James v. Day, 37 Iowa 164

James v. Day

37 Iowa 164 | Iowa | 1873

Miller, J.

The basis of the relief asked by the defendant Day, in his cross-demand, is the alleged fact that he sustains the relation of surety to his co-defendant Close. He was not surety on the note at the time of its execution and delivery. He was a joint purchaser of the land for which the note was given in part consideration, so that in making the note he became a joint maker thereof with Olose for their joint debt. They were both principals in law and in fact. This the answer of Day concedes. It is alleged, however, that Day’s relation to the other parties was subsequently changed, and that he became but a surety. The alleged sale by Day of his interest in the land to his co-defendant Close would not of itself have that effect. The original relation of the parties could not be changed so that Day would become a surety instead of a principal debtor unless by some valid agreement to that effect entered into by the parties. No such agreement is alleged. The alleged promise of Olose to pay the entire debt created no obligation on the part of plaintiff to release ■Day from his liability as a principal debtor. Stevenson & Rice v. District Township of Summit, 35 Iowa, 462. While *167upon a sale by Day of his interest in the land to Close, a valid agreement by the latter to pay the entire debt to plaintiffs would create the relation of principal and surety as between Close and Day, yet such agreement could not affect the mortgagees; as to them both Close and Day remained principals. Corbet v. Waterman, 11 Iowa, 86; Massie v. Mann, 17 id. 131, 135, and eases cited. Both Close and Day were originally principal debtors. They remained such as to the plaintiffs unless the latter, for a valid consideration, agreed to release Day, or to accept him as a surety only. There is no such agreement alleged in the answer.

Day being, therefore, as to the plaintiffs, a principal debtor, they are not compelled to proceed to foreclose under the mortgage for the installment of interest due on the note. They have the election to sue the makers on the note at law, or to foreclose. Revision, §§ 3663, 3661, 3671; Hershee v. Hershee, 18 Iowa, 25.

Nor did the alleged release of a part of the mortgaged property operate to discharge Day from his liability on the note as a principal debtor. The plaintiffs never accepted, or contracted with him as a surety. As to them he never sustained that relation, and therefore cannot claim the rights peculiar thereto.

Whether in any event the defendant Day would become entitled to be subrogated to the rights of the plaintiff under the mortgage we do not decide; certainly he is not now so entitled, nor will he be by payment of the interest now due on the note. It is upon the payment of the debt by the surety, that he becomes entitled to be subrogated to the rights of the creditor, so as to have the benefits of all the securities which the creditor had for the payment of the debt. The right does not result so much from contract as upon a principle of equity, that the surety paying off the debt shall stand in the place of the creditor with all of his rights for the purpose of obtaining reimbursement. Massie v. Mann, 17 Iowa, 131, and cases cited; Braught v. Griffith et al., 16 id. 26, and cases cited; Lathrop & Dale’s Appeal, 1 Barr. 512. When the surety pays the *168debt so that the lien, of the creditor is extinguished at law, he thereby becomes entitled to be snbrogated to the creditor’s rights prior to such payment. Eddy v. Traver, 6 Paige’s Ch. 521. In the case before us, however, the principal of the debt is not sued for, is not yet due, and the plaintiff is entitled to hold and retain his lien, under the mortgage, until the debt shall be fully paid off. When a surety pays off the debt, equity transfers to him all the securities held by the creditor, but we have found no case holding that the creditor can be deprived of any of his securities until the debt for which they are pledged, is extinguished. He has the right both at law and in equity to ^retain all the securities held by him, until the entire debt is paid. No equitable right to their transfer arises as against the creditor, until full payment is made. The plaintiffs cannot be deprived of the security of their mortgage while the debt it secures remains unpaid.

The ’cross-bill of defendant failing to state facts entitling him to the relief demanded, the demurrer was properly sustained.

Affirmed.