Berthold v. Berthold

Bliss, Judge, delivered the opinion of the court. The $10,000 note due Sarpy was deposited as collateral security for the payment of the one made by defendant for the accommodation of Tesson & Son. When the last-named note fell due, the maker, Berthold, failed to pay it, and the holders took their pay out of the proceeds of the note belonging to Sarpy. Sarpy was thus made to pay the debt of defendant, and now asks to be subrogated to the right of the holder of defendant’s note. This, stripped of the -unusual circumstances that surround it, is all there is of the case as presented. There is no question as to the plaintiff’s equity.- It would be altogether superfluous to give the multitude of cases all pointing in the same direction, where it is held that a surety who had paid the debt of another is, subrogated to all the rights of the creditor as to other securities in his hands. (Sto. Eq., § 499, and cases cited; 1 W. & T. Eq. Gas. 144, 3d Am. ed., and cases cited; Haven v. Foley, 18 Mo. 136; 19 Mo. 632.) So, in the United States, though not in England, it is held that a surety who pays the debt of the principal is entitled to an assignment of the instrument paid. (Sto. Eq., note 3 to § 499 c.) This is disputed in Copis v. Middleton, 1 Turn. & Russ. 224, upon the ground that an instrument thus paid is extinguished and would be worthless in the hands of the surety.' But in Hodgson v. Shaw, 3 Myl. & K. 183, it was held, in an elaborate opinion by Lord Brougham, that when a bond was given as collateral security for another bond, the surety upon the collateral bond who had paid it was entitled to be subrogated to all the rights of the creditor as to the first bond; that ho had become in equity its purchaser and was entitled to its assignment. The chancellor distinguished the case from Copis v. Middleton, and held that the original security still subsisted, notwithstanding the discharge of the second security, and notwithstanding the inability of the creditor to avail himself of it; but it subsisted “ only to the effect of clothing the surety with that creditor’s rights against the principal debtor.” It does not matter, so far as the rights [563] of the present plaintiffs are concerned, which view is held, jet I can not but be impressed with the broader equity and superior reason of the American cases. Lord Eldon held, in Copis v. Middleton, that the payment of the obligation by the surety extinguished it. So it does, so far as the creditor is concerned, but it should not be extinguished as to any right the surety has acquired by its payment. It should still subsist with its liens and priorities to enable him to recover of the principal as well as to' compel contribution by co-sureties, or to avail himself of any securities or collaterals turned out by the principal. So, when the second obligation turned out as collateral is paid, the original instrument, so far as the creditor is concerned, is paid and extinguished, but is still alive in favor of him who has paid it, and he should be permitted to avail himself of any rights in regard to it to which its purchase would entitle him. Counsel for defendant claims that the doctrine of subrogation can only apply between parties to a contract, and where the relation of principal and surety existsi But I can see no reason in thus confining its beneficial operation, and the law does not so confine it. (Furnold v. Bank of State of Missouri, 44 Mo. 336.) Plaintiff’s intestate was made against his will to pay the note of defendant. His equities would not have been’greater had he been an indorser of the note or had he executed a collateral. It would seem that thoy should rather be less, for in that case he would voluntarily have assumed a risk. If, through the agency of defendant and bad faith of Tesson, Son & Co., he is compelled to pay this note, I am wholly at a loss to conceive how the equitable claim of his administratrix to all she can make out of the instrument he iras thus made to pay can:,'be less than if, as in Hodgson v. Shaw, ho had given a collateral obligation to pay. Her rights arise from the fact that her intestate has paid, and was compelled to pay, what others should have paid; and for that reason she is entitled to whatever benefit she may derive from an assignment to her of the instrument thus paid. In Valle’s Heirs V. Fleming’s Heirs, 29 Mo. 152, though not a case like the, present, the doctrine of subrogation was carried to its fullest extent, and founded upon the naked justice of the case and not upon contract. (See 4 Johns. Ch. 123, 130; 1 Comst. 599.) [564] Defendant also claims that lie should not bo charged, because the equities are equal; but in this he greatly mistakes the relations and mutual obligations of the parties. Suppose the plaintiff’s intestate had consented that the note belonging to him be deposited as collateral, or that he had himself made a collateral promise in writing to pay defendant’s note, it is clear that defendant would be bound to repay him. The fact that defendant was an accommodation maker could only avail him against his principal, nor against those whose obligations were subsequent to his. This case is submitted upon an agreed statement of facts, and the pleadings are informal. Counsel upon both sides have argued it as though it were an equitable proceeding for subrogation, yet I can not see how it becomes necessary to resort to this doctrine in order to enable the plaintiff to recover. Were there any securities to be reached, wore any-advantago to be derived from an assignment of the note, or did the plaintiff seek any other proper equitable relief, she has a clear equity which should command the interposition of the chancellor. But she seeks to avail herself of the personal liability of defendant, and against him she has a clear legal claim, and is entitled to the ordinary money judgment which she obtained, and which is affirmed. The other judges concur.