Case ID: g-j_10/html/0499-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Archer, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

W. S. McPherson vs. Joseph Talbott.
    
    December, 1839.
    . Co-sureties are always supposed to assume the same risk, and to stand rela. tively to the principal, in the samo situation, neither obtaining any benefit by the transaction, but each equally subjecting himself to responsibility.
    Where one surety, without the knowledge of his co-surety, by previous arrangement with the principal debtor, received one-half of the sum borrowed, ho is not entitled to contribution from the other surety, who may have undertaken the responsibility, in the confidence that his associate was, equally with himself, exposed to risk.
    Appeal from the equity-side of Frederick County Court.
    The bill in this cause was filed on the 19th August 1829, '.by the appellee against the appellant, and charged that, on the ,10th May 1826, John Reynolds having occasion for a sum of money applied to, and borrowed of, a certain Edward Traill the sum of $1000, to secure the re-payment of which he gave to the said Traill his single bill, with the appellant and appellee as his sureties; that the single bill not being paid, Traill sued thereon at law, recovered judgment, and levied an execution on the property of appellant and appellee; that complainant the appellee paid thereon $621.87, one half of the debt, interest and costs; that John Reynolds is insolvent; that on the 22nd March 1827, Reynolds .executed to W. S. McPherson, a bill of sale to indemnify him from loss, on account of his endorsement of other notes, and the single bill aforesaid; that when the bill of sale was executed, Reynolds was known to be in failing circumstances, and the property transferred by it was the mass of Reynolds’ estate; that McPherson has sold the property assigned to him, and received the proceeds, the amount being unknown to .complainant; that no part of the money arising from said sale, has been applied to the bill given to Traill, and that if the funds in the hands of McPherson arising from the said sale, were properly applied, that the debt to Traill would be nearly if not fully liquidated- That in the single bill to Traill, McPherson and complainant were co-sureties, Reynolds the principal debtor; that the bill of sale was given in part to secure McPherson from liability on account of this debt; that the proceeds of that property in the hands of McPherson are applicable in a just proportion to the extinguishment of the debt aforesaid due from Reynolds to Traill, and for the common benefit of the co-sureties. Prayer for subpoena against McPherson, account, and equitable application of the fund in question, &c.
    The answer of William S. McPherson, admitted the execution of the single bill, but denied he was co-surety with Talbott. It admitted that the proceedings at law by Traill were correctly stated, that Talbott paid one half of the judgment, and he McPherson paid the other half under said fieri facias; that Reynolds is insolvent; that in fact Talbott was alone known to defendant, as the principal debtor in the said bill at the time of the execution of the same; that the $1000 borrowed was originally paid by Traill to Talbott; that defendant became a party to the bill at Talbott’s solicitation, and to accommodate him, and as his surety; that Reynolds made no application to respondent; that defendant afterwards, finding that Talbott and Reynolds had divided the $1000 between them, he pressed the said Reynolds for indemnity. The answer admitted the sale of Reynolds’ property, his application for relief under the insolvent laws, and denied all obligation to account to Talbott, &c. &c.
    A commission was issued and a variety of evidence taken, the result of which in point of fact is stated in the opinion of this court.
    The County Court (J. Buchanan, C. J., andT. Buchanan, A. J.,) decreed as follows:
    It must be admitted that the case is not free from difficulty, and doubts may exist, as to the real character of the transaction. If the facts were as stated by, the defendant in his answer, it would result that, the complainant has no equitable title to the interposition of this court; on the other hand, if the defendant was a co-security with the complainant to Edward Traill, who loaned the sum of $1000, and for the payment of which the obligation or single bill dated 10th May 1828, was given, then, it is conceded that, the complainant is entitled t«? the relief sought by the bill. The defendant is positive in the statement made by him in his answer, and the court feels embarrassed by the known character and- acknowledged integrity of the defendant, in coming to a conclusion in conflict with his defence, but there is no avoiding such a decision. None of the witnesses examined for the complainant under the commission have been impeached, of course they stand fair before the court, and their evidence, taken in connexion with the bill of sale, executed by Reynolds to the defendant on the 22nd March 1827, is sufficient by the established rules of equity to sustain •the allegations of the bill, whatever the real merits of the case may be. Considering the complainant and defendant as co-secureties for Reynolds in the obligations to Traill, the question occurs, whether the complainant is entitled to any, and what contribution from the funds placed in the hands of the defendant by Reynolds on the 22nd March 1827.
    It is admitted by the answer that, the property embraced by the bill of sale was sold, and the proceeds first applied to a debt due to the bank, and the residue amounting to $621.87 to the payment of Traill’s debt, founded on the bill obligatory aforesaid. This residue, being the same placed by Reynolds in the hands of the defendant, for the payment of and to indemnify him against Traill’s claim, having been applied by the defendant to that object, must be considered, in the view of -a court of equity, as a payment made by Reynolds himself, and if so, the complainant, w'ho has paid one half of Traill’s debt, is entitled to a contribution from the defendant, who it seems has paid nothing out of his own funds, Therefore decree that, McPherson pay to Talbott $310.93, with interest from 14th August 1829, it being one half of the sum which the defendant received from Reynolds for the payment of Traill’s debt, and further, that the defendant pay the costs of suit.
    From the decree W. S. McPherson appealed to this court.
    The cause was argued before Archer, Dorsey and Chambers, J.
    By W. A. Schley for the appellant, and
    By Palmer for the appellee.
   Archer, J.,

delivered the opinion of this court.

We are of opinion that, the complainant has no equity which would enable him to recover against the defendant, as co-security with him for Reynolds. The loan was in fact obtained for the mutual benefit of Reynolds and Talbott, by an understanding and agreement between Reynolds and Talbott, anterior to the loan. The money obtained was divided between them, each taking one half of the sum borrowed. This understanding and agreement we have no evidence was ever communicated to McPherson.

If we are to take Reynolds' evidence as true, then he was held out to McPherson as the principal, and he was by him invited to be his security with Talbott. Under such circumstances, it would not have occurred to McPherson, that the loan was to be equally for the benefit of his co-security.

Securities are always supposed to assume the same risks and responsibility, and to stand relatively to .the principal in the same situation, neither obtaining any benefit by the transaction, but each equally subjecting himself to responsibility, relying on the ability of the principal to meet the engagement, and relying on each other’s willingness to embark in the same risks and responsibility,. McPherson may have relied on the willingness of Talbdtt to go security, and may have been influenced to become the security by the confidence reposed by Talbott in the solvency and ability of Reynolds, supposing that Talbott was in the condition of an ordinary security. But if he had been informed, that Talbott's signature had been purchased by a promise to let him have half the money, as a consideration upon which he would give his name to Reynolds as securety, it is by no means certain that he would have incurred the obligation. The concealment of the fact by Talbott that he was to derive an advantage by the loan, operated as a fraud upon the co-security, who had a right to suppose that he was conferring a benefit solely upon the principal.

' The co-security might be very willing to obligate himself for the principal, but unwilling to assume responsibility for the surety, and to the extent of that part of the loan, which passed by agreement into the hands of Talbott, it was put to a hazard to which the co-security had never subjected it, and might have been entirely unwilling to have subjected it. To be sure, McPherson would not have objected to the uses to which Reynolds chose to apply the sum borrowed, after he had obtained it; that he may be presumed to have been willing to trust to his prudence and discretion; but it is the previous agreement, to allow the security to participate in the loan, without the disclosure of that fact, which in our judgment forms-the objectionable feature in the transaction. The most entire fairness on the part of secureties, each would have a right to exact; their situation should be equal, and this may be demanded in all cases where contributions for losses are sought, by one security from another.

DECREE REVERSED WITH COSTS, AND BILL DISMISSED.-

Chambers, J., dissented.