| N.Y. Sup. Ct. | Mar 7, 1859

By the Court, E. Darwin Smith, J.

The provision in the assignment of Chapman, for the payment to the defendant Campbell, of 'whatever sum he may or shall pay in pursuance or consequence of said Campbell’s guaranty of the nine promissory notes of Chapman to the plaintiff, therein mentioned, is not a distinct ¡^reference in behalf of the plaintiff, of his debt, but a mere provision of indemnity to Campbell against his liability for its payment. It was doubtless supposed, at the time of making this assignment, by the parties, *191that there was some question in respect to Campbells liability on his guaranty of said notes, and it was probably the intention of the parties to contest in the courts such question; and this provision in the assignment was designed as a contingent indemnity to Campbell against any such sum as he should be ultimately compelled by law to pay, by reason of his guaranty of said notes. Campbell obviously was not expected to pay these notes voluntarily; but if compelled to pay them by law, then he was to be indemnified for such payments, by the assignees of Chapman, from the proceeds of the assigned property. Campbell, accordingly, has contested his liability on his guaranty of said notes, and a recovery of the amount thereof has been had against him; yet, though executions have been issued against him, and the same have been returned unsatisfied, he has not yet paid any thing or been compelled to pay any amount in satisfaction of such judgments, or in discharge of his liability on such guaranty. As Campbell has not thus yet sustained any loss or paid any sum whatever, upon such notes, it is claimed by the counsel for the defendants that this provision in the assignment is inoperative, and that as he could.not maintain any action upon it, his creditor, the plaintiff, cannot. This doubtless would be so at law, within the cases of Gilbert v. Wiman, (1 Comst. 530,) Scott v. Tyler, (14 Barb. 202,) and numerous others, but I think it is not so in equity. This provision in the assignment is certainly a collateral security to Campbell against his liability on his guaranty of these nine notes held by the plaintiff at the time. Judgments having been recovered against him on such guaranty, a clear, fixed and certain duty rests upon him in law and equity to pay such judgments. As one of the assignees of Chapman, he has virtually in his own hands, or in connection with his co-assignees, a fund expressly created and appropriated to pay this debt. This fund is a security provided by the principal debtor for that purpose; and it is a settled principle in equity that when the principal debtor has given to his surety any securities for his indemnity, such securities are *192regarded as trusts for the benefit of the creditors. (4 Comst. 312. Vail v. Foster, 1 Story’s Eq. 55, 502 and 638.) As soon as Campbell's liability to pay the plaintiff became fixed by the judgment against him, it was the right of the plaintiff, in equity, to have the fund provided by the principal debtor applied in its payment. The assignees of Chapman could • not divert this fund to any other purpose. It was provided and set apart expressly to meet this liability of Campbell. His insolvency cannot operate to discharge or diminish his claim, that the fund remain unappropriated in the hands of the assignees, in sacred trust to meet this debt, so long as his liability for its payment remains. Equity considering this fund as thus set apart expressly to pay this debt, and that it is Campbell’s duty to pay the same, lays hold of the fund in the hands of the assignees, and appropriates it at once for the payment of the debt for which it was created and set apart. It seems to me quite clear that Campbell being himself the trustee, or one of the trustees, and having the funds in hand to meet this debt, is bound in equity, in conjunction with his co-assignee, at once to apply it for that purpose, and cannot he permitted to put his creditors at defiance on the ground of his personal inability to pay this debt, in the first instance, from his own means. What he is, in law and equity, bound to do, he should be deemed so far to have done, as to entitle him to claim and appropriate the funds in the hands of the assignees for the discharge of the plaintiff’s debt. It is Campbell’s right and duty, upon this hypothesis, to claim the appropriation of the funds in the hands of the assignees to discharge this debt, and the plaintiff has a right, through this court, to claim the enforcement of such duty, and to reach the fund for the payment of his judgments. I think the decision of the special term overruling the demurrer to the plaintiff’s complaint should be affirmed.

[Monroe General Term, March 7, 1859.

Welles, Smith and Johnson, Justices.]

Order affirmed.

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