement, 544, 608. as regulated by statute in England, 575. promisor is subrogated to securities held by the creditor even though he makes his contract without knowledge that the creditor holds such securities, 549. promisor is subrogated although securities came into the hands of the creditor after the execution of the original contract, 549n. payment in full essential, 564. conflicting views whether payment by the surety extinguishes the bond of judgment, 566, 569, 576, 582. promisor I who pays judgment subrogated to rights of creditor, 583. surety upon stay bond not subrogated to prior sureties, 618n. sureties upon last bond where successive appeals are taken are not subrogated to creditor's rights against sureties upon the first ap- peal, 618n. subrogation includes the right to have an assignment of security held by creditor, 586. extends to all remedies of creditor against principal, 591. promisor who pays may subject trust funds in the right of the creditor, 593. surety upon bond to secure purchase price of land, subrogated to vendor's right to bring ejectment, 595n. surety for judgment, subrogated to creditor's right to maintain bill in equity to subject assets, 596n. surety who pays may maintain action to set aside fraudulent con- veyance in the right of the creditor, 596n. the creditor's right of priority passes to the promisor by subrogar tion, 596n. surety paying judgment subrogated to the judgment lien of creditor upon property of principal, 583. promisor who pays subrogated to mortgage security held by cred- itor, 549. rule as to "tacking to mortgage," its effect upon subrogation, 596, 600. applies to one in the situation of a surety, 605. retiring partner paying firm debt, subrogated to firm securities held ^ by creditor, 605. indorser, subrogated to all the remedies of the holder against the maker, 549. INDEX. "^S (Bgferences are ta page^.) SUBEOGATTOMi— ContMttteii. ii)^@;^B$r entitled tp to eubregated to inortBafi^ seeunity heM Sy cred- itor, 649. prcBnlsor who pays, subrogated to pro-rata share fii dividend de- rived fv&m assets of principal, 610. between co-sureties, 613. if one cp-gurety hoM^ indemnity furnished by a ationger the other sureties are not subrogated to it, 615n. |)et\feen pupeessive sureties, 615. where successive bpnds are given in legal proceedings the sureties upon Iftst ijjqnd can pot be subrogated to eireditor's right against prior sureties, 6I811. prior surety in successive Jega} prooeedings suhvogatad to rtghts of creditor against later swety, 416. ■n^V ^at liat^r surety in legal proceedings is entitled to 8ubi>bgation againpt th^ pripr surety where the prip; sur^y consents to the istay of exeeution, 61Sn. in favor of creditor to gecurities }ield by surety, 886; 619; if ntflftgpgA pee^rea twQ debts, for one of which the mertg'^gee is only surety, the creditor's right of subrpgation, held to be superior ii) the prppeeds of the mortgage, 208. creditor not subrogated to indemnity in hands of EUret^ furnished by ft ptrflnger, g83, view of the English courts as to subrogation in favor of a creditor, egp. ffdJufg by preditpr to file mortgage dischjirgfis- surety, 166n. B^rctjr 4^priyed pf fi^ht Pf subrogation by aet of creditor, 626. release of levy pf pxeeutipn discharges purety, 186n. W^n ^urpty flifiy 'be gflbrpgated to the principal^ right of set-o£F, 285, 289n. j!pnyentw"*l wbrpgfttjos, 662, SigOPBSSIVE .BOJfPS, second bond given in same term of public officer, eumidative, 375n. successive appeal bonds, 416, 419n. suilafogsiftipp Ijetwppn gjiecessiyB bonds, 618. STJPEB/gEIJBAS (S^ gT4Y Of EXECUTION). SlTEETy. defined, 1, general and special mining at the teran, 3. a favored (JclitPF; iS^P. distinguished frflpj gjj[:arsntor, 1, 3, 4, 6. not entitled tq noticp pf d^fajilt, 3. guaranty ^ surpty (4 #1J prior signatures, 299. paying debt of another, entitled to have securities held ffj creditor asgjgflfij to jhjrn, 5|Ij5, paying a judgment, entitled tp haye it assigned' to himself, §8.6, paying ^ebt,, sybrjag^ted to right of creditor to subieet assets by creditor's bill pjr «,ct>ign to set aside fraudulent conveyance 596n. paying debt of another, entitled to the priority held by the creditor 59.te, y . 736 INDEX. (References are to pagea.) SURETY — Continued. subrogation, as applied to one in the situation of a. surety, 605. entitled to pro rata share of dividend derived from assets of prin- cipal, 610. entitled to dividend on entire claim against estate of deceased co< surety, 613n. {holding indemnity from the principal, must account for it to co- surety, 613. need not account for indemnity furnished 'by a stranger, OlSn. subrogation between successive sureties, 615. when surety will be subrogated to the principal's right of set-off, 285, 288n, 289n. contribution between co-sureties, 632. surety for surety not entitled to contribution, 643. contribution between persons in the situation of a surety, 641. one becoming surety at request of co-surety, 647, 648. contributing to default of principal, barred from contribution, 651. equitable exoneration before payment, 316. contribution between sureties as affected by the insolvency of one or more co-sureties, 662. wiho has paid, may recover back from indemnified co-surety a pro- portionate share of the indemnity, 613. paying debt barred by statute of limitations, can not recover con- tribution, 672n. who pays to prevent default, can not recover contribution, 669. a^mount recoverable by surety upon implied right of indemnity, 686. wben surety can not recover from principal for payment of claims for which the principal was not liable, 680. who pays, may have indemnity although payment could not have been enforced, 689. judgment against surety conclusive as to his right of indemnity, 694. omission of name of surety from the body of the bond, not a de- fense, 36. Official bonds. qualiiioation and approval' of sureties upon official bonds, 412, 416n. surety of pubMc officer not discharged by a change in the compensa- tion of the principal, 37 In. as affected by an extension of the tenure of office, 37 In. sureties of officers holding office several terms, 374n. liability as affected by the fact that the wrongful act of the officer is partly in one term and partly in another, 374n. liable for interest collected upon public funds, 378. cases holding officer not liable to account for interest on public funds, 384. liability of sureties of sheriff or constablte lor trespass and otiier wrongs committed colore officii, 389, 306. liable for loss of public money by failure of bank, 399, 404. loss of public money by theft or robbery, 403n, Judicial honda. judicial bond not conforming to the law as to the number of suretiea 414. INDEX. 737 (References are to pages.) BURETY— Ctojitinuei. not bound, where court acquires no jurisdiction in attachment by reason of defective affidavit, 452. upon attaclunent bonds, estopped from questioning the regularity of the proceedings, 450. exoneration of sureties in attachment proceedings, 455. judgment against plaintiff in replevin dismissing action or finding right' of property in defendant, conclusive against sureties, 452, 461, 462. SURETY IN LEGAL PROOBEDIN-GS (See JUDICIAL BONDS). SURETY OP PUBLIC OFFICERS (See PUBLIC OFFICERS AND OFFI- CIAL BONDS). SURETY FOR A SURETY. not liaJble in contribution, 643. first sureties upon successive appeal bonds, sureties for the later sure- ties, 416. SURETY COMPANIES (See CORPORATE SURETYSHIP). SURETYSHIP BY OPERATION OF LAW, 40. SURETYSHIP DEFENSES. duress of principal as a defense, 21, 194n. failure to give notice of acceptance to guarantor, 123, 127, 127n. enlargement of the business of employer increasing the risk as a defense to promisor, 160n. delay of creditor in pursuing remedies against principal, not a defense to promisor, 172n. liability against promisor revived if payment or substituted security is void, 174, 177. whatever releases principal will release promisor, 190. surety entitlled to injunction against judgment, 411. where release of principal by operation of law is without fault or procurement of the creditor, 195. if main contract is void by reason of prohibition of statute, 194n, insanity, infancy or other incapacity of principal, not available as de- fense to the promisor, 8, 13n. set-off or counterclaim as a defense to the promisor, 285. omission of name of surety from body of bond, not a defense, 36. to actions upon appeal or stay bonds, 416. to actions upon replevin bonds, 464, 465n. to actions upon bail bonds, 494, 497, 500n. Alteration of the principal contract, 140. which adds to or takes away some obligation already imposed, 142. ■promisor discharged even though alterations are beneficial, 161. changing the date of maturity of the principal contract as a defense, 140. changing the date of appearance in a bail bond, 38. alteration of contract as affected by the absence of fraudulent intent, 150n. addition of a new party as principal maker, a defense to promisor, 151, 157n. 7?6 HSTDEX. (Refdrerideg Eire td' pA^e^.) SURETYSHIP DKFEKSES— Continued. adAitma of nfew party a^ surety or gilslraritbf, ndt &. defetlSe, 158, 250. change in the duties of the principal as a defense to the prraniaor,. 157, I60n. . surety upon bond of public officer as affected by subsequent legislation changitg duties of the office, 159n, 871n. SaltenBion 6f iime^ 164. giving time to principal without thS consent of prdmisor, 114. promisor discharged by extension even though no daJDage tO the prom- isor, 166ni prpMisor aot diSdhai'gea. by an agt^elnent TTlth a straiigS* foi'-^xten^ sion, 166. extension agreement must be for a consideration, 17(hi. payment of interest in advance, 170hi promise to Jay interest in advance, 170n. payment of usurious interest is a consideration, 170!ni not a defeiiae if pfemi^oi- is fiiUy iftdeinnifiedj 173. will not be implied from the acceptance of collateral nlatu^ihg^ &i ft later date, 171n. extension of time by act ef legislature, 171, 371. as a defense to persons in the situation of a sutetyi 40. Foiiitre of creditor tb sue principal, 261. promisor not discharged because the creditor fails to sue when, re- guested, ZS3^ bill in equity to compel creditor to proceed against principal, 268n. doctrine of Pain v. Packard, 261, Fraud of the creditor. practiced by the creditor upon the principal^ 197. creditor not bound by unauthorized representatioils by agent materially affecting the risk, 217; recitals in the bond that rejifesentations affedting the tisk have been made) bind tlie dreditor, although reditala unauthorized, 221. secret stipulations between creditor and principal affecting thfe per- formance of the main contract, a fraud upon thfe proniisor, 197, 199n. concealment of material fact& affecting the risk of the promisor, 199. not required of creditor to disdiose what he knows oondernliig the Irregularities of principal in other tfan^aeticmfii, 234. conflicting views as to whethdl* ereditor is ehargfeable with eonsfcfuctive fraud who has the means of knowIed|;e, affecting ^uretyiihip #isk, 206, 214. construetive fraud) resulting frOm failure t& disclose faetsi affecting the I'isk, coming to the knowledge Of the creditor alter ihi execu- tion of the contract, 229. insolvency of the priniiif al need not be disclosed to prbtnisor, 209n. breach of eontraet by principal deed iiot be .disclosed^ 234ilw creditor need not exercise diligence in watching the prifloipal in the intereat of the prdmisdr^ B34n> . fraud can not be predicated upon a promise of the cr^toi", 249n. rwDEXi 739 (Beferenoes are to pagea) SUBiETYSHIP DEFENSES— Comtimted. Fraud pprljed tb d«liver7 '^itluKtt complying fwith conditions, 249n. circumstances amounting to cdSstructive notice of conditions, 214n, 249n. i ..Beleaae of.pmmiSca' tp erSditir^ 190. creditor who has . dieclared to promisor that eonti'aoi is at an end, estopped from enforcing it, 253. release of .od'^retydigcbarges renialDiDg itDr«ty to* the esteni; of his right in contribution, 255. release by operation of law, 257n. • : . release of co-promisor, reserving rights against remaining promisor, not a defense, 258. Release of security held by creditor, 182. . promiBoi' »c>t ditohafged if security of Ao VfthlSy iMiij . same effect whether release is voluntary of JfestJlt of negligence, 186n. failure to file mortgage, 186n. feleaS0. of property cxf principal ndt heliA a& seestifity fin- suretyship debt, 187. Revocation. ex^dutttry.e^traet ol euj'etylibii) retobfid 4>y avVim, 130. when death of promisor ia tti tevooatien> 139a. TACKING MORTGAGES. rale »d td taelting ufton sddured elaiia suibge^eut advdUSM of the creditor, 596, 600.. TEKUHE OF OFFICE, extension. id, lay. ligisIatiTd Aety 871A. TERM OF 0FFIC3E. second bond given in same term of office, cumulative, 375n. liability of sureties where default of officer is partly in one term and Ipartly in another, 374n. TRESPASS. liability of sheriff or constable for trespass committed colore offloii, 389, 396. TRUST FUNDS. may be followed and subjected in the right of the creditor by promisor paying the debt of another, 593. u ULTRA VIRES. when act of corporation becoming surety upon bond is lUtra virei, 14. 740 INDEX. (References are to pages.) TOTSOUNDNES® OF MIND. promisor must be of sound mind, 8. USUEY. payment of usurious interest in advance aa a consideration: for aa extension of time to the principal, 170n'. if note given in renewal is void on account of usury, tbe liability upon tlte original note is revived, 176n. V VENDOR. ' in the situation of a surety wbo sella land subject to a mortgago whicb the vendee assimies and agrees to pay, 41. VENDOR'S LIEN. surety for purchase price of land subrogated to, B@6a. VENUE, CHANGE OP. is not a forfeiture of bail, 501. W WAIVER. dismissal of injunction by conaent^ a iraiver of defendant's right to damages, 419, 422. WARRANTY. when are statements made in> applications, representations and when are they warranties, 535. WASTE. creditor permitting security in his hands to be wasted, to the extent of the loss, releases promisor, lS6n. WRITING. contract of suretyship must be in writing, 00. as to whether the statute of frauds requires tiie consideration to be expressed in writing, 57, &ln. statute of frauds does not require the entire contract to be in writing, but merely a "memorandum" of it, SZ. contract of indemnity need not be in writing, 66, 70, 72. view that contract of indemnity must be in writing, 68.