President, Directors of Washington Bank v. Shurtleff , 45 Mass. 30 ( 1842 )

Hubbard, J.^*

The contract between these párties presents the simple case of creditor and surety ; and in the construction to be given to it, we are to regard it as coming within the well established rule of law, that a surety, on paying the debt of the principal, is entitled to be substituted in the place of the creditor, with the same right to avail himself of any security for the debt, which is placed in the hands of the creditor — whether consisting of real or personal estate, or choses in action. The rights and duties of the parties appear to us to be the same in principle, as if the defendant had been the last indorser on the several notes, to an amount not exceeding $ 3000. If this had been the precise situation of the parties, and the defendant had paid the notes as they severally fell due, he certainly would have been entitled to a delivery of them for his own benefit. That the plaintiffs gave this construction to the contract, we think is manifest from the notice which they gave to the defendant at the time when the first note became due, and when no other note, discounted for Ticknor and embraced under the defendant’s guaranty, was actually payable ; and also from the subsequent notices. And we do not perceive that the non-payment of the notes by the defendant, at the times, respectively, when he received notice of their dishonor, varies or affects the legal rights of the parties.

It is said, however, that in such case there will be a difficulty in deciding which notes belong to the defendant, and which to the plaintiffs. But we think such difficulty does not exist. It is true that the plaintiffs might discount notes for Ticknor, during the existence of the contract with the defendant, beyond the sum of $ 3000, and might receive payment therefor; and the plaintiffs could have determined, at the time of making the loans, to which of them the guaranty of the defendant should apply. But we are of opinion, that giving the notice to the defendant, as the notes were severally dishonored, fixed the liability of the defendant to those particular notes, till their amount became equal to $ 3000, and that the notes beyond that amount, and falling due afterwards — whatever may have been their date — belong exclusively to the plaintiffs, as well as any security specially appropriated to the payment of those notes.

Adopting this mode of settling the rights of these parties, a question arises, in what manner interest shall be cast on the guaranty of the defendant. And as to this, we are of opinion that the obligation is, not to pay the round sum of § 3000, but an amount not exceeding that sum, on notes or acceptances discounted by the plaintiffs, from time to time, for Ticknor; and consequently, that as each note fell due and notice was given to the defendant, he became fixed, under his guaranty, for the pay ment of the same, with interest if the payment should be delayed. The plaintiffs will therefore be entitled to cast interest on the several notes, up to the amount of $ 3000 of principal, from the times they were payable; and this interest is to be added to the $ 3000. For this amount the plaintiffs will be entitled to judgment; first deducting, however, any payments which may have been made, to them upon said notes : And on receiving satisfaction for the same, they will be bound to deliver the said notes to the defendant for his own personal use, without account to the plaintiffs.

It appears, on inspecting the schedule of the notes, that, taken in their order, they will not make the precise sum of $ 3000. The eight first notes amount to $ 2782-29, and the next note,being $ 460, we are of opinion, that on the satisfaction of the judgment now to be rendered in this action, the plaintiffs will be trustees of the defendant, in the sum of $ 217-71, part of the note for $ 460; and the balance of the note, being $ 242-29, will belong to the plaintiffs. Any amount, therefore, recovered by the plaintiffs on that note, will belong to them, to the amount of $ 242-29 and interest, and the balance to the defendant.

Judgment will be entered for the plaintiffs for the amount to be ascertained as above directed.

* The chief justice did not sit in this case.