Paulin v. Kaighn

27 N.J.L. 503

• Court: Supreme Court of New Jersey
• Decided: June 15, 1859
• Status: Published

Opinion

The opinion of the court was delivered by

Whelpley, J.

This was an action for contribution, brought by Kaighn against Paulin. Kaighn, Paulin, and one Cooper executed a joint bond, on the 9lh September, 1852, to one Champion. Judgment was obtained upon it, and Kaighn and Cooper paid it off, each paying one-half. Kaighn brings this action to recover of Paulin the one-third of the one-half paid by him. The case, on the part of the plaintiff, was made out on the trial. But the defence offered by the defendants was overruled, and error is brought on bills of exception for this overruling.

The defendants offered to show, by parol evidence, that the bond was executed by the three obligors, as sureties for the South Camden Ferry Company. This was proved . by ' the plaintiff himself,, and was clearly admissible evi'dence. The rule seems well settled, that in an action brought by the surety against the principal for indemnity, or by one surety against another for contribution, the real -situation and responsibility of the parties may be shown by •parol evidence in an action at law. There is an obvious propriety in excluding the evidence at law in an action upon the contract brought by the creditor. By the form of the instrument, they agree to be bound to him as principals ; the action is to enforce the instrument in the shape the parties put it. But' when the action is brought for indemnity or contribution, by one of the parties signing it, no such reason exists; the creditors not interested in that question, it comes up collaterally. The instrument is not the foundation of the recovery—that depends upon .whether the relation of principal 'and surety existed ; the fact that they agreed to, and did become jointly bound ' with another to a creditor, is not inconsistent with the fact that they were jointly bound as sureties. Craythorne v. Swinburne, 14 Vesey 160; Taylor v. Savage, 13 Mass. R. 102; Harris v. Warner, 13 Wend. 400; Sisson v. Barrett, 6 Barb. 199; S. C., 2 Comst. 406; Pintard v. Davis, 1 Zab. 634.

The defendants offered to show that the Camden Ferry .Company put into the hands of Kaighn and Cooper securities to indemnify them against their liability, which they surrendered without the consent of Paulin. They also offered to prove that the ferry company executed a ■mortgage to Kaighn, Cooper, Paulin, and others, for the sum of $30,000, to secure the persons named as mortgagees' therein for all sums of money advanced, or to be advanced, and for all responsibility by them incurred for the company, pro ratá\ to the extent of the thirty thousand dollars; that said mortgage was held' by said Kaighn and Cooper, ánd was by them canceled and discharged, .without the consent of Paulin, after the payment to Champion.

■ Wore these offers relevant evidence ? did they disclose any legal defence to the action ?

It is said that the offer made did not amount to an offer to prove that Kaigim, Cooper and Paulin were sureties for the ferry company; that it did not appear that the company was liable to Champion at all; that the plaintiff, defendant, and Cooper absolutely assumed to pay the debt, not as sureties for the company, but as principal debtors.

I understand the offer to have been to prove that these persons were sureties to Champion for the debt of the ferry company—at all events it was a liability contracted for the company at its request; the company, as to them, was bound to pay the debt in their exoneration; that constituted the relation of sureties inter sese; each had his remedy against the company for what he might be compelled to pay on the contract; each had his remedy against the other for contribution.

It seems well settled that sureties are not only entitled to contribution from each other for moneys paid in discharge of their joint liabilities for the principal, but they are also entitled to the benefit of all the securities which have been taken by any one of them to indemnify himself against such liabilities. The action for contribution rests not upon contract, but upon the broad principle of equity, that in cases where there is an equality in the obligation there shall be equality in supporting if. Equality is equity in such cases—being equally hound, they shall equally pay. 1 Story’s Eq. 499; Theobold on Principal and Surety, ch. 11, § 283; Swain v. Wall, 1 Ch. Rep. 149.

The surety may fake colli fora Is from his principal to indemnify himself against his liability; and if he brings ail action against his co surety for contribution, his holding such collaterals will not bar his recovery. Done v. Walley, 2 Wels., H. & Gor. 198; Bachelder v. Fiske, 17 Mass. R. 464.

But any collateral he may take will enure to the benefit of all the sureties; as soon as such collateral is taken by one of the sureties, all have an equal interest in it with himself. He has no right, without their consent, to deprive them of that which has once enured to their benefit.; the proceeds of such collateral must be applied to the satisfaction of the joint debt.

In this case the collaterals were not only, in law, for the benefit of all the co-sureties—they not only enured for their benefit, but a portion of them were in fact for the benefit of Paulin by their very terms; the security was intrusted to two of the sureties for all. This was given up without the consent of Paulin. He was thus deprived, by the act of' the plaintiff, of the indemnity intended by the principal debtor for his benefit; to give it up was to practise a fraud upon him, if done without his consent for that purpose. The opening does not charge fraud in fact upon Kaighn- and Cooper, nor does it state that the securities given up would have been sufficient to indemnify; for aught that appears, they may have been of small value.

But the main question still remains to be settled—what is the effect of the relinquishment of these collaterals, the joint property of all the sureties, the precise value of which is unknown, without the consent of the joint owners. It did not change the liability of the ferry company to Paulin, if he had been compelled to pay the debt, nor did it, in any way, affect the right of Paulin to his action for contribution against Kaighn and Cooper; the liabilities growing out of the relation of co-sureties still remained the same.

Where timers given by a valid contract upon ,a sufficient consideration by the creditor to the principal debtor, the surety is discharged, because the original contract upon which he was surety is materially modified without his consent; the contract upon which he was surety no longer exists. Bell ads. Martin, 3 Harr. 171, and cases (here cited. In the case now before the court, tiie act of Kaighn in no way affected the original contract of surety-ship, as we have already seen. It is alleged that the act of Kaiglin absolved Paulin from all liability to contribute to him., because he gave up securities to which Paulin had a right to resort for reimbursement. If the act had been fraudulent in fact, there can be no doubt but that it would discharge Paulin from all liability to Kaighn ; if Kaighn had received anything, as the liquidated price or value of the securities, he would, as we have seen, been obliged to. credit it upon the debt paid by him; if he had retained them, he would have done so for the joint benefit of all the sureties.

In the case of Woodruff v. The Insurance Co., 2 Dutcher 557, Chancellor Williamson, delivering the opinion of the Court of Errors, seems to have held that where an insurer had a right of subrogation to certain collaterals held by the insured, that if the insured relinquished any of them he must deduct their value from the insurance money. What was said by the learned Chancellor was said arguendo, and was unnecessary for the decision of the case. If he meant to be understood as holding that this deduction could be made in a court of law in an action for the insurance money, either by way of set-off, payment or forfeiture pro tanto, I cannot yield my assent to the doctrine; it is utterly without support, either upon principle or authority. A court of law cannot thus convert a mere breach of an equitable right without express proof of injury occasioned thereby, and the amount of that injury into a debt, to be set off, or treat it as a payment made.

If the securities still remained in the possession of Kaighn, notwithstanding that he would still be entitled to contribution, and to maintain his action for it, and Paulin, upon payment of his eontributive share, could then, by bill in equity, enforce his right of subrogation to these securities, or if they had been given up without his consent, and the right of subrogation be a right which can be recognized in a court of. law, brings his action on the case for the damages sustained by the violation of that right, these damages are necessarily unliquidated, and, as such, not the subject matter of a set-off, and a fortiori, could not be treated as payment. Smock v. Warford, 1 South. 306; 2 Parsons on Con. 245.

I am of opinion that the relinquishment by Kaighn of the securities held by him without fraud, although without the consent of Paulin, did not discharge the liability of Paulin to contribution.

The defendant opened a further defence, in substance, that Kaighn, with others, had signed an agreement not under seal, dated the 29th December, 1855, by which the signers agreed to receive, in lieu of their respective debts, certain bonds to the amount thereof, secured by a mortgage upon the property of the company, upon certain terms therein expressed; and that certain creditors, who liad signed the agreement, did receive the bonds mentioned in it; and that it was part of the agreement that all of the indebtedness of Kaighn, Cooper, and the other creditors who signed it, that time should be given upon such indebtedness funded as aforesaid, and that Kaighn was bound to fund the indebtedness for which this suit was brought.

One of the terms upon which this agreement was to be binding upon the signers was, that all the other creditors of the company, except certain second mortgage creditors, would accept these bonds in lieu of their indebtedness, except certain small creditors, who were to be paid after giving a credit of six months.

The defendant did hot offer to show that all the creditors signed this agreement; on the contrary, Paulin himself never signed it., and Was not bound by it.

It wits an agreement not amounting to a release; its terms were never complied with; Kaighn never was bound to. ltiil'd. his- indebtedness Under its provisions; at the most, if, was a more agreement to accept bonds in lien oí' his claims upon the company upon certain conditions. The debt of the company to Kaighn was never cither paid or released by force of that agreement.

There, was no valid agreement to give time to the company —none which the company were ever in a condition to enforce against Kaighn ; his rights against them remained unchanged. Paulin's remedy against the company was in no way changed by the action of Kaighn ; the whole arrangement remained incompleto, and became, by non-compliance with its stipulations, a dead letter.

The opening of the defendant in regard to that agreement, and the action of the plaintiff under it, fall far short of showing a legal defence to this action.

There can be no doubt but that if that agreement to fund the debt had been signed by all the necessary parties, and the conditions upon which it was to be binding bad been performed, so that it was capable of being enforced by the company against all who signed it, it would have materially changed the position of Paulin ; but these events never happened—the agreement never did become binding upon any of the signers, and nothing done under it by Kaighn ever affected his rights against Paulin.

The judgment must be affirmed.

Reversed, 5 Dutch. 480.