The bill then charged that Helme, instead of satisfying the judgment of $1,491.33, which the plaintiff had confessed, by applying the amount of it to the sum thus paid as his surety, had assigned the judgment to the defendants Washington and Thompson, who were (152) copartners, in payment of a debt due them, and that they, in the name of Helme, had issued an execution thereon, and were about to raise its amount from the assets in the hands of the plaintiff. The prayer of the bill was for an injunction and a discovery. All the defendants answered, and proofs were taken, but the case made by the will was not materially varied. It appeared from the answer of the defendants Washington and Thompson that the assignment was made by Helme to them on 2 June, 1826, which was before the payment of the $4,877.87 by the plaintiff. The equity of the plaintiff arises from the insolvency of Helme.
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WILLIAMSv. HELME,16 N.C. 151(1828)
ISAAC WILLIAMS, ADMINISTRATOR OF JOHN WILLIAMS, v. ROBERT H.
HELME, JOHN WASHINGTON, AND DAVID THOMPSON.
Supreme Court of North Carolina
1. A surety has in respect of his liability the rights of a creditor, and upon the insolvency of the principal debtor may retain any funds belonging to him in his hands.
2. Therefore, where the surety owed the principal debtor, who became insolvent, and assigned for value the debt due by the surety:It washeld, that the latter might retain the amount of his subsequent payment against the assignee.
From JOHNSTON. The plaintiff in his bill alleged that before 27 May, 1826, his intestate was bound as surety for the defendant Helme to a large amount, and was also indebted to him on that day in the sum of $1,491.33, for which suit had been brought by Helme, returnable to the county court, which sat on the said 27 May, 1826; that Helme was very anxious to collect the amount due on the debt of $1,491.33, and the plaintiff to prevent him, as he wished to retain that sum as an indemnity against the suretyship of his intestate for Helme; that it was agreed between them that the plaintiff should confess a judgment for the debt, with a stay of execution for three months, which was accordingly done; that on 27 May above mentioned, after the confession of the judgment by the plaintiff, Helme, whose circumstances had been doubtful, failed, and proclaimed his insolvency; that between that time and the ensuing August term of the county court executions issued against him and the plaintiff on a judgment which had before that time been entered up against them, whereon the plaintiff had paid the sum of $4,877.87, for which his intestate was bound as surety for Helme.
The bill then charged that Helme, instead of satisfying the judgment of $1,491.33, which the plaintiff had confessed, by applying the amount of it to the sum thus paid as his surety, had assigned the judgment to the defendants Washington and Thompson, who were (152) copartners, in payment of a debt due them, and that they, in the name of Helme, had issued an execution thereon, and were about to raise its amount from the assets in the hands of the plaintiff.
The prayer of the bill was for an injunction and a discovery.
All the defendants answered, and proofs were taken, but the case made by the will was not materially varied. It appeared from the answer of the defendants Washington and Thompson that the assignment was made by Helme to them on 2 June, 1826, which was before the payment of the $4,877.87 by the plaintiff.
Badger Devereux for plaintiff.Seawell Gaston for defendants Washington Thompson.Page 94
HENDERSON, J.
The equity of the plaintiff arises from the insolvency of Helme. The right of the latter to assign the judgment was lost when he became unable to exonerate the plaintiff from the thraldom in which he was placed on account of the suretyship — when Helme became unable to reciprocate the act which he required Williams to perform. I do not know a plainer equity; indeed, it was admitted in the argument that if Williams had, before the assignment, actually suffered, he would be entitled to the relief which he asks. Or if he had, before the assignment, applied to this Court to restrain Helme from transferring, that then the assignment would not avail, as it would have been made in violation of an order of the Court. Williams has other equities besides those arising from actual sufferings. As a surety, he has a right to have his fears and apprehensions quieted, to be made safe from apprehended harm. He need not wait till he has suffered, because his equity arises before that time; and this seems to be admitted in that part of the argument which rather concedes that he might have obtained an order that Helme should not assign. And as to the position that Williams should have applied to a court of equity to restrain Helme from transferring. I think that his equity is higher than any which could arise from the violation of orders or rules of court. It is independent of them; it arises from the principle first mentioned, that Helme could neither by himself nor by another require of Williams to do what he (Helme) was (160) unable to do towards him, from the fact of his insolvency. Williams being indebted to him, was also bound for him in a very large sum, from which he sustained a loss of double the amount of the sum which Williams owed. The debt which the plaintiff owed should have been left in his hands as an indemnity in part for his loss. It is true that if the judgment had been of a negotiable character, it would have been proper to have applied to a court to restrain its negotiation; for had it been of that character, Williams might have had a legal owner to contend with, one who stood upon his own right, instead of those of another, and who would not, as these defendants, represent the original creditor, and be bound by every obligation which was imposed upon him.
The defendants say it might possibly be different if they were suitors to the court; but they are not; they ask nothing of this Court. In this they are mistaken; they are applicants for a favor, in the character of defendants. The law gives them nothing; their rights are not known at law. They would not be even heard to allege them. There, Helme is still the owner of the judgment. Here, the defendants are made parties by mere courtesy. The plaintiff might have left them to come into this Court as petitioners, asking to be permitted to use the name of Helme. They owe their existence as claimants to the principles of this Court, andPage 95they ask to do, in the name of their assignor, what it would be the height of inequity to permit him to do, because they say that the latter sold to them. But Helme had nothing that he could sell. I think, therefore, that the injunction should be perpetuated. I have viewed the case as if Helme intended no actual fraud when he assigned to the defendants. He says so, and there is nothing to induce a belief that he did. But the fact is that he was then insolvent, and therefore could pass nothing in the judgment, as against the plaintiff.
TAYLOR, C. J.
I am of opinion that the prayer of this bill (161) could not be rejected without violating very clear principles of natural justice and subverting that series of decisions by which this Court has been constantly guided for the protection of sureties. It is not controverted that the estate of the plaintiff's intestate, who was surety for Helme, became liable to pay a considerable sum for him a very short time after the confession of judgment, and that this money was subsequently paid out of the estate. It is very evident, that if Helme had determined to enforce the judgment upon the expiration of the stay, he would have been enjoined, unless the counter-secured the estate against his own debts. When the debts of Helme were paid out of the estate, his debt against it was extinguished, according to such plain principles of justice that I imagine the law of every civilized nation has adopted them. In the civil law it was called compensation, and is thus spoken of by a writer on that law: "When it is said that compensation is madeipso jure, it means that it is made by the mere operation of law, without being pronounced by the judge or opposed by the parties. As soon as a person, who was creditor of another, becomes his debtor of a sum of money, or other matter susceptible of compensation with that of which he was a creditor, and,vice versa, as soon as a person who was debtor to another becomes his creditor of a sum susceptible of compensation with that of which he was a debtor, a compensation is made, and the respective debts are from thenceforth extinguished, to the extent of their concurrence, by virtue of the law of compensation." Pothier on Obligations, 599. As the civil law exists in Scotland, the principle is there adopted without variation, and it is held that where the same person is both debtor and creditor to another, the mutual obligations, if they are for equal sums, are extinguished by compensations. Erskine's Institutes, 325.
Williams had a well ascertained equitable right against Helme, (162) before payment of money for him, and might have called upon him in this Court to relieve him from his liability by payment of the debt, and would certainly have been allowed to set off the judgment against it. The case ofLee v. Rockfurnishes an instance where a manPage 96borrowed money on the mortgage of his estate for another, of his being allowed to go into equity to have his estate disencumbered by him, and the covenant in the mortgage deed was held to bind the defendant, though no party to it; but the money being borrowed for him, it was his debt, and the surety was only a nominal person. Mosely, 319. And he may not only come here to be relieved from his liability, but as soon as he becomes liable to the creditor, or is endangered, though he has not paid the debt, he has a right to enforce mortgages or other counter securities given to indemnify him.Antrobus v. Davidson, 3 Merivale, 579;Tankersley v. Anderson, 4 Dessaus, 44.
This was the relation in which Williams stood to Helme immediately after the confession of judgment, and when the true state of the latter's affairs were known. This equity was prior, then, to any which could be acquired by the assignees of the judgment. But there was, in fact, no equity to be acquired by them, for it would be against first principles that the assignor should place the assignee in a better situation than he stood himself. Policy has introduced an exception with respect to bills of exchange and notes endorsed before they are due, but in all other respects the rule and law of this Court are on that subject universal.Coles v.Jones, 2 Vern., 692;Davis v. Austen, 1 Ves., Jr., 247.
As many of our most valuable principles of equity, as well as law, are derived from the civil law, it is not surprising to meet with almost the very case before us, stated in a work of authority on that law as administered in Scotland. "Though," says the writer, "compensation (163) cannot be pleaded after the decree, either against the creditor or his assignee, yet if the original creditor should become bankrupt, the debtor, even after decree, may retain against the assignee till he give security for satisfying the debtor's claim against the cedent." Erskine's Institutes, 328.
PER CURIAM. Let the judgment be made perpetual, with costs.Cited: Battle v. Hart,17 N.C. 32;Green v. Crockett,22 N.C. 393;Allen v. Wood,38 N.C. 388;Long v. Barnett, ibid., 636;Mosteller v.Bost,42 N.C. 42;Walker v. Dicks,80 N.C. 265;Scott v. Timberlake,83 N.C. 384;Baker v. Brem,103 N.C. 80.Page 97