Ives v. Merchants Bank of Boston

THIS case was brought up, by writ of error, from the Circuit Court of the United States for the District of Rhode Island.

It was a consequence of the case of the New Jersey Steam Navigation Company v. The Merchants Bank of Boston, decided by this court at December term, 1847, and reported in 6 How., 344.

The Merchants Bank of Boston were the plaintiffs in the Circuit Court, and the cause of action is thus stated in the brief of the counsel for the plaintiff in error in this court. There was a special declaration in the Circuit Court, to which the defendant demurred:--

The facts set forth in the declaration and admitted by the demurrer, upon which the questions here presented arise, are shortly these.

The suit in admiralty-New Jersey Steam Navigation Company, Appellant and Libellee v. The Merchants Bank of Boston, Libellant and Appellee, lately decided by the Supreme Court of the United States, and commonly called the Lexington case, was commenced in the District Court of the District of Rhode Island, by attachment of the steamer Massachusetts, then belonging to the Navigation Company. The suit coming by appeal to the Circuit Court of the United States for the District of Rhode Island, a decree therein was rendered against the Navigation Company at the November Term, 1843; whereupon an appeal was taken by the company to the Supreme Court of the United States, and Moses B. Ives, the plaintiff in error, entered into appeal-bond, as surety for the company, of which he was a member, in the penal sum of $2500, with the following condition:

'Now, therefore, if the said New Jersey Steam Navigation Company shall prosecute their said appeal before the said Supreme Court of the United States with effect, and shall well and truly pay all such costs and damages as shall be adjudged for them to pay by said Supreme Court, or by said Circuit Court by reason of said appeal, then the before-written obligation to be void and of no effect, otherwise it shall remain in full force and effect.'

The suit terminated in the Supreme Court in a decree in favor of the libellant and appellee, and execution finally issued against the Navigation Company for the sum of $28,302.26 debt, and costs taxed at $680.50, which, together with the sum of 75 cents for the execution, made the whole amount of the execution $28,983.51, the debt drawing interest from the 19th day of June, 1848.

Of the debt, so called, embraced in the above execution, the sum of $6,228.78, consisted of the costs and damages of the appeal decreed by the Supreme Court, that is to say, $6078.26 of it was interest on the amount decreed, accruing during the pendency of the appeal, given by way of damages of the appeal, and the balance $150.52 were the costs of the appeal. This sum, $6228.78, drawing interest from the 19th day of June, 1848, is the sum for which Mr. Ives would have been liable, to the extent of the penalty of the appeal-bond, had the execution remained wholly unsatisfied. But the above execution was levied by the marshal upon the steamer Massachusetts, attached as aforesaid on the original process in the suit, and on the 26th day of July, 1848, the Massachusetts was sold by the marshal under the levy for the sum of $25,000, and, deducting therefrom the sum of $883.38, the marshal's fees and expenses, the sum of $24,116.62 was paid over by the marshal to the Merchants Bank, and the execution thereupon returned satisfied for that amount, and unsatisfied for the balance, that is to say, between four and five thousand dollars of the execution remained unpaid.

The present action is an action by the Merchants Bank against Mr. Ives, the surety on the above appeal-bond to recover the costs and damages of appeal; and the plaintiff and defendant in error claimed, below, that he was entitled to apply the 24,116.62, not proceeds of the Massachusetts, first to that portion of his execution not protected by the appeal-bond, and was compelled to apply the balance only to that portion of the execution protected by the appeal-bond, treating the sum made upon the execution in the same manner as if it had been a voluntary payment without direction by the payor, in which case the right of appropriation remains with the payee. To this result the learned judge who tried the case below, for various reasons came, and rendered judgment against Mr. Ives for the penalty of the bond, with interest from the day of demand by action brought.

The cause was argued in this court by Mr. Ames, for the plaintiff in error, and by Mr. Pitman, upon a brief of Tillinghast & Bradlee, for the defendant in error.

The plaintiff in error contended.

1. That, under the facts set forth in the declaration, judgment should not have been rendered against him for a greater sum, at the most, than what would remain due of the costs and damages of the appeal, after deducting therefrom the amount thereof received from the net proceeds of the Massachusetts, applied pro rata to every portion of the execution, as well to the costs and damages of appeal for which the plaintiff in error was liable as surety for the Navigation Company, as to that portion of it for which he was not liable. In other words, we say that the net amount made by the levy of the execution paid upwards of eighty per cent. of the amount of the same. Equally apportioned to the costs and damages of appeal, which it should have been, it paid upwards of eighty per cent. of them, that is to say, about $5000 of them; leaving about $1200 of them due with interest from the day of demand by action brought, for which, at the most, judgment below should have been rendered against us, instead of for the whole penalty of the bond with interest.

2. That so far from the law permitting the defendant in error to apply the amount made on the execution exclusively to the portion of the debt not secured by the appeal-bond, it will itself apply it, in the first instance, to the payment of the costs and damages of appeal in exoneration of the surety on the bond.

3. That, at all events, judgment should not have been rendered for a sum exceeding the penalty of the bond, which is the utmost extent of our liability; the judgment, so far as interest on the penalty is concerned, being erroneous.

The points raised by the counsel for the defendant in error were the following:

1. That the plaintiff in error upon the bond in this suit is a substitute for the New Jersey Steam Navigation Company, and that his liabilities are the same as those of the company would have been, had the bond been executed by them.

2. That the plaintiff in error is, at all events, nothing more than a surety for the accommodation of the company.

3. That, in either light, he cannot claim a discharge from his liability, until the debt to the Merchants Bank is paid; and this, 1st, upon the principle illustrated in the cases 1 Gill & J. (Md.), 346, and 15 Conn., 437. See also Kyner v. Kyner, 6 Watts (Pa.), 222. That a creditor holding a security for both portions of his debt, and a surety also for one portion, may, and the court will, so apply the securities, as to pay the whole debt. The surety is not entitled to any transfer or appropriation of securities for his benefit, until the whole debt is paid. 2d, Upon the rule of the civil law to be followed in its analogies in our courts of equity, which makes a positive appropriation of any payment first to the debt upon a judicial demand, and not first to the interest or damages allowed for the detention of such a debt. 3d, Because such appropriation is the only mode by which the purpose of the court in requiring an appeal-bond, can be accomplished, and justice done between the parties.

4. We submit that interest on the penalty of a bond from the date of the writ is allowed against the obligor and sureties on a bond in the courts of the United States, as shown by the decisions in 1 Paine and 1 Gallison, both confirmed in the Supreme Court, and such also is the prevailing doctrine in other courts.

Mr. Justice CATRON delivered the opinion of the court.