The Eureka. want of due communication should be specially pleaded; though I am not sure whether the privy council agree in this: see The Olivier, Lush. 490; Glascott v. Lang, 2 Phill. 310; The Bonaparte, 8 Moore, P. C. 460. Taking the evidence exactly as it stands before me, and taking the captain's letters to be honest, which they seem to be, and laying aside all consideration of the burden of proof, the case does not appear to be one in which the master could well have waited for funds after he found out his need of more money than the sales of damaged cargo would supply: The Staffordshire, 25 Law Times, N. s. 137; 8 Moore, P. C. N. S. 443; L. R. 4 P. C. 194; The Gratitudine, 3 Rob. 240. In the latter case, which is the great fountain of learning and suggestion on this subject, will be found many remarks applicable to the case at bar: see pp. 262 and 274. The learned judge sustained the bond upon the cargo under circumstances which strike me as far less favorable to the holder in this matter of communication than is that now before me. Here the mail took three months go and return, and there is much reason to say that the master had no expectation of staying so long at Cape Town. In his letters he regrets, in terms which have every appearance of sincerity, that he is so distant as to be practically beyond the advice and assistance of his owners. to There is one piece of evidence, indeed, that might lead one to suspect that the master had held back information. The libellants, who transacted all the business with the master, say that already in May there was an arrangement for a bottomry bond. If this were so, I think the master ought to have informed the managing owner. But the master denies the fact. There may have been a misunderstanding between the parties; or it may be that the agreement was conditional on a state of circumstances which the master thought would never happen, that is, that the repairs would exceed the value of the damaged sugar to be sold, and so the conversation escaped his recollection. I do not feel justified in finding fraud, which there must have been, if so important an agreement was purposely kept back. Most of the contested cases in England have been cases about cargo, because the master almost always does inform his owners of all that happens to him; and such notice is all that can usually be The Eureka. required, and is equivalent in most cases to a demand for money; and an absence of such usual communication would be strong evidence of fraud. But as applied to the freighters, the doctrine is admitted to be peculiar to England, and believed by many learned judges there to be novel. I reserve my judgment upon it, except that, if it is understood that any rigid and arbitrary test of an agent's good faith and prudent action is likely to be adopted in the maritime law, I do not share that opinion. The pleadings and evidence which I have already referred to make it unnecessary to dwell more upon the law. If the English cases were of authority here, they would not require this bond to be set aside. Coming, then, to the items of the account, several objections are made. 1. To the premium for insuring the risk being included; and this is abandoned by the libellants. 2. To the amount of the charge for maritime interest. This charge is called fifteen per cent, but is in fact a little above twenty per cent, because the sum or principal upon which it is charged includes a charge for the bill of exchange, which was not accepted. It seems that the libellants, acting for the master, whose agents they were, advertised for money on bottomry; but they published the advertisement in the morning, and gave only until the same day at one o'clock in the afternoon for proposals. They appear to have acted on one of those supposed conventional rules that I have referred to, and to have thought that a publication was necessary, but might be merely formal. We must take them upon their own ground, and assume the notice to have been necessary or desirable; and from its inadequacy we ought to presume that a lower bid was feared, if time had been given to make one. Indeed, it is by no means clear that a lower offer was not made; but the evidence is somewhat obscure, and I do not rely upon it. I shall allow twelve per cent upon the advances actually made, which will amount to nearly fifteen, because the advances were partly by a loan of credit, entirely justifiable and proper, but which gave the libellants a further premium than that appearing on the face of the bond. 3. The captain received in money from the libellants £88, for discounts, which the libellants testify would have been allowed him for his own use by the several tradesmen, if he had The Eureka. settled his bills himself. This practice of agents procuring discounts on the bills of their principals is a most immoral one, but, unfortunately, very extensive and very persistent. The courts have discouraged it in vain. The master, however, swears that he has accounted for the money to his owners. If this is so, there is no reason, perhaps, in this particular case, why they should retain it, though they certainly ought not to pay interest and premium upon it. I understood the managing owner to say he had received only a part of it. He may prove by affidavit how much he has received in account, and for that he should be charged without interest. 4. £630 paid to the master. I think I ought to order a further examination of this item, both upon the law and the facts, if the claimants desire it. It was decided in The Royal Stuart, 2 Spinks, 258, cited at the argument, that an agent who takes a bond is bound to see to the application of the money borrowed, though an ordinary lender may accept the captain's assurance that it is wanted for the legitimate uses of the ship. I should wish further light upon the law, and, if it is as ruled in the case cited, as to the facts of this expenditure. 5. In marshalling the funds, it is claimed by the charterer that he should be repaid the sum of £271 38. 9d., advanced by him at Java, on account of the freight. This is a valid demand by the law of England, and has been adopted in New York by the district and circuit courts: see The John, 3 W. Rob. 170; The Catherine, Swabey, 263; The Salacia, Lush. 578; The Karnak, 6 Moore, P. C. N. s. L. R. 136; 2 P. C. 545; The Anastasia, 1 Bened. 188, 201, note. I ought to follow these precedents, unless fully satisfied that they are wrong, which I am not, by any means. This claim is therefore allowed. Bond pronounced for, excepting as above stated. Further hearing upon the £630, if asked for by claimants within five days; otherwise, decree to be made up in conformity with this opinion. F. Goodwin, for the libellants. J. B. Richardson, for the ship-owners. J. C. Dodge, for the owners of cargo. Ex parte Morris.- Re Foye. Ex parte MORRIS.Re FOYE. AUGUST, 1875. If a mortgage, pledge, or lien be given by a principal debtor to secure his surety, and both principal and surety become insolvent, the creditors, whose claims the surety is bound for, have an equity to require the mortgaged property to be applied to the discharge of their debts specifically. This equity depends upon the equities between the parties to the mortgages, and if by negligence of the creditors the surety is discharged, or if the state of accounts between the parties is such that the surety has lost his lien, the creditors have no lien. The creditors must first apply their security, and prove against either estate for the deficiency only. If the holders of the claims secured by the mortgage to the surety prove in full, they waive their security. Whether, if the estate of the surety will pay no dividend, the pledged property should not be surrendered to the assignee of the principal, quære? DOCTRINE OF EX PARTE WARING.1- In June, 1874, George F. Foye mortgaged his stock and fixtures to his brother, John W. Foye, to secure him for all liabilities he had assumed or might assume for the mortgagor. Within a few months both parties became bankrupt, and the petitioner was chosen assignee of both estates. He realized about $9,000 from the sale of the mortgaged property, and nothing of importance from any other assets in either case. Upon his petition, asking directions for the distribution of the assets, the register notified all creditors, and from his report and from the papers on file it appeared that John W. Foye had indorsed for his brother for more than $15,000, all of which debt was outstanding, and formed the bulk of the indebtedness of both estates; that the creditors, holding the notes, had proved against both estates, and most of them had voted for the assignee; that none of them had appeared before him at the hearing of this petition; that one general creditor of George F. Foye had appeared and filed a brief, which was sent to the court. The register reported that the money received for the stock and fixtures should be divided among the creditors of George F. 1 The peculiar equity discussed in this case is known in England by the name of the leading case, Ex parte Waring (19 Ves. 345). Ex parte Morris. - Re Foye. Foye without distinction, because the holders of the notes had waived any equity they might have had, by proving in full, and voting under both bankruptcies; and because the assets of John W. Foye being insufficient to pay any dividend, his creditors had suffered and could suffer no injury from the indorsements, and therefore the mortgage had become inoperative. LOWELL, J. It is well settled that if a mortgage, pledge, or lien is given by a principal debtor to secure his indorsee or other surety, and both become insolvent, the holders of the notes or other debts for which the surety is bound have an equity to require the property to be applied to the discharge of their debts specifically. Many of the American cases upon this subject are reviewed by the late Judge Hall in Jaycox's Case, 8 N. B. R. 241, and by the learned American editors in 1 Lead. Cas. Eq. (ed. 1859) p. 163. The English decisions I have not seen fully collected, but have had occasion to examine them more than once. Some of the more important of them are Ex parte Waring, reported in three places, 19 Ves. 345, 2 Rose, 182, 2 Glyn & J. 404; Powles v. Hargreaves, 3 DeGex, M. & G. 430; Ex parte Carrick, 2 DeGex & J. 208; Ex parte Copeland, 3 Dea. & Ch. 199; Ex parte Prescott, id. 218; Inman v. Clare, Johns. Eq. 769; Bank of Ireland v. Perry, L. R. 7 Exch. 14; City Bank v. Luckie, L. R. 5 Ch. 773; Ex parte Dewhurst, L. R. 8 Ch. 965. Under all these decisions, in both countries, the holders of the notes would prima facie have the equity which I have referred to. But this equity is obtained by subrogation, and depends upon the equities between the parties to the mortgage. Thus it has been held that if the surety has been discharged by the negligence of the creditors, or if the state of the accounts between the parties is such that the surety has lost his lien, the creditors have no equity: Hopewell v. Bank of Cumberland, 10 Leigh, 206; Bibb v. Martin, 14 Smedes & M. 87; Vaughan v. Halliday, L. R. 9 Ch. 561; Ex parte Parr, Buck, 191. It is further settled that the creditors must work out their equity, and apply their security so as to prove against either estate for the deficiency only: New Bedford Inst. v. Fairhaven Bank, 9 Allen, 175; Jaycox's Case, 8 N. B. R. 241, per Hall, J.; Powles v. Hargreaves, 3 Mont., D. & DeG. 576; Banner v. John |