CHAPTER XXXV SURETIES' RIGHTS AND REMEDIES Sureties' equitable rights.. Subrogation... 1264 1265 The surety is entitled to be subrogated to securities held by the creditor... 1266 1267 1268 Subrogation is allowed only when debt is fully paid. 1269 Surety of a surety is entitled to subrogation.... 1270 A surety is entitled to subrogation against a co-surety. 1271 Security for several debts... .. 1272 Subrogation against a bankrupt principal in favor of a surety for part of a debt... 1273 The surety's right of reimbursement. 1274 The surety's right of exoneration... 1275 The surety's right to compel the creditor to resort first to security, or to the principal debtor.. A surety must share with his co-sureties the benefit of security. 1281 Co-sureties and successive sureties. . . . . 1282 A surety who pays unnecessarily is not entitled to indemnity or contribution. 1283 Measure of surety's recovery . . . . 1284 The surety is limited to reimbursement.. 1285 When a surety who has paid the debt is denied relief against the principal or co-surety because of a defence of the latter. 1286 Laches.. 1287 § 1264. Sureties' equitable rights. Though a creditor is generally entitled to collect his claim from any securities or obligations which he holds in the manner which may seem most to his advantage, it is the duty of the court, especially a court of equity, to adjust the rights of the parties so far as possible, so that the ultimate loss shall accord with the equitable position of the parties. The method by which this is accomplished is by the enforcement of the equitable principles of (1) subrogation of the surety to the creditor's rights; (2) reimbursement of a surety by the princi pal debtor of whatever loss the surety has suffered from his suretyship; (3) exoneration by the principal debtor of the surety from his liability to the creditor before it has been enforced against him, and (4) contribution among several sureties. § 1265. Subrogation. Subrogation is generally understood to mean putting one to whom a right does not legally belong in the position of the legal owner of the right. Sometimes, however, subrogation may involve the creation of a new right in favor of the party entitled to be subrogated, not the enforcement of the original right, for sometimes the original right has been cancelled by payment or otherwise, before subrogation takes place, and moreover the party subrogated generally enforces his claim in his own name without joining the creditor as a party defendant. But the original right measures the extent of the new right. Suretyship does not furnish the only application of the doctrine, but it furnishes the commonest one. A surety who has paid the debt is entitled to the right for the purpose of charging property or persons equitably bound to pay the debt before himself. The justice of the principle will be apparent if it is observed that in this way the creditor is denied the power of throwing the ultimate payment of the debt in one way or another as suits his caprice. Subrogation does not depend upon contract, but on the equities of the situation.1 Therefore, a surety who did not become such at the request of the principal, and who has no privity of contract with him, is not thereby deprived of subrogation on payment of the debt. 1 Duncan V. North and South Wales Bank, 6 App. Cas. 1; Ohmer v. Boyer, 89 Ala. 273, 7 So. 663; Talbot v. Wilkins, 31 Ark. 411; Smith v. Foran, 43 Conn. 244, 21 Am. Rep. 647; Devine v. Harkness, 117 Ill. 145, 7 N. E. 52; Davis v. Schlemmer, 150 Ind. 472, 50 N. E. 373; Bishop v. Rowe, 71 Me. 263; Stevens v. King, 84 Me. 291, 24 Atl. 850; Amory v. Lowell, 1 Allen, 504; Stewart v. Parcher, 91 Minn. 517, 98 N. W. 650; Union, etc., Banking Co. v. Peters, 72 Miss. 1058, 18 So. 497, 30 L. R. A. 53 Vt. 321. 2 Howard v. Burns, 279 Ill. 256, 116 N. E. 703; Davis v. Schlemmer, 150 Ind. 472, 50 N. E. 373; Matthews v. Aikin, 1 N. Y. 595; Bishop v. Rowe, 71 The surety is entitled to be subrogated to securities held by the creditor... 1266 1267 1268 Subrogation is allowed only when debt is fully paid. 1269 Surety of a surety is entitled to subrogation. 1270 A surety is entitled to subrogation against a co-surety. 1271 Security for several debts..... 1272 Subrogation against a bankrupt principal in favor of a surety for part of a debt... 1273 The surety's right of reimbursement. 1274 The surety's right of exoneration.. 1275 The surety's right to compel the creditor to resort first to security, or to the A surety must share with his co-sureties the benefit of security. 1281 Co-sureties and successive sureties...... 1282 A surety who pays unnecessarily is not entitled to indemnity or contribution. 1283 Measure of surety's recovery. . . . 1284 The surety is limited to reimbursement.. 1285 When a surety who has paid the debt is denied relief against the principal or co-surety because of a defence of the latter.. 1286 Laches.... 1287 § 1264. Sureties' equitable rights. Though a creditor is generally entitled to collect his claim from any securities or obligations which he holds in the manner which may seem most to his advantage, it is the duty of the court, especially a court of equity, to adjust the rights of the parties so far as possible, so that the ultimate loss shall accord with the equitable position of the parties. The method by which this is accomplished is by the enforcement of the equitable principles of (1) subrogation of the surety to the creditor's rights; (2) reimbursement of a surety by the princi pal debtor of whatever loss the surety has suffered from his suretyship; (3) exoneration by the principal debtor of the surety from his liability to the creditor before it has been enforced against him, and (4) contribution among several sureties. § 1265. Subrogation. Subrogation is generally understood to mean putting one to whom a right does not legally belong in the position of the legal owner of the right. Sometimes, however, subrogation may involve the creation of a new right in favor of the party entitled to be subrogated, not the enforcement of the original right, for sometimes the original right has been cancelled by payment or otherwise, before subrogation takes place, and moreover the party subrogated generally enforces his claim in his own name without joining the creditor as a party defendant. But the original right measures the extent of the new right. Suretyship does not furnish the only application of the doctrine, but it furnishes the commonest one. A surety who has paid the debt is entitled to the right for the purpose of charging property or persons equitably bound to pay the debt before himself. The justice of the principle will be apparent if it is observed that in this way the creditor is denied the power of throwing the ultimate payment of the debt in one way or another as suits his caprice. Subrogation does not depend upon contract, but on the equities of the situation.1 Therefore, a surety who did not become such at the request of the principal, and who has no privity of contract with him, is not thereby deprived of subrogation on payment of the debt.2 1 Duncan v. North and South Wales Bank, 6 App. Cas. 1; Ohmer v. Boyer, 89 Ala. 273, 7 So. 663; Talbot v. Wilkins, 31 Ark. 411; Smith v. Foran, 43 Conn. 244, 21 Am. Rep. 647; Devine v. Harkness, 117 Ill. 145, 7 N. E. 52; Davis v. Schlemmer, 150 Ind. 472, 50 N. E. 373; Bishop v. Rowe, 71 Me. 263; Stevens v. King, 84 Me. 291, 24 Atl. 850; Amory v. Lowell, 1 Allen, 504; Stewart V. Parcher, 91 Minn. 517, 98 N. W. 650; Union, etc., Banking Co. v. Peters, 72 Miss. 1058, 18 So. 497, 30 L. R. A. 53 Vt. 321. 2 Howard v. Burns, 279 Ill. 256, 116 N. E. 703; Davis v. Schlemmer, 150 Ind. 472, 50 N. E. 373; Matthews v. Aikin, 1 N. Y. 595; Bishop v. Rowe, 71 § 1266. The surety is entitled to be subrogated to securities held by the creditor. On paying the debt the surety is entitled to be subrogated to securities held by the creditor. The equitable character of the right is shown by the fact that it is immaterial that the securities in question were given after the contract of the surety was entered into. Or that the surety was ignorant of the existence of security at that time. Nor is the principle confined to ordinary kinds of collateral security. A surety for one who has entered into a contract to purchase land acquires, on paying the latter's obligation, the vendor's rights against the land. So if the creditor has a lien to secure the debt for Me. 263; Burns v. Huntington Bank, 1 Pen. & W. 395. 3 Yonge v. Reynell, 9 Hare, 809; Fawcetts v. Kimmey, 33 Ala. 261; Beaver v. Slanker, 94 Ill. 175; Howard v. Burns, 279 Ill. 256, 116 N. E. 703; Josselyn v. Edwards, 57 Ind. 212; Rand v. Barrett, 66 Iowa, 731, 24 N. W. 530 (but see Bockholt v. Kraft, 78 Iowa, 661, 43 N. W. 539); Storms v. Storms, 3 Bush, 77; Hardy Buggy Co. v. Paducah Banking Co. (Ky.), 210 S. W. 452; Interstate Trust &c. Co. v. Young, 135 La. 465, 65 So. 611; Maine Central R. v. National Surety Co., 113 Me. 465, 94 Atl. 929, L. R. A. 1916 A. 881; Torp v. Gulseth, 37 Minn. 135, 33 N. W. 550; Taylor v. Tarr, 84 Mo. 420; Guthrie v. Ray, 36 Neb. 612, 54 N. W. 971; Etna Ins. Co. v. Thompson, 68 N. H. 20, 40 Atl. 396, 73 Am. St. Rep. 552; Young v. Vough, 23 N. J. Eq. 325; State Bank v. Smith, 155 N. Y. 185, 49 N. E. 680; Holden v. Strickland, 116 N. C. 185, 21 S. E. 684, (but see Browning v. Porter, 116 N. C. 62, 20 S. E. 961); Wills v. Fuller (Okl.), 150 Pac. 693; Gossin v. Brown, 11 Pa. 527; Klopp v. Lebanon Bank, 46 Pa. 88; Beaver Trust Co. v. Morgan, 259 Pa. 567, 103 Atl. 367; Lowndes v. Chisholm, 2 McC. Ch. 455, 16 Am. Dec. 667; James v. Jaques, 26 Tex. 320, 82 Am. Dec. 613; National Bank v. 5 Cushing, 53 Vt. 321; M'Neale v. Reed, 7 Ir. Ch. 251. Cf. In re H. B. Hollins & Co., 225 Fed. 618. 4 Brandon v. Brandon, 3 De G. & J. 524; Lake v. Brutton, 8 D. M. & G. 440; Havens v. Willis, 100 N. Y. 482, 3 N. E. 313; Riverside Bank v. Totten, 11 N. Y. S. 519; Scanland v. Settle, Meigs, 169; Scott v. Knox, 2 Jones (Ir.), 778. 5 Mahew v. Crickett, 2 Sw. 185, 191; Lake v. Brutton, 8 D. M. & G. 440; Duncan, etc., Co. v. North & South Wales Bank, 6 App. Cas. 1; Smith v. McLeod, 3 Ired. Eq. 390; Dempsey v. Bush, 18 Oh. St. 376; Hevener v. Berry, 17 W. Va. 474; Scott v. Knox, 2 Jones (Ir.), 778. The right attaches to securities given after the surety contracted, as well as to those given at the time the surety became bound. Ballew v. Roler, 124 Ind. 557, 24 N. E. 976; Highland v. Anderson's Adm., 13 Ky. L. Rep. 710, 17 S. W. 866; Tuck v. Calvert, 33 Md. 209; Myres v. Yaple, 60 Mich. 339, 27 N. W. 536; Torp v. Gulseth, 37 Minn. 135, 33 N. W. 550; Smith v. Schneider, 23 Mo. 447; Fulkerson v. Brownlee, 69 Mo. 371; Ex parte Pettillo, 80 N. C. 50; Stenhouse v. Davis, 82 N. Car. 432; Deitzler v. Mishler, 37 Pa. 82; Galliher v. Galliher, 10 Lea, 23; Hatcher's Adm. v. Hatcher's Erx's, 1 Rand. 53. |