though the procedure in the various States which is essential for the protection of the surety is not uniform. § 1269. Subrogation is allowed only when the debt is fully paid. The surety's right of subrogation does not arise until the debt is paid in full. A partial payment of the debt even though it may be of the full amount for which the surety has bound himself, will not entitle him to subrogation to the creditor's rights and securities. 16 But "while it is true that the rights of the sureties to the remedies of the principal do not become complete and are incapable of present enforcement until they shall have discharged their principal's obligation, yet their right becomes an inchoate one as soon as they have entered into the relation of suretyship; and their equitable assignment of their principal's rights and remedies, when completed by their performance of his obligation, relates back, as against each other and their principal, to that earlier time.17 And all persons who have in the meantime received any securities or payments from either party to the principal contract, with notice of the facts and of the surety's responsibilities and consequent rights, must in equity hold them for his benefit." 18 Trusdell, 44 N. J. L. 597 (statutory); McKenna v. Corcoran, 70 N. J. Eq. 627, 61 Atl. 1026; Brewer v. Franklin Mills, 42 N. H. 292; Wilson v. Burney, 8 Neb. 39; Townsend v. Whitney, 75 N. Y. 425; City Trust Co. v. American Brewing Co., 70 N. Y. App. D. 511, affirmed, 174 N. Y. 486, 67 N. E. 62; Peters v. McWilliams, 36 Oh. St. 155 (statutory); Cottrell's App., 23 Pa. 294; Richter v. Cummings, 60 Pa. 441; Boltz's Estate, 133 Pa. 77, 19 Atl. 303; Garvin v. Garvin, 27 S. C. 472, 4 S. E. 148; M'Nairy v. Eastland, 10 Yerg. 310; Krall v. Campbell Printing Press Co., 79 Tex. 556, 15 S. W. 565. 16 Cooper v. Jenkins, 32 Beav. 337; Peoples v. Peoples Bros., Inc., 254 Fed. 489; Schoonover v. Allen, 40 Ark. 132; Rice v. Morris, 82 Ind. 204; Swan v. Patterson, 7 Md. 164; Wilcox v. Fairhaven Bank, 7 Allen, 270; Musgrave v. Dickson, 172 Pa. 629, 33 Atl. 705, 51 Am. St. Rep. 765. 17 Labbe v. Bernard, 196 Mass. 551, 82 N. E. 688, 14 L. R. A. (N. S.) 457; citing Rice v. Southgate, 16 Gray, 142; Wood v. Lake, 62 Ala. 489; Lewis v. Faber, 65 Ala. 460; Conner v. Howe, 35 Minn. 518, 29 N. W. 314; McArthur v. Martin, 23 Minn. 74; Forbes v. Jackson, 19 Ch. D. 615. See also Stavrelis v. Zacharias, (N. H. 1919), 106 Atl. 306. 18 Labbe v. Berrard, 196 Mass. 551, 82 N. E. 688, 14 L. R. A. (N. S.) 457; citing Norton v. Soule, 2 Greenl. 341; Atwood v. Vincent, 17 Conn. 575; Greene v. Ferrie, 1 Desaus. Eq. § 1268. Subrogation to rights of the creditor which have been legally destroyed by the surety's payment. Under a narrow view taken by the English courts it was held that a surety could not be subrogated to advantages of the creditor which were legally destroyed by payment of the debt. That is, the advantage which the creditor might have as a bond creditor, or a judgment creditor, would not enure to the benefit of the surety, since his payment satisfied the bond or the judgment. 12 And this rule has been followed more or less completely in a few of the United States. 13 As subrogation is an equitable doctrine, there seems no difficulty in keeping alive for the benefit of the surety an obligation which has been satisfied at law. The refusal of equity to allow a legal defence its ordinary operation when injustice will thereby be caused, is no novelty. This result has been achieved in England by statute,1 and the same principle is largely adopted in the United States, 15 N. E. 470; Blake v. Traders' Nat. Bank, 145 Mass. 13, 12 N. E. 414; Wernecke v. Kenyon, 66 Mo. 275; Clark v. First Bank of Harrisonville, 57 Mo. App. 277; Brown v. Houck, 41 Hun, 16; Bunting v. Ricks, 2 Dev. & B. Eq. 130, 32 Am. Dec. 699; Thompson v. Humphrey, 83 N. C. 416; Rhame v. Lewis, 13 Rich. Eq. 269; Edmunds v. Venable, 1 Pat. & H. 121; Pinckard v. Woods, 8 Gratt. 140. 12 Jones v. Davis, 4 Russell, 277; Armitage v. Baldwin, 5 Beav. 278; Dowbiggen v. Bourne, 2 Y. & C. Ex. 462. 13 Whittier v. Heminway, 22 Me. 238, 38 Am. Dec. 309; Adams v. Drake, 11 Cush. 504; Holmes v. Day, 108 Mass. 563; New Bedford Savings Inst. v. Hathaway, 134 Mass. 69, 45 Am. Rep. 289; Frevert v. Henry, 14 Nev. 191; Moore v. Campbell, 36 Vt. 361. 14 Mercantile Law Amendment Act, 19-20 Victoria, c. 97, Sec. 5. 15 Schindelholz v. Cullum, 55 Fed. 885, 889, 5 C. C. A. 293, 12 U. S. App. 242; Bragg v. Patterson, 85 Ala. 233, 4 So. 716 (statutory); Talbot V. Wilkins, 31 Ark. 411, 423; Williams v. Riehl, 127 Cal. 365, 370, 59 Pac. 762, 78 Am. St. Rep. 60; Merriken v. Godwin, 2 Del. Ch. 236; Dodd v. Wilson, 4 Del. Ch. 399; Patterson v. Clark, 101 Ga. 214, 28 S. E. 623 (statutory); Rice v. Rice, 108 Ill. 199; Manford v. Firth, 68 Ind. 83; Frank v. Traylor, 130 Ind. 145, 148, 29 N. E. 486, 16 L. R. A. 115; Hollingsworth v. Pearson, 53 Ia. 53, 3 N. W. 818; Schleissman v. Kallenberg, 72 Ia. 338, 33 N. W. 459; Harris v. Frank, 29 Kans. 200 (statutory); Honce v. Schram, 73 Kan. 368, 85 Pac. 535; Roberts v. Bruce, 12 Ky. L. Rep. 932, 15 S. W. 872; Connely v. Bourg, 16 La. Ann. 108, 79 Am. Dec. 568; Wallace v. Jones, 110 Md. 143, 72 Atl. 769 (statutory); Smith v. Rumsey, 33 Mich. 183; Kimmel v. Lowe, 28 Minn. 265, 9 N. W. 764; Swan v. Smith, 57 Miss. 548 (statutory); Benne v. Schnecko, 100 Mo. 250, 13 S. W. 82; Bledsoe v. Nixon, 68 N. C. 521; Rice v. Hearn, 109 N. C. 150, 13 S. E. 895; Fowle v. McLean, 168 N. C. 537, 84 S. E. 852; Durand v. the co-sureties are insolvent this is not the case. A right of contribution against an insolvent co-surety gives merely a provable claim for the amount due. Not so the right of subrogation. Where one of two sureties pays the debt in full and his co-surety is bankrupt, the surety who has paid is subrogated to the creditor's proof against the bankrupt's estate if already made, or if the creditor has not proved, the surety may prove for the full amount of the debt, being restricted, however, in the recovery of dividends to an amount equal to the share of the debt, which the bankrupt equitably ought to pay.22 Any other rule would enable the creditor to vary the ultimate payments of the two sureties, for the creditor unquestionably can either prove against the bankrupt surety for the full debt, and then recover from the solvent surety the deficiency; or at his option sue the latter for the whole debt without proving against the bankrupt estate. If the solvent surety cannot then by subrogation prove for the full debt against the bankrupt estate, the ultimate situation of the parties will be varied according as the creditor chooses one or the other course. § 1272. Security for several debts. Where a surety pays his entire indebtedness he is entitled to subrogation to any right or security of the creditor exclusively applicable to that debt. But where the creditor holds security for several debts, payment of his entire obligation by a surety for one of those debts will not entitle him to subrogation to any part of the security until the creditor has satisfied all the debts to which the security was applicable. 23 22 Ex parte Stokes, De Gex, 618; In re Parker, [1894], 3 Ch. 400; Hess's Estate, 69 Pa. 272; Pace v. Pace's Adm'r, 95 Va. 792, 30 S. E. 361, 44 L. R. A. 459. See also Federal Bankruptcy Act, Sec. 57 (i). But see contra-Maxwell v. Heron, 3 Ross, L. C. 129, s. c. sub nom. Keith v. Forbes, 3 Paton, 350; Apperson v. Wilbourn, 58 Miss. 439, 444; New Bedford Institution v. Hathaway, 134 23 Rice v. Morris, 82 Ind. 204; Welch v. Parran, 2 Gill, 320; Parker v. Mercer, 7 Miss. 320, 38 Am. Dec. 438; Mathews v. Switzler, 46 Mo. 301 (compare Allison v. Sutherlin, 50 Mo. 274); Grubbs v. Wysors, 32 Gratt. 127. See also National City Bank v. Zimmer, etc., Co., 132 Minn. 211, § 1273. Subrogation against a bankrupt principal in favor of a surety for part of a debt. It is obvious that if a surety pays the whole of the debt for which he is bound, he is entitled to be subrogated to the creditor's claim against a bankrupt principal; and even though the creditor has other claims against the principal not fully satisfied, he should not receive, and if he has received should not keep, the dividends of the claim which the surety has paid. This principle has been extended in England, 24 and it is there held that "when a surety is only surety for a part of the debt, and has paid that part of the debt, he is entitled to receive the dividend which the principal debtor pays in respect of that sum which the surety has discharged." 25 And similarly such a surety is entitled to subrogation to a ratable portion of the securities held by the creditor to secure the whole debt, to the exclusion of any right on the part of the creditor to apply that portion to the balance of his claim.26 A distinction very difficult of application is taken between a surety for part of the debt and a surety for the whole debt with liability limited to a fixed sum. In the latter case the surety is not subrogated to the dividends unless the creditor is fully paid.27 The English doctrine has been justly criticised, and is not generally followed in the United States. 28 There is no equity on which to base the deprivation of the creditor of any of his legal rights until he has been paid in full. To impute any intention of the sort to the parties involves the baldest fiction. If indeed the creditor contracted 156 N. W. 265; Patch v. First Nat. Bank, 90 Vt. 4, 96 Atl. 423. 24 The extended principle was first announced in Ex parte Rushforth, 10 Ves. 409. 25 Gray v. Seckham, L. R. 7 Ch. App. 680. 26 Harmer v. Gibb, [1911] Sc. Sess. Cas. 1341. Ellis v. Emmanuel, 1 Ex. D.'157; In re Sass, [1896] 2 Q. B. 12. The surety may by his contract with the creditor surrender this right. Midland Banking Co. v. Chambers, L. R. 4 Ch. 398. 28 Knaffi v. Knoxville Banking, etc., Co., 133 Tenn. 655, 182 S. W. 232, Ann. Cas. 1917 C. 1181. See also Board of Health v. Teutonia Bank, etc., Co., 137 La. 422, 68 So. 748, Ann. Cas. 1916 B. 1251; Commissioners of Banking v. Chelsea Savings Bank, 161 Mich. 691, 125 N. W. 424, 127 N. W. 351. But see Cole v. Myers, 100 Neb. 480, 160 N. W. 894, 895; Buffalo German Ins. Co. v. Title Guaranty, etc., Co., 51 N. Y. Misc. 267, 99 N. Y. S. 883. the co-sureties are insolvent this is not the case. A right of contribution against an insolvent co-surety gives merely a provable claim for the amount due. Not so the right of subrogation. Where one of two sureties pays the debt in full and his co-surety is bankrupt, the surety who has paid is subrogated to the creditor's proof against the bankrupt's estate if already made, or if the creditor has not proved, the surety may prove for the full amount of the debt, being restricted, however, in the recovery of dividends to an amount equal to the share of the debt, which the bankrupt equitably ought to pay.22 Any other rule would enable the creditor to vary the ultimate payments of the two sureties, for the creditor unquestionably can either prove against the bankrupt surety for the full debt, and then recover from the solvent surety the deficiency; or at his option sue the latter for the whole debt without proving against the bankrupt estate. If the solvent surety cannot then by subrogation prove for the full debt against the bankrupt estate, the ultimate situation of the parties will be varied according as the creditor chooses one or the other course. § 1272. Security for several debts. Where a surety pays his entire indebtedness he is entitled to subrogation to any right or security of the creditor exclusively applicable to that debt. But where the creditor holds security for several debts, payment of his entire obligation by a surety for one of those debts will not entitle him to subrogation to any part of the security until the creditor has satisfied all the debts to which the security was applicable. 23 22 Ex parte Stokes, De Gex, 618; In re Parker, [1894], 3 Ch. 400; Hess's Estate, 69 Pa. 272; Pace v. Pace's Adm'r, 95 Va. 792, 30 S. E. 361, 44 L. R. A. 459. See also Federal Bankruptcy Act, Sec. 57 (i). But see contra-Maxwell v. Heron, 3 Ross, L. C. 129, s. c. sub nom. Keith v. Forbes, 3 Paton, 350; Apperson v. Wilbourn, 58 Miss. 439, 444; New Bedford Institution v. Hathaway, 134 23 Rice v. Morris, 82 Ind. 204; Welch v. Parran, 2 Gill, 320; Parker v. Mercer, 7 Miss. 320, 38 Am. Dec. 438; Mathews v. Switzler, 46 Mo. 301 (compare Allison v. Sutherlin, 50 Mo. 274); Grubbs v. Wysors, 32 Gratt. 127. See also National City Bank v. Zimmer, etc., Co., 132 Minn. 211, |