Mankey v. Willoughby ( 1903 )

Mr. Chief Justice Alvey

delivered the opinion of the Court:

The answers of Mankey and Clegg, not being called for under oath, are not evidence of the facts set forth therein, as against the complainant, but they are proper to be referred to as showing the ground of defense of the parties. Both Mankey and Clegg were examined as witnesses in their own behalf, but Mankey does not profess to have any personal knowledge of the transactions that occurred between Willoughby and Clegg; and the statements of Clegg as to what transpired between himself and Willoughby, in regard to the matter here involved, being excepted to, are not admissible against the complainant as executrix of Willoughby, under the statute. Code, D. C., Sec. 1064.

The exhibits in the case, to which we have referred, together with the undisputed facts as disclosed in the testimony, present, at least, a prima facie case for the relief prayed by the complainant. The case as thus presented, apart from the matters of defense, is plainly within the established principle, that a surety, or a party who stands in the position of a surety, such as indorser or guarantor,, is entitled to receive and to be subrogated to all the rights- and remedies of the creditor whose debt he has been required to pay, as to any security, fund, lien or equity, which the creditor had against any other person or property, on account of such debt. This right of the surety to be subrogated, on the payment of the debt, to the securities held by the creditor, does not depend upon contract, but rests upon principles of justice and equity. The surety is entitled to have the security in the same plight and condition-in which it stood in the creditor’s hands, and is entitled to all the remedies thereon that were available to the creditor. Wright v. Morley, 11 Ves. 12; Craythorne v. Swinburne, 14 Ves. 159; Mayhew v. Crickett, 2 Swanst. 185 ; Pledge v. Buss, Johns. (V. C.) 666; King v. Baldwin, 2 Johns. Ch. 554; Mathews v. Aikin, 1 N. Y. 595; Swan v. Patterson, 7 Md. 164.

In the answers, as we have seen, and also in the testimony on the part of the defendants, it is claimed that the certificates pledged as security for the payment of the $600' note, guaranteed by Willoughby, belonged to Mankey, and that they had been pledged by Willoughby for the payment of the note in violation of the agreement by which they had been placed in the hands of Clegg by Mankey. And while it is averred that-Willoughby had knowledge of that agreement, the proof fails to show that he knew anything about the terms upon which the certificates had been delivered to Clegg by Mankey. That the certificates belonged to Mankey may be conceded, but that fact does not operate to conclude the right against Willoughby, the guarantor of the note, for which the certificates were pledged as collateral security.

It is not indispensable, says Judge Story, in his work on Bailments, Sec. 291, that the pledge should belong to the pledgor; it is sufficient if it is pledged with the consent of the owner. And even without the consent of the owner, the thing may, as between the parties, be completely deemed a pledge, so that the pledgor himself cannot reclaim it except on discharging the obligation. If Clegg abused the confidence that was reposed in him by Mankey, in not using the certificates in the way and for the purpose only for which they were obtained, and in not returning them to the owner, after they were so used, that was an affair to be settled and adjusted as between Mankey and Clegg. The certificates would appear to have been lawfully in the hands oí Clegg, with the assignment of Mankey indorsed thereon in blank, without any restriction of the use that might be made of the certificates, with an express authority to have made upon the books of the syndicate a transfer of all right and interest evidenced by the certificates. Phillips, with whom the certificates were pledged as collateral security, was well justified in receiving and relying upon the certificates, and when the note was paid or taken up by the executrix of the surety or guarantor, Phillips, the creditor, was fully justified, indeed, required by the settled rules of law to deliver up to the surety the note, together with the certificates, as means of indemnity to the surety. Jarvis v. Rogers, 13 Mass. 105; Same Case, 15 Mass. 389; Tally v. Freedman’s Savg. and Trust Co., 93 U. S. 321.

If the defense set up by Mankey and Clegg had been clearly made out by competent proof, that the money obtained on the note to Phillips for $600 had been received and applied by Willoughby to his own use, or that he had received money with which to take up the note when due, but failed to so apply the money, such proof, of course, would be a full answer to this proceeding by the executrix of Willoughby, and would require the bill to be dismissed. And, in such case, having obtained the certificates upon the payment of the note, they could not be retained to indemnify the estate of Willoughby for any other liability that he may have incurred for Clegg. The onus of proof, however, is upon the defendants, and they are required to make out the defense by clear and definite proof, in order to overcome the prima facie case shown on the part of the complainant. The testimony of Jackson, a partner of Clegg, a witness produced on the part of the defendants to prove that the money received on the note for $600 from Phillips was paid over to Willoughby would appear to be directly in conflict with the testimony of Phillips; and besides, the testimony of Jackson seems to be inconsistent with much of the most material Bvidenee of the case. Indeed, the proof on the part of the defendants, when considered as a whole, is far from satisfactory to establish the defense. It is altogether too loose, indefinite, and conflicting to warrant any certain conclusion therefrom. The court below passed a decree granting the relief prayed by the bill; and upon default of the redemption of the certificates by the defendants, or one of them, that said certificates should be sold and the proceeds of such sale be applied under the direction of the court. We find no error in the decree, and it must, therefore, be affirmed; and it is so ordered.

Decree affirmed.

A motion for a rehearing filed on behalf of the appellants March 16, was denied April 7, 1903.