90 Va. 592 | Va. | 1894
delivered the opinion ot the court.
The case, as disclosed by the record, is as follows: The bill was filed in December, 1887, by the appellee, against the appellant, William Morton, and the other defendants, alleging that on July 10, 1884, William T. Cunningham and the appel-lee, James M. Dillon, executed a bond to the appellant, Wil
In September, 1887, it was arranged between Morton and Dillon that the latter should raise and pay or deposit the $35 36 still due on said judgment, and then enjoin Morton from delivering up the said bond. But when, in October, 1887,
The error assigned here is to the action of the court in decreeing against Morton the amount of the collateral, instead of decreeing against the Cunninghams and T. Henry Glenn the collection of the bond. There can be no doubt that the surety was entitled to be subrogated to the rights of the creditor as further security for the debt on which the surety is bound, so far as he has paid the debt as surety, and the creditor is bound to hold the collateral so deposited with him for the benefit of the surety, as well as for his own; and he must account to the surety for the value of the property, not only if he parts with it, or surrenders it, without the conseut of the surety, or does any affirmative act in violation of the trust upon which he holds it, but also for any negligence or omission to perform any act, whereby the surety’s recourse to the fund is prejudiced. Sheld. Subr.. §120, and cases cited; Id., 129, §§ 119, 123. A surety, upon paying the debt, is subro-gated to the rights of’the creditor in any collateral security which the creditor holds for the payment of the debt. It follows that, if a creditor holding collateral security surrenders it to the principal debtor without the knowledge or consent of the surety on the debt, he thereby discharges him, to the extent of the value of the property surrendered. Jones, Pledges, §§ 513, 515; opinion of Mr. Justice Matthews in Hampton v. Phipps, 2 Sup. Ct., 612, 624. A surety may recover the value of the collateral, when he has discharged the debt in ignorance of the surrender of the collateral to which he was entitled. Jones, Pledges, § 517. If the principal debtor has himself paid part of the debt and the surety the residue, when once the creditor is fully satisfied, the same principle of equity
Decree aeeirmed.