Pearl Street Congregational Society v. Imlay

Ellsworth, J. We do not think it is necessary to comment upon the numerous cases which have been read, illustrating and enforcing the principle of equity, equally well settled in England and here, that any security which’ has been appropriated by the debtor, to secure his debt, whether it be placed in the hands of the creditor or the surety, shall be made available for the debt and for his benefit, who is forced to pay it. It is treated as a fund, set apart for that purpose. The principle itself is founded in the highest justice and wisdom, while, in applying it to cases, as they arise, there are distinctions and circumstances, that must be observed, as essentially belonging to the principle itself. Nothing can be more obvious, than that, if the creditor will insist upon collecting his debt out of the surety or endorser, while he has the property of the debtor in his hands, he shall make over that property to him who pays the debt, that it may be applied, as it ought to be, to relieve and indemnify the surety. Now, if this were all, if Wales had merely given his creditors additional security, the surety might justly insist upon having the benefit of it, as claimed, but there is much more than that here. There is a controlling circumstance, bearing strongly upon the supposed equity, set up by Mr. Imlay. Mr. Wales did not appropriate the security unconditionally, to secure his debt, but he merely made an arrangement for temporary relief, in the particular emergency. He did what he was under no obligation to do. -Mr. Imlay had suspended payment; the society had expressed their dissatisfaction with the security, and Mr. Wales agreed to give them the mortgage in question, for a short time, until he could procure a satisfactory name. He, and the society, stipulated that the mortgage should be released, in order that he might mortgage the property to the savings society, to raise money to pay off the mechanic’s lien. Mr. Imlay had nothing to do with this private arrangement, nor had he knowledge of it, nor did he become surety, in consequence of it, nor [17] did he notify the society to retain the security, for his benefit. He had, in fact, no connection with it, further than what the law created, which, under the circumstances, we hold, did not create a right of subrogation or substitution. When Mr. Wales gave the society a satisfactory name, they were absolutely bound to release the mortgage, as they agreed, and he could and in fact, did, in good faith, mortgage anew. We do not mean to say, that a surety can not claim a right to property, appropriated by the debtor, unless he had knowledge of it at the time, or gave notice to have it kept for him, or became surety expressly upon the faith of the appropriation. This may not be necessary, but in this case, a different principle applies, which must control us, as we have endeavored to show, steering clear of all these questions. It is objected, that the contract between Mr. Wales and the society was in parol and could not be proved. Not so. Even if the evidence is obnoxious to the statute of frauds, which we do not decide, the society, in justification of their act, can show the agreement, and their good faith, in performing it. Besides, the statute only says, “ no action shall be brought,” &c., and not that the contract is absolutely void. Moreover, it is executed, and this is conclusive. We advise judgment for the plaintiffs. In this opinion the other judges concurred. Judgment for the plaintiff.