Case ID: sc-eq_23/html/0160-01.html
Source: Caselaw Access Project
Author: {"author": "Johnston, Ch.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Wm. McKenna et al. (official sureties of Secrest, sheriff,) vs. Leroy Secrest et al.
    
    Columbia,
    May, 1850.
    A sheriff had contracted with one of his sureties for the purchase of a house and lot, and had subsequently paid the money. The surety had given a bond for titles, but the sheriff proving insolvent, he refused to convey. The sheriff, with some of his private creditors, filed a bill against him for a conveyance in conformity to the contract, and these creditors desired that the premises should be sold to satisfy their demands. The surety concurred in the application for a sale, but resisted the payment of the proceeds to the private creditors, on the ground that the title was yet in him, and that he had an equity to be protected out of the proceeds of the sale, against the liability he had incurred as one of the sureties of the sheriff. The premises were sold in accordance with the application, and the surety became the purchaser. The Court ordered the proceeds of the sale of the house and lot to be charged to the surety, on behalf of the sheriff’s official creditors, in addition to his liability as surety of the sheriff for an aliquot proportion of his official bond.
    Complainants, sureties of an insolvent sheriff, filed their bill calling in his official creditors, and seeking to be discharged upon payment of their aliquot shares of the bond towards the demands of the creditors; but they did not, upon filing the bill, apply for leave to pay their respective proportions of the bond into Court, nor did either of them pay in' his proportion. Held, that the sureties were not entitled, in ascertaining the amount for which they were respectively liable on the bond, to a credit for any payments which had been applied in extinguishment of interest or costs which accrued after die filing of their bill.
    A party assigned his notes and accounts and also his executions then in the sheriff’s office. Against the same party there were also unsatisfied executions in the hands of the sheriff. Upon the assigned executions, the sheriff, both prior and subsequent to tire assignment, had collected money which he had not applied to the executions against the assignor. Held, that the assignment of the executions, before an actual and formal application of the money previously collected on them, to the executions against the assignor, transferred the right to the money to the assignees, and prevented its application to the executions against the assignor; that it also gave the assignees a good right to all money afterwards collected on the executions previously lodged, as well as to the money afterwards collected on executions on the notes and accounts subsequently obtained and lodged.
    
      Appeal from a decree made by Johnstow, Ch., at Lancaster, June Sittings, 1848.
    The plaintiffs, McKenna, Mcllwain, Johnson, Ingraham and Twitty, were the sureties on the official bond of the defendant, Seerest, as sheriff of Lancaster, and filed their bill the 23d of January, 1843, calling in his official and seeking to be discharged upon payment of their aliquot shares of the bond towards the demands of the creditors. The share of each surety to the bond was $2400. The creditors were enjoined from proceeding at law, and called in to establish their demands in this Court. Seerest, the principal to the bond, as sheriff, as well as all his sureties, except McKenna and Mcllwain, were insolvent; and therefore the creditors were to be paid out of the aliquot shares of the bond for which McKenna and Mcllwain were liable under the statute, so far as these would extend; which was only to a part of the demands, leaving a considerable balance unsatisfied.
    The plaintiffs did not, upon filing their bill, apply for leave to pay their respective shares of the bond into Court; nor did either of them pay in his share.
    Upon taking the account of the demands of the creditors, and the sums which McKenna and Mcllwain, the solvent parties to the bond, had paid towards them, and in discharge of the $2400 for which each of them was bound, it was ascertained that
    Mcllwain had paid.$3412 80
    Of which there was applied to interest accrued on the creditors’s demands, after bill filed.$345 93
    And on account of costs,. 98 57 . 444 50
    Leaving applied to demands, as they stood at the filing of the bill, and exclusive of costs and interest, afterwards accrued, the sum of. $1968 30
    And that McKenna had paid.$2167 28
    Of which there was applied to interest accrued on croditors’s demands, after bill filed, the sum of..$312 96
    And for costs,. 84 62. 397 58
    Leaving applied to creditors’s demands, as they stood at the filing of the bill, the sum of.$1769 70
    The Commissioner, in his report upon the accounts, allowed Mcllwain and McKenna credit upon their aliquot shares of the penalty of the bond, for the entire sums thus paid by them; and allowed them credit for the whole amount paid.
    The creditors, by way of exception to the report, contended that they were not entitled to credit for so much of the payments as were applied to costs incurred in resisting the creditors, and to the interest accrued on the creditors’s demands after bill filed; and the Chancellor sustained the exception, observing :
    “ The Court is of opinion that the sureties are not entitled, in ascertaining the amount for which they are respectively liable on the bond, to a credit for any payments which have been applied in extinguishment of interest or costs, which have accrued since the filing of the bill. The costs were incurred in resisting claims for which they, as sureties, were personaj]y liable, and should not be thrown upon the security fund: which would be equivalent to making the creditors liable for them. As to the interest, it is a rule that parties to a penal bond are not liable beyond the penalty ,• and these sureties are not liable'beyond their aliquot share of the penalty. But they should have paid in their share on the filing of their bill; and, by retaining it, must be regarded as liable for the interest which accrued while improperly retained in their hands.”
    Another point brought before the Chancellor arose as follows :
    In 1833, Secrest, the sheriff, had contracted with McKenna, one of nis sureties, and one of the plaintiffs in this case, for the purchase of a house and lot in the town of Lancaster, at the price of $3930, to be paid in three annual instalments; and Secrest paid the money in 1841-2. McKenna had given a bond for titles. Secrest, with some of his private creditors, filed a bill against McKenna for a conveyance of the house and lot, in conformity to the contact, and the private creditors desired that the premises be sold to satisfy their demands. McKenna concurred in the application for a sale, but resisted the payment of the proceeds of the sale to the private creditors, upon the ground that the title was yet in him, and that he had an equity to be protected out. of the proceeds of the sale, against the liability he had incurred as one of Secrest’s sureties as sheriff.
    The Court ordered the premises to be sold, reserving all questions in the case until the Commissioner should report in this case, (the one now under consideration,) “in which,” says the order, “is involved an inquiry as to the extent of McKenna’s liability for Leroy Secrest, as surety to his official bond.”
    The house and lot were sold accordingly, and were purchased by McKenna, at the nett price of $1020; who subsequently procured an order on circuit, in that case, (Secrest et al. v. McKenna,) that the purchase money be paid over or retained by him.
    In taking the accounts in the case now under consideration, (McKenna et al. v. Secrest, sheriff, et al.) it became a question whether this sum of one thousand and twenty dollars, thus received by McKenna, the proceeds of the house and lot, should not be charged to McKenna, on behalf of Se-crest’s official creditors, in addition to his liability as surety of Secrest, for an aliquot proportion of his official bond: and the Chancellor ruled that he should be so charged.
    A third point in the cause arose out of the following circumstances :
    There were several executions in the office of Secrest, as • sheriff, against one William Clarke. The oldest of these executions were those of Pitman & Day, and of Hall & Co., exceeding $2400. Junior to these two executions was another execution of Parish, Wiley & Co. vs. William Clarke, Caleb Clarke, Sr., and Caleb Clarke, Jr., for $2000. On this latter execution William Clarke was bound as principal, and his said co-defendants were his sureties: and they were also his sureties on a note in Bank for about $720.
    . William Clarke had certain executions in sheriff Secrest’s hands. At Fall Term, 1839, a rule was taken out by Pitman & Day and Hall & Co. against him, (Secrest,) and made absolute unless he made the money due on their execution, out of .William Clarke, by the 1st of December, 1839.
    On the executions in favor of William Clarke, the sheriff collected, prior to the assignment hereinafter spoken of, the sum of $497 79; but did not apply it to the executions against him.
    On the 12th of March, 1840, William Clarke assigned to Caleb Clarke, Sr. and Caleb Clarke, Jr., (who, it will be remembered, were his sureties on his note in Bank, and also on the execution of Parish, Wiley &. Co. against him,) his notes and accounts, and also his executions then in the sheriff’s office.
    After this assignment the sheriff collected the further sum of $340 76 on the executions of William Clarke, which had been lodged in his office before the assignment was made, ánd the sum of $206 30, on executions obtained on the accounts and notes which had been assigned, making together the sum of $547 06, collected after the assignment.
    Subsequently, the sheriff, Secrest, satisfied the attachment issued against him.
    Upon the accounting in this case, Caleb Clarke, Sr. and Caleb Clarke, Jr., the assignees of William Clarke, claimed not only the $497 79, collected before the assignment, but the $340 76 collected after it, upon executions which had been lodged before it was made; and the $206 30 collected upon executions lodged after the assignment.
    On the other hand, the sureties of Secrest insisted they should not be charged. with these sums; contending that Secrest had a right to detain them, having satisfied the older executions of Pitman & Day and Hall & Co. against William Clarke, to which they were applicable.
    The Commissioner decided that he was entitled to retain the $497 79 and the $340 76; the former sum being collected before the assignment and the latter being collected upon executions lodged before the assignment; but that he was not so entitled in respect to the $206 30, which was collected after that event, and upon executions not lodged at that time.
    
      To this decision these two assignees put in an exception: ; which was overruled by the Chancellor.
    Upon all these points an appeal was taken from the Chancellor’s judgment, and argued, by
    Clinton, for Sécrest’s sureties;
    
      Boyce, for C, & C. Clarke, the assignees; and Hanna, contra.
   The Court delivered its opinion as follows:

Johnston, Ch.

Taking up the appeal of C. & C. Clarke» in the first instance, I have to observe: That according to the practice of the Law Court, while I was at the bar, and according to the older cases, such as Summers v. Caldwell and others, reported in our books, the money collected on the executions of William Clarke, prior to his assignment of them, would have been applied to the executions against him in the sheriff’s hands; and of course the assignee, taking subject to all equities and incumbrances existing at the time of the assignment, would have no claim to such money. It appears, however, that later decisions by the Law Courts, (which are binding on us,) have varied this doctrine; and that the rule now is, that an assignment, before an actual and formal application of the money to the executions against •the party for whom the money is collected, transfers the right to the money to the assignee, and prevents its application according to the older cases. To these decisions:I must yield, whether I perceive their correctness or not; and they are sufficient to sustain the claim of C. <fc C. Clarke to the money collected before the assignment made to them.

If this be so, a fortiori, the assignment gives them a good right to all money afterwards collected on the executions previously lodged; and, with still stronger reason, establishes their right to money afterwards collected on executions after-wards obtained and lodged.

I turn now to the appeal taken by McKenna and Mcllwain.

One of the grounds taken is, that the Chancellor’s decision in relation to interest is erroneous.

It is a general rule that interest will not be allowed upon a bond beyond its penalty, any more in equity than at law. But where parties to an obligation come into this Court, asking its active interposition on their behalf, they must do what equity and justice demand, as a condition of the Court’s interference.

These plaintiffs, by the very act of filing their bill, admitted that the official creditors of Secrest, their principal, were entitled to be paid out of their aliquot share of the bond to which they had made themselves parties. When they called in those creditors to present and establish their demands here, and enjoined them from proceeding at law, they were bound to pay their share of the penalty into Court, and to throw no unnecessary obstruction in the way, to procrastinate their re-, covery of what was due them. *

Ves. 79, cited Grant v. Grant, 5 Cond. E. Ch. 155.

5 Cond. Eng. Cl1-155;

17 ves. ice.

3 Caine’s cases> 481

2 Strob. Rep. 113-

Instead of paying the money into Court, however, these plaintiffs withheld it, while interest was accumulating on the demands to which it should have been applied. Lord Eldon, in the case of Pulteney v. Warren, speaking of Duvall v. Terry, says — “The decree for principal and interest beyond the penalty of the bond, was affirmed upon the very ground that the party was prevented from going- on at law while the demand was.under the penalty.” “That is the way” says the vice Chancellor in Grant v. Grant, “in which Lord Eldon represents the case ; and. it is in substance a true representation of-it; and he applied the principle of that case to the circumstances of the case of Pulteney v. Warren, which, arose on the ground of the conduct adopted by Warren, one of the lessees on the Pulteney estate; and he gave an account, which was continued far beyond the time it would have been continued to, but for- the conduct of Warren. The same principle seems to have been adopted in Clarke v. Lord Abingdon, and the other cases which were mentioned at the bar; all of which go to support the principle, which is merely founded on this, that if a. party chooses, by improper proceedings, to prevent a creditor from having payment as soon as the creditor ought, these- proceedings shall not operate to the prejudice of the creditor; but he shall be-considered as entitled to receive what is really due to him ; and notwithstanding there is a form of penalty in the bond, that shall not be the limitation of what shall be recovered by him.”

See, also, on this subject the case of Smedes v. Hooghtaling, and the note appended to it.

When the creditors were called in and-, enjoined from, proceeding at law, this was. equivalent to saying they were entitled to what a Law Court would, at that time, have given them judgment for; and in the casé of the State v. Wylie, it was held that the interest accruing after judgment is to be allowed beyond the penalty ; and Withers, J. says, “ I held, that they” (the sureties of Wylie, who was sheriff of Pair-field) “ were not entitled to any credit for costs which accrued in the litigation of other creditors against them, for I could not conceive how the creditors of the sheriff should receive, among them, what the law allowed, to wit: the whole penalty, if costs arising from the default of the sureties and their principal, paid, (as they were) to various officers of Court, should be deducted from the creditors’s fund; and, for the like reason, I excluded the item of interest from the calculation, arising, as that did, from the peculiar default of the defendants. If the sureties” he adds, “ had gone into a Court of Equity, I believe that jurisdiction would have required them to pay into Court the whole penalty of the bond, which would have been invested, and the creditors might have had ■ interest on the penalty.”

Burge on Suretyship, 324, citing 9 East. 35, and JO B. & C. 93.

The last ground relates to the $1020 received by McKenna from the sale of Secrest’s house and lot.

It is true that in the case of Secrest v. McKenna, it was intimated that as between Secrest and his private creditors on the one hand, and McKenna on the other, McKenna was entitled to hold this money to indemnify him for what losses he might sustain as surety on Secrest’s official bond. But the difference between those creditors and these is this, that Mc-Kenna was no surety and in no manner bound for the debts which Secrest owed the former. Their demands had no lien on the house and lot, and therefore, their claim to be paid out of the proceeds of the premises was merely an equity, and McKenna had an equal equity, to which was superadded the further circumstance, that the title to the house and lot, though paid for by Secrest, was still in McKenna, the vendor. But in the present case, it is to be considered that McKenna is surety for the very debts to which Secrest, the equitable owner of the property, whose proceeds McKenna has received, should have applied the money. We are to regard the case, therefore, as if Secrest had placed the $1020 in McKenna’s hands. A creditor ” says a respectable elementary writer, well supported by authority, is entitled to the benefit of all the securities which the principal debtor has given to his surety, as well as those which were given • to the creditor by the principal.”

To the same effect is a passage in Pitman on Principal and Surety, page 88, 40 Law Lib. citing 1 Eq. Ca. Abr. 93, and 11 Ves. 12.

On the whole, I do not perceive any error in the decree against the sureties ; and, as to them, it is ordered that the decree be affirmed and the appeal dismissed.

But as to C. & O. Clarke, it appears the decree was erroneous. Their exception should have been sustained, and it is so adjudged.

It is ordered, that the cause be remanded to the Circuit Court, and the account recommitted to the Commissioner for correction, according tó this opinion.

Dunkin’ and Dargan, CO., concurred.

Decree modified.