Case ID: ohio-st_1/html/0281-01.html
Source: Caselaw Access Project
Author: {"author": "Bartlet, C.J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*John R. Russell v. Christian Failor.
    'The right of contribution among sureties is founded, not in the contract of suretyship, but is the result of a general equity which equalizes burdens and benefits; and the common law which has adopted and given effect t® this equitable principle, by an action upon an implied assumpsit, only allows the action where there is a just and equitable ground for contribution.
    "Where a surety has voluntarily paid money on a void note or obligation, he can not maintain an action against his co-surety for contribution.
    Writ of error to reverse the judgment of the court of common ■pleas, reserved iu the district court for the county of Warren.
    The original action was assumpsit, instituted in the common .pleas in November, 1850, for contribution on account of money paid -by the plaintiff as co-surety with the defendant. Plea, won assumpsit. The intervention of a jury being waived and the cause submitted, the court found for the defendant. The plaintiff moved for a new trial, which motion was overruled and judgment rendered against the plaintiff. A bill of exceptions was taken to the ruling of the ■court, from which it appears:
    That on the 1st day of February, 1849, William Eussell, J. Yan Harlington, John E. Eussell, and Christian Failor executed their Joint and several promissory note for one thousand dollars, payable ninety days after its date, to the Preble County Branch, in Eaton, ■of the State Bank of Ohio, at the Ohio Life Insurance and Trust Company, Cincinnati. On this note William Eussell was the principal, and the other above-named makers were sureties. The note was discounted for William Eussell, and the proceeds applied for his benefit. On the 19th of May, 1849, the note was protested for non-payment. Shortly after the discount of the note, William Eussell failed ; and on the 5th of March, 1849, John E. Eussell, the plaintiff, executed a mortgage on certain real estate in Middle-town, Butler county, Ohio, to the Preble Branch Bank, to secure the payment of this and also another *note; and on the 19th of April, 1850, paid to said branch bank $700, in full for the note .above described, and at the same time satisfied the residue of the mortgage. And this suit was brought to recover Taylor’s proportion of the $700. Prior to the- commencement of the suit the plaintiff called on the defendant, presented the note and protest,., informed him of the payment, and demanded contribution, which-the defendant refused to make. It appears, from the testimony of an agent of the branch bank, that, when the note was discounted,, ■interest at the rate of six per cent, per annum was reserved oi taken thereon by the branch bank in advance; and that, in addition-to such interest, the further sum of three-fourths of one per cent, on the amount of said, note was reserved on the alleged ground of a charge for exchange, and the trouble and expense of collecting and remitting the funds when collected from Cincinnati to Eaton. It further appears that, at the time of the discount of the note, the-rate of exchange between Eaton and Cincinnati was in favor of the-latter place ; also, that the plaintiff had notice of the reservation by the branch bank of the three-fourths of one per cent, over and above the six per cent, interest before the payment of the note. It doeá not, however, appear by any direct proof that he had knowledge of this fact at the time of the execution of the mortgage aforesaid.
    
      G. J. & J. M. Smith, for plaintiff.
    
      Ward, for defendant.
   Bartlet, C.J.

The errors assigned in this case are substantially the following:

1. That the court erred in holding that the note was void, and that the payment of the same by the plaintiff gave him no right of action against the defendant for contribution.

2. That the court erred in overruling the motion for a new trial, etc.

Two questions are here presented for determination:

1. Was the note void on the ground of usury?

2. *Oan a surety on a promissary note which is absolutely void by the voluntary payment thereof, entitle himself to contribution against the co-surety ?

The first question has been determined in the affirmative by adjudications already made in this state. See the case of the Preble Branch of the State Bank of Ohio v. William Russell and others, ante, p. 313; also Chillicothe Bank v. Swayne, 8 Ohio, 257; Creed v. The Commercial Bank of Cincinnati, 11 Ohio, 489 ; The Miami Exporting Compamy v. Clark, 13 Ohio, 1; Commercial Bank v. Reed, 11 Ohio, 498; United States Bank v. Owens, 2 Pet. 538.

The second question is one which does not appear to have been very frequently presented for adjudication.

The right of contribution among sureties is founded not in the contract of suretyship, but is the result of a general principle of equity which equalizes burdens and benefits. The common law has adopted, and given effect to this equitable principle on which a surety is entitled to contribution from his co-surety. This equitable obligation to contribute having been established, the law raises an implied assumpsit on the part of the co-surety, to pay his share of the loss resulting from a concurrent liability to pay a common debt. This jurisdiction, by an action at law, is, therefore, resorted to, when the case is not complicated ; and the more extensive and efficient aid of a court of equity is thus rendered unnecessary. It follows that this action can only be sustained where there exists a just and equitable ground for contribution.

A contract of suretyship is accessory to an obligation contracted by another person, either contemporaneously, or previously, or subsequently. It is of the essence of the contract, that there be a subsisting valid obligation of a principal debtor. Without a principal, there can be no accessory; and by the extinction of the former, the latter becomes extinct. This results from the nature of the obligation of suretyship. Burge on Suretyship, 3, 6 ; Theobald on Prin. and Surety, 2.

*It would seem to follow, from the very nature of the undertaking, that if the principal contract is absolutely void, the obligation of the surety would likewise be void. But it is said, that where the contract of the principal debtor is only viodable on account of incapacity or otherwise, and the person undertaking as surety contracted with a knowledge of the incapacity or other cause making the principal obligation voidable, he must be understood as incurring not merely a collateral but a principal obligation. How far this may extend, as between surety and principal, it is not necessary here to inquire; but there seems to be sound reason in the doctrine, that where the surety has knowledge of that which amounts to a valid defense for him against the creditor, he is bound either to avail himself of it, orto give notice to the principal debtor, so as to enable him to set up the defense ; and in default of doing either, he would be deprived of recourse against the principal. Burge on Suretyship), 367.

The-utmost extent to which a surety, who has made payment can claim, is a subrogation to the rights of the creditor, so that he will rank against the debtor in the same degree as the creditor would have done if he had not been paid. Where, therefore, a surety could have no remedy against the principal, he clearly could have none against his co-surety, against whom he would have less equity in his favor.

Such, then, being the nature of the contract of suretyship, to what right of contribution was the plaintiff entitled in this case against the defendant ? The claim set up by the branch bank was absolutely void ; and it could have acquired no validity from the execution of the mortgage by the plaintiff before he had notice of the usury, especially as against the defendant. And it appears that the plaintiff had knowledge of the usury before he paid the debt. With what pretense of equity can the plaintiff, who was not bound himself by voluntarily paying a void note, claim to impose an obligation upon the defendant as his co-surety, who was under no obligation before, either legal or equitable ? Had the creditor instituted a suit on the note against the defendant, his ^remedy was clear and complete; and he could not certainly have been deprived of his means of defense by the voluntary act of the plaintiff. This is clearly not a case where an implied assumpsit could have been raised against a co-surety for contribution.

The principle laid down in the case of Skillin v. Merrill, 16 Mass. 40, would seem to be in point in this case, and fatal to the plaintiff’s cause of action. And it is not shaken by the case of Ford v. Keith, 1 Mass. 139, and the case decided upon its authority, of Wallace v. Burns, 6 Ala. 780, to which reference has been made. The last two cases are not strictly analogous to the present one. Upon no principle of justice or sound reason can a surety, by voluntarily paying money on a void note, impose an obligation upon a co-surety for contribution.

Judgment affirmed.