United States v. Hillegas

| U.S. Circuit Court for the District of Pennsylvania | Oct 15, 1811

WASHINGTON, Circuit Justice

(charging jury). The only question for your determination is, whether the securities mentioned in the pleadings were taken, and the credit to Nichols enlarged, by the United States, without the knowledge or consent of the sureties? The United States, are a collective invisible body; which can act, and can be seen only in the acts of those who administer the affairs of the government, and their agents, duly appointed and empowered to act for them. This. position, which is undeniable, leads us naturally to an inquiry into the character and powers of those officers, concerned in the management of the revenues of the United States, and who appear to have had any agency in this particular business. And first, the secretary of the treasury, who is declared by law to be the head of that department. His duties are: to digest plans for improving and managing the revenue, and for the support of public credit; to prepare and report estimates of the revenue, and expenditures: to superintend the collection of the revenue; to decide on the forms of keeping and stating accounts, and making returns, and to grant warrants for money to be issued from the treasury; to act in relation to the sales of the public lands; to make reports to congress, on such matters as may be referred to him by that body, or which shall appertain to his office; and, generally, to perform all services, relative to the finances, required of him by law.- He is to superintend the collection of the duties on impost and tonnage, as he shall judge best; and the different officers employed in relation to the internal revenue, are, from time to time, for the better execution of their duties and trusts, to observe and execute such directions as they shall receive from the treasury department. See Acts Cong. 2d Sept., 1789 [1 Stat 65]; 3d March, 1791 [Id. 215]; 8th May, 1792 [Id. 279], The commissioner of the revenue, is a member of the treasury department, particularly charged with the superintendence, under the direction of the head of that department. of the collection of the revenues of the United States, other than those arising from duties on impost and tonnage; and is to execute such other services, conformable to the constitution of that department, as shall be directed by the secretary. The supervisor has the appointment of the collectors, and other inferior officers; and the collection of the internal revenue is to be made under his management.

Thus, it appears, that the collection of the internal revenue, is committed to the management of the supervisor, subject nevertheless, to the control and superintendence of the commissioner of the revenue, who, in his turn, is under the control and superintendence of the secretary of the treasury. In this case, not only the before-mentioned revenue officers, but the law officers of the United States, were engaged in some way or other, in the transaction which is put in issue. The supervisor, or manager of the internal revenue. in relation to the collection, agreed to give Nichols six, twelve, and fifteen months’ indulgence, for paying what was at that time due to the United States, in considerataion of receiving from him certain securities. The commissioner of the revenue, under whose superintendence this officer was, approved of the measure: and the secretary of the treasury. with full knowledge of all that had been done, if lie did not expressly approve, he evinced no disapprobation of what the supervisor had done, and certainly did not attempt to control him. The supervisor directed a suit to be brought on the mortgage, which was done, for the use of the United States, in express terms, and the money was raised. The supervisor received upwards of 9000 dollars, part of the money secured by the mortgage: and the district attorney took out of court between two and three thousand dollars. other part of the same; and the United States, by its officers, are now contesting with the state of Pennsylvania, the right to the residue.

After all these acts of the officers of the government, all acting within their proper spheres, it is too much to deny, that they are to be imputed to the United States, and to be considered as the acts of the United States. As there is no proof given on the part of the United States, that the sureties knew of, or consented to the arrangement made with Nichols, the fact must be taken as it is stated in the defendants’ rejoinder. Consequently. your verdict must be for the United States, on the first issue, and for the defendants, on the second issue; subject to the opinion of the court: on the point reserved, whether the two sureties of Nichols had not been discharged, by the United States having taken the bonds and mortgages of Nichols, in which time was given for the payment of the debt, due by him to the United States.

The jury found accordingly.

Afterwards, the question reserved for the decision of the court, having been argued, THE COUKT gave the following opinion:

The point reserved for the consideration of the court is, whether the act of the supervisor, in extending the time for payment of the debt due from Nichols, the principal in this bond, discharged the sureties? The principle of law. established by the eases of 1 Selw. N. P. 311. 312, 314; 2 Ves. Jr. 540; 2 Brown, Ch. 579; 2 Bos. & P. 61: 3 Bos. & P. 365.—is, that if a creditor, without the knowledge and consent of the surety, expressly or tacitly yielded, give time to the principal, bs' enlarging the credit beyond the period mentioned in the contract, the surety is discharged, both in equity and at law. The reason is an obvious one. The surety’ guaranties the performance of the particular contract, to which he is a party, and no other. If. without his consent, this contract be varied by the act of the creditor, he is not bound by the new contract; and the old contract cannot be enforced, according to the terms of it. without injustice to the principal, and a breach of the agreement made between him and the creditor. The surety, not being himself the debtor, but in relation to the obligation of his principal, has no right to prevent the creditor from indulging the principal, to any extent the creditor may please; but, as such indulgence cannot be granted at the risk of the surety, the only legal or equitable consequence, which can result from the indulgence granted to the principal, is, to discharge the surety’ from his engagement.

Should the surety call upon the creditor, as he undoubtedly may, to bring suit against the principal debtor as soon as the debt becomes due, and in case of refusal, to ask the aid of a court of equity to compel him; or should he even pay the creditor, with a view to sue the principal earlier than the period to which the new agreement had extended the credit;—the creditor, in the first instance, could not obey the call, nor could the surety, in the other, sue the principal without a violation of the second agreement. The inevitable consequence, therefore, must be what has been before stated.

It was contended on the part of the United States, that the rule does not apply, where the condition of the surety is improved by the extension of credit, granted in consideration of additional security for the debt. The answer to this argument is, that whether the security is bettered or not, was a consideration for the surety to decide upon; and the court has no right to inquire into, and to weigh the good or the bad which might result from the new contract. It would lead, most certainly, to a vast variety of speculation. on which no sound principle could be built. In this ease, it led unfortunately to the very loss which is now endeavoured to be fixed upon the shoulders of the surety. The principle on which the rule is founded, is not that the change of the contract, is upon calculation more or less beneficial to the surety, but that the contract, the performance of which was guarantied by the surety, has been changed without his consent.

Again, it was contended that the cases cited, do not apply to bonds with collateral conditions. but to such only as are expressly for the payment of money. How there should be a distinction, between the one kind of obligation and the other, is not perceived by the court. In both, the responsibility and the rights of the surety are -the same, and the principle of the rule, equally protects him in both. In the one, he guaranties the performance of certain acts, for a breach of which damages may be recovered; and in the other, tlie payment of a specified sum; but in neither, is he bound to guaranty any other'contract, than that to which he is a party; and of course, the principle which discharges him, in ease that contract is varied, in the one case, must discharge him in the other.

But, in this case, Nichols, at the time he was dismissed from the office of collector, was indebted in a specified sum to the United States, which he was then bound to pay, and for which a suit might immediately have been brought. The surety had a right to insist that a suit should be brought. But the United States, being, by an act of a public agent, disqualified from obeying such a requisition, had it been made, the surety was discharged.

Judgment for defendant.