COLLECTED COMMENT

1.

THE PRINCIPAL'S "PROMISE IN LAW" TO INDEMNIFY HIS SURETY.

2. - RIGHT OF HOLDER OF INVALID TAX DEED TO BE SUBROGATED TO LIEN OF THE PUBLIC.

1. THE PRINCIPAL'S "PROMISE IN LAW" TO INDEMNIFY HIS SURETY. - Estate of Ramsey v. Whitbeck, 183 Ill., 550, 74 Ill. App., 524, 81 Ill. App., 210, was made to turn upon the proposition that, where the principal makes no promise of indemnity, upon payment of the debt by the surety, the principal comes under a "promise in law" to reimburse the surety. The opinion of the Supreme Court gives rise to two observations: First, that proposition had nothing to do with the case. Second, on the Court's view of the case, the law, and justice to the parties, required the Court to disregard the principal's "promise in law" as "a mere form," or "fiction of law,' and to consider only "the real truth and substance of the thing.' (Lord Mansfield, in Johnson v. Smith, 2 Burr, 950, 962, and see the quotation from this case in Union Traction Co. v. Chicago, 199 Ill., 579, 635.)

The case was this: Ramsay was elected State Treasurer in November, 1892. Certain Chicago men, being officers of five National Banks in Chicago, became Ramsay's official bondsmen, pursuant to an arrangement with Ramsay that he would deposit the State's money in his custody as State Treasurer in said five National Banks; that he would allow the depositary Banks to use the State's money in their business of making loans to their

a [1 Ill. Law Rev., 619, April, 1907.]

customers; and that the depositary Banks would pay to Ramsay, for his own private use, interest on the average daily balances of the State's money at the rate of 21⁄2 per cent. per annum. Ramsay died by his own hand, a defaulter to the State for $478,539.51. This amount was paid to the State. The Supreme Court assumed that Ramsay's bondsmen paid his debt to the State. But the truth appears to be, that the money of the stockholders of the five depositary Banks went to pay the State. Ramsay's bondsmen prosecuted, for the benefit of the depositary Banks (183 Ill., at 566), a claim against Ramsay's estate on the legal theory that, having paid Ramsay's debt to the State, they were entitled, under the doctrine of subrogation, to enforce the State's rights to priority of payment out of Ramsay's estate given by the Administration Act. General creditors of Ramsay in his own proper person contested the claim, Ramsay's estate being insolvent.

After using the doctrine of subrogation to get jurisdiction to re-examine the Appellate Court's finding of facts (183 Ill., at 558-559), the Supreme Court laid the doctrine to one side, and dealt with the merits on the theory that Ramsay's bondsmen were seeking indemnity against Ramsay. It is too plain for discussion, however, that they wanted only the benefit of the doctrine of subrogation. And, of course, the Court could not give them that without proof, by them, that they had paid, in a substantial sense, that is to say, with their own money, Ramsay's debt. Payment of Ramsay's debt by the Banks could do Ramsay's bondsmen no good, because such payment must have been either (1) voluntary (see Young v. Morgan, 89 Ill., 199; Stearns on Suretyship, Sec. 276), or (2) illegal (see Devine v. Holmes, 117 Ill., 145; 27 Am. and Eng. Ency. of Law, Ed. 2, 204, note 6) for two reasons: First, the Banks were forbidden by the

law of their being to bind themselves as sureties of the State Treasurer (Bowen v. Needles National Bank, 87 Fed. Rep., 439, aff'd C. C. A., 94 Fed. Rep., 925); Second, such payment by the Banks must have been, on the case as reported, pursuant to a term and condition of the arrangement—admittedly, in this case, forbidden by the law of the State-agreeably to which Ramsay's bond was underwritten. The bondsmen and the Banks, therefore, united or divided, had no case. And such was the result reached by the Supreme Court, but by a line of reasoning to which the second observation, supra, is applicable.

Counsel for the bondsmen, whether there was method in it or not, shifted the argument away from the doctrine of subrogation to the doctrine of indemnity. The point fatal to this argument (Shepard v. Ogden, 2 Scam., 257; Bonham v. Galloway, 13 Ill., 68), lying right on the surface of the case, inadequate proof that Ramsay's bondsmen had paid Ramsay's debt, was not taken. It was agreed by counsel on both sides, and by the Court, that, upon payment of Ramsay's debt by his bondsmen, the law imposed a promise upon Ramsay to reimburse his bondsmen, and that this promise in law related back to the contract of suretyship. The whole of the argument was upon the question, whether Ramsay's promise in law, contemporaneous, by relation back, with the contract of suretyship, was a separable, or an inseparable, part and parcel of the said illegal arrangement, pursuant to which Ramsay's bond was signed. The Supreme

1 Choteau v. Jones, 11 Ill., 300, was thought to support this. It is apparent, however, that Choteau v. Jones does not go the length ex contractu to which it was carried. The Court there only enforced the proposition (p. 318): “The relation of debtor and creditor between principal and surety, so as to entitle the latter to avoid a voluntary conveyance made by the former, commences at the date of the obligation by which the surety becomes bound, and not from the time he makes payment."

Court decided, that Ramsay's promise in law of indemnity, and the said illegal arrangement, were inseparable, and that, therefore, the maxim, ex turpi causa non oritur actio, applied, and, under it, the bondsmen had no case. To defend this use of the two legal notions of a "promise in law" and "relation back," a fiction upon a fiction, to impute such legal delinquency to the bondsmen as would bring them within the reach of the principle of policy on which the maxim ex turpi causa rests, the policy of enforcing the supremacy of, and obedience to, law, "which the defendant has the advantage of, contrary to the real justice as between him and the plaintiff, by accident, if I may so say," (Lord Mansfield, quoted in Pullman Car Co. v. Transportation Co., 171 U. S., 138, 150-151), the Court invoked the aid of another great first principle, the principle of equality before the law, or, as the Court put it, "The law is the same for all." (183 Ill., at 568.)

Obviously, the question What is "the real truth and substance" of a principal's "promise in law" to indemnify his surety? was a material one in Ramsay's case, on the view the Court took of the case. Lord Holt, who was quite opposed to entertaining actions of assumpsit founded upon promises in law, said, in Starke v. Cheeseman, 1 Ld. Ray, 538, that "the notion of promises in law was a metaphysical notion, for the law makes no promise, but where there is a promise of the party." We all know, however, that this "metaphysical notion" has long been "fixed in our law." (Ames, "The History of Assumpsit," 2 Harv. L. R. at p. 66.) As between principal and surety, the legal notion of a promise in law of indemnity does not mean, as the Supreme Court implies, if it does not say, in Ramsay's case, that a surety's right of indemnity is founded on promise or contract, actual or in law. A surety's right of indemnity is founded, in the absence of