Court Opinion

ID: 6575583
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:33:59.118321+00
Date Added: 2024-06-11T15:57:05.025872
License: Public Domain

Church, J.
There are now certain well settled principles *383of equity applicable to funds appropriated to the security of debts, which, the plaintiff supposes, justify ins claim to tribution in this case.
1. Where a fund is placed in the hands of a creditor, the surety is entitled to the same benefit as against the principal whose debt he has paid, as the creditor had himself. It is the debt which is to be protected, by the fund or security, first in the hands of the creditor, and ultimately in his hands who has paid it. No matter how it may be modified, or what shape it may have assumed, or into whose hands it may come, until it is paid, the pledge accompanies it, and remains for its redemption. New-London Bank & al. v. Lee & al. 11 Conn. R. 112. Hodgson v. Shaw, 3 Myl. & K. 190. 1 Sto. Eq. 592. & seq.
2. If the fund or pledge be in the hands of the surety for his indemnity, the creditor may, if he has no other remedy, compel its appropriation to the payment of the debt. 1 Eq. Ca. Abr. 93. (K.) Moses v. Murgatroyd, 1 Johns. Ch. R. 110, Russell v. Clark’s exrs. 7 Cranch 69. Phelps v. Thompson, 2 Johns. Ch. R. 418. Miller v. Ord, 2 Binn. 202. 1 Sto. Eq. 592.
It seems to us, that the plaintiff misapplies these principles, upon which he relies ; and, indeed, that the recognition of this claim would subvert them. The bank, in requiring the plaintiff’s indorsement, and also in procuring Kilbourn’s mortgage, intended only security for itself, to protect itself. In this latter transaction, the plaintiff had no agency: he was a stranger to it. And his equity as indorser or surety was merely collateral, growing out of the acts of the other parties, and can exist only after the whole fund or security, has been first applied to the whole debt due to the bank,and can attach only upon the surplus remaining with the bank, after its entire demand shall be satisfied.
It would have made no difference in this case, if Whiting had procured the mortgage from Kilbourn for his own indemnity merely ; for the bank, after availing itself of the plaintiff’s indorsement for that part of the debt secured by the mortgage, had still the right, as we have seen, to compel Whiting to appropriate the mortgage in satisfaction of the balance of the debt, unless it bad some other adequate remedy for its payment.
*384The entire debt due to the bank is not vet paid ; and after , . . „ f , appropriation of the whole avails of the mortgage, about the sum of 400 dollars remains due. If therefore, the plain-succeeds in this application, the effect will be, to compel the bank to refund a portion of the money it has collected, and which was justly due, and which, by its vigilance, it had secured. And it will be, also, to give back to the indorser a part of the debt, with which he became charged, and which, both legally and equitably, he was bound to pay. If the plaintiff had been sued as indorser of the notes indorsed by him, he could have made no defence at law ; judgment must have passed against him, and the whole amount of the notes have been collected. And we do not see, that, in the absence of fraud or mistake in obtaining such judgment, a court of equity could interfere for his relief. Nor can we now see, that his claim upon the bank can be any better sustained, so long as the bank has failed to collect, in the use of due diligence, the whole amount of its legal demand.
We are of opinion, that there is nothing erroneous in the decree and judgment of the superior court.
In this opinion the other Judges concurred, except Williams, Ch. J., who gave no opinion, being interested as a stock-holder in the Hartford Bank.
Decree affirmed.