Hubbell and another v. Carpenter

Hubbell and another v. Carpenter. Subrogation. — Discharge of surety. If a surety, after judgment against himself and his principal, refuse to accept the control of an execution against the latter, when offered to him, he will lose his right of subrogation; and, consequently, cannot claim to he discharged by any subsequent arrangement between the creditor and the principal debtor. After separate j-idgments against principal and surety, a covenant not to enforce the judgment against the principal debtor, reserving the fight to collect that against the surety, does not discharge the latter; it does not deprive him of the right over against the former, after payment of the demand. Hubbell v. Carpenter, 5 Barb. 520, reversed; and s. c. at special term, 2 Id. 484, affirmed. Appeal from the general term of the Supreme Court, in the third district, where, on a rehearing, the decree of the court, at special term, in a creditor’s suit, had been reversed. (Reported below, ■ 5 Barb. 520, and, at special term, 2 Id. 484.) This was a creditors’ suit, commenced by bill, in the usual form, by Hubbell & Curran, the plaintiffs, to reach the choses in action, &c., of the defendant, Carpenter, against whom an execution had been returned unsatisfied. On the 30th March 1843, the plaintiffs, Hubbell & Curran, recovered a judgment against one Joseph P. Ellis, for $843.68 and costs. This judgment embraced a note for $200, made by Ellis, and indorsed for his accommodation by Hiram Carpenter, the defendant. The plaintiffs subsequently brought suit against the defendant, as indorser, and, on the 27th September 1843, recovered a judgment against him for $259.60 and costs. About the time of the recovery of the judgment against him, Ellis made an assignment for the benefit of his creditors, with preferences; the plaintiffs filed a bill, to set aside this assignment as fraudulent; but the suit was subsequently discontinued, on the 10th January 1844, each party paying his own costs, leaving the judgment unpaid, except as to a sum of money which the plaintiffs had realized out of a collateral security. On the 23d February 1844, Carpenter addressed a letter to the plaintiffs, requesting that an execution against himself might be sent to him, subject to his own control, with instructions to the sheriff to do with it as he should direct; and suggesting that Ellis might thus be induced to arrange the debt, in whole or in part, for his proteetion; but that unless he could have the entire direction of it, it would be of no use to send it. Instead of complying with this request, the plaintiffs, on the 28th February 1844, sent Carpenter a fieri facias against Ellis, in a letter, to the following effect: “ Dear Sir: Annexed we send you a fi. fa. against J. P. Ellis, subject in all respects to your control, except to indorse it satisfied; and you are authorized to receive proposals for a compromise, to send them to us for our acceptance. We believe, the above is full authority for you, as reqiiested in yours of the 23d instant; but, if it is not, write us. We hope, you will succeed in collecting enough to, at least, protect yourself; and we think, now, if Ellis would do that, ‘and pay the costs on this judgment, that was made by his defence, that we would release him. Please keep us advised of your progress. The fi. fa. against you is yet in the sheriff’s hands.” On the 4th March 1844, the defendant replied to this letter, as follows: “ I have received yours, inclosing an execution against Ellis. I wish to have nothing to do with this execution. I did not ash it. I said, if an execution was here, in the hands of the sheriff, against me, and under my control, I thought it very likely, they would pay, rather than see me suffer, as they have always agreed, to. do. This is all I meant to say; you probably misunderstood me. The sheriff, however, has not returned the execution against me, and if you choose to write me, or him, giving me the control over it, except to receipt, I will try and do something for you. There is no catch or trick about it, but to put it in a situation to induce them to relieve me, which I will do, if I can control the sheriff, otherwise not.” *In August 1845, under an execution against Ellis, the plaintiffs levied upon and advertised for sale certain personal property, which was claimed by other parties, and two suits were commenced against them, by the claimants, before the sale was closed. An arrangement was thereupon entered into, whereby the plaintiffs, on the 21st August 1845, upon the receipt of $200, transferred the goods which had been sold, and also their judgment against Ellis, to one John McCum-ber, with the following proviso: “ This assignment is not to impair the right of the said Hubbell'& Curran to collect and enforce all the collateral securities with said judgment now in their hands. It being understood, that we hold no collateral securities, except a judgment against Hiram Carpenter,- and a small balance on a note against McDonough.” *On the same day, the plaintiffs gave Ellis a receipt, in the following terms: “Received of Joseph P. Ellis, one dollar, in full of all demands, except a judgment in the supreme court in favor of Hubbell & Curran against said Ellis, this day assigned to John McCumber; but this receipt is in no way to affect our rights and claims under a judgment in our favor against Hiram Carpenter, as the indorser of said Ellis. And we promise and agree, not to enforce any claim under, or by virtue of said judgment, against said Ellis, in any way or manner whatever, or on the note upon which said judgment has been obtained.” The defendant insisted, that by the assignment of the judgment to McCumber, and the release to Ellis, the principal debtor, he was discharged from liability to the plaintiffs on the judgment against him. The learned judge, before whom the cause was brought to a hearing, at special term (Parker, J.), decided that the plaintiff still remained liable to the plaintiffs on the judgment, and directed a reference to ascertain the amount due thereon. (2 Barb. 484.) This decree, however, was reversed, on a rehearing, at general term, and the bill dismissed (5 Barb. 520), whereupon, the plaintiffs took this appeal. Hill, for the appellants. Carpenter, respondent, in propria persond. [MAJORITY — Ruggles, C. J.] Ruggles, C. J. Assuming, but without deciding, thai the rights and obligations *arising out of the relation of principal and surety, continue to exist between the creditor and the surety, after the judgment against the latter; this case must, according to my view of it, be decided against the defendant, on the ground, that he voluntarily rejected the offer and abandoned the right of being substituted in the place of the creditor, and of having the benefit of his remedy against the principal debtor. On the 23d of February 1844, Carpenter wrote to the complainants a letter, dated at Carthage, Jefferson county, where he then resided, requesting them to send to that place an execution against himself, subject in all respects to his own control, with positive directions to the officer not to attempt to harass or perplex him in the least, but to do with it as he should direct; stating, that Ellis and his counsel had always assured him, that he should be kept harmless and protected throughout, and that he thought, if the execution was so sent, they miglit be induced to arrange it, in whole or in part; hut that unless he could have the entire direction of it, it would be of no use to send it. This was, very clearly, a proposition to which the complainants were under no obligation to accede. They had, at that time, an execution in the sheriff’s hands against Carpenter, on the same judgment, unreturned, and which Carpenter had told the sheriff he had no means of satisfying; and Carpenter told the plaintiffs so, in the same letter in which he asked for another execution. The plaintiffs were certainly not bound to put themselves into Carpenter’s power, by any such directions as he asked in relation to the executions against himself. Instead of doing so, they sent him a fi. fa. against Ellis, with the following letter (The learned chief justice here stated the plaintiffs’ letter of the 28th February 1844, and the defendant’s reply thereto, of the 4th March, refusing to have anything to do with the execution, and continued):— *Here, then, was an explicit offer on the part of the complainants to give to Carpenter the benefit of the judgment and execution against Ellis: and a positive refusal on his part to have anything to do with it. This was not merely an offer to give him the benefit of the execution, upon payment of his part of the debt. It was an offer to give him that benefit; before payment, and, therefore, better than the complainants were bound to make; and yet it was rejected. At the time of this correspondence, Ellis was, and had been, for more than a year, insolvent. Carpenter represented himself *to be so. Carpenter’s right, as surety, to make use of the complainant’s judgment against Ellis, must have been regarded by him as of no value, and it was, probably, for that reason renounced. Under these circumstances, it seems to me, that the complainants were at liberty to pursue such course for the collection of the balance, as seemed most conducive to their own interest, without regard to Carpenter’s equitable right to subrogation. The equity of a surety can never be set up, in such way as to embarrass the creditor in an honest endeavor to collect his debt from the principal debtor; if he claims equity, he must do equity. Carpenter could not, or would not, pay the debt; nor would he take the control of the execution to collect it from Ellis. The complainants afterwards advertised for sale under their execution, property in the possession of Ellis, claimed by other persons, and when the day of sale arrived, it was ascertained that they could not proceed with the sale, without encountering the hazard and expense of obstinate litigation. This they were not bound to do, for the benefit of the.surety; they made a compromise, which they had a right to do. Carpenter, by this defence, places himself in the attitude of - a surety, who will neither pay the debt himself, nor permit the creditor to collect it of the principal debtor; this is not a surety’s equity. The arrangement made on the 21st of August 1845, was not a satisfaction of the judgment against Ellis. The complainants stipulated that they would never enforce it against Ellis; but with a reservation or condition that the stipulation should in no way affect their rights and claims under their judgment against Carpenter. Ellis agreed to this, by his acceptance of the receipt; and the effect of it was, to give to Carpenter the right to compel Ellis to refund to him whatever he might after-wards be compelled to pay to the complainants. (Pit-man on Principal and Surety, 181-2, 189.) The complainants, at the same time, assigned their judgment against Ellis to McCumber, but with a similar reservation of *their remedies against Carpenter. It is unnecessary to say, whether Carpenter, if he should pay the complainants, would still have a right to claim from McCumber the benefit of the judgment and execution against Ellis. Admit that he would not, and tlie case is not altered; Carpenter, by refusing to take the control of the execution when he might have had it, and when he ought to have taken it, justified the complainants in making such fair and honest disposition of it, as was most advantageous to themselves. All Carpenter’s rights against the principal debtor remain, excepting the right of making use of the complainants’ judgment; and of that, if lost, he has deprived himself. The judgment of the supreme court, at the general term, should, therefore, be reversed, and the judgment at the special term affirmed, with the costs of the appeal to the general term. Judgment reversed, and that of the special term affirmed.