Jackson v. Patrick
10 S.C. 197
S.C.
1878
Check Treatment

The opinion of the Court was delivered by

McIver, A. J.

The facts of this case are so fully and clearly stated in the decision below that it is wholly unnecessary to repeat *203them here. Indeed, the Circuit Judge has so fully vindicated the correctness of the conclusion which he has reached that it is difficult to add anything to what he has so well said. That in order to discharge a surety the creditor must do some act of a positive character, either by entering into a valid contract with the principal debtor, varying the terms of the obligation, by extending the time for its performance or otherwise, or by doing some othér act prejudicial to the interests of the surety, or he must omit, after demand from the surety, some duty imposed upon him whereby loss results to the surety, is a proposition too well settled to admit of dispute. The inquiry then, in this case is, has the creditor done any such act, or has he, after demand from the surety, omitted the performance of any such duty ? The appellant contends that the creditor has done such act by accepting the provisions of the assignment. This involves two questions, one of fact and the other of law: 1. Did the creditor, as matter of fact, accept the terms of the assignment? This fact is alleged in the complaint and denied in the answer, and, as there is no distinct finding by the Circuit Judge upon this issue, it will be necessary to look to the testimony bearing upon it. It is true that the Circuit Judge, in one part of his decision, seems to imply that he treated the case as if the creditor had accepted, and argued that even if he did accept that this would not discharge the surety; but we do not regard this as establishing the fact put in issue by the pleadings. There is no positive evidence that the creditor did, in terms, accept the provisions of the assignment, and it is very clear that there was not only no necessity for the creditor to accept, but that the terms of the deed of assignment did not seem to contemplate anything of the kind on the part of the creditors, as .there were no provisions for release, &c. Why, then, should the creditors accept? It is argued by the appellant that though the creditor did not, in terms, accept the provisions of the deed of assignment, yet that such acceptance may be presumed from his acting in conformity with the terms of the deed. Without undertaking to dispute or consider this proposition, we are at a loss to discover any sufficient evidence of the circumstances necessary to raise such a presumption. The only circumstance tending that way, so far as we can see, is the fact that the respondent’s intestate attended the meeting of the creditors called to determine the question whether an agent, and, if so, who, should be appointed to act with the assignees, and he, with the other creditors present, simply declined to *204exercise the privilege given them by the statute in such cases, for the statute does not require, but merely permits, the appointment of such agent. This certainly was not sufficient to show that the creditor accepted the terms of the assignment, especially ’when taken in connection with the fact that the deed of assignment, so far as disclosed to us, did not provide either expressly or impliedly that the creditors should accept its terms, and with the additional important fact that the creditor proceeded with his suit, which he had previously commenced against the principal debtor, and obtained judgment in due course of law, which was clearly inconsistent with the idea that he had accepted the terms of the assignment, as one of the main purposes of the assignment, doubtless, was to prevent this very thing, by which costs would be multiplied against the debtor. Indeed, the meeting of creditors for the appointment of an agent to act with the assignees is ordinarily, if not universally, appointed some time before the period has elapsed within which the creditors are allowed to come in and accept the terms of the assignment; and it may well happen that a creditor who has attended such meeting may afterwards be unwilling to accept, for certainly the business capacity, energy and character of the persons who are to administer the assets are important elements for one to consider in determining whether he will accept his^ro raía share of such assets in discharge of his debtor. So that even if the deed of assignment required a release, and therefore involved the necessity of an acceptance of its terras, it may well be doubted whether the mere fact that the creditor had attended such meeting and participated in its proceedings would amount to an acceptance of the terms of the assignment. If, therefore, the appellant has failed to establish the fact upon which his legal proposition rests, it is scarcely necessary for us'to consider such proposition. But, even assuming the fact to be as contended for by the appellant, it is difficult to see how the act of accepting the assignment could in any respect injure the surety. As we have seen, there was no release required, and there was no extension of time given to the principal debtor, for, on the contrary, the creditor proceeded with his suit then pending against the principal debtor and obtained judgment in due course of law. Hence, even conceding that the conduct of the creditor amounted to an acceptance of the assignment, we do not see how such act could operate as a discharge of the surety.

*205The next inquiry is, has the creditor omitted any duty imposed upon him after demand from the surety that he should perform it ? Assuming that it was the duty of the creditor to pursue the assignees and require of them the prompt execution of the trusts which they had assumed, there is not the slightest evidence that the surety ever made any demand upon the creditor so to do. Before the assignment was made the creditor might, upon the demand of the surety, have been required to pursue the principal debtor, and, failing so to do, the surety would have been discharged of loss which thereby fell upon the surety; but mere delay or omission to pursue the principal debtor, without such demand, would not discharge the surety.—Pain vs. Packard, 13 Johns. Ch., 174; King vs. Baldwin, 17 Johns. Ch., 384, with the notes thereto in 2 Amer. Lead. Cases, 255, followed in the recent case of Colgrove vs. Tallman, (67 N. Y., 95,) 23 Amer. Rep., 90, and recognized and approved in Lang vs. Brevard, 3 Strob. Eq., at page 64.

How, then, is this case altered by the transfer of the assets of the principal debtor into the hands of the assignees? If mere delay to pursue the principal debtor would not be sufficient to discharge the surety, we are unable to see why mere delay in pursuing the assignees could have such an effect. The remarks made by Moses, C. J., in the recent case of Muller vs. Wadlington (5 S. C., 347,) seems to us peculiarly applicable to the present inquiry. In that case Bauskett as principal and Wadlington as surety gave to Fair & Marshall seven money bonds, secured by a mortgage of real estate belonging to Bauskett. Muller became the assignee and holder of one of these bonds, the other six remaining in the possession of Fair, who had acquired Marshall’s interest. After this assignment to Muller, by an endorsement upon the mortgage, Fair, without the knowledge or consent of Muller, released the lien of the mortgage. In an action upon the bond held by Muller against the surety, Wadlington, it was held that such release did not discharge the surety so far as the bond in the hands of Muller was concerned.

In delivering the opinion of the Court, the late Chief Justice uses this language: “To exonerate the appellant from his liability on the bond because of the alleged loss of the security through the mortgage, it should appear that it resulted from the fault of the creditor. There has been no attempt in any way to connect the respondent, who had the whole legal interest in the bond, with the *206act of the assumed discharge by Fair. The appellant had as much control over the mortgage as the respondent. Fair stood in a fiduciary relation to both of them. The mortgage enured to their mutual benefit. And if on the one hand it is said by the surety to the creditor, ‘you should have assumed control or dominion over the mortgage,’ he might well reply, ‘you knew of its existence, and, as I have done nothing to destroy its validity, why did you not require the mortgagee who held it to enforce it for your benefit?’”

These remarks may well be applied to the present case. If the surety here complains that the creditor should have taken steps to enforce the performance of their duty by the assignees, whereby the debt might have been paid, the creditor may, with equal propriety, reply:. “The deed of assignment was on record; you knew of its existence and of its terms, and, as I have done nothing to destroy its validity, why did you not require the assignees to carry out its provisions for your benefit?” There is no foundation for the distinction attempted to be drawn in the argument that a mortgage is a mere security for the debt, while an assignment is a transfer of property for the payment of the debt. The sole object of a mortgage is to put into the hands of a creditor the means, to the extent of the value of the property mortgaged, of enforcing the payment of his debt; and the purpose of an assignment is the same, except that, instead of the property being put into the hands of the creditor, it is put into the hands of third persons — as, in fact, the mortgage was in the case of Muller vs. Wadlington. Nothing but money can be regarded as payment unless it is accepted as such, and the assignment could not operate as payment unless it was so accepted, of which there is no pretense, as no release was required. If the assignment had been mad & to the creditor, that might possibly make a difference, for in that case active duties would be imposed upon the creditor. Nor are we able to perceive how the fact that the mortgage is given at the time the debt is contracted and the assignment made subsequently can affect the question we are considering. Both, in our view, are mere collateral securities for the payment of the debt, and we are at a loss to see how the time at which they are executed can affect the inquiry.

There is, however, another view of this case which is conclusive against the appellant. It is a well-established rule that “ whenever a competent defense shall have existed at law the party who may have neglected to use it will never be permitted to supply the *207omission, and set it up by bill in chancery.”— Walker vs. Robbins, 14 How., (U. S.) 584; see also to same effect Creath vs. Sims, 5 How., (U. S.) 204; Sample vs. Barnes, 14 How., (U. S.) 70. This rule has been fully recognized and enforced in this State in a case very similar to the one now under consideration.—Maxwell vs. Conner, 1 Hill Ch., 14.

Now, although the Court of Equity, as a separate tribunal, has been abolished, and its powers conferred upon the Court of Common Pleas, this change only affects the mode by which equitable relief is to be sought and the tribunal in which it is obtained. It does not alter the essential principles upon which such relief is obtainable; they remain the same as before. Hence, if the plaintiff’s case was not maintainable in the Court of Equity under the rules governing that tribunal, it cannot now be maintained in the Court of Common Pleas.

Under the rule above stated, the plaintiff is not entitled to the relief which he now seeks if he has heretofore had an opportunity, which he neglected to use, of obtaining such relief in another proceeding on the law side of the Court of Common Pleas. That he has had and has neglected such opportunity is unquestionable. For, even if he could not have made the defense (the benefits of which he now seeks to avail himself of) in the original action because it was commenced before the deed of assignment was executed, (although, as judgment was not recovered until nearly a year afterwards, such defense, for aught that appears, might have been interposed,) yet no possible reason is or can be suggested why he could not have set up the discharge which he now contends for when called upon to answer the summons served upon him in September, 1875, but a very short time before the commencement of this action, to show cause why the execution should not be renewed. If it had been paid, or was otherwise discharged, that was the time to set up such payment or discharge; and to permit him now, by another action, to avail himself of the benefits of a defense which could have been as well set up in answer to the summons, would lead, as Daniel, J., says, in Creath vs. Sims, (supra,) “to the encouragement of useless and expensive litigation.”

It is contended, however, that the judgment in question was invalid, because the defendant therein, who is the plaintiff here, had never been served with process, the acceptance of service being signed by “ Clawson & Jackson, defendants’ attorneys,” which the plaintiff herein says he never authorized them to do. Admitting *208this to be so, however questionable it may appear to us from the circumstances appearing in the case, it is very clear that it cannot avail the appellant in this proceeding. The proper mode of availing himself of this would be by a proceeding to set aside the judgment for want of service. This action does not even contemplate such a thing, and, on the contrary, the existence and validity of the judgment is distinctly recognized by appellant in the fifth paragraph of his complaint, as it seems to have been impliedly recognized by appellant in a conversation between him and respondent as late as 1866, and there is no allegation of want of service or other defect in the judgment, the sole ground relied upon being that the appellant, as surety, was discharged from his liability under the judgment by reason of the assignment. And when it is remembered that no such ground was set up, or, if set up, that it was overruled, in the answer to the summons issued to renew the execution, it is very clear that it cannot avail the appellant in this action even were the fact fully sustained by the evidence.

The judgment of the Circuit Court is affirmed.

Willard, C. J., and Haskell, A. J., concurred.