Case Name: M. Galphin in his own right, and as guardian of G. Galphin, and C. Scriven and B. his wife v. B. M'Kinney and C. Breithaupt
Court: South Carolina Court of Appeals
Jurisdiction: South Carolina
Decision Date: 1826
Citations: 1 McCord Eq. 280
Docket Number: 
Parties: M. Galphin in his own right, and as guardian of G. Galphin, and C. Scriven and B. his wife v. B. M’Kinney and C. Breithaupt.
Judges: 
Reporter: South Carolina Equity Reports
Volume: 6
Pages: 280–300

Head Matter:
M. Galphin in his own right, and as guardian of G. Galphin, and C. Scriven and B. his wife v. B. M’Kinney and C. Breithaupt.
1826.
Columbia.
Liability'of Sdeied.C°n"
The bill stated that by virtue of a decree of the Court °f Equi ty of February 1818 at Edgefield, the Silver Bluff lands, situated on Beach Island, were sold by the Commissioner in Equity for Edgefield district, for one third of the purchase money in cash, and two thirds to be paid in one and two years; and the parties concerned were directed by the decree to account before the Commissioner, that he might ascertain, after the mortgages and other incumbrances were satisfied, to whom the residue of the money, arising from the sale, should belong. At the sale made by the Commissioner, B. M’Kinney became the purchaser at the price of $35,000, and he paid one third thereof to the Commissioner in cash; and the said B. M ’Kinney, and C. Breithaupt as surety, gave their bond and mortgage in the penal sum of $■46,666.67 for the balance of the purchase money. That the Commissioner made his report, by which it appeared that the demands, which the Silver Bluff lands were sold to satisfy, amounted to $10,000; so that the money paid in cash was sufficient to pay off the same; and that the balance of the purchase money was due to the heirs of Thomas Galphin, deceased; that at the sitting of the Court of Equity in February 1820, at Edge-field, the said B. M’Kinney and C.. Breithaupt improperly and fraudulently, without the knowledge, and contrary to the wish, of complainants, obtained an order of the Court to have the bond delivered up by the Commissioner to the said B. M’Kmney, as executor of the said Thomas Galphin deceased, which was accordingly delivered to the said B. MKinney, as executor of the said Thomas Galphin’s estate; and the said B. M’Kinney and C. Breithaupt now refused to pay the balance of the said bond. The prayer was for relief.
The answer of B. MKinney and C. Breithaupt admitted the sale of the land in question, and the purchase thereof by B. MKinney; and that he and C. Breithaupt gave their bond as charged in the bill; and that the sum paid in cash was sufficient to satisfy the incumbrances on said estate. The answer further admitted that B. MKinney, obtained an order of the Commissioner in February 1829 for the delivery of the bond up to the said B. MKinney. But they denied the charge of having obtained the order by fraud; and insisted that B. MKinney, as the only qualified executor of Thomas Galphin deceased, was legally entitled to the possession thereof; and they further insisted that the order of the Court was a conclusive bar to the claim of the complainants; and they regarded it as very extraordinary, that the complainant, M. Galphin, should seek to establish this bond against them, when he claimed a part of the land by a title adverse to that under which the land was sold, and was, at that time, in possession of that part thereof.
The answer also stated, that at the time this order was obtained, the pecuniary resources of B. MKinney were very ample; and he was able and willing to have indemnified his co-defendant from his suretyship to said bond; and when the bond was delivered up, the defendant, C. Breithaupt, required no other indemnification; but now, if the said bond be set up and payment required, C. Breithaupt would be obliged to pay the money, from the unfortunate reverse in the circumstances of B. MKinney.
The defendant, B. MKinney, as to so much of the bill of complainant as called upon him to account as executor of Thomas Galphin, answered, that several other persons were entitled to distributive shares of that estate besides the complainant, to wit, .Ann M’Kinney the wife of defendant, George Galphin, and Joseph Grant; and he prayed that he might have the benefit of that fact as if pleaded. He also further answered that he and the complainant, M. Galphin, had been made defendants to a bill filed by Frederic Leavenworth and John Hagood, judgment creditors of the said Thomas Galphin, deceased, requiring them .to satisfy said demands; and he prayed to be allowed to retain the amount of those demands. He also filed an account, as an exhibit shewing his transactions with the estate of Thomas Galphin, by which it appeared, as he insisted, that he was a creditor of the said estate to a .large amount. He insisted that he performed great services, paid large sums, and incurred great trouble and expense in settling the affairs of the estate of Thpmas Galphin, for which he had received no compensation ; and he prayed to have the benefit thereof in a settlement of the estate.
At the hearing of the cause the will of Thomas Gal-phin was produced in evidence, dated 5th of May 1812.
Mr Brooks, the Commissioner, was examined as a witness. He testified, that an order was obtained for the delivery of the bond up to B. MKinney in February 1820. He thought, but was not sure, that Colonel Breithdupt was present. The bond and mortgage was in possession of the witness. It was not paid but was delivered up under the order to B. M’Kinney, as executor of Galphin. He gave a receipt for it to the witness, and signed the receipt as executor of Galphin.. The proceeding by which the order was obtained was ex parte. The Galphins were not present, and no opposition made on their behalf. The witness thought it extraordinary that it was given up. After the bond was given up, B. M ’Kinney mortgaged the land to creditors of his (Boyd and Reid), and it had since been sold under that mortgage, and the money paid over to those creditors. The children of Galphin would have no resource, unless the bond be set up against the security, as B. M’Kinney was insolvent. Breithaupt knew of all the proceedings: he was the master spirit. He acted as the agent of Boyd and Reid; and witness paid him the money, on the resale of the Silver Bluff lands, for Boyd and Reid. He was also the agent of Mr Poinset, the creditor, at whose instance the Silver Bluff lands were originally sold when B. M’Kinney purchased them, and gave bond, with Mr Breithaupt as security.
Mr R. Wilde testified, that in February 1820 the property of B. M'Kinney was not sufficient to pay all his debts. He did not know or believe he had any property, unincumbered, to pay a debt of $20,000. B. M’Kinney had lands in Florida, which were bound by liens to particular creditors. He also sent some negroes to Florida, but they were attached by other creditors. He had property under his control, he believed, equal to $25,000 ; and there were large debts due to, him, perhaps to the amount of $90,000, by Groce & Co. and Sims and others, which were, however, insolvent houses. He believed B. Kinney had not received any part thereof.
Colonel J. M’Kinney testified, that he thought B. McKinney had some property not mortgaged, which might have been sufficient to indemnify a security for $20,000; such as property in Florida, ships, &c.; but all his visible and tangible property in Georgia was under lien.
In the arguments for the defendants, it was conceded that the principal debtor, B. M’Kinney, was liable; but it vyas contended that the order of Court for the delivery of the bond was fairly obtained, and operated as a dis-« charge to the surety. The answer denied fraud, and ¡ns¡ste(j that the bond could not be revived against the surety Breithaupt. That sureties were not liable be-j . . , . yond the law 5 and as the remedy at law was gone m this case, the Court. would not give a remedy beyond the law. That the surety had a good counter security in the mortgage to the Commissioner, which was also given up, and that unless that could be revived, the Court would not hold him responsible on the bond; and that, at all events, the surety would be entitled to the benefit of all payments made and discounts which B■ M’Kinney might have against the estate of Thomas Galphin.
June 1824.
For the complainants it was argued that the bond and mortgage were given up to B. .M ’Kinney, as executor of, Thomas Galphin, and not intended as a discharge to be destroyed. That if the executor did destroy the bond and mortgage delivered to his custody, he acted improperly ; and such act would not amount to a discharge of the debt, ora release of the liability of the surety. That the order of Court would not, at any rate, affect persons not parties to the suit; and that the mortgage of M’Kinney to Boyd and Reid not being recorded, was .void as to all other creditors.
De Saussuée, Chancellor (after stating the case).
In considering this .case, the first and indeed the principal question is, as to the nature and effect of the order of Court, made in February 1.820. It directs that the bond of M’Kinney and Breithaupt (should be delivered up to M’Kinney, as executor of the estate of Galphin; and he signs the receipt as executor. There is no pretence that the bond is. paid off; or that the order expresses any intention, or furnishes any implication of an intention, that in giving directions to deliver the bond to the executor, it was to be cancelled. Nor will the Court permit the order to be so used. Indeed there is no point on which the Court should act with more decision, than when it is called upon to prevent or correct an evil or abuse attempted to be educed out of its own proceedings.
In his answer the defendant M’Kinney denies fraud, and insists, as sole qualified executor of Thomas Gal-phin, he was legally entitled to the custody of the bond. Being then legally in custody of the bond, does this amount to a discharge of the debt and a cancelling of the bond 1 It has been conceded, and rightly, that the order and delivery of the bond did not discharge B. M Kinney, the ' principal debtor, but that it discharged the surety, which cannot be contended.
The debt and liability for it are one thing — the evidence is another. The evidence may be destroyed, and yet the debt subsist and be sustained by other proofs. Accordingly, it is distinctly laid down by Mr Maddock, in his Treatise on Equity, that the Court of Equity will not only give relief against the principal in a bond, where it is lost, burnt or cancelled by accident or mistake, but will set it up against the surety in such bonds. 1 Madd. Cha. 26. 3 Atk. Rep. 93, and 9 Yes. 464. So in Lee, Comptroller General v. Waring and his Sureties, 3 Desaus. Rep. 67, it was decided, that though the original bond was lost, so that no action could be supported at law, and a nonsuit was suffered there, yet the loss or destruction did not release the sureties. Their demurrer, as well as that of the principal debtor, was overruled. This was decided, on solemn argument, by the Court of Appeals, though there were strong objections to the bond itself, as varying from the bond prescribed by law. It appears that sureties can not have the benefit of discharges, even when intended to operate as such, if they are improperly obtained. But in the case-we are considering, the order of the Court, directing the delivery of the bond to B. M’Kinney, as exe cutor of the estate of Galphin, was not intended to operate as a discharge 0f the debt: for there was no proof of payment made; nor was it put to the Court, that in making that order it was intended to cancel the bond and release the surety. It was delivered to the executor eo nomine,, for the benefit of the estate, and if he destroyed it he was guilty of a breach of trust; and a breach of trust will form no foundation ón which he could obtain a discharge of himself or his surety. • The surety, it is in proof, knew of all these transactions, and especially that the debt was not paid. And if he consented to the destruction of the mortgage, to enable M’Kinney to give a new mortgage of the same land to another creditor, Boydaná Reid, who was represented by, and acted and acting through, the surety Colonel Breithaupt, it was at his peril; and if by acting thus he, defeated ■ his own security, under - the first mortgage (which operated as a counter security to him), he must take the consequences of his own indiscretion or precipitation. He, however, may endeavour to protect himself under the first mortgage, as second mortgages ate taken subject to the operation of the first; and if they sell the property included in both, they sell, subject to the rights of the first, and the purchaser takes the property so subject. Indeed no more than the equity of the redemption ought to be sold where a prior mortgage is in force. To act upon the presumption, that the order in question operated as a discharge, was rash in the extreme, more especially as the order did not even direct the mortgage to be given up. It is with regret that the Court ever witnesses sureties being made losers by their engagements. Rut if their engagements bind them,, the Court can not and ought not to absolve them. The regret is diminished in. this case by the answer and the account filed by the defendant M’Kinney, which, if correct, shew that there may be nothing due on the bond; and the surety will be entitled to the benefit of every payment made by the principal and of every discount he may be able to establish. That must be inquired into.
It is therefore ordered and decreed, that it be referred to the Commissioner to examine and report on the state of accounts between B. M’Kinney, the executor, and the estate of Thomas Galphin; and that he allow, as credits on the bond, all payments made thereon, and all discounts, properly established by B. M’Kinney, applicable to the bond debt; and that the defendants do pay such balance as may be reported to be jointly due on the bond. Such balance, when recovered, tobe applied in the first instance to the payment of the debts of Thomas Galphin, according to their respective rights, under his will, or, as distributees.
The Commissioner will further inquire and report on the fact alleged, that part of the Silver Blufflands,sold as Thomas Galphin’s estate and purchased by B. M ’Kin-may, did not belong to that estate; but is claimed and held by M. Galphin, as his private estate ; and report, if any, and what deduction ought to be made, on that account.
M’Duffie, for the appellants (the surety).
If not to exonerate the surety, what object had the order 1 The Court ordered the money in the Commissioner’s hands to be paid to M’Kinney, as executor, without security. It might be argued that the Court would compel security, but this order was an answer to that. The mortgage was given up. ■ It was an incident to the bond. What was the condition of the surety 9 He lost his only counter security; otherwise he might have secured himself by the land. He had been induced, by the ordej’, to abandon his counter security. Would the Court permit the order of a competent tribunal to have that effect % The Court usually protects sureties, 2 Ves. Jun. 540. 4 Ves. 824. The surety is usually discharged by indulgence of the principal, or by any alteration of the circumstances by the creditor by which the surety may be in a worse condition. Would the Court alter that rule ? But the C'ounsel agrees, it would injure the heirs of Galphin. Suppose it was improvident. The intention was to throw the heirs on the responsibility of the executor.
As to. the ground of fraud. What motive was there to commit a fraud on the part of the surety 1 He had no interest. He might have made himself secure. He might rather suppose M’Kinney and his relations confederated to defraud the surety. . The case might afford strong presumption.
W. Thompson, contra.
If true, that the executor was in advance with the estate, there was no damage to the defendant. If the order was fairly obtained, it could not bind my clients who were not parties to it. Bonds cancelled by mistake, or lost, have been set up. The sureties were to be exonerated by acts of the obligees, as well against sureties as principals, 3 Atk. 90. 9 Yes. 465. 1 Madd. Cha. 23. Comptroller General v. Waring, 3 Desaus. Rep. 57. It was easy to shew a motive for fraud. It could only be to exonerate sureties. He was then the only person interested. M’Kinney had no interest. His liability continued the same. But Breithaupt had a motive. He was surety for a person insolvent. If the bond had remained there would have been no occasion for this proceeding. He certainly must have paid the bond if it had remained. Could Gal-phin have consented 1 If the bond had remained he could not have had the same opportunity of collusion. The motive was evidently fraudulent, for it was to exonerate a solvent surety to an insolvent principal. M’Kinney wanted to mortgage to others. It was to deprive near friends of a security in order to give it to others. The bond was given when B. M’Kinney was rich, and discharged when he was insolvent. There was no such application till M’Kinney became insolvent. Why was it not made before the bond had remained so long a time “? It was not necessary there should be imputation of fraud. Fraud in the principal was sufficient. Fraud was to be imputed to the most interested. There must have been fraud somewhere. It deprived us of security. It was deluding. Would the Commissioner have taken M’Kinney’s single bond ‘l The parties interested would not have sold on those terms. To give forged bonds is a fraud. I have never known before of the Court’s ordering bonds to be transferred from the Commissioner to the executor. Should not in fairness notice have been given to the parties interested *? Was it so unimportant to them'? When money is in the hands of the Commissioner it is never paid to the executor but by order of the Court. The executor had nothing to do with the proceeds of the real estate. Suppose the money paid to the Commissioner, would the Court have permitted it to go to the executor if the truth had been shewn1? Even if he had a right to demand and receive it, might not the parties have resisted it1? The order has been obtained by fraud; and if not, still it is not binding on those not parties to it. The order never intended the bond to be cancelled.
If the bond had been given to another obligor it would have shewn a clear intent to discharge ; but when given to the executor, it admitted of a different interpretation. It was given to him as executor, and he had a right to the custody of it, next to the Commissioner. If it had remained, the Commissioner would have sued and collected it, though well secured. It might have been given to the executor to preserve and to indulge, but not to destroy. It was given for one purpose and used for another. Suppose the facts had been known to the Court, —and if not known it was a fraud — would the Court have granted the order % Is it. possible that any Judge would make such an order 1 If Breithaupt has suffered injury, it is his own fault. He was agent for Poinset, an<* Boyd and Reid, to whom the land was afterwards mortgaged, and who had no security but M’Kinney, personally. He was then interested as agent, at least, to obtain this security for Boyd and Reid. Breithaupt was the mover of all these transactions. He has suffered no injury by being prevented from obtaining counter security, except as to the mortgage of which he has the benefit now'. B. M’Kinney had no property to secure a debt of this amount.
The subsequent mortgage was not recorded and the former not ordered to be given up. What authority was there then to cancel the mortgage ? If destroyed without authority, it would still avail.
M’Duffie, in reply.
The argument has been made on assumptions that Breithaupt was a party to the obtaining of the order. He was not more so than the complainants. If they wished to avail themselves of any such fact it must be proved. He had no possible interest in obtaining this order. M’Kinney’s relation to these parties shews it. If one of two parties must be injured, he should suffer who is most intimately related in law to the party committing the fraud. M’Kinney was the agent and representative of the Galphins. There was no privity between Breithaupt and the cestui que trust. There is no doubt but lost bonds have been set up against sureties. But this is distinguishable from the ordinary cases. , The principal debtor here was the agent and representative of the creditor. But the law quoted from Atkyns is denied; for a release obtained by fraud of the principal discharges the surety, and the creditor is responsible himself for being imposed on. Breithaupt had no interest, for he was as secure with the mortgage as if now discharged.
January 1826.
It is not pretended that there was more than a trifling balance due by B. McKinney. Securities to the Court of Equity were within its control : but there is no control over security given to the executor.
If third parties were injured by the order, others are not responsible. It must be presumed the Court found that the order could be safely made. McKinney, believing himself not indebted, wished to discharge his surety. Breithaupt had an interest, if you suppose B. M’ Kinney insolvent and there was no other security; but there was ample security in the Silver Bluff lands. The money was ordered to be paid without security. It was asked why the bond was not ordered to be cancelled “?■ It was not intended to be; because it was intended to be left answerable to Galphin’s legatees and creditors. It had been given to him as executor. If the Court intended to indulge, it put it out of the power of any one to sue on the bond. This is the very principle upon which it has been held that a surety is discharged. It was put out of their power to sue.
As to BreithaupVs being not yet deprived of security. Of .two unrecorded mortgages, the last takes the preference. It is a fraud on the second mortgagee.
Thomson referred to Williams v. Maxwell, where legatees recovered negroes sold by the executor .
This case is not reported.

Opinion:
Cuma, per
Nott, J.
It appears from the proceedings in this case, that the bond in question was given to the Commissioner, for the purpose of securing the payment of the money arising from the sale of the Silver Bluff to such person as upon investigation before him should appear to be entitled to receive it. Upon that investigation it appeared that all, except a part of the first instalment, was due to the estate of Thomas Galphin deceased. How this claim of GalpMn's arose does not very dis-tinctly appear; and perhaps^ it is not necessary that it should in the investigation of the question now under consideration.
this state "are assets for the payment of debts; and given his bond with a security to the erfora'sum1" d"e on a purchase at his sales, which reference appeared to belong to the estate of his the^exeeutor afterwards tained an order of Court bond'deiiver-ed up tp him, thaTthe sure-by 'dischai-ged from liability the executor solventabas" the executor rightto1re-the bond, and canceut.t0
The bill states that the money was due to the heirs of Galphin; and being the proceeds of the sale of land, it occurred to the Court, at the argument of the case, that perhaps it ought to be considered as the real estate of Galphin, which should be paid to the heirs and not to the executor. That doubt created the only- difficulty ' ¶ which has arisen in the case. But I am not prepared to that it would have altered the. result. For lands are assets in the hands of executors for the payment of debts. , 4 . And if it were clearly ascertained that this money ought to considered as a part of the real estate of Galphin, and that the Court of Equity thought proper to order it to be 4 ^ ¶ ¶ « a paid over to the executor for the payment or the debts ot foe estate, I am disposed to think that it ought to exone-ra(e the security. However, I am satisfied that that ques- . , , . . . ^ tion cannot arise in this case ; and therefore it is not neces-sai7 to express any opinion upon .it. The bill barely that the money was due to the heirs of Galphin, . , . . . but it does not state how that claim arose; nor was any Pro°f °f the fact offered to the Court. On the contrary, the bill further states, or rather it appears from the first decree in the case, that complainants' ancestor had sold ^an<^ ^o B-amsays and Goodtoyn.'- Besides, it has not been, contended in the argument that it ought to be considered as real estate; nor has the decree put it on that footing. .
. It appears therefore, from all the circumstances of the case, that the money was due to the executor of Galphin, not to ^e'rs- Barmy M'Kinney, the. defendant and purchaser of the land; was the executor of Galphin, so that the money was actually due to himself. Being so entitled he applied to the Court of Equity to have the bond delivered up to him, which' was accordingly done. It will not be denied, that prima facie the executor is entitled to all the funds of the estate. The testator had placed that confidence in him, and no reason has presented itself to my mind why the Court should not ? As the whole matter was within the jurisdiction of the Court, and the executor being the proper person to receive the money, it would appear perfectly consistent with the relation of all the-parties that the bond should be delivered up to him.
No collusion between the executor and surety proved, or fraud on 'the Court on the part of the executor.
But the ground of relief relied on is, that he procured the bond to be delivered up. by fraud. It is difficult to conceive how a man can be guilty of fraud in obtaining what is his own. Suppose Galphin himself had been alivé and had purchased the land, would not the Court have ordered the land to be delivered up to him when it was ascertained that the money was due to himself1? And has not the executor the same right"? Suppose any other person had been the purchaser, would not the Court have ordered the money to be paid over to M'Kinney, or the bond to be assigned to him for collection'? But where is the evidence of fraud? The only witness to that part of the case is the Commissioner, Mr Brooks. The whole of his testimony in relation to M'Kinney is, " that Mr M 'Duffie, on his behalf, obtained an order to have the bond delivered up. It was an ex parte application. The Galphins were not present.". I do not observe in this testimony any appearance of fraud. It is not pretended that there was any misrepresentation. The grounds on which the motion was predicated, if any were stated to the Court, do not appear. It is probable that the Court considered him as executor entitled to thp money, and therefore ordered the bond to be delivered up on that ground alone. It may perhaps have been stated that the estate was involved, and the money was required to relieve it from those embarrassments. The game js now stated, and the contrary does not appear. The complainants, it is said, were not present, nor had any not'ce °f the application. But the executor was under no necessity to give them notice. Suppose the money had been lying in bank, he might have taken it out without giving notice to the heirs. Suppose an action had been brought on the bond, they would not have been parties, and. a verdict for the defendants would have been a perpetual bar to their claim. The heirs need never be made parties, or have notice of any suit relating exclusively to the personal estate. An heir is never made a party where an executor is sued at law. If an executor plead plene administravit, the plaintiff need not controvert it; he may reply that there are lands, and the Court will order the lands to be sold to satisfy the debt without making any inquiry into the truth of the plea. The heir may afterwards call the executor to account, and shew that he had not fully administered; but that will not affect the creditor or purchaser. In the case of D'Urphey v. Nelson, it appeared that an action had been brought against the administrators of H5 Urphey ; they had neglected to plead plene administravit, and had thereby admitted assets in their hands. The plaintiff took judgment and issued execution against them; but not being able to find any goods and chattels on which to levy, he levied on the land of D'Urphey, and had it sold. It was purchased by Nelson. An action -was brought by the bQb's °f D'Urphey against Nelson for the land. The Court held that the proceedings were regular, and that ^an<^s were assets in the hands of administrators, and were as liable to be sold under, a Ji. fa. as the personal estate. The case under consideration is still stronger. The order for the delivery of the bond was the immediate act of the Court, and not of the party. The Court was not deceived, because it was not pretended that the heirs of Galphin had notice. After the closest examination I have not been able to discover a scintilla of fraud on the part of M 'Kinney.
An heir at er'bemadeT party or have notice of any suit relating exclusively to the personal estate of a deceased person.
If the executor plead jplene admin-istravit at law, and the plaintiff replies that there are lands, the Court will order them to be sold without inquiring into the truth of the plea.
Lands may a^!/«. Under minktrato ad" although he-pkne^dndn-istravit. •
Let us now examine the facts in relation to Brei-thaupt. With regard to him also Mr Brooks is the only witness. He does not even know " that Breithaupt was in the state when the order was made. He thinks he was present, hut is not certain. Breithaupt was. the agent of Poinset, at whose instance the land was sold when it was purchased by M'Kinney. He was also the agent of Reid and Boyd, to whom it was afterwards sold. Breithaupt knew all these proceedings, and was the master spirit. M' Kinney is now insolvent; and the complainants' only resource is against Breithaupt." That is all the evidence against Breithaupt. There is something high sounding in the words master spirit, as if some meaning was lurking under them, which has not been developed, and therefore is left to be inferred. But we cannot condemn a man as guilty of fraud, without evidence somewhat more satisfactory than this. Colonel Breithaupt was indeed acquainted with all the circumstances connected with the transaction. He was the agent of Poinset, to foreclose whose mortgage the land was sold to M'Kinney. The money however, which was paid at the time of the sale, discharged that defendant, and there was an end of his agency. He then became security for the payment of the balance of the money, and a mortgage was taken as a further security for the same. But he had no agency or interest in that part of the transaction. The land was afterwards mortgaged by Jfcf 'Kinney to Beid and Boyd, to secure a debt due by him to them. But that was not done until after the bond was delivered up, and Breithaupt released from all responsibility, as he then supposed. He was then appointed the agent of Reid and Boyd, for the purpose of taking a mortgage of the land to secure their defendant, and was also their agent when it was afterwards sold to satisfy that mortgage, and received the money for them. He may indeed have been their agent before, but it does not appear to me that it would aifect the question. He could not accept a mortgage for the land, while he knew it was under another incumbrance.
If no fraud in obtaining will discharge the surety.
Where equi-not interfere.
He might safely do it when that was removed ; and it is not improbable that that was one of the objects of M'Kinney in obtaining an order for his bond to be delivered up. But admitting the fact to be so, it furnishes to my view no evidence of fraud. M'Kinney wished to secure the debt to Reid and Boyd, and -perhaps had no other effectual means of accomplishing the object but by mortgaging this land. It was important to him therefore to remove that incumbrance. But he resorted to no subterfuge or deception to effect it. It might have been an incautious order in the Court, but still the defendant is entitled to the benefit of it. And even if the motive in obtaining the order could be any evidence of fraud in M'Kinney, it could not be visited on Breit-haupt. It will be observed, that the ground of complaint is a fraud practised on the Court, and not a fraud in the executor of the estate of Galphin. These are two distinct questions. Admitting for instance that M'Kinney was actuated by the most fraudulent views in getting up bond, (of which however I do not see any evidence) and admitting he has most wantonly wasted the estate, (of which there is as yet no proof) if he has practised no ¿eception 0n the Court, the order of the Court will protect the surety. And it is most manifest that there was not one material fact connected with the transaction which was not as well known to the Court that made that order as to either of the parties to be affected by it. The error therefore was in the Court, if any error there was, and not in this defendant. And he certain-even in that point of view, has as strong an equity on t[je court under whose authority he acted as the complainants can have j and where the equities are equal the Court will not interfere. It is by the act or order of the Court that he has been deprived of his indemnity; and surely that same Court will not make him liable tor an act oí its own. ,
creditor to from the Plin?;Pal: and time is given, it will exone[yto flie sme*
at law, giving day to the principal ^"exomí the sure-
the Jatheofficer1 of the-Court, lppiy7otythey and if the by an*execu-Court te delivered ecutorupon". which the heirs and requiringNot th.?,se vent the dis-surety if the* bo"d,ls deli" vered up.
But let us now examine that order and see whether it was, as Mr Brooks seemed to think it, a very "extraordinary order." If the bond had been payable to a private individual, Colonel Breithaupt vyould have had a right to apply to the obligee to enforce the payment the money by the principal; and if he had then ed the time of payment it would have exonerated the surety. That I take it now is an established princi-.J . r pie rn the Courts of Equity. Burn v. Administrators of Poaug, 3 Desaus. Rep. 604. Gifford's Case, 6 Ves. 809. Rees v. Berrington, 2 Ves. Jun. 542. Nesbit v. Smith, 2 Bro. C. C. 579. Even at law giving day to the principal - will in many cases exonerate the surety, English v. Darley, 2 Bos. & Pul. Rep. 60. Clark et al. v. Devlin, 3 Bos. & Pul. Rep. 363. The King v. The Sheriff of Surrey, 1 Taunt. 159. Bowsfield v. Toweer, 4 Taunt. 458.
Suppose Colonel Breithaupt had come into Court and insisted upon having suit brought against the principal, or that he should be exonerated ; what could the Court have done ¶ It could not have kept the funds of an embarrassed estate locked up in its own coffers, out reach of the executor. If it had extended the credit to the principal it would have exonerated the surety. It would therefore have done precisely what it has done this case, viz. " order the bond to be delivered up." To be sure the Court might have required terms which would have secured the heirs and legatees in the event of a mal-adminisfration on the part of the executor ; but that was a matter for the consideration of the Court, and not for these defendants. I have now examined this part * of the case with the attention which appeared to me due to the novelty and importance of the question. ' And the result of my investigation is, that there was no such evidence of fraud in the transaction as to render either of the defendants liable on that ground.
When the Court places the fund again into the hands of the principal it discharges the surety.
But the Chancellor does not place the' case on the ground of fraud at all. . " The order of Court, it is said, directing the delivery of the bond to C. M'Kinney, as the executor of the estate of Ccalphm, was not intended to operate as a discharge of the debt, for there was no proof of payment made ; nor was it put to the Court that in making that order it was intended to cancel the bond and release the surety." With the most respectful deference for the opinion of the learned Chancellor who delivered that decree, I cannot bring my mind to concur in that construction of the order. Delivering the bond to the obligor must of itself imply an intention to place it entirely at his disposal. What' other intention can possibly be conceived ¶ It is said, " it was delivered to him as executor eo nomine, for the benefit of the estate, and if he destroyed it he was guilty of a breach of trust." If it was delivered to him for the benefit of the estate, it was for the purpose of enabling him to appropriate the money due upon it to the payment of the debts and,legacies of the estate. It was then giving the entire credit to the principal; and the Court would violate its own rules not to construe it into a release of the surety. The destruction of the bond was no, breach of trust, because being in the hands of the obligor it became a dead letter. The misapplication of the fund might have been a breach of trust; but Bréithaivpt was not answerable for that. He was not security for the faithful administration of M'Kinney. But if the order to deliver the bond did not of itself import a discharge of the debt, the release of the money due on the first instalment was an unequivocal expression of such intention. I think therefore, that Colonel Breithaupt had a clear and undoubted right to considér himself as released from that bond. And eyen if there had been any thing ambiguous in the order, I think the Court considering it as its own ° act ought to construe it most liberally in behalf of the surety. It is said, that if Colonel Breithaupt consented to give up the mortgage which was his own indemnity, lie must take the consequences of his own indiscretion. But there is no evidence that the mortgage was up by the consent of Colonel Breithaupt. It was the voluntary act of the Commissioner, who would not have asked his consent, and which he had no right to oppose. The Commissioner, I think very correctly, considered the mortgage as an incident to the bond, and as the principal was destroyed the incident went with it. Green v. Hart, 1 Johns. Rep. 580. Runyan v. Mersereau, 11 Johns. 534.
The Court should con-actTmost li" surety,
The mere loss of a bond w¡n not dis-the
And I think that the same principle which would make Breithaupt liable on the bond would make the Commissioner liable to him for depriving him of his security by giving up the mortgage. Now' if Breithaupt should file a bill against the Commissioner for giving up that mortgage by which he became liable to pay the debt out of his own estate, would not-that order of Court be his protection 1 And if a protection to him, why not to Breithaupt? "
That the mere loss or destruction of a bond will not ,. , . . . . discharge a surety is a proposition too plain to require authority in its support. That is not the ground on which the defendant rests his defence. But it is, .that he has been discharged by the bond having been delivered up, to the principal obligor, who was entitled to recover the monéy due upon it. That it was ordered to be delivered up by a Court of competent jurisdiction, with a full knowledge of all the facts and circumstances. That he has thereby been deprived of the indemnity which he then had. And that he ought not to suffer by an act of the Court, in which he had no agency, over which he had no control, and in opposition to which he had no right to interfere. That if the same thing had been asserted on his own application, it would have been nothing more than he had a right to ask, and what the Court would not have refused without affording him some other adequate protection. Sureties are always looked upon with peculiar indulgence in a Court of Equity; and it apjpears to me that it would be treating Colonel Breit-hmpt with unprecedented rigour to set up the bond against him. I think therefore, that the decree against him ought to be reversed, and the bill as to him dismissed with costs.
Decree reversed.