Russell v. La Roque

ORMOND, J. What is the true nature of the indemnity intended to be given to the surety, by the execution of the note in suit? Was it designed as a mere indemnity against loss, in th.e event he was compelled to pay the debt for his principal, or did the parties intend to provide an indemnity against liability to suit ? We held in effect that it was the latter, when this case was here at a previous term, (7 Ala. R. 798) and such is still our opinion. It is frequently a matter of great doubt and difficulty, what the true nature of an indemnity is, but the circumstance which influenced our judgment previously, and which has confirmed it on subsequent reflection, is the fact, that the note executed as an indemnity, was payable at a day certain, thus establishing very satisfactorily, that the right of the surety to an action on the note, was not to depend on his being compelled to pay the debt for his principal, as the time when that would happen was uncertain, if it happened at' all, whilst the right to sue at a particular time was ascertained, and depended on no contingency. The court of exchequer has recently decided the same point, in a case the facts of which are precisely the same as in this, and held, that the surety could sue on the covenant given as an indemnity, though he had not been compelled to pay the principal debt, as in this case remaining unpaid. Baron Parke adds, “the defendant may perhaps have an equity that the money he may pay to the plaintiff, shall be applied in discharge of his debt, but at law the plaintiff is entitled to be placed in the same situation under this agreement, as if he had paid the money on the bill.” [Loosemore v. Radford, 9 Meeson & W. 657.] [359] Whether the surety could have maintained an action on the note, after the statute of limitations had created a bar to the suit on the debt, for which he was surety, is a question not necessary to be decided. The facts are, that before the principal debt was barred by the statute, the attorney of the creditor called on the surety for payment, and was about to institute a suit against him, when he handed over to the attorney the note thus executed as an indemnity, to be sued on, instead of being sued himself, and whilst this suit has been in progress, the time has run on the principal debt. It does not appear that the creditor released the liability of the surety, upon receiving the note, for suit. It is true, the surety who was examined as a witness, says he does not consider himself liable on the note to the company, but whether he is still liable or not, is matter of law, and does not depend on his opinion. There is no fact stated by him from which such an inference can be drawn. The substance of his testimony is, that he handed this note to the attorney of the creditor for suit, and to prevent a suit from being brought against himself. It does not appear that the original liability was given up to the surety, or canceled, and it appears to us that this note was in effect received by the creditor, as a collateral security from the surety. The transaction between these parties, is an unqualified admission ’on the part of the surety, that the company’s-debt was then due, and its effect was to postpone the operation of the statute six years longer. [St. John v. Garrow, 4 Por. 223]; and the same principle has been re-affirmed at the present term in Deshler v. Cabiness. In this aspect of the case, as the liability of the surety still continues upon the original debt, he may maintain this action for his indemnity. If the liability of the surety does not continue, then the delivery of the note by the surety must operate as a payment of the debt, and extinguished the liability both of himself and his principal upon the note due the railroad company, and in that event it is obvious the action is maintainable. We are not able to ascertain from the record, that there is any difference between the condition of the plaintiff in error and Lewis. If the statute of limitations has not operated in his favor, the fact should be shown. The presumption must [360] be, in the absence of proof, as more than six years have elapsed since the debt matured, that it is barred. ■ The intimation thrown out by Parke, Baron, that the debtor would have the right to apply to a court of chancery to direct the amount recovered by the surety to be applied to the payment of the principal debt, has been effected in this case by the surety turning over to the creditor, the note given as an indemnity to be sued for, and applied in payment of the debt, which when received by him, will extinguish the liabilities of all the parties, both principal and sureties. Let the judgment be reversed^and the cause remanded.