Magee v. Leggett ( 1873 )

SlMEALL, J. :

On the 26th September, 1866, A. S. Harper, administrator of Hathorn, deceased, compromised with McNair, administrator of Stewart, deceased, the liability of his intestate, as surety on a note merged into a judgment, by paying $400, part of the debt, in consideration of which his intestate’s estate was released and discharged from the debt. The bill seeks subrogation, pro tanto, to the rights of the creditor, to whom the payment was made.

The first question to be disposed of is, when does the statute of limitations begin to run ? that being set up as one of tbe special causes of demurrer.

If the complainant should be entitled to substitution at all to the judgment and its privileges, must suit be brought within the time limited for the assumpsit at law on the implied promise of indemnity ?

It is too well settled to admit of controversy, that at law the cause of action in favor of the surety accrues when he pays the money, and from that time the statute of limitations begins to run. Scott v. Nichols, 27 Miss. 94; Marshall v. Hudson, 38 ib. 57; Dixon v. Miller, 11 S. & M. 594; Mathews v. Southeimer, 39 Miss. 174.

Conceding the surety may go into a court of chancery to be refunded what he has paid on account of his principal, the remedy is governed as to time, as in the suit at law. But if more be asked than the ordinary monied decree, as in this case, that the complainant shall have the benefit and privileges of the judgment, other considerations present themselves as to the propriety of that relief.

It was said in 4 Band. 444, and repeated in Growing v. Bland’s, adm’r and heirs, 2 How. 815: “ The surety is entitled to every remedy which the creditor has against the principal debtor; to enforce every security; to stand completely in the place of the creditor.” In Conway v. Strong, 24 Miss. 666; Bowen et ux. v. Hoskins, 45 ib. 186; Osborn v. Noble, 46 ib. 453, the principle is declared that a secondary party, who has been obliged to discharge the debt, has a right in equity to occupy the place of the creditor, and be subrogated to his rights against the party primarily liable, as to any lien or security which the creditor may have.

But it appears from the allegations of the bill, that the complainant’s intestate paid only $400, part of the judgment; that the creditor assigned $160 of its amount, which by mesne assignment now belongs to Mrs. Magee. It thus appears that part of the judgment still belongs to the original creditor, and part to Mrs. Magee. It is plain that both of these parties are entitled to satisfaction of what may be respectively due them, out of the property pointed out in the bill, in preference to the re-imbursement to the complainant, from that source, of what the estate which he represents has paid'. Nor is it so much as averred that the property is of value to satisfy these claims.

In Berry, use of Burgess v. Nicholls, 2 Harr. & Johns. 508; Merryman v. State, etc., 5 ib. 423, the sureties who had paid the amount of the judgments were permitted to sue out execution in the name of the judgment creditor, for their use, against the principal debtor. Equity treated the payment by the surety as working, by operation of law, a transfer of the judgment for his use, so as to give him the same process for recovery of the money which the creditor had. So far as we have examined, we do not find well-considered judgments holding that there can be a partial transfer by legal operation. A partial payment does not have that effect, unless it be a balance which satisfies what is due the creditor. In Hollinsworth v. Floyd, 2 Harris & Gill, 91, such assignment was repudiated and denied, where the surety had paid but part of the debt, and still owed a balance to the creditor; and also rejected as an anomaly a pro tanto assignment, the effect of which would be to give' distinct interests in the same debt to both creditor and debtor.

The assignment to Mrs. Magee of part of the judgment, gives her an equal right pro tanto with the creditor. She would be protected in a court of law, in the use of its process to levy the debt compulsorily. If the complainant could be relieved in the mode specifically prayed, his' right under the judgment would be subordinate to Mrs. Magee, and also to the creditor for any balance- due him. It is distinctly declax-ed in Garnett v. Blodgett, 39 N. H. 152, “that the surety’s right could only accrue upon his payment of the whole amount of the creditor’s claim.” “ The creditor’s rights must be entirely divested before another can be substituted by mere operation of law, in his place, so as to have them vest in him.” Stamford Bank v. Blodget, 15 Conn. 437; Belcher v. Hartford Bank, 15 ib. 381; Union Bank of Maryland v. Edwards, 1 Gill & Johns. 346. In Kyner v. Kyner, 6 Watts, 227, the. court say: “ There shall be no interference with the creditor’s rights or securities, which by possibility might prejudice or embarrass him in the collection of the residue of his debt. The surety must satisfy first his entire debt.” We do not understand the rule as requiring that the “ surety” must make entire ¡Dayment. it is enough if the creditor has been fully paid, ¡3art by the principal debtor, and part by the surety. In such case, subrogation will accrue pro tanto to the extent of his payment. Such would be the effect, if two or more sureties contributed in equal or unequal amounts to the payment. Bank of Pennsylvania v. Potaces, 10 Watts, 152; Hardcastle v. Commercial Bank, 1 Harring. 374. If these adjudications affirm the principle correctly, as we think they do, then the complainant cannot be substituted to the place of the creditor against the principal debtor, because the surety has 'not entirely divested the rights of the creditor or his assignee, Mrs. Magee.

But notwithstanding, he sustains the relation to the principal debtor, of a creditor, for money paid on his account, which the debtor, ex equo et bono, is under a duty to refund, and may recover in this suit unless the remedy is barred. As we have seen, the cause of action arises from the payment to the creditor. In this case, the payment was made the 26th of September, 1866. The statute of limitations was then suspended, and so continued until twelve months after the close of the war. That was determined by the President’s proclamation to have ended the 2d of April, 1866. The statute begun then to run the 2d of April, 1867. The three years within which suit might be brought, expired the 2d of April, 1870. The bill was filed the 5th of October of that year, so that the remedy was cut off. It is not necessary to consider any of the other questions that would be raised upon the record.

It follows that there was error in overruling the demurrer of the defendants.

Decree reversed, and judgment here sustaining the demurrer and dismissing the bill.