Tracy v. Pomeroy Bros.

Opinion, Me. Justice Claek: The principles of subrogation in equity have, in our opinion, no application whatever to this case; the only question is,whether or not the plaintiffs have proceeded upon the note and the collaterals with due diligence, and have in good faith applied the proceeds, and, having exercised such diligence, failed to collect the full amount of the note. [21] The Eureka Company were the principal debtors, and in equity and good conscience ought to pay the debt for which the bond in suit was taken as an additional security. Bartlett and Means were accommodation indorsers merely, and therefore sureties for the company; and so was Tracy a surety, but his equity attached, subject to the prior equities of Bartlett and Means: he assumed a new and independent responsibility, with knowledge of their antecedent equities; he was a volunteer ; his undertaking was at the instance of Pomeroy Brothers, in order to better secure the debt owing to them. If Tracy had paid the $500 in full satisfaction of Pomeroy Brothers’ claim, he might perhaps have been subrogated to their rights as against the company. This would probably depend upon the special circumstances under which the obligation was assumed. But we cannot see upon what principle he could have been substituted to their rights, as against Bartlett and Means, whose equities were not only essentially equal to, but earlier than his. Nor is it entirely clear to our minds that Bartlett or Means, upon payment of the whole debt, would have had any such right as against Tracy; for his liability, as we have said, was incurred, not at the instance of the company, the principal debtor, or for its advantage, or to the disadvantage or delay of the indorsers. The obligation in suit was an independent undertaking on the part of Tracy, which could do the company no good and the indorsers no harm. It is a general doctrine of equity, that where a surety pays the debt of his principal, he may avail himself of the securities which the principal has placed in the creditor’s power; “but,” as Mr. Justice Sergeant said in Pott v. Nathans, 1 W. & S. 155, “where such means consist of the responsibility of an individual, becoming a later surety or guaranty for the same debt of the principal, there arises a conflict of equities, which may give rise to new questions as to priority, between the former and the latter surety; such latter surety, stipulating at the instance of the principal to pay the debt, suffers no absolute injustice in being obliged to do so, since he is compelled to perform no more than he undertook, and has no right to complain that he is not allowed to use, as a payment by himself, the money which proceeds from another person whom his principal was previously bound to save harmless. How the equity [22] would be, in a naked case of this kind, I give no opinion. It is sufficient that it is settled, that if the interposition of the second surety may have been the means of involving the first in the ultimate liability to pay, the equity of the first surety decidedly preponderates.” If Tracy had simply agreed, at the instance of Pomeroy Brothers, to become bound as an additional surety for the payment of this debt, to the amount of $500; if that were the “naked case” presented, we cannot see that Tracy would have any right to complain, if he was obliged to do just what he undertook to do; or that he was not allowed to use the Madden collateral, because that collateral did not belong to the company but to Bartlett, whom the company was previously bound to save harmless; and, if the interposition of Tracy was in no sense an advantage to the company, and could not be the means of involving the indorsers in the ultimate liability to pay, we cannot discover any equity which would arise, if the controversy were between the indorsers and Tracy, to impose the ultimate liability on him. The nature and extent of the engagement into which Tracy entered is, therefore, to be ascertained from the terms of the writing in suit; the question of his liability must be determined upon the reasonable construction of the contract, by which his liability is attested. Tracy’s obligation to pay was not an absolute one, it was qualified by certain conditions. He was bound to do just what he agreed to do, and no more. He promised “ to pay to Pomeroy Brothers any sum which they might fail to collect on said note, or from said collaterals,” not exceeding, in the whole deficiency which he was to “ make up,” the sum of $500, with interest, etc. The failure to collect, which was in the mind of the parties, was of course such as resulted from a reasonable effort in that behalf, and the question of fact for the jury was whether Pomeroy Brothers exercised reasonable diligence in the collection of the note and the collaterals. If they have done so, and have justly and in good faith applied the proceeds of the collection, at their true value, to the debt, they have done all they were required to do, in order to fix Tracy for the amount of his collateral obligation. It is conceded that the Eureka Company was pursued to in [23] solvency, and that no money could be made more than was made from that source; it is also conceded that the plaintiffs were not able to collect anything from Bartlett. It is of no consequence to Tracy that the- collaterals were transferred to Mrs. Madden, if their value was exhausted; if Bartlett, to whom they belonged, consented to this, Tracy had no right to complain. Tracy had no claim to these collaterals by subrogation or otherwise; his right under his contract with Pomeroy Brothers was to have a reasonable effort made to collect them, and to have the proceeds of collection applied to this debt, at their actual or real value, and this according to the finding of the jury was done. Means, it is conceded, was insolvent; he compromised with his creditors; Pomeroy Brothers and R. O. Smith, together, took a mortgage on forty acres of land worth $1,750 to $1,800 ; there is no evidence that anything better could have been done, or that any more of the claim could have been made out of him; indeed, it is not shown he had any other property. It is true, that upon the delivery of this mortgage, Pomeroy Brothers released Means from further liability on the note, but this was of no consequence to Tracy. Means was only a surety, and Tracy, as we have said, had no equity which would entitle him to stand in Pomeroy’s place as against Means. The Pomeroys had taken the kernel out of Means’s estate, and Tracy was not in position to demand that the empty shell must be turned over to him, before any liability would attach on his bond. The duty of Pomeroy Brothers was to use every reasonable effort to collect the note, and also the collaterals, and when they had done this, without realizing the full amount of their claim, their right of action against Tracy was complete. Pomeroy Brothers were not bound to await the mere possibility that Bartlett’s collaterals might sometime become available, or that Means might rise above insolvency. We are of opinion that the case was properly submitted to the jury, and— The judgment is affirmed.