Logan v. Mitchell

Napton, J. — The general rule in equity that a creditor is entitled to the benefit of the securities which his debt- or’s sureties have taken for their own indemnity, and may subject them to the payment of his debt, is conceded by both parties in this case. (1 Story Eq. § 638.) The question upon which the case turns, is whether the creditor must not be content to take the securities as he finds them, when he applies to be subrogated to the rights of the sureties. In other words, if his equity is derived through the sureties, and not independently of them, it would seem clear that he occupies no other position than they do, and if they have in good faith released, discharged or otherwise impaired their value before he has taken any steps to subject them to his claim, the creditor cannot justly complain. The sureties, it is true, cannot alter or impair his right, and if the securities are originally taken, not ouly to indemnify the sureties but to secure the creditor, any action of theirs would be powerless to affect him. But if the securities are merely to indemnify the sureties, and the creditor desires to be subrogated to them, it is clearly equitable that he should take them just as the sureties themselves hold them. (Rankin v. Wilsey, 17 Iowa 464.) The answer in this case alleged a contract between the sureties and the defendants, by which the sureties agreed that defendants should have a pro rata share of the proceeds of the mortgaged property. This contract, founded upon a sufficient consideration, was binding on the sureties, arid was made long before the plaintiffs instituted this suit in equity. The answer was demurred to, and the court overruled the demurrer. The plaintiffs stood on the demurrer and the court ordered the distribution in accordance with the facts stated in the answer, [529] which in our opinion, was correct. Judgment affirmed. The other judges concur. Affirmed