Halliburton v. Carter

Adams, Judge, delivered the opinion of the court. On the 5th day of July, 1862, Collin T. Carter was duly appointed guardian of the person and curator of the estate of William W. C. Moore, a minor, and on the same day executed his bond, with the plaintiff and others as his sureties. He made his last annual statement or report of the estate of his [437] ward, on the 8th day of January, 1861, shortly after which time, he became non-resident, and was for that reason removed from the guardianship and curatorship of said ward on. the 7th day of January, 1867, by the Probate Court of Linn county, and another curator was appointed for the said minor. Carter never made any report of the condition of his trust, after the 8th day of January, 1861, and never accounted for the balance of $3,411.87j then' shown to be in his hands belonging to his ward. On the 26th day of January, 1867, suit was brought on the bond of Carter, and Halliburton was served with summons therein, on the 6th day of February, 1867, and judgment was rendered against Halliburton and Sandusky therein, on the 15th day of June, 1869, which was afterwards modified by this court (See State, &c., ex rel. Moore by guardian vs. Sandusky, 46 Mo., 377); and judgment rendered against two of the sureties for $4000, which the said Halliburton fully discharged on the 20th day of December, 1870. On the 29th day of February, 1868, the defendant Carter, was on his own petition adjudged a bankrupt by the District Court of the United States, for the Western District of Missouri, and a discharge in bankruptcy was granted to him on the 8th day of December, 1868. The appellant now seeks in this action to recover from the defendant the money so paid by him on said judgment, and the respondent interposes his discharge in bankruptcy as a defense, and-the only question presented by this record is, whether the respondent is protected by said discharge in bankruptcy-from the payment of said demand. This question was raised by the evidence, and instructions given and refused, and was decided by the Circuit Court in favor of the defendant. It is manifest from this statement that the solution of the point in dispute, depends upon the proper construction to be given to the bankrupt’s discharge under the Act of Congress of 1867. Section 32 of that act declares, that the court shall grant him a discharge from all his debts, except as therein after-wards provided. This section also prescribes the form of a [438] certificate of discharge which contains the exception in this language, “excepting such debts, if any as are by said act excepted from the operation of a discharge in bankruptcy.” By section 33 it is provided “that no debt created by fraud or embezzlement of the bankrupt, or by his defalcation asa public officer, or while acting in any fiduciary character, shall be discharged under this act, but the debt maybe proved, and the dividend thereon shall be a payment on said debt, and no discharge granted under this act shall release, discharge or affect any person liable for the same debt for or with the bankrupt, either as partner, joint contractor, indorser, surety or otherwise.” Section.35 provides “that a discharge duly granted under this act shall, with the exceptions aforesaid, release the bankrupt from all debts, claims, liabilities and demands which were, or might have been proved against his estate in bankruptcy, and may be pleaded by a simple averment, that on the day of its date such discharge was granted to him, setting the same forth in haec verba as a full and complete bar to all suits brought on any such debts, claims, liabilities or demands, and the certificate shall be conclusive evidence in favor of such bankrupt of the fact and the regularity of such discharge.” By section 19 of the same act it is provided that any person liable as surety, &c., for the bankrupt, who has paid the debt or any part thereof in discharge of the whole, shall be entitled to prove the debt or stand in the place of the creditor if he shall have proved the same, &c.; and any person so liable as surety, may if the creditor shall fail or omit to prove the debt, prove the same either in the name of the creditor or otherwise as may be provided, by the rules, &c. These are all the provisions of the bankrupt law bearing on the question under consideration. The defalcation of the defendant on his bond as guardian, beyond all controversy constituted a d.ebt which was created while he was acting in his fiduciary character; it was therefore excepted from the operations of his discharge in bankruptcy, and continued against him after his discharge in full force, [439] and with all of its incidents as before, and the plaintiff stood as his surety, after the discharge, precisely as he had done before the proceedings in bankruptcy. Their obligations towards each other and in regard to the ward remained the same; one was the principal, and the other the surety, for the same debt or defalcation. The law is well settled that where a surety pays the debt of a principal, an implied promise on the part of the latter arises to refund the money.' It is considered as money paid and expended for the use of the principal by the surety, and may be recovered by him as such in an action at law. The point is made here, that although the debt or defalcation in favor of the ward was not discharged, yet the contingent liability of the principal to his surety was released on the ground, that such liability is not of a fiduciary character. The statute in my judgment will not bear this construction. Where the principal is released from a debt by his discharge in bankruptcy, he would also be released from his contingent liability to his surety for the same debt; but when the debt itself remains unaffected by the discharge, there can be no reason why the surety for the same debt should not retain all his rights against the principal. (Carlin vs. Carlin, 8 Bush., 141.) The case of Jones vs. Knox, (46 Ala., 53,) relied on by counsel for defendant, is not in conflict with the doctrines here contained. That case was a suit against a surety on a guardian’s bond, in which the court held that the surety does not occupy a fiduciary relation towards the ward of his principal, and that a discharge of the surety in bankruptcy, discharges his contingent liability as surety on the guardian’s bond. Let the judgment be reversed, and the cause remanded. All the judges concur.