Warner v. Beardsley

By the Chancellor. In Pain v. Packard, 13 Johns. R. 174, the supreme court decided that the surety was. discharged where the principal debtor was perfectly responsible at the time the debt became due, and the creditor, although requested by the surety, refused to proceed and collect his debt until the principal became insolvent. This decision was made without argument, and two, at least,-of the judges who concurred therein, afterwards expressly dissented from it, and declared themselves satisfied it was wrong. It was also overruled by Chancellor Kent, in King v. Baldwin, & Fowler, 2 Johns. Ch. R. 554, and although Chief Justice Spencer, afterwards succeeded in this court, 17 Johns. R. 386, in reversing the decree of the chancellor, it was in opposition to the votes of all the other justices of the supreme court who » took part in the decision. The decision was made by the casting vote of the president against the opinions of some of the most distinguished lawyers in the state, who were then members of this court as senators. It also stands in opposition to the decisions of most, if not of all of the states in the union, where the question has arisen. Davis v. Huggins, 3 New-Hamp. R. 231. Frye v. Barker, 4 Pick. R. 382. Buchannan v. Bordley, 4 Har. & McHen. R. 41. Croughton v. Duval, 3 Call’s R. 69. Moore v. Broussard, 20 Martyn’s R. 277. Lenox v. Prior, 3 Wheat. R. 524. In Pennsylvania, where they have no court of chancery to enable the surety to proceed in his own name to compel payment by the creditor, it has, after much hesitation, been decided, that where the [199] principal is solvent, the surety will be discharged if the creditor does not proceed and collect the debt on request, or permit the surety to proceed in his name. See Dehuff v. Turbitt’s Ex’rs, 3 Yeates, 157. Cope v. Smith’s Ex’rs, 8 Serg. & Rawle, 110. Gardner’s Adm’rs v. Ferree, 15 id. 28. But as the case of King v. Baldwin was decided by the court of dernier resort, it must probably be considered as binding authority in all cases coming directly within that decision. I am not, however, disposed to carry its principles any further, or to extend it to cases in which the facts are materially different. To bring a case within that decision, it is necessary for the surety to show that the principal was solvent at the time he requested the creditor to proceed and collect his debt, and was within the jurisdiction of the state, and that the creditor, without any reasonable excuse, neglected or refused to proceed until the principal debtor became insolvent and unable to pay. Applying these tests'to the case under consideration, it is evident the endorser of this note was not discharged by the mere neglect to proceed and incarcerate the insolvent drawer, who had not sufficient visible means to pay the costs of the proceeding. The plaintiff in error entirely misapprehends the grounds upon which even a court of equity proceeds to compel the creditor to collect his debt of the principal. Under our law» unless the contract is special that the surety shall only be liable after it is ascertained by due course of law that the debt cannot be collected against the principal, the creditor has a right to demand his money immediately from the surety, as well as from the principal debtor; and a court of equity will not interfere to deprive him of his legal rights, unless such proceeding would be unconscientious, and would deprive the surety of some equitable benefit to which he is entitled. If the time of payment is past, and the creditor neglects to proceed, the surety himself may institute a suit in equity against the principal debtor and the creditor ; but such suit is not for the purpose of delaying the latter: it is to compel the former to pay the debt, and thus to relieve the surety from his responsibility. So, if the creditor holds any additional or collateral security against the property of the principal debtor, or otherwise for the payment of the debt, the surety who pays is en [200] titled to be substituted in the place of the creditor in respect to such security ; and where it is necessary that such securities should be enforced in the name of the creditor, or that he should do some act to give the surety the benefit thereof, a court of equity will compel him to do such act, or to permit the surety to proceed in his name, on his being indemnified for the expense and costs. Thus, under the English bankrupt law, as it formerly stood, a surety or endorser, who paid a debt after the bankruptcy, was not entitled to prove his debt under the commission. In such cases, to prevent injustice, the court of chancery, upon the surety’s depositing the money and indemnifying the creditor against the expense, has compelled such creditor to prove the debt under the commission for the benefit of the surety. 6 Ves. jun. 734. 10 id. 409. As a general principle, however, if the surety, by paying the debt, and being substituted in the place of the creditor, will be entitled to all his rights, both as against the principal debt- or, and as to any other securities held by the creditor, the latter cannot be delayed in the collection of his debt, if he is willing to make such substitution. In this case there was a distinct offer on the part of the creditor to permit the surety to proceed in the name of the creditor upon the attachment, to coerce any thing from the principal debtor which might be obtained by his incarceration. I have looked into the principles of the civil law, referred to by the plaintiff on the argument, and I find if those principles are applied to this case, they will not place him in a bet- ' ter situation. In cases where, by the civil law, the creditor could be compelled in the first instance to discuss the property of the principal debtor, he was not bound to proceed against an insolvent who had no visible property within the jurisdicof the courts of the state or country in which the suit was instituted against the surety. The party pleading discussion was bound to point out to the creditor property or effects of the principal debtor, which might be obtained and applied to the payment of his debt. He was also bound to furnish money to carry on the litigation, or to indemnify the creditor for the risk and expense of the discussion, 1 Bell’s Law Dict. tit. Discussion, 454; 1 Domat B. 3, tit. 4, § 2, art. 5; Baldwin v. [201] Gordon, 12 Martyn’s R. 378; Code Napoleon, art. 2023 ; and the surety could in no case delay the creditor by a plea of dis- ■ cussion where he was bound in solido as a principle debtor, either by a joint and several obligation, or as the endorser of a note or bill of exchange, or where the benefit of discussion was either expressly or impliedly waived. Thibodeaux v. Pattin 13 Mart. R. 478. Van Der Linden’s Inst. 211. Code Nap. art. 2021. Commercial Code, art. 118, 187. But in these cases, although the surety, or person standing in the place of a surety, was not entitled to the benefit of discussion, he was in other respects entitled to the privileges of a surety, and if he paid the debt, he was subrogated to the rights of the creditor as against the principal debtor and his property. He was therefore discharged, either wholly or pro tanto, where the creditor had discharged any collateral security by which the whole or a part of the debt was secured. He had the right also to proceed against the principal debtor to compel the payment of the debt at any time after it became due, and was therefore absolutely discharged by any binding agreement on the part of the creditor, which extended the time of payment without his consent, and by which the remedy of the surety against the principal was also suspended. There is, therefore, no material difference, except as to the forms of proceeding between our law of principal and surety and the civil law, from which all our equitable principles on this subject'were originally derived. None of the principles which I have referred to are sufficient to discharge the legal or equitable liability of the plaintiff in error, upon the facts disclosed on the trial; and although this is undoubtedly a hard case on the part of the surety, yet it was an obligation which he voluntarily assumed, and he is only in the situation of hundreds of others who have been compelled as sureties to pay demands for which they derived no benefit, and without the slightest prospect of indemnity from the principal debtor. I am satisfied the judgment of the supreme court was correct, and that it ought to be affirmed. [202] ' By Mr. Senator Seward. Whether the plaintiff in error, as endorser of an accommodation note, is entitled to be regarded as a surety, and if so regarded, whether in accordance with principlelaid down in the case of Pain v. Packard, he could discharge his liability by giving notice to the holder of the note to prosecute his remedy, are questions not necessarily to be decided in this cause, and upon which I wish to be understood as not expressing an opinion by my vote. If both those principles were assumed, still the notice proved in this case was not sufficiently explicit to discharge the plaintiff iq error, and he ought moreover to have accepted the proffer of the attachment, and availed himself of the advantages it afforded. For these reasons alone, I am of opinion that the judgment of the supreme court ought to be affirmed. The court being unanimously of opinion that the judgment of the supreme court ought tobe affirmed, it was accordingly AFFIRMED.