Court Opinion

ID: 6234646
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:29:41.19428+00
Date Added: 2024-06-11T08:58:00.286234
License: Public Domain

The opinion of the court was delivered, July 2d 1873, by
Williams, J. —
If the transaction out of which the question in this case arises had been a loan, and the bonds had been transferred as collateral security for its payment, the appellant under the rule settled in Keim’s Appeal, 3 Casey 42, and reaffirmed in subsequent cases (Miller’s Appeal, 11 Id. 481, and Patten’s Appeal, 9 Wright 151), would have been entitled to a dividend out of the assigned estate on the whole amount of his claim. But the transaction was not a loan ; it was a purchase of the bonds by the appellant, who become the equitable owner. The seller, out of whose assigned estate the dividend is claimed, by a separate contract endorsed on each bond, guaranteed its payment. The contract of guaranty was subsidiary to the bond ; it did not constitute the principal obligation for the performance of which the bond was transferred as collateral security, but the contract of guaranty was collateral to the obligation created by the bond. When, therefore, the judgment which was first entered on one of the bonds, was satisfied out of the proceeds of the sheriff’s sale of the obligor’s property on which it was a lien, it extinguished the debt and put an end to the, liability on the contract' of guaranty ; and if so, what right has the appellant to a dividend thereon out of the assigned estate ? If he had purchased but the one bond upon which judgment was first entered and which was satisfied out- of the proceeds of the sheriff’s sale, it would hardly be pretended that he would be entitled to a dividend. But why should his purchase of three other bonds entitle him to a dividend on all of them, when one has been paid ? They were of different dates, and for different amounts, having no connection with each other, and their payment was guaranteed by separate and independent contracts. If either had been paid by the obligor it would have extinguished the debt and the collateral contract guaranteeing its payment. There can be no doubt that the satisfaction of the judgment out of the proceeds of the sheriff’s sale extinguished the obligor’s liability for the whole debt for which it was obtained ; and it follows as a necessary corollary that the assignor’s liability on the contract of guaranty was also extinguished. If then the bond and guaranty were both extinguished, there ivas no debt or liability upon which the appellant was entitled to a dividend. The court below was therefore clearly right in deciding that he was entitled to a dividend only upon the bonds which had not been paid.
Decree affirmed at the costs of the appellant.