Court Opinion

ID: 6234218
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:28:46.110865+00
Date Added: 2024-06-11T08:57:59.511724
License: Public Domain

The opinion of the court was delivered, October 9th 1871, by
Read, J.
Henry Hess the father and Christian Lintner the father-in-law of Samuel Hess became bound as sureties, on bonds and notes given by Samuel Hess to different individuals. On February 27th 1869, Samuel Hess made a general assignment for the benefit of creditors, and on the next day his father Henry Hess died insolvent. Christian Lintner, under legal pressure, paid these debts for which he and Henry Hess were bound, and took transfers thereof from the creditors. The auditor gave a dividend only on one-half the amount paid, which the court reversed and gave a dividend orí the whole amount. The two estates of Samuel and Henry Hess will not pay together fifty per cent, of the amount paid by Christian Lintner.
The decision of the auditor was founded upon a Scotch case, decided by the House of Lords on the 11th of June 1794, reversing a decision of the Scotch court, -who had held that the surety was entitled to rank for the whole sums due on those debts paid by him. It is to be found in Ross on Principal and Surety, in Yol. 99 of the Law Library, p. 93.
In the Roman law, the obligation of co-cautioners was undertaken by the “ stipulatio,” in which each answered or engaged for the whole debt. The consequence was that each was liable singuli in solidum ; and that there was not in law any obligation or ground of action to the several cautioners against each other, but on any one of them paying the debt it was extinguished, and all the rest of the cautioners discharged. Two remedies in equity were afterwards introduced: the Benefioium JDivisionis, by which any one might insist on the others being called on to pay their share; and the Benefioium Gedendarum Actionum, by which anyone cautioner on paying the debt, was entitled to require the creditor to assign his right to him: Shaw’s Edition of Bell’s Principles of the Law of Scotland, p. 97, § 268; Oumius’ Manual of Civil Law, p. 204-5.
In 1 Bell’s Commentaries on Laws of Scotland, p. 354, it is said: “ Where the principal debtor has failed, and there are two cautioners, one of whom is solvent and the other insolvent, the creditor after discussing the principal may either go against the solvent cautioner, and make him pay the remainder of the debt, or he may, if he think fit, claim to be ranked for the full amount of the debt upon the estate of the insolvent cautioner; and after *275drawing a proportional dividend make the balance of the debt (after imputing such dividend) from the solvent cautioner. But he can so claim for the whole debt only before receiving payment of any part.”
“ If the creditors go first against the solvent cautioner, and compel him to pay the whole debt, such solvent surety is entitled to be ranked upon the estate of the insolvent cautioner for one-half only of what he pays. For as where there are two cautioners, each stands indebted as principal for one-half of the debt, and as cautioner for the other, when a solvent cautioner pays the whole debt, he necessarily extinguishes that moiety of it in which he stands indebted as principal; and of course he can claim and prove against the co-cautioner’s estate only the other moiety which he has thus paid in the character of surety for his co-cautioner,” — and for this doctrine the case cited by the auditor is the authority.
“ Where on the other hand the creditor goes first against the estate of the insolvent cautioner, he is entitled to be ranked upon it for the full amount of the debt, and to draw a proportional dividend, in regard that both cautioners are bound to him in solidum.” .
“The doctrine thus established,” says the learned commentator, “ does in its consequences seem inequitable and arbitrary, since according as the creditor may think fit to proceed, very different results to the cautioner arise. If the creditor choose to take full payment from the solvent cautioner, it will be ultimately for the advantage of the estate of the insolvent cautioner. If, on the other hand, he thinks fit to go in the first place against the estate of the insolvent cautioner, it will be ultimately for the advantage of the solvent cautioner.”
In America, and certainly in Pennsylvania, a surety paying the debt of his principal is entitled to be subrogated to all the rights and remedies of the creditors, as against his co-sureties in precisely the same manner as against the principal debtor, and as substituted in the place of the creditor and entitled to enforce all his liens, priorities and means of payment, and by the Act of 19 & 20 Vict. c. 97, § 5, this is now the law of England.
The debts paid by Christian Lintner and transferred to him, .'stand exactly in the same position to the assets of the decedent, Henry Hess, as if presented by the creditors themselves,, their status being fixed by his death, and nothing having occurred to change or reduce the amount. So far as they existed as debts payable out of the estate, no part of them is paid or extinguished, for the effect of subrogation is to consider them in full life, and enjoying all the rights of the original creditors.
• We regard the administrators of the decedent as trustees, and the creditors as cestuis que trust, owners of their share of the *276assets, and which, applying the principle in Miller’s Appeal, 11 Casey 481, and Patten’s Appeal, 9 Wright 161, passed to the co-surety who stepped into their shoes when he paid the amount due on such claims.
In Lidderdale v. Robinson, 2 Brockenbrough 160, affirmed by the Supreme Court of the United States, 12 Wheaton 594, it was held “where there are two sureties on bills of exchange and specialties, and one of them has paid more than his proportion, and his representatives seek contribution out of the estate of his co-surety, the surety who has overpaid will be subrogated to the rights of his creditors. The representatives of the surety, who has overpaid, are entitled to rank according to the dignity of the claims on which such excess was paid. The principle of substitution applies equally to cases arising between co-sureties and those between a surety and his principal.”
Chief Justice Marshall said (p. 168): “ The principle which the cases decide is this: Where a person has paid money for which others were responsible, the equitable claim which such payment gives him, or those who were so responsible, shall be clothed with the legal garb, with which the contract he has discharged was invested; and he shall be substituted to every equitable intent and purpose, in the place of the creditors whose claims he has discharged. This principle of substitution is completely established in the books, and being established, it must apply to all persons who are parties to the security so far as is equitable. The cases suppose the surety to stand in the place of the creditors as completely as if the instrument has been transferred to him, or to a trustee for his use. Under this supposition he would be at full liberty to proceed against every person bound by the instrument.”
This case leaves no doubt as to the correctness of the decision of the court below.
The opinion of the Chief Justice in Mosier’s Appeal, 6 P. F. Smith 76, and the cases cited by him show the extent of the doctrine of subrogation in this state, and directly affirm the principles above stated.
Decree affirmed, and appeal dismissed at the costs of the appellants.