Irick v. Black

The Chancellor. The right of a surety, as against his principal, to bo protected from loss by reason of his snretiship, so far as it can be done without prejudice to the rights of the creditor, is a recognized and familiar doctrine of equity. When the surety has paid the debt, he may not only call upon the principal to re-imburse him, but for the purpose of obtaining indemnity from the principal, he is at once subrogated to all the rights, remedies, and securities of the creditor. Nor is his remedy confined, as at law, to the obtaining indemnity after the payment of the debt. But as soon as the debt has become payable, he may file a bill to compel payment by the principal, in order that the security may be relieved from responsibility. He may, in special cases, compel the creditor to resort to securities in bis hands before coming upon the surety. And although the creditor will not, as a matter of course, bo restrained from enforcing his rights against the surety till his remedies against the principal are exhausted, yet when the creditor is fully indemnified, where he is subjected to no delay and exposed to no risk of loss, he will be compelled to resort first to the property of the principal in satisfaction of his claim. If the court is asked to interfere on behalf of the surety before judgment is recovered against him, he must present some special ground of equitable relief. Where judgment has been recovered — 196 — against both parties, the equity of the complainant, to have the property of the principal first applied to satisfy the exe-, cution, is clear. This equitable doctrine has been expressly sanctioned by the legislature of this state, and the exercise of the power conferred upon the courts of common law. Nix. Dig. 669, § 160. It is difficult to conceive a clearer case for the exercise of the power than that presented by the complainant’s bill. A judgment has been recovered against the principal and the surety. Execution has been issued and levied upon the property of the principal, amply sufficient to satisfy the claim. The sheriff was instructed by the plaintiff in execution, in accordance with the clearest dictates of justice and equity, to make the debt out of the property of the principal. Thereupon the father of the principal purchased the judgment, took an assignment with a power of attorney to control the execution, and instructed the sheriff to make the debt out of the property of the surety. It is against that inequitable act that the complainant asks relief. The bill further alleges, that the assignee of the judgment took the assignment with full knowledge of the equitable rights of the complainant,. and further, that the principal debtor is largely involved in debt, and that if the surety is compelled to satisfy the judgment, he will be exposed to the hazard of losing all means of indemnity against his principal. The material charge of the bill upon which the complainant’s equity mainly rests is, that Black is the principal debtor, the complainant being the surety only. This fact is distinctly and unequivocally charged in-the bill. It is denied by the defendant, only upon information and belief. Such denial will not avail to dissolve the injunction. The defendant must, in order to entitle himself to a dissolution of the injunction, answer upon his own knowledge. Everly v. Rice, 3 Green's Ch. R. 553; Ward v. Van Bokkelen, 1 Maige 100. But it is urged that the injunction must be dissolved, inasmuch as the defendant has explicitly denied the complain — 197 — ant’s allegation that the defendant, before taking the assignment of the judgment, had notice of the fact that the complainant was surety only for the debt; and also the allegation that the principal was largely indebted, and that the complainant, by paying the judgment, would be exposed to the hazard of loss. Neither of these allegations of the hill is essential to the complainant’s case. The surety’s claim to equitable relief as against the principal, does not depend upon the fact that the creditors had notice of the sureti-ship. Nor does the fact of that notice at all interfere with the creditor’s right to enforce his claim for the recovery of his debt. The complainant does not deny the creditor’s right to recover his debt, nor does he seek to impair his remedy. The defendant does not allege that his security will be in any wise impaired by granting the relief prayed for. On the contrary, he ex-plicity admits that the property of either of the defendants levied upon by virtue of his execution, is amply sufficient to pay his debt, To him, as execution creditor, it is a matter of total indifference, which of the defendants pays the debt. The controversy is a pure question of equity between the defendants, the decision of which cannot affect the substantial rights of the creditor. Nor does the allegation that the surety will be in danger of losing his means of indemnity against the principal, constitute an essential element of the complainant’s claim to relief. The complainant’s equity, as recognized in this court and as expressly declared by the statute, is to have the property of the principal debtor, rather than that of the surety, where both are under execution, applied in satisfaction of the judgment. The fact of irreparable injury is no element of his right to recover, although it may strengthen the claim for relief and quicken the action of this court. The court will interfere though the principal is perfectly able to respond in damages, and there be no danger of eventual loss. It interferes to compel payment by the principal, rather than the surety, in order to enforce the performance of the obvious — 198 — duty of the principal to protect the surety from a needless burden, and to prevent circuity of action. The defendant, by his answer, denies that he purchased the judgment at his son’s request, or by virtue of any arrangement or understanding with him in relation thereto, or in relation to the party of whom the payment was to be collected, and alleges that he purchased it of his own accord and for his own purposes. Here is a full denial by the creditor of any combination with the principal for any sinister or fraudulent purpose, and an express avowal that the act vías done for purposes of his own. In point of fact, the defendant, immediately after purchasing the judgment, countermanded the orders which had been given to the sheriff to raise the debt out of the pi-operty of his son, and oi'dered thé sheriff to levy and make the debt out of the px-operty of the surety. Now it is obvious that the judgment was not purchased as an investment, nor to give indulgence to the defendant; for the purchaser proceeded immediately to collect the debt. Nor were his instructions to the sheriff given to secure or advance his rights as a judgment creditor, for ho admits that the levy under the execution upon the property of the principal was amply sufficient to pay the debt. As execution creditor, it was totally immaterial out of which defendant’s property the debt was made. The judgment must have been purchased by the father, and the instructions to the sheriff given, either to promote the intei'ests of his son, by satisfying the judgment out of the property of the surety; or, if done strictly for his own interest, it must have been to relieve his son’s property from the lien of the execution, in order to charge it with some claim of his own. In either event, his purpose was to satisfy the debt out of the property of the surety, and thus defeat his equitable right to have the debt paid in the fii-st instance out of' the property of the principal, and to put at hazard his means of indemnity. In all its aspects, I think the equity of the bill is virtually confessed by the answer. It is further insisted that the complainant has a complete and adequate remedy at law, and therefore has no title to — 199 — relief in this court. He can have no redress anywhere, except by the interposition of a court of law or of equity, to protect and enforce his claim to equitable relief. By the statute already referred to (Nix. Dig. 669), the legislature have conferred upon the court, out of which the execution issued, the power of administering equitable relief, where a judgment is recovered against both principal and surety. But it is perfectly well settled, that the conferring of equitable powers upon the courts of common law, does not take away or abridge the jurisdiction of a court of equity. It constitutes simply a case of concurrent jurisdiction, where either tribunal may afford relief, at the option of the party aggrieved. It is insisted further that the bill is defective for want of proper parties, inasmuch as the principal debtor is not made a defendant. The objection is well taken. The injunction in this cause cannot be made perpetual without affecting the rights of the alleged principal. It is true, that not being a party, he will not be bound by the decree. But for that very reason he is a necessary party. The complainant is entitled to have both the defendants in execution before the court, in order that their rights, as well as his, may be finally settled. Whether the defendants in execution do, in fact, occupy the relation of principal and surety, is, in fact, the main subject of controversy, and that question, cannot he settled, either as between the defendants themselves, or in relation to the rights of the complainant, unless they are both parties to the bill. But a defect of parties is not necessarily a reason for dissolving the injunction. The bill may be amended without prejudice to the injunction. The affidavit of John Black, jun., is annexed to the answ'cr. He denies, explicitly, the charges of the hill, that the loan was made for his individual benefit, and that the complainant signed the bond as surety only. It is objected, with much apparent reason, that the complainant should not be permitted to gain an unfair advantage, by omitting a necessary party. That if Black had been made a party, his — 200 — answer would have denied the whole equity of the bill, and entitled the defendants to a dissolution. . There is no good reason to suppose that the party was omitted for the sake of gaining an unfair advantage. The frame of the bill justifies the belief that he was not deemed a necessary party. The objection may constitute a very good reason why the defendants should be permitted to renew their motion to dissolve, after the amendment has been made and the answer filed. But supposing that Black had been made a party, and had answered, denying the equity of the bill as explicitly as he has done by his affidavit^ as the case now stands, I do not apprehend that the injunction must have been dissolved. It is well settled that the injunction will not be dissolved as of course, even upon a full denial of the equity of the bill, if the court see good reasons for retaining it. Its dissolution depends upon the sound discretion of the court. Chetwood v. Brittan, 1 Green's Ch. R. 438; Greenin v. Hoey, 1 Stockt. 137; Furman v. Clark, 3 Stockt. 135; Stotesbury v. Vail, 2 Beas. 394; Roberts v. Anderson, 2 Johns. Ch R. 202; Poor v. Carleton, 3 Sumner 75; Orr v. Littlefield, 1 Wood. & Minot 13. In this case, the complainant has annexed to his bill an affidavit of the attorney of the original creditors and plaintiffs in execution, by whom the loan was negotiated and the bond drawn, His evidence distinctly and fully confirms the charges of the bill, that the loan was made for the individual benefit of Black, and that Irick signed the bond as surety only. His evidence upon this point is full, clear, and unequivocal. Under such circumstances, especially where the dissolution of the injunction must defeat the complainant’s equity, and effectually deprive him of the relief sought, the injunction should be continued to the hearing. The'motion is denied,