Alabama Gold Life Insurance v. Anderson

BRICKELL, C. J. — The general principle on which appellant relies in support of the remedy it seeks to enforce, is well known and familiar to courts of equity, and has been in this court allowed its largest operation. The principle is, that if a principal debtor creates-a security, or trust, for the indemnity of his surety, not in terms limited to the mere personal protection of the surety, it is a security or trust for the payment of the debt enuring to the benefit of the common creditor. To bring a case within the operation of the principle, there must, of course, be a trust, or security created, conferring on the surety the clear right to appropriate it to the payment of the common debt, and the right to retain it until the debt is paid. The agreement between Daughdrill, the surety, and the Southern Life Insurance Company, the principal debtor, cannot be construed as creating a trust or security for the payment of the common debt, or for the mere personal protection of Daughdrill as surety. Reading that agreement by its terms alone, or in the light of the attending circumstances, by the loan of money to Daughdrill, and the contemporaneous mortgage to secure its payment, no other than the simple relation of debtor and creditor was created, or contemplated. True, in the agreement it is recited, as one of the inducements to the company to make the loan, that Daughdrill had agreed to become surety on the writ of error bond. This is, however, in connection with the recital of other inducements — the taking from the company a policy of insurance on his own life, or that of his wife ; the procuring, within two months, insurance on the lives of healthy persons, to the extent of ten thousand dollars, if practicable, and the use of his in.fluence in promoting the business of the company. The writ of error bond, and the agreement, were executed cotem 429 poraneously. The loan was made subsequently, after Daugb.drill’s liability as surety had been incurred. Now, if Daughdrill had declined taking the policy of insurance on his own life, or that of his wife ; or had declined to furnish the insurance promised on the lives of healthy persons, it being practicable ; or had declined to exercise his influence in promoting the business of the company, without any want of good faith, without a violation of confidence reposed, the company could have declined making the promised loan. Or, if the titles to the real estate, which was to be mortgaged as security for the loan, were not satisfactory, or the real estate was not worth twice the amount of the loan, the company, keeping within the agreement, could have refused to make the loan, though Daughdrill’s liability as its surety was existing, and from it he was without remedy to demand relief. The company, doubtless, was influenced in making the loan, by the fact that Daughdrill had become its surety on the writ of error bond. It may have been more inclined for' that reason to accommodate him with a loan, than it would have been if that relation had not existed. The mere inducements to parties to contract, cannot vary the relations the contract creates, nor can they stamp upon the contract a nature and character inconsistent with its terms, and the obligations arising from them. . The company was very carefully keeping in view their relation and rights as creditors, and stipulating for security in that relation. It was not indemnity to Daughdrill for the liability he had incurred as surety, or security for the debt if the judgment was affirmed, or the creation of a fund for its payment, which was contemplated, or which was deemed necessary. There is a stipulation for the continuance of the loan beyond the period of one year, until the decision of the cause in which the writ of error had been taken, but that is dependent on conditions. The continuance was not a matter of right in Daughdrill, unless he kept down the interest, paid the premiums on the policy of insurance he had promised to take, and kept down the taxes on the mortgaged property. The test whether a trust or security was created for the payment of the debt, is, whether Daughdrill could have claimed to retain the íoan merely because of his liability as surety. Before paying the common debt, he had no remedy against the principal, and no right to withhold payment of the debt due from him. — Standifer v. White, 9 Ala. 527. The agreement would not have furnished cause for resisting the exercise of the power of sale contained in the mortgage, nor would it have afforded defense to a bill for foreclosure. The 430 common debt being unpaid, was not of present inquiry, but of prospective and contingent inquiry only; and this could not have afforded him an equity to retain his own debt, until it was removed. There is no feature of the case, as it is presented — no view of the rights and remedies of Daughdrill, which would authorize the conversion of the relation of the parties from that which the agreement so clearly imports, of debtor and creditor, into that of trustee and cestui que trust, and that is the relation which must exist, or the claim of the appellant cannot be supported. It was not that relation, with its rights and duties, the parties contemplated: Daughdrill was the debtor of the Southern Life Insurance Company, for money loaned. The company became his debtor, when, by the death of his wife, the insurance policy became payable. By the terms of the policy, the debt to Daughdrill was to be applied to the payment of his debt to the company. Whether the application was made or not is immaterial; for, in a court of equity, it will be regarded as made — that being considered as done, which ought to have been done. We find no error in the record, and the decree is affirmed.