State ex rel. White v. Smith, 47 N.C. 4, 2 Jones 4 (1854)

Dec. 1854 · Supreme Court of North Carolina

47 N.C. 4, 2 Jones 4

STATE TO THE USE OF THOMAS D. WHITE AND WIFE vs. EDWARD F. SMITH, et al.

Where a Clerk and Master took money belonging to his Office and used it in speculation, the sureties of the bond for the term, then current, are liable : notwithstanding the amount invested had been paid to him by his copartner in trade after the time covered by that bond had elapsed, and a new bond had been given.

Such a return of the funds could only be considered in mitigation of damages, and to have that effect it should be shown that the funds were specifically appropriated to the payment of those entitled to them.

Where the sureties on the second bond were erroneously sued and the money forced out of them, the judgment in that suit is no bar to the action against the sureties who were actually liable ; and where the judgment had been assigned to the use of the sureties who had wrongfully paid, it will not be allowed to go in mitigation of damages.

Action of debt, tried before his Honor Judge Bailey, at the Spring Term, 1854, of Perquimons Superior Court.

The bond sued on was executed by the defendant Smith, as clerk and master in Equity, and the other defendants, as his sureties at Eall Term, 1846, of the Court of Equity of the county of Perquimons, and is in the usual form. At Spring Term, 1848, it was ordered that the clerk and master lend out the fund in controversy, (the proceeds of the sale of a tract of land) and pay the interest to one Richardson during the joint lives of himself and wife, and if she survived, then to her, during her life. At the Spring Term, 1850, it was decreed that the clerk and master pay the fund to "the relators upon bond being given to secure the interest annually to Richardson and wife, as directed in the former order. The relators executed the bond and called upon the defendant, Smith, for the fund. He failed to pay, and therefore the relators brought suit upon the bond of 1848, and obtained judgment against Smith and his sureties in that bond. Smith had become insolvent, and the sureties paid the amount of the judgment to the relators and took an assignment thereof. This action was then brought on the bond of 1846. The breach assigned is, that Smith had, in December, 1847, taken the fund out of the office and applied it to his own use. It was proved on the part of the plaintiff that he had used the fund in the purchase of a number of horses upon speculation; and it was proved on the part of the defendants that in July, 1848, he had a settlement with his partner in the horse dealing, to whom he had handed the money and received the amount back from him, a part in cash, and the balance in good notes upon individuals to whom he had sold horses. There was no evidence that Smith had returned either the money or the notes to his office: on the .contrary, there was evidence tending to show that he had not done it. His Honor intimated an opinion that the plaintiff could not recover; whereupon, a nonsuit was submitted to, and an appeal taken.

Smith, for plaintiff.

Heath, for defendant.

Pearson, J.

The ground upon which his Honor based his opinion is not stated: In the argument two grounds were taken to, sustain it.

It is clear that the withdrawal of the fund from the office, .and the application of it to his own use by Smith in December, 184tf, was a breach of the bond of 1846. But it is said that this breach was repaired, and the cause of action extinguished by the fact, that in July, 1848, Smith received back the whole amount of the fund in cash and good notes.

If, after the misapplication, the fund had been actually paid over to the relators, that fact would have repaired the breach, to the extent of mitigating the damages to a mere nominal amount. It may be, that if the fund had been returned to the office and set apart specifically for the use of the relators, that fact would have mitigated the damages. But the simple fact, that Smith afterwards received back the amount of the fund in “ cash and good notes,” cannot have the effect of extinguishing the cause of aetion, nor does it in any way tend to mitigate the damages. It is the same to the relators whether Smith squandered the money in the first instance, or received it back and afterwards squandered it: The success of his first speculation was to them a matter of perfect indifference. The misapplication of the fund was a breach of duty on the part of Smith, and gave the relators a cause of action : His receiving back the fund did not amount to retribution ; of course it could not amount to an extinguishment of the cause of action, and the injury stands unmitigated.

It is said, in the second place, that the proceedings had in favor of the relators on the bond of 1848, is a bar to the present action: either under the plea of “former judgment,” or as a satisfaction of the damages. To sustain the plea of “former judgment,” it must be for the same cause of action, and between the same parties. That action was upon the bond of 1848, and the parties were not the same. If the judgment on the bond of 1848, had been paid off and satisfied, so as to be extinguished, it may be granted that this action could not have been maintained, in as much as the relators by it, seek to recover damages for, and in respect of the same subject matter, in regard to which damages had been recovered in the former action, and the relators would not be entitled to receive the damages a second time : but that consequence was guarded against by having the judgment assigned over: The effect of which is to prevent it from being satisfied or extinguished, and to keep it outstanding for the benefit of the surety who advanced the money to the trustee to whom it was assigned, so as to make the transaction a purchase of the judgment and not a satisfaction. This contrivance (if you please so to call it) by which sureties are enabled to protect themselves, and to take the benefit of all the liens and securities, and remedies to which the creditor has the right to resort, has been so long, and so often sanctioned by the Courts, that it has become settled law, and cannot now be drawn in question.

This case is a striking instance, to show that the practice of taking assignments, so as to prevent bonds and judgments from being satisfied or extinguished, is in furtherance of justice. The fund was withdrawn from the office in 1841: there is no evidence that it was ever returned, and had the sureties upon the bond of 1848, been as well advised before, as they were after the judgment was obtained against them, no such judgment would have fallen, in the first instance, upon the present defendants, who are the sureties of 1846, and were bound at the time of the default of Smith. Justice requires that they should still bear the loss, to the relief of sureties who were not liable at the time of the breach.

Venire de novo.

Per Curiam.