Muller v. Wadlington

5 S.C. 342 | S.C. | 1874

The opinion of the Court was delivered by

Moses, C. J.

That a surety is entitled to the full benefit of every security which the creditor holds, or may make available, against the principal debtor, is a proposition admitting of no dispute. As the creditor may subject the security to the payment of his debt, and thus obtain its satisfaction, the surety may compel him to do so, although he may not have known of its existence when he became bound, or even although it may have been given after the contract of suretyship had been entered into. The principle is not contested, and there is, therefore, no necessity to sustain it, either by argumerft or authority.

The foundation on which it rests involves another conclusion, following as a legitimate result, and, in its consequences, giving rise to questions not of so easy a solution as those which depend on the mere application of the principle itself. These affect the rights of the surety, so far as they depend on the action of the creditor. If he commits any positive act prejudicial to the security he holds, or omits or neglects any act, on the demand of the surety, which the relation in which he stands imposes as a duty, the loss must fall upon him who has contributed to it, and not on the surety who has been free from all participation. If, therefore, there is a loss of the security by the fault of the creditor, the surety will be discharged.

Muller, the respondent, under the Act of 1798, (5 Stat., 130,) held the legal title to the bond which had been assigned to him before January, 1855. The other six bonds, as they are not accounted for, must be supposed either to have been paid to Fair by Bauskett, the principal, or remained in his hands, when, on April 14th, 1863, he released and discharged the lien of the mortgage,

The assignment of a debt carries with it all the collateral securities held for its payment, and equity will enforce them for the benefit of the assignee. The mortgage constitutes a charge on the property mortgaged for the security of the debt, and whoever holds the latter may claim the enforcement of the lien, which is only an incident of or accessory to it.—Story’s Eq, § 1047; Martin et al. vs. Mowlin, 2 Burrows, 969; Wright vs. Evans, 10 Rich. Eq., 585.

The assignment of the one bond to Muller did not, however, transfer to him the legal title of the mortgage; this remained with Fair, while the respondent had an equitable interest in it to the extent of the debt due him, and could compel the application of its proceeds to the satisfaction of his obligation, in the proportion which it bore to the other bonds, for the security of all of which the mortgage was executed.—Johnson vs. Hart, 3 John. Cases, 322; Pattison vs. Hall, 9 Cowen, 747. Nor had Muller, as assignee of the one bond, any right to the custody of the mortgage as against Fair, the mortgagee, who had the legal title to the other six bonds.

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 act 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?

The argument for the appellant proceeds upon the ground that the release executed by Fair operated not only as a discharge of the lien of the mortgage, so far as it was a security for the six bonds retained by him, but that it also included and affected the bond assigned to Muller, and as to which Fair had parted with all title. While Fair had the right to the possession of the mortgage he had no power over the bond assigned to Muller, and to secure which the mortgage was in part executed. He was the proper custodian of the instrument, but without authority to release it, save as to the interest which he held in it, through the six bonds which he retained. The purchaser of the land had notice, by the mortgage itself, that it had been given to secure seven bonds. Common prudence, it seems, would have dictated the natural enquiry as to their payment, which would have led to the knowledge of the fact that one of them, at least, had been transferred by the mortgagor. In fact, the endorsement on the mortgage did neither express or imply payment of the bonds it was intended to secure, but purported to be a “ release and discharge of the lien and legal effect” of the mortgage, and those who accepted it as such may be able to sustain it for their protection, if there was no obligation on them to enquire as to the right of Fair to deal with the mortgage, in regard to all the bonds, as if he were the owner of them. Nothing can be inferred from the silence of the respondent as to the proposed discharge of the lien, at the time it was executed, for there is no evidence of any notice, on his part, that the act was intended or designed.

In referring to the general principles by which our judgment is to be governed in the case, as presented to us, we do not propose that they shall have any weight beyond the purpose for which they are intended. Of course nothing that we can say here will preclude the purchasers of the land, should the occasion arise, from making any defense as to which they may be advised. We deal only With the case before us, and our judgment here can not prejudice their rights, whatever they may be.

The motion is dismissed.

Wright, A. J., and Willard, A. J., concurred.