Curan v. Colbert

By the Court. Nisbet, J., delivering the opinion. The following are the facts appearing on this record. Curan, the complainant in the' bill, became surety on a note for some $250', to Colbert, the defendant in the bill, for Tharp. Curan notified Colbert to sue, informing him at the same time that his principal, Tharp, had property sufficient to pay the debt, and that he would point it out so soon as the judgmerit was had. Colbert reduced the debt to judgment, both against the principal Tharp, and Curan the surety. Curan pointed out property of his -principal sufficient to pay the debt, and at that time, he was solvent. The levy was made and released, (Colbert taking the principal’s word that he would pay at Christmas following,) without the consent of Curan, and without consultation with him. At or before the expiration of the time given to the principal, he had removed all his property out of the state, and was insolvent. The surety, Curan, had in the mean time removed to Alabama, and the plaintiff in the execution fraudulently procuring a valuable wagon and team to be brought into the state of Georgia, which belonged to the surety, caused it to be levied on and sold, and he became the purchaser at less than half its value. Curan did not know of the levy until a few days before the sale, and in consequence of his distance from the place of sale, and of sickness, could not attend, and was thereby prevented from putting in a claim or otherwise arresting the sale, but had notice given at the sale, that it was illegal. Afterwards, Curan brought trover for the wagon and team, and at the first trial term, in consequence of inability to make the necessary proof, — 246 — a judgment was confessed for the defendant, and an appeal entered. Pending the appeal, Curan filed his bill, setting forth these facts, and his inability to proceed at law, and, asking discovery; also praying that the common law action might be continued from term to term ; and until the further order of the Court that the creditor might be enjoined from using hi's title thus acquired to the wagon and team,in defence of that action; and that the creditor, Colbert, be decreed to keep the wagon and team, and pay to the complainant their value, with hire for the use. The bill of exceptions states that the action of trover was afterwards dismissed. At the '•appearance term of the bill, the defendant answered, and moved to dissolve the injunction; whereupon the Court passed an order dissolving the injunction, and directing the defendant’s answer to be read on the trial of the common law action. At the term following the cause was not called, and at the next term complainant’s solicitor moved a ,-rule calling upon the defendant to show cause why the bill.áh'opld not proceed to a. hearing; to which it was replied, that the bill was for discovery only, and that the order dissolving, the, injunction, and directing the answer to be read, dismissed it, and that-tberfewasno equity in the bill, and therefore it ought not- to.be lrea.rd, butdf still in court, to be dismissed. The Coiht consiSb'rin’g^^thj' rule nisi, and the answer thereto, dismissed the rule, . It is.-now complained before this Court, that the presiding Judge erred, 1. In ruling that this was a bill for discovery alone. 2. In ruling that the order-taken at the first term, dismissed the bill. 3. In deciding that there was no equity in the bill, and therefore the Court could not entertain jurisdiction. [1.] The first and second grounds of error, resolve themselves into one. If this was a bill for injunction and discovery alone, then we hold with the Court, that the answer having come in, it had performed its functions, and that the order dismissed it; so that the questions for our consideration are, 1. Is this; a bill for discovery and injunction alone, or is it also a hill for injunction, discovery and relief ? 2. Is there such equity in it, as, according to the facts charged, entitles the complainant to relief in a court of equity 1 I shall proceed briefly to give the views of this Court upon these questions, the second of which involves, as will appear, other very serious points of discussion. Whilst the bill asks discovery, it — 247 — certainly does not stop at that — it also asks relief — relief upon a statement of facts which justifies the praypr for relief. That prayer is specific, to wit, that the defendant be decreed to pay the complainant the value of the wagon and team bought by him, (the defendant) at the sale. It does not follow that because a bill asks discovery and prays injunction, it is not therefore a bill also for relief. We do not question the correctness of the order to dissolve the injunction, and direct the answer to be read at law; but although it was competent to do that, it was also competent to hold up the bill for a hearing upon the merits. The order did not dismiss the bill — it did only what it purports to do, dissolve the injunction and order the answers to be read, leaving the question for relief to be heard. If there were no allegations in it.authorizing the exercise of chancery jurisdiction, there would beef course nothing upon which to predicate any further action, and the bill would fall; but if there were, then it m i 'I'11 Whether the allegations are sufficient to giy&Puiry, is the question to be discussed under theCeo^hu ground cm ejttror. The order does not settle that fiuestionlyhafcMatMe^jaSaífeihe Court upon the hearing of the response tjapsP^rn^iamant’s iijjae to proceed to a hearing. In connexion m error, it was claimed by the counsel for the oSGpHÍSmfsin errorápiíat where a party has two remedies for the sarn^igfe^at law and the other in equity, he may be put upon his election as to which he will resort; that he cannot have two recoveries, &c. This position we admit, but we do not think it applies here. Upon the face of the bill it is not apparent that the complainant has two remedies; on the contrary, the complainant expressly charges that his remedy at law is inadequate. It is also said, that the order referred to, had the effect of an election to proceed at law. Not so — it was moved by the resppndent, and granted at his instance ; the complainant chose nothing. If this was a case in which the doctrine of election applied, then we hold, that under our practice the complainant was not held to elect at the first term. He was entitled to elect as he did elect, afterwards to proceed in equity by dismissing his common law action, filing a replication to the answer, and asking for a hearing. Our practice, indeed, has been, where a bill is filed ancillary to a suit at law, and at the same time praying for relief as an original bill, to permit the suit at law and the bill to be heard together, and to allow a decree to determine both ; so we think there is error in the record, on the first ground. — 248 — Whether the Court had jurisdiction, or whether there was equity-enough in the bill to retain it and order a hearing, came properly up, as I have stated, on the hearing of the complainant’s rule; and to that question I now address myself. 12.] The allegations in the bill are, that the principal debtor being solvent, property enough of his to pay the debt was levied on and seized by the officer; and that the creditor giving time to him, without the privity or consent of the surety, ordered the levy to be dismissed, and the property to be released ; afterwards, the principal having become insolvent, the property of the surety is seized and sold. Now, was not the surety, in this case, discharged by the act of the creditor1? and if so, was not that sale illegal and void í We think, clearly, he was discharged, and the sale was illegal and void. The doctrine as to what will or will not discharge a surety, is distinctly settled in the books. Mere indulgence, unless given upon a new and distinct consideration, or unless given under such a binding obligation as precludes the creditor from pursuing his remedies on the debt, will not discharge the surety. Mere forbearance to me or to call upon the principal for the money, will not discharge the surety; for such forbearance may be beneficial to both parties. If the delay be the result of fraud, the surety will be exonerated. 3 Call R. 69; 1 Gallison R. 33; 2 Johns. Ch. R. 559; 6 Binn. R. 295; 7 Johns. R. 338; 13 id. 174; 15 id. 433; 17 id. 384; 10 East. R. 36; 6 Vesey R. 734; 1 Bos. & Pul. R. 419. But if the creditor, by agreement with the principal, without the concurrence of the surety, varies the terms of the contract, as, by enlarging the time, or does any act by which the mrety is injured, and his risk increased, he is discharged. Kirby R. 397; 1 Caines Cas. 1; 10 Johns. R. 180; 10 id. 587; 3 Binn R. 523; 6 id. 295; 2 Johns. Ch. R. 559; 2 Desauss. Ch. R. 250; 3 id. 604. This rule is founded upon the rights which the surety has in the contract; he is bound according to its terms and not otherwise. His contract is to pay if his principal does not; but it is not to pay if the creditor shall make new arrangements with the principal, amounting to a new contract, or in variation of the old contract. In equity and at law, if the creditor does any act which is prejudicial to the surety, or which increases his risk, he forfeits the right of holding the surety to the obligations of a guarantor of the debt. It is greatly prejudicial to the surety for the creditor to put it out of his power to sue or pursue the principal. He has a right to go into equity to compel him to put the debt in suit, which he cannot — 249 — do if he has prolonged the time of payment by a new contract, or has bound himself not to sue. It is the clearest and most manifest equity, that the creditor shall not carry on any transaction with the principal, without the privity of him who must necessarily be concerned in every transaction with the principal. “You cannot keep him bound and transact his affairs (for they are as much his as your own,) without consulting him.” Lord Chancellor, in Rees vs. Berrington, 2 Vesey R. 543. These doctrines and reasonings apply more particularly to the relations subsisting between the creditor and the surety, before judgment; the rule iá more stringent against the creditor in cases where he has converted his claim upon the principal into a lien, as in this case. Here the creditor has a perfect lien in his judgment; by our statute it binds from its date. It may be taken as a well established rule, that where a lien is fixed, any act of the creditor which discharges that lien, without the privity of the surety, discharges him. 2 Dev. & Bat. Eq. R. 118; 2 id. 90; 7 J. J. Marsh. 582; 8 Sergt. & Rawle 452; 6 Gill & Johns. R. 157; 3 Wend. 24; 1 Munf. R. 269; 2 Vesey R. 540, note. In the case before us, not only is the lien fixed by judgment, but a levy was made, and the means of satisfaction in the hands of the creditor. He dismissed the levy and discharged the means which he held for the payment of the debt; not only so, but gave time to the principal, before the expiration of which the principal became insolvent. Who shall say that these acts are not to the injury of the surety ? By retaining the levy, the debt would have been paid by the principal; byreleasing it, it falls upon the surety. That is the injury done — the measure of it is the whole amount of the debt — no greater could have been brought upon him. Who shall say that he is not discharged % A plainer case was never brought before a chancellor. Dismissing a levy is an extinguishment of the lien, so far as other and junior liens are concerned; it is a fraud upon younger judgment creditors. 5 Hill N. Y. R. 377; 2 id. 364; 11 Johns. R. 110; 17 id. 274; 4 Wend. 332; 5 Conn. R. 392. A levy is a satisfaction of the execution, so far as to throw upon the plaintiff the burden of proving, either that it was insufficient, or that the proceeds were applied to the satisfaction of some prior lien, or that it was otherwise rendered unproductive, without his fault. Davis vs. Barkley, 1 Bailey S. C. R. 140, 142. If these propositions be true as between liens, their application — 250 — is easy to the case of a creditor holding a judgment, levied upon the property of the principal and his surety — in short, to the case before us. If this dismissal of a levy is the extinguishment of a lien, if a levy is a satisfaction, then, surely, in this case, where there was alien, levy and dismissal, the surety is damnified and discharged. In the case of Bullit’s ex. vs. Winstons, 1 Munf. R. 269, the Court of Appe.als of Virginia, declared the surety, Winston, discharged, on the ground that the creditor, who held a judgment against the principal, had, by letter addressed to the sheriff, countermanded an execution which was proceeding against the principal, without the privity of the surety, who was a co-defendant. In Cooper & Arrington vs. Wilcox, 2 Dev. & Bat. Eq. R. 91, when indulgence was granted to the principal, after judgment against/ him and the surety, the Supreme Court of North Carolina held the surety discharged, Judge Gaston (magnus vir et venerabile nomen) saying, “ If the creditor does any act for the ease of the' principal, without the privity of the surety, by which the surety is injured, or exposed to injvtry, that act may be laid hold of for the surety’s relief.” In the case of the Commonwealth vs. Miller, 8 Serg. & Rawle R. 452, the Supreme Court of Pennsylvania held, that there is no clearer rule in equity, than that, when the creditor has the means of satisfaction in his own hands, and chooses not to retain it, the surety is discharged. These cases from Virginia, North Carolina and Pennsylvania, are all leading cases, and were cases where there were judgments against principal and security. [3.] They recognise fully, that the relation of principal and surety, with all the rights of the surety, continues after the judgment. In the Pennsylvania case, the court say, “ the doctrine that the relation of principal and surety ceases after judgment, has no foundation either in law or reason.” It is true that the evidence of the original debt is extinguished by the judgment; that is, merged.in the higher evidence of indebtment — the judgment. But the contract continues; and so do the rights of the surety under it, continue. I agree in the opinion of the Supreme Court of Pennsylvania, that the contrary doctrine has no foundation in law or reason. In addition, our statute authorizes the surety to make special defence, and to have the judgment entered against him as surety, and upon paying off a judgment against his principal, to enforce it against him for indemnity; thus recognising the relation of principal and surety, after judgment against both. Prince, 461, 436, 509. — 251 — It is objected, however, that by our statutes'just referred to, the surety is protected, in this, that he may at any time step forward and pay off the judgment, and at once indemnify himself, and therefore, he ought not to be discharged. This right — that is, the right of being subrogated to the position of the creditor upon paying the debt, existed by the general law, before’ our statutes. They only afford him cumulative remedies. It has never been held in equity or at law, that the surety must pay the debt before he can avail himself of the acts of the creditor in discharge; if that were the law, Ido not see how, in any case, any act of the creditor would discharge the surety. He would in every- instance be turned over to his right to pay, and be subrogated; it would be in all cases a sufficient response to his demand for relief that he might have paid the debt. This doctrine would repeal all the law, and turn into contempt all the learning, now so much abounding in the books, relative to the rights and obligations of principal and surety. The surety has a right to insist upon the terms and conditions of his contract; hy that he is liable to the creditor; but not liable, if by his act, without his privity, injury, or loss, or liability to loss, or increased l’isk accrues to the surety. He may pay up the debt, and be subrogated tp the rights of the creditor against his principal; but he is not hound to do this. Pain vs. Packard, 13 Johns. R. 174. It only remains to inquire whether the surety could avail himself of the grounds of discharge set forth in this bill, at law. We think he could not. Before judgment, his discharge may be pleaded in an action against him. Béfore judgment, unless under special circumstances, he could not come into equity, because his, defence would be adequate at law. After judgment, his relief can only be full and complete in equity. The judgment, by the release of the levy, is not void, but voidable, and can be vacated only by a judgment of the court. At law, I do not see but that the title of the defendant in the action of trover must prevail. Besides, the complainant in the bill goes, not for the prbperty, but he goes, as we think he has a right to go, for its value at the time of the sale, with hire. The property may have been greatly injured — it was perishable — he therefore demands an accounting on the part of the creditor. To this end the law would give him no adequate remedy. In the cases which I have reviewed, where judgment was open against both principal and surety, the proceedings were in chancery. Let the Judgment of the Court below, be reversed.