Walker v. . Dicks

Ashe, J. The only question presented by the facts in this case as agreed upon, is, — has the defendant the right to use his liabilities as surety for R. L. Walker, as an equitable set-off against the note sued on by the plaintiff, the widow of the said R. L. Walker? At law, the defendant clearly would have no such right,, but we think it is .equally clear that such a defence will be sustained in equity. Our equity courts have been liberal in extending its aid to creditors, and although a surety is not a creditor before he pays his liabilities as such, yet the rights of a creditor have been accorded to him by the beneficent jurisdiction which the courts of equity in this state have assumed on this subject. The principle seems well .established *265 by the current of authorities, that a surety before he has suffered from his suretyship, may use his liabilities as equitable sets-off against the debt he owes his insolvent principal, and this defence will'avail him equally against án assignee, provided the note is over-due when assigned, or assigned with notice. The surety’s equity consists in his liabilities as such — his ability to meet them and the insolvency of his principal. When these incidents concur, he has the right to insist that his debt shall not be used so as to make him a loser thereby. Williams v. Helme, 1 Dev. Eq., 151; Miller v. Cherry, 4 Jones Eq., 197. In our case this equitable defence arose in the lifetime of R. L. Walker, and attached to the note in controversy while he was the holder thereof. The note was past due, and according to the authorities above cited, if he had transferred it, the same equity would have followed it in the possession of the assignee; if so, we can see no reason why it should not follow it in the hands of the plaintiff who holds it under her husband, R. L. Walker, and must take it affected with the same equities to which it was subject in his hands. Error. Reversed.