Case ID: nc_62/html/0085-01.html
Source: Caselaw Access Project
Author: {"author": "Pearson, C. J. Per Ccriam.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

AUGUSTE W. MILLER v. ANNIE W. MILLER, ROBERT H. COWAN and HAYWOOD W. GUION, and wife, ELLEN.
    Where a vendor had executed a full title to the land sold, taking from the vendee a personal bond, with two sureties, for the purchase money; upon the insolvency and death of the vendee and one of the sureties, and a sale of the land by the devisee of the vendee to a purchaser with notice, Held, that the other surety could not subject the land for his indemnification upon the bond.
    Original Bill, filed to Fall Term, 1866, of the Court of Equity for Blaben, at which time a demurrer and an answer were put iu, and the cause was set for hearing, and transmitted to this court.
    The bill stated that in 1858 Mrs. Guión, then Miss Owen, sold to Thomas C. Miller an improved lot in Wilmington, (which was described,) and made a deed in fee to him, taking bond from him for $12,000, payable, with annual interest, at ten years after date, and with the complainant and James S. Miller as sureties thereto; that Thomas C. Miller died in 1865, and James S. Miller previously, and that the estates of both are insolvent; also that Annie W1 Miller, the wife of the former, is his devisee, and has, by the will, an absolute power of sale. The bill further stated that complainant had applied to Mrs. Miller to be allowed to take the lot, and assume payment of the debt, but had been refused, because she wished to make an application of its proceeds for her own advantage, and that afterwards she sold it on a credit for $12,000, which is considerably less than its value, to Robert H. Cowan, who purchased under various circumstances that put him upon notice; that Miss Owen has married Mr. Guión, and the latter holds the bond on which complainant is surety, and has notified him that he will sue upon it.
    The prayer was that Cowan be declared a trustee for the benefit of the oomplainant; that the land might be Bold for 'his indemnity; that an account might be taken, and that complainant might have other relief, &c.
    The answer of Mr. and Mrs. Guión admitted the material ■allegations of the bill.
    Mr. Cowan and Mrs. Miller filed a joint general demurrei-.
    ,Shepherd, for the complainant.
    1. No principle in equity is better established than that ;d surety may file a bill quia timet, like the present, against his principal, or his assignee with notice. Mitford, Eq. PL, 148; 1 Story Eq., § 327, 2 ibid, §§ 730, 849; Adams’ Eq., á70, and cases cited in the notes.
    2. A person who has gotten the estate of another ought not in conscience, as between them, to keep it, without paying the full consideration money, (2 Story’s Eq., § 1219,) and a resulting trust will be implied in favor of those who actually pay the money, whatever may be the form of the deed, or state of the title. 2 Story’s Eq., §1200.
    3- Precedents for the present bill may be found in Green v. Crocket, 2 Dev. & Bat. Eq., 390; Polk v. Gallant, id., 397; Arnold v. Hicks, 3 Ire. Eq., 17; Smith v. Smith, 5 id., 41; Egerton v. Alley, 6 id., 190; Freeman v. Mebane, 2 Jon. Eq., 47. In the last case the legal title was in the principal, and yet his surety was relieved out of the property, and that too against a principal, made such by equitable substitution— upon the ground, as there stated, that if a surety pays for the property, he has a right to hold it bound for his exoneration.
    4. The case does not rest upon the doctrine of vendor’s lien, but upon the duty from a principal to his surety. Mrs. Miller is a mere volunteer, and Mr. Cowan purchased from her under circumstances which fix him with notice. Even if the latter had no notice, yet as he has not paid all of the purchase money, this court will lay hold of so much as is unpaid for the benefit of the complainant; and besides, as the price was inadequate, if Cowan retain it he should account for the difference between that price and the value.
    
      Strange and Person, for the defendant Cowan.
    Their points were: 1. That although the doctrine of vendor’s lien is established in England, (Macreth v. Simmons, 15 Yes., 329, and 1 AVhite & Tudor’s Lead. Gas. in Eq., 220, and notes,) with the consequence of subrogating the surety of the vendee to such lien, (Dewig v. the Dari of Winchelsea, AYhite & Tudor, 193, and notes,) yet in North Carolina, after having been at first adopted by a divided court in Wynne v. Alston, 1 Dev. Eq., 163, and subsequently doubted in Johnson v. Cawthoj'n, 1 Dev. & Bat. Eq., 32, and C7xitdey v. Timderlahe, 1 Ire. Eq., 346, it was. (by a divided court,) exploded in WombleY. Battle, 3 Ire. Eq., 182; which case has been followed in Henderson v. Burton, 3 Ire. Eq., 259, v. Mason, 7 IreEq., 180, and Symmms v. Spruill, 3 Jon. Eq., 12.
    2. The principle of Green v. Crochet, Both v. Gallant, Smith v. Smith, Freeman v. Mébane, cited for the complainant, is that a surety shall have the benefit of any security taken from a principal, and that here is only the bond. S. R. PutledgeY. Smith, 2 Jon. Eq., 283.
    3. That the demurrer is regular. Bay v. Bay, 6 Ire. Eq., 355; Littlejohn v. Williams, 2 Dev. Eq., 380; Sed. vide, Rev. Code, c. 32, s. 21; Barker v. Swain, 4 Jon. Eq., 220.
   Pearson, C. J.

It was properly conceded by Mr. Shepherd, on the argument, that the doctrine of “ the lien of a vendor for the purchase money ” does not obtain in this State. (See the cases collected in Battle’s Digest.) He rested the complainant’s right to relief on the relation of principal and surety, and assumed, in the first place, that a surety is not bound to wait until he has been forced to pay Hie debt, but is allowed to file a bill “ qma timet ” and obtain. a decree, that the principal pay the debt tor his exoneration. This proposition is true, and the only difficulty is that it does not fit the case; for one of the allegations of the bill is that the estate of the principal is hopelessly insolvent: so a decree of this kind would be useless, and is not prayed for. The scope of the bill is to have a house and lot, belonging to the principal, subjected to the payment of the debt. Mr. Shepherd puts this equity on the ground that the debt, for which the complainant is bound os surety, was created for the purchase of this very house and lot, and as the principal, is insolvent, the complainant, as surety, has an equity to be indemnified out of it, in preference to any other creditor, on the broad principle that a surety, who pays, or is about to be forced to pay, for the property, ought in conscience to have it, or at least to be indemnified by it; and he insists that the defendant, Mrs. Miller, who is the executrix of the principal, and the defendant, Mr. Cowan, who purchased from her with notice, are subject to this equity. The latter branch of this proposition is true. Neither Mrs. Miller nor Mr. Cowan can be in a better condition than the principal debtor, “in whose shoes they stand.” So the only point is: Gan the first branch of the proposition be sustained, either upon principle or by authority ?

That a surety, who is forced to pay for property, ought in conscience to be indemnified out of it, is a proposition which, at first view, will strike every one as in accordance with natural justice. Yet, upon examination, it will be found that it cannot be practically applied, without interfering toe much with the ordinary dealings between man and man, and without restricting too much the exercise of the-rights of property. For this reason, although Courts of Equity have at all times been studious to protect sureties, yet they have never adopted this broad principle, and have confined their interference to the limited bounds, which I will have .occasion to state below.

Take our case, by way of illustration. In 1853 Thomas CL Miller bought the house and lot of Mrs. Guión, and she accepted from him a bond, with two sureties, for the pur- , ®hase money, to be paid at the expiration of ten years, interest to be paid annually, and thereupon executed to him a deed for the property, by force and effect whereof he be-same, to all intents and purposes, the owner, both at law and in equity. After that time Mrs. Guión had no more right to look to this property for the payment of the debt than to any other property of his, and no more concern with it than any other creditor; and he had as full ownership in it as in any other property that belonged to him. What an intolerable fetter would it be on the rights of property to adopt the doctrine that he could not sell this house and lot, and that it could not be sold for his debts as long as a bond, which, by the acts of the parties, had become a naked personal abligation, or any part of it, remained unpaid ?

Let us now see how far the courts 'have felt at liberty to go in favor of sureties. It is true, as Mr. Shepherd contended, that, when a surety pays the debt, he is held in equity to entitled to the benefit of any security which the creditor bolds against the principal; in other words, to be subrogated to the rights of the creditor against the principal. So here, if Mrs. Guión had retained the title as security, or if she had taken a mortgage, the surety would have been entitled to the benefit of the security. For this position Green v. Crocket, Polk v. Gallant, and the other cases cited for the complainant, are authorities; but they all proceed on the principle that the legal title being in the creditor, as a se®xsrity, the surety may call for it, as an indemnity. The learned counsel was forced to concede that these cases do not apply. But he relied upon Freeman v. Mebane, 2 Jones’ Eq., 44, as an authority in point; for he says that there the legal title was in the principal, and not in the creditor, and was subjected in the hands of a purchaser to indemnify the surety.

It is true, that in that case the legal title was in the principal, but an examination of the case will show that it was not an extension, but a new application, of the doctrine of substitution, laid down in Green v. Crocket and the other cases, and is subject to the very same limitations. Freeman was the surety of one Sutton, on a bond to make title to one Nichols. Afterwards Mebane bought the legal estate which Sutton held at sheriffs sale. Freeman thereupon filed a bill and obtained a decree to subject the land ly> his indemnity, on the ground that Nichols, the creditor in the bond, had the equitable estate, and could force Mebane to convey the legal estate to him; and by the doctrine of substitution, Freeman, the surety, had a right to call on the creditor and have the benefit of all the rights and secureties which he held against the principal. There the surety took the place of the creditor, and was allowed to set up his equitable title. In Green v. Crocket, and the other cases', the surety took the place of the creditor, and asserted his legal title. But in all of the cases the creditor had either a legal or equitable title; whereas, unfortunately for the complainant in our case, the creditor has neither a legal nor equitable title, and there is nothing for a Court of Equity to act upon, by way of substitution. It is the misfortune of the surety that the creditor relied on the bond alone, and ho himself neglected to take any counter security.

Per Ccriam.

Demurrer allowed, and bill dismissed with costs, except as to defendants Guión and wife.