Swant v. Smith

Chalmers, J., delivered the opinion of the court. Isaac Smith and James T. Swan, who had been partners in the building of a public bridge for the county of Lincoln, submitted to arbitrators the settlement of their partnership accounts. By the award it was determined that Swan should pay the debts due by the firm to one Erwin and to one Watson, and should also pay to his partner Smith the sum of one hundred and twenty-eight dollars, for which sum he executed his due bill. Smith was to pay all other firm debts. This award was accepted by both parties' as satisfactory. Smith paid all the firm debts, the payment of which was allotted to him, but Swan paid neither the debts due to Erwin and to Watson, nor the due bill executed to his partner. Smith brought suit upon the due bill, recovered judgment, and [553] had return of nulla bona. Watson and Erwin brought suits against both Smith and Swan on the firm debts held by them and recovered judgments. Smith paid Erwin’s judgment, and arranged to pay Watson’s before filing this bill, the object of which is to vacate an alleged fraudulent conveyance of property on the part of Swan to his wife. It is objected by demurrer that the bill cannot be maintained, because it is not shown that the complainant was an existing creditor at the date of the alleged fraudulent conveyance. The point is not well taken. The rights and obligations of the parties must be considered as originating with the award which took place in February, 1873, whereas the conveyances complained of-were made in August following. It is further objected that the complainant cannot maintain any claim to relief based on his payment of the Erwin judgment or his arrangement to pay the Watson judgment, because as to neither of these is he a judgment creditor of Swan. The argument is that inasmuch as none but judgment creditors can maintain bills to vacate fraudulent conveyances, the complainant, before filing the bill, should have brought suit against his former partner, upon his assumption to pay these claims, and should himself have recovered a judgment at law against him, on account of his failure to meet his obligation. There is no difficulty in maintaining the bill so far as the Erwin judgment, which the complainant has paid, is concerned. From the date of the arbitration, and by virtue thereof, the relation of principal and surety existed between the partners as to the firm debts, which each thereby obligated himself to pay in exoneration of the other. As to the Erwin and Watson debts, Swan became primarily and Smith secondarily liable inter sese. While the creditors were in no manner bound by the arrangement, and a court of law could take no notice of it, a court of chancery will respect and enforce it, and will regard Smith, in paying off these judgments, in the light of a surety who has discharged a burden resting primarily on his principal. It is well settled in such cases .that the surety will in a court of chancery be subrogated to all the liens, rights and privileges of the holders of the debt discharged. Our statute, Code 1871, § 2258, giving to sureties and indorsers who have paid [554] judgments against themselves and others primarily bound, the right to executions'in their own names against such others, is but the statutory adoption in courts of law of a well-settled equitable principle. While the statute limits it to those who are legally sureties or indorsers, courts of equity apply it whenever the circumstances of the case establish the practical relation. 1 Story Eq. Jur. §§ 493-502; Conway v. Strong, 24 Miss. 665; Woods v. Ridley, 27 Miss. 119; Short v. Porter, 44 Miss. 533. With regard to the Watson judgment, the bill alleges that the complainant had made arrangements for paying, and expected shortly to pay it. It was paid before the hearing. If the bill had been filed upon that judgment only, it could not be maintained notwithstanding the subsequent payment; but as it is part of a common transaction, as the jurisdiction is given by the other demands, and as the court has the fund and all the parties before it, we shall not remit the complainant to a new suit, but upon the same principle that authorizes the embodiment in a decree of the full amount due on a series of notes, some of which have fallen due since the filing of the bill, we permit a recovery upon it in deference to the doctrine that equity will, when possible, prevent a multiplicity of suits. Upon the merits we concur with the Chancellor in thinking the conveyances to Swan’s wife fraudulent. He properly disregarded Swan’s claim that he had been defrauded in the arbitration. According to his own statement, he knew of the alleged frauds before the rendition of judgment on the due bill, and yet made no defence to it, and gives no reason for not having done so. The Chancellor erred, however, in failing to protect the interests of Pierre Becker & Son. They had paid off valid incumbrances upon the property, and were entitled to be reimbursed. The decree will be reversed, and cause remanded with instructions to have an account stated of the amount due them, and then for a decree of sale, with directions to the commissioner to pay that amount out of the proceeds, and apply the balance to the complainant’s decree; the costs in this court to be divided, and those in the court below to be paid by Swan and his wife. Decree accordingly.