Hill v. Denniston

Opinion by Mb. Justice McCollum, In this case the facts are stated concisely in the opinion of the court below, and need not be repeated. It is. sufficient to refer to the agreement of July 15,1893, forming a syndicate of creditors, and pledging various items of property of F. P. Bell as security for his debts. The agreement signed by the creditors named recites that “F. P. Bell is indebted to J. F. Denniston in the sum of $18,450, part of which is a note of $3,000 indorsed by S. W. Hill and J. E. Ridall, also to Nannie Denniston in the sum of $3,200 ; also to the Central Bank of Pitts-burg in the sum of $26,500, and to Julius Adler in the sum of $2,500, and said D. P. Reighard is indorser on notes of said F. P. Bell in the sum of $21,500, making the total aggregate due of $72,150.” After enumerating the property held in pledge by these different creditors prior to the agreement, and other property then deposited with C. O. Davis, cashier of the Central Bank of Pittsburg, “ in further security of all of said indebtedness and indorsements,” the agreement provides, “that any money collected or realized from any of the securities mentioned, held either by any of the respective creditors or by said C. 0. Davis for all, shall be distributed pro rata upon all of said indebtedness.” Language could hardly be more specific than this. All of the property is to be distributed pro rata to all of the indebtedness, including the note paid by plaintiff as accommodation indorser. But the following language is relied upon as affecting the plaintiff’s right to participate in the distribution of the funds produced by the property pledged: “ It is distinctly understood that nothing in this agreement is to be an extension of the commercial paper upon which S. W. Hill and J. E. Ridall are indorsers so as in any manner to relieve said indorsers from liability thereon, and that no money paid by said indorsers shall inure to the benefit of any one excepting said J. F. Denniston.” It is plain that this language does not have the effect claimed for it. The specifications of property enumerated were pledged as security for the debts named. Plaintiff as accommodation indorser of the $3,000 note was also security for that debt. It occurred to the parties no doubt that the pledge of the property on the one hand might operate to release the indorsers, or on the other that a payment by the indorsers might be claimed as a further secu [275] rity for the benefit of all the creditors. It was evidently to prevent such construction from being placed upon the agreement that the clause last quoted was added. The language used is capable of no other construction. It is equivalent to saying that no money paid by said indorsers shall inure to the benefit of any one of the parties to the agreement excepting said J. F. Denniston. It would be a perversion of the language to hold it to mean that a payment by the indorsers shall not inure to the benefit of the indorsers. The payment by plaintiff could not be said to inure to his benefit. It was clearly to his detriment notwithstanding, the fact that by such payment he became the owner and holder of the note. It is evident that the purpose of the clause was as stated above. There was nothing in the agreement to modify the express provision for a pro rata distribution amongst all, including the note indorsed and paid by the plaintiff. The question of subrogation is not involved. The syndicate property was pledged in part for the promissory notes. A release of this or a breach of duty with regard to it would be a defense by the accommodation indorser: Sitgreaves v. Farmers and Mechanics’ Bank, 49 Pa. 359. A paying surety is entitled to the benefits of all collateral securities protective of the debt paid by him which are held by the creditors: Kinley v. Hill, 4 W. & S. 426; Gossin v. Brown, 11 Pa. 527, cited in Graff & Co.’s Estate, 139 Pa. 76. If a surety pays the amount of a judgment against his principal he suceeds by operation of law to the rights of the creditor and is entitled to collect his judgment. It is not necessary that the paying surety be subrogated: Duffield for use of Jackson v. Cooper, 87 Pa. 443. Payment of the note carried with it all the incidents of ownership which included the right to the collateral. That is as much a part of the property acquired by the payment of the note as the note itself. Decree affirmed and appeal dismissed at the cost of appellants. Mitchell and Fell, JJ., dissent.