Opinion
(January Term, 1867.)
Where a vendor had executed a full title to the land sold, taking from the vendee a personal bond, with two sureties, for the purchase money; upon the insolvency and death of the vendee and one of the sureties, and a sale of the land by the devisee of the vendee to a purchaser with notice: Held, that the other surety could not subject the land for his indemnification upon the bond.
ORIGINAL BILL, filed to Fall Term, 1866, of BLADEN, at which time a demurrer and an answer were put in, and the cause was set for hearing and transmitted to this court.
Shepherd, for the complainant.
Strange and Person, for the defendant, Cowan.
The bill stated that in 1853 Mrs. Guion, then Miss Owen, sold to Thomas C. Miller an improved lot in Wilmington (which was described), and made a deed in fee to him, taking bond from him for $12,000, payable, with annual interest, at ten years after date, and with the complainant and James S. Miller as sureties thereto; that Thomas C. Miller died in 1865, and James S. Miller previously, and that the estates of both are insolvent: also that Annie W. Miller, the wife of the former, is his devisee, and has, by the will, an absolute power of sale. The bill further stated that complainant had applied to Mrs. Miller to be allowed to take the lot and assume payment of the debt, but had been refused, because she wished to make an application of its proceeds for her own advantage; and that afterwards she sold it on a credit for $12,000, which is considerably less than its value, to Robert H. Cowan, who purchased under various circumstances that put him upon notice; that Miss Owen has married Mr. Guion, and the latter holds the bond on which complainant is surety, and has notified him that he will sue upon it.
The prayer was that Cowan be declared a trustee for the benefit of the complainant; that the land might be sold for his indemnity; that an account might be taken, and that complainant might have (86) other relief, etc.
The answer of Mr. and Mrs. Guion admitted the material allegations of the bill.
Mr. Cowan and Mrs. Miller filed a joint general demurrer.
It was properly conceded by Mr. Shepherd, on the argument, that the doctrine of "the lien of a vendor for the purchase money" does not obtain in this State. (See the cases collected in Battle's Digest.) He rested the complainant's right to relief on the relation of principal and surety, and assumed, in the first place, that a surety is not bound to wait until he has been forced to pay the debt, but is allowed to file a bill " qui timet" and obtain a decree, (88) that the principal pay the debt for his exoneration. This proposition is true, and the only difficulty is that it does not fit the case; for one of the allegations of the bill is that the estate of the principal is hopelessly insolvent; so a decree of this kind would be useless, and is not prayed for. The scope of the bill is to have a house and lot, belonging to the principal, subjected to the payment of the debt. Mr. Shepherd puts this equity on the ground that the debt, for which the complainant is bound as surety, was created for the purchase of this very house and lot, and as the principal is insolvent, the complainant, as surety, has an equity to be indemnified out of it, in preference to any other creditor, on the broad principle that a surety who pays or is about to be forced to pay for the property, ought in conscience to have it, or at least to be indemnified by it; and he insists that the defendant, Mrs. Miller, who is the executrix of the principal, and the defendant, Mr. Cowan, who purchased from her with notice, are subject to this equity. The latter branch of this proposition is true. Neither Mrs. Miller nor Mr. Cowan can be in a better condition than the principal debtor, "in whose shoes they stand." So the only point is: Can the first branch of the proposition be sustained, either upon principle or by authority?
That a surety who is forced to pay for property ought in conscience to be indemnified out of it, is a proposition which, at first view, will strike every one as in accordance with natural justice. Yet, upon examination, it will be found that it can not be practically applied, without interfering too much with the ordinary dealings between man and man, and without restricting too much the exercise of the rights of property. For this reason, although Courts of Equity have at all times been studious to protect sureties, yet they have never adopted this broad principle, and have confined their interference to the limited bounds, which I will have occasion to state below.
(89) Take our case, by way of illustration. In 1853 Thomas C. Miller bought the house and lot of Mrs. Guion, and she accepted from him a bond, with two sureties, for the purchase money, to be paid at the expiration of ten years, interest to be paid annually, and thereupon executed to him a deed for the property, by force and effect whereof he became, to all intents and purposes, the owner, both at law and in equity. After that time Mrs. Guion had no more right to look to this property for the payment of the debt than to any other property of his, and no more concern with it than any other creditor; and he had as full ownership in it as in any other property that belonged to him. What an intolerable fetter would it be on the rights of property to adopt the doctrine that he could not sell this house and lot, and that it could not be sold for his debts as long as a bond which, by the acts of the parties, had become a naked personal obligation, or any part of it, remained unpaid?
Let us now see how far the courts have felt at liberty to go in favor of sureties. It is true, as Mr. Shepherd contended, that, when a surety pays the debt, he is held in equity to be entitled to the benefit of any security which the creditor holds against the principal; in other words, to be subrogated to the rights of the creditor against the principal. So here, if Mrs. Guion had retained the title as security, or if she had taken a mortgage, the surety would have been entitled to the benefit of the security. For this position Green v. Crockett, 22 N.C. 390; Polk v. Gallant, Ibid, 397, and the other cases cited for the complainant, are authorities; but they all proceed on the principle that the legal title being in the creditor, as a security, the surety may call for it, as an indemnity. The learned counsel was forced to concede that these cases do not apply. But he relied upon Freeman v. Mebane, 55 N.C. 44, as an authority in point; for he says that there the legal title (90) was in the principal, and not in the creditor, and was subjected in the hands of a purchaser to indemnify the surety.
It is true, that in that case the legal title was in the principal, but an examination of the case will show that it was not an extension, but a new application, of the doctrine of substitution, laid down in Green v. Crockett and the other cases, and is subject to the very same limitations. Freeman was the surety of one Sutton on a bond to make title to one Nichols. Afterwards Mebane bought the legal estate which Sutton held at sheriff's sale. Freeman thereupon filed a bill and obtained a decree to subject the land to his indemnity on the ground that Nichols, the creditor in the bond, had the equitable estate, and could force Mebane to convey the legal estate to him; and by the doctrine of substitution, Freeman, the surety, had a right to call on the creditor and have the benefit of all the rights and securities which he held against the principal. There the surety took the place of the creditor, and was allowed to set up his equitable title. In Green v. Crockett, and the other cases, the surety took the place of the creditor and asserted his legal title. But in all of the cases the creditor had either a legal or equitable title; whereas, unfortunately for the complainant in our case, the creditor has neither a legal nor equitable title, and there is nothing for a Court of Equity to act upon, by way of substitution. It is the misfortune of the surety that the creditor relied on the bond alone, and he himself neglected to take any counter security.
PER CURIAM. Demurrer allowed, and bill dismissed with costs, except as to defendants Guion and wife.
Cited: Reade v. Hamlin, post, 132; Thigpen v. Price, post, 147; Latham v. Skinner, post, 299; Crawford v. McAdams, 63 N.C. 69; Blevins v. Barker, 75 N.C. 438; Carlton v. Simonton, 94 N.C. 404; Quinnerly v. Quinnerly, 114 N.C. 148; Piano Co. v. Spruill, 150 N.C. 169.
(91)