Case ID: tenn_26/html/0169-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Gkeen, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Bouie, Guardian, &c., vs. Pucket.
    A certificate of discharge under the bankrupt law, may be pleaded in bar of a suit against such bankrupt, as a surety on guardian bond.
    Garret was the guardian of the minor heirs of Bouie, and Pucket was one of the sureties on the guardian bond.
    A bill was filed in the Chancery Court at Franklin, against Garret, Pucket and the other sureties, by Sarah Bouie, the subsequent guardian for an account.
    Pucket relied on his answer on a certificate of discharge, granted to him by the District Court of the United States, and the presiding Chancellor was of the opinion that the discharge of said Pucket, under the bankrupt law, was no discharge of his liability on the guardian bond and so decreed. From this decree Pucket appealed. >
    
      David Campbell, for complainant.
    The decision of this question of Pucket’s continued liability depends upon the construction of the first section, and of the last proviso of the second section of the bankrupt law, and the counsel of the complainant has been able to find no case which bears directly upon that question. The first section of the bankrupt law is in these words: “All persons whatsoever residing in any State, District or Territory of the United States, owing debts, which shall not have been created in consequence of a defalcation as a public officer, or as executor, administrator, guardian, or trustee or while acting in any other fiduciary capacity, who shall by petition, &c., shall be deemed bankrupts within the provision of this act, and may be so declared accordingly by a decree of such court.” The last proviso of the second section is in these words: “And provided, also, that nothing in this act contained shall be construed to annul, destroy or impair any rights of married women, or minors, or any liens, mortgages, or other securities, on property, real or personal, which may be valid by the laws of the States, respectively, and which are not inconsistent with the provisions of the second and fifth sections of this act.” Owen on Bankruptcy, Appendix, p. 51. Now is the claim against Pucket a debt created in consequence of a defalcation as guardian? That it is all must conceed. Then it is within the exact terms of the statute. But it may be urged that the statute only intended to embrace the case of the defaulting guardian himself. The statute does not say so, and if that had been its intent, the terms would have been in consequence of his defalcation as guardian, as those are the appropriate terms by which to restrict the operation of the statute to the case of the defalting guardian himself. The statute on the contrary employs the terms in consequence of a defalcation as guardian, &c., which terms embrace all who are responsible for the debt of the defaulting guardian, as well as the guardian himself, and indicates very strongly that no such debtor, whether as principal or security should be discharged from the trust debt under the law.
    This view of the construction of this section assumes that the words “in consequence of a defalcation” are to be understood before each of the terms guardian, executor, &c., and that is conceived to be the true reading of the statute, and if it be, then the present case is within its very terms. But would the construction of this section, that the sureties of guardians are dischargeable under it, “annul or impair the rights of minors.” Certainly it would not. Then it cannot be so construed, because the last proviso of the second section has said nothing in the act shall be so construed.
    In the absence of authority directly upon the point some assistance may be derived from the general observations in the case of Tibbatts, 5 Law Rep. 2-59, and Forsyth vs. Riddle, 2 Pet.
    
      J. Campbell, for defendant.
    Does the certificate in bankruptcy discharge Pucket from his liability on this bond? The chancellor decided that this debt was of a fiduciary character, and therefore Pucket could not be discharged from it under the bankrupt law. In this it is believed he erred. Who is the trustee here? It is Garret. Garret cannot be discharged. Pucket is not a trustee. He is the mere security that Garret will perform the trust. It never was the intention of this act of Congress to place the securities of defaulting officers and trustees upon the same footing of the officers and trustees themselves. They intended the act to operate upon the guilty man who had used the money of others, and not upon the innocent surety, who is made to answer as long as he has property for the guilt of another. If there is any set of men among the debtor class, whom all the community would say ought to be favored, it would be the unfortunate sureties. To hold securities liable after they are discharged under the bankrupt law, is a construction not favored by the words of the act, and is at war with its spirit.
   Gkeen, J.

delivered the opinion of the court.

The only question that we need notice in this case is, whether Packet, who has beeft discharged in bankruptcy, is liable ofi the guardian bond as one of the securities for J. R. Garret, the former guardian of complainant. And we think he is not.

The first section of the bankrupt law provides, that “all persons whatsoever residing in any State, District or Territory of the United States, owing debts which shall not have been created in consequence of any defalcation as a public officer, or as executor, or administrator, or guardian, or trustee, or while acting in any other fiduciary character, who shall petition, &c., shall be deemed a bankrupt within the provision of this act, and may be so declared accordingly by a decree of such court.”

Neither the words nor méaning of this act excepts the sureties of a guardian, executor, &c., from its benefits. It excludes from its benefits those who have become debtors, in consequence of a defalcation while acting in a fiduciary capacity. The surety does not act in a fiduciary capacity, he does nothing in connexion with the transaction but execute the bond. Whatever plausible ground might exist for excluding the surety by the words “in consequence of any defalcation,” &c., it is entirely removed by the subsequent words “while acting in any other fiduciary capacity,” thereby making it plain, that the party so acting and becoming indebted thereby, is alone excluded.

The last proviso of the second section, “that nothing in this act contained shall be construed to annul, destroy or impair any lawful rights of married women, or minors, or liens, or mortgages, &c., which may be valid by the laws of the State respectively, and which are not inconsistent with the provisions of the second and fifth sections of this act,” does effect this question. This provision was inserted to avoid interfering with the peculiar legislation of any of the States upon the subjects enumerated, where such legislation might not be inconsistent with the provisions of this act.

The exception out of the operation of the bankrupt law of debts which have been, created in consequence of a defalcation as a public officer, or as executor, or administrator, or guardian, trustee, or while acting in any other fiduciary capacity, was intended to act as an incentive to faithfulness in the discharge of such trusts.

Debts created while acting in a fiduciary capacity, were deemed by Congress to create a higher obligation than existed in relation to debts created in the ordinary traffic and business of life, because in the former a peculiar trust and confidence is reposed, and the very existence pf the defalcation implies a breach of that trust, and consequently, some decree of moral turpitude. Whereas the latter are the ordinary results of one’s every day’s business, existing with perfect honesty, and which a man may be rendered unable to pay without a fault. Hence, while the law provided for his discharge from these, it enacted that as to those, the obligation should still continue, that thus reprobating all unfaithfulness in public trusts and refusing to such guilty debtors, a boon which was granted to all other debtors, persons acting in fiduciary capacity might be excited to faithfulness or punished if defaulters.

But these reasons can have no application to the surety in such case. So far as he is concerned the debt is no more sacred than other liabilities. . This liability to pay for any defalcation will stimulate him to use all the means in his power to prevent it, and he needs no excitement from the discrimination of this law, and if he is punished, it is inflicted for a crime he did not commit and could not have prevented. '

We think, therefore, that neither the letter nor the spirit of this law, excludes the surety of a guardian from pleading his certificate , of discharge to a suit for the default of such guardian.

The decree must be reversed and the defendant Pucket discharged from liability.