Pickering v. Day

8 Del. 474

• Court: Supreme Court of Delaware
• Decided: June 5, 1867
• Status: Published

Opinion

Gilpin, C. J.,

announced the opinion of the Court. The second section of the act of Congress of July 1st 1862, entitled “ An act to provide internal revenue to support the government and to pay the interest on the public debt,” authorized the President of the United States to appoint collectors of internal revenue, for the several collection districts into which the States, territories and the District of Columbia should be divided. The fourth section of the act declares that before any such collector shall enter upon the duties of his office, he shall execute a bond, for such amount as shall be prescribed by the commissioner of Internal Revenue under the direction of the Secretary of the Treasury, with not less than five sureties, to be approved as sufficient, by the solicitor of the Treasury—Containing the condition &c. &c. By the fifth section of the act, each collector is authorized to appoint by an instrument of writing under his hand, as many deputies as he may think proper: and may require bonds or other securities, and accept the same from such deputy; and each of such deputies is invested with the like authority in' every respect, to collect the duties and taxes levied or assessed within the portion of the district assigned to him, which is by the act vested in the collector himself. And here it may not be amiss to remark that while this section expressly provides that the collector shall in every respect be responsible, both to the United States, and to individuals, as the case may be, for all money collected and for every act done as deputy collector by any of his deputies whilst acting as such, and for every omission, it does not in any event whatever make the deputy responsible, either to the government, or to individuals, for his own faithfulness, or for the manner in which he shall perform his duties. The collector is the recognized agent of the Government, and is made responsible to the Government; the deputy is the agent of the collector, and is made re sponsible to him, and not to the government, and he may take security, or not, as he pleases. We do not deem it material to consider at much length, the question raised by the bill in regard to the money collected from divisions Ho. 9 and 10, and which it is contended should be credited in reduction of the amount indorsed on the bonds, as being due from Clements to Day on the 10th of August 1865; because we think it is satisfactorily shown by the answer, and by the testimony of Clements himself, the witness of the complainant, that all the money collected by Clements from these divisions during the time he was deputy collector of Ho. 9, and paid over to the defendant, have been properly applied by the latter, and that the same constitutes no part of the sum of $11,520 57, which is divided between, and indorsed on the bonds, as the amount of the defalcation. Hor do we consider it necessary to advert to the checks of April 29, 1864 and February 7th 1865, which are claimed as additional credits in reduction of the said sum of '$11,520.57, further than to say that it satisfactorily appears from the answer, and from the testimony of Bateman, Prouse, and M. Day that the first was given in satisfaction of a note due William L. Hansel & Co., then in the defendant’s hands for collection, and that the second was given in reimbursement of money loaned by the defendant to Clements on his private account. The testimony of Clements on this point, is very weak and uncertain; at most, it amounts but to an impression or belief on his part. The answer on the contrary, is direct and positive, and is supported by the evidence of defendant’s witnesses. After a careful examination of the acts of Congress upon the subject of internal revenue, we are of opinion that molasses manufactured from sorghum, was a subject of taxation under section 75 of the act of July 1st, 1862, and under section 94 of the act of June 30th, 1864; under the former, of three per cent, ad valorem, and under the latter, of five per cent, ad valorem. We think it comes within the meaning of the terms “ or of other materials,” to be found in the paragraphs commencing with the words “ on all manufac turcs of cotton, wool, silk, worsted, flax, &c.” The language of both paragraphs is the same. It is quite unnecessary to state the process of reasoning by which we have arrived at this conclusion.

Having thus briefly disposed of these several matters, we will now consider the more important questions presented by the case, and which the counsel on both sides, have discussed with so much ability. The defendant, Charles H. B. Day, was appointed and commissioned collector of Internal Revenue for the collection District of the State of Delaware, on the 4th of March 1863, to hold the office during the pleasure of the President. He gave bond of that date to the Hnited States, according to the requirements of the fourth section of the act of July 1st 1862. On the first of October 1863, he re-districted the State, reducing the number from twelve, to six divisions, two- for each county, and on the same day he appointed John F. Clements deputy collector for division Ho. 4, comprising the hundreds of Murderkill, Milford, and Mispillion in Kent county. Some days afterward, but prior to the 20th of October 1863, Clements, as deputy collector of division Ho. 4, with James R. Clements, William Smith, James Creen and Thomas Pickering, as his sureties, executed and delivered to Day, as collector of Internal Revenue, a bond in the penal sum of ten thousand dollars, conditioned in substance, for the faithful and diligent collection of all rates and taxes which should be committed to him for collection, and to pay over the same at such times, and in such manner and form, as the said Day should prescribe and direct. On the 13th of October 1864, Clements as deputy collector of division Ho. 4, with James R. Clements and Daniel McBride as his sureties, executed and delivered to the defendant as collector of Internal Revenue, another bond in the penal sum of five thousand dollars, with like condition as that annexed, or underwritten to the said bond for ten thousand dollars. The object or purpose of both bonds was the same, the protection and indemnification of the defendant against all loss and dam age to which he might become liable, by reason of the default or misconduct of Clements as deputy collector of division Eo. 4, the sureties taking upon themselves the responsibility of guaranteeing the faithfulness of Clements in collecting and paying over all the public money which should come to his hands as such deputy. Shortly after the execution of the bond of October 1863, Clements entered upon the dutiés of his office as deputy collector of division hTo. 4, and continued therein until the 15th of July 1865, when he was removed; it appearing according to the accounts, that he was a defaulter on the first of July 1865, to the amount of $11,520.57. It is stated in the answer that this sum was somewhat increased by the subsequent discovery of additional items of indebtedness. This sum, however, was assumed on the 10th of August 1865, by all the parties interested, to be the actual amount of Clements’ indebtedness, and he and his sureties in both bonds on that day entered into an agreement with the defendant to apportion and divide that sum between the two bonds, according to the same proportion which the penal sums mentioned in the bonds respectively bore to each other; by which agreement written on the said bonds, and executed under the hands and seals of Clements and his sureties, the sum of $7,680.38 is ascertained and declared to be the true amount due on the bond of October 1863, with interest from June 30th 1865, and the sum of $3,840.19 is ascertained and declared to be the true amount due on the bond of October 13th 1864, with interest from June 30th 1865. At the same time the sureties between themselves, executed another agreement, to which, as constituting a part of one general arrangement in regard to their respective liabilities, we may here after have occasion to refer.

The question which we now propose to consider is, whether the defendant, Day, consented to Clements’ using the public money in his private business of buying and speculating in grain. The bill, on information derived from Clements, charges that he did consent to such use of it. If this be true, it was a fraud on the sureties, and dis charges them from their liability. But the answer, on the contrary, denies the charge directly and positively where-ever made, insinuated, or suggested in the bill. The language of the defendant is that he “ utterly denies that he ever did directly or indirectly assent, consent, or agree to the use of any such money by the'said John F. Clements, or John F. Clements and William S. Prouse, trading as John F. Clements & Co. or by any other person whatsoever,” and he avers that he had no information or suspicion that the money was so used or employed until about the first day of February 1865, when upon balancing his accounts as of the first of January then next preceeding, it was discovered that he was a defaulter. As the answer of a defendant is a formal and deliberate statement, it is evidence against him, and when made under oath, as is usually the case, it is evidence of the most conclusive character. But whilst this is so,it is nevertheless equally true thathis sworn answer is also evidence in his favor, equal in weight to the testimony of a single witness, and is not to be discredited nor any presumption raised against it, by reason of its being the answer of.an interested party. And the answer is sufficient in itself, if direct and positive and responsive to to the bill, to establish the denials and the affirmations of facts which it contains, if not outweighed by opposing proof. Allen v. Mower, 17 Vermt. 61. Powell v. Powell, 7 Ala. 582. Schwarz v. Wendell, Walk. Ch. 241. Woodcock v. Bennet, 1 Cowen 711. 3 Greenl. Ev. sec. 285. And this is so, because, the complainant having seen fit to make the defendant answer under oath, has substantially made him his witness, and it would be unreasonable and unjust, after compelling him to testify, to treat his testimony as entitled to no credit. His oath is therefore deemed to be equal to the oath of a credible witness, and the complainant is bound by his answers, unless they are satisfactorily disproved. 10. Johns. 542. The well established rule in courts of equity in regard to the denials of a defendant, as stated in 3 Qreenl. Ev. sec. 289, and which may be said, with some slight qualification, to embody the result of the decisions on this point, is “ that an answer which is responsive to the allegations and charges of the hill, and contains clear and positive denials thereof, must prevail, unless it is overcome hy the testimony of two witnesses to the substantial facts, or, at least, by one witness, and other attendant circumstances which supply the want of another witness, and thus destroy the statements of the answer, or demonstrate its incredibility or insufficiency as evidence.” The true meaning of the rule, however, is not that the testimony of a witness with additional and corroborative circumstances, is indispensable in all cases; because circumstances alone may sometimes be found in the answer itself, or in documentory evidence referred to in the answer sufficient to more than countervail the denials of the answer. The rule properly applies to the case of an answer opposed only by the testimony of a single witness.

How, if this case stood alone on the bill and answer, or on the bill, answer, and the testimony of a single witness, it would be perfectly obvious that the complainant had not made out a case upon which he could stand in a court of equity. For it is certainly well settled, as we have seen, that where the allegations and charges in the bill as grounds for obtaining a decree are clearly and positively denied by the answer, and proved hy only a single witness, the court will not, decree against the defendant. But on the other hand, it is equally well settled that where the witness on the part of the complainant sustains the allegations and charges of the bill, and his testimony is supported by corroborative circumstances, the denials of the answer will be overborne, and the complainant will consequently be entitled to a decree. But in order to have this effect, what must be the character of the witness, and his testimony? And what the nature of the corroborative circumstances? We answer that the witness must not only be competent, but his testimony must be credible, and the circumstances relied on as corroborative, must be such as to materially support the witness, and strengthen his testimony, so that when both are considered together, they may be sufficient to satisfy the conscience of the court that the allegations and charges of the bill, in respect to the point in controversy, are true. And it has been held that if the answer be positive, denying the charges in the bill, it ought not to be overthrown by evidence less positive, though it proceed from the mouth of two witnesses. Auditor v. Johnson 1. Hen. & Munf. 536. Nor should such answer be considered outweighed by mere proof of facts or circumstances which may be reconciled with the truth of statements contained in the answer. Branch Bank v. Marshall, 4 Ala. 60.

Now, the first general observation which we have to make in regard to the witness Clements and his testimony, is that he appears to be a person of uncertain and imperfect recollection. He does not recollect many things which would have impressed themselves upon most men’s minds, and which, from, their nature and importance, he ought to have remembered. One would suppose that a person situated as he was, would have a vivid recollection of all that was said, and of all that occured in relation to this subject; and yet, he does not remember the respective amounts for which his bonds were given. He says two of them were for $10,000 each, and one for $5,000, and he thinks the $5,000 one was given for stamps, and that Green and Pickering were on all the bonds. Now, we know that these things are not so. He Is also strangely oblivious of almost every thing that was said or done on the 10th of August 1865, at the interview and arrangement which took place at the collector’s office, although he was present during the whole time. He says he remembers that whilst deputy collector of No. 9, he told Day that unless he allowed him to use the public money, he would resign; and yet, he does not know, nor remember Day’s reply, but says he did not object. He next says his impression is he gave his consent, and subsequently he becomes very sure he gave his consent; and lastly, he avers that he did consent on the occasion of Mrs. Wilson’s funeral; but he does not recollect the month when this took place, or whether it occurred in 1863 or in 1864. His answers to the inter rogatories propounded to him in this regard, are hesitating, limping answers. And as a whole, his testimony is defective, obscure, uncertain, doubtful and unsatisfactory. Moreover, he is discredited by John H. Bateman and Matthias Day. Then, as to the corroborative circumstances. It is alleged and proved, and admitted by the answer, that the defendant was frequently paid by drafts . of the firm, drawn by Clements on their factors in Philadelphia and Hew York; and it is insisted that this shows that Day consented to the use of the public money by Clements in his grain business. It appears by the bill of the complainant that at the time of the appointment of Clements as deputy collector, he was already extensively engaged in association with Wm. S. Prouse, in the business of buying and selling grain, and speculating in the purchase and sale thereof. And it appears from other sources, that his house was in good standing and fair credit, and that their drafts were always honored and paid at maturity. There is no suggestion in the bill that either Clements, or his house, had been at any time prior to the discovery of his defalcation in 1865, in embarrassed circumstances. According to the allegations of the bill, he was conducting an extensive business, and it seems that his credit was good. It does not appear from any evidence in the cause, that he extended his business after his appointment. It would seem, therefore, whatever may have been the real fact, that there was no necessity for his using the public money in his business. If he could carry on an extensive business on the means and credit of his firm before his appointment, why could he not do so after his appointment ? There is no evidence tending to show that the defendant knew or suspected that he had made any losses. Why then, should he suspect that Clements was abusing his trust ? How then, can we say under such circumstances, that the receiving of these drafts in payment of taxes collected by his deputy, shows that the defendant consented to the use of the public money in Clement’s grain business? The defendant admits in his answer that he received the drafts in payment of taxes collected, but he states at the same time in response to the allegations of the bill, the circumstances under which, and the reasons why, he received them. And we think that the fact that he did so receive them, is reconcilable with the denials and averments of the answer. We, therefore, fully agree with the Chancellor on this point, that the answer must prevail.

The next question which we propose to consider is, whether the complainant and his co-sureties were discharged from their liability under the bond for $10,000, executed and delivered in the month of October 1863, by reason of the act of Congress of June 30th. 1864, entitled “ An act to provide internal revenue to support the government, pay interest on the public debt, and for other purposes.” By the 173rd. section of the last mentioned act, the internal revenue act of July 1st, 1862, is declared to be repealed, “ except the one hundred and fifteenth and one hundred and nineteenth sections thereof, and excepting further, all provisions of said act which create the offices of Commissioner of Internal Revenue, assessor, assistant assessor, collector, deputy collector, and inspector, and provide for the appointment and qualification of said officers.” And after repealing other acts and parts of acts, there is the further exception in the form of a proviso, that the provisions of said acts shall be in force for levying and collecting all taxes, duties and licenses properly assessed, or liable to be assessed, or accruing under former acts, or drawbacks, the right to which had already accrued, or might thereafter accrue under said acts; and for maintaining and continuing liens, fines, penalties and forfeitures incurred under and by virtue thereof, and for carrying out and completing all proceedings which had been already commenced, or that might be commenced to enforce such fines, penalties, and forfeitures, or criminal proceedings under said acts, and for the punishment of crimes of which any party should be, or had been, found guilty. Anri, as if to shut out all question or doubt as to who should exercise the powers, and perform the duties referred to in the savings of the act, it is further provided, “ that no office created by the said acts and continued by this act, shall be vacated by reason of any provisions herein contained, but the officers heretofore appointed shall continue to hold the said offices without re-appointment.” How, our duty is to ascertain, if possible, what Congress meant by these saving clauses ? They are perhaps deficient in precision and clearness, but, however faulty or imperfect in phraseology or structure, we are bound to give to them such an interpretation as may appear best adapted to effectuate the object contemplated by Congress. When the design of the Legislature is not. clearly apparent, it is always to be presumed they intended that the most reasonable and beneficial interpretation should he given to the language which they have used. If the language is clear, and the intent manifest, there is, of course, no room for presumptions. But if, on the other hand, the language is not clear, and it is obvious that by a particular construction in a doubtful case, great public interests would be endangered or sacrificed, the court ought not to presume that such construction was intended by the makers of the'law. How, remembering that the intention of Congress, if it can be ascertained, is to govern, and that a thing which is within the meaning of the makers of the law, is as much within the law, as if it were within the. letter; and applying the rules of construction, which we have suggested, to the savings of the 173rd. section, and to the declaratory clause contained in the second proviso thereof, we think it is not difficult to give a reasonable and safe, as well as beneficial construction to the clauses under consideration.

The learned counsel for the complainant insist that immediately upon the passing of the act of June 30th. 1864, the office of collector created by the act of July 1st. 1862, ceased to exist; and that the defendant and his bond, being thus rendered functus oficio, the sureties of his deputy, Clements, who gave bond under the act of July.1st. 1862, were discharged from liability. And, assuming as they do, that the defendant no longer held the office which he had prior to June 30th. 1864, or that if he was in office, it was a new office, with new duties and responsibilities by force of the act of June 30th. 1864, the 9th section of which required him to give a new bond before entering upon the duties of his office, they insist that, as he had not given such new bond, he was not legally competent to appoint a deputy, or to take a bond from him, and that, therefore, the bond of the thirteenth of October 1864 for $5000 is a mere nullity. Are these positions of the counsel tenable ? We think they are not. It seems to us that the manifest design of Congress was to prevent any break, suspension, or interruption in the collection of internal revenue, by preserving and continuing in active operation, all the old instrumentalities which had been provided for that purpose. We consider that the provisions of the act of July 1st. 1862, which create the offices of collector and deputy collector, and provide for their appointment and qualification, namely, the second, fourth, and fifth sections, are by the exception or saving taken out of, and excluded from, the operation of the repealing clause; and that these sections remain unrépealed and in full force; and that the defendant and his deputy, Clements, continued to hold their respective offices by force of their appointment under these unrepealed sections. And we consider that the defendant’s bond, and also Clements’ bond of October 1863, remain in full force, in so far, at least, as respects the taxes and duties assessed and levied under and according to the rates prescribed by the act of July 1st. 1862. We do not mean, however, to be understood as saying that the obligation of either bond is necessarily limited to the taxes and duties collected under that act. For, as the appointments were indefinite and without limitation as to time, and as the bonds are for the faithful performance of the duties of their offices according to the conditions thereof; and as it would seem that the responsibility of the sureties is co-extensive with that of the principal, it might perhaps, be justly holden that the responsibility of both principal and sureties under their bond would continue so long as the principal’s employments under their appointments continued. But it is not necessary to decide this question, and we, therefore, express no opinion on it. As regards the collector and his deputy continuing to hold their offices, we think the result would have been the same without the provision contained in the second proviso of the 173rd. section, which provision seems to us to partake more of the character of a declaratory law than any thing else. It does not create any office, nor appoint any officer. It speaks of offices already “ created” by other acts of congress “ and continued by this act.” But how continued by this act? Cohtinued, we answer, by being excepted, and thus taken out of, and excluded from, the operation of the repealing clause. It declares that these offices shall not be vacated by reason of any provision contained in the act. It speaks of officers “ heretofore appointed,” and declares they shall continue to hold “the said offices,” meaning the offices which were created by prior acts, and which they already held prior to the act of June 30th. 1864.

Another question which we have been called on to consider is, whether the defendant who had given bond under the act of July 1st. 1862, was under any legal necessity of giving a new bond after the passing of the act of June 1864 ? If, according to our theory, he was already in office under the former act, had already given bond and entered upon the duties of his office, and had been continued •in said office by reason of the savings just referred to, then it would seem to follow that it could not have been the intention of Congress that the ninth section of the act of June 30th. 1864, should apply to his case, or to any such case; but rather, that it was intended to apply only to future appointments. It is true, the Secretary could have required him to give a new bond; for under both acts, collectors are required to renew, strengthen and increase their bonds, whenever directed by the Secretary of the Treasury to do so. But let us extend the inquiry. Is the giving of a bond by the appointee, made by either act, a condition precedent to his authority to exercise the powers and perform the duties of a collector of internal revenue ? Let us see. It is true, he is to execute a bond for such amount as shall be prescribed by the Commissioner of Internal Revenue under the direction of the Secretary of the Treasury. But here, something is to be done by the Commissioner, before the bond can be executed. The Commissioner is first to prescribe the amount, and if this be done, then the collector can give the bond. Can he give it before the amount is prescribed ? But suppose the Commissioner from any cause should fail to prescribe the amount, should the collector be considered in default, and thus rendered incapable of exercising his proper official functions, because he has not done that which he could not do until the amount of the bond had been prescribed by that officer ? We have not urged the argument of inconvenience, because it is only where there are serious doubts as to the proper construction of the statute, that such arguments are entitled to much weight. But after giving full consideration to the argument which has been urged with so much earnestness on behalf of the complainant, we are constrained to differ from his counsel, and to say that we do not consider the giving óf a bond a condition precedent to the collectors entering upon the discharge of the duties of his office. On the contrary, we think the fair and reasonable interpretation of the provision in question is, that it is merely directory to the proper officer of the Treasury department, and that the execution of the bond may be, either required or waived, according to his discretion. The bond, we know, is intended solely for the security and benefit of the government, and we are unable to see how it can constitute any part of the contract of Clements or his sureties, or how the giving, or not giving of it, can in any way affect their responsibility. The bond of the defendant to the government, and the bond of Clements to Day, constitute distinct and independent contracts, and impose on the parties respectively distinct and independent obligations. In conclusion on this point, we think this doctrine is fully sustained by the cases of United States v. Vanzant, 11 Wheaton 190. Bank of United States v. Danbridge, 12. Wheaton 64. United States v. Bradley, 10 Peters 364. Bowman v. Barnard, 24 Vermont 355. Boreland v. Washington County, 8 Harris 151. And, if this be so, then, we are justified upon principle as well as authority, in saying that the' defendant’s authority as collector did not depend upon his giving bond, on the contrary, that he derived his official authority from his appointment, and •the acts of Congress defining his powers and duties, and that his appointment as collector, was complete and valid for all purposes when confirmed by the Senate.

Again, the complainant claims to be discharged on the ground of misrepresentation and concealment on the part of the defendant, of material facts, and of the true state of affairs between him and Clements which he was bound in good faith to disclose truly to him and his co-sureties ; and he also contends that if not absolutely discharged from liability, still that the concealment of material facts by the defendant, at and before the time of the arrangement of August 10th 1865, and which if made known to the sureties would have prevented that arrangement, affords at least sufficient grounds to justify the Court in canceling the indorsements on the bonds, and thus to open the question of appropriation of payments, so that that question may be finally settled by this court, according to the rules of law. Concealment, in the sense in which this term is understood in courts of Equity, means the concealment of those material facts and circumstances which one party to the contract, is under a legal or equitable obligation to .make known to the other, and which the latter, of right and by law, is entitled to have communicated to him. -1. Story Dq. Jur. sec. 207. And that as touching the liability of a surety, where there has been a defalcation on the part of the principal, the concealment of the fact must be active or industrious, and, therefore, fraudulent in its character. Shepherd v. Beecher, 2 P. Wms. 288. Peel v. Tatlock, 1 B. & P. 419. Kent Nav. Co. v. Harley, 10 East 34. Goring v. Edmonds, 6. Bing. 94, 98. Eyre v. Everett, 2. Russ. 381. Wright v. Simpson, 6 Ves. 734. Orme v. Young, 1 Holt 84. Leading Cases in Eq. Vol. 2 part 2. Am. notes, 362. To be available as matter of defence there must be an undue concealment, or Supressio Veri, to the injury or prejudice of the surety; for it is not every concealment, even of material facts, that will discharge him. To have this effect, the concealment must be injurious, and must fall within some definition of fraud. Mere passiveness on the part of the creditor in not enforcing his remedy, will not of itself discharge the surety; nor will failure or neglect to give notice to the surety, of the principal’s defalcation, have that effect. The creditor under such circumstances, is not bound to anticipate inquiry by disclosure. Hamilton v. Watson, 12 Clark & Fin. 109. The North Brit. Insurance Co. v. Lloyd, 10 Exch. 523. Stewart v. McKean 10 Exch. 675. In the case of Wright v. Simpson, Lord Eldon says, as to the case of principal and surety, “I never understood that as between the obligee and the surety, there was any obligation of active diligence against the principal. If the obligee begins to sue the principal and afterward gives time, the surety has the benefit of it. But the surety is a guarantor, and it is Ms business to see whether the principal pays, and not that of the creditor.” • How, what material facts has the defendant concealed to the injury of the complainant and his co-sureties? We have already decided that the charge of consenting to the use of the money in the grain business, not having been made out to our satisfaction, the denials of the answer in regard to it must prevail. We have also decided that the giving of a new bond was not a condition precedent to the collector’s entering on the duties of his office. These matters, therefore, are out of the way. But it is charged that the defendant misrepresented to the complainant the state of affairs between himself and Clements. The charge is not sustained by proof, and it is denied by the answer.

Again, it is contended that in consequence of a want of knowledge of facts which it was the duty of the defendant to have communicated to them, the complainant and his co-sureties were surprised into the execution of the indorsements on the bonds, and that the same were made under a misapprehension of their rights, and without due deliberation; and, therefore, the indorsements should be canceled. We do not so understand the case. It is a well known maxim that ignorance of the law excuses no one; it cannot, therefore, constitute a ground for setting aside, or reforming a written agreement. Ignorance of fact may. Ignoranlia facti excusat. But a court of equity will not grant relief in cases of written instruments, unless there is a plain mistake clearly made out by satisfactory proofs. 1 Story Eg. Jur. sec. 157. It seems to us, that all the parties that met at the defendant’s office on the 10ih of August 1865, understood perfectly well what they were about. They knew Clements was a defaulter; they knew the amount; the books and accounts were there open to their inspection. They went there by appointment for the express purpose of arranging this very matter in some way or other. The bonds were there and they discussed the question of whether the second bond was in addition to, or superceded, the first bond; they discussed their respective liabilities under these several bonds, and they entered into an agreement among themselves to refer the question of their respective liabilities,as between themselves, to arbitrators. They considered the expediency of protecting themselves by taking an assignment from Clements; and they urged the the defendant to issue execution against Clements, which he refused to do, unless they first made the indorsements on the bonds, ascertaining the respective amounts due thereon. They remained there, discussing and deliberating on these matters for a period of six hours and upward. But they say they wished execution issued against Clements which the defendant refused to issue unless they, the sureties, would first make the indorsements on the bonds, and supposing from the defendant’s declarations that no execution could be issued until the indorsements were made on them, they agreed to make them. The defendant admits in his answer that he did refuse; but he assigns a reason for it And we think he had a perfect right under the circumstances to refuse without assigning any reason; because the law accorded to him the right to remain passive, or to proceed against Clements, or against the sureties, or against both, at his option. After fully considering the subject, we think the complainant has failed to show any undue concealment on the part of the defendant, or that the sureties were taken by surprise, or were misled. On the contrary, we think it manifest from the evidence, that the complainant and his co-sureties were fully cognizant of all the facts really affecting their interests, which it was at all material for them to know, and that in executing the agreements indorsed on the bonds, they acted advisedly and with due deliberation. We, therefore, consider that the chancellor' did right, in refusing to disturb the said agreements.

And here we might close the case. Because, we consider that as between the defendant and the sureties, the indorsements on the bonds amounted to an appropriation by the sureties themselves, of the payments made by Clements;—an appropriation just in itself toward, the defendant, and which cannot in the end, operate unjustly toward any of the sureties, since they have taken the wise precaution of providing by a special agreement tor-the equitable adjustment of their respective liabilities as between themselves. But it is said that the defendant should have discharged Clements immediately on the discovery of his defalcations, and that having failed to do so, the sureties were thereby discharged from their liability on the .bond. We do not think so. We know of no decision, or rule of law, requiring the defendant to discharge Clements on discovering his defalcation. They guaranteed his faithfulness and honesty in the discharge of his duties. The bond was given for the express purpose of protecting the defendant against the consequences of his defalcation. Their contract was essentially a pledging of themselves and their estates, to make good any and every misfeasance or nonfeasance of their principal, during the whole time he should hold the office, to the extent of the penalty of the bond. It was no part of the contract that the defendant should discharge him immediately upon his failure to pay over the money in his hands. Moreover, the sureties suffered no detriment by his continuance in office; in fact, they were benefited. He reduced the amount of his indebtedness. Nothing less than fraud, actual or constructive, on the part of the defendant, could relieve them from their responsibitily. U. S. vs. Kirkpatrick, 9 Wheaton 720. U. S. v. Vanzant, 11 Wheaton, 184. Sailly v. Elmore, 2 Paige 500. McLemore v. Powell, 12 Wheaton 554. We freely concede the correctness of the general doctrine that the contract of a surety should be construed strictly, if by strictly is meant that the liability of a surety shall not by implication, be extended beyond the fair scope of the terms of bis contract. Indeed, the doctrine is so obviously founded in reason, as to need no authority to support it. But at the same time that we say this, we confess our inability to comprehend how the doctrine can affect the right of the defendant to recover under the ten thousand dollar bond. There can be no doubt of the existence of a defalcation on the part of Clements to the extent of $11,520.57 and upward. There can be as little doubt that this defalcation extended to both bonds, and that the penalties of both bonds were forfeited. There can, we think, be no shadow of question that the bond for $10,000 extended to and covered all taxes assessed and collected under the act of July 1st, 1862, whether the same were collected before or after the act of June 30th, 1864. But whether that bond can be held to extend to taxes assessed and collected under the act of June 30th, 1864, is a question which we do not think it material for us to consider in this case. Nor have we deemed it necessary to go into a critical exami nation of the accounts to ascertain the exact amount due on each bond, because, as already stated, we consider that, as between the defendant and the sureties, the sureties themselves have settled the matter of appropriation by their indorsements on the bonds, and have provided by their concurrent agreement for the final adjustment of their respective liabilities upon them. Still, we may say that it seems to us after a cursory examination of the accounts, that the amount of defalcation for taxes assessed under the act of July first 1862, will be found to he not very far from the surn indorsed by the sureties as being due on the ten thousand dollar bond. But, inasmuch, as all the authorities hearing on the question of the appropriation of payments have' been cited, and the question itself has been elaborately discussed, and, as the counsel for the complainant have earnestly contended that the apportionment of the defalcation between the two bonds as thereon indorsed, is unjust and contrary to the settled rules of law respecting the appropriation of payments, it is, perhaps, proper that we should state, at least briefly, what we understand to be the present state of the law on this question.

The general rules upon the subject are these : If there be several debts due from a person, and he pays money to his creditor, the debtor has a right to appropriate the payment to which debt he pleases. But he must make the appropriation at the time he makes the payment, and he cannot make it afterward. If no specific appropriation be made by the debtor at the time of payment, then, the right of appropriation is devolved upon the creditor, and he may make it in any way he may think proper, and at any time before an account is settled between them, or before action brought; provided that such appropriation is not manifestly inequitable in respect to third persons. It is true, the decisions are conflicting as to the time when the creditor must make the appropriation, but the rule, as just stated, may now be considered as settled by the weight of authority, both in England and in this country. Simpson v. Ingham, 2 Barn, & C. 65. Philpot v. Jones, 2 Ad. & Ell. 41. Mills v. Fowkes, 5 Bing. N. S. 455. Bosanguet v. Wray, 6 Taunt. 597. Mayor of Alexandria v. Patton, 4 Cranch 320. Fields v. Holland, 6 Cranch 27. Stone v. Seymour, 15 Wend. 19. U. States v. Jones, 7 Howard 689. If no appropriation be made by either party, then, the payment must be applied as the law directs. Mr. Justice Story, in the U. S. v. Kirkpatrick, 9. Wheat. 737, states the proposition rather differently. He says, “ the law will apply the payments according to its own notions of justice.” And in Cremer v. Higgenson et al., 1 Mason 323, he says the law will apply the payment according to its own notion of the intrinsic justice and equity of the case. Another rule appliable to indefinite payments deduced from the case of Devaynes v. Noble et al., 1 Merivale 605, known as Clayton’s Case, which was decided by Sir William Grant in the year 1816, is, that if neither party makes the appropriation, the law will apply the payment to the discharge of the several items of the account in the order of their priority, the first item on the debit side of the account, being the item discharged or reduced by the first item on the credit side of it. How, where there is a single running account between the same parties in which third persons are not interested, the application of this rule is certainly well enough, for it will apply the payment according to the justice of the case. Clayton's Case was a case of a running account and indefinite payments, and the rule applies to just such cases. There is nothing in the case to warrant the assumption that Sir William Grant intended to lay it down as an inflexible rule, applicable alike to all cases. "Moreover, the case itself did not necessitate the annunciation of such a rule. There had been an account drawn out and delivered to Clayton showing the appropriation of the payments, to which he made no objection, and the report of the master states that the silence of Clayton after the receipt of his banking account, was regarded as an admission of its correctness. “ Both debtor and creditor must, therefore,” says Sir William Grant, “ be considered as having concurred in the appropriation.” So that, it is apparent from the case that the appropriation had really heen made by the parties 'themselves. The rule in itself is sound enough. It is its application to cases never contemplated by Sir William Grant, that is objectionable. And it seems clear to us that whenever there are intervening equities in favor of third persons, the true doctrine is that the law will apply the payments according to its own notion of the intrinsic justice and equity of the case. We have said that the rule in Clayton’s Case is not an inflexible rule. In the case of Lysaght v. Walker, 5 Bligh N. S. 1, decided in 1831, Lord Tenterden, who delivered the opinion of the House of Lords, declared that there was no inflexible rule which necessarily required subsequent payments to be applied in payment of the first item of the account, when different interests were concerned. In Stone v. Seymour 15. Wend. 33, decided in 1835, Chancellor Walworth, who delivered the opinion of the Court of Errors, declared as the result of his examination of the authorities in cases of indefinite payments “made on account of public moneys received and placed in general account by the officers of the Treasury, or the Controller, from time to time, without any specific appropriation thereof, and the accounts have not been stated and settled after the receipt of such payments, and where no intention was manifested by the debtor as to the application of the money, such general payments are not necessarily to be applied to the first item of charge on the debit side of the account, but they may thereafter be appropriated according to equity.” Arid Senator Tracy thought that an inflexible application of the rule would be inconsistent with equity and reason. In the case of The Postmaster General v. Norvil, 1 Gilpin 125, tried in the year 1829, it was ruled that a debtor could not appropriate a payment in such manner as to affect the relative liabilities or rights of his different sureties without their consent.—That where a public officer has given successive official bonds with different sureties, moneys received subsequent to the execution of the latter cannot, before it is discharged, be applied to the payment of the former. And that where a public officer has given different bonds with different sureties, his payments must be so appropriated as to give each bond credit for the money respectively due and collected and paid under it. The learned Judge Hopkinson, who tried the cause, after stating the general doctrine of the appropriation of payments, proceeds to say, “ There can be no objection to this doctrine where no party is concerned but the debtor and creditor. But how is it in a case like the present ? Here a public officer in the receipt of public money, has given security for the faithful performance ©f his duties, and for the accounting for and payment of all the moneys which shall come to his hands. The sureties remain for several years, and then a new bond with new sureties is given, at which time there is a large sum of money actually due to the public, and for which the sureties on the first bond were liable, that is to say, the penalty of the first bond was actually forfeited, and the amount of the defalcation due and recoverable from the sureties in it. Can the government for whose security both bonds were given, apply the money collected by the officer after and under the second bond, and on the responsibility of the sureties in the second bond, to the payment or credit of the balance due on moneys collected, and which ought to have been paid under the first bond ? Can the burden actually resting on the first sureties—can the forfeiture actually incurred by them, be shifted by the process of appropriation without the consent or knowledge of the second sureties, from the shoulders of the first and be put upon the second ? I am of opinion, most clearly, that it can not;—and that each set of sureties must answer for its own defaults, and is entitled to ■ be credited with its own payments. If authority can be required to sustain a principal of such obvious justice, it will be found in the case of the United States v. January, 7 Cranch 572.” Following this, we have in the year 1833, the case of the United States v. Eckford’s Executors, 1 Howard 261, which was the case of a public officer, who had given different official bonds, at different times, with different sets of sureties. Mr Justice McLean who delivered the opinion of the court, says, “ the rule as to the appropriation of payments by debtor or creditor in the ordinary transactions of business, is earnestly relied on as applicable to the present case. And all the leading authorities on the subject are referred to. In the case of Devayne v. Noble (Clayton’s Case) 1 Mer. 606, which governs the application of payments, was elaborately considered. But the applicability of this doctrine is not admitted. We think the rule established by this court in the case of the . United States v. January and Patterson, 7 Cranch 572, is the true one.” Then, we have in the year 1849, the case of Jones v. the United States, 7 Howard 688, in which it is declared by the court that, “ In instances of official bonds executed by the principal at different times with different and distinct sets of sureties, this court has settled the law to be that the responsibility of the separate sets of sureties must have reference to, and be limited by, the periods for which they respectively undertake by their contract, and that neither the misfeasance nor nonfeasance of the principal, nor any cause of responsibility occurring within the period for which one set of sureties have undertaken, can be transferred to the period for which alone another set have made themselves answerable. Such is the rule established in the cases of U. States v. January & Patterson, and U. States v. Eckford’s Executors.” We shall not attempt to reconcile either the real, or apapparent discrepancies or conflict in the decisions on this subject. We consider that the supreme court of the "United States in the cases of the United States v. January & Patterson, the United States v. Eckford’s Exec’rs, and Jones v. the United States, just referred to, have finally settled the law as to the appropriation of payments where different sets of sureties are concerned,—we say finally settled the law, because whatever is settled right, upon just principles, should be held to be settled forever. We fully agree with the Chancellor in all his conclusions, and therefore are of opinion that his decree in this case should be affirmed in all respects.