Branch of the Bank of the State at Montgomery v. Perdue

COLLIER, C. J. It has been so often decided, as to be considered the settled law of this Court, that a surety may quicken the diligence of the creditor, by requiring him to put in suit the security by which the debt is evidenced, and if upon such requisition, suit is not brought, and it appears that it might have been made available, the subsequent insolvency of the principal, is a good defence for the surety, even at law. Bruce v. Edwards, 1 Stew. Rep. 11; Herbert & Kyle v. Hobbs & Fennell, 3 Stew. Rep. 9; Goodman v. Griffin, ibid. 160; Gayle v. Randall, 4 Porter’s Rep. 236; Scott v. Bradford, 5 Porter’s Rep. 443; Strader v. Houghton, 9 Porter’s Rep. 334. But this principle vre think cannot be applied without disturbing others equally well settled, so as to authorise the surety to require the principal, by a mere notice, to proceed on any collateral security he may have for the payment of the debt. By a collateral security, we mean one in which the surety is not bound, or one which is apart from the principal or primary engagement. Where the principal and surety make a' direct promise in writing to pay money, and in addition, one or both of them execute a mortgage to the creditor, to secure a performance of [413] their undertaking, the creditor is not obliged to proceed upon bis mortgage, but may either foreclose it, or prosecute an action at law upon the promise of the debtor and his surety. The mortgage is a mere security for the debt, and is regarded as an incident to the legal contract to pay. In Cullum v. Emanuel & Gaines, et al. 1 Ala. Rep. N. S. 23, the law is so laid down; and the Court there held, that a surety could not injoin a judgment at law, by showing that his principal had mortgaged to the creditor, property of greater value than the amount óf the debt. It has been held, that sureties are entitled to go into a Court of Equity, after a debt has become due, to compel the debtor to exonerate them from their liability, by paying the debt; and it has been said that a surety upon the maturity of the debt, may obtain the aid of equity to compel the creditor to sue for, and collect the debt from the principal, if he will indemnify the creditor against the risk, delay and expence of the suit. 1 Story’s Eq. 322 and cases cited. But this latter proposition has been questioned by some, who have maintained, that the right of the surety does not, independent of a statute, extend so far as to authorise him to compel the creditor to seek a recovery of the principal; that his contract obliges him to pay the debt, and when he has done this, he may reimburse himself by suit. When the surety has paid the debt of the principal, he stands in the place of the creditor, not only through the medium of contract, but even by means of securities entered into without his knowledge, having a right to have those securities transferred to him, though there was no stipulation for it; and to avail himself of those securities against the debtor. Where the creditor has not applied such securities in discharge of the debt, he must hold them as a trustee, ready to be applied for the benefit of the surety; and if he disables himself from yielding up to the surety, the means of reimbursement, which he had, the surety will be exonerated from liability, fro tanto ; unless the creditor acted without a knowledge of the rights of others, and with good faith and just intentions. Cullum v. Emanuel & Gaines, et al. 1 Ala. Rep. N. S. 23. We have thus briefly stated the rights of the surety against the creditor, and we think they lend no countenance to the de~ [414] fence set up by the plaintiff in error. It was entirely competent to have required the Bank to have proceeded against the principal debtors ; but had such a requisition have been made, no consequences favorable to the surety would have resulted, as,the note which was due at the time the notice was given, has, (as we learn from the record) been paid by the principals. As for the mortgage, it was but another and indirect means of securing the payment of the notes, which we have seen, the Bank might avail itself of in the first instance, or if it so elected, it might sue upon the direct engagement to pay. The nature and extent of the sureties, contract, does not authorize him to act for the creditor, which of the two remedies he shall pursue, and consequently, a notice to proceed upon the mortgage must be unavailing as the ground-work of a legal defence. The principle which recognizes the right of the surety to require the note or bond of the principal to be put in suit, must proceed upon the idea that the creditor impliedly undertakes to do so, upon a notice to that effect being given him. In the Manchester Iron Man. Co. v. Sweeting, 10 Wend. Rep. 162, the Court say, where the plaintiff refuses to prosecute the principal, on the request of the surety, his neglect is a virtual agreement to discharge the former, and look alone to the responsibility of the latter. But this reasoning cannot be applied to a notice to foreclose a mortgage, for that constitutes no part of the contract to pay the debt, but is merely assistant to it. Again: the creditor cannot be injured by suing the principal to judgment even if he be insolvent, but it may be important to him in a country where real property fluctuates in value as in this, that he should choose his own time of selling under a mortgage. To this, it may perhaps be answered, that he may, if it is depréssed, become its purchaser and take the chances of the maritet; but it might not suit him to purchase, and he should not be forced to become a purchaser against his interest. In every view in which this case has presented itself, we are of opinion that the defence interposed in the County Court should not have been sustained; and the judgment is consequently reversed, and the cause remanded.