Dodd v. Wilson

The Chancellor :—

If we consider only the remedies given by our statute^* to sureties i. e. the remedy by taking an assignment of the evidences of the debt,which in this case are the judgments paid, then it may be true, as assumed by the demurrer that only the three obligors in the second bond could, as the sureties who had satisfied the original judgment, take an assignment of that judgment and that Barkley Wilson’s administratrix on paying the judgment on the second bond could take under the statute only an assignment of the second judgment. But these statutory remedies are only cumulative. The statute expressly reserves all pre-existing remedies, legal or equitable; and I feel no doubt that independently of the Statute, equity, under the circumstances of this case will give direct relief against William Wilson, the principal debtor in the original bond and that such is the proper course of proceeding.

This would result from the very positions assumed in support of the demurrer—viz,—that Barkley Wilson’s administratrix is entitled to contribution from the coobligors in the second bond ; and that then the three co-obligors in that bond, as sureties for the original debt, would have their remedy against William Wilson, either by assignment of the original judgment, or by suit at law for money paid, or, it may be added, by a bill in equity. Now assuming such to be the direct remedies of the sureties then equity will relieve the surety, who has paid his debt, by a bill against William Wilson as the party ultimately bound to refund. This is upon the principle of preventing a multiplicity of suits—a principle of very familiar and general application which was not controverted in the argument and against which, in its application to such a case as the argument for the demurrer assumes this to be, I can find no reason or authority.

' But the equity of the bill seems sustainable upon broader grounds. A court of equity will look to the substance and purpose of a transaction without respect to the legal forms under which it is clothed. This is especially true in the case of suretyship, with respect to which, whatever may be the form of the instrument or the obligations of the parties, on the face of the instrument or in a court of law, a court of equity will always inquire into the real nature and objects of the transaction and afford relief accordingly. In the present case, this Court, looking to the substance of the transaction, will consider the second bond as a security, given for William Wilson’s debt, by the three sureties, and will treat the payment by Barkley Wilson’s administratrix as the payment of William Wilson’s debt by one of those sureties. No question would have been made of this had William Wilson been joined in the second bond. Now while it is true that William Wilson’s being omitted in the second bond precludes the statutory remedy as against him by an assignment of the judgment—it makes no difference as to any equitable remedy. A court of equity will consider, according to the fact, that the debt secured by this second bond was William Wilson’s debt,treating him as the principal and the obligors as sureties with the same effect as to all equitable remedies as if he had joined in the second bond. Thus there can be no doubt that the sureties might have filed a bill before the debt was settled to compel William Wilson to pay it and exonerate them, though his name was not on the security given. It is not questioned that if the three sureties had jointly paid this bond they could jointly have proceeded in equity against Wilson to reimburse them. If so then one surety paying the debt alone ought to have the same remedy.

The fallacy of the defendant’s argument lies in considering that William Wilson’s liability as debtor was limited to the first bond. That was true so far as concerned the Bank. To the Bank his liability ceased upon the satisfaction of the first baud.

But the second bond being in fact given to secure a debt originally Wilson’s, equity will still treat him under that bond as the principal so far as the sureties are concerned and for all purposes of equitable relief in their favor. This would be true had the first bond had not been given at all and had the second bond been the original transaction. The principle which governs the case is, that so far as the sureties are concerned and for all general equitable remedies, the Court will look to the substance of the transaction and the real relations of the parties and will therefore treat Wilson as though joined in the second bond, it being in fact given for his debts. The only difference resulting from his omission as a party to it was the loss of the legal remedies depending on the face of the instrument. That is, the bank would have no remedy against Wilson and the sureties could not take an assignment of his bond under the Statute so as to reach Wilson. But their general equitable remedies were not lost by his not being joined.

It results then that either of the three sureties paying the debt would have his remedy, by a bill in equity, directly against William Wilson as the principal without being put first to call on his co-sureties for contribution. More than this, the surety paying the debt would not be permitted to proceed solely against the co-sureties. In a bill by a surety for contribution, the principal must be made a party. Rainey vs. Yarborough, 2 Ired. Eq. 249; Adams on Eq. [269] note. In such a case the Court would so frame and execute its decree as to enforce payment in the first instance by the principal, or to exhaust the remedy against him before enforcing contribution by the sureties.

Another ground of demurrer is that the co-obligors with Barkley Wilson, being-, his co-sureties, are not made parties. But this is unnecesary. It is a recognized exception to the general rule, requiring all interested in the subject-matter to be joined in the suit, that one of several sureties paying the debt, may proceed against the principal without joining his co-sureties, In such case they have no claim to be enforced entitling them to be joined as co-plaintiffs. No decree is sought against them requiring them to answer as co-defendants, nor are they under any responsibility over to the principal, requiring them to be joined for the protection of interests to be affected by a decree against him. Sto. Eq. Pl. Sec. 169 and cases cited; Lord Hardwicke in Madox vs. Jackson, 3 Atk. 406; Lord Eldon in Cockburn vs. Thompson, 16 Ves. 326.

In the cases cited in support the demurrer on this ground from 5 East 225, and 2 John. 214, the sureties had jointly paid the debt and their remedy against the principal was therefore held to be joint. In this case the debt was paid only by Barkley Wilson’s administratrix. The defendant erred in assuming that the second bond was of itself a joint payment of the debt. That bond was only a joint and several security. It operated it is true as a satisfaction of the first bond so far as the Bank was concerned but it was not a payment as between the principal and sureties. Clearly these three sureties could not on giving the second bond have proceeded against William Wilson for reimbursement in money as if they had paid the debt. They might have proceeded jointly to protect themselves as by taking an assignment of the first bond under the statute or by filing a bill calling on Wilson to exonorate them; but their giving the bond of itself created no joint demand against Wilson for the money. A right to collect the money from him, which is the right now to be enforced, could arise only upon payment of the money and could enure only to such surety or sureties as should finally pay his debt.

The demurrer must be overruled and the defendant ordered to answer or plead.

* Rev. Code Ch. LXV,

1 . 5—DEL. CH, IV.