Blanding v. Wilsey

Granger, J. This single proposition is presented on the appeal: Was the bank under a legal obligation to protect [48] from loss the guarantors by a resort to the property pledged as security ? It should he borne in mind that the bank had not the property in its custody or care. In Fuller v. Tomlinson, 58 Iowa, 111, this court said: “We have a case where a holder of paper, who has a lien upon personal property for security, but is charged with no responsibility for its custody or care, fails to enforce his lien, and the security is lost. We have seen no case which goes to the extent of holding that such failure can be set up in defense by a surety or guarantor, nor do we think that such is the law. If the surety or guarantor apprehends that the security will be lost, it is his privilege to pay the debt, and enforce the lien himself.” This rule is conceded by appellant to be correct, but it is said there are exceptions to it, and the rule is cited that, where a surety or guarantor pays a debt, he is entitled to be subrogated to all the securities which the creditor had in his hands. That means securities held by the creditor at the time the guarantor makes payment, for that is -when subrogation is effected. In this case there has been no payment. The security held by the bank was the mortgage, and to that the guarantor, upon payment, would be entitled. The rule stated goes no further. It is further said, as a part of the rule, that the surrender of the security, therefore, is a direct impairment of the surety’s or guarantor’s rights. That must mean the security in his hands. The bank held the mortgage, and it has not surrendered it. So we see that in no way does this case come within the exception, as it is called, to the rule stated in the Fuller-Tomlinson Case. Stress is placed on the fact that the bank was notified and requested to apply the security. The notice or request does not change the legal obligation of the bank. The remedy of the guarantors was not in giving the notice or making the request, but in paying the debt, and taking to themselves the security for enforcement. Appellant refers to Bank v. O’Connell, 84 Iowa, 377. That case is widely different from this. In that case the makers of the note placed in the hands of the bank, as payee, notes and certificates as [49] collaterals, so that the bank was under obligation to preserve the property so held from loss. The tax-sale certificates were lost because of failure to take up and apply the money paid in for redemption, and the notes were held till action thereon was barred by the statute of limitation. The question was whether the bank was liable for the value of the securities because of its neglect to care for property it held in its hands. To make that case applicable to this, the facts of this case should be that the debtor (mortgagor) put the property pledged in the custody of the bank, and the bank, by neglect, permitted its loss, and then the debtor sued for its value by way of a counterclaim to the note. Of the authorities cited, none contravene the rule of the Fuller-Tomlinson Case as applicable to this case, and the judgment will be aeeirmed.