Hunter v. United States. 5 P. WILLIAM HUNTER, Appellant, v. THE UNITED STATES, Appellees. 5 P. 173. A surety, who pays a debt to the United States, is subrogated to the right of priority of payment which belonged to the United States. A creditor who obtains a judgment, after a petition for the benefit of an insolvent law was filed, but before an assignment was made of the effects of an insolvent, has a right to participate in those effects. A private act of congress for the relief of a debtor of the United States, which retains the right to proceed against his property subsequently acquired, does not release his surety. Though an officer of the government had the power to retain moneys to pay a debt to the United States, his omission to do so does not release the debt, or prevent the United States from asserting a lien on those moneys in the hands of a third person. THE case is stated in the opinion of the court. Hunter, for the appellant. Berrien, (attorney-general,) contrà. *M'LEAN, J., delivered the opinion of the court. [ *181 ] This is a suit in chancery brought to this court by an appeal from the decree of the circuit court of Rhode Island. The material facts in the case are these: William Hunter, the defendant in the court below, is the surviving assignee of Archibald and Frederick Crary, who, in June, 1809, obtained the benefit of the insolvent law of Rhode Island. One Jacob Smith, as surety on a custom-house bond, had been compelled to pay to the United States, in May, 1808, for the Crarys, about $2,125. In February, 1810, Smith filed his petition for the benefit of the insolvent law; and in August, 1811, Hunter, and one Littlefield, now deceased, were appointed assignees. On the 3d day of September following, Smith made to them an assignment of his property. Smith and one M'Gee were sureties for William Peck, as marshal of the Rhode Island district, who became a defaulter to the government, and against whom and his sureties, in August, 1811, a judgment was recovered for $13,508. Upon his being afterwards committed to prison, on an alias execution issued in pursuance of this judgment, Smith petitioned the secretary of the treasury for relief, and stated that he was reduced to poverty, and had assigned all his property under the insolvent law. His insolvency, he alleged, had been accelerated, if not produced, by his having paid large sums as surety on certain [182] custom-house bonds, and particularly the above sum for the Crarys. He was discharged by the secretary on the 17th day of October, 1811, on his making a formal assignment of all his effects to Hunter v. United States. 5 P. the United States. This assignment purports to convey the same property which he had previously assigned. In 1812, the United States imprisoned Peck, the principal, on execution, and in the month of June, in the same year, he was discharged by act of congress.1 In July, 1824, Hunter, as the assignee of the Crarys, obtained from the United States, under their treaty with Spain,2 the sum of $8,158.81. Out of this sum, Smith was entitled to the amount he paid for the Crarys; and the United States claim the same from Hunter, as assignee, in part satisfaction of their judgment against Smith. Hunter claims this sum in behalf of the creditors of Smith, under his first assignment. By the original bill, the government rested its claim on the second assignment. This clearly cannot be sustained. Smith, under the insolvent law of Rhode Island, having assigned all his property for the benefit of his creditors, could not, by a subsequent assignment to the United States, affect the first transfer. The government can set up no right, under the second assignment, which might not be claimed by any other creditor. This ground is abandoned by the amended bill, and the claim of the government is placed on its priority, under the act of congress.3 By this act a preference is given to a government debt over all others; and if the debtor be insolvent, such debt must first be satisfied. It is true, as the defendant insists, that the original bill still remains in the record, and forms a part of the case. But the amendment presents a new state of facts, which it was competent for the complainants to do; and, on the hearing, they may rely upon the whole case made in the bill, or may abandon some of the special prayers it contains. The same right of priority which belongs to the government attaches to the claim of an individual who, as surety, has paid money to the government. Under this provision, Smith could [ * 183 ] claim a preference to other creditors for the * money he paid as surety for the Crarys; and on his right the priority of the government is asserted. The defendant resists this demand on various grounds. He contends, in the first place, that the doctrine of priority is not applicable in this case. This prerogative of the government can only operate, it is insisted, on a debt due at the time; that it cannot reach a debt which depends upon a future contingency; and such was the claim of the Crarys, under the Spanish treaty. It was not realized until in June, 1824, 16 Stats. at Large, 109. 28 Ib. 252. 3 1 Ib. 515. Hunter v. United States. 5 P. nearly thirteen years after the benefit of the insolvent law had been extended to the claimants. It is also contended that the first assignment of Smith had relation back and took effect from the date of his inventory, which was prior to the judgment obtained against him by the United States. This being the case, the priority of the government could not attach, it is urged; for it can only act on a debt, and there was no debt in this case, as against Smith, until judgment was entered. The assignment, under the insolvent law, could only take effect from the time it was made. Until the court, in the exercise of their judgment, determine that the applicant is entitled to the benefit of the law, and, in pursuance of its requisitions, he assigns his property, the proceedings are inchoate, and do not relieve the party. It is the transfer which vests in the assignee the property of the insolvent, for the benefit of his creditors. If, before the judgment of the court, the petitioner fail to prosecute his petition, or discontinue it, his property and person are liable to execution, the same as though he had not applied for the benefit of the law. And if, after the judgment of the court, he fail to assign his property, it will be liable to be taken by his creditors on execution. The property placed upon the inventory of an insolvent may be protected from execution while he prosecutes his petition; but this cannot exclude the claim of a creditor who obtains a judgment before the assignment. If this Spanish claim had passed into the hands of the assignee of Smith, and been distributed by him before the debt of the United States was established, or notice of its existence had been given to him, no controversy could have arisen on the subject. * The defendant, as assignee, could not have been held re- [ *184] sponsible under such circumstances; nor could the creditors who received payment have been compelled to refund to the government. If the judgment of the government had not preceded the assignment of Smith, there might have been some ground to question the right of priority which is contended for. But the judgment preceded the assignment, which gave the government an unquestionable right of priority on all the property of Smith. Did not this right extend to the claim on the Crarys? It would seem that no doubt can exist on this subject. If the right cover any part of the property of the insolvent, it must extend to the whole, until the debt be satisfied. It was proper for Smith to include in his assignment the claim on the Crarys. However remote the probability may have been at that Hunter v. United States. 5 P. time of realizing this demand, still, under the insolvent law, it was an assignable interest. If, at the time of the assignment, this claim was contingent, it is no longer so. It has been reduced into possession, and is now in the hands of the representative of the debtor to the government. If, under such circumstances, the priority of the government does not exist, it cannot be said to exist in any case. It would be difficult to present a stronger case for the operation of this prerogative. But it is contended by the defendant below that, if the doctrine of preference or priority be applicable to this case, the United States, by various acts, have waived it. The release of Peck from imprisonment by the act of congress, under the circumstances of the case, it is urged, was a release of Smith the surety. This act was passed the 24th of June, 1812, and it provided that, before his discharge, Peck should assign “all his estate, real and personal, which he may now own or be entitled to, for the use and benefit of the United States." And it also provided "that any estate, real or personal, which the said William Peck may hereafter acquire, shall be liable to be taken in the same manner as if he had not been imprisoned and discharged." [ * 185 ] *By the act providing for the relief of persons imprisoned for debt due to the United States, passed June 6, 1798,' the secretary of the treasury is authorized to discharge in certain cases, and the individual so discharged, it is declared, “shall not be liable to be imprisoned again for the same debt, but the judgment shall remain good and sufficient in law." As in the act of 1798 there is an express provision that "the judgment shall remain good," which is omitted in the act discharging Peck, a doubt has been raised whether the judgment against him can be further prosecuted. If by this act the judgment be released against Peck, as a matter of course, his surety is discharged. This act specially provides, "that any estate which Peck may subsequently acquire, shall be liable to be taken in the same manner as if he had not been imprisoned and discharged." From this provision it clearly appears that the release from imprisonment was the only object of the statute, and a proper construction of it does not release the judgment. If the property of Peck may be taken "in the same manner as if he had not been imprisoned," it may be taken under the same judgment. That the same rules of contract are applicable where the sovereign is a party, as between individuals, is admitted; but the right of the 11 Stats. at Large, 561. Hunter v. United States. 5 P. sovereign to discharge the debtor from imprisonment, without releasing the debt, is clear. And how can such a release discharge the surety? Does it embarrass his recourse against the principal? In this case, if Smith had paid the debt to the government, he might have resorted to all the remedies against Peck, which the law allows in any case. The recourse of the government against the property of Peck still remains unimpaired; consequently, the judgment remains unsatisfied, and no act has been done to the prejudice of the surety. The cases in 2 Dane's Abridg. 155; 3 Sergt. & Rawle, 465, 466; and 2 Dall. 373, were cited to show that, while a defendant is charged in execution, the debt is considered as satisfied; and that a discharge of one co-debtor is a discharge of all. The imprisonment of a defendant is a means to enforce the payment of the judgment, and is only considered a satisfaction * of it, so far as to suspend all other process. If, by the [*186 ] operation of law, by an escape, or by any other means, without the assent of the plaintiff, the defendant be released from prison, the judgment still remains in full force against him. The imprisonment of Peck the principal, was no bar to an execution against the body of his surety. In the case under consideration, Smith had been imprisoned and discharged before Peck was confined. These proceedings were all regular, however great the hardship may have been to the surety; and did not, in any manner, lessen the responsibility of either principal or surety. The authorities read in the argument, going to show a release of the sureties, where the creditor without their assent enlarges the time of payment, &c., are not considered as opposed to the doctrines here laid down. The act of the government in releasing both the principal and surety from imprisonment, was designed for the benefit of the unfortunate debtors, and no unnecessary obstructions should be opposed to the exercise of so humane a policy. If the discharge of the principal, under such circumstances, should be a release of the debt against the surety, the consequence would be, that the principal must remain in jail until the process of the law were exhausted against his surety. This would operate against the liberty of the citizen, and should be avoided, unless required to secure the public interest. A discharge from prison by operation of law does not prevent the judgment creditor from prosecuting his judgment against the estate of the defendant. To this rule a discharge under the special provisions of a bankrupt law, may form an exception. In the cases under consideration, the defendants were discharged |