Braught v. Griffith , 16 Iowa 26 ( 1864 )

Dillon, J.

I. The claim of Peck having been duly “ stated, sworn to and filed,” as the statute requires (Rev. § 2393), within six months, would have ranked, if established, as a claim of the third class.

And if established, it is plain, both on principle and authority, that the surety on paying the debt would have a right to stand in the place of the creditor.

Thus, it is held that where the creditor has proved the debt against the estate of the principal, and the surety afterwards pays the creditor the debt, the creditor will be considered a trustee of the dividends for the surety. Ex parte Rushworth, 10 Ves., 409; Wright v. Morley, 11 Id., 12. . But Peck never obtained an allowance of his claim in the County Court, and the appellants insist that he even withdrew the same. In one respect this is a most material inquiry; and we have occasion exceedingly to regret the embarrassment arising from the uncertainty and vagueness of the agreed statement of facts in this regard.

The stating, verifying and filing of the claim in the County Court, stand for or are in the nature of a petition.

There is no express provision of the statute requiring a creditor, whose demand is based upon a written instrument, to file the original when he files his claim. He may, as if proceeding in the District Court, file a copy and it will be sufficient if the original is produced and filed on the trial, or at the time the claim is allowed. Baker v. Chittucks, 4 G. Greene, 480,

Iii the present case the creditor chose to file the original note, and he verified his claim in due form within a few weeks after the administrators gave notice of their appointment. By these acts he instituted proceedings to establish his claim. And now the inquiry is, “ did he abandon or withdraw these proceedings?” The agreed statement in this respect is in this wise: “ That on the 28th day of November, 1857, the said John Peck, without abandoning his claims against said estate, but with the intention not to release said estate from the payment of his said claims, went to the office of the said county judge and took the note from the files for the purpose of sueing the other joint makers thereof, who it is conceded were but sureties for the said Hoclcett, and, at the time of the said withdrawal of said note, the county judge made the following memorandum on the paper to which the note had been attached, to wit:

“November 28th, 1857. Jno. Peck this day withdrew the note for $1000 which was on file in this office. P. P. Henderson, County Judge.”

If what he did amounted to a dismissal of his proceeding in the County Court, it would not be material what his intention, uttered or unexpressed, might have been. But it will be observed there is no record of the County Court or judge which dismisses or discontinues the proceeding. The indorsement on the paper by the county judge was, as we are inclined to think, a mere private memorandum to enable him to recollect, or his successor to know, that the note had been taken from the files. Withdrawing the note for the. special purpose indicated, was not equivalent to a withdrawal or abandonment of the proceedings to establish it.

Because, then, first, there is no record of any dismissal of Peck’s proceedings; because^ second, it is possible to withdraw the note without discontinuing the proceedings, and because, third, and chiefly, the agreed statement positively declares, as an ultimate fact, that he withdrew the note “ without abandoning his claim against the estate, • but with the intention not to release said estate,” we conclude that he did not dismiss or abandon his proceedings against the estate. Peck then having filed his claim within six months, and not having abandoned it, it would be entitled to rank in the third class, though not proved up till long after. Hart v. Jewett, 11 Iowa, 276; Chandler v. Hockett’s Admr., 12 Id., 269.

And now the question is, the sureties having been compelled to pay the Peck claim, are they entitled to the same rights against the estate which Peck would have had? Upon the authorities, and especially upon the American authorities, it seems to us that no question is more reasonably or more definitively settled. The late lamented Horace Binney Wallace, in his note to the leading case of Dering v. Earl of Winchelsea (1 L. C. in Eq., 106), thus clearly and correctly states the general doctrine: “As soon as the surety has paid the debt, an equity arises in his favor, to have all the securities, original and collateral, which the creditor held against the person or property of the principal debtor, transferred to him, and to avail himself of them as fully as the creditor could have done; for the purpose of obtaining indemnity from the principal, he is considered as at once subrogated to all the rights, remedies and securities of the creditor; as substituted in the place of the creditor, and entitled to enforce all his liens, priorities and means of payment as against the principal, and to have the benefit of securities that were given without his knowledge.”

Many, but by no means all, of the cases are collected in the note referred to, and we need not cite them at large. We refer especially to Watts v. Kinney, 3 Leigh, 272, 294, and the masterly reasoning of Tucker, P.; to Lidderdale v. Robinson, 2 Brock., 160, decided by C. J. Marshall; S. C., 12 Wheat., 594; to Shultz v. Carter, 1 Speers’ Eq., 534, and Eddy v. Traver, 6 Paige, 521, as covering the case at bar in all of its essential features.

The same general principle has been more than once recognized in this court. Murray v. Catlett, 4 G. Greene, 108; Wilkinson v. Daniels, 1 Id., 179.

The right of the surety to subrogation seems to have especial force in cases where, like the present, the principal debtor is deceased. Thus it has been held that the payee is not bound to proceed in the Probate Court; that he may neglect to present his claim until barred against the estate of the principal debtor, and may afterwards proceed against the surety, who, it has been holden, will not be discharged by the creditor’s neglect to present his claim, and who, having paid the note, may then recover of the executor, though the statutory time has elapsed in which suit could have been maintained on the note itself. Sibley v. McAllister, 8 N. H., 389.

In Iowa, both under the Code of 1851 (§ 1681), and the Revision (§2764), the creditor may, even after the decease of the principal debtor, proceed directly and alone against .the sureties or any one of them. If he thus elects to pursue the sureties, their chief protection, in many cases, must consist in the maintenance, in their favor, of the right of substitution in its unimpaired vigor.

II. It is claimed by the appellants, in the next place, that the -order appealed from, was erroneous, because the appellees failed to comply with § 2397 of the Revision, which is as follows:

“ Contingent liabilities must also be presented and proved, or the court or executor shall be under no obligation to make any. provision for satisfying them when they may afterwards accrue.”

In this case, Peck did not commence suit against the sureties until more than six months had elapsed. The action seems to have been litigated, and thereby delayed. Until a trial, the sureties may not have known that they were liable, and until payment, they had no absolute claim to file against the estate. Under these circumstances if the law be (which we do not find it necessary to determine), that because the sureties did not file their claim in six months, they are deemed guilty of laches, and postponed or barred, it would seem to be a very harsh doctrine especially as applied to sureties. In Missouri, a statute of limitations provided that all claims not prosecuted against an estate in three years, should be forever barred. It was held in favor of a surety who paid a debt after the lapse of three years, that the “statutory provision was not designed to work the gross injustice of barring demands accruing after the expiration of the three years.” And it was further held, that the surety might, in such a case, maintain a bill to be subrogated to the rights of the creditor whose debts he had paid, and to enjoin the distribution of assets under the order of the Probate Court. Miller v. Woodward et al., Admrs., 8 Mo., 169. See also Sibley v. McAllister, supra.

But it may be claimed that the section of the Code above quoted in relation to contingent liabilities, applies to and will enable sureties to protect themselves. Whether this section embraces sureties we need not determine, because we hold that if it does, the failure of the appellees to comply with its provisions, does not, under the circumstances, prejudice them. The leading object of this and other similar provisions is to enable estates to be closed up as speedily as may be, and to this end the court and executor should have notice of all the claims. In this instance they had notice. The creditor (Peck) placed the claim on file and as above held, the sureties, when compelled to pay, stood in Peck’s shoes and were clothed with all his rights.

III. We understand the appellants furthermore to insist, that when the sureties paid the Peck claim, they should, in order to be entitled to be substituted to his rights, have proceeded on the original note and had it established.

This was not necessary, although by an order of. Court they might perhaps have had a right to use Peck’s name, resume his proceeding, and prosecute it. Douglass v. Carlisle, 12 Ohio, 169; but see United States v. Preston, 4 Wash. C. C. R., 446. Having been paid, Peck was entitled to no judgment in his own right, but the sureties who paid him were thus entitled. When the order appealed from was heard, the defendants could have made any defense which they could have made to having Peck’s claim established as a third class claim. Without further elaboration, we conclude, that the sureties need not proceed on the original note, but that they may have the same relief by any appropriate proceeding which shows the facts, entitling them to it; for courts, in applying and enforcing the doctrine of substitution “ look not to the form, but to the essence of the transaction.” Enders v. Brune, 4 Rand., 438; Hickman v. Hall's Admr., 5 Litt., 338; Dias v. Bonchard, 3 Edw., 485; The United States v. Preston, supra.

No question has been made, if indeed it is open to question, as to the power and authority of the County Court to make an order accomplishing a result which is usually effected through the medium of a bill of chancery. This point has not been taken or argued, and has not therefore been considered. We only remark that while it is true that the doctrine of subrogation originated in equity, or rather was first borrowed by that court from the civil law, it is now recognized to a great extent as a legal right. Willard’s Eq., 113; Mathews v. Aikin, 1 Com., 595; Norton v. Coons, 3 Denio, 130.

And the rights of the parties to this controversy having been submitted to the County Court, and also to the District Court, upon an agreed statement, those courts might, and indeed ought to pass upon those rights,' being guided by the general principles of law applicable thereto. The case of Mahlon Haworth v. The same defendants, and involving the same facts as the present one, is decided in the same way, and they are both

Affirmed,

Cole, J., having been of counsel, took no part in the determination of this cause.