Opinion
(June Term, 1849.)
There was a judgment against the principal and two sureties, and an execution levied on the property of one of the sureties. A. bought this property from this surety, pending the levy, and afterwards obtained an assignment of the judgment to enable him to have the whole amount satisfied out of the property of the cosurety, and issued an execution for that purpose. Held, that a court of equity will restrain him from collecting out of the cosurety more than the fair proportion which the latter owed, whether A. had actual notice of the lien of the execution or not.
APPEAL from an interlocutory order made at Spring Term, 1849, of Surry Court of Equity, Ellis, J.
J. T. Morehead for plaintiff.
Iredell for defendant.
This is an appeal from an order dissolving an injunction, and upon the pleadings the case is as follows: The plaintiff and George W. Brown and several other persons became cosureties for one Waugh to the Bank of Cape Fear, at Salem, by a note for $450, and in April, 1842, judgment was taken by the bank against Waugh, Dobson, Brown, and the other sureties; and from that time to the filing of the bill, in September, 1848, writs of fieri facias were regularly sued out and delivered to the sheriff of Surry, in which county the debtors lived. On 15 May, 1844, the defendant Prather purchased from George W. Brown a house and lot in Rockford, in Surry, at the price of $1,000, and took a conveyance in fee. At the time of the purchase, Prather inquired of Brown and the sheriff whether there were any executions against the property, and was informed by them that there were several, amounting to (32) upwards of $1,000, which they showed him; but that of the bank against Waugh and his sureties was not among them. Prather thereupon closed the contract, and paid the consideration money, and out of it Brown then paid the sum of $800 to the sheriff toward the discharge balance due on them. Prather took also, from the sheriff, a covenant that there was no other execution against Brown's property, and to indemnify him against it or them, if there should be any. Subsequently the property of Waugh was sold on executions for this and other large debts to the bank, and out of the proceeds a sum was applied to this debt, which reduced it to $276.08 on 18 February, 1845, and $10.80 for costs. Waugh then became insolvent, and so also did all the sureties except the plaintiff and Brown; and, indeed, Brown was insolvent and had no estate subject to execution for this debt, excepting only the house and lot, which he had sold to Prather, and which was subject to it, inasmuch as an execution was in fact out and in the hands of a deputy sheriff at the time Prather made his purchase, though unknown to him. On 8 May, 1844, the plaintiff and some other sureties for Waugh, not including Brown, requested the bank not to have Waugh's property then sold under the bank's executions, as it was thought by them that, with indulgence, Waugh would avoid a sacrifice of his property and be able to pay all the debts; and the bank acceded thereto, and also upon another subsequent occasion before the sale in February, 1845. Some time thereafter Prather, discovering that there had been an execution in the hands of the deputy sheriff when he purchased from Brown, and that alias and pluries writs had been regularly kept up, and that the sheriff was about to levy half the balance of this debt from the plaintiff and sell the house and lot for the other half unless he would pay it, applied to the (33) bank to accept from him the sum due on the judgment and assign it to him, so as to give him the control of it, with a view to save himself from loss by having the whole of the money raised out of the plaintiff's property. The plaintiff then filed this bill against Prather and the bank, praying an injunction against all further proceedings on the judgment. Besides the facts on his behalf already stated, the plaintiff sets forth in the bill that as much of the money raised by the sale of Waugh's property as would satisfy this debt ought to have been applied to it; but that the bank had caused the same to be misapplied to executions on junior judgments, so as unlawfully and unjustly to leave the before mentioned balance apparently due thereon. The plaintiff further sets forth that Brown was and still is indebted to Waugh in a larger sum than the balance on the judgment, and that before his sale to Prather he had agreed with Waugh to pay on this judgment the amount of his debt to him. On the bill the injunction was granted as to the whole debt as prayed for.
The answers deny any misapplication of the money raised on the executions, and they state that in truth the sum, which was a very large one, was applied under the directions of an eminent attorney who represented the present plaintiff on that occasion, as well as others of the sureties for the several debts. The defendant Prather also denies that Brown was, to his knowledge or belief, indebted to Waugh, or under any engagement or legal obligation to pay anything upon the debt in question, except as one of the sureties therefor.
Upon the reading of the bill and answers and the motion of the defendants on the circuit, his Honor dismissed the injunction in toto, but allowed the plaintiff an appeal.
Although copies of the records of the judgments at law and the executions are not before us, yet it must be understood from the pleadings that, at the time Prather purchased from Brown, the house and lot were subject to the lien of a fieri facias for this debt, and that the lien has been kept up ever since; for a fieri facias binds from its teste against a purchaser from the debtor, and an alias and pluries preserve the lien by relation to the teste of the first writ. Gilkey v. Dickerson, 9 N.C. 341; Brassfield v. Whitaker, 11 N.C. 309. Very clearly, then, the house and lot are liable at law to be sold on this process; and, indeed, the sole object of the defendant Prather in taking an assignment of the debt from the bank was, by his power over it, to prevent the law having its course. The question, then, is whether there be any equity on his side to entitle him thus to deal with the process; and we own that we see none. At law the property is subject in the hands of Prather precisely as it would be in those of Brown. That is simply the nature and legal effect of the lien of an execution. It takes no notice of the debtor's alienation, but considers the thing as still belonging to him; and, consequently, it does not recognize any rights of the purchaser, as such, in the property. Therefore the defendant Prather cannot allege that, when he bought, he had no knowledge that the execution was out or might be taken out of a teste elder than his purchase, although upon inquiry from the sheriff himself he received information which caused him to believe that in fact there was no execution; for every one is bound to take notice of a lien created by the law itself, and, above all, of that arising from a judgment and execution. This defendant, then, cannot claim the equity which, in many other cases, is held to belong to a purchaser without notice. That doctrine applies as a bar only to relief which is sought in respect of an equitable right asserted by the plaintiff. But with respect to the lien of executions the whole is (35) a matter of strict legal right, without any regard to the actual state of a person's knowledge. If, instead of buying from Brown, and taking an indemnity from the sheriff, the defendant Prather had suffered the house to be sold under the executions in the sheriff's hands against Brown alone, then he would have obtained a good title, although those executions might have been junior to this one of the bank. Bell v. Hill, 2 N.C. 72; Ricks v. Blount, 15 N.C. 128; Jones v. Judkins, 20 N.C. 591. But, taking the course he did, the defendant cannot, as against the plaintiff, avail himself of the representation made to him by the sheriff, or of the application that was made of the price he paid. He was simply a purchaser from the debtor of property over which a fieri facias was then and still is impending; and it must be regarded here, as at law, as his folly or misfortune thus to have purchased. Prather therefore stands, in relation to the other parties and in reference to the lien of the executions, precisely in the shoes of Brown. Now, clearly, the relation between Brown and the plaintiff was that of perfect equality; and that of the creditor towards both of them was that of equal benevolence. If Brown had continued to be the owner of the house, he would not only be bound to pay half the debt as surety, but, having no other property but the house, he would not be allowed, by collusion with the creditor, to acquire the control of the process and use it so as to exonerate the house from the lien of the execution, and thereby throw the whole of the debt on the cosurety, as a total loss. The creditor, it is true, may raise the debt from one of the sureties, as a legal right. So he may in equity, for any sufficient reason growing out of his own interests. But he has no just right capriciously to deal with one of the sureties so as to enable him to rid himself of the debt and make the other pay all; and equity will not (36) sustain such dealing. It has been commonly said that the equity between these parties arises out of a right of sureties to be subrogated to the rights and remedies of the creditor against the principal and cosureties. This, of course, is equal in each of the sureties; and hence, if one of two sureties pay half the debt, the creditor is a trustee of the security to that extent for him. But when the other shall pay the other half, the creditor is in like manner a trustee for him. Thus the sureties are brought to an equality. But if one of the sureties pay the whole debt, the creditor thereby becomes a trustee of the entire security for him; yet it is subject, necessarily, to this provision, that the other surety may still place himself upon an equality with the first by paying his half; and upon doing so, it would be contrary to the duty of the creditor to require him to pay more and disturb the equality then existing between them. It can make no difference in the principle, whether the surety who pays all the debt in the first instance take an assignment to a trustee for himself or leave it with the creditor, as above supposed, for the assignee merely stands as the creditor did, and subject to all the equities that existed against the creditor. But resort need not be had to the refined equity of substitution in order to do justice between sureties; for the doctrine of contribution between sureties is so well settled as a substantive principle of equity as to suffice to bring about the same end. Then, suppose a surety to have paid the debt and to have taken an assignment to one to his use: it is clear that he ought not to raise the whole sum from another surety; for, although he might at law do so on an execution, equity will restrain him at once, because he is liable to contribution in equity, and, to avoid circuity, the court will prevent him from raising more than the half in the first instance. Suppose this plaintiff had taken an assignment from the bank, with the view of selling the house which Prather bought from Brown, for the whole debt. Although that could be done at law, Prather's equity, as (37) representing Brown and as a purchaser, would have been very clear to restrain the other party to the one half which ought justly to be raised out of that property. On the other hand, there is the same equity against Prather, that he should not levy the whole debt from Dobson, but that he should contribute the half for which the house might be sold. The Court holds, therefore, that the injunction in this case was proper as to one-half the debt, interest, and costs, and that to that extent it was erroneous to dissolve it.
But the Court likewise holds that, as to all but the one-half, the injunction ought to have been dissolved. The grounds on which relief is sought as to the other half are completely answered. As to the application of the money arising from Waugh's property, the question was one properly for the court of law, and the plaintiff ought to have sought his redress there. But without recurring to that, the plaintiff has made no case on the point, for he does not specify the various executions and point out the misapplication of which he complains, and he only alleges in general terms that the money was improperly applied to younger executions. That is denied by the defendants in general terms also, and, besides, they say that the proceeds of the sale were distributed among the executions under the direction of an attorney who represented the plaintiff as well as the sureties for the other debts.
In like manner the other ground fails the plaintiff upon the facts. The defendants deny, as far as they can, that Brown had engaged with Waugh to pay this debt, or that he was indebted to Waugh at all. We need not, therefore, now inquire what the equity would be between the plaintiff and Prather had there been such indebtedness or engagement on the part of Brown, unknown to Prather. Leaving that point, if there be anything in it, for the hearing, if the plaintiff should think it worth his while to proceed to proof on it, it is sufficient at present to say that the facts are denied in the answers, as far as the defendants know or believe; and therefore the decree must be upon the supposition that those (38) facts do not exist.
The decree must be reversed, with costs in this Court; and the motion of the defendants for a dissolution of the injunction allowed as to one-half the sum due on the judgment; and as to the other half, the injunction must be continued to the hearing.
PER CURIAM. Decree accordingly.