Pott v. Nathans

The opinion of the Court was delivered by

Seuoeaut, J.

The general doctrine that a surety who pays to, the creditor the debt due by his principal, shall enjoy the benefit of the securities for the debt placed in the power of the creditor by the principal, has been acted on by courts of equity, and recommends itself to our sense of justice. It seems right, that the creditor should transfer the means of indemnification, for which he has no longer occasion, to him who, under a legal obligation to pay, in default of the principal debtor, has released these securities from the demand of the creditor, and paid the debt for which they were furnished. Where, however, such means consist of the responsibility of an individual, becoming a later surety or guaranty for the same debt of the principal, there arises a conflict of equities, which may give rise to new questions as to priority between the former and the latter surety. Such latter surety, stipulating at the instance of the principal to pay the debt, suffers no absolute injustice in being obliged to do so, since he is, compelled to perform no more than he undertook, and has no right to complain that he is not allowed to use, as a payment by himself, the money which proceeds from another person whom his principal was previously bound to save harmless. How the equity would be, iff a naked case of this kind, I give ho opinion; it is sufficient that it is settled, that if the' interposition of the second surety may have been the means of involving the first in the ultimate liability to pay, the equity of the first surety decidedly preponderates.

This principle seems to have been determined by this court, in the case of Burns v. The Huntingdon Bank, 1 Penn. Rep. 395, which I am not able to distinguish from the present. There a judgment was obtained against the maker of a promissory note, who afterwards entered absolute security, under the Act of Assembly, in order to obtain a stay of execution. After the expiration of the time stipulated in the stay of execution, judgment was obtained against the surety, and it was held that one of two endorsers who paid the note was entitled to an assignment of the judgment against the surety. The case now before us is also that of an endorser, who is in point of law but a surety, and is entitled to all the rights and remedies of a surety. One of those rights is to be subrogated to the means of indemnity, in the hands or under the control of the creditor, if the surety steps into the place of the principal, and pays his debt. The creditor here was the Philadelphia Loan Company; and when Nathans paid, as endorser, the right of the Company against Pott, Clemens & Patterson was complete by virtue of the promissory note of the 11th of June 1839, taken by the attorney of the company from Shoemaker, as collateral security for their judgment against him. The receipt for the note given by the attorney, was an engagement for a stay of execution till the time of its payment; for it stipulates that on paying the note the judgment should be' transferred to such of the makers as should pay it; and the attorney immediately stayed proceedings on the execution. The execution had been levied on the real estate of the principal, when the three makers of the note interposed, and procured its stay, by giving their note. So that it runs parallel with the case of Burns v. The Huntingdon Bank, where the stay was obtained by the entry of absolute bail for the payment of the money. The equity in that case was held to arise from the interposition of the bail to procure a personal advantage to the principal, to the detriment of the surety, who might perhaps have been exonerated, had not the proceedings been stayed against the principal.

Several cases have been cited, in which it has been held, that the relation of principal and surety ceases, as respects the credit- or, after judgment. But the contrary doctrine seems to have been held in the case above mentioned, and also in that of Commonwealth v. Haas, 16 Serg. & Rawle 252, where, after judgment, the creditor issued execution against the principal, and levied on his goods and chattels, and it was held, that the surety was discharged to the amount which the goods would have sold for. These cases show that after judgment the creditor is required not to abandon the means in his hands, which might prove available for the relief of the surety, nor to do any act which may prejudice the surety.

Judgment affirmed.