Case Name: J. F. Bingham vs. E. A. Mears, et al.
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 1894-11-13
Citations: 4 N.D. 437
Docket Number: 
Parties: J. F. Bingham vs. E. A. Mears, et al.
Judges: All concur.
Reporter: North Dakota Reports
Volume: 4
Pages: 437–452

Head Matter:
J. F. Bingham vs. E. A. Mears, et al.
Opinion filed November 13th, 1894.
Appeal Bond — Liability of Surety.
It is no defense to an action against sureties on an appeal undertaking that the plaintiff holds security amply sufficient to pay the claim for which the sureties have become bound, and that plaintiff has refused on demand to resort to such security for payment, there being no proof that the sureties were prejudiced by such refusal.
Rights of Surety as to Collateral Held by Creditor.
Whether a surety may not, under exceptional circumstances, compel a creditor to exhaust collateral security before suing him, not decided.
Appeal from District Court, Cass County; McConnell, J.
Action by J. F. Bingham against E. Ashley Mears and M. B. Mears on an undertaking on appeal. Judgment for plaintiff, and defendants appeal.
Affirmed.
A. S. Drake, for appellants.
A surety can compel the creditor to proceed against the debtor, until he has exhausted his remedy against the debtor. Story’s Eq. Jur. 327, 494, 639; Daniels Neg. Inst. 1339; Black River Bank v. Page, 44 N. Y. 457; Philadelphia Ry. Case, 5 At. Rep. 361; § 1681, Civil Code; Kennedy, v. Falde, 29 N. W. Rep. 670, 4 Dak. 319; Meridan Silver Plate Co. v. Flory, 7 N. E. Rep. 753; Richards v. Oseóla County Bank, 45 N. W. Rep. 294. All the surety has to do to protect his property is to point out property belonging to the principal debtor. Barnes v. Cavanaugh, 3 N. W. Rep. 803; Bedwell v. Gephart, 24 N. W. Rep. 585.
Newman, Spalding & Phelps, for respondent,
The obligation of defendants is statutory and not common law. Thompson v. Blanchard, 3 N. Y. 335; Doolittle v. Dininny, 31 N. Y. 350. An undertaking on appeal is an absolute independent contract on the part of the sureties, in the nature of a guarantee of payment. Curtis v. Richards, 9 Cal. 34, City of Sacramento v. Dunlap, 14 Cal. 421; Murdock v. Brooks, 38 Cal. 596; Heebner v. Townsend, 8 Abb. Pr. 234; Robinson v. Plimpton, 25 N. Y. 487; Staples v. Goky, 34 Hun. 289.
Plaintiff is not bound to exhaust his remedies against the Mortgage Bank, and Investment Co., or resort to collateral. Heebner v. Townsend, 8 Abb. Pr. 234; Murdock v. Brooks, 38 Cal. 596; Laws 1891, Ch. 120. § 22; Wallerstein v. American Surety Co., 15 N. Y. Supp. 954.

Opinion:
Corliss, J.
The defendants were sureties on an undertaking given on appeal to this court from a judgment. Their only defense to this action against them on the undertaking is that the principal on whose behalf they signed the undertaking assigned to the plaintiff, as collateral to the claim on which such judgment was rendered, certain promissory notes secured by real estate mortgages, and that such collateral security is sufficient to pay such judgment and all expenses; that they have notified the plaintiff that he must resort to such collateral to collect his claim, but that he has failed to do so. Under the circumstances of this case, these facts do not constitute a defense. The general rule is that the surety has no right to insist that the creditor shall first proceed against the principle debtor, or any security which such debtor may have given him. Upon default the surety may at once be sued. 1 Brandt, Sur. § 97. It is true that in cases characterized by exceptional features, equity may compel the creditor to resort first to the property of the principal debtor where this will occasion no inconvenience or delay to the creditor. See Railroad Co. v. Little, (N. J. Err. & App.) 7 Atl. 361. But the facts of this litigation do not call for the application of this rule. There is no claim that the principal debtor is insolvent, or that these collateral securities will not be available to the sureties in their hands for their indemnity after they have become by payment subrograted to all the rights of the plaintiff therein. There is also another rule which appears to be well supported, but this case is not brought within its scope. There is authority for the doctrine that upon indemnifying the creditor against the expenses of the proceedings the surety may, in equity, compel him to first exhaust his remedies against the principal debtor. Brandt, Sur. § 238. But in this case no offer of indemnity appears to have been made. This is a simple action at law upon a contract. The right of the sureties with respect to this collateral security is to resort to it themselves on paying the debt, and not to compel the creditor to resort to it. It is because of this right of a surety to look to such security for indemnity after he has paid the debt that the release of such security by the creditor will discharge the surety. When the surety is sued, he cannot, in an ordinary case at least, defend on the ground that the principle should have been first sued, and all efforts to collect the debt from him exhausted. On the same principle, the surety cannot insist that the creditor must first essay to collect his claim out of the collaterals the principle debtor has given him, except in the case mentioned in section 4310. This statute is inapplicable to this action. Another section of our statutes clearly contemplates that the mere failure, after request, to sue the principle debtor, or to proceed against collateral security, will not defeat an action against the surety. The latter may nevertheless be sued, and is liable for every dollar of the debt, except to the extent that he is prejudiced by the refusal of the creditor to proceed as requested. Comp. Laws, § 4305. The fact that the principal debtor has not been sued, or that collateral security has not been exhausted, is never a defense of itself. It is not a defense, even when a request of the surety is shown, that the creditor sue the principle or resort to his collateral, unless the surety is prejudiced by the failure of the creditor to act as requested; and then only to the extent of such prejudice. To have made out a defense because of the failure to resort to this collateral security, defendants should have proved that they had been prejudiced thereby,
Another section of our statute leads us to the same conclusion. Section 4310, Comp. Laws, provides that "whenever property of a surety is hypothecated with the property of the principal, the surety is entitled to have the property of the principal first applied to the discharge of the obligation." Here is a single instance in which the surety may insist that collateral held by the creditor shall be first exhausted. It follows that in no other case does this right exist, unless the right was well established under the decision prior to the enactment of this statutory law. So far from finding such a rule to have been settled at the time our Code was adopted, we have been unable to discover a single authority sustaining such a doctrine where the facts were not exceptional. All the adjudications support the contrary rule. Fuller v. Loring, 42 Me. 481; Thorn v. Pinkham, 84 Me. 101, 24 Atl. 718; Morrison v. Bank, 65 N. H. 253, 20 Atl. 300; Abercrombie v. Knox, 3 Ala. 728; Allen v. Woodard, 125 Mass. 400; Jones v. Tincher, 15 Ind. 308; Brick v. Banking Co., 37 N. J. Law, 307; 1 Bandt, Sur. § § 97, 237; Buck v. Sanders, 1 Dana, 187; Day v. Elmore, 4 Wis. 190-198; Pen v. Ingles, 82 Va. 65; Davis v. Patrick, 6 C. C. A. 632, 37 Fed. 909; Callahan v. Mitchell, 29 Ind. 419; Aultman v. Smith, 32 Mo. App. 351.
The judgment of the District Court is affirmed.
All concur.