Lyon v. Bolling

COLLIER, C. J. It may be conceded, notwithstanding some adjudications to the contrary, that if a surety discharges a judgment rendered against himself and principal jointly, the judgment is satisfied, and its legal efficacy destroyed. [1 Turn. & Russ. Rep. 230; 4 Russ. Rep. 277; 2 Mad. R. 464; 3 Mylne & K. Rep. 183; Foster v. The Athenæum, 3 Ala. Rep. 302, and cases there cited.] But in the case at bar, several judgments were rendered against the maker and indorser of notes, and the judgments against the latter were pa¿d by himself; the question is, whether, by these payments, the judgment against the maker of the notes became functus officio; or Vas their vitality suspended, subject to be resuscitated whenever the indorser should seek their enforcement, with the view of reimbursing himself? It was said by Lori? Eldon, in the case of Craythorne v. Swinburne, 14 Ves. Rep. 162, that “ a surety is entitled to every remedy which the creditor has against the principal debtor, to enforce every security, and all means of payment ; to stand 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 all those securities against the debtor.” This very just and comprehensive statement of the law has been often reiterated, not only by the text writers, but in adjudged cases. [2 Brock. Rep. 159, 252; 1 Hill’s Eq. Rep. 275; 3 Sumner’s Rep. 410; Pitman on Prin. & Surety, 113; Cullum v. Emanuel & Gaines, 1 Ala. R. 23, [467] and cases there cited. But the authorities do not all agree as to the extent to which the doctrine of substitution shall be' carried, in favor of a surety. Hodgson v. Shaw, 3 Mylne & K. Rep. 183, which professedly conforms to Copis v. Middleton, 1 T. & Russ. Rep. 224, determines, that the surety who pays the debt of his principal, can only claim for his reimbursement such securities as continue in force against the principal debtor, and do not go back to him upon payment by the surety. Both these decisions affirm, that if the principal debtor mortgages an estate to the creditor, as a collateral security for his debt, in addition to a bond given to the creditor, by the principal, to which the surety is a party; although the surety cannot, upon the payment of the money due, call upon the creditor to assign the bond, yet he has a right to stand in the place of the mortgagee, in respect to the mortgaged estate, which has not “ got back” to the debt- or, and compel him to assign the same. The reason the payment of the debt did not extinguish the mortgage, (which we have frequently held to be merely accessorial,) Lord Eldon said, was, because the payment did not, as in the case of a bond, extinguish the security without a reconveyance; consequently there was something to assign or transfer. [Copis v. Middleton, supra.] In Watts v. Kinney, 3 Leigh’s Rep. 272, the right of subrogation has perhaps been carried as far as in any other case that has fallen under our notice. There, a judgment was recovered against the principal and his sureties, but no elegit, or other execution, was sued out within the year; the sureties satisfied the judgment. It was held, that the sureties had a right to be substituted in equity to the benefit of the lien of the creditor’s judgment, upon the lands of the principal, in preference to a foreign attachment, sued out by another creditor,-after the judgment was obtained. Favorable as this case is, to the interest of sureties, it is very fully sustained by Worthington v. Ferguson, 4 Har. & Johns. Rep. 522, and Creager v. Bengle, 5 Id. 234.] In Clason v. Morris, 10 Johns. 526, certain persons as sureties, indorsed the note of their principal; suit was brought against the principal by the indorsee, who recovered a judgment, and afterwards sued the indorsers and obtained a judg [468] ment against them also. The indorsers paid the plaintiff the amount of the debt, and an assignment was made of the judgment against the principal. The court decided, that the indorsers stood in the place of the indorsee, and might avail themselves of the judgment in his favor to recover the money paid by them, from their principal. To the same effect is Brahan & Atwood v. Ragland, et al. 3 Stewt. Rep. 247. It has been held, that where one person gives his own bond for duties on goods imported by another, and afterwards discharges the same, although the obligor cannot be placed in the condition of the United States in a claim against the importer, under the act of Congress, yet upon general principles of equity, the obligor will be substituted in the place of the United States as a creditor, and entitled to the same preference in respect to other persons. [Enders v. Brune, 4 Rand. Rep. 438.] We think it clearly inferable from the principles stated, that an indorser, by satisfying a judgment against himself, does not necessarily destroy one that has been rendered against the maker of the same note. The indorsement was in itself a substantive contract, consequential to the making of the note ; the judgments were several, and the indorser, as between himself and the maker, liable only, in the event that the latter was unable to pay. True, the holder of indorsed paper, though he recover several judgments against the parties to it, is entitled to but one satisfaction, yet it does not follow, that if the indorser satisfy a judgment against himself, that he is not entitled to enforce in the name of the holder judgments obtained by the latter against the previous parties, for the purpose of reimbursing himself. Perhaps in such case, the right of substitution could only be made available in equity, as a court of law might not, consistently with its principles, look into the equities of the parties, and if an exe-. cution were issued on the judgment against the maker, would probably quash it, upon the allegation that the plaintiff had received one satisfaction of the indorser. Upon the payment of the judgment by the indorser, the maker would not be entitled to receive the note; that, according to our practice, would remain in the files of the court [469] rendering the judgment, subject to be withdrawn by leave of court, by one who proposed to use it for a legitimate purpose. The judgment against the maker, would be no more discharged by the mere fact of payment of the judgment against the indorser, than would a mortgage which had been taken as a collateral security. In the former, satisfaction should be entered of record, or evidenced in some other manner; in the latter, to reinvest the mortgagor with the title, a reconveyance, or some other equivalent act is necessary. To show that a payment by the indorser, does not necessarily annul the judgment against the maker, the cases of Clason v. Morris, and Brahan & Atwood v. Ragland, et al. supra, are conclusive authority. There it was held allowable to continue its vitality, by an arrangement between the indorsee and indorser, by which the former assigned it to the latter. We deduce from this course of reasoning, the right of the indorser, upon paying a judgment recovered against himself, to^be substituted in equity to a judgment in the name of the same plaintiff against the maker of the paper. And if, in such case, an execution has been issued and returned “no property found,” he may go into Chancery to subject the equitable estate of the defendant, to the satisfaction of the judgment. See Roper v. McCook and another, 7 Ala. Rep. 318. For the same purpose he may resort to equity to cause conveyances of real property to be set aside, which the defendant has made, or caused to be made, in fraud of his creditors. In respect then to the two notes on which judgment was recovered, the bill makes out a proper case for equitable interposition. Whether in view of the insolvency of the defendant at law, the jurisdiction being thus far unquestionable, it would not be competent if there should be an excess arising from the sale of property found liable to the judgments, to direct its appropriation to the payment of the note on which no suit has been brought, we need not now consider. It results from what has been said, that the decree dismissing the bill must be reversed, and the cause remanded.