Seibert v. Thompson

[69] The opinion of the court was delivered by Valentine, J.: This case has been very ably managed in this court on the part of the plaintiffs in error. But notwithstanding the skill and ingenuity of the learned counsel who managed it, we are unable to perceive any error sufficient to reverse the judgment of the court below. It is claimed that the petition below was not sufficient because it did not state that either Ludington or Lykins were insolvent, or that the property which Seibert held as assignee of Lykins was not sufficient to pay all of Lykins’ debts. This question was not raised in the eorn-t below, and therefore it is very questionable whether it can be raised here. But suppose the question can be raised here: then, is the petition defective? Thompson’s right to have the lot applied in payment of said note is not a right that results to him originally. The right results first to Ludington, the co-surety, and through Ludington to Thompson, the creditor; and it was Ludington who first applied in this case to have said lot used in payment of said debt. Now, before Ludington can have this lot so used, must he show that he is himself insolvent? or, before this right of his is transferred to Thompson, must it be shown that Ludington is insolvent? We think not. If it were necessary to show that Lyldns was insolvent, or that the property which Seibert held as assignee of Lykins was not sufficient to pay all of Lykins’ debts, then we think it was sufficiently shown. If such was not the case, if Lykins was not insolvent, then he had no right to assign his property to Seibert for the benefit of his creditors, and such assignment would be void being made for the purpose of hindering, delaying, and defrauding such creditors. (Comp. Laws, 568, § 2; Gen. Stat., 504, § 2; 1 Sanf. Ch., 4, 9; 3 Barb. Ch., 644, 646; 15 Barb., 56, 57, 560, 563; 18 Barb., 272, 275, 612, 614; Burt v. McKinstry, 4 Minn., 204.) [70] i. Equity powmuitipUcSy’ of suits. 3* Co-sureties ‘application of securities [69] It must be remembered that in equity Shaler W. Eldridge was the principal debtor in this transaction, and that Ludington and Lykins were only sureties, though Eldridge was not a [70] party to said note. And it must also be remembered that although this action was commenced originally as an action at law, it was afterwards on the request of Ludington converted into a suit in equity. It is a principle of equity that where the court has all the parties before it, y. -rán adjudicate upon all the rights of the parties connected with the subject-matter of the suit so far as it can, so as to avoid a multiplicity, of suits. It was proper that the court should in this suit adjudicate upon the rights of Ludington, and not compel him to first pay the debt to Thompson and then sue Lykins and Seibert for contribution. That Ludington’s right in equity to have this property applied in payment of this debt, we think is clear beyond all doubt. We coj>y the following from a note appended to the case of Deering v. Earl of Winchelsea, 1 Lead. Cas. in Eq., 162, 163, 164: “ It is a settled principle of equity that if one of several co-sureties subsequently take a security from the principal for his own indemnity it inures to the common benefit of all ^ the sureties; if therefore the principal convey prop- ' x x o x x erty by deed of trust, expressly for the benefit of one of the sureties only, the others have an equity to come upon it to the same extent that he can. Welch v. Belcher, 5 Munford, 187; McMahon v. Fawcett, 2 Rand., 514; Fagan v. Jacobs, 4 Dev. 263; Gregory v. Murrell, 2 Ire. Eq., 233, 236; Field v. Pelat, 1 McMul. Eq., 370; Hinsdell v. Murrary, 6 Vt., 136, 150; Elwood v. Deifendorf, 5 Barb., 399, 405; Rice v. Morton, 19 Mo., 263; Steele v. Mealing, 24 Ala., 285; Tyus v. De Jarnette, 26 id., 280. “ Sureties,” said Kennedy, L, “are bound to observe good faith toward each other; and when funds are placed by the principal in the hands of one surety to be apjDlied either to the payment of the debt or for the purpose of indemnifying him against any loss that may arise from the suretyship, he must be considered as holding them for the common benefit of all concerned. The giving of the funds was the act of the principal who was equally bound to indemnify all his sureties alike; and upon him, as well as to all his means for that purpose, each of them had an equal and just [71] claim. It is unjust and. inequitable that one surety without the consent of his co-sureties should derive any exclusive benefit from the act of the principal in giving up what he might and ought to have applied for the common benefit at all.” Agnew v. Boll 4 Watts, 31, 33. Where “ one surety stipulates for a separate indemnity,” says Henderson, J., in Moore v. Moore, 4 Hawks, 358, 360, “such indemnity is reached in favor of his co-surety, upon the ground either that it was intended for the benefit of all, or that the taking it was a fraud upon the others. In such cases courts of equity convert him into a trustee, not permitting him to allege his own turpitude or selfishness as a protection, for they enter into the agreement under a belief of perfect equality, trusting apparently to the same laws of indemnity, and to the united exertions of each other to avoid harm severally; therefore for one to take a separate indemnity is a fraud upon the rest, and more especially as it lessens the ability of the principal to indemnify the others; and if taken without such secrecy, it is presumed to be designed for the benefit of all.” See also Hall v. Robinson, 8 Ire., 56. “The surety receiving securities is a trustee for his co-sureties, and is bound to such discreet and reasonable irse of them as would be required from'a trustee, but no greater.” Carpenter v. Kelly, 9 Ohio, 106. See Pool v. Williams, 8 Iredell, 286. 3 Ana creditor tiento benefit of securities. “ In like manner the principal creditor is in equity entitled to the full benefit of any security given by the debtor to a si:u’efy for his indemnity and for the discharge of ^he debt; and it makes no difference that such principal creditor did not act upon the credit of such security in the first instance, or even know of its existence.” Maure v. Harrison, 1 Eq. Cas. Abr., 93, pt. 5; Wright v. Morley, 11 Vesey, 12, 22; Moses v. Murgatoyd, 1 Johns. Ch., 119, 129; Phillips v. Thompson, 2 id., 418, 422; Pratt v. Adams, 7 Paige, 617, 627; Curtis v. Tyler, 9 id., 432, 435; Ten Eyck v. Holmes, 3 Sanf., 428; Roberts v. Calvin, 3 Grat., 359, 363; Toulmin v. Hamilton, 7 Ala., 362, 367; Ohio Life Ins. Co. v. Ledyard, 8 id., 866, 872; Paris v. Hulet, [72] 26 Vt., 308; Riddle v. Bowman., 7 Foster, 236; Haven v. Foley, 19 Mo., 632; Aldrich v. Martin, 4 R. I., 520. In fact a court of equity under the title of subrogation exercises a paramount control, for purposes of justice and convenience, in resj^ect to the relation of principal and sureties. “ If property is pledged to either the creditor or a surety, though not to the person seeking to charge it, it may be reached by substitution in a court of equity, without regard to the intention of the contracting parties;” per Parker, J., in Hopewell v. Bank of Cumberland, 10 Leigh, 206, 226. See also McCollom v. Hinckley, 9 Vt., 143, 149. “This,” says Parker, J., (p. 221,) “ arises not from any notion of mutual contract between the parties, that in providing for the surety the creditor shall be equally provided for, but from a principle of natural equity, independent of contract, namely, that to prevent the surety from being first harrassed for the debt or liability, and then turning him round to seek redress from a collateral security given by the principal, a court of equity will authorize and even encourage the creditor to claim, through the medium of the su/rety, all the rights he has thus acquired, to be exercised for Ms benefit and in discharge of his obligations. This equity of the creditors rests upon the doctrine of subrogation or substitution; and therefore the creditor cannot claim the security unless the surety had a right to come upon it. Bibb v. Martin 14 S. & M., 87. Bush v. Schup, 4 Cushman, 463.” See also upon this same subject, 1 Story Eq. Jur., §§ 499 to 502; Com. Dig., Chancery 4, D. 6; Hew Bedford Savings Inst. v. Fair Haven Bank, 9 Allen, 175; Eastman v. Foster, 8 Metc., (Mass.) 19. Now, in the light of reason and authority we are unable to see why a court of equity should postpose Ludington’s rights, and require him to set them up in another suit, when the creditor himself is willing that they be set up in this suit. And we do not think that it makes any difference whether Lykins is insolvent or not. He and his assignee hold said lot in trust for the payment of said debt. We do not think it is necessary to decide what Thompson’s [73] rights, independent and aside from Ludington’s rights, would be, for that question is not before us. He claims under, through, and at the request of Ludington. Therefore we do not think that it makes any difference in this suit, and as to him, whether Ludington and Lykins are insolvent or not. The court below finds that said lot was conveyed by Deitzler to Lykins, not only to pay said note, but also to pay a debt which Deitzler owed to Lykins, and that Lykins so accepted it in payment of both debts. And upon this finding counsel for plaintiffs in error (though they made no issue of this kind by their pleadings in the court below,) refer to several authorities to show that an estate can never pass unless it be a definite and certain estate, or an aliquot part of some definite and certain estate. This proposition is admitted: and it will also be admitted that the amount of said note was not an aliquot part of the consideration or the valuation of said lot. Rut this makes no difference. It is not claimed by Ludington or Thompson that they are purchasers of said lot, or of any estate or title therein. It is not claimed that they furnished any part or portion of the purchase money. It is not claimed that they are the owners of said lot, or any part or portion thereof; and they do not seek, nor have they obtained any judgment decreeing or declaring them to be such owners. Lykins, or his assignee, is the owner of every part and portion of said lot, and all the estate therein; and all the interest that Ludington or Thompson has in it is a mere lien (which is no estate at all,) upon it for the purpose of paying said note. It is a lien similar to a mortgage lien, which in this State is no estate at all; (Chick v. Willetts, 2 Kas., 391;) or a judgment lien, or an attachment lien, or a mechanic’s lien. It is a lien upon the whole estate, but constitutes no part of the estate, and is not in amount any aliquot part of its value. The judgment of the court below is affirmed. All the Justices concurring.