4 Ga. 343 | Ga. | 1848
By the Court.
delivering the opinion.
This was a Bill filed by the plaintiff in error, as Administrator, to marshal the assets of his intestate. The defendant in his answer, set forth, that as surety for the plaintiff’s intestate upon a note of hand under seal, he had paid the debt of his principal, and therefore claimed in equity, to be subrogated to the rights of the creditor, and to come in, in the marshalling of the assets, as a bond creditor. The plaintiff in error claims that ho is only an open account creditor. The question, therefore, and the only question made upon this record, is this : Can a surety, in Equity, upon the settlement of an insolvent estate, who has paid, a debt of his principal due upon an instrument under seal, be subrogated to the rights, and substituted to the position of the creditor, so as to come in as a creditor under that instrument, or is he entitled only as a creditor by open account 1
It is a well settled doctrine of the Common Law, that a surety upon payment of the debt of his principal, is entitled to an assignment of all the independent securities in the hands of the credItor, with all the remedies which he had to enforce them against the principal. The Roman Law goes farther. By that law, not •only is lie entitled to these securities, but he is also entitled to be substituted as to the very debt itself, to the creditor, by way of cession or assignment. The debt in favor of the surety is treated, not as a paid, extinguished debt, but as sold to him — all its original obligatory force, -continuing against the principal. The surety .is viewed in the light-of a purchaser. The statement and reasoning of the Civil Law is as follows: “ Fidejussoribus succurri ¡solét, ut stipulator compéllatur ei, qui, solidum solvere paratus est, mendere cceierorum ,nomina. Gum is, qui et reum et fidejussores Jiabens, ab uno ex,fidejussoribus accepta pecunia prcestot actiones » poterii quidem did, nullas jam esse ; cum'suum perceperit, et pre-»ceptione omnes liberati sunt. Sed non iba est; non enim in solutum ■accepit, sed quodammodo nomen debitoris ven&didÁt. Et ideo ■habeit actiones, quia tenebw <a£ id ipsum, ut prmstt actiones.” Of the reasoning npon which the Civil Law goes. Mr. Story says 5 it may seem a little artificial, but it has a deep foundation in natural justice.” Bothier on Oblig, by Evans, n. 275, 280,281. 428, 429, 430, 51.9, 520, 521, 522, Dig. Lib. 46, tit, 1, 1, 17, 1„ 36. Pothier Band. Lib. 46, tit. 1, w.4-6, LDomat. B. 3 tit. 1, Sect. 3. Art. 6, 7.
This rule, I stated, is adopted in countries which recognise the Civil Law. Nap. Gode, Art. 1251,1252. Bell’s Diet. Art. Ben-•eficiumcedendarum actionum. 'Civil Code of Louisiana, Art. 2157, 2158. Voet, ad Panel. Lib. 46, tit. 1 Sect. 27, 29, 30. Huber Predect. Inst. Lib. 3, tit. 21, n. 8. Ersh. Inst. B. 3, tit. 3, Art. 68. 1 Kaime’s Eq. 122, 124, The Courts of Great Britain, in some £>f the earlier,cases, enlarged the rule that I stated was settled-^ io-wit: that a surety is entitled to the independent collateral se-
Inconsistent too with their reasoning, is the rule as to the rights of sureties, which has been adopted in the English Courts of Bankruptcy. If the creditor, in case of the bankruptcy of the principal debtor, has proved his debt before the commissioners, and then the surety pays the debt, the latter will be entitled to the dividends declared on his estate, and the creditor will be held his trustee for that purpose. Ex parte Rushworth, 10 Vesey, 409. Wright vs. Morely, 11 Vesey, 12, 22. Watkins vs. Flannagan, 3 Russel, 421. Exparte Houston, 2 G. & Jamieson, 36. Ex parte Gee, 1 G. & Jamieson, 330. So also, the surety may compel the creditor to go in and prove his debt before the Commissioners, and then, if he pays the whole debt, the creditor will in like manner become a trustee of the dividends for him. 10 Vesey, 409, 414. Wright vs. Simpson, 6 Vesey, 73 4. In these cases the surety is subrogated to the rights of the creditor, upon the specific debt which is due him by the Bankrupt.
The fact of proving his debt before the commissioners, can create no stronger equity in favor of the surety, than that which results to him, in case of the insolvency of the estate df the debtor, after his decease. In marshalling the assets of a decedent, a Court of Chancery would allow a bond, creditor his dividend, according tqjhe dignity of his debt, only upon the debt being proven. Upon the principles of the rule inj^ankruptcy, if a decree ^marshalling assets should allow a creditor his dividend, it would ¡be considered that his debt had been proven; and if the surety ^hould then step forward and pay it, he would be entitled to all 'the creditor’s rights under that decree. In equity, without such decree, it would seem that his rights ought" to'be the same. The equity which substitutes him at all, ought to substitute him always upon the payment of the debt.
. The authority of Mr. Story is claimed in support of the doctrine, as taught in Copis vs. Middleton and Hodgson vs. Shaw. The claim is questionable — it is even doubtful whether the oq>in-ion, from all that appears, of that learned Jurist be not against that ■doctrine. As a faithful commentator, it was his duty to state the rule, as it was settled at the time he wrote. He does state it to be settled according to the decisions of Lords Eldon and Brough
V, In the New York Chancery, it may be assumed as an incontrovertible fact, that the rule of the Civil' Law prevails. There a surety who has paid the debt is considered as a purchaser of the security upon which it is founded. Chancellor Kent, in Cheeseborough vs. Millard, says, “if a creditor to a bond exacts his whole demand of one of the sureties, that surety in entitled to be substituted in his place, and to a cession of his rights and securities, as if he was a purchaser, either against the principal debt- or or the co-sureties.” 1 Johns. Ch. R. 413. Now this dictum asserts motxs than that the surety is entitled to a cession of the collateral securities and to the rights of the creditor thereon — it declares the principle of the Civil Law, that he is to be considered as a purchaser from the cr editor of the debit," It therefore denies the position of Lord Eldon, that the payment by the surety i» an extinguishment of the debt, and of course all the conclusions drawn from that position. To show that Ch. Kent is to be understood as going that far, I advert to the fact that he, in this case, f quotes and comments on,, approvingly, both the Roman Law,- and
In 183G, Chancellor Walworth speálcs yet more explicitly, if possible, as follows : “ The equitahle-.principles of the Civil Law as to suretyship have long since been established as the Law of this Court upon that subject. One of the fundamental principles of that law, is, t]iat_co-sureties or joint cautioners, are bound to contribute equally as between themselves, to the discharge of the common burden. And another is, if one surety pays the whole debt for which they were jointly bound, he is entitled to the cession of the rights and remedies of the creditor, not only as against the principal debtor, but also as against his co-sureties. Or more properly, according to the modern doctrine upon this subject, the surety, by the mere payment of the debt, and without any actual assignment from the creditor, is in Equity, subrogated to all the rights and remedies of the creditor, for the recovery of his debt against the principal debtor, or his property, or against the co-sureties and their property, to the extent of what they are equitably bound to contribute.” Cuyler vs. Ensworth, 6 Paige, 32, 33. See also Ibid, 525. I quote this extract because of its declaration that the equitable principles of the Civil Law had long been established as the law of the Chancery Court of New York. Now the principle of the Civil Law, is absolute and unrestricted substitution. In the Ontario Ba,nk vs. Walker and others, the creditor had obtained a judgmentjointly against the principal debtor and three sureties. One of the sureties paid it, and moved the Court for an order giving him the control of the judgment. Held that he could not get the control at law, because it was extinguished, but, if he was in fact surety, upon a proper case made, equity would, in that particular, subrogate him to the rights of the creditor, because it .could not be done at,law. 1 Sill, N. Y. R. 652, 653. See also the dictum of Marcy, J. in the New York State Bank vs. Fletcher, 5 Wend. 85, 89.
In Virginia it is settled that the surety of a bond debtor, who has paid the debt, in the settlement of the éstate of his principal, is subrogated to the rights of the- creditor, and is. let in to a dividend as a specialty creditor, and not as a creditor by open account. In Epps et al, Executors of Wayles vs. Randolph, the surety ofabond debtor paid off the debtjbuttoakno-assignmentofthebond,
The leading case in Virginia is Lederdale vs. Lobinsón, determined by Ch. J. Marshall on the Circuit, and taken up to the Supreme Court. The case was this. Robinson fy Smith, were joint indorsers for one Roots on a bill of exchange drawn by him. Robinson Sf Smith had to take up the bill, and Smith paid more than his moiety. His administrators filed a bill to compel Robinson to reimburse him, in the excess of his payment over and above his moiety. Robinson being largely in debt, and his assets being likely to prove insufficient to pay the whole, the right of priority became a question among the creditors.
Under a Statute of Virginia, protested bills, after the death of the drawer or indorser, are made of equal dignity with judgments. Under this Statute, and also upon equitable principles, the Executors of Smith claimed to be, by substitution for the creditor, let in to a dividend, as a judgment creditor of Robinson, to the extent of his payment above one moiety of the debt. It was contended that he was entitled only as a creditor by open account. It will be perceived that the Statute of Virginia did not affect this question. That only gave the bill the dignity of a judgment. It does not affect the question of substitution. Judge Marshall held, in an opinion which surveys the whole field of this argument, and which is characterized by his transcendant ability, that the surety was subrogated to the rights of the creditor on the bill of exchange, and that he was entitled to share in the distribution of Robinson’s assets, as a judgment creditor. He placed his opinion upon the broad ground of equity, springing out of the relationship of the parties to the bill of exchange, and the fact of payment by the surety, irrespective of any assignment, or of any idea about the extinguishment of the debt. There, I think, the question, ought to be placed. The province, to my mind, of a Court of Chancery is, in cases of manifest equity, to give relief, although it may be at the expense of reasoning which is purely technical. “ The clq%i of the surety,” says Ch. J. Marshall, “ is clothed in equity, with the legal garb with which the original contract is, invested.”'
We are the better satisfied with our judgment in this case, for the reason that the substitution does injustice to no one. The creditor of course has nothing to do with it — he is gatisfied, and if the representatives of the principal, if he be dead, or if the principal debtor himself, being in life, can be presumed, to be un-affectedby the paramountequity of his sureties’ claim, he and they must be presumed to be indifferent, whether-it-is allowed to him, or is reserved for creditors of a lower grade. Let the amount of the claim go either way, no injustice can be done to him. In any event, it goes in payment of his debts. If any body is entitled to complain, it is the creditor, who holding a lower grade of claim, is excluded by the substitution of the surety. .But, really, no injustice is done to him. The surety, by paying the debt to the creditor, abstracts from the assets of the principal debtor, just that amount which the creditor himself would have abstracted, if he had not paid it. The surety could compel the creditor indeed to go upon that fund before resorting to him. Story’s Com. Vol. 1, 592. 1 Vern. 1, 89. 6 Vesey, 734. 2 John. Ch. R. 561, 562. So the creditor, by claim of lower grade, is in no worse condition than he would be if the security had not paid the debt.
Our judgment, too, derives support from the obvious policy of all our own legislation, relative to the substitution of sureties. That policy is to place the surety in the place of the creditor.
Let the judgment of the Court below be affirmed.