Searcy v. Shows , 204 Ala. 218 ( 1920 )

The equity of the original bill may well be rested upon the principle found stated in the following quotation from Thomas v. St. Paul M. E. Church, 86 Ala. 138, 5 So. 508:

"No principle of equity is more familiar, or more firmly established, than that a surety, after the debt for which he is liable has become due, without paying, or being called on to pay it, may file a bill in equity to compel the principal debtor to exonerate him from liability by its payment, provided no rights of the creditor are prejudiced thereby. The principle has been extended to cases of pledged or mortgaged property. * * * The right of the surety to be exonerated from liability is founded on equitable principles — the primary duty of the principal to pay the debt, and it being unreasonable that the surety should be burdened with the liability, a cloud hanging over him, at the will of the creditor, and the risk of ultimate loss. The doctrine has been expressed by Lord Redesdale as follows: 'A court of equity will also prevent injury in some cases, by interposing before any actual injury has been suffered, by a bill which has sometimes been called a bill quia timet, in analogy to proceedings at the common law, where, in some cases, a writ may be maintained before any molestation, distress, or impleading.' "

This principle has found frequent reiteration in subsequent decisions of this court. West Huntsville Cotton M. Co. v. Alter, 164 Ala. 305, 51 So. 338; Tillis v. Folmer, 145 Ala. 176,39 So. 913, 117 Am. St. Rep. 31, 8 Ann. Cas. 78; Hudson Trust Co. v. Elliott, 194 Ala. 441, 69 So. 631. And to like effect, see, also, 1 Story's Eq. Jur. (13th Ed.) § 327; 2 Story's Eq. Jur. (13th Ed.) § 730; Brandt on Suretyship Guaranty, vol. 1, §§ 245, 246; West v. Chasten, 12 Fla. 315; De Cottes v. Jeffers Cothran Co., 7 Fla. 284.

Counsel for appellees rely upon the well-recognized general rule as stated in Lane v. Westmoreland, 79 Ala. 372, and quoted in Cooper v. Parker, 176 Ala. 122, 57 So. 472, to the effect that a surety cannot recover indemnity from the principal or indemnitor until he has paid the debt. Upon the payment by the surety of the debt, for which he is bound, it being then due, a right of action for reimbursement arises in his favor against the principal, and in the absence of an express agreement the law implies a promise of indemnity on the part of the principal. Brandt on Suretyship Guaranty, § 226. Yet, by express contract, such right of action for indemnity against the principal may be given before the payment of the debt. Id. §§ 242, 243. However, the general rule above referred to does not militate against the well-recognized principle found stated in the quotation from the Thomas Case, supra, to the effect that, if the debt for which the surety is liable has become due, he may, without paying the debt, file a bill in equity to compel its payment by the principal, and thereby be exonerated from liability thereon. He does not in such bill seek to recover indemnity from the principal, but merely to compel the principal to pay the debt for which he is primarily liable, and thus relieve the surety who is only secondarily liable therefor. In giving effect to this doctrine there need be no risk either to the principal or to the creditor, for a court of equity will protect the interests of both in the application of the funds. As pointed out in Cooper v. Parker, supra, it is "clear that the mortgagor-principal would have an equity to have the fund so realized applied to the principal debt, if he still remained liable thereon." See, also, De Cottes v. Jeffers Cothran Co., supra. Many cases are cited in the note to section 245 of Brandt on Suretyship Guaranty, and in section 246 of the same work, as directly applicable here, is the following:

"A surety or guarantor who holds a mortgage on the property of his principal may, after the maturity of the debt, and before paying it, have the mortgage foreclosed, and the proceeds thereof applied to the payment of the debt."

This is what is sought by the original bill — to compel the payment of the amount due by the principal debtor, and to have the mortgage foreclosed and the proceeds of sale applied in the extinguishment of the debt for which the complainant is surety.

Furthermore, under the previous decisions of this court, the mortgage given complainant very satisfactorily discloses upon its face that the parties did not intend the surety should be required to first pay the debt before resorting to the enforcement of the security. The mortgage recites that it was given to indemnify the mortgagee against loss on his part by reason of the suretyship on the replevy bond. This condition was broken when the principal debtor failed to pay the final judgment rendered, for, as said in Daniel v. Hunt, 77 Ala. 567, "when this happened, there was, in legal contemplation, a loss to the surety, who was personally bound for the payment of the debt. * * * The word 'loss,' here, means nothing more than legal damage, detriment, or forfeiture." The principal also executed his note in a fixed sum due upon a certain date, and the mortgage was given to further secure the same. In Russell v. La Rogue, 11 Ala. 352, it was held that a note executed by the principal to the surety as indemnity, payable at a certain date, established "very satisfactorily that the right of the surety to an action on the note was not to depend on his being compelled to pay the debt for his principal," and in this respect the La Rogue Case was followed in Cooper v. Parker, supra.

We are therefore of the opinion that the bill as originally filed contained equity, and that the amendment which disclosed that subsequent to the filing of the original bill complainant had paid the judgment was not essential to its equity, but was properly averred as affecting the application of the funds upon the rendition of the final decree.

The remaining assignment of demurrer is argued by counsel for appellees upon the assumption that the bill shows complainant had satisfied, canceled, and surrendered the mortgage to the mortgagor. The bill, however, does not so aver, but merely states in substance that being misinformed as to the legal effect of the execution of the supersedeas bond, and for this sole reason, he entered satisfaction upon the margin of the record, although nothing had been paid thereon. Clearly, this does not show a cancellation, surrender, and satisfaction of the mortgage debt. This assignment was not well taken.

It results that the court below committed error in sustaining the demurrer to the bill as amended, and the decree will be reversed and the cause remanded.

Reversed and remanded.

ANDERSON, C. J., and SAYRE and BROWN, JJ., concur.