Liddell v. Wiswell

The opinion of the court was delivered by Ross, J. There were nine signers to the note of April 1, 1872. Between themselves each signer was principal, for the payment of one-ninth of the note, was surety to each other signer for the payment of one other ninth, and co-surety for the payment of the other seven-ninths. These relations the plaintiff had to each of the other signers. He has been compelled to pay the whole note, with an accumulation of interest and costs. He seeks contribution from the defendant. The defendant has interposed his • discharge ' in bankruptcy, obtained before the plaintiff was compelled to make payment. As to the ninth of the note for the payment of which the plaintiff was principal, he has no right of contribution from any one, regardless of the defendant’s discharge in bankruptcy. To the ninth of the note for the payment of which the defendant was principal and the plaintiff his surety, we think the discharge in bankruptcy is a bar. It was held to be so under the bankrupt law of 1841. The plaintiff’s right to indemnity arises from the contract of suretyship. The law of 1841 allowed contingent demands to be proved, and the liability of a surety for his principal was held to bo such a demand — a demand arising from the contract itself. A distinction was taken between a contingent demand and a contingency whether a demand toill ever exist. The liability of a surety for his principal was held to be the former, and the equitable liability between co-sureties to sustain the burden of suretyship equally, to be the latter. Hence, while the former was held to be barred by a discharge under the law of 1841, the latter was held not to be barred when the payment was subsequent to the discharge. Swain v. Barber, 29 Vt. 292. [368] By the bankrupt law of 1867 all provable claims and demands are barred by a discharge. It provides for proving “ contingent debts and liabilities contracted by the bankrupt” in two ways; first, by proving the whole claim and receiving a dividend thereon, if the contingency happen .before the order for final dividend ; secondly, by having the value of such debt or liability ascertained under an order of the court, proving and receiving a dividend on the amount so ascertained. The liability of the principal to indemnify his surety is a contract liability, a direct liability of the surety to the creditor in actual existence, provable under the bankrupt law of 1841, though the surety had paid nothing thereon. Mace v. Wells, 7 How. 272. The bankrupt law of 1867 also, as we have seen, permits such liabilities to be proved. Hence for the ninth of the note for the payment of which the plaintiff was the surety of the defendant, the defendant’s discharge in bankruptcy is a bar. The plaintiff and defendant were co-sureties for the payment of the other seven-ninths of the note. When the defendant obtained his discharge no contingent liability for contribution existed in favor of the plaintiff, only a contingency that such a liability might thereafter arise if the plaintiff should ultimately be obliged to bear more than his proportionate share of the common burden that might be cast upon him in the payment of that part of the note for which they were co-sureties. The implied obligation of the defendant to bear his proportionate share of the common burden resting on all the co-sureties is not regarded as arising from contract, but from an equitable duty which the sui’eties are supposed to be cognizant of, and assent to, at the time they enter into the contract of suretyship. 1 Lead. Cas. Eq. notes to Deering v. Earl of Winchelsea, 84, and cases there cited. In Mason v. Lord, 20 Pick. 447, Shaw, C. J., says : “ The action of assumpsit for contribution is founded pui’ely on equitable principles. It proceeds upon the broad ground that when two or more are subject to a loss or burden common to all, and one bears the whole or a disproportionate part, it lays an equit [369] able claim for contribution from those who are thereby pro-portionably relieved.” The doctrine thus ’announced has been adopted.by this court in Mills v. Hyde, 19 Vt. 59; Strong v. Mitchell, 19 Vt. 644. Not being a contingent liability contracted by the defendant existing at the time of his discharge, it was not provable against his estate in bankruptcy, and is not barred by his discharge. On the facts shown, by-the agreed case, the plaintiff is under no more duty to go into a foreign jurisdiction, and attempt to secure some indemnity from the estate of D. L. Dawley than is the defendant. It may be doubtful if anything can be secured from that estate, and if there can be, it will doubtless be attended with trouble and expense. From the equitable principles which control this class of liabilities, the plaintiff and defendant are in duty bound to share equally the common burden. Hence the defendant cannot be heard to claim that it is the duty of the plaintiff to go to the distant State of Colorado and endeavor to secure something from the estate of Dawley to relieve the defendant from a part of the common burden now resting wholly on the plaintiff. It is held in this State, and generally, that insolvency of one or more of the co-sureties is regarded in actions at law for contribution, and that the share to be recovered by one who has paid the whole debt is determined by the number of solvent sureties ; and it has been held by other courts that removal from the State is for this purpose equivalent to insolvency. 1 Lead. Cas. Eq., supra; Boardman v. Paige, 11 N. H. 431. The pro forma judgment of the County Court is reversed, and judgment rendered for the plaintiff to recover one-third of seven-ninths of the debt and costs paid by him August 6,1885, with interest thereon since August 6, 1885, and his costs.