Case Name: John P. Jackson vs. Henry E. Davis, Administrator
Court: Supreme Court of the District of Columbia
Jurisdiction: District of Columbia
Decision Date: 1885-06-15
Citations: 4 Mackey 194
Docket Number: Equity. No. 7,990
Parties: John P. Jackson vs. Henry E. Davis, Administrator.
Judges: Justices Cox, J ames and Merrick sitting.
Reporter: Reports of cases argued and determined in the Supreme Court of the District of Columbia (District of Columbia - reported by Mackey)
Volume: 15
Pages: 194–213

Head Matter:
John P. Jackson vs. Henry E. Davis, Administrator.
Equity. No. 7,990.
Decided June 15, 1885.
Justices Cox, J ames and Merrick sitting.
Where one oí two sureties on a bond given to the United States pays the debt of the insolvent principle, he is entitled, in his olaim for contribution, to be subrogated to the priority of the United States over the other creditors of the estate of his co-surety.
STATEMENT OE THE CASE.
Bill in equity by a surety against the administrator of his co-surety to enforce contribution. The material averments of the bill were as follows:
That on the 2d of September, 1865, Oscar H. Burbridge, as principal, and Philip B. Eouke, John O. Eorbes, and the complainant, John P. Jackson, as sureties, executed a joint and several bond in $25,000 to the United States, conditioned for the faithful discharge by Burbridge of the duties of the office of Supervising Special Agent of the Treasury Department,’and the due accounting for all public moneys and property coming into his hands by virtue of that office.
That Burbridge entered upon the discharge of the duties of his office and failed to account for a sum of public money greatly in excess of the conditions of the bond.
That the United States entered suit against the parties to the bond, but process was had only on Burbridge and complainant.
That Burbridge and complainant appeared and defended the suit, but verdict was rendered and judgment entered against them, November 22, 1815, for $36,560.50, with interest.
That complainant subsequently paid the sum of $30,466.41 on this judgment and procured it to be entered satisfied, the entry of satisfaction showing the amount actually paid.
That Burbridge and Eorbes, one of the sureties, at the time of the breach of the condition of the bond were, and ever since have been, and still are, utterly insolvent and unable to pay the penalty of the bond, or any part thereof.
That neither Burbridge, nor Forbes, nor Fouke, has ever contributed anything to reimburse complainant for his payment in satisfaction of the penalty of the said bond.
That Fouke, the defendant’s intestate, died solvent, and when the assets of his estate are reduced to possession, they will suffice to discharge the debts of the estate.
That the estate of the said Fouke is liable to the complainant for a contribution to the extent of one moiety of the amount paid by the complainant to the United States in satisfaction of the bond; and that by virtue of his said payment to the United States, the complainant is subrogated to all the rights originally pertaining to the United States as a creditor of said estate under the bond; and that by virtue of such subrogation he is made a preferred creditor of said estate, and in the .event the assets thereof should prove insufficient to discharge its Habilites, he is entitled to have his demand paid in preference to any and all other liabilities of said estate. The bill concluded with a prayer that the defendant’s administrator be decreed to pay to complainant one moiety of the amount paid by complainant in satisfaction of the penalty of the bond, and that the payment be made in preference to any payments to any other creditor of the estate.
The defendant answered, calling for strict proof. Testimony was taken in support of the averments of the bill. The case was then certified to the G-eneral Term to be there heard in the first instance. A number of points were raised by the defendant on the hearing, such as the Statute of Limitations, non-joinder of parties, &c., but were overruled by the court upon consultation on the bench, the Chief Justice announcing that the court would hear argument only on the question of the right of the plaintiff to be subrogated to the priority of the United States.
Randolph Coyle for complainant:
1. Complainant is subrogated to the rights of the United States against the estate of bis co-surety, and even if tbe estate be not solvent, bis claim has priority of all others as far as tbe asset's will go towards paying it, to an amount not to exceed one moiety of that paid by complainant.
Section 3466 of tbe Revised Statutes of tbe United States provides that, “whenever any person indebted to tbe United States is insolvent, or whenever tbe estate of any deceased debtor, in tbe bands of tbe executors or administrators, is insufficient to pay all tbe debts due from tbe deceased, tbe debts due to tbe United States shall be first satisfied.”
Under this provision of law, tbe United States were entitled to priority of payment out of tbe estate of Fouke (upon his death insolvent) of tbe debt for which be was bound as surety of Burbridge, and tbe debt having been paid by complainant, be “is permitted on the principle of subrogation to stand in tbe shoes of tbe United States, and to recover and receive from the estate of said decedent [intestate] what the United States would have been entitled to receive therefrom if tbe payment aforesaid bad not been made by” the complainant. Robertson vs. Trigg’s Adm’r, 32 Gratt., 76, 85.
Tbe case last cited, is, so far as it is in point, a cross-bill for contribution by two sureties on an official bond given to tbe United States, against tbe estate of a co-surety, in which tbe doctrines of contribution and subrogation are carefully reviewed.
Referring to section 3468, R. S., providing substitution of tbe surety, who has paid the debt of tbe principal, to tbe right of priority of tbe United States against tbe estate of the principal, and considering tbe argument therefrom “that because the statute makes no express provision for substitution of a surety to tbe rights of tbe creditor against a co-surety, it was intended to exclude such substitution on tbe principle, expressio unius est exclusio alterius,” tbe court say:
“We are not prepared to say that tbe remedy provided by tbe statute, for tbe surety against bis principal, would not have existed under tbe general rules of equity, as ad ministered in the federal courts, independently of any statutory provision. Whether that be so or not, the rule of substitution for the purpose of enforcing contribution between sureties is too well established in equity jurisprudence to he set aside hy implication of less force than an express statutory denial of the remedy.”
The question of the right of subrogation as between co-sureties was exhaustively treated by Chief Justice Marshall in Lidderdale vs. Robinson, 2 Brock., 160, and affirmed by the Supreme Court in 12 Wheat., 594. See also case of Hess’ Estate, 69 Penn. St., 275; Fleming vs. Beaver, 2 Rawle, 128; Smith vs. Rumsey, 33 Mich., 183; Felton vs. Bissell, 25 Minn., 15; Howell vs. Reams, 13 N. C., 391; Cuyler vs. Ensworth, 6 Paige, 32; Cheesborough vs. Millard, 1 Johns. Ch., 409, 413; Scribner vs. Hickok, 4 Johns. Ch., 531; Lawrence vs. Cornett, 4 Johns. Ch., 545; Croft vs. Moore, 9 Watts, 451.
II. What proportion of the amount paid by him is complainant entitled to ' recover from defendant ?
In equity the rule (differing from that at law) is that the proportion is to he determined by the number of solvent sureties. “Thus [at law], if there are four sureties, and one is insolvent, a solvent surety who pays the whole debt can recover only one-fourth part thereof (and not a third part) against the other two solvent sureties. But in a court of equity he will he entitled to recover one-third part of the debt against each of them; for in equity tbe insolvent’s share is apportioned among all the other solvent sureties.” Story’s Eq. Jur., § 496, and cases cited. Robertson vs.. Trigg’s Adm’r, 32 Gratt., 76.
Riddle, Davis & Padgett for defendant:
The complainant is not subrogated to the priority of the United States against the defendant’s intestate.
The priority of the United States, or of a surety, in such cases depends upon sections 3465 and 3468, R. S., which are as follows:
Sec. 3466. “ Whenever any person indebted 'to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.”
Sec. 3468. “Whenever the principal in any bond given to the United States is insolvent, or whenever, such principal being deceased, his estate and effects come to the hands of his executor; administrator or assignee, are insufficient for the payment of his debts, and, in either of such cases, any surety on the bond, or the executor, administrator, or assignee of such surety pays to the United States, the money due upon such bond, such surety, his executor, administrator or assignee, shall have the like priority for the recovery and receipt of the moneys out of the estate and effects of such insolvent or deceased principal as is secured to the United States; and may bring and maintain a suit upon the bond, in law or in equity, in his own name, for the recovery of all moneys paid thereon.”
The right of priority of the United States does not rest in any prerogative, as in the case of the crown in England; but it is exclusively founded on the provisions of the statutes. U. S. vs. State Bank, 6 Pet., 29.
And in case of insolvency, the United States are not entitled to priority of payment, unless the insolvency be a legal and known insolvency, manifested by some notorious act of the debtor pursuant to law. It must be a technical insolvency, of one of the three sorts indicated by sec. 3466. Prince vs. Bartlett, 8 Cranch, 431; Thelusson vs. Smith, 2 Wh., 396; Conard vs. Ins. Co., 1 Pet., 439; Beaston vs. Farmers' Bank, 12 Pet., 102; U. S. vs. McLellan, 3 Sumn., 351, 852; U. S. vs. Wilkinson, 5 Dill., 275; U. S. vs. King, Wal., C. C., 12.
So, tbe right of a surety to priority depends exclusively on the statute provisions. Without the statute, a surety would at best rank as an ordinary specialty creditor in every case; the statute improves his condition in one particular, viz., it promotes him to the priority of the United States as against his principal.
Thus it is held that a surety who pays a bond to the United States, has the same priority as the United States against the principal, or his estate, but no other advantages secured to the United States. U. S. vs. Hunter, 5 Mason, 62; 5 Pet., 173; U. S. vs. Preston, 4 Wash. C. C., 446.
Nor is the question in anywise affected by the general equity principle that entitles a surety paying a debt to succeed to the rights of the creditor. That principle has reference to such advantages as the creditor may have in the form of the instrument of indebtedness, or lien or other security. The position of a surety in that respect is wholly .outside that of a surety within the contemplation of the statute. The advantage secured to the surety in ordinary rests upon certain general equitable principles, which were clearly ascertained and established at the time the statute was passed. But the statute makes no reference to them, and its terms exclude all consideration of them in the particular case provided for.
A surety who pays a bond is not entitled to be subrogated to the rights of the United States against his co-surety, so as to give his demand for contribution a preference over other creditors; nor on general principles of equity can he claim to stand in the place of the United States as against the co-surety. Pollock vs. Pratt, 2 Wash. C. C., 490; Bank of S. C. vs. Adger, 2 Hill’s Ch. (S. C.), 262.

Opinion:
Mr. Justice Merrick
delivered the opinion of the court.
This was a bill in equity filed for the,purpose of subjecting the estate of an insolvent decedent to the claims of the co-surety of the decedent upon the bond of a principal, which had been given to the United States for certain duties in the collection of moneys. The principal had become insolvent, other sureties had become insolvent, the defendant's intestate died, but, before his death, the liability became fixed by the co-surety paying the entire claim. He then came into this court by his bill in equity and claimed the priority of the United States by way of substitution, under the ordinary doctrine of substitution and subrogation held by courts of chancery. And the only question in the case is this: Whether, under such circumstances, a co-surety is entitled to be subrogated to the priority of the United States over the other creditors of the estate of the decedent.
The statute gives to the United States priority over all creditors to the estate of the principal debtor, and also gives to the sureties of the principal debtor this right of priority over the estate of the principal debtor where they have paid the debt. But the statute is silent as to the right of subrogation to that priority as between the estates of co-sureties.
The question to be solved here is whether, under the circumstances, one co-surety is entitled, as against the estate of a deceased co-surety, to the assertion of this priority over the other creditors for his benefit to the extent of the contributory share of the deceased surety which was paid by him to the United States.
Upon an examination of the authorities it seems to be entirely clear that the right exists. There is one case reported in 32d Grattan, 76, the case of Robinson vs. Trigg's Administrator, where the precise question was presented, and there that very learned court, relying upon the antecedent decisions, to one of which I shall advert in a moment, used this language (p. 87):
"Whether or not the remedy provided hy the statute for the surety against his principal would have existed independent of the statute, yet the rule of substitution for enforcement of contribution as between sureties is too well established in equity jurisprudence to be set aside by implication of less force than an express statutory denial of the remedy."
This case and the other cases are based upon the decision of Chief Justice Marshall, to be found in the opinion in the case of Lidderdale vs. Robinson, reported in 2 Brockenborough, 168 — the opinion, I should say., of Chief Justice Marshall himself, because there was a difference of, opinion between him and the circuit court judge which was certified to the United States Supreme Court, and there the opinion of the Chief Justice was affirmed without hesitation. Chief Justice Marshall, in that so certified opinion, says that the right of suhi'ogation (passing now ordinary co-sureties — he was not speaking about them, hut the particular doctrine of substitution) stands, as respects the claim of the surety who pays the debt, upon the principles incontrovertibly established to every purpose in the place of the creditor.
That case went to the Supreme Court of the United States, and the decision was affirmed in the most unqualified manner. Mr. Justice Johnson, delivering the opinion of the court, comments upon the argument of hardship made on behalf of the other creditors in case the doctrine of substitution should be allowed, and he answers it most conclusively. I read from the case of Lidderdale vs. Robinson, 12 Wheaton, 595. He says:
"The priority, therefore, of the holder of the bill of exchange as well against the estates of the endorsers as the drawer, is unquestionable, but the other creditors insist that, as between the co-endorsers, the rights of Smith against the estate of Robinson must be determined by the nature of the action to which he would have been put at law to recover back what he paid above his moiety, that is, assumpsit on simple contract. Both on principle and authority we are induced to think otherwise. What have the creditors of Robinson to complain of? They are only referred back to the situation in which they were before they were relieved by the application of Smith's funds to the payment of the bill of exchange. If the bill of exchange still remained in the hands of the holder unsatisfied his right to a priority from Robinson's estate as to the moiety of the bill would be unquestionable, and if relieved from that state by the money of Smith it is but right that Smith should have refunded to him that sum which they, without that payment, would certainly have been obliged to relinquish."
So in this case. What have the creditors of Fouke's estate to complain of? They are only remitted back to the condition in which they were before the money of Jackson, the complainant, was applied to relieving and paying the debt for which they were bound. Fouke's estate would have been swept away by the principal creditor, the United States, the co-surety being compelled to come in and relieve that debt, they are in no worse estate than they would have been if the United States had asserted its own rights in the first instance.
After commenti ng upon the general doctrine, and referring to the.fact that the decision might have been supposed to have been based upon the law of Virginia recognizing the right of substitution, and for the purpose of excluding that idea, Justice Johnson, then, in his opinion on page 598, uses this emphatic language:
"That this, then, is the settled law of the State, in which this contract and this cause originated, cannot be doubted. But we feel no inclination to place our decision upon that restricted ground since we are well satisfied with its correctness on general principles and on authorities of great respectability in other States."
In the course of my investigations I have discovered a decision in the State of Maryland which was not referred to in the argument, and which I quote along with the case in 110th United States, for the purpose of showing that the right of substitution applies equally well where the right of preference has originated out of prerogative, as where, it originates out of positive statute or out of contract. The doctrine is broad enough to cover all cases, and it stands upon the broad claim of absolute right, not upon contract, not upon statute, not upon prerogative, but upon the broad claim of the right in equity as between man and man; that one who has been subjected, by the action of the dominant creditor, over whose will he has no control, to an undue proportion of the burden, should be relieved by being placed in the condition of the dominant creditor for the purpose of working out the equities as between himself and his co-sureties.
The case of Orem's Executrix os Wrightson, reported in 51st Maryland, at page 34, was a case where parties had become sureties upon a tax collector's bond, and one of them had been obliged to pay the whole. He then sued the insolvent estate of his deceased surety, and he was, by the decision of the Court of Appeals, held entitled to succeed to the priority of the State of Maryland. The court, at the bottom of page 42, after showing that in many previous cases the right of priority had been vindicated by the Court of Appeals of the State, as the prerogative right and the flower of sovereignty, says:
"In the present case, there being no liens in the way, the State was clearly entitled to be first paid out of the assets in the hands of the administrator of Leeke. The next question to be examined is, to what rights, if any, the appellees, as sureties of Leeke, are subrogated by their payment to the State of the debt due by him, at the time of Ms death, as principal debtor. The doctrines of subrogation, or substitution as it is also termed, is a peculiar feature of equity. It is not founded in contract, but has its origin in a sense of natural justice. So soon as a surety pays the debt of the principal debtor, equity subrogates him to the place of creditor, and gives him every right, lien and security to which the creditor could have resorted for the payment of his debt."
Then he goes on and discusses all the eases, from Deering vs. Earl of Winchester, down. Then at the bottom of page 45 and on page 46, he says:
"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. Is a different rule to be applied where the State is a creditor?"
That is tó say where the right of priority flows out of perogative or out of a statute. He continues:
"We can see no reason why it should, be. It is not necessary to inquire how or in what manner the State's right to rank as a preferred creditor is derived, whether it is a prerogative right derived from the common law, or whether it has been conferred by statute. As it is said in some of the cases to which we have referred, equity, in applying the doctrine of subrogation, looks not to form but to the substance and essence of the transaction. It looks to the debt which is to be paid, add not to the hand which may happen to hold it, and will see that the fund charged with its payment shall be so applied."
The Supreme Court of the United States, in 110 U. S., in the case of the United States against Eyder, where the claim was made of the subrogation of the bail in a criminal case to the right of priority, deny the right of subrogation of the bail on account of public policy. But while they deny that, they revie w the doctrine of subrogation at common law and especially refer to the recognized doctrine of subrogation to the right of prerogative of the Crown of England. So it has been applied from the time of Magna Oharta in iav or of sureties and also in favor of one surety against his co-suretj, so as to vindicate the justice of the particular case in all instances irrespective of the sources from which the right to priority has flowed to the principal creditor.
I read a passage from page 733 of' the opinion of the Court delivered by Mr. Justice Bradley. After discussing the case of Dering vs. The Earl of Winchester, to be found in' 1st White & Tudor's Leading Cases in Equity, 100, he goes on to say :
" The doctrine is that a surety paying the debt for which he is bound is not only entitled to all the rights and remedies of the creditor against the principal for the whole amount, but against the other sureties for their proportional part. This is clearly the rule where the principal obligation is the payment of money or the performance of a civil duty. And in England the sureties of a debtor to the king (as for duties, taxes, excises, etc.,) have always, since magna charta, at least, had the right, upon paying the debt, to have the benefit of prerogative process, such as extent or other crown process adapted to the case, to aid them in coercing payment from the principal and compelling contributions from co-sureties."
So that it is quite apparent that the doctrine of prerogative out of which the doctrine of priority arises, is no qualification of the right of a co-surety to be placed in the exact position with all the rights and exclusiveness of the principal creditor as against the party for whom he has paid his money.
One other remark. It was suggested that if such a doctrine were allowed, it would tend to impede the facility, and diminish fhe chances, of obtaining sureties on official bonds. The Court of Appeals of Maryland, in this case to which I have referred, mention that subject too, and takes just the opposite view, as I shall, of that matter. At the close of the opinion to which I have referred, they say, a't the bottom of page 46:
" 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 of solvent securities, other creditors are not injured, for if the State has the first claim upon the funds, it does them no wrong whether this claim is enforced by the State or by those standing in its stead."
This brief review of these authorities and a multitude of others to which I could have referred, show that every objection which has been urged is without foundation in the present case, and the party complainant is entitled to the right which he claims at the hands of a court of equity to be substituted, and to be paid the contributory share of his co-security out of the assets of the decedent, to the exclusion of all his other creditors, and it will be so ordered.