Case Name: Bank of South Carolina vs. James Adger
Court: South Carolina Court of Appeals
Jurisdiction: South Carolina
Decision Date: 1835-03
Citations: 2 Hill Eq. 262
Docket Number: 
Parties: Bank of South Carolina vs. James Adger.
Judges: Johnson, J., concurred.
Reporter: South Carolina Equity Reports
Volume: 11
Pages: 204–208

Head Matter:
Bank of South Carolina vs. James Adger.
A surety to a.oustom house bond having paid it, is not entitled, under the Acts of Congress of ’97 and ’99, to be subrogated to the rights of the United States as against his co-surety, so as to give his demand for contribution a preference over other creditors'; nor on the general principles of equity can he claim to stand in the place of the United States as against the co-surety. [*266]
Joint judgment against principal and sureties paid by one of the sureties, will not be set up for contribution against the co-surety. [*267]
On the 12th of September, 1825, Samuel H. Lothrop made a general assignment to William Price, of all his estate, for the payment of certain preferred creditors in the first place, and the surplus to his other creditors. William Price died intestate, and administration of his estate was committed to the defendant, James Adger. This bill was filed for an account of the administration of his estate, and an order was made directing Mr. Gray, the Commissioner, to take an account of the estate of William Price, and also of the estate of Samuel H. Lothrop, assigned to him; and of the assets that have come to the hands of the defendant; and also *2631 ^n(ln^’e at)(l take an account of the debts due by *the said -J William Price, at the time of his death, in his own right, and as assignee. The accounts have been taken, and it is found that Price is insolvent, but has left assets to pay his bond creditors; and that he is indebted to the assigned estate of Lothrop, in a large sum on bond. The preferred creditors of Lothrop claim to be paid according to his assignment, but a claim is interposed by John C. Miller and James A. Miller, assignees of Duke Goodman, on the following grounds : — .
Duke Goodman and Samuel H. Lothrop were the sureties of Joseph T. Weyman, on two custom house bonds; one bond dated 2d May, 1825, payable 2d February, 1826, conditioned for $1332 15, upon which bond judgment was entered up against Weyman, Lothrop, and Goodman on 22d March, 1826; and another bond dated 29th April, 1825, payable 29th April, 1826, conditioned for $4534 50, on which last mentioned bond judgment was had against the principal and both the sureties, on the 6th July, 1826.
In September, 1826, the assignees of Goodman paid the amount of these bonds to the District Attorney, who assigned to them the judgments against Weyman, the principal; and they now claim contribution from, the assets of Lothrop for one moiety. The assets of Weyman are exhausted. On this state of facts, His Honor, Chancellor Johnston, decreed the funds of Lothrop to be paid over to his preferred .creditors, and the assignees of Goodman appeal:—
1. Because the estates of Lothrop and Goodman were equally bound to pay these bonds; and the United States had a priority to all other creditors. And the accidental circumstance that payment had been made by Goodman’s assignees before the funds of Lothrop were got in, should not be allowed to favor one set of creditors, or disappoint another.
2. Because Goodman’s assignees, by paying off the debts, are entitled to be substituted to the rights of the United States, and to set up the judgments against Lothrop for the moiety which his estate ought to have paid.
Petigru, for the appellants.
Upon the general principle of marshaling assets, the assignees of Goodman have a right to payment of a moiety of the debts paid for Weyman.
*By the 5th section of the.Act of Congress of 1197, (1 Story’s Laws U. S. 465,) when any person indebted to the United States *- becomes insolvent, or makes a voluntary assignment to pay his debts, the United States shall have priority in the payment of debts: and the 65th section of the Act of Congress of 1199 (1 Story’s Laws U. S. 630) declares, that on all bonds for duties, when the estate in the hands of executors, administrators or assignees, shall be insufficient to pay all the debts, the debt due the United States shall be first satisfied ; and if the principal debtor be insolvent, and the sureties pay the bond, “ then such surety or sureties shall have and enjoy the like priority and preference.” By the insolvency and consequent assignment of Lothrop, the United States, under the Acts of Congress, were entitled to priority over all his other creditors — a right existing in respect to all the obligors in the nature of a joint mortgage. By the payment of the judgments, the rights of Goodman could not be affected — it was what the law would have compelled. Nor can the United States’ Attorney, by coercing payment from Goodman’s assets, defeat any of his rights. It has been shown that the United States had priority of all Lothrop’s creditors. On principles of general equity, Goodman, the surety, having paid the debt, is entitled to be remitted to all the rights of the creditor, and to be paid from Lothrop’s estate, as if the United States were now claiming. — Aldrich v. Cooper, 8 Yes. 382. As to the right of setting up the judgments, Robinson v. Wilson, 1 Mad. Rep. 567. Lord Eldon, in Copps v. Middleton, overruled this last case, allowing, however, that if there had been a mortgage as a collateral security, the principal would have been right; and in this case, the judgment may be set upon the same principle.
Gilchrist and King, contra.
It is not denied that Goodman’s assignees are entitled to contribution — the rank which they are to occupy is the question. Against the principal debtor they may rank as the United States, but as against the co-surety, neither under the Acts of Congress, nor by the general principles of Equity, can they claim other than as a •simple contract creditor. The preference under the Act of Congress applies only between the surety and his principal — it has no application between co-sureties, and it has been so ruled. Pollock v. Pratt & Haney, 2 Wash. C. C. Rep. 490. Nor will the equity doctrine of subrogation* apply. Noonan v. Gray, 1 Bail. 437 ; Stat. Eq. Rep. 91; b -* Copps v. Middleton, 1 T. & Russ. 224; 10 John. Rep. 549. Aldrich v. Cooper does not apply to this case. This is not a case of a creditor having two funds from which to be paid, and where he might be compelled to take one so as not to prejudice other creditors; this is a claim to priority.

Opinion:
O'Neall, J.
By the 5th section of the Act of Congress of 1797, (1 Story Laws of the U. States, 465,) it is provided, "that where any revenue officer, or other person, 'hereafter becoming indebted to the United States, by bond or otherwise, shall become insolvent, or where the estate of any deceased debtor, in the hands of executors or administrators, shall be insufficient to pay all the debts due from the deceased, the debt due to the United States shall be first satisfied; and the priority hereby established shall be deemed to extend, as well to cases in which a debtor not leaving sufficient property to pay all his debts, shall make a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed or absent debtor shall be attached by process of law, as to cases in which an act of legal bankruptcy shall be committed."
The 65th section of the Act of 1799, (1 Story's Law of the U. S. 630,) after directing a suit to be brought on any bond for duties which may not be paid on the day on which it becomes due, directs that " in all cases of insolvency, or where any estate in the hands of executors, administrators or assignees, shall be insufficient to pay all the debts due from the deceased, the debt or debts due to the United States on any such bond or bonds shall be first satisfied. " The proviso declares, that if the principal be insolvent, or if he be dead, and his estate be insufficient to pay all his debts, and the surety or his representatives shall pay the money due on such bonds to the United States, then that the said surety or his representatives " shall have and enjoy the title, advantage, priority or preference for the recovery and receipt of the said moneys out of the estate and effects of such insolvent or deceased principal, as are reserved and secured to the United States.
Under these two acts, the United States were entitled to be preferred and first satisfied out -of the estates and effects of Weyman. Goodman and Lothrop, under the last act, the security paying the debt, would be entitled to be preferred and first satisfied out of the estate and effects of the insolvent principal.
*But it is perfectly clear that it does not give to him the prefer^bbJ enee of the United States to be paid out of the estate of his co-security. The case of Pollock v. Pratt & Haney, 2 Wash. Cir. Court Rep. 490, is a direct authority upon the point. Judge Washington said, " In regard to the advantages reserved to the surety in the custom house bond, the provisions are confined to the estate and effects of his insolvent or deceased principal." In that case the claim was by the surety against the assignees of one of the assignees of an insolvent principal in a custom-house bond, who had received a large sum of his assignor's estate, mingled it with his own, and then became insolvent and assigned to the defendants. Under such circumstances, Judge Wash-' ington ruled that the plaintiff was not entitled to be preferred, and used the words which I have quoted. If in such a case the plaintiff was not entitled to be substituted in the place of the United States, it would seem to follow pretty clearly, that the claim of the co-surety, Goodman's assignees, to be substituted in the place of the United States, against the administrator of William" Price, the assignee of Lothrop, the co-surety, cannot be allowed to prevail. For here as well as there, it may be said that the provisions of the act of Congress do not cover the case made.
But it is said, concede this to be true, and still the assignees of Goodman, on the general principles of Equity, have the right to stand in the place-of the United States, and the case of Aldrich v. Cooper, 8 Ves. 381, was cited and relied upon in support of that position ; but I think it does not sustain it. This is not a case of a party having two funds ; and therefore the equity rule laid down in Aldrich v. Cooper, that in such a case a party shall not by his election disappoint the party having only one fund, cannot apply. By the custom-house bond, the United States had the right to expect payment from any one of the three obligors, Weyman, Goodman or Lothrop. But they could not be forced by Goodman to accept his part of the bond, and look to Lothrop for the balance. It was an entire debt due by all or either of the obligors. Payment of it by one of the co-sureties entitled him to contribution as for so much money paid, laid out and expended; and the debt thus due to him by his co-surety, is a mere simple contract. This was ruled by Lord Chancellor Eldon, in Copps v. Middleton, 1 T. & Russ. 224. In that case, the Lord Chancellor stated the conclusion, which is, I think, directly applicable to this He said, "there has been a case cited, where, upon the ^general ground that a surety is entitled to the benefit of r^ocir all securities which the creditor has against the principal, it seems L 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, that the surety, if he pays the bond, has a right to stand in the place of the mortgagee, and as the mortgagor cannot get bach his estate again without a conveyance, that security remains a valid and effectual security, notwithstanding the bond debt is paid; but if there is nothing but the bond, my motion is, that as the law says that the bond is discharged by the payment of what was due upon it, the bond is gone and cannot be set up." The bond to the United States was paid by Godman's assignees; in the language of Lord Eldon, " it is gone and cannot be set up." If the bond is gone, it follows that the preference given to the United States to be first paid and satisfied out of the estates and effects of all the obligors is also gone. The surety has none of the rights of preference of the United States, except as against the principal. The same reasoning applies to the judgment which was a joint debt against Weyman, Lothrop and Goodman. Satisfaction of it by any one of the parties, was a satisfaction of it against them all; the law, without any further act to be done, ended its legal operation. If there had been separate judgments against each of the obligors, then it might have been that the satisfaction of one of the judgments against one of the sureties by himself, would not have been necessarily a satisfaction of all the other judgments, unless it was so intended by the surety making the payment.
It is ordered and decreed, that Chancellor Johnston's decree be affirmed,
Johnson, J., concurred.
See Perkins v. Kershaw, 1 Hill's Oh. 351.