Hempstead v. Watkins

1 Ark. 317
CourtSupreme Court of Arkansas
DecidedOctober 15, 1845
StatusPublished

This text of 1 Ark. 317 (Hempstead v. Watkins) is published on Counsel Stack Legal Research, covering Supreme Court of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hempstead v. Watkins, 1 Ark. 317 (Ark. 1845).

Opinion

OuDHAM, J.

delivered the opinion of the court.

We do not conceive it to be necessary in this case, to determine at what time a defendant should regularly object to a bill for want of equity, or whether the defendant in this case has sufficiently reserved the point in his answer, so as to enable him to question •the sufficiency of the bill upon the final hearing; but will proceed, at once, to the consideration of the question, whether the bill discloses a defence cognizable in a court of equity.

It is laid down as a general rule, that “if a creditor does any .act injurious to the surety, or if he omits to do any act when required by the surety, which his duty enjoins him to do, and the omission proves injurious to the surety, in all such cases the latter will be discharged, and he may set up such conduct as a defence to any suit brought against him, if not at law, at least in equity.” 1 Story’s Eq. Ju. 321. The jurisdiction of this class of cases originally and intrinsically belonged to equity, id. 475, and rests upon the principles of good faith between the parties, and to prevent ¡either party from taking an undue advantage of the other. It is said that the conscience of the party is affected by the relationship of .creditor, principal and surety, and that the creditor is bound to a faithful observance of the rights of the surety, and to a performance of every duty' necessary for the protection of those rights.

The leading case upon this subject is Rees vs. Herrington, 2 Ves. 540, in which it was definitely settled that, if the obligee in a bond with a surety, without communication with the surety, takes notes from the principal, and gives further time, the surety is discharged, Since that case, the giving of time has been considered and held as a settled subject of defence in equity, and has never been doubted. This principle having become firmly engrafted in the system of equity juris.prudence, courts of law acting upon the same broad and liberal principles of equity, have adopted the same rule as the subject of legal remedy, except in cases where the surety was estopped, as for instance by his bond, from averring his suretyship in a court of law: but Mr. Justice Story remarks, “but still the jurisdiction now assumed in courts of law upon this subject in no manner affects that originally and intrinsically belonging to equity.” Com. on Eq. Ju. 475.

• Several of the courts of the United States acting upon, and guided by those same liberal and enlightened principles of equity, have extended the defence of the surely still further. In Pain vs. Packard, 13 J. R. 174, it was held, “ that if an obligee or holder of a note, who is requested by a surety to proceed against the principal without delay and collect the money of him, who is then solvent, neglects to proceed against the principal, who afterwards becomes insolvent, the surety will be discharged. That in law and equity the holder was bound to use due vdiligence against the principal.” This question was again raised in King vs. Baldwin, 2 J. C. R., when Chancellor Kent dissented from the doctrine of the supreme court in Pain vs. Packard; but an appeal was taken from his decree'to the court of errors, where his decision was reversed, and the rule, as laid down by the supreme court, was held to govern both in law and in equity. 17 J. R. 384. Although the authority of this last mentioned case has been called in question upon the argument of this cause, as well as upon various other occasions, yet we conceive that the reasons given by Chief Justice Spencer, in the opinion which he delivered, have never been met, and refuted. In truth, they are unanswer^Jala^jSSa^ased his decision upon the solid ground “that the credj'&.^JgiSi&^^mtable obligation, and such is the essence of thewmiract, to obtaiiff payment of the principal debtor and not fron|j^j^^u^|^;lSQlá%the principalis unable to pay the debt.” Thi,||case was received fpd approved of, as authority, by the supreme c«¡¡url* JjP^mlsseKjn Thompson vs. Watson & Gibson, 10 Yer. 362. ^feasiá^Sífertífis a statute similar to ours, requiring the holder to bring suit against the principal upon notice from the security, but differing as to the proof of notice. Yet in the case last cited, and in the case of Hancock vs. Bryant & Hunt, 2 Yer. R. 476, the court held the sureties discharged, although the notice in the first case was verbal, and in the last could not be proved by two witnesses, as required by the statute. In neither of these cases did the complainants come within the provisions- of the statute, and could not have availed themselves of their defence at law; yet they were held' to be exonerated in equity. See Herbert et al. vs. Hobb et al., 3 Stew. Ala. 9.

The complainants in this case, in their bill, allege as'strbng a case as either of those cited, and like the case of Hancock vs. Bryant & Hunt, and Thompson vs. Watson & Gibson, they also allege the additional ground for equitable relief, that the notice in writing, which was served upon the holder of the bond, requiring him to sue, was mislaid, and- complainants were fearful that they could not establish the contents of the notice by proof; and is, so far, a stronger case for the jurisdiction of the chancellor than King vs. Baldwin.

Our statute declares that, unless the holder brings his suit within a specified time after service of notice, and prosecute the same to judgment and execution with due diligence, in the ordinary course of law, the surety shall be exonerated from liability. It is true that this statute declares a legal right, but it is based upon equitable principles, those same principles which first induced courts of equity to take cognizance of this class of cases, and to determine that if the obligee should give time to- the principal upon a new contract, it discharged the surety. The act is almost a reaffirmation of the rights, which the supreme court, and court of errors in New York, and the supreme court of Tennessee had declared in the cases already cited, that a court of equity would observe and enforce. Courts of equity originally took cognizance of this class of cases, not because of the particular state of facts existing, but in consequence of the relationship existing between the parties as creditor, principal and surety, and because, in the language of Chief Justice Spejtcer, already quoted, “the creditor is under an equitable obligation and such is the essence of the contract, to obtain payment of the principal debtor and not from the surety, unless the principal is unable to pay the debt.” An additional reason why chancery took jurisdiction in such cases, when the contract was by a bond, ahd all appeared to be principals, was that the surety was estopped by his bond from averring in a court of law that he executed the instrument as surety, hut in chancery might aver and establish the character of his undertaking. The statute is but declaratory, and an extension of an existing and originally equitable remedy, and which has been adopted and converted by courts of law into a subject of legal cognizance. The statute extends the original remedy, or so qualifies it that the surety is not bound to show the injury resulting from the subsequent insolvency of the principle to entitle himself to a discharge from his suretyship.

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Bluebook (online)
1 Ark. 317, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hempstead-v-watkins-ark-1845.