SUBSTITU'I'ED LIABILITIES.

TREATISE

ON

THE LA \V OF SUBROGATION,
WITH

_____
FULL REFJ!;UKNCES TO THE CIVIL LAW.
___...,.._ ....

BY
•
8 . F . DIXON.

PHILADELPHIA:
GEORGE W. CHILDS.
18 62 .

•·"- .
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~ ~~~ - ~~~~~~~~~~~~--~~·
 Entered according to Act of Congress, in the year 1862, by
S. F. DIXON,
In the Clerk's Office of the District Court of the District of Massachusetts.

CAMBtttt>G~:

Allen and Farnham, Printers.

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 CONTENTS.

CHAPTER I.
PAtr&
Subrogation 7

CHAPTER II.
Subro~ation in favor of a purchaser • 21

CHAPTER III.
Of subrogation in favor of a joint-debtor 41

CHAPTER IV.
Of subrogation in favor of a surety 43

CHAPTER V.
Subrogation in favo1· of a surety of a surety 126

CHAPTER VI.
Subrogation under negotiable instruments 137

CHAPTER VII.
Subrogation as between parties who hold a fiduciary relation to
each other . • • • • • . . • . . • . . . . 146

CHAPTER VIII.
Of the right of subrogation in favor of insurers to the rights of
action of parties insured • • • • • • . . • • . • . 151

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IV CONTENTS.

CHAPTER IX.
Of subrogation in favor of a legatee . • • 159

CHAPTER X.
Subrogation in favor of a stranger • • 165

CHAPTER XI.
Of the nature of the rights acquired by subrogation 169

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 TABLE OF CASES CITED.

A. PAGE
140
PAOE Corey v. White
Agnew v. Bell 136 Cornell v. Prescott 88
Aldrich v. Cooper 94, 116 Cowden's Estate 37
Alexander v. Smith 148 Cox v. Wheeler 86
Allen v. Clark 37 Craythorne v. Swinborne 13:1
Atwood v. Vincent 91 Crispe, Ex parte 53
Croft v. Moore 62, 174
Culpepper v. Aston 161
B.
Bsiky v. Brownfield 149 D.
Hnkcr v. Marshall 112
Baldwin v. Norton 18, 23 Dering v. Earl of Winchelsea 164
'"Thompson 92 Dias v. Bouchaud 121
Bank of Pennsylvania v. Potius 123 Dorr v. Shaw 95
Bank of Salina v. Ahbot 140 Douglas v. Fagg 130
Barnes v. Huntington Bank 129 Donley v. Hayes 36
v. Rncstcr 37, 95, 107 Dowbcggin v. Bourne 56, 57
Bassett v. Nosworthy 110 Dozier i·. Lewis 170
Beale v. Parish 138 Dwight v. King 173
Bibb v. Martin 135
Bowditch r. Green 69
Bowker v. B11ll 169 E.
Brackett t•. Winslow 69
Briley v. Sugg 72 Eddy v. Traver 83
Brown v. Lang 119 E1lgerly v. Emerson 72
Buckingham Bank v. Clagget 72 Enders v. Brane 122
Burk v. Chrisman 172 Eppes v. Randolph 117
Burr v. Smith 142 Erb's Appeal 174
Burrows v. Mc Whann 125 Executors of Baker v. Marshall 112
Butche1· v. Churchill 62
F.
c.
Ferris v. Crawford 88
Cheese borough v. Millard 75 Field v. Pellott I 27
Cherry v. Monroe 89 Fink v. Mahaffey 176
Childress "· Allen 163 Fleming v. Beavan 80.
Clark v. Blything 151 Forbes v. Moffat 17
Clason v. Morris 75 Foster v. Trustees of Athenrenm 72
Clowe~ v. Dickinson 31
Connecticut Mutual Life Insurance
Company v. New York & New G.
Haven Railroad Company l!\3
Conrod v. Harrison 39, 95 Gearhart v. Jordan 89·
Copis v. Middleton 47, 50, 51, 54, 56, 61 Gibson v. Crehore 18
A•

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vi TADLE OF CASES CITED.

Givens v. Nelson
Gomez v. Lnzarus
1ao
144
I M.
Gouverneur v. Lynch 35 Marsh v. Pike 85
Groves v. Steel 173 Mason v. Sainsbury 151
Guion v. Knapp 31 Mathews v. Aikin 77
Mavhew v. Crickett 104
McLung v. Beirne llO
H, Mertens v. Winnington 142
Mollan v. Griffith 160
Halsey v. Reid 86 Montpelier B1mk v. Dixon 112
Hammatt v. Wyman 69 Morrison v. Marvin 72
Hardcastle v. Conimercial Bank 123 Morris v. Oakford 92
Harger v. McCullough 76
H11rrisburgh Bank v. German 179
Harrison v. Bisland 162 N.
v.Lane 133
Hart v. Western Railroad Corpora- Nailer v. Stanley 35
tion 151 Neffv. Miller JOO, 179
Hayes v. Ward 50, 76 Neptune Insurance Company v. Dor-
Hays t>. Steamboat Columbus 121 sey 123
Hereford v. Chase 109 Newton v. Chorlton 104, 106, 107, 112
Hill v. Voorhies 150 v. Field 117
Hindsill v. Murray 136 Nolte & Co. v. Their Creditors 163
Hodges v. Armstrong 71 Norton v. Soule 171
Hodgson v. Shaw 5i, 62
Holden v. Pike 37
Hollnnd r. Pierce 144 0.
Hollingsworth v. Floyd 122
Hopewell v. Cumberland Bank 139 Ontario Bank v. Walker 140
Houston v. Bank of Huntsville 117
Howe v. Frazier 134
Hunt v. Hunt 18 P.
Hunter v. United States 121
Paine v. Hathnwlly 161
Parkman v. Welch 37
J. • Parsons v. Briddock 53
Patten v. Agricultural Bank 37
James v. Hubbard 34 Patterson v. Pope 134
Jones v. Duvids 55 Patty v. Pease 35
Jumel v. Jumel 87 Perrins 1•. Ragland 132
Perry v. Wright 17
Pott v. Nuthims 128
K. Powell v. White 55
Presbyterinn Corporation v. Wallace 36
Kendall, Ex JHlrle 95
King v. Baldwin 75
v. Dwight 173 Q.
Kleiscn v. Scott 172
Kyner v. Kyner 123 Qnebec Fire Insurance Company.v.
St. Louis 154

L.
R.
La Grange v. Morrill 127
Lanµ:ford v. Perrin 132 R~µ:ina v. Salter 126
Latlirop & Dnle's Appeal 82, 97 Hichar<l,on v. Washington Bank 113
Litld~rd,de v. U.obinson 56, 17 4 Rittenhouse i·. Levering 175
London Assurance Company v. Sains- Rockin:.:hnm Mutual Fire Insurance
bury 153 Company 1•. Bosher 153
Longley v. Griggs 126
Lutkins v. Leigh 159
s.
i Salano v. Relf 163

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 TABLE OF CASES CITED. vii

Sanford v. McLean" 80 v.
Schultz v. Carter 56
• Sherwood v. Collier 70 Vanderkemp v. Shelton 86
Smith v. Bing 129
v. Smith 145
State i:. Van Vechten 87 w.
Swan v. Patterson 122, 141
Wade !.!· Coope 104
Watts v. Kinney 55
T. West v. Belcher Ill, 136
v. Creditors 120
Tipping v. Tipping
Torregano v. Seguira
Toulmin v. Steere
159 Wilkes v. Harper
173 Williams v. W nshington
17 Wright v. Morley
. 78
99
54

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 ERRATA.
For co-obligeJJ where occurring in Chapter III. read c<Hibl.igur •
•

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 INTRODUCTION.

IN tracing the doctrine of subrogation to its original source

in the Roman law, the design in the following treatise has
been to compare the principles of the Roman jurisprudence
on that subject with the rules applied to subrogation at the
common law, and more especially with the law as understood
and administered in these United States. It will be seen
that by the Roman law, when the debt was paid by one who,
being a debtor, was, nevertheles81 justly entitled to subro-
gation, a species of fiction was resorted to, by treating the
payment as a sale of the debt, and no technical difficulty was
found in the cession from the creditor to such a debtor of
the cause of action, when its effect was merely to authorize
him to sustain an action in the name of the creditor, and not
in his own name. The cession of actions by the creditor in
such a case, to be effectual, as the law is understood in Eng-
land, mul:!t be made to a third person. After a cession of actions
according to the rules of the respective jurisdictions, subro-
gation being effected, the action is in the name of the cred-
itor, and the rights and immunities secured thereby are, as
well by the common law as the civil law, strictly such as the
creditor himself was entitled to before payment. An absolute
legal right exists in favor of the party to whom cession is
made, which prevails against all subsequent creditors or pur-
chasers. It will be seen, that though at the common law, as

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6 INTRODUCTION.

understood in England and in this country, when a direct

cession of actions is made by a creditor to a debtor on pay-
ment, who is entitled to demand subrogation, .he acquires a
legal right of action in the name of the creditor, and all the
advantages which attend a priority of right; if the party is
not thus subrogated by the act of the creditor in cases where
an express cession of actions might have been required, that
privilege which is termed legal subrogation gives him merely
an equitable cause of action against the principal debtor which
may charge such securities as remain in his hands, but cannot
prevail against subsequent purchasers.
The distinction which is stated between the doctrine of
marshalling assets and securities, and subrogation, is rendered
important by the consideration, that a party who is entitled
to the equitable remedies which attend legal subrogation,
might by a cession of actions have acquired the absolute
rights of the creditor, whereas, under the doctrine of mar-
shalling securities, an incumbrancer could not by any cession
of rights acquire an action at law. Subrogation is the sub-
stitution of one creditor for ano•her. Marshalling is but the
substitution of one incumbrance for another, and always pro-
ceeds upon equitable grounds.

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 THE LAW OF SUBROGATION.

CHAPTER I.

SUBROGATION.

SUBROGATION is the substitution of another person in the

place of a creditor, to whose rights he succeeds in relation to
the debt. Personal ~ubrogation is of two sorts, conventional
and legal. The difference between them~ in regard to the effects
of subrogation,- in general, results only from the modifications
of rights which are constituted by express agreement. Subro-
gation differs from delegation in this respect, that it is the sub-
stitution of a new creditor, .whereas delegation introduces a
new debtor in the place of the former, who is discharged.
Subrogation differs from a transfer or assignment of a debt, and
from delegation, in the circumstance, that it does not neces-
sarily depend upon the creditor, but may be made indepen-
dently of him. It is, properly speaking, but a fictitious cession
made to one who has a right to offer payment; it is not a true
cession nor sale of a debt, but such as is conceded by law, and
may have effect by operation of law and the act of the debtor,
even without the consent of the creditor from whom the debt
proceeds. Fit ex necessitate juris habenti jus ojferendi; non est
vera cessio, nee venditio nominis, sed cessio fictfoa, et a jure con-
cessa, qu<.e vim habet a lege, et fit beneficio legis etiam invito credi-
tore a quo nomen procedit.
The term subrogation does not, in relation to this subject,
occur in the Roman law. It was called variously, cessio actio-
nU'tlJ-,U, lege, beneficium cedendarum actionum; successio; substi-

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 SUBSTITUTED LIABILITIES.

tutio. He who had the cession of rights of action by provision

of law, that is to say, he who was subrogated and who suc-
ceeded to the rights of the creditor who was paid, did not hold
his right as derived from the creditor, although he entered in
his place and stead. The creditor did not cede and transfer
his right, but he ceased to be creditor by the payment which
was made to him, and another took his place and succeeded to
his rights. Non est vera cessio, sed succe.~sio in locum alterius.
This appears from the nature of the transaction itself, when it
is considered, that it is not the creditor who disposes himself of
his debt, in virtue of his right of property, but that payment is
made to him by the debtor to liberate himself and change his
creditor; for when such evidently appears to be the fact, there
is not a true cession and transfer, ~ven though at the time of
payment the creditor declares that he sells and transfers his
right, but a simple subrogation.
He, therefore, who had a cession of rights of action, that is
to say, he who was subrogated, did not hold his right of the
creditor, with whom he had contracted no obligation. He
held his right principally as derived from the law, in the case,
where by law the cession of actions and subrogation took effect
as of right; or he held his right as derived from the law and
express agreement also, in the ca~e where the law required that
subrogation should be expressly stipulated for.
As examples of f:lubrogation by the Roman law, may be men-
tioned the case, where a debtor had hypothecated his property
to several creditors. The law allowed a subsequent creditor to
offer to a precedent one payment of the amount due to him,
either to avoid controversy, or to prevent the property of the
debtor, which constituted the common security, from being
exhausted in expenses. By the payment which is made to the
first creditor his interest in the debt is extinguished, and he
ought not to refuse to receive that which is his due, nor to trans-
fer or deliver the evidences of his title to the subsequent creditor
who pays him. Therefore the law in this case did, by its own
operation, effect a transfer of action, and provided that the
subsequent creditor should be subrogated to the rights of the
older creditor, who had been paid, and that he should enter in
his place and right. There was no necessity that the subse•

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 SUBROGATION. 9

quent creditor should stipulate with the former creditor for a

cession of actions and subrogation, the cession of actions and
subrogation being regarded as effected by the law itself when
the subsequent creditor made payment of the older debt.
As an example of subrogation which proceeded from the law
and a stipulation combin.ed, may be stated the case of a debtor,
who, being apprehensive that his creditor will enforce payment
from him by process of law, desires to pay him and receive a
discharge. If the debtor in such case had any recourse to exer-
ci::ie, either because he was surety or because there were co-
obligors, and he might derive an advantage from being substi-
tuted to the creditor, he might, on making payment, stipulate
for•a cession of actions, that is, for subrogation, and the creditor
was obliged to consent to it. There are many passages of the
Roman law which show that payment might be refused by the
debtor, if the creditor declined to consent to subrogation and a
cession of actions - habet exceptionem cedendarum actionum.
This exception and defence was regarded as highly just, because
it was the duty of the creditor to consent to a cession of actions
and subrogation, which could work no prejudice to himself.
Oreditor debet prO!stare actionem quam habet. This excep-
tion cedendarum actionum was not, however, founded on strict
right, but was introduced by equity. It was provided, also,
that when the creditor refused to agree to a cession of actions
and subrogation on payment, at the requisition of him who _was
entitled to make it, he might have recourse to the authority of
a court, and procure an ordinance or ~ecree of the court for a
cession of the rights of action, notwithstanding the refusal of
the creditor. As, in the case where a testator by his will be-
queathed property which was hypothecated to a creditor; the
Roman law declared that it belonged to the heir to pay the
creditor, and 11ot to the legatee, who ought to have the prop-
erty bequeathed free from any charge, and that if the heir did
not assume the payment, the legatee might make payment
himself and obtain from the creditor a cession of actions, for
the purpose of proceeding against the heir as subrogated to the
rights of the creditor ; and if the creditor had refused to make
cession of actions and subrogation, it might be decreed by the
court. it thus appeared that the cession of actions which is
1

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10 SUBSTITUTED LIABILITIES.

called subrogation did not depend upon the creditor, and that it
might be made in spite of him.
The Roman law speaks,1 on this subject, of the case of a
slave who had been freed by the will of his master, at the
charge of accounting for the administration of certain property
which had been intrusted to him. This freedman, after the
death of his patron, accounted and paid to the heirs the balance
of his account, in which he had included several sums still due,
and which were yet to be recovered, and the law declared that
the freedman might oblige the heirs of his patron to agree to a
cession of the rights of act.ion, and ,to consent to subrogation;
and that he might require a decree to that effect to enable
him to recover the amount advanced from his own funds, not-
withstanding the opposition of the heirs.
Another instance may be adduced 2 to show that the party
subrogated does not hold his right of the creditor who has
been paid, and \}hat subrogation does not depend on him; as
where a debtor' borrows money to reimburse a troublesome
creditor. He who lends his money to the debtor to pay his
creditor may declare to the debtor that he will not lend the
money but on condition of being subrogated to the rights of the
creditor. He ought to stipulate with him for subrogation, but
there is no necessity that he stipulate with the creditor who is
to receive payment. It is not necessary that he should be
subrogated by the creditor, nor that he should consent to subro-
gati~n and the cession of actions; for although the creditor may
not have consented, and .in the discharge he declares that ·he
has received payment without subrogation on his part, and that
he does not intend to subrogate him who has lent his money to
make the payment, nevertheless, if the debtor who has bor-
rowed the money consents to subrogation, it will be good and
effectual. The subrogation takes place by operation of law, in
virtue of the stipulation and agreement made between the
person lending the money and the debtor, who is the borrower.
Though the lender is subrogated in this case to the rights of
the creditor, he does not hold those rights of the creditor.

1 Digest, 33. 8. 23.

2 Renassons, Tr. de la Subrogation, Ch. 2, No. 19.

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 SUBROGATION. 11

This subrogation takes effect to the prejudice of other cred-

itors later than the first creditor, but no injustice is done to them
by the change. " He derives no cause of action," says Dumou-
lin,t " from the creditor, but only from the debtor, and yet he
succeeds to the right of the first creditor, or at least to one
similar and equivalent, and to the prejudice of other creditors
subsequent to the first creditor, to whom no injury is done,
though no advantage is gained by them, because the new cred-
itor is subrogated, in the place of the first creditor, the state of
things in other respects remaining as before." - Nullam causam
habet a creditore, sed solum causam ltabet a debitore et tamen
succedit in jus primi credito.ris, saltem in jus simile et <equipotens,
etiam in pr<ejudicium aliorum creditorum posteriorum primo credi-
tori, quibus tamen non dicitur damnum inferri, sed lucrum non
ajferri, quia duntaxat novissimus iste creditor loco primi cred-
itoris subrogatur, eodem in c<eteris rerum statu manente.
The law permitted subrogation to be effected by the act of
the debtor, from a consideration of the advantage which he
might derive from the substitution of a new creditor.
A payment which is made to the creditor for another, as
surety or co-obligee, differs from that which is made by a
stranger who would lend money to a debtor for the purpose of
reimbursing his creditor. A surety or a co-obligee who pays
a debt, and who would be subrogated to the rights of the
creditor, to exercise his recourse, may stipulate for sutrogation
with the debtor for whom he makes payment, or with the
creditor. It is sufficient if the one or the other agret>s to it, and
that it is declared in the receipt of payment; and if one or the
other refuses his consent, he may offer payment to the creditor,
with demand that he i;hall consent to subrogation, and, on his
refusal, the creditor will be required by a court to make the
proper transfer; but a stranger is not entitled to subrogation
without the consent of the debtor to whom he has lent money
for the purpose of paying the existing debt.
It is said by Dumoulin 2 that the cession of actions, which is
termed subrogation, is not to be regarded as an ordinary trans-

1 Dumoulin, Tract. Usur. et Redituum Qurest. 37, No. 276.

~ Dumoulin, Tract. Usur. et Red. Qurest. 49.

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12 SUBSTITUTED LIABILITIES.

fer or sale of a debt, but rather as a simple cession of actions,

made for the purpose of preserving the existing securities·
Licet creditor dicat se cedere, veruiere jus suum, tamen hoc non
intelligitur fieri ad transjerrendum dominium, sed solum hypothe-
cam in cessionariam; quia non censetur emere et pecuniam dare
dominii acquirendi causa sed gratia servandi pignoris. The
cession has the same effect as a sale of the debt would have,
but its design is mer~ly to transfer the securities.
Subrogation, says Renussons,1 produces some of the effects
of a transfer and sale, but not all the effects of a sale, for
although it preserves the security, the former creditor is not
subjected to liabilities such as result from a sale. In respect to
him the transaction may be regarded rather as an extinguish-
ment of the debt- est potius distractus quam contractus.
By the Roman law,2 every person, even a stranger, who paid
a personal creditor, was subrogated of right to such creditor
when paid ; but this subrogation was attended with no results
when there were no securities to be transferred ; for he who
paid became in his own right, by that act, a personal creditor,
and entitled to the action negotiorum gestorum, to recover the
money which he had paid. When, under that law, a stranger
paid a debt to a creditor who had a personal privilege, he was
subrogated of right to this personal privilege, and he was thus
enabled to exclude other personal creditors who had not the
same privilege.a
Renussons says,4 the reason for such subrogation, as of right,
when payment was made of a personal privileged debt, is not
apparent, as it would seem that the personal privilege would
not pass to a stranger unless he had expressly stipulated for
subrogation ; for payment alone would simply operate as an
extinguishment of the debt and of all its incidents.
When the debtor had, under the Roman law, subjected his
property to hypothecation, he might charge the same property
in favor of other creditors, but their right was subordinate to

1 Renussons, Tr. de IJ!. Subrogation, Ch. 2, No. 25.

~ Ibid. Ch. 3, No. 31.
a Ibid. No. 48.
' Ibid. No. 49.

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 SUBROGATION• 13
•
that of the previous creditors. When the property exceeded in
value the debt with which it was charged, a subsequent creditor '
might, by payment, render it effectual for his own debt; and
this could not be prevented by the refusal of the first creditor.
to receive the amount of his debt. ·
The Roman law on this subject is declared in that passage
of the Digest 1 in which it is said, that when the second creditor
pays him who precedes him in order of time, or offers to make
payment, he may dispose of the property which has been hypoth-
ecated, as well for the amount which was due to him from the
common debtor, as for that which he has paid to the first or
precedent creditor.
In another passage,2 it is said that a subsequent creditor may
offer to a prior creditor the money due to him, and if this cred-
itor declines to receive it, he shall derive no further advantage
from his hypothecary action, and he cannot prevent the subse-
quent creditor from proceeding against the property charged for
the recovery of his debt, because it was his own fault that he
did not receive what was due to him. Si paratus est posterior
creditor priori creditori solvere quod ei debetur, videndum est an
competat ei hypothecaria actio, nolente priori creditore pecuniam
acciper'e. Et dicimus, pr.iori creditori inutilem esse actionem,
quum per eum fiat ne ei pecunia solvatur.
It is declared in the Code of Justinian,s that when the second
creditor pays a prior creditor, or deposits the amount of the
debt on his refusal to receive payment, he thereby establishes
his own right. Qui pignus secundo loco accepit, ita jus suum
confirmare potest, si priori creditori pecuniam solverit, aut cum
obtulisset eam obsignavit et deposuit.
It is also declared, under the same title of the Code,4 that so
long as the more ancient creditor remains unpaid, the subsequent
creditor cannot proceed for payment against the thing hypothe-
cated, but that he must first pay the precedent creditor. Di-
versis temporibus, eadem re duobus, jure p1'grwris obligata, eum
qui prior data mutuo pecunia, pignus accepit, potiorem haberi certi

1 Digest, 20. 5. 2.
2 Ibid. 20. 4. 11. 4.
s Code, 8. 18. l.
4 Ibid. 8. 18. 8.

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 14 SUBSTITUTED LIABILITIES.

et manifesti juris est, nee alias secundum creditorem distrahendi

potestatem hujus pignoris consequi nisi priori creditori debita
juerit soluta quantitas. It is also said,1 that the prior creditor
may proceed against the property hypothecated for the payment
of his debt, and that he cannot be required to offer payment to
the subsequent creditor, but that such subsequent creditor, by
payment, assures to himself the benefit of the pledge. Prior
quidem creditor compelli non potest tibi qui posterf,ori loco ac-
cepisti debitum ojferre, sed si tu illi id omne quod debitur solveris
pignoris tui causa firmabitur. But if the former creditor is
unwilling to receive payment of the debt from the creditor who
is subsequent, if, on the contrary, it is his wish to make pay-
ment of the debt for which the property has been subsequently
pledged, he may do so and retain the property.2
If the subsequent creditor was in possession of the thing
hypothecated, he had the right to preserve his possession of the
property by offering to pay the prior creditor the amount which
was due to him, on the ground that the condition of the party
in possession was most favorably regarded.a
The Roman law, which provided that the subsequent creditor
might offer to a prior one the amount which was due to him,
provided also for the interest of the subsequent credhor, by
whom the payment should be made, by declaring that such cred-
.itor should be entitled to succeed to the prior creditor, and be
subrogated to his rights, to the end that if · creditors subsequent
to him should appear and disturb him in the possession of the
,! thing hypothecated, or assert a right so to do, he might defend
himself against them as an original creditor, and that he should
be subrogated to the rights of the creditor whom he had paid,
I'

I
and be preferred on the property hypothecated in the same
I manner as the creditor paid would have been. The reason of
II this subrogation and preference was, that as he had made the
i payment for the purpose of preserving his pledge and to confirm
11
his right to the property, it would be unjust that a privilege
which the law accorded him should turn to his disadvantage,
I:
1 Code, 8. 18. 5.
2 Renussons, Tr. de la Subrogation, Ch. 4, No. 6.
s Digest; 20. 6. 12. I.

1'
IiI

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 SUBROGATION.

and that, after having paid the charges on the property, he

should be disturbed by other claims subsequent to that which
he had paid. There are many texts and passages of the Ro-
man law which declare the rule on this subject. In a passage
of the Digest, 1 it is said that a subsequent creditor, who has
paid a prior creditor the principal and interest of his debt, ac-
quires a charge upon the property hypothecated for the princi-
pal and interest, though the paym1mt may have been made
without the consent of the debtor and against his vvish, but that
he shall not be allowed for interest on the interest of the debt
which he may have paid the prior creditor. Sciendum est, se-
cwndo creditori, rem teneri etiam invito debitore, tam in suum debi-
tum, quam in primi creditoris et in usuras suas, et quas primo cred-
itori solvit, sed tamen usurarum' quas primq creditori solvit, usu-
ras non consequenter; non enim negotium alterius gessit, sed
mag-is suum.
In another passage of the Digest,2 it is declared that a. subse-
quent creditor who pay13 the first creditor succeeds to his rights,
as in the following case. If you are the creditor of a certain
debtor by titles of hypothecation of different dates, and Seius,
another creditor, interposed in order of time between your two '
debts, offers to pay that which is due by your first title, the law
permits him to do this, and provides that on such payment he
shall be subrogated as of right to your first hypothecation upoll
the property, as well for the amount which he has paid as for
that which is due to him, and that he shall be paid preferably to
your last debt.· Qucerbatur si post primum contractum tuum,
antequam etiam pecuniam tu crederes, eidem <i,ebitori Seius credi-
di.~set quinquagenta et hyperocham, hujus rei, qum tibi pignori
data esset, debitor obligassit, dehinc tu eidem debitori credens
forte quadriginta, quod plus est in pretio rei quam primo credidisti,
utrum ·ei, ob quinquegenta an tibi in quadriginta cederet pig-
noris hyperocha...;..finge Seium paratum esse ojferre tibi summam
primo ordine creditam. Dixi, consequens esse ut Seius potior
sit in eo, quad amplius est in pignore, et oblata ab eo summa primo

• 1 Digest, 20. 4. 12. 6.

~ Ibid. 20. 4. 20.

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 16 SUBSTITUTED LIABILITIES.

ordine credita usurarumque ejus post ponatur primus creditor in

summa quam postea e!iam debitori credidit. .
The subsequent creditor, it is again said,1 who has offered to
a prior creditor payment of his debt, succeeds in his place. cum
secundus creditor oblata p.riori pecunia in locum ejus successerit,
etc. And it is declared in the Code,2 that a subsequent cred-
itor of one who is indebted to the public treasury may pay the
State and offer what is due, for the purpose of succeeding to its
rights. Si potior respublica contraxit,fundusque ei obligatus, tibi
secundo creditori ojferenti pecuniam,potestas est ut succedas etiam
in jus reipublicre.
All the writers who have treated on this branch of the
Roman law concur on this point, that a subsequent creditor
who pays a prior creditor is subrogated, as of right, by such
payment.a The reason, says Renussons,4 that it was held by
the Roman law that a subsequent creditor who pays a prior
creditor, succeeds to him by operation of law, and is subrogated
as of right without the necessity of any special agreement to
that effect, is, that it is just that the payment which is made
by the subsequent creditor to the more ancient one, in virtue
1 of the privilege which the law allows him, should not result to
his prejudice and be unavailable to him. Not indeed being
a debtor, but occupying the position of a creditor, and the
property of the debtor being hypothecated to him, his only
object in making payment is to establish hls right to the thing
hypothecated, and to unite in his person the right of the prior
creditor, and thus prevent the property charged from being
wasted in expenses. It is, therefore, just that he should not
be disappointed in his purpose, and that, to render his payment
available, he should succeed by operation of law, and as ·o f
right to the creditor who has received payment of his debt. It
is not necessary that he should stipulate for subrogation, or
enter into any agreement to that effect at the time of payment,
for the consideration of the payment is sufficiently evident, and

1 Digest, 20. 5. 5.
Code, 8. 19. 4.
2
11 Renussons, Tr. de la Subrogation, Ch. 4, No. 12. •
4 Ibid. No. 13.

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 SUBROGATION. 17
the intention is declared by the nature of the transaction. It
is clear that the payment was made by the subsequent creditor,
for no other reason than to acquire the rights of the first
creditor, for as he is not in the condition of a debtor, he ha~
paid such creditor merely to enter in his stead and place, and
by this means preserve the property charged. In this respect,
a creditor who redeemed a prior incumbrance, was distinguished
from a surety who paid the debt, and who was by reason thereof
entitled to a cession of actions.
At the common law, it seems to have been held that it
depends in such a case upon the intention of the parties, whether
the original charge shall be extinguished or kept alive, so as to
give the purchaser in respect thereto the advantage of priority
over an intermediate incumbrancer.
In a case 1 where there were two mortgag68, the estate mort-
gaged was sold to a purchaser, one of the terms of the agree-
ment being, that out of the purchase-money he should retain
in his hands a certain sum in order to pay the two mortgages,
and by indentures of lease and release reciting the mortgages
the estate was conveyed to him. Afterwards, the first mort-
gagee conveyed, by the purchaser's direction, the premises to a
trustee. The purchase-money was furnished by another person,
to secure whom the premises were demised for a term of years.
It was held that the second mortgagee thereby became the first ·
incumbrancer, and that the person who furnished the purchase-
money was not entitled, to the extent of the money paid to the
first mortgagee, to have his mortgage considered as still subsist-
ing. The Vice-Chancellor observed, that when the money of
the lender was applied in satisfaction of the first mortgage debt,
the parties might have made an arrangement which would have
kept the security against the second mortgage. Such an in-
tention would perhaps have been presumed at the civil law.
With regard to the presumptive intention, where a person,
· becomes entitled to an estate subject to a charge for his own
benefit, Sir William Grant was of opinion,2 that a Court of

1 Perry v. Wright, 1 Sim. & Stu. 369; 5 Russell, 142. See Toulmin v. Steere,
3 Meriv. 210. I
2 Forbes v Molfat, 18 Vesey, R. 392.
2•

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18 SUBSTITUTED LIABILITIES.

Equity would consider whether it was most advantageous for

the party that the mortgage should be kept on foot, as other-
wise a priority wonld be given to subsequent mortgages.
In a case decided by the Supreme Court ot Massachusetts,1
it was held that where a purchaser of a right to redeem takes
an assignment, this shall or shall not operate as an extinguish-
ment of the mortgage according as the interest of the party
taking the assignment may be, and according to the real intent
of the parties. The defendant first purchased the equity of
redemption, and then took an assignment ; and, as against a
widow claiming a right of dower, it was held that the mort·
gage was not extinguished. And in another case, the same
doctrine was held. " Suppose," said Shaw, Ch. J.,2 " a man in
good credit mortgages his teal estate to two thirds of its value
to A. Subsequently, it is attached by B. upon a secret attach-
ment, not known to a subsequent purchaser,· or, subsequently,
C. purchases the equity of redemption to protect his own
interest, he must obtain from the first mortgagee either an
assignment or an extinguishment of the mortgage. If the
latter, he may let in all the claims of attaching creditors, or
second purchasers, and lose all the money he has paid, to dis-
charge. the mortgage. If the former, then he will stand, as he
ought, in the place of the first mortgagee, with an unquestioned
title to the extent of the money paid for such assignment, as
against all subsequent claimants, so that if they would redeem, ·
they must first repay to him, as assignee, the amount of the
mortgage, leaving them to stand towards him, in his capacity
of purchaser of the equity, according to their legal and equi-
table rights, in exactly the same manner as they would have
stood towards the first mortgagee himself."
In a case decided by the Supreme Court of Connecticut,3
where there was a first and second mortgage of land, the ·first
mortgagee received a release of the equity of redemption from
the mortgagor, in consideration of giving up to him the note
on whic~ the mortgage was given, and it was held, that the

1 Gibson v. Crehore, 3 Pickering, R. 475.

2 Hunt 11. Hunt, 14 Pickering, 383.
a Baldwin t•. Norton, 2 Conn. R. 161, 709.

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 SUBROGATION. 19

second mortgagee was not entitled to foreclose the first mort-

gage without paying off the first incumbrance. The question
in this case was, whether the purchase of the equity of re-
demption by the first mortgagee, and the cancelling of his
debt against the mortgagor, was a purchase of the land sub-
ject to the second mortgage. The decision of the court was
founded upon the presumption that the purchase was not made
subject to that mortgage. It was most advantageous to the ·
purchaser to regard his incumbrance as subsisting; and if it
had been the intention to provide in the transaction for the
payment of the second mortgage, that intention should have
been declared in the transaction.
As the subsequent creditor has the right to offer payment to
the prior creditor, and be subrogated as of right by such pay-
ment, so, e converso, undoubtedly, the prior creditor may, on
payment to the subsequent creditor, be subrogated of right to
such creditor.1 It may happen that the prior creditor, to render
the property available for the payment of each debt, may wish
to pay the subsequent creditor, and in such a case, it is reason- ·
able that the anterior creditor should have the same advantage
which the subsequent creditor has in the like case, namely, to
be subrogated to his rights by the mere act of payment. And
by the Roman law, the first creditor hadjus ojferendi the right
to offer payment in preference to the subsequent creditor. He
might have an interest to preserve the property hypothecated,
and to exclude the subsequent creditor on paying to him what
was his due, and whose only claim was for payment.2
A simple creditor without hypothecation has, by the law of
France, no right to require a creditor by title of hypotbecation
to receive p~ment of his debt, and if the latter consents to
receive payment from such creditor creancier cltirograp!J,iaire,
he is not subrogated thereby as of right to his debt. He can
only acquire a right to subrogation by express agreement. · In
this respect, a creditor without hypothecation is regarded as a
mere stranger. •It would seem, however, that when such a
creditor had acquired, as he might, a judgment which should

1 Renussons, Tr. de la Subrogation, Ch. 4, No. 22.

2 Ibid. No. 14.

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20 SUBSTITUTED LIABILITIES.

charge the properfy of the debtor, he would be in a .condition·

to offer payment and to require subrogation.
The subsequent creditor who pays a former creditor, acquire8
a right to be subrogated to the creditor who has been paid ;
but this subrogation t!lkes effect only against this common
debtor, and not against his co-obligees, except in the case where
they also are the common debtors of both creditors.1 If there
were other persons than the common debtor who were bound
to the creditor, subrogation would have no effect against them,
unless they were common debtors, because, in respect to them,
the creditor who is entitled to subrogation is in the position of
a stranger, and, therefore, he cannot have subrogation against
them except by special stipulation,
The action which the subsequent creditor has who is subro-
gated of right by payment to a precedent creditor, is the same
action which the former creditor had who has been paid.2 The
right of action and the hypothecation is the same. The debtor
remains bound to the new creditor who has been subrogated,
in the same manner as he before was to the old creditor who
has been paid ; there is no change except in the person of the
creditor. A distinction would seem to exist between the case
of a posterior creditor who succeeds to the rights of a precedent
creditor by payment, and that of a person who is subrogated
by the debtor to the rights of a creditor, to pay whose debt he
has lent money to the debtor. In the first case, the last cred-
itor is subrogated to the. action of the first, but when subro-
gation is by the act of the debtor, without any concurrence by
the creditor, the new creditor is not subrogated to the same
action as that of the first creditor, but to a like action, and to
the place and rights of the creditor.

1 Renussons, Tr. de la Subrogation, Ch. 4, No. 23.

2 Ibid. No. u. .

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•

CHAPTER II.

SUBROGATioN IN FAVOR OF A PURCHASER.

WHEN a purchaser is subjected to process of law by a cred-

itor of the vendor, anterior to the sale, to whom the land has
been hypotliecated or mortgaged, and is compelled to make
payment of the debt to avoid a loss of the property purchased,
the question arises whether he is subrogated as of right to the
creditor paid, though no express stipulation has been made for
subrogation.
It was established by the Roman law, that the purchaser in
this case should succeed as of right to the creditor whom he
had. paid, and that he should be subrogated in his place and
stead, though he had not required or stipulated for subrogation
at the time of payment, and that he might to that extent be
protected against the claims of other creditors of the vendor,
subsequent to the creditor who has been paid, and that he might
defend himself against them as subrogated to the rights of
such creditor. This rule was established because the only
motive for the payment by the purchaser to the first creditor
of the vendor, was to liberate the property purchased by him,
and by this means to preserve possession ; and if, on being
proceeded against by other creditors for the property, after
payment to the first creditor, he was compelled to abandon the
property purchased, the payment which had been made to the
first creditor would constitute a charge upon the property in .
the hands of creditors, or, if sold by a decree of court, upon the
results · of the sale, it being equitable that in abandoning
possession, he should not be subjected to the loss of money
paid in discharge of an actual incumbrance on the property,
In like manner, when a purchaser I
was bound by his contract
to pay a creditor of the vendor, and he had paid such creditor,

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22 SUBSTITUTED LIABILITIES. .

it was regarded as just, by the Roman law, that the purchaser •

should succeed as of right to the creditor, and, as subrogated
to his privileges, defend himself against such subsequent cred-
itors as might disturb his possession, or, if he was compelled
to abandon the property, the amount paid to the creditor should
constitute a charge thereupon, in the order of the security as
it existed in favor of the creditor before payment.
There were several provisions to this effect in the Digest and
Code - as in a passage of the Digest,I where it is said that he
who has purchased of his debtor land charged with another debt,
shall be so far protected as payment has been made to a former
creditor. Eum qui a debitore SUQ pra:dium obligatum compara-
vit eatenus tuendum, quatenus ad priorem creditorem ex pretio pe-
cunia pervenit.
In the Code,2 it is said, in substance, that if precedent credi-
tors have been paid by the funds of a purchaser from the results
of the sale, the purchaser will succeed to the rights of such cred-
itors, and will have a just defence against subsequent creditors.
Si potiores creditores, pecunia tua demissi sunt, quibus obligata
fuit possessio, quam emisse tu dicis, ita ut pretium perveniret. ad
eosdem priores creditores, in jus eorum successisti, et contra eos
qui infirmiores illis fuerunt justa defensione te tueri potes.
The better opinion is, that by the Roman law a purchaser
who discharged an existing debt which constituted an incum-
brance upon the property, was f?Ubrogated as of right thereby to
the privileges and rights of the creditor. An express stipulation
for subrogation does not seem to have been necessary, though
the purchaser• might demand that the subrogation should be
made to him expressly, by the creditor asserting his claim under
a prior debt.
The case of a purchaser who discharges a debt existing
against property bought, is entirely unlike that of a payment
made by one who was in the condition of a co-obligor. In that
case payment is made by a debtor. The object of the payment
may have been to extinguish the debt, but where a purchaser
of land pays a debt which constitutes a charge upon the land,

l Digest, 20. 4. 17.

2 Code, 8. 10. 19.

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 SUBROGATION IN FAVOR OF A PURCHASER, 23
his object i1:1 to protect himself ·in the possession of the land.
He does not pay the debt as a debtor who is bound to make
payment; therefore, when subsequent creditors whose debts con-
stituted a charge upon the land proceed against him, justice
requires that the object of the payment, and the character in
which it was made, should be regarded with a view to pre-
vent subsequent incumbrancers from gaining an unjust advan-
tage.
A case may be stated, as depending upon the same principle,
by which a purchaser is subrogated to a creditor whose debt
charged upon land he has paid.1 As where a mortgagee of
land purchases the land of the mortgagor, and pays him a sum
of money over and above the amount of the mortgage debt,
and being afterwards subjected to a suit on the part of a prior
incumbrancer, abandons the land, it would seem that on princi-
ples of equity, although the mortgage debt was paid and extin•
guished by the sale, yet, when afterwards the sale was disaf-
firmed on account of the appearance of a precedent incum-
brancer, the charge upon the land in favor of tM mortgage
creditor revived.2 On the same principle, that the purchaser
would have been sub'rogated to the rights of a creditor, whom
he had paid for the sake of rendering his purchase secure, and,
on an abandonment of the property, would have been entitled
to ·have the debt constitute a charge upon it, the mortgage
debt in his own favor must be held to revive. The purchaser,
says Renussons,a may be held to succeed to himself.
That such would be the result in a Court of Equity under •
the system of the common law, is very clear. The maxim, that
a party cannot at the same time be creditor and debtor for the
same debt, though it extinguished the mortgage debt in the
purchase, would not, when the purchase was abandoned, prevent
the creditor from setting up his debt as a charge upon the land,
precisely as if no sale had been made. Ca1:1es of this kind are
regarded at the civil law as resting on principles analagous to

1 Renussons, Ch. 5, No. 21; Nouveau Repertoire Vo. Subrogation des Personnes,
Sect. 2, 4 4, No. 5; 7 Toullier, No. 144. •
2 See Baldwin v. Norton, 2 Conn. R. 161 and 709.
a Renussons, Ch. 5, No. 34.

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 24 SUBSTITUTED LIABILITIES •

• those applicable to the doctrine of subrogation. In a passage

of the Digest,1 it is said that where a creditor who had accepted
. property pledged, which a second creditor by a second agree-
ment had received, and afterwards, on a novation, the first cred-
itor had received other property in addition to that originally
pledged, it was decided that he held in the order of time of the
original pledge, as succeeding to himself. Oreditor acceptis pig-
noribus, qua secunda conventione secundus creditor accepit, nova-
tione postea f acta, pigwra prioribus addidit; superioris temporis
ordinem. manere primo credi.tori placuit tanquam in suum ·locum
succedenti. The effect of novation in general is to extinguish
the old debt, but in this case it was kept alive, in the same
manner as if, by the agreement which constituted novation, a
new creditor had acquired by transfer the first debt with its
securities. The intention in this case was not to make way by
novation for the second creditor. The intention to preserve the
original security was presumed, though not declared in the no-
vation.
So it is· said in another passage,2 that if th~ first creditor
receive by novation a new pledge in addition to a former, he
succeeds to himself. Si prior creditor, posteq, novatione f acta
eadem pignora cum aliis accepit in suum locum eum succedere.
But if the second creditor does not offer to pay the first, the
first creditor may sell the property pledged for payment of· the
first debt, but not for payment of a subsequent debt, and
what remains he is to restore to the second creditor. Sed si
• secundus non offerat pecuniam, posse priorem vendere, ut primam
tantum pecuniam expensam ferat, non etiam quam postea cre-
didit ; et quod super.ftuum ex anteriore creditore accepit, hoc se-
cundo, restituat.a Notwithstanding the novation, the creditor in
these cases, for the purpose of sustaining the preference which
the law gave him in order of time, succeeded to himself, that
is to say, the law looked beyond the transaction by which the
old debt was merged in a new obligation, and gave the first
creditor the advantage of his original priority.
The question has been presented, whether by the abandon-

1 Digest, 20. 4. 3.
I Ibid. 20. 4. 12. 5.
a Ibid.

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 SUBROGATION IN FAVOR OF A PURCHASER. 25
ment or resolution of a purchase, the original obligation may
be restored as against a surety, and whether a creditor who is
·ousted, by one wlw has a prior charge, from an estate which
he had taken of his debtor in payment, enters into all the rights
which he had before the purchase, not only against the principal
debtor, but also against the surety of the debtor. It may be
maintained that the creditor, by accepting property in payment
from his principal debtor, has liberated him so that the surety
cannot proceed against him for his indemnity, because the
debt is extinguished, and that therefore the surety is absolutely
discharged.I The better opinion, however, under the civil law
was, that the creditor who is ousted from the property which
he has received from the debtor in payment, reenters into
all his rights, not only against the principal debtor, but also
against the surety himself.2
The release which is effected by the acceptance of property
in payment, involves the tacit condition, that if the creditor is
evicted therefrom, the debt shall revive, not only against the
principal, but also against sureties who have not been dis-
charged, provided there has been no want of diligence on the
part of the creditor.
The doctrine of the civil law, as stated by Renussons 8 and
others, is, that when land is mortgaged to a creditor for a debt,
and is then sold in parcels, at different times, to different persons,
the first purchaser cannot, by satisfying the debt, acquire the
right to be subrogated to the creditor against the second pur-
chaser, as liable for the debt or on the guaranty, by reason of
the subsequent assignment to him from the vendor, whether,
at the time of the payment of the debt, subrogation was stipu-
lated for generally or not; because the purchaser is entitled to
apply the right acquired by subrogation only to that portion of
the property incumbered which he has purchased. It is further
held, under the civil law, that the first purchaser has no claim
for contribution in virtue of subrogation as against a subse-
quent purchaser. He can only protect thereby the property

l Basnage, Tr. des Hypotheqnes, Ch. 15.

2 Renussons, Tr. de la Snbrogation, Ch. 5, No. 40.
a Renussons, Tr. de la Subrogation, Ch. 5, No. 42 ; 7 Toullier, No. 145.
3 .

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26 SUBSTITUTED LIABILITIES.

which he has purchased. His only claim in addition, is a

personal one, on the vendor for guaranty. If he has purchased
the land without acquiring a charge upon the land remaining
in the hands of the vendor, he cannot pursue it, as charged with
the guaranty in the hands of a subsequent purchaser. He has
.no recourse, except against the vendor. As the purchaser had
no lien upon the lands remaining in the possession of the
vendor as security, the land passed without incumbrance to
the subsequent purchaser. The assignee could not be charged
with liability by reason of the assignment of property to which
it was not before subject.
A case is stated by Renussons,1 which, so far as it is material
to the question of subrogation, may be stated as follows:
Sempronius borrowed of Mrevius the sum of 6,0001., for which
he bound himself to the payment of the annual sum of 300l.,
and mortgaged therefor two houses which belonged to him,
.one in the Faubourgh St. Germaine, the other in the Fau-
bourgh St. Antoine. Mrevius died, 1;tnd was succeeded by his
son as heir. Sempronius, being thus indebted for the annual
.payment of 300/., sold the house in the Faubourgh St. Ger-
maine for 6,0001. to Titius; and, one year after, sold the other
house in the Faubourgh St. Antoine for the sum of 8,000/.
Afterwards, the heir of Mrevius, to whom the annual payment
of 300/. was due, instituted proceedings against Titius, the
purchaser of the house in the Faubourgh St. Germaine, that
he might be charged with the payment of the 300/. Titius,
to protect his purchase, paid the principal and arrears of the
debt which was due to Mrevius, and, as subrogated to his
rights, commenced proceedings against Caius, the second pur-
chaser, not only for the said debt and arrears, but also as bound
to guaranty of the purchase which he had made. Titius
claimed that Caius, the second purhaser of a part of the
mortgaged premises, was, as assignee of the vendor, bound
in like manner to warranty, and also that he was charge-
able with the whole debt due to Mrevius, to which he had
become subrogated by payment. Caius, the second pur·
chaser, though admitting that Titius, the first purchaser, was

1 Renussons, Ch. 5, No. 42.

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 SUBROGATION IN FAVOR OP A PURCHASER. 27

subrogated as of right to Mrevius, by the payment which he

had made of the debt to Mrevius, maintained that the effect of
the subrogation was limited to the house which he had pur-
chased in the Faubourgh St. Germaine; that, as subrogated
to the creditor, he had a right to protect his possession, and to
defend himself against any subsequent creditors who might
appear and claim to charge the property ; because, having
liberated it from the debt, he had acquired a right to the security,.
and it was just that he 1e1hould be preferred to subsequent cred-
itors; but that this subrogation gave him no right to proceed
against the second purchaser, because, in paying the debt for
the purpose of securing his possession of the house which he
had bought, he had merely discharged a debt from him, by
reason thereof, and without the payment of which, he must
have abandoned the property. When a debtor, it was said,
discharged a debt, the payment operated merely as an extinc-
tion of the debt, and there was no cession of any right of action,
nor is there a sale of the debt, because no one is regarded as
purchasing by payment that which he owes. Debitore solvente
extine,<rUitur obligatio, nee possunt ei eedi aetiones, nee ejus re-
speetu, potest diei emptio nominis; quia nemo emere videtur quod!
ipse debet.
Though Titius was not indeed, originally, the principal
debtor, but only a purchaser of mortgaged property by which
it was secured, yet, as he had paid the creditor for the sake of
securing his possession in the property purchased, it was said
that he should really be regarded as debtor, by reason of his
possession, and that, in the capacity of debtor merely, he had
made payment ; that he discharged himself in liberating the
property, of which he preserved the possession, and that though
the law subrogated him as of right, by the payment which he
had made to the creditor, that subrogation was limited to the
property possessed, for the law merely gave him the right to
defend himself against subsequent creditors asserting a right,
and gave him a preference on the property possessed, but that
this subrogation gave him no right to proceed against a subse-
quent purchaser to charge his land with the debt.
Renussons t is of opinion that the defence of Caius, the

l See also, 7 Toullicr, No. 145. Toullier is of opinion that the same principle

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 28 SUBSTITUTED LIABILITIES.

second purchaser in the case stated, was well founded ; for

Titius, by paying Mrevius the principal and arrears of his debt,
was subrogated as of right to Mrevius by the payment, but the
subrogation was limited to the property purchased, because a
purchaser who pays a creditor of bis vendor, who sets up a
charge against the property, has no other design but to secure
his possession ; it . is not his intention to acquire the right of
the creditor as a charge on other property, because it is not
declared at the time of payment.
The intention to succeed to the rights of the creditor gene-
rally, does not appear. The law gives effect, as of right, to
subrogation, merely to sustain the apparent intention of the
parties; and in this case, the purchaser's intention, from the
nature of the case, is limited to the liberation of the property.
Such being the case, the first purchaser, by discharging the
debt for which his land was mortgaged, acquired no right to
proceed, for the same debt, against a subsequent purchaser of
other property also mortgaged for its security.
Although a purchaser may be a creditor by hypqthecation
for the guaranty of his purchase, and every such creditor is
subrogated to creditors of the same character whom he may
have paid, the purchaser, who is entitled to his actions of
guaranty, is not regarded in the same light as an actual cred-
• itor for a sum certain. There is, in relation to this matter, an
entire difference between them. He who is an actual creditor
for a sum certain, and who pays a creditor of the debtor, has
no motive to make such payment, but to acquire the general
rights of the creditor upon the property of their common debtor,
for he iR not a debtor on his own account.
A subsequent creditor who pays a prior creditor, makes the
payment merely to acquire the rights of the prior creditor.
The payment is made to preserve the property charged, and
prevent its being wasted. This is his intent in acquiring the
rights of the creditor by payment; therefore the law subrogates
him, as of right to the creditor, for all the property hypoth-
ecated.
must be extended to the analogous case, where legal subrogation is accorded to a cred-
itor who pays a preferred creditor, to preserve the common security, and prevent its
being consumed in expenses. 7 Toullicr, No. 146. See note, however, to No. 146.

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 SUBROGATION IN FAVOR OF A PURCHASER. 29

It is otherwise of a purchaser against whom proceedings are

commenced by a creditor·of the vendor. He is not, in the first
place, a creditor. He bas merely an action against his vendor.
In the second place, be is himself a debtor, as possessor of
the property hypotbecated, which was purchased by him. He
is obliged to pay as debtor, or give up the property which he
has bought. If, to avoid this, he simply pays, it is true that he
becomes a creditor of his vendor, and that he has his. action to
recover that which he has paid ; yet he has had no purpose
but to resort to this action, and to liberate the property which
he has purchased. It is not to be presumed that he had any
other object in view when he made payment, since he has not
declared it ; and, therefore, the law which subrogates him as
of right to the creditor . paid, has limited also his subrogation
to the property purchased. In regard to the right of action
which the purchaser has on his own account, founded upon the
guaranty of the sale, he may exercise it on all the property of
the vendor which may be reached by it, but for the subroga-
tion which the law gives him ipso jure, by reason of the pay-
ment which he has made to the mortgage creditor, the law has
limited him to the property purchased. And the same principle
holds, though, in the case supposed, Titius, the first purchaser,
who had paid the debt charged upon his land, is subsequently
evicted from the same land by creditors anterior to that sale.
The subrogation which the law gives him being limited to the
property purchased, if he is evicted from that property by
creditors of an earlier date, still he bas no recourse except to
the vendor and his privies. The eviction suffered in conse-
quence of the appearance of creditors who have a superior
right, gives him no new cause of action against the second
purchaser. The purchaser who has paid a debt for which the
property purchased has been charged, acquires no right by
reason of his limited subrogation on other property. He has
only the action of wall"anty and the action negot'iorum gestorum,
to recover from the vendor the debt from which he has been
discharged by the payment of the purchaser, over and above
the amount of the purchase~money.
The question presents itself whether, if the first purchaser, on
paying the debt which constitutes a charge on his property and
3•

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also on that of the second purchaser, stipulates expressly for

subrogation, and it is declared in the discharge, that he shall
be subrogated to the rights of the creditor, it extends to the
whole property charged. It may be said, on behalf of the
second purchaser, that the first purchaser, in paying the debt,
has acted merely as a debtor who seeks to discharge his prop-
erty from an incumbrance ; that the subrogation stipulated for
has its effect upon the property liberated, and secures the
possession, whilst it also enables him to defend himself against
other creditors ; that he has no right to resort to the second
purchaser, because, having acquired a secure possession of the
property purchased, by means of the subrogation applied to
that, it would be unjust for him to acquire a second recom-
pense by resorting to the property of the second purchaser. It
might be added, also, that the subrogation stipulated for at the
time of payment gave him only the rights of the creditor, and that
as the creditor, had he not been paid, might have entered upon
the land of the first purchaser, for satisfaction of the debt; the
debt being thus discharged, he could not afterwards resort to
the second purchaser. And the same result, it may be said,
would follow from payment by the first purchaser with express
subrogation. He enters upon the property in the right of the
creditor, and the debt is satisfied thereby, as it would have
been if the cre~tor himself had taken the property in payment
of the debt. The subrogation in this case may be regarded as
having had its full effect upon the property, and that, therefore,
resort cannot be had to the second purchaser for a double
recompense.
The question suggests itself, whether the second purchaser,
Caius, in the case supposed, would not be bound to con-
tribute to the payment of the debt with which the property
was charged, together with other property of the party subro-
gated. It may be said, in favor of such contribution, that when
two or more persons are jointly bound /or one and the same
debt, that if one of the co-debtors pays the entire debt to the
creditor, and stipulates at the time of payment for subrogation
to his rights, the debt is extinguished for the part to which he
who has made payment was bound, debitore solvente extinguitur
obligatio, nee possunt ei eedi aetiones, nee ejus respeetu, potest
dici emptio nominis, quia nemo emere videtur qu-0d ipse debet.

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 SUBROGATION IN FAVOR OF A PURCHASER. 31

There is no subrogation except for the shares of the other

co-obligees, but for such parts it exists because payment has
been made for them, and it may be said that the same prin-
ciple is applicable to several purchasers whose property is
charged with the same debt, so that when one o'f the purchasers
pays the whole debt, he should be permitted to resort to the
others for contribution.. There is, however, a difference between
co-obligors who are jointly charged at the s~me time and bound
for the same debt, and purchasers who have separately pur-
chased different properties charged with the same debt, and
who are neither co-debtors nor co-obligors.
Notwithstanding the acknowledged difficulty of the subject,
the established rule of the civil law 1 seems to be, that neither
by operation of law, nor by express stipulation, has the first .or
a subsequent purchaser a right to be subrogated against other
property charged with the same debt on payment thereof, but
that the purchaser shall be subrogated alone against the prop-
erty, for the protection of which the payment was made.
The rules which prevail in Courts of Equity under the com-
mon ' law, where the maxim governs that equality is equity,
have been supposed in such a case to require contribution be-
tween the respective purchasers.
In a case decided by the Court of Chancery of the State of
New York,2 however, a rule was laid down which would, in
the case supposed, render the second purchaser liable for the
debt, in exoneration of the first. Mr. Chancellor Kent, says:
" If there be several purchasers in succession at different times,
I apprehend that, in that case, there is no equality and not con-
tribution as between purchasers. Thus, for instance, if there

l Ren11880ns, Cb. 5, No. 69.

2 Clowes v. Dickinson, 5 Johns. Ch. R. 235. See Guion v. Knapp, 6 Paige, 35.
In this case, it is said by Mr. Cb. Walworth, that if the mortgage is a lien upon 200
acres of land, and the mortgagor conveys l 00 acres thereof to A. ; the l 00 acres which
remain in the hands of the mortgagor is to be first charged with the payment of the
debt, and if that is not sufficient, the other 100 acres is next to be resorted to. But if
A . had subsequently conveyed one half of his 100 acres to B. with warranty, the 50
acres remaining in the hands of A., is in equity first chargeable with the payment
of the balance of the debt which cannot be raised from the 100 acres still remaining
in the hands of the mortgagor. And the principle holds in every case, whether the
ale is with or without warranty, if it is not a mere sale of the equity of redemption.

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be a judgment against a person owning at the time three acres

of land, and he sells one acre to A., the remaining two acres
are first chargeable in equity with the payment of the judgment
debt, as we have already seen, and that, too, whether the land
be in the hands of the debtor himself or of his heirs. If he
sells another acre to B., the remaining acre is then chargeable,
in the first instance, with the debt as against B. as well as
against A. And if it should prove insufficient, then the acre
sold to B. ought to supply the deficiency, in preference to the
· acre sold to A. ; because, when B. purchased, he took his land
charged with the debt in the hands of the debtor, in preference
to the land already sold to A. In this respect, we may say of
him as is said of the heirs, he sits in the seat of his grantor,
and must take the land with all its equitable burdens ; it cannot
be in the power of the debtor, by the act of assigning or selling
his remaining land, to throw the burden of the judgment, or a
ratable part of it, back upon A. It is to be observed, that the
debt in this case is the personal obligation of the debtor, and
that the charge on the land is only by way of security ; the
case is not analogous to a rent charge which grows out of the
land itself, and every purchaser of distinct parcels of a tract of
land charged with the rent, takes it with a proportionable part
of the charge. The owners of the land in that case all stand
equal, and if the whole rent be levied upon one, he will be
eased in equity by a contribution from the rest of the pur-
chasers, because of the equality of right between them."
Mr. Justice Story 1 questions the correctness of this doctrine.
After stating that the general rule now acted upon by Courts
of Equity, is, that where there is a lien upon different parcels
of land for the payment of the same debt, and some of these
lands still belong to the person who, in equity and justice, owes
or ought to pay the debt, and other parcels of land have been
transferred by him to third persons, his part of the land, as
between himself and them, shall be personally chargeable with
the debt, he then observes : " But it has been further held, that,
if he has sold or transferred different parcels of the land at
different times to different persons, as incumbrancers or pur-
chasers, then, as between themselves, they are to be charged in

l 2 Story's Equity, § 1233.

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 SUBROGATION IN FAVOR OF A PURCHASER. 33

the reverse order of time of the transfers to them ; that is to

say, the parcels last sold are to be first charged to their full
value; and so backwards, until the debt is fully paid; for, it is
said, the last purchasers are to take only as far as they may,
without disturbing the rights of the prior incumbrancers or
purchasers, who, being prior in point of time, have a superiority
of right."
And Mr. Justice Story proceeds to say : ''But there seems
great reason to doubt whether this last position is maintainable
upon principle; for, as between the subsequent purchasers or
incumbrancers, each trusting to bis own security upon the
separate estate mortgaged to him, it is difficult to perceive that
e'ither has, in consequence thereof, any superiority of right
or equity over the other; on the contrary, there seems strong
ground to contend, that the original incumbrance or lien ought
to be borne ratably between •them, according to the relative
'value of the estates." And so he says the doctrine has been
asserted in the most recent English cases on the subject. If
the doctrine stated by Mr. Justice Story furnishes the true
rule of equity, each of the purchasers, in the case above stated
from Renussons, was chargeable ratably, according to the
relative value of their lands, and, by the principles of equity, if
either of the purchasers had become subrogated to the rights of
the creditor, either by operation of law or by express stipu-
lation, the subrogation would not merely be applicable to the
land purchased, which the design of the payment was. to li~r­
ate from the debt, but the purchaser would be subrogatecf'to
the creditor's security against the other purchaser for the share
which be would be bound to contribute, ratably, to the value of
the estate. There is no similarity between the condition of the
original vendor and that of the second or last purchaser. The
vendor is the debtor, and is chargeable with the whole debt.
The property, while remaining in his hands, is to be applied in
relief of purchasers. It is true, that when a purcha~r has a
right to have land in the hands of the vendor applied in re-
lief of the lands purchased, a subsequent purchaser is in
privity with the vendor, but he is not a debtor. The first
Pll!chaser cannot call upon him to pay the debt. in discharge of
his land. The legal title of the second purchaser is perfect, and,

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on principle, his only liability is an equitable one, by which he

may be bound to a ratable contribution.
Although by the civil law, it would seem, the first purchaser
could not,·on payment of a debt which constitutes a charge on
his own land, as well as on the land of the second purchaser,
be subrogated to the rights of the creditor~ for the purpose of
recovering the same from the second purchaser, either by
operation of law, or conventionally ; as it is the right of a
creditor to proceed against any property charged with the debt,
and the same right exists in favor of his assignee ; if there is no
rule of equity which provides for a contribution between the
first and second purchasers, the policy of the law may be com-
pletely evaded by either of the purchasers, if the payment of
the debt is secretly made to take the form of a sale to a third
person. If the payment of the debt is made with the funds of
the first or second purchaser, by a third person who is expressly
subrogated to the debt, he may proceed to recover the same
from either purchaser, because he succeeds to all the rights of
the creditor. This inequitable result cannot always be avoided,
unless the rule of a ratable contribution according to values
exists as between the purchasers, however charged.
As between the rule of the civil law as stated by Renussons
and others, which throws, in certain events, the whole burden
of a debt charged on separate parcels of land, in the hands
of different purchasers, upon one of the purchasers, without the
riitt of contribution : that of Mr. Chancellor Kent, which
renaers, in default of the original debtor, the last purchaser
liable as representing the debtor: and that of Mr. Justice Story,
which proceeds upon the ground that the burden of the debt
should be equally borne by those who are subjected to a
common charge, it must be conceded, that the doctrine of
contribution stated by Mr. Justice Story, as the existing rule of
equity in England, is founded upon a broader view of the
principlts of equity, and furnishes the only fixed measure for
the respective liabilities of the several parties. But the doctrine
that the last purchaser is liable, as stated by Mr. Chancellor
Kent, has been generally followed in these United States.
Whenever, says Mr. Chancellor W alworth,1 the judgment

1 James v. Hubbard, l Paige, R. 233.

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 SUBROGATION IN FAVOR OF A PURCHASER. 35

creditor disposes of a part of the land held by the judgment,

the purchaser has an equitable right to have the judgment
discharged out of the residue of the property. ·Although a
subsequent purchaser' has an equal equity to have the land
which he has purchased and paid for discharged from the lien
of the judgment as against the debtor, the first purchaser,
having the prior equity, must be preferred.
In another case, Mr. Chancellor Walworth says: 1 "Where
lands belonging to several persons are covered by a mortgage
given by the person from whom they all derive their titles, the
lands last sold by him are first liable to satisfy the incum-
brance ; and the several parcels must be sold by the master in
the inverse order of their alienation."
Where lands incumbered by a mortgage or judgment against
the owner, said the Vice Chancellor,2 are subdivided and
conveyed to different persons at different periods of time, that
portion which is conveyed last by the incumbrancers, is to be
first called upon to contribute, for its full value, towards satis-
fying the incumbrance, and thus each portion is to bear its pro-
portion of the burden in the reverse order of the time of alien-
ation.
In a case decided by the Supreme Court of Pennsylvania,a
where a man owning several tracts of land, bound by a judg-
ment against him, sold one tract to another person, the re-
maining tract being more than sufficient to pay the judgment,
and afterwards sold one of the remaining tracts to another who
had notice of the circumstances ; it was held, that if the land of
the second purchaser was taken in execution, and the judgment
satisfied by the sale of it, he could not maintain assumpsit on
an implied promise against the first purchaser for contribution.
The court also were of opinion that the second purchaser had no
remedy by audita querela, or in any other way. The court
held that the second purchaser stood in no better situation than
the vendor of the land who was the original debtor; that he
took it subject to all the incumbrances against the vendor, and

·1 Goavemear v. Lynch, 2 Paige, R. 300.

~ Patty v. Pease, 8 Paige, R. 278.
8 Nailer v. Stanley, IO Serg. & Rawle, R. 450.

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36 SUBSTITUTED LIABILITIES.

that he was bound to look to the state in which the Yendor and
the first·purchaser stood.
Because, if the lands had descended or been devised by the
debtor, who was the vendor, his heir or devisee could not have
compelled contribution, the court said that the subsequent
purchaser had no such remedy; but the condition of a pur-
chaser is certainly very different, in regard to the vendor, from
that of an heir or devisee who personally represents the debtor.
The purchaser is not to be regarded, in equity, as standing in
the place of the debtor, because he is not indebted, and has paid
an equivalent for the land.
In another case determined by the same court,1 however, the
question was, whether a mortgagee of land of the debtor, con-
veyed to secure the payment of seven bonds payable at differ-
ent times by the mortgagor to him, the first four of which had
been assigned by him to four different persons at different
dates for value received, could, upon a sale of the mortgaged
premises being made for a sum of money insufficient to pay all
the bonds, claim a full pro rata dividend of the proceeds of the
sale, with the persons to whom he had assigned the first four
bonds, towards payment of the three remaining bonds still held
by him that became last payable; and it was held by a majority
of the court that the claim might be sustained.
In another case,2 the question arose, whether the purchasers
of different tracts of land at different times, subject to a pay-
ment of a mortgage upon the whole, should contribute pro rata
to . the payment of the mortgage, according to the relative
values of their respective tracts ; or whether the last purchaser
should not contribute, in the first place, to the amount of the
whole value of his tract, if requisite, and if found insufficient to
pay the whole debt, then the preceding purchasers to con-
tribute, according to the inverse order of the time in which they
purchased, until the mortgage debt should either be paid or all
the mortgaged lands exhausted. A majority of the court de-
cided that each purchaser, or that the land purchased by him,
was liable to contribute, pro rata, towards the payment of the
mortgage debt according to its relative value.

l Donley v. Hays, 17 Serg. & Rawle, R. 400.

2 Presbyterian Corporation v. Wallace, &c. 3 Rawle, R. 109.

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 SUBROGATION IN FAVOR OF A PURCHASER. 37

In a more recent case,1 which is regarded as settling the law

in that court on this subject, the doctrine of the two last-
mentioned cases was denied, and the rule above stated of Mr.
Judge Story was held inapplicable. The question presented
was, whether, in the distribution of funds in the hands of the
court, moneys arising from the sales should be marshalled or
appropriated in such a way as to throw debts and legacies
which had become payable at the time of the sales, upon those
funds which had been raised from such parts of the estate as
became fast incumbered, so that the incumbrancers as between
themselves should be charged in the reverse order of the time
of the incumbrances obtained by them, that is, that the last
incumhrances should give way in an inverted order, to all prior,
until the latter should be paid so far as they might be adequate
to that end: and it was held by the court, that the debts and
legacies must be paid in full out of the moneys that otherwise
would be applicable to the payment of the last incumbrances
or liens, in point of time.
In those cases where it has been held that the whole of a
debt, for which the estates sold to different purchasers at differ-
ent times are liable, shall be thrown upon the last purchaser or
incnmbrancer, it has been assumed that the position of the sec-
ond purchaser is assimilated to that of the heir of the vendor or
debtor, or to that of a person claiming merely as a volunteer ;
but the jW1tice of this comparison was not admitted in an
English case, where this position was taken by counsel. In this
case,2 Sir L. Shadwell, the Vice-Chancellor, proceeds upon the
ground that equity requires the original incumbrance on several
estates to be ratably distributed upon them.
Racster being seized of Foxhall Coppice and a piece of land
marked in a plan of the estate as No. 32, mortgaged in 1792,
Foxhall to Barnes ; in 1795, Foxhall to Hartwright; in 1800,
Foxhall and No. 32 to Barnes, to secure a further advance; in
1804, Foxhall and No 32 to Williams. The 1mbsequent incum-
brances · were taken, with notice of the prior incumbrances.

1 Cowden's Estate, 1 Penn. State R. 267. See also, Patten v. The .Agricnltural
Bank, 1 Freeman, R. 419; Holden v. Pike, 24 Maine R. 427. But see .Allen v. Clark,
17 Pick. 47, and Parkman v. Welch, 19 Pick. 231.
s Barnes v. Racster, 1 Younge & C.R. 401.
4

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The question, as stated by the court, was, whether as No. 32

was sufficient to pay the whole of Barnes's demand, Hartwright
could, as against Williams, compel Barnes to resort to No. 32,
thereby leaving H~rtwright, the first incumbrancer, on Foxhall 6"""~'
Two other questions were presented which were not considered
by the court. First, what would have been the rights of Hart-
wright and Williams, had Barnes's security upon No. 32 pre-
ceded, and not b'een subsequent to Hartwright's security on
Foxhall; secondly, what would have been the rights of the
parties, had WilJiams's security not existed at all, o:t not ex-
isted until after the commencement of the proceedings in
equity. The Vice-Chancellor was of opinion, tha~, with-
out any reference to Hartwright or to Williams, the nature
and effect of the security of 1800 were, to make No. 32 and
Foxhall pari passu and ratahly, accordin~ to their values, liable
to Barnes's two charges, as between the different heirs of Rac-
ster, had he died intestate and insolvent as to his personal
estate, leaving one person his heir as to No. 32, and another
person his heir as to Foxhall. He was also of opinion that
Hartwright had not, before 1804, when Williams took his secu-
rity, acquired any right in No. 32, or any equity against Rac-
ster, to preclude him from dealing with it as his necessities
might require. Hartwright had no privity or concern with the
mortgage by Racster of No. 32 to Barnes, and had no equity
to prevent Racster from selling or incumbering it, as charged
ratably and pari passu with Foxhall. He was also of opinion,
that if it were conceded that had Williams's charge not existed,
the right claimed by Hartwright, that is to say, the right of
marshalling, could be enforced against Racster, it did not fol-
low that in 1804 any such right had arisen. Hartwright's title,
if any, against No. 32, did not extend beyond such interest in
it as before the suit, Racster did not alienate for value.
It further appears from this case, that the last incumbrancer
is not to be regarded as representing the debtor, so as to be ren-
dered incapable of subrogation to the rights of the creditor for
his just proportion of the securities. Instead of the whole bur-
den of the debt being thrown upon the land conveyed to him,
the securities were marshalled ratably, so as to let the last
incumbrancer in upon the property of the debtor, pari passu,
with a prior incumbrancer.

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 SUBROGATION IN FAVOR OF A PURCHASER. 39
In contrast with the above case; may be cited a case decided
by the Court of Appeals of Virginia. 1 S. mortgaged a parcel
of three hundred acres of land to B. to secure a debt due to
him ; then S. mortgaged all of the same land, except seventy·
five acres, to H., to secure a debt due to him, these seventy-five
acres being excepted and reserved out of the second mortgage,
because the mortgagor was then in treaty with a third person
for a sale thereof to him, which treaty was afterwards broken
off; and then S. mortgaged the whole parcel of three hundred
and sixty acres to C., to secure a debt due to him. It was held
by the court, 1. That H., the second mortgagee, had a right as
against S., the mortgagor ; B., the first mortgagee ; and C., the
third mortgagee ; to claim that the debt due to B. should be
satisfied out of the parcel of seventy-five acres reserved out of
the second mortgage to H., so as to leave that part of the prop·
erty mortgaged to H. untouched, and applicable to the satisfac·
tion of the debt due to him. 2. That C., the third mortgagee,
had no right to call on H., the second mortgagee, to contribute
pro rata to the satisfaction of the debt due to B., the first mort·
gagee.
This case differed from the preceding one, in the circum·
stance, that the first mortgage covered both pieces of land,
and the question decided by the court was one which the Vice·
Chancellor declined to consider, namely: What would have
been the rights of the subsequent incumbrancers, had the secu-
rity of the first mortgagee acquired on No. 32, by the second
deed, preceded that of the second mortgagee, and not been sub·
sequent to it. The court proceeded in their decision, upon the
ground that the right of marshalling, which existed in favor of
the second mortgagee against the first mortgagee, who had a
more extensive lien, was an absolute charge upon the land.
But this doctrine, it is believed, is unsound. The second mort-
gagee had no privity or concern with the first mortgage. His
equity did not extend beyond such interest in it as, before the
suit, the mortgagor had not alienated for value.
According to the doctrine of the English Court of Chancery,
if the second mortgagee had satisfied the first mortgage, he

1 Conrad v. Harrison, 3 Leigh, R. 532.

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could have been subrogated only for a ratable contribution

against the land not embraced in his own mortgage; but, under
the rule which prevailed in the Court of Appeals of Virginia,
the second mortgagee would, on payment of the first mortgage
debt, have been entitled to be subrogated for the whole debt
against the land not included in bis own mortgage,

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 CHAPTER III.
OF SUBROGATION IN FAVOR OF A JOINT DEBTOR.

WHEN the several heirs had, under the Roman law, accepted
the common succession, they were bound for the debts as co-.
obligees. Each of the heirs, as between themselves, was
chargeable with his several part only, but he might be proceed-
ed against by hypothecary creditors for the whole debt, and,
in that case, he had his recou15e to his co-heirs for contribution,
and might recover from each one his respective part. But as
the action which one of the co•obligees had, who paid a com-
mon debt, might often be of no avail, if the othe~ co-obligees,
from whom the respective portions were due, had hypothecary
creditors who were anterior to him, the party who paid the
whole debt for which he was bound with others, might, for his
own security, stipulate for subrogation to the rights of the cred·
itor to whom· he made payment, so that he might proceed
against his co-obligees for their several portions, from their prop·
erty, as suhrogated in the place of the creditor who had been
paid. By the Roman law, when 8everal persons were bound
to pay the same sum for the same consideration, if they were
not bound jointly, the one for the other, and if they had not
renounced the benefit of division, each of the parties bound
was liable for his own part, and if one paid the parts of the
others, his payment was regarded as made by a stranger, that
is, as it would be, if made by any other person who was not
one of the co-obligees. If he desired to be subrogated to the
creditor, to recover that which he had paid from the others,
he ought to stipulate for subrogation, otherwise he would have
only the action, - negotiorum gestorum.1 And when several

1 RenUAOns, Ch. 6, Noe. 66, 67.

4•

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were bound to p.ay for the same cause, and were bound jointly,
each for the other, and had renounced the benefit of division,
each of the co-ob~was charged with payment of the whole,
but each was princiPaI debtor qnly for his part and surety for
the others for their parts. And he who paid the entire sum,
either voluntarily or by constraint, ought to stipulate for subro-
gation, otherwise, he had only the action mandati, or the action
negotiO'fum gestorum, to recover from the others what he had
paid for them.1
A question which, under the civil law, has receive<!._great
discussion, is, Whether, when one of several co-oblig~ bas
paid the entire debt and stipulated for subrogation to the·"'rights
of the creditor, he may, as thus subroRated, exercise his right of
action against all the other co-ob~ or only against each one
of them for his several part. On one side, it might be said, that
the effect of subrogation is to cause the party subrogated to
succeed to the creditor for the exercise of the same rights of
action which he had, and that as the creditor might undoubt-
edly proceed against all, so he who is subrogated may sustain
an action against all jointly, deducting the portion for which he
was himself ch~eable. On the other hand, it might be said
that the co-obliger, who has procured himself to be subrogated,
i.s bound himself'for the whole, and that to permit him to sue
for that for which he was bound himself, would be merely to
authorize a circuity of actions. Great diversity of opinion has
existed on this subject, but ·the better opinion, and that which
has generally prevailed, is, that the subrogation which is stipu-
lated for by one of the co-oblig~ gives him a right of action
for its recovery only against each of the other oblig~ for his
part.2

1 Rennssons, Ch. 6, Nos. 66, 67.

:i 7 Tou.llier, No. 163.

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 CHAPTER IV.
OF SUBROGATION IN FAVOR OF A SURETY.

A SURETY who paid the debt of the principal debtor had, by

the civil law, always his recourse against him for the sum
which he had paid. He might resort to the actio mandati for
his indemnity.
The question here presents itself, whether the surety, who has
paid for the principal debtor, is subrogated as of right, by the
payment, to the actions of the creditor who has been paid, or
whether he is only subrogated when he has stipulated for sub•
rogation, and whether, if he has neither required nor stipulated
for subrogation, he has only the action mandati, and the personal
action negotiorom gestoro:m.1
At the civil law, a surety who simply pays the debt to a
creditor, and has neither asked nor stipulated for subrogation
to the rights of the creditor, does not succeed to him as of right,
nor enter in his place, and he cannot exercise his rights and
actions ; and, in order to be subrogated, he must expressly
· require and stipulate for subrogation.ii In the first place, this
appears, it is said, from this consideration, that the law which
makes provision for the indemnity of the surety who has been
constrained to pay for the principal debtor, or who has volun·
tarily paid, to prevent an action by the creditor, provides no
other remedy than the actio mandati, which results from his
becoming surety; or the action negotiorum gestorum, for having
paid money for the debtor. The law has not expressly subro·
gated, as of right, the surety who has simply paid the debt to
the rights of the creditor. The law does not presume that by

1 7 Toul.lier, No. 147.

2 Renussons, Ch. 9, No.1.

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44 SUBSTITUTED LIABILITIES.

mere payment, without an express stipulation, it is the inten·

tion of the surety to be subrogated. In the second place, when
the surety has consented to become bound for the principal
debtor, and has simply paid the debt to the creditor, without
having asked or stipulated for subrogation, he has relied upon
the faith of the. principal debtor ; he is satisfied with the obli·
gation which the debtor has contracted with him as surety, and
relies upon the action mandati, or the action negotiorum gesto-
rum (equivalent to the action of assumpsit), which the law
gives, on his own account. It is evident from his inaction, that
he has had no intention to acquire the rights of the creditor on
making payment.
The provisions of the Roman law, which gave to the surety
on payment of the debt, special actions, would be unmeaning if
they were to be construed as giving him a cession of actions
and subrogation, as of right, to the creditor by the mere effect
of payment. Though a surety is not subrogated as of right, or
by mere operation of law, when payment is made by him, it is
in certain instances declared by law, that the surety has a right
to claim that he shall be subrogated, on payment, to the rights
of the creditors. As where a person gave an order to another
to lend a sum of money to Titius, and the party on whom the
order was drawn, in compliance with the mandate, paid the
money, and afterwards proceeded against the drawer of the
order for reimbursement of the sum paid, and enforced payment
from him, it was declared that the party who had paid the
money on the order, ought, on being reimbursed, tu consent to·
a cession of actions, in favor of him by whom the order was
drawn, and subrogate him to his rights of action.1
It is said in the Code,2 that although a creditor, who has
taken security and a surety for a debt, may, if he prefers so to
do, proceed against the surety for the payment of the debt, for
which he has bound himself, yet, having done so, he ought to
·transfer to him the right to the security. Oreditori, qui pro
eodem debito, et pig·nora et .fidejussorem accepit, licet, si malit fide,
jussorem convenire in eam pecuniam in qua se obligaverit ; quod

1 Digest, 46. 3. 95. 10.

s Code, 8. 4. 1. 2.

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 SUBROGATION IN FAVOR OF A SURETY, 45
cum f <ecit debet jus pignorum in eum transferre. It appears,
that though, under the Roman law, subrogation did not take
effect of right or by operation of law; it was only because
some act was necessary on the part of the surety, manifesting
·his desire to have the right of the creditor preserved and trans·
ferred to him for his benefit. The natural effect of payment
by the surety, without more, was to extinguish the debt. If the
surety intended that the right of the creditor should be pre·
served for his benefit, after payment, it was necessary that this
should be manifested at the time of payment. The right to
subrogation depended altogether upon the intention of the surety,
and not of the creditor. If the surety made an absolute pay·
ment without demanding subrogation, the law gave him bis
action mandati, or negotiorum gestorum, and the debt of the
,creditor being extinguished, there remained nothing for the law
to transfer as of right to the surety. But if the payment was
qualified by a demand for a cession of actions and subrogation,
the debt was not extinguished, and the surety might demand a
cession from the creditor and a subrogation to the securities :
but, under the Roman law, this subrogation did not take place
as of right. The surety might, on the refusal of the creditor to
make the necessary transfer, resort to the courts for relief; and
they provided for the indemnity of the surety, not by a subro·
gation as of right, nor by operation of law, but by requiring
the creditor to make the necessary transfer. There was noth·
ing in the mere fact of payment by the surety, as necessarily
extinguishing the debt, and with it the creditor's right to se-
curities, which made the creditor'a right of action incapable of
transfer. Such an effect was only produced by the absence of
intention on the part of the surety, at the time of payment, to
acquire the right of action. If the surety simply paid, the debt
was extinguished. If the surety, on payment, required subro·
gation, the payment was made with a view to a transfer of the
creditor's rights. When the payment was thus made, the debt
afterwards existed, .and the cession of actions with subrogation,
whether voluntarily made by the creditor or under a decree,
partook of the nature of a sale of the debt.
In a passage of the Digest,1 it is said, that when a creditor

i Digest, 46. 1. 36.

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46 SUBSTITUTED LIABILITIES.

to whom the principal debtor is bound with sureties, receives

the amount due from one of the sureties, and transfers his rights
of action, though it may be alleged that no such rights of
action exista as the creditor has received his debt, and thereby
all have .been discharged: yet this is not so, for in such a case.
he has not received the money in discharge of the debt, but he
has, as it were, sold the obligation with the name of the debtor.
The creditor, therefore, has existing rights of action, because he
is bound by law to transfer his actions to the surety. Oum is
qui reum et fidejussores habens, ab uno ex fidejuss<Wibus, accepta
pecunia, pr<estat actiones poterit quidem dici, nullas jam esse, cum
suum perceperit, et perceptione, omnes liberati sunt. Sed non ita
est: non enim in solutum accepit, sed quodammodo, nomen debi-
toris vendidit ; et ideo habet, quia tenetur ad id ipsum, ut pr<e,stet
actiones.
The same principle prevailed in regard to co-sureties. By•
the Roman law, the surety who made payment of the debt for
which he was bound, did not, as against co-sureties, acquire, by
operation of law, a right to subrogation. If the surety simply
made payment of the debt without demanding subrogation, the
debt was extinguished, and be had no remedy against' his
co-sureties, hut by the action mandati, or negotiorum gestorum;
but if, on payment, he was subrogated by the creditor, either
voluntarily or by the· decree of a court, he might, as subrogated
to the creditor, proceed against his co-sureties for their re-
spective portionf!.
It has been supposed that the rules of law as adminiatered
by Courts of Equity, under the system of the common law,
were different. The general principle is, that the surety, on
payment of a debt for which he was bound, acquires a right of
action on his own account. This is the rule of the common law,
as well as of the Roman law. At the common law, the surety
has his action of assumpsit on payment, and is not subrogated
as of right to the actions of the creditor. The creditor may be
a specialty creditor, and so privileged; but the surety who pays
the specialty debt is not thereby subrogated to the specialty.
That is gone by payment. If the surety wishes to be subro-
gated to the privileges of the creditor, he must take the proper
measures to effect that object. One mode of attaining this

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 SUBROGATION IN FAVOR OF A SURETY. 47

end, as said by Lord Eldon in a case decided by him,1 was by

causing ~he bond which was paid by the surety, to be assigned
to a perf.ton in consideration of a sum of money paid ; another
mode was by means of a counter bond, so that if a surety paid
one bond, he became instantly a specialty creditor by virtue of
the other bond. The technical difficulty which is supposed to
render a transfer to a third person on payment, rather .than to
the surety, necessary, founded upon the idea that a party cannot
at the same time be creditor and debtor for the same debt, did
not exist at the Roman law, for, on payment by a surety or by
a co-obligor, cession of actions might be made with effect to
the surety or co-obligor, who thereby became creditor for the
11mount justly due to him.
The principal design of subrogation as an equitable remedy,
must be borne in mind. Although· a surety is entitled to sub·
rogation against his principal, whether the latter has given
eecurity or not, it is ordinarily attended with no results, except
in regard to the security. And if the property given as security
remains after payment in the hands of the debtor, it may be as
effectually reached by the actions which the law gives the
surety on payment, as by subrogation to the actions of the
creditor, it is only as against subsequent purchasers and cred-
itors who have acquired a new lien, that subrogation has any
important effect. If, on payment of a debt, the property given
as security returns by the mere fact of payment to the debtor,
he may dispose of it by sale or otherwise, so as to give the
purchaser not only an equitable right, but a legal title such as
must, on principles of justice, prevail over the claim of the
surety, who by his own neglect has permitted the property to
return under the control of the debtor. The surety can have
no relief, by way of subrogation, by operation of law except in
those cases, as of mortgages of land, where the security does
not, on payment, return to the debtor.
It appears, from the decision of Lord Eldon in the case
referred to,2 that, as a general rule, payment by the surety abso-
lutely extinguishes the debt, and that, by the mere effect of ,

1 Copis v. Middleton, 1 Tarner & RllBs. R. 224.

~Ibid.

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48 SUBSTITUTED LIABILITIES.

payment, the security, if of a certain character, may be abso-

lutely lost. In that case, it was held that a surety who paid
the bond debt, became a simple contract creditor only of the
principal. Lord Eldon said, that, as a general rule, a surety is
entitled to the benefit of all the securities which the creditor
has against the principal, but that the nature of those securities
must be considered; "where there is a bond merely, if an action
was brought upon the bond, it would appear upon oyer of the
bond that the debt was extinguished ; the general rule, there-
fore, must be qualified by considering it to apply to such securi-
. ties as continue to exist, and do not get back, upon payment, to
the person of the principal debtor ; in the case, for instance,.
where, in addition to the bond, there is a mortgage, with ~
covenant on the part of the principal debtor to pay the money,
the surety paying the money would be entitled to say : " I have
lost the benefit of the bond, but the creditor has a mortgage,
and I have a right to the benefit of the mortgaged estate, which
has not got back to the debtor." Lord Eldon distinguished
between pledges of personal property for the security of the
debt, which would, on payment, return to the debtor, and mort-
gages of land which would not go back to him by the mere
effect of payment.
If the technical difficulty which attends subrogation in favor
of a surety or co-obligor, who has by a fiction of law received
an assignment of the debt for which he was jointly bound with
the principal, may be overcome, and if he may, by express
agreement, acquire the creditor's :rights of action against the
principal debtor, a deduction being made for the portion of the
debt for which he was properly chargeable, what rule shall be
applied to cases where no expre8s agreement is made to pre-
serve the lien of the surety or co-obligor by subrogation 1 The
Roman law provided that payment by the party jointly bound,
should extinguish the debt, unless the intention of the party to
preserve the lien of the creditor by subrogation was declared at
the time of payment. The simple payment of the debt ex-
tinguishes it, and enables the debtor to convey the property
or charge it with other incumbrances. Can the rule be estab-
lis~ed consistently with principle, that property which has been
received by the creditor as security for his debt, shall remain

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 SUBROGA'J.!ION IN FAVOR OF A SURETY. 49
chargeable in his hands after payment of the debt by the surety,
until it shall appear that the surety has been fully indemnified,
or until his intention appears to release the security and rely
upon the new rights of action which the law gives him on
payment 1 If a surety desires to provide for an eventual lien
upon the security, if he shall afterwards be compelled to pay
the debt, he may acquire such a lien by express stipulation.
Or.i if, on payment of the debt, he would be subrogated to the •
security of the creditor, he may preserve the security, hut that
intent is not to be presumed, and does not always exist. It
may well have been the intention of the surety to ·rely upon the
personal credit of the debtor, and to concede to him the privi-
lege of freely disposing of the property after having himself
paid the debt. . The law does not presume an intention that
is not declared, as is evident from the consideration that a new
action is given to the surety, on payment by him. After such
payment without an express stipulation for subrogation, the
debtor may transfer the property to a new creditor as security,
or to a purchaser. If the debt for which it was bound is paid,
the creditor or purchaser acquires a legal right to the property,
and is not bound by latent equities. It is sufficieDt for him
that the debt for which it was charged as security has been paid.
By an express stipulation for subrogation in the manner re-
quired by law, the surety might have acquired a legal right
which would have taken precedence of subsequent incum-
brances, and, without an express stipulation, he may have an
equitable claim to the security whilst it remains unincumbere<l
in the hands of the debtor, and also to property which is not
returned to the debtor by the mere effect of payment. Lord
Eldon, in the case above cited, seems to have supposed that,
where the surety by paying the debt had lost the benefit of the
bond, he might, when the mortgagor resorted to a Court of
Equity for a reconveyance, in some way assert his right to the
benefit of the mortgaged estate. It would be impossible for a
subsequent incumbrancer, before a reconveyance, to gain the
legal estate in the land mortgaged, and his equitable interest
would not take precedence of a prior surety.
For the same reason, namely, that, because of the superior
equity of the surety, land mortgaged will not be reconveyed
5

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 50 SUBSTITUTED LIABILITIES.

unless the surety, on his demand, is indemnified for the payment

which he has made, it is plain that, before payment, that equity
would be made effectual at his instance, by rendering the whole
property liable in the first instance to the debt, which, on pay-
. ment of the debt, would, by operation of law, return to the ·
debtor..
A surety has a right, in a proper case, to require that the
• creditor shall proceed not only against the person of the ,P.¥1.Y,
but also against the property received by him as security.1 , He
has not only the right of subrogation to every remedy which ·the
creditor has against the principal debtor, to enforce every secu-
rity and all means of payment, and to stand in his place and
stead for that purpose; but, before payment, and when the cred-
itor might, by obtaining judgment against the surety, extin-
guish the lien by means of the bond, the surety has a right to
require the creditor to render the securities available, which
would be lost, if the debt was paid or extinguished without
any provision for the rights of the surety.
The doctrine .o f Lord Eldon in the case cited 2 has been
questioned as resting only upon narrow and technical grounds,
but, when.properly considered, it may be found to be necessary to
the security Di legal rights, and to sustain the presumed intention
of the parties, so far as it regards subsequent .transfers or
incumbrances.
If the surety has lent his credit to a merchant for the purchase
of a stock of goods which are mortgaged to the creditor, and
the surety afterwards pays the debt, and the goods return to
the debtor and are sold by him in the course of his business,
or charged as security for debts newly contracted, the legal
right of the purchaser, or of a new incumbrancer, ought- to
prevail over any claim of the surety founded upon a supposed
.legal subrogation.
The right of a purchaser or a new creditor may be more
manifest when the property constituting the security for a debt
is delivered to the debtor, on payment of the debt by the surety
with his express consent, and for the purpose of enabling him
to proceed in his business; so, when there is a second debt, for

1 Hayes v. Ward, 4 Johns. C. Rep. 123.

2 Copis v. Middleton, 1 Turner & Russ. 224 .

•
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 SUBROGATION IN FAVOR OF A SURETY. 51
which the property is bound by a judgment or incumbrance
created before the payment, by the surety for the first debt: if,
on payment, the property is, without objection on the part of
the surety, subjected to the control of the debtor in the conduct
of his business, the second incumbrance may become the first
charge in exclusion of the surety. The presumption is, that
the surety relied upon the personal security of the debtor, even
after payment of the second incumbrance.
The question in such cases is one of intention, ·and when
new legal rights have been acquired, the intention of the surety
to be subrogated to the rights of the satisfied creditor is not to
be presumed, and, in general, an express stipulation for subro·
gation seems necessary to prevent the debtor from absolutely
disposing of the security, after payment of the debt.
· The case is different when, though payment is made by the
surety without express subrogation, no new legal right is ac-
quired, and where no intent on the part of the surety can he
presumed so to aid the debtor as to let in a subsequent incnm-
brance to priority. Subsequent incumbrancers cannot in equity
assert a claim to be substituted to the first. While the property
remains within the control of the debtor, the equitable claim of
the surety ori the first incumbrance is prior in time, and must
therefore prevail.
But if, by operation of law, a surety is, on payment, supposed
to be subrogated to the rights of the creditor as fully as he would
be if it were expressly stipulated for at the time of payment,
by the surety, of the debt for which he was bound, that is, if the
security remains charged with the debt by operation of law
on such payment, until the surety has been indemnified; the
intention <?f the parties to liberate the property from the lien,
must be expressly shown in each case. Such, however, is not
the just construction of the agreement between the parties, and
under the civil law,1 as well as by the law of England as
settled by Lord Eldon,2 the intention to discharge the security
was presumed. In order that subrogation should be wrought
in favor of a surety, it was necessary to give to payment by

1 Pothier, Tr. des Obligations, No. 280.

ll Copis v. Middleton, l Turner & Russ. 224.

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52 SUBSTITUTED LIABILITIES.
•
him the fictitious effect of a sale, and a cession of actions by the
creditors was necessary.
The modern French law, as declared in the Code,1 seems to
reverse this presumption. A distinction is made between the
effect of pure and simple payment, and payment with subro-
gation. Legal subrogation takes effect whenever payment is
made by a surety, unless the intention is otherwise declared.
In the United States, where a surety for a debt has been
regarded as subrogated by operation of law, and as thus en-
titled to the benefit of securities provided for the creditor'- the
surety has never been regarded as acquiring the legal rights of
the creditor, but rather as entitled to equitable relief; and there
is a plain distinction between a surety who has obtained a
cession of actions from the creditor, and such a . surety who has
merely a claim in equity to relief against the debtor for securi-
ties remaining in his hands. A surety to whom a cession of
actions has l)een made by the creditor, has a right to stand in
the shoes of the creditor, and to exercise his absolute rights; but
subrogation by operation of law, or on an imaginary assignment,
would give him only a claim to relief in equity.
On the subject of contribution between sureties, Mr. Justice
Story says: 2 " The ground of relief does not stand upon any
notion of mutual contract, express or implied, between the
sureties to indemnify each other in proportion (as has some-
times been argued); but it arises from principles of equity,
independent of contract. If the doctrine were otherwise, a
surety would be utterly without relief; because he has not,
either in equity or at law, any title to compel .the obligee to
assign over the bond to him upon his making payment, or
otherwise discharging the obligation."
" In the Roman law," he proceeds, "analogous principles ex-
isted, although, from the different arrangements of that system,
they were developed under very different modifications. By
that law, sureties were liable, indeed, for the whole debt due to
the creditor; but this liability was subject to three modifications.
In the first place, the creditor was generally bound to proceed,

1 Code Civil, Art. 4250.

2 1 Story's Equity Jurisprudence, ~ 493.

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 SUBROGATION IN FAVOR OF A SURETY• 53
•
by process of discussion (as it is now called), in the first in·
stance, against the principal debtor, to obtain satisfaction out ·
of his effects, before he could resort to the surety. In the next
place, a suit against one surety, although each surety was
bound for the whole after the discussion of the principal debtor,
yet the surety, in such a suit, had a right to have the debt
apportioned among. all the solvent sureties, on the same obli-
gation, so that he should be compellable to pay his own share
only; and this was called the benefit of division. ~ut if a
surety should pay the whole debt, without insisting upon the
benefit of division, then he had no right of recourse over
against co-sureties, unless (which is the third case) he procured
himself to be substituted to the original debt (which he might
insist on) by a cession thereof from the creditor; in which case,
he might insist upon a payment of a proper proportion from
each of his co-sureties."
The rule which formerly prevailed in Courts of Equity, under
the jurisprudence of the common law, is supposed by Mr.
Justice Story .to have been the same, and to have been founded
upon the same principle ; and several cases are cited by him.
When there is a principal and surety, said Lord Hardwicke,
and the surety pays off the debt, he is entitled to have an
assignment of the security, in order to enable him to obtain sat-
isfaction for what he has paid over and above his own share.I
The liability of bail for the principal was regarded as in the
nature of security for the principal debt, to which the sureties
were entitled on payment. As in a case 2 where the principal
in a bond gave bail, and judgment was had against the bail.
The sureties, who had been sued and forced to pay the money,
brought their bill to have the judgment against the bail assigned
to them, in order to be reimbursed what they had paid. It was
held by the Lord Chancellor, that the bail stands in the place of
the principal, and cannot be released on other terms . than on
payment of principal, interest, and costs, and the sureties in the
original bond are not to be contributory; and he therefore decreed
the judgment against the bail to be assigned to the plaintiffs,

l Ex parte Ctjsp, l Atk. R. 135.

2 Parsons v. Briddock, 2 Vernon, R. 608.
5•

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54 SUBSTITUTED LIABILITIES,
•
in order to reimburse them what they had paid, with interest
and costs. In this case, though technically the effect of pay·
ment of the bond debt by the sureties might be to discharge the
bond for the' debt, it could have no such effoct upon the bail
bond. The bail, when sued upon the bond after assignment,
could not, in defence, avail themselves of payment by the sure-
ties. The sureties in the original bond were not to be contribu·
tory, because the undertaking of the bail was for the benefit of
the suretie::;, as well as for that of the creditor. Though in a
certain sense the bail was surety, he was of a different class
from the sureties for the debtor.
In a case 1 where a surety for the husband, who had granted
an annuity, and who had assigned the dividends of certain
stock standing in the name of trustees for the wife, as security,
had paid some instalments, Sir William Grant held, that the
surety, with regard to the payment he had actually made of the
annuity, was entitled to stand in the place of the creditor, and
to' be reimbursed out of the dividends, and had also an equity
to have the fund applied in his exoneration ; that fund being
provided by the principal debtor ; and made subject to the
payment of the annuity. "I conceive," said the Master of the
Rolls, '' that, as the creditor is entitled to the benefit of all
the securities the principal debtor has given to his surety, the
surety has full as good an equity t~ the benefit of all the secu-
rities the principal gives to the creditor. The equity of the
surety, as against the principal debtor or his representatives,
and as against creditors who had acquired any lien upon the
property after payment by the surety, was unquestionable; and
it would seem that, as the security had been provided for a
continuing liability, that is, for the annuity as "long as it was
payable, it would not, by the payment of certain instalments,
return to the control of the debtor so as to enable him to assign
the security or charge it with a new liability."
In the case decided by Lord Eldon,2 which is supposed to
have changed the law on this subject, two persons executed a
bond, the one as principal, the other as surety, and no other
assurance was given at the time. As no security was given,

1 Wright v. Morley, 11 Vesey, R. 12.

ll Copis v. Middleton, I Turner & Russ. 224.

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 SUBROGATION IN FAVOR OF A SURETY. 5l5

no question of subrogation to securities was presented. The

only question in this case was, in effect, as to the nature of the
remedy which the law gives the surety who has been forced
to pay a bond ·debt. By payment, the bond debt was extin-
guished and gone, and the action which the law gave the
surety was certainly not a privileged action, as on a spe-
cialty, but an action of asimmpsit, as on a simple contract
debt. 1

l In most of these United States where the question has arisen, it has not been
held thnt the surety, on payment of a bond debt, is reduced to the rank of 11 simple
contract creditor of the principnl ; but it has generally been held thnt he is subrognted
as of right to the claim, or one of the same chnrncter as that of the creditor. The
question has arisen in cases where, on payment ofter the death of the principal, the
indemnity of the surety required that he should occupy the position of 11 ~pecialty
creditor. It has been held in the State of Virginin, that where the surety hns made
payment after the principnl's death, he will be regarded as holding the pince of the
bond creditor, and entitled to all the advantages which snch a claimant hllS OYer
simple contract creditors. Such is the doctrine in equity (11 Leigh, R. 9i) ; though
at lnw, a surety paying off a bond debt, becomes only a creditor by simple contract.
The right of subrogation in equity, it was held, existed in favor of sureties when a
judgment was recovered against a principal and his sureties, and no eligit or other
execution had been sued out within the year, and that they had a right to be subro-
gated in equity to the benefit of the lien of the creditor's judgment upon the lauds of
the principal, in preference to a foreign attachment, sued out by another creditor of
the principal, after the judgment. "The whole train of authorities," said Tuc:-ker, P.,
"ou this subject, is founded upon the principle of the superior equity of the sure-
ties, to be paid out of that fund to which their creditor might have resorted for their
relief. The surety in a bond, for the payment of which the principal hllB bound
particullll' property, has a preference over all other persons to have the debt charged
upon that fund. If the principal dies, and after his death the surety pays off the bond,
he has a right to demand the payment of the bond out of the assets, before the simple
contract creditors, and thus to be placed in the shoes of the obligee ; because, at the
instant of the principal's death, the obligee had a right to demand payment out of
the assets, in preference to any simple contract creditor." Watts v. Kinney, 3 Leigh,
R . 272. But if he acquired only a right to the action of assumpsit by bis implied
contract with the principal, he occupied no higher ground tbnn any other simple con·
tract creditor. If he had only a claim in equity to become a preferred creditor, it is
difficult to discern any equitable principle which would justify the court in creating
inequality between simple contract creditors. This ca.se was decided before that of
Copis v. Middleton.
In a subsequent case (Powell v. White, 11 Leigh, R . 309), the same judge (Tucker)
refers to the case of Jones v. DaYids, 4 Russ. 277, where it is decided that a surety who
paid the bond after the death of the testator, who was bound by it, was only a simple con-
tract creditor of the testator's estate. This doctrine he controverts, though he says the
court does not pince the surety in the shoes of the bond creditor, when he has paid off
the bond in his principal's lifetime, but still considers him merely a simple contract

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. .
In a subsequent case,1 Cawthorne as principal, and Dowbig·
gin as surety, gave tO Bourne their joint and several promis·
sory notes for .£1,130 lent to Cawthorne. Dowbiggin paid
several sums as interest on the promissory note, and afterwards
Bourne brought separate actions against Cawthorne and Dow·
biggin on the note, and recovered judgment in both actions,
and, having issued execution against Dowbiggin, the surety, the
debt and cost::1 were paid by him. The administratrix of Dow·
biggin afterwards filed a bill against Cawthorne and Bourne,
for the purpose of obtaining an assignment of the judgment
obtained by Bourne against Cawthorne, the principal debtor.
To this bill, Cawthorne, the principal debtor, demurred for
want of equity, chiefly on the ground that the judgment was
satisfied at law, and that no effectual assignment could be
made of it.
The Lord Chief Baron (Alexander) said that be apprehended
it to be the settled and general rule of courts of equity, that
when a surety pays the debt of the principal debtor, he has a
clear right, by the course of proceedings in equity, to the bene·
fit of all instruments and securities given by the principal
debtor for payment of that debt. His Lordship distinguished
the case from that of Copis v. Middleton, in which, principal
and surety having executed a bond, without any mortgage or
other assurance, and without any counter-bond being executed

creditor. "But aft.er the principal's death, there are righta which the creditor has, and
to which the surety has a right of subrogation. These are the right to go against the
heir, and the right of priority in the administration of the asseta." The doctrine of
Lord Eldon, in Copis v. Middleton, proceeds, he says, upon the ground that the debt
is extinguished at law, and therefore cannot be made available for any purpose, and
that equity has no power to revive it, and to sustain the surety in an action upon it for
bis benefit, by enjoining the principal from unrighteously barring the just recovery of
the surety by a plea of payment, when that payment was made to the creditor by the
surety himself. But the court were of opinion that a Court of Equity had the power
to revive a debt which was extinguished at law in favor of the surety, and therefore
reaffirmed the decision in Watta v. Kinney, as ·above stated.
The doctrine of the court in the above cases was recognized by the Supreme Court
of the United States as presenting the settled law on the subject in the State of
Virginia. Lidderdale v. Robinson, 12 Wheaton, R. 594. See also, Schultz v. Car·
ter, 1 Speers, Eq. R. 534. The claim of a surety to be substituted to a privileged
creditor on payment of the debt against the principal, is less obvious, on grounds
of natural equity, than his right to be substituted to the creditor's lien upon secu·
cities which have been specially set apart for the satisfaction of the debt.
1 Dowbiggin v. Bourne, 1 Younge, 111.

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to the surety, it was held, that the surety, having paid off the
bond, xvas only a creditor, by simple contract, of the principal
debtor. He said, that "if this were a case of a joint judgment
by a principal and surety, he should probably be of opinion
that the judgment having been satisfied, there is an end of it.
But that where, as in the present case, there are two judg-
ments, and where it may, and perhaps will, come before the
court of law, on a question of pleading in audita querela, he
was of opinion that he could not properly enter into considera-
tion of the subject on demurrer."
The case 1 afterwards came on for hearing upon the answers
and evidence. Alderson, Baron, said, the whole effect of assign-
ing the judgment to the plaintiff would he to give her that
which would be wholly useless, except for the purpose of recov-
ering the costs of the action against Cawthorne, and to which,
as administratrix of Dowbiggin, she could not possibly have
any right. The case,' he proceeds, is not distinguishable from
that before Lord Eldon (Copis v. Middleton),2 in which he says,
that if a bond is given by principal and surety, and at the same
time a mortgage is made for securing the debt, the surety pay-
ing the bond has a right to stlilnd in the place of the mortgagee ;
but that, if there is nothing but the bond, the surety, after dis-
charging it, cannot set it up against the principal debtor.
In a subsequent case,3 decided by Lord Brougham, the right
of the surety, having been secured by a distinct obligation, was
held not to be extinguished by payment. In 1812, a joint and
several bond was executed by Richard Shaw and Henry Shaw,
as principals, to one Wilkinson. In 1813, Wilkinson died, and
soon afterwards Richard Shaw died. In 1815, Henry Shaw
and John Whaley joined, the former as principal, the latter as
surety, in a bond for the sum of .£2,420 due on the bond of
1812. Whaley died in 1818, having made some payments on
account of the bond of 1816 to the executors of Wilkinson.
After Whaley's decease, other payments were made by his rep-
resentatives out of his estate, in further discharge of what was

1 Dowbiggin v. Bourne, 2 Yonnge & C. 462.

2 1 Turner & Russ. 224.
1 Hodgson v. Shaw, 3 Mylne & Keene, 183.

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due in respect of that bond, and in consideration of those pay-

ments, which amounted in the whole to the sum of .£2,937, the
executors of Wilkinson, by an indenture dated 24th June, 1830,
reciting that they had received from Whaley and his estate the
sum of .£2,937, in part discharge of moneys due on the bond of
1816, and that no payment had ever been made by Richard
Shaw and Henry Shaw, on account of the bond of 1812, and
that the same was still subsisting and an available security at
law for the full amount of principal and interest thereby
secured ; and further reciting, that the estate of Whaley was
entitled to the benefit of the bond of 1812, for recovering the
sum of .£2,937 so paid by the estate of Whaley, as such secu-
rity for Richard Shaw and Henry Shaw as aforesaid, they the
executors did thereby assign and transfer to John Harrison, in
trust, the said bond of 1812, and all the sums of money thereby
secured : In the first place, to pay them the amount still ·due to
Wilkinson's estate, and, upon the further trust, to pay the per-
sonal representatives of Whaley the surety, in the bond of
1816, for their own m1e and benefit.
The Master of the Rolls, Sir John Leach, having decided
that the personal representatives of Whaley were not entitled
to rank as specialty creditors against the estate of Richard
Shaw, the case came by appeal before the Lord Chancellor.
Lord Brougham, after stating the circumstances out of which
the question arose, said, " The principles upon which Copis v.
Middleton rest are sound and unquestionable ; and it is only
upon a narrow and superficial view of the subject, that the
decision has ever been ch~rged with refinement or subtlety.
The ground of the determination was clear ; it was founded. in·
the known rules of law, and determined in strict conformity
with the doctrines of this court."
" When a person pays off a bond," said his Lordship, " in
which he is either co·obligor or bound subsidarie, he has at law
an action against the principal for money paid to his use, and
he can have nothing more. The joint obligation towards the
creditor is held to give the principal notice of the payment, and
also .to prove his consent or authority to the making that pay-
ment."-" But beyond this claim, which is on simple contract
merely, there exists none against the principal by the surety

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 SUBROGATION IN FAVOR OF A SURETY. 59

who pays his debt; nor, when the matter is clearly viewed,
ought there to exist any other. The obligation, by specialty,
is incurred not towards the surety, even in the event pf his pay-
ing, but only towards the obligee; and there is no natural rea-
son why, because I bind myself under seal to pay another per-
son's debt, the creditor requiring security of that high nature, I
should therefore have as high a · security against the principal
debtor. If I had chosen to demand it, I might have taken a
similar obligation when I became so bound ; and if I omitted
to do so, I can only be considered as possessing the rights
which arise from having paid money for him which I had
voluntarily, and without comdderation, undertaken to pay."
Lord Brougham stated the true doctrine to be, that the surety
paying off the debt shall stand in the place of the creditor, and
have all the rights which he has, for the purpose of obtaining
his reimbursement. His Lordship adopted the exposition of
the doctrine of the court, in the argument of Sir Samuel Ro-
milly, in Craythorne v. Swinburne,1 which had been sanctioned
by Lord Eldon, in giving judgment in that case, by his full
approval, as follows : " A surety will be entitled to every rem-
edy which ·the creditor has against the principal debtor, to
enforce every security and all means of payment; to stand in
the place of the creditor, not only through the medium of con-
tract, but even by means of securities entered into without the
knowledge of the surety; having a right to have those securi-
ties transferred to him, though there was no stipulation for
that ; and to avail himself of all those securities against the
debtor." "Thus the surety," said his Lordship, "is entitled to
every remedy which the creditor has. But can the creditor be
said to have any specialty, or any remedy on any specialty,
after the bond is gone by payment 1" But he distinguishes the
case from that of Copis v. Middleton, ·supra, by the circum-
stance, that in that case the debt had been paid by the surety,
bound in the same obligation with the principal, whereas in this
case it had been paid by a third party, who had, by a separate
instrument, made himself liable for the same debt. It could
not be contended that the specialty was gone ; that the bond

l 14 Vesey, 160.

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of 1812 was paid off and at a·n end; and that in the year 1830
there remained nothing to be assigned. The bond of 1812 sub-
sisted to the effect of beirig assignable; the bond of 18i6 was
paid hy John \Vhaley, and of this it was true, that it was paid
and gone, so that it could not be assigned to him or his repre-
sentatives, to give him a claim as a specialty creditor against
the estate of Henry Shaw, who was the principal in that bond.
As against that estate, Whaley could only claim on the iwieb-
itatus assumpsit at law, and in equity he could only stand as a
simple contract creditor, for there was no longer any thing
capable of as::1ignment. The security was gone by being paid
off, but the security of 1812, in which the transaction had its
origin, remained. The payment, which of necessity must be
attributed to the bond in which John Whaley was an obligor,
could not extinguish that to which he was a stranger. There
was something, therefore, to assign, and an assignment was in
fact executed.
By paying ·off his own bond, says Lord Brougham, and
obtaining an assignment of the bond of 1812, John Whaley
and his representatives had become purchasers of the latte.r
specialty, and stood in the relation of assignees of the debt.
" It is true," he adds, " that if the surety had paid off the bond
in which he was bound, he could have no assignment; but that
is because, in paying at once his own debt and the principal's,
he had extinguished the obligation."
Notwithstanding the stress which his lordship lays npon the
circumstance, that the party claiming subrogation was not
bound in the debt assigned, it is equally true, in point of prin-
ciple, that, by a proper assignment, a co-surety may acquire a
debt in which he is personally bound, and when the indebted-
ness on his part is in effect extingubhed by the assignment.
In that case, as in the case decided by Lord Brougham, the
instrument might be kept alive, if such was the intention of the
parties. A co-surety who is bound with the principal in an
obligation, may either pay ~e amount due and extinguish the
debt, or he may, by agreement with the obligee, take an assign-
ment of the bond and keep it alive, notwithstanding the effect
of the transaction is to extinguish his liability. Every thing
depends upon. the intention of the parties as appearing from

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the transaction. In this very case, the right of the surety to

avail himself of the original bond depended entirely upon the
assignment.. If he had paid the second bond without making
any provision for keeping alive the first bond, he would not
have been entitled to claim that, by operation of law, the
specialty should be preserved for his advantage. But for the
special agreement, the payment of the amount due would have
extinguished ·both obligations; and if there had been an agree-
ment for the transfer to the surety of the bond in which he was
himself liable, and an assignment had followed, that, according
to the rule of the civil law, would have been equally available.
The transaction would have been equivalent to a purchase of
the debt and securities for a sufficient consideration. Lord
Brougham insists that payment of the bond of 1816, which was
given for the greater part of the same debt, which was secured
by the bond of 1812, would not have been payment of that
bond. But in a court of equity it would hav~ constituted pay-
ment, and, so far as it regarded the rights of the surety, as
resulting from payment, to take precedence of a subsequent
incumbrance, it is not true that he would be entitled to claim
that, by operation of law, the first bond should be kept alive in
his favor. The legal right of the surety to the first bond
depended upon an express agreement to that effect, and an
actual assignment of the parties.
The several bonds being extinguished by payment, if there
was no mortgage of land or other security which would not
return to the debtor by the effect of payment, a court of equity
could give no relief to the surety on either bond, simply for
the reason, that, "1ithout an assignment of the bond, another
remedy was provided, namely, the action of indebitatus as-
sumpsit.
It is observable, that, in the case of Copis v. Middleton,,
decided by Lord Eldon, as well as in that of Hodgson v. Shaw,.
by Lord Brougham, the question of subrogation to securities,
either by operation of law or by asllignment of the creditor, did
not arise, though discussed by the court. It is clearly shown
in these cases that the remedy which the law provides for a
surety on a bond or specialty, is an action on a simple contract
debt, a remedy of a less favored class. From the nature of the
6

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case, a debt which was extinguiohed by payment, could not be

kept alive for the benefit of a surety, but the policy of the law
was to furnish the surety with an action which placed him only
on a footing of equality with other creditors.
In commenting upon the case. of Hodgson v. Shaw as com-
pared with that of Copis v. Middleton, Mr. Justice Story sup-
poses that the principles of the Roman law on this su4ject have
been departed from, though he says that Sir William Grant
was influenced by those principles in the case of Butcher v.
Churchill.1
Mr. Justice Story says,2 the reasoning in those cases pro·
ceeds upon the ground that, by the payment by the surety, the
original debt is extinguished. Now that, he says, is precisely
what the Roman law denied,3 and that it treated the transac-
tion between the surety and the creditor, according to the pre-
sumed intention of the parties, to be not so much a payment
as a sale of the debt, and he proceeds to say, that it is not
wonderful that courts of equity, with this enlarged doctrine in
their view, which is in entire conformity to the intention of the
parties as well as to the demands of justice, should have
struggled to adopt it into the equity jurisprudence of England.
'!'he opposing doctrine is founded more on technical rules than
· on any solid reasoning founded in general equity. " In truth,"
he says," courti:.I of equity, in many cases, do adopt it and act
upon it; as in cases where they give the right of substitution
to particular parties, when there are two funds, out of one of
which a creditor has insisted upon receiving satisfaction, to the
disappointment of the parties who have no claim upon the
other fund. Whether it might not have been wise for courts

1 14 Vesey, 568.
2 I Story's Equity Jurisprudence, ~ 499 c, note I.
a Notwithstanding what is said by Mr. Justice Story, it would seem that the Roman
law, in requiring a cession of actions by the creditor to the surety on payment by him, ·
in order to give effect to subrogation as upon a fictitious sale, though legal snhroga-
tion took effect in favor of a subsequent creditor who redeemed a prior incumbrance,
proceeded upon the ground that payment by the surety, without an express cession of
actions, extinguished the debt. The discrimination made in these cases showed that,
without an express stipulation to the contrary, the security was lost. That the effect
of payment by the surety was to extinguish the debt, is expressly stated in 11 passage
of the Digest, 43. 3. 76. cited below, p. 65.

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SUBROGATION IN FAVOR OF A SURETY. 63
of equity to have followed out the Roman law to its full extent,
instead of adopting a modified rule, which stops, or may stop
short of some of the purposes of reciprocal justice, he considers
it now too late to inquire."
It is believed, however, that the discrepancy between the
principles of the Roman law and the rules which have been
establishe.d on this subject in courts of equity, is not so great
as has been stated. In one respect, there is a technical dif-
ference. Under the Roman law, the surety, who is also bound
for the debt together with the principal, is permitted to give pay-
ment of the debt the form of a sale, and afterwards to become
a creditor on the transfer, and to sustain an action, in the name
of the original creditor, against the debtor for the whole debt, or
against other sureties for the respective portions for which they
were liable.
If, when a surety pays the debt for which he was bound,
together with the principal debtor, he cannot, under the law of
England, be subrogated to the action of the creditor by express
stipulation, the technical difficulty which prevents one co-debtor
from acquiring a right of action, may be avoided in the manner
suggested by Lord Eldon in the case of Copis v. Middleton.
His lordship mentions, as a reason why the surety on payment
became only a simple contract creditor, that "the bond was not
assigned to any body in consideration of a sum of money paid,
which was one way we used to·manage these things." Subro-
gation, to be effectual in favor of the surety, must be expressly
stipulated for, and it seems that the cession of actions must be
to a third person, otherwise, on payment, the personal property
might be sold or subjeoted to a new incumbrance.
There is not to be found a single passage in the Roman law
which shows that the surety, on payment, was subrogated to the
rights of the creditor by operatio~ of law. Dumoulin, however,
has maintained, against the opinion of all former jurists, that a
debtor in solido, a surety, and generally all those who pay what
they owe, with or for others, are thereby subrogated of right to
the actions of the creditor, and without requiring subrogation.
His reason is, that they ought always to be presumed to have
only paid, subject to this subrogation which they had a right
to demand, nobody being presumed to neglect and renounce

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• his rights. The only passage cited by Dumoulin in support of

this view, is from the Digest, 1. 1, § 13, de Tutelis et Rationibus;
but, as is justly observed by Pothier, who denies the doctrine
of Dumoulin on the ground that subrogation is a privilege
which may be renounced, this passage is to be understood as
applicable to the actio utilis negotiorum gestorum. 1
The doctrine of Dumoulin 2 has not generally prevailed,
because there can .be no subrogation as of right unless it is
expressly provided for by law. The doctrine of Dumoulin,
however, was regarded as so conformable to the principles of
justice that it was provided in the Civil Code of France,8 that
subrogation should take effect as of right in favor of him who,
being bound with others or for others for the payment of the
debt, had an interest in its discharge, thus giving a surety an
absolute lien upon the security, unless the intention is otherwise
expressly declared by the parties at the time of payment. The
rule of the Roman law which required that, on payment by a
surety, subrogation to be effectual must be express, was founded
upon the co~sideration that the natural effect of simple pay-
ment was to extinguish the debt on which the law provided
for the surety by new actions, mandati and negotiorum gestorum.
In order to give the character of a sale to the surety, who was
bound for a debt when payment was made by him, an express
stipulation was necessary. Under a system of law which
substitutes the surety on payment as of right, the presumption
in regard to the extinction of the debt is reversed, so that it
becomes necessary to show by positive proof, when such is the
fact, that it was the intention of the surety, on payment, to
relinquish the right of subrogation; that the debt was extin-
guished; and that he relied upon the personal credit of the
surety; and it would seem that this could be done only with
the like formalities as are necessary to discharge the right of
the creditor himself. The construction given to the transaction
by the Roman law was more consistent and natural.
If payment was made simply, and the debt thereby extin-

I Pothier on Obligations, No. 280.

2 7 Toullier, No. 147.
s Code Civil, 1251.

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 SUBROGATIC?N IN FAVOR OF A SURETY. 65
guished, there could be no subsequent subrogation, for rights of •
action which had ceased could not be transferred to a third
person.
Modestinus was of opinion,1 that if it was not till after pay-
ment of what remained due from a debtor as guardian, that the
rights of action had, after an interval of time, been ceded with-
out any agreement having been made to that effect, nothing
was accomplished by such cession, as no action remained to
be ceded. But if this had been done before payment, or if on
payment there had been an agreement for a future transfer, the
cession would have been valid; because the amount received
in this case would have been regarded rather as the consider-
ation of the rights of action than as payment, by which the
debt would have been extinguished.2 - Modestinus respondit:
si post solutum, sine ullo pacto, omne quod ex causa tutel<e debea-
tur, actiones post aliquod intervallum ces:ue sint, nihil ea cessione
actum, cum nulla actio superfuerit. Quod si ante solutionem hoc
factum est, vel quum convenisset ut mandarentur actiones, tune
solutio fact a esset, mandatum subsecutum est: salvas esse man-
datas actiones : quum novissimo quoque casu · pretium magis
mandatarum actionum solutum, quam actio qu<e fuit, perempta
videatur.
In this statement of the Roman law we find the same dis-
tinction as is made by the English courts of equity, the only
difference being, that the rules of equity require that, in point
of form, the cession of actions should be made to a third per-
son, and not to the surety who is chargeable himself as a

1 Digest, 46. 3. 76.

2 Pothier, in e. note to this passage in his edition .of the pe.ndects (Lib. 46, Tit. 1,
§ 49), says, that when simple payment is me.de, the obiige.tlon and rights of action
which resulted from it a.re extingnished, and cannot therefore be ceded ; and to this
opinion, that a. cession would not be effectual if me.di) a~ an interval after payment,
another law of the Pandects (D. 30, 57) is not opposed, namely, that e. person to
whom e. fa.rm, subject to e. mortgage, is left in trust, may require of the creditors to
whom the fa.rm is mortgaged, that the rights of action against the debtor may be
ceded to him : which, although it was not done e.t the time, that is, e.t the time when the
agreement was me.de with the creditors, will still be decreed to him by the Prretor of
the Province, because in that case there was no question respecting payment which
should extinguish the debt, but only respecting the delivery of a farm, made by the
party in whose favor the trust exfsted, to creditors prosecuting their mortgage debts.
6•

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• debtor. The whole question is made to rest upon the inten-

tion of the parties to make payment or to make a transfer; and
some act is necessary to show that a transaction, importing in
itself simply payment, is intended by the parties to constitute
a sale.
It appears, from the above-cited passage of the Roman law,1
that if, when payment is made in good faith by another who
has a right to make it, from his own funds, subrogation will
take place, though the transfer has not actually been made, if
such person, in making payment, has stipulated expressly that
subrogation should afterwards be made to him. An agreement
ut mandaremwr actiones manifests the intention of the parties,
that a transfer of the rights of action should follow the pay-
ment. Whatever may have been the operation of such an
unexecuted stipulation for a cession of actions, under the
Roman law, when, after payment, the debtor bad sold the prop-
erty charged, which by the mere effect of payment returned to
his control, it would seem that a purchaser without notice
must, under the rules of the common law, prevail against the
surety who has inerely stipulated for future subrogation.
The doctrine which has prevailed in modern times in those
countries whose jurisprudence is founded upon that of the
Roman law, agrees with the principles of that law, in regard to
the necessity of an express stipulation, as a general rule, to
give the new creditor, who has become such by payment of
the debt for which he was bound, the benefit of subrogation.
Unless such an express agreement has been made to that effect,
the third party, who has paid the debt, when the law has not
subrogated him, the debt being extinguished, and with it all
the securities which were attached to it, has no other action
against the debtor than the action mandati or the action nego-
~i.cwum gestorwm, equivalent to the action of assumpsit at the
common law, though, if payment had been made with subroga-
tion, the third person would have, besides these remedies against
the debtor, whose liberation be has effected, the same rights of
action which the creditor would have had himself, and, as a
consequence, all the securities belouging to the debt.

1 Digest, 46. 3. 76. •

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 SUBROGATION IN FAVOR OF A SURETY. 67
When, says Duranton,1 the operation of payment by a third '
person is to give the latter the advantage of existing securities
by subrogation, it is not to be regarded as an ordinary pay-
m~nt, having simply the effect of extinguishing the debt, but as
a payment with restricted effects, according to the intention
with which it has been made, and merely in discharge of the
claims of the creditor, from whence it follows, he says, that,
besides the action negotiorum gestorum, the third party has
really, by the effect of subrogation, the same action which the
creditor had himself, with all the accessories attached to it, but
without any claim to recover from the debtor more than an
agent would be entitled to receive for services rendered, since
his intention in receiving subrogation was to act in behalf of
the debtor.
Subrogation by the civil law must be express, that is to say,
the intention of the party must clearly appear by the agree-
ment or discharge. Therefore, says Duranton, it is sufficient,
if it is said in the writing which acknowledges payment, or by
which the debt is discharged, that the creditor puts in his place
such a one, who has made payment of the debt; or, if it is
said that he substitutes him to his rights, or that he transfers
or relinquishes the debt to the person thus making payment.
But there is no subrogation, if it is merely said that the cred-
itor has received from another the payment of his debt against
such a one, with the right of recourse to him against the debtor,
or to cause himself to be reimbursed, or other similar phrases.
Subrogation must be express, and these terms do not express it.
But subrogation agreed to in general terms, as to the rights of
the creditor, to his right of action, his claim, &c., comprehend
thereby all privileges, mortgages, and other securities and
advantage!:!, attached to the debt.2 And it is indifferent, in
reference to subrogation, when that is agreed upon, whether it
is said, in the discharge or acknowledgment of payment, that
the third party pays in his own name or in that of the debtor,
or whether any positive declaration is made on the subject.
The creditor, it is tme, cannot be compelled to subrogate a

1 12 Duranton, No. 117 note.

2 Ibid. No. 119.

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third party who has no liability in reference to the debt, be-

cause this would be in effect to constrain him to sell his claim
without a motive, and no man can be compelled to cede his
property, except for the public advantage.1 But if he is willing
to agree to subrogation, he may do so, since he may, at his
election, dispose of his rights. The creditor, in consenting to
the subrogation of a third party, does in some sort sell to him
his debt; and, in effect, subrogation has, between the third per-
son subrogated and the debtor, the general results of a sale or
a transfer of the debt. In one, as in the other case, the debtor
remains always debtor and of the same debt; the privileges,
mortgages, and securities, if there are any, remain, in the two
cases, and in both, there is only a change of the creditor, but
nevertheless without novation, for it is always the same debt.
The Roman law, on the subject of the receipt of payment
by a creditor from another person than the principal debtor
himself, treats the transaction as a sale.2
When he who has a claim against the principal debtor and
sureties, on the payment of the money by o~e of the sureties,
transfers the rights of action, it may be said, indeed, that no
such rights exist, as he has received his due, and by such receipt
liberated all. But the doctrine of the civil law is, that payment
of the debt is not in such a case actually made; there may not
only be a transfer of the rights of action by the creditor, but, in a
proper case, the law requires the cession of actions to be made.
The rule which in the English Court of Chancery has re-
stricted subrogation to cases where on payment an assignment
is made to a third person, proceeds upon the principle, that a
right of action exists which may be ceded, but there must be
an actual cession made, and to one who is not also bound for
the debt.
There is some diversity of opinion in the American courts,
but in general the doctrine has prevailed, that on payment the
surety becomes subrogated by operation of law.
The rule is recognized in Massachusetts, that a co-debtor
who makes payment of a debt in which others are bound with

1 Duranton, No. 128.

2 Digest, 46. 1. 36.

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him for payment, thereby extinguishes the security, leaving the

party who makes payment to his remedy at law by an inde-
pendent action.
A joint debtor in an execution, who was liable for the whole
debt, paid to the creditor's attorney the amount of the judg-
i:nent, and, instead of having a discharge entered upon the exe-
cution, took a separate receipt, purporting that he had received
the sum paid, in full satisfaction of the execution. The court
held that the judgment was satisfied by this payment, received
from a person who was party to it and obliged to pay it; that
the execution was functus officio. The payment of the whole
execution by one of the judgment debtors, gave him a right of
action against his fellow-debtor, but did not keep alive the exe·
cution for his benefit.I
When one of two judgment debtors paid the sum due, but
instead of the execution being returned satisfied, it was with
the assent of the creditors returned unsatisfied, and an alias
was t:i-ken out, upon which the other judgment debtor was
committed, with a view to compel him to contribute his share
,of the debt for the relief of that debto,r who had made the pay·
ment; the court held that payment by one joint debtor dis-
charges both ; that an obligation was thereby raised against
the other to pay his proportion, but that the suit would be an
equitable one, and that the defendant would be let in to show
that he had paid, or that he ought not to pay, according to the
equitable circumstances in the case.2
When one of two sureties pledged a note to a creditor, as
security for the debt due to him, and on payment the creditor
· delivered to a surety the note thus pledged as collateral security;
it was held that the creditor had no right to transfer the note,
his lien having been discharged. The court were of opinion
that, as the sureties were jointly liable to the creditor, the pay-
ment by one discharged both.3
In the State of North Carolina, the doctrine of subrogation
by operation of law, on payment of a debt by a person who is

1 Hammatt v. Wyman, 9 Mass. R. 138.

2 Brackett v. Winslow, 17 Mass. R. 153.
s Bowditch v. Green, 3 Metcalf, R. 360.

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70 SUBSTITUTED LIABILITIES.

bound as a co-debtor or co-surety with another, is not admit-

ted, and effect is given to technical rules which restrict one who
is a co-debtor from occupying the position of a creditor. It
has been held by the Supreme Court of the State,• that at law,
a payment by any one of two or more jointly, or jointly and
severally bound for the same debt, is payment by all; and anY.
of the parties may take advantage of it, and plead it to an ac-
tion brought by a satisfied creditor, or in his name by the sure-
ties. " It is true," said Ruffin, J., " that if a payment be not
intended, but a purchase, there is a difference. But that can
only be by a stranger, or by using the name of a stranger, to
whom an assignment can be made when there is but a single
security, and that one upon which all the parties are jointly
liable. This is upon the score of intention, and because the
plea of payment by a stranger is bad upon demurrer. If the
assignment of a joint security be taken by the surety himself,
there is an extinguishment, notwithstanding the "intention;
because an assignment to one, of his own debt, is an absurdity.
When the securities are separate, as several bonds or a several
judgment upon a joint and several note, probably an assign-
ment may be made to the surety himself, since he is no party
to the judgment. But if that can be, clearly nothing but a
plain intention, evinced by an assignment to keep up the judg-
ment, can have that effect. Upon the face of the transaction,
it is a payment." This was an action at law for the benefit of
the surety, in the name of the creditor who had received and
intended a satisfaction. But a surety may make payment
without extinguishing the debt, if an assignment thereof is
made to a third person.
A surety who was bound with the principal for the payment
of a debt, deposited the money with a third person, with express ·
directions not to pay it in discharge and satisfaction of the
judgment, but to take an assignment thereof, for the purpose
of keeping it in force against the defendant. The agent, in
pursuance of his instructions, took an assignment to himself in
trust for the pl~ntiff. The court were of opinion that " no sat-
isfaction of the judgment acknowledged of record; no release

l Sherwood "· Collier, 3 Devere11x, R. 380.

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 SUBROGATION IN FAVOR OF A SURETY. 71

of it ; nor any receipt of money, as and for a payment of it;

no payment; was intended, but the contrary." The question,
then, said the court, is, whether, against the intention of the
parties, the payment shall be deemed to be in satisfactfon,
because the money belonged to one of the defendants in that
suit. This, they said, "was a common mode whereby a surety
indemnifies himself. He may relinquish it by making payment
in satisfaction; but he may make the payment not in satis-
faction, and take an assignment. If the surety is not a party
to that suit, he may take the assignment to himself. This is
generally done by an indorser who is not sued jointly with the
maker. By taking an assignment, the judgment is preser¥ed, and
satisfaction may be obtained from the principal by immediate
process. If the judgment be joint against the surety and the
principal, the former does not thereby lose his right to an
assignment. He cannot take the assignment to himself, how-
ever, for that would be an extinction of the judgment. But he
may take it to another person." 1
The surety in a bond on which judgment had been recov-
ered, paid the debt and took an assignment of the judgment.
By the payment of the amount due on the judgment, the surety
did not intend to satisfy it, but meant to avail himsdf of the
lien which might exist under it upon the property of the prin-
cipal. The prayer of the bill was, that effect might be given
to the judgment, so as to give him priority to other creditors in
satisfaction of ·his debt. But the court held, tliat though the
plaintiff did not intend to extinguish the judgment, by paying
the amount due thereon, yet in a court. of law and in a court
of equity, it would have that effect. If the plaintiff, said the
court, had taken an assignment of the judgment against his
principal and himself to a stranger, and did not intend satis-
faction, then the judgment would not have been extinguished,
and if an execution had been issued on the same, it would have
held its rank in the scale of priorities. But the plaintiff,
the surety, had paid the debt to the judgment creditor, and the
general rule was, that if one of the joint obligors, being a surety,
pays off the debt, he is at law merely a simple contract cred-

1 Hodges v. Armstrong, 3 Devereux, R. 253.

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72 SUBSTITUTED LIABILITIES.

itor of the principal ; and if the principal dies, equity will not
convert him into a specialty creditor.I
The doctrine of subrogation is stated by the Supreme Court
of Alabama:<: as follows: " The rule is, that a surety paying a
debt, shall stand in the place of the creditor, and is entitled to
the benefit of all securities which the creditor had for the pay-
ment of his debt, from the principal debtor ; in a word, he is
subrogated to all the rights of the creditor. The surety, how-
ever, cannot avail himself of the instrument on which he is a
surety, by its payment. By payment it is discharged, it ceases
to exist, and the payment will not, even in equity, be considered
an assignment; the surety merely becomes the creditor of
his principal to the amount paid for him. The security," the
court proceeds, " which the complainant seeks the benefit of, or
through which, it is supposed, his equity can be traced or
derived by this doctrine of substitution, is the. covenant entered
into by the complainant and others to indemnify a party against
his acceptance. But this became functus officio, the moment
the debt was paid, either by the corporation or by any party
to it, and cannot be again resuscitated." This doctrine proceeds
upon the authority of Copis v. Middleton, but differs from the
mass of American authorities by which subrogation is admitted
in equity, in favor of a surety who has at law extinguished the
principal debt by payment.
As a general rule, the payment of a debt by any person who
is liable for ifs -payment, is a discharge of it. It is, therefore,
functus officio, and cannot be enforced against any person who
is liable for its payment, in the same degree as the party
paying. The rule is applicable to co-debtors, and, under
ordinary circumstances, to the case of the co-debtor who is
surety merely, as well as where all the debtors are principals.
But it was held by the Supreme Court of New Hampshire,3

1 Briley v. Sugg, l Dev. & Bat. Eq. R. 366.

2 Foster v. Trustees of the Athenreum, 3 Alabama, R. 300; Morrison v. Marvin,
6 Alabama, R. 797.
a Edgerly v. Emerson, 3 Foster, 555. Buckingham Bank v. Claggett, 9 Foster, 292.
If a joint and several promissory note is taken up by one of the sureties with the inten-
tion to purchase it, and not with the intention to pay and discharge it, such payment
will not be a discharge of the debt, and an action may be maintained upon it for the
benefit of the real plaintiff in the name of the payee. Whether, in such·a case, the note
was paid by the surety or purchased by him, was held to he a question for the jury.

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 SUBROGATION IN FAVOR OF A SURETY. 73
that the rale, that a surety may take an assignment of any
security for the payment of the debt which is held by the
creditor, unavoidably implies an exception to the general rale,
that payment of a debt by a co-debtor, discharges the other
co-debtors, whether the debt rests in contract merely, or is
merged in a judgment. It is of the nature of all securities for
a debt, said the court, to be mere incidents of that debt, and
entirely dependent upon it. Payment of the debt discharges
all the securities for it. The mortgage either of real 1 or per·
sonal property is discharged by payment of the mortgage debt;
and in the same way pledges and liens are at once at an end,
when the debt is paid. If, then, it were held that by the pay·
ment of a debt by a surety the debt was entirely discharged,
all the collateral securities of the creditor must also be dis-
charged. He would no longer have any thing to assign, and
the equitable principle, that the surety is entitled to the ben·
efit of all the securities of the creditor, would be entirely de·
feated. But it has never, such was the opinion of the court,
been so held. The debt is regarded as still unpaid and unsatis·
fied, so far, and perhaps no further, than is necessary to the
preservation of the sureties' interest in such securities. The
court were, therefore, of opinion that the rale, that payment by
a co-debtor discharges the debt, must be subject to this excep·
tion; namely, if the co-debtor making the payment, is a surety,
the debt will be holden undischarged, so far as is necessary
to preserve and give effect against the principal to the collateral
securities assigned by the creditor to the surety, either volun-
tarily or by a decree of a court of equity. Assuming, then,
this principle, the inquiry was, whether an attachment under
the law of the State, was such a collateral security for the
payment of the debt as to come within the same reason and
rule as the mortgage pledge, and other more common collateral
securities.
The court were of opinion, that the lien of an attachment
is to be preserved for the benefit of the surety who pays the

l In certain jurisdictions, it may be held that a mortgage is discharged by payment;

the legal estate, however, would be regarded as in the mortgagee for all equitable
purposes, and subject to the control of a court of equity.
7

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debt and takes an assignment of the creditors' securities, in the

same manner and to the like extent, whether the payment
was before or after judgment; that, though payment for most
purposes discharges the debt, it does not so discharge it as to
destroy the security of the surety, but a judgment may be
entered up, to be levied on the property attached, or, if judg-
ment be rendered, a levy on that property may be effectually
made, though the execution would be enjoined or set aside if
used for any other purpose.
The court seems to have distinguished between the case
where there has been a cession of actions by the creditor, or
subrogation by a decree of the court, and the case where, at the
time of payment, there has been no such cession or demand for
subrogation by the surety. It does not, from this decision,
appear that there could have been any subrogation by opera-
tio~ of law in favor of the surety, such as would preserve bis lien
on the securities for his indemnity. On the contrary, it would
seem that payment alone, by the surety, operated at once to
extinguish the debt. There seems to be no difficulty, in a case
where subrogation had been stipulated for, or where it had
·been made by a decree of court, in viewing, even after judg-
ment and E'.Xecution, a payment of the amount due as a pur-
chase, and the transfer of the execution as a sale of the debt,
according to the rule of the civil law, precisely as if the assign-
ment had taken place, on payment of the debt, before judg-
ment, to a third party. The principal was bound in equity to
the surety, and liable to an action at law, even if there had been
no agreement for an assignment. And it is very clear that the
surety was entitled to the benefit of the lien in equity, even if
the action was extinguished at law. Even if there had been
no assignment to the surety by the creditor, or decree of the
court in his favor, on refusal by the creditor, it might well have
been claimed that, as against the principal, the surety might
insist that the security should, in equity, be available for his
benefit.
Though, in the more recent cases decided in the State of
New York, the doctrine that the surety who has paid the debt
for which he was bound with the principal debtor, is subro-
gated by operation of law, has been generally acted upon; in

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 SUBROGATION IN FAVOR OF A SURETY. 75
many of the early cases, the. right . of subrogation is placed on
the ground of assignment, or an actual cession of actions at the
time of payment: as in a case 1 where the ~ndorsers of a note
as sureties for the principal who was sued by the payee, and
against whom judgment was recovered, were also afterwards
sued as such indorsers, and judgment recovered against them.
The sureties paid the amount of the debt, and took an assign·
ment of the judgment against the principal. The court were
of opinion that the judgment assigned by the creditor to the
sureties, must be considered unsatisfied and a legal Zien on the
property. " Had the judgment," said Thompson, J., " against
the indorsers been paid and discharged without at the same
time taking an assignment of the judgment against the prin·
cipal, it might have operated as a satisfaction of that judg·
ment; but the surety stood before the court as a purchaser and;
assignee o( the judgment; the money paid by him, being the
consideration for the assignment. The judgment against the
principal and the surety were separate and distinct, and there
was no reason why the surety might not purchase a judgment
against the principal as well as any other person. But the
court were of opinion that, though the assignment was made
to one of the sureties alone, as the payment was made by both,
the assignee ought not to be allowed more than a moiety of
the judgment.
" If the creditor to a bond," said Mr. Chancellor Kent,2
" exacts his whole demand of one of the sureties, that surety is
entitled to be substituted in his place and to a cession of his
rights and securities, as if he was a purchaser, either against the
principal debtor or the co-sureties." " This doctrine of substi-
tution," he says, "which is familiar to the civil law and the law
of the countries in which that system essentially prevails, is
equally well known to the English Chancery."
:rhe surety is entitled to pay the debt when it becomes due,
or he may call upon the creditor, says Mr. Chancellor Kent,a
by the aid of a court of chancery, " to enforce his demand

1 Clason t'. Morris, 10 Johns. R. 524.

~ Cheeseborough v. Millard, I Johns. Ch. R. 409.
• King v. Baldwin, 2 Johns. Ch. R. 554.

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76 SUBSTITUTED LIABILITIES,

against the principal debtor. On paying the debt, he is entitled

to the creditor's place by substitution."
"According to t~e doctrine of the civil law," says the same
learned judge 1 in another case, " the surety may, per excep-
tionem cedendarum actionum, bar the creditor of so much of his
demand as the surety might have received, by an assignment
of his lien and the right of action against the principal debtor ;
provided the creditor had, by his own unnecessary or improper
act, deprived the surety of that resource. The surety, by his
very character and relation of surety, has an interest that the
mortgage taken from the principal debtor, should be dealt with
in good faith, and held in trust, as well for the secondary interest
of the surety as for the more direct and immediate benefit of
the creditor; and the latter must do no wilful act, either to
poison it in the first instance, or to destroy or cancel it after-
wards. This doctrine," he says, "does not belong merely to
the civil law system. It is equally a settled principle in the
English Chancery, that a surety will be entitled to every remedy
which the creditor has against the principal debtor, to enforce
every security, and to stand in the place of the creditor and
have his securities transferred to him, and to avail himself of
those securities against the debtor. This right of the surety
stands not upon contract, but upon the same principles of
natural justice upon which one surety is entitled to contribu-
tion from another."
And in a more recent case,2 where the second indorsei of a
bill paid the plaintiffs and took up the bill, the court held that
this did not extinguish the bill as against the drawers or against
a prior indorser. The second indorser might have sued either
of those parties on the bill ; but as a judgment had already
been recovered against the principal on the bill, the indorser
took an assignment of the judgment, with authority to use the
names of the plaintiffs for his own benefit. There was nothing,
the court held, objectionable in this transaction. It was a sale,
rather than a satisfaction of the judgment.
A second mortgagee became the purchaser of the equity of
redemption of that mortgage. Afterwards. he became the as-

1 Hayes v. Ward, 4 Johns. Ch. R. 123.

2 Harger v. McCullough, 2 Denio, R. 119.

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signee of the first mortgage, and then commenced an action at

law in the name of the first mortgagee against a surety, who,
after the bond and mortgage were given, without the desire or
request of the mortgagor, but at the solicitation of the creditor,
had executed upon the bond a guaranty of the payment thereof,
and recovered judgment against him for the amount remaining
due upon the bond and mortgage. The surety (who was the
complainant in the bill) thereupon tendered the amount recov-
ered against him, anq demanded an assignment to himself of the
bond and mdrtgage. This was refused ; and the complainant
then paid absolutely the sum, and demanded an assignment.
This was also refused. The complainant claimed, by the bill, to
be subrogated to the rights of action of the holders of the bond
and mortgage, for the purpose of reimbursing to himself the
sum collected of him by suit on the guaranty; and the prayer of
the bill was, that such right of subrogation might be declared,
and that the premises might be sold, etc. The court were of
opinion, that the legal presumption was, that when the second
mortgagee purchased the premises at the sale under his mort-
gage, he only bid to the value of the equity of redemption, and
that he must be adjudged to hold them subsequently as a fund
for the satisfaction of the prior incumbrance ; that, therefore,
the surety had a right to deman<i of the creditor, whose debt he
had paid, the securities he held against the principal debtor, and
to stand in his shoes, and that this right did not depend at all
upon any request or contract on the part of the debtor with the
surety, but grew rather out of the relations existing between
the surety and the creditor. " If the creditor," said the court,
" has insisted upon the surety's discharging his obligations and
liabilities as such, and fastened the character upon him by a
judgment, he cannot, after receiving from him his debt, tum
round and deny him the rights of a surety." It is clear that the
party in this case was entitled to a decree for subrogation. By
demanding subrogation before payment, and subsequently pro-
ceeding, on refusal, by a bill in equity, he undoubtedly preserved
his lien upon the land as a legal incumbrancer.1
"It is perfectly well settled," said Mr. Chancellor Walworth;

l Matthews ti• .Aiken, 1 Comst.ock, R. 595.

7•

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·"as a general principle of equity, that where one person or his

property stands in the situation of a surety for the payment of
a debt, for which payment another person or his property is
primarily liable, the one who is secondarily liable, upon
payment of the debt to the original creditor, is entitled to be
subrogated to all the rights and remedies of the creditor as
they can exist against the principal debtor or his property." 1 He
is entitled to demand subrogation on payment, and, on refusal,
may, as in the above ease, seek the aid o{ a court of equity.
The doctrine which has generally prevailed in•these United
States in opposition to that which has been adopted, as pre-
senting the true rule, in the English Court of Chancery, is, that
a surety who is bound for a debt, may satisfy the debt of his
principal, and that, without thereby extinguishing the debt, he,
though a co-debtor, may be subrogated to the rights of action
of the creditor himself by intendment of law. But, after all,
there is no real subrogation. At law, the debt is extinguished.
A party cannot at law be at the same time debtor and creditor
on the same debt. Subrogation which takes effect by operation
of law, is merely equitable. The ground on which courts have
proceeded in giving· the surety a recourse to securities of the
creditor, has expressly been stated as a revival of the debt by
the equitable jurisdiction. It ·is only in equity that payment
of the debt, however made, is not, on oyer of a bond, etc., a
discharge. If the action of a court of equity in favor of the
surety was merely upon the person of the creditor, requiring
him to make a cession of actions, its jurisdiction would end
there ; but this is not the case. A cession of actions is de-
signed to prevent a discharge of the debt by giving the transac-
tion the form of a sale ; but when a court is applied to for the
revival of a debt for the sake of giving relief to a surety who is
in fact a co-debtor, the jurisdiction of equity is exerted
throughout, and relief is given on the principles of the court
with reference to countervailing equities and legal rights. Thus
subrogation by intendment of law, is reduced to an equitable
proceeding by bill in favor of the surety, nearly analogous to
the direct remedial action which is given to him at law. There-
fore, on principle, relief can only be given against the parties

1 Wilkes v. Harper, 2 Barh. Ch. R. 338.

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to the original debt and their privies, and not against subse-
quent incumbrancers or purchasers.
Very different is the condition of a party who has made
himself an assignee of the creditor. When the creditor has
assigned his debt to a stranger for a pecuniary consideration,
his assignee may sustain an action at law in the name of the
creditor, and avail himself fully of such right of action. So
when· the surety pays the debt, and at the same time takes an
assignment in the name of a third person (and at the civil law
the cession to the surety himself would be sufficiently effectual),
the legal right of the creditor is preserved. The right of action
will prevail against all, and the right of the surety will be main-
tained on· legal grounds, and as standing in the place of the
creditor.
Actual subrogation which takes effect by a cession of actions
or an assignment, gives the surety every right which the
creditor may have, and those rights must prevail against subse-
quent purchasers without notice. Whereas, subrogation by
operation of law or on an imaginary assignment, is little more
than an extension of the equitable jurisdiction to give a direct
recourse to securities which, though discharged from legal
incumbrances, have not been subjected to new liens or charges. -
Without a cession of a9tions by .the creditor, or a decree of the
court constituting in effect such a cession, there can be, indeed,
no true subrogation to legal rights of the creditor in favor of a
surety. It is a mete perversion of terms to speak of the equi-
table remedies of the surety against the principal as a substi-
tution to the creditor, and such as may be attended with
injurious consequences. No inconvenience, perhaps, may follow
from giving a court of equity some degree of concurrent
jurisdiction with courts of law in favor of the surety, when it is
called into exercise against the debtor, and with a view to more
effectual relief against property in the hands of the debtor, or of
his assignee with notice; but this is only a quasi subrogation,
and is not to be taken as a true substitution of the surety to
the legal or absolute rights of the creditor.
When, as in the State of Pennsylvania, on payment by a
party who would be entitled to a cession of actions, the debt
is held to be extinguished, but the court, in the exercise of

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equitable jurisdiction, revives the extinguished debt on the

ground of an imaginary assignment in favor of him who was
entitled to legal subrogation, it must be conceded that there
was an interval of time during which the debtor might have
charged the security with new incumbrances, which must
prevail both at law and in equity, whereas, if the surety had
been actually subrogated to the creditor by a cession of actions;
he might have exercised all his legal rights to as full an extent
as the creditor himself.
The doctrine of subrogation by operation of law, has been
fully recognized in the Court of Chancery 0£ the State of New
, York. In a case 1 decided by Mr. Chancellor W alworlh, he
stated the right of a surety, who is compelled to pay a debt for
which he was bound, to be subrogated, as taking effect in all
cases, by operation of law. " It is only in cases," he said,
"where the party advancing money to pay the debts of a third
party, stands in the situation of a surety, or is compelled to pay
it to protect his own rights, that a court of equity substitutes
him in the place of the creditor, as a matter of course, without
any agreement to that effect. In other cases," he says, "the
demand of a creditor which is paid with the money of a third
person, and without any agreement that the security shall be
assigned, or kept on foot, for the benefit of such third person, is
absolutely extinguished."
The doctrine of an imaginary assignment of securities, which
is held to take place in Pennsylvania, in favor of a surety, on_
payment of the debt by him, is equivalent to the doctrine of
subrogation by operation of law in all cases.
" Actual payment," says Gibson, C. J.,2 "discharges a judg-
. ment at Jaw, but not in equity, if justice requires the parties in
interest to be restrained from alleging it, or insisting on the~
legal rights. Kuhn v. North, 10 Serg. & Rawle, 39," he says,
"was the case of the voluntary payment of the debt of another
which, so far from creating an interest in the judgment to affect
subsequent creditors, would not have sustained an action of
indebitatus assumpsit against the debtor. There is an obvious .

1 Sanford v. McLean, 3 Paige, R. 122.

ll Fleming v. Beaver, 2 Rawle, R. 132.

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 SUBROGATION IN l'AVOR OF A SURETY. 81
difference between one who has voluntarily paid the debt of
another, and one who has paid on compulsion, from having
become surety at the instance of the debtor, which gives an
equity, not only against the latter, but against every one else
deriving title from him subsequently to the contract of surety-
ship." The learned judge is to be understood as expressing
the opinion, that a surety who has been compelled to pay the
debt, acquires a right to subrogation by operation of law, which
will prevail against subsequent incumbrancers and purchasers.
In the case where the doctrine of subrogation was stated, as
above, it was decided that the surety of a judgment debtor was
entitled to be subrogated to the right of a creditor, as against a
second judgment creditor. This was a case where, in equity,
a subsequent creditor, whose fund was taken away· by a
prior creditor, would have had a right to be substituted to the
prior creditor, under the doctrine of the marshalling of assets,
but for the claim of the surety to subrogation on payment; and
it was claimed that it was a case where there was but equity
against equity, and that therefore the parties should be left to
their legal advantages. The case was decided on the ground,
that the surety had a prior equity. "The right of the surety,"
said the court, "to be substituted in the first place, is indisput-
able; and the question stands exactly as if the prior creditor
himself were pressing his claim on this fund, without having
pursued the surety to insolvency." " The surety contracted on
the credit of this very fund ; and being prior in time, he is
·prior in right to a creditor who has acquired a claim on it sub-
sequently." " As to the s-t;ipposed inefficiency," said the court,
" of the substitution attempted by the parties, and the alleged
inability of this court to compel the creditor to assign the judg-
ment, it is sufficient to remark, that an actual assignment is
unnecessary. The right of substitution is every thing, and act-
ual substitution nothing. By a fiction to which we are in-
debted for nearly all our equitable jurisdiction, the law has made
the assignment already ; and hence the right of the party enti-
tled, by no means depends on the willingness of the creditor to
transfer the security. Here there is a clear right of substitu-
tion ; and the surety, having paid the debt, succeeds, by opera-
tion of law, to the rights of the creditor."

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One of three sureties who paid the debt to their common

creditor, it was held, may be subrogated to the rights of the
creditor, in the judgme~t paid by him, to enable him to recover
contribution from the other two. "As a remedy," said Gibson,
C. J., "between surety and principal, or between sureties them-
selves, subrogation to the ownership of the security has advan-
tages which must always incline courts to favor it. As each"
co-surety is separately liable at law for no more than an aliquot
part to one who has paid the whole, an action for contribution
has this disadvantage, that it leaves him who has paid more
than his part exposed to a possibility of loss from the insol-
vency of any one of the contributors, which a,bill in equity does
not." " The necessity," he adds," that we a~e under of admin·
istering equity through the medium of common-law forms,
compels us, in cases like the present, to arrive at justice indi·.
rectly, by the instrumentality of an imaginary assignment of
the security, which enables the surety to apply it, by direction
of the court, in a way to cast the burden on those who ought to
bear it." 1
After citing, in a subsequent case,2 the various decisions
which had been made, in the State of Pennsylvania, on the
subject, the court say," from the foregoing cases it would ap-
pear, that we have adopted the general rule, that a surety, by
paying the debt of his principal, becomes entitled to be subro-
gated to all the rights of the creditor, so as to have the benefit
of all the securities which the creditor had for the payment of•
the debt, without any exception, as well as those which became
extinct, at law at least, by the act of the surety's paying the
debt, as all collateral securities which the creditor held for the
payment of it, which have not been considered as directly ex-
tinguished by the surety's paying the debt." "These decisions
have been made upon a supposed principle of equity, which, for
the purpose of doing justice to the surety who has paid the
debt, interposes to prevent the judgment or security which has
been extinguished at law, from being so considered as be·
tween the surety and the principal, or his subsequent lien cred-
itor."

1 Croft v. Moore, 9 Watts, 451.

' Lathrop & Dale's Appeal, 1 Barr, R. 512.

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In the following case,1 the relief to which the party was

entitled in equity, seems not to have rested upon the artificial
assumption which was made by the court, that, as surety, he
might claim the benefit of subrogation to the rights of a cred-
itor by operation of law, or by a direct cession of actions.
Where one of four heirs of an intestate conveyed the undi-
vided fourth part of a portion of the real estate which descended
to her, to a purchaser, and, the personal estate of the intestate
being found to be insufficient for the payment of his debts, the
administrator sold a part of the land in which an undivided
share had thus been conveyed, and the proceeds thereof were
applied to the payment of the intestate's debts, and thereupon,
as the vendor of such undivided fourth part still owned an
undivided fourth part of the premises which were subsequently
decreed to be sold in a partition suit, the purchaser claimed to
have an equitable lien upon that undivided interest, to remun-
erate himself for his one fourth of the proceeds of the lands
sold for the payment of the debts, Mr. Chancellor Walworth
held, that the defendant Ross, the purchaser, had an equitable
lien upon the undivided interest of the vendor, of which parti-
tion was sought in the case, to the extent of one fourth of
the proceeds of the lands in which he had purchased his share,
and which were sold for the payment of the debts of the intes-
tate. " It is an established principle of equity," he said, " that
sureties, or those· who stand in the situation of sureties for those
.who pay a debt for them, are entitled to stand in the place of
the creditor, or to be subrogated to all his rights as to any fund,
lien, or equity which he may have against any other person or
property on account of the debt. And where the creditor has
two funds to which he may resort for the satisfaction of his
debt, if he resorts to that which in equity is only secondarily
liable, to the injury of one who ha8 a claim upon the secondary
fund only, or resorts to a fund belonging to a third person,
which fund is only secondarily liable foi; the payment of the
debt, the person who is the owner of, or has a claim upon the
fund thus taken, is considered as a surety merely, and is enti·
tled to stand in the place of the creditor or against the primary

1 Eddy v. Traver, 6 Paige, R. 521.

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fund.". It appears, from the statement of the case, that the per-
sonal estate was insufficient for the payment of the debts; there
was, therefore, remaining .no fund to which the party might
resort, as primarily liable on subrogation. The only ground,
therefore, on which the assignee of one of the heirs could claim
subrogation, was for contribution against the other heirs. But
the relief sought in this case was against the vendor and his
portion of the proceeds of the land, and the purchaser would
seem to have had a direct equitable claim against the vendor
and his portion, founded upon the implied warranty. The case
would have been different if relief had been sought against all
the heirs, and for a contribution from the portion of each in
the fund. He might perhaps have .asserted this claim as sub-
stituted to the creditor ; but the creditor had no action against
the vendor. The action of the creditor was gone. Mr. Chan-
cellor Walworth proceeded in this case to say: " In cases
depending upon this equitable principle as between the debtor
and his sureties, it makes no difference, except as against
bona fide purchasers or mortgagees, that the debt has been
actually paid by the sureties or out of their property, so that
the credit.or's lien upon the property of the principal debtor is
extinguished at law." But the acquisition of a legal right is
the very foundation of subrogation. The creditor in this case
had an absolute legal right upon the whole estate, and, by a
proper cession of actions, one of the heirs, on payment of the
whole debt, might have acquired such legal right not only as
against the co-heirs and their representatives, but also .against
bona fide purchasers and incumbrancers.
There is a class of cases where, on a transfer of the security
to a purchaser, he has covenanted with the debtor to assume
and pay the debt for which he continues liable, but without
actually charging himself to the creditor, where the debtor, who
was the vendor of the security, and who has been compelled to
pay the debt, has been subrogated as a surety to the rights of
the creditor as against the security, on the ground that the
purchaser is the real debtor, and that the vendor is, in effect,
only secondarily liable as a surety. It is true that, as between
himself and the debtor, the purchaser who has agreed to assume
the debt, is actually bound to him for its payment. But there

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is no privity between him and the original creditor, who has no

right of action against the purchaser on his promise. The
vendor, in such a case, who has failed to take security from his
purchaser on his promise to pay tfie debt, cannot set up, as
against subsequent purchasers, the security given by himsel~ to
the creditor. On payment to the creditor by the principal
debtor, the creditor has no right of action. If the vendor has
failed to take security from the purchaser for payment, he
cannot, after payment of the original debt, avail himself of a
security for that which he has sold without reserving a lien.
In certain cases decided by Mr. Chancellor W alworth,1 an
undue application of the principle of subrogation seems to
have been made by an artificial view of the relation of a debtor,
as surety, to purchasers who have assumed liability for the debt,
which has been paid by the debtor. As where the complainant
Marsh, who wy the owner of certain land, mortgaged the same
for $3,000 to the defendant Pike; and afterwards, the complain-
ant conveyed the mortgaged premises to the defendant McLean,
subject to the mortgage, the amount of which was deducted
from the purchase-money, and which mortgage McLean
agreed with the complainant to pay off and discharge. Subse-
quently, McLean sold the premises to the defendant Towle,
subject to the mortgage as a part of the consideration of the
conveyance, and which mortgage Towle agreed to pay off and
satisfy. After the mortgage became due, the complainant
called upon Towle to pay off and satisfy the bond and mort-
gage, so as to relieve him from his responsibility upon his bond,
but he neglected to do so. " The effect of these several con-
veyances and agreements," said Mr. Chancellor \Valworth, " is,
in equity, to place the complainant in the situation of a surety
for the payment of the bond and mortgage, and to make the
defendants, Towle and McLean, the principal debtors as to
him ; the first being primarily, and the latter secondarily liable
to him for the payment of the debt. The complainant, there-
fore, if he had paid the bond and mortgage to Pike, would have
been entitled to be substituted in Pike's place, not only as to
the remedy against the land, but also as to the equitable cJaim

1 Marsh v. Pike, 10 Paige, R . 595.

8

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against McLean and Towle, who had agreed to pay off the
mortgage." Undoubtedly the purchasers of the mortgaged
premises were bound to pay the debt, and the decree of the
court against them on belt.:tlf of the complainant was just; but
if the complainant had paid the debt, he could not have been
su6rogated to the action of the creditor against himself. When
a debt is pa.id by the debtor, the debt is necessarily extin·
guished. The claim of the debtor was not, as was supposed by
the Chancellor, that of a surety, but the purchaser was liable to
him in the first instance. On payment of the mortgage by the
debtor, he had a right to resort to the purchaser for reimburse-
ment, but not as subrogated to the creditor's action. That was
gone. The purchaser was not in privity with the creditor, and
could not be treated as the original debtor. His liability de-
pended upon his agreement with the mortgagor, of whom he
purchased, and it depended upon that agreement whether the
•
purchase-money was a lien upon the land, or whether it would
pass to another purchaser discharged of the lien. The com-
plainant did not, as was held in this case, occupy the anomalous
position of debtor and surety, though he bad a recourse to a
third party who had, subsequently to the mortgage, promised
to pay the debt.
When the equity of redemption is sold by the mortgagors,
subject to the payment of the debt, with or without an express
agreement on the part of the purchaser to pay the debt, and the
mortgagors are afterwards compelled to pay the amount of
their bonds " to any other persons as the owners of such bonds
and mortg8:ges, the mortgagors would in equity have, as against
the purchaser of the equity of redemption, a right to be indem-
nified for such payments, but not as subrogated to the rights
of the creditor against the mortgagors themselves. The right
to indemnity is merely equitable." 1
When mortgaged land was sold subject to the incumbrance,
"the land itself," said Mr. Chancellor \Valworth,2 "became
thereby, in equity, the primary fund for the payment of that

1 Halsey v. Reid, 9 Paige, R. 446; Vanderkemp v. Shelton, 11 Paige, R. 34.

2 Cox v. Wheeler, 7 Paige, R. 258.

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incumbrance ; and if the premises were sold to a stranger, the
mortgagor, upon being compelled to pay the incumbrance by
suit upon the bond, would be entitled to be substituted in the
place of the holder of the incumbrance as to the remedy against
the land as the primary fund." If the party is entitled to be
thus subrogated, he has, besides his equitable claim, a legal
right to the estate, and may follow it into the hands of a pur-
chaser without notice from the vendee of the equity of redemp-
tion. Actual subrogation always imports the transfer of all
the legal rights of the creditor, but, though the purchaser of the
equity of redemption holds subject to the claim of the -creditor,
it is certain that the lien would not exist against a purchaser
from him, under a conveyance of the legal estate, made bona
· fide, for a valuable consideration without notice, if he has paid
the purchase-money. A right to a mortgage by subrogation
is absolutal
In another case,2 where land had been purchased, subject to
the mortgage therein particularly mentioned, Mr. Chancellor
Walworth, though he held that the mortgagor, who had been
compelled to pay the debt, would have a right to be subrogated
to the creditor against the land in the hands of a grantee of
the purchaser, rested the right to resort to the land as the
primary fund for payment, upon the circumstance that the
equitable charge appeared upon the deed, so that the grantee
had constructive notice. The right to equitable relief did not,
therefore, ~epend upon subrogation.
Where a debtor,3 against whom executions had been issued,
which were liens upon his personal estate, made an assignment ·
of his property to a trustee for the payment of his debt8, and
directed the avails of certain cloth in the process of manu-
facture, to be first applied to the payment of notes given to
M. and S. for the purchase-money of the wool used in the
manufacture of such cloth, after paying the manufacturer's
lien thereon; and the sheriff subsequently sold the cloth upon
the prior executions, subject to the manufacturer's lien, and the

1 2 Story, Equity Jurisprudence, ~ 1228.

2 Jumel v. Jumel, 7 Paige, R. 594.
• State v. Van Vechten, 11 Paige, R. 21.

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same was bid in by the assignee, and subsequently sold for a

much larger sum ; it was held, that the other part of the
assigned property, as between M. and 8. and the general
creditors, was the primary' fund for the payment of the execu-
tions, which were liens upon th~ assigned property, and that
M. and 8. were entitled to be subrogated to the rights of the
execution creditors, against the fund assigned for the payment
of the debt generally, so far as the cloth assigned for the pay-
ment of the debt of M. and 8. specifically, had been applied in
payment of such execution creditors. The parties to which the
property was specifically assigned, had undoubtedly an equity
to stand in the place of the execution creditors; their right,
however, was a simple equity, and not to be subrogated to the
rights of the creditors. Subrogation would have revived the
lien of the execution creditor, which was discharged by pay-
ment ; but M. and 8., in this case, would have no clat.ll against
a bona fide purchaser.
The distinction between the doctrine of subrogation and that
of marshalling of assets, is often disregarded by the courts ;
but it is of the utmost importance to keep in view the prin-
ciple that true subrogation is absolute for every existing legal
right; whereas, the right of a party who might have required
assets to be marshalled in his favor, is, after payment of the
debt, a mere equity, and can never revive a lien which has been
extinguished against a purchaser without notice.
The jurisdiction of the court was legitimately exercised in
another case,1 where a mortgagor sold his equity of redemption,
and the amount of the mortgage debt was deducted from the
price, and the land was charged in equity in favor of the debtor,
but the right was not placed on the ground of subrogation.
There was no necessity for subrogation against the purchaser
of the equity of redemption ; a grantee from him without
notice would have been protected.
In another case,2 two persons became joint purchasers of
land mortgaged, and assumed the payment of the mortgage
debt, as a part of the purchase-money. One of the purchaser's

1 Ferris v. Crawford, 2 Denio, 595.

2 Comell.v. Prescott, 2 Barbour, Supreme Conrt R. 16.

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 SUBROGATION IN P'AVOR OP A SURETY, 89
paid his share of the debt due upon the mortgage, which was a
· charge on the premises ; although the whole of the premises
remained liable to be sold for the payment of the mortgage debt.
Mr. Justice Harris, sitting in equity, held, that when one of the
purchasers had paid his share of the debt, he had the right,
without paying his co-purchaser's share of such debt, to apply
to a court of equity to compel such co-purchaser to pay off his
portion of the mortgage debt, so that the lien of the mortgage
upon the whole,,roperty may be discharged, and the purchaser
who has paid his share be protected against a bond of indem-
nity to the mortgagor.
The equity in this case was clear; but it is by no means
tme, as was supposed by the court, that the mortgage debtor
would, on payment of the debt, be entitled to be subrogated to
the action of the creditor. The right of the party to be relieved
against. his co-purchasers, was effectual against the land whilst
it remained his property, but would not have followed the land
into the hands of a bona fide purchaser.
C. and S. bought land, and gave a bond and mortgage for
the price. Afterwards, C. conveyed his moiety to S., who
agreed to pay the debt. The creditor attempted to collect the
whole debt of C. by a suit on the bond. Mr. Chancellor
Walworth 1 was of opinion that, by the agreeme9lt between the
debtors, subsequent to the execution of the bond and mortgage,
C. became a surety for S., who was thereby made primarily
liable, and that, as such, he had a right to be subrogated to the
mortgage creditor. But C. was a joint debtor for the original
debt. The subsequent agreement was a thing distinct. It
could not make him a surety on the mortgage debt.
The agreement by one of the purchasers and co-debtors to
indemnify the other, may have given him an equitable right to
claim that the land should be applied to the payment of the
debt, but did not constitute a legal charge upon the land
against subsequent purchasers.
In a case 2 decided by the Supreme Court of Pennsy~vania,

1 Cherry v. Monroe, 2 Barbour, Ch. R. 618.

2 Gearhart v. Jordan, I Jones, Penn. R. 825.
s•

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the application of the doctrine of subrogation was very question-

able. The case, so far as it regards this subject, was as follows : •
Baldy obtained a judgment against Clark for a debt. The judg-
ment became a lien upon a house and land, which Clark after-
wards agreed to sell to Gearhart, the plaintiff in error, and Brown.
Brown's moiety of the house and land was sold and applied to
the payment of Baldy's judgment against Clark, the vendor.
A judgment creditor of Brown afterward presented a petition
to the court, praying the court to decree thlt the petitioner
might be subrogated to the rights of Baldy, the creditor of
Clark, under his judgment against the moiety of Gearhart,
to the extent of one half of the said judgment. The court
decided, that the right of subrogation existed on the ground that,
in equity, each of the purchasers was bound to contribute _only
in proportion towards the discharge of the common burden,
and beyond thh1, was to be considered as a surety of the
remaining party. But, though the joint purchasers might, as
between themselves, be regarded as occupying a position analo-
gous to that of sureties, they had no connection in that char-
acter with the creditor, whose debt had been satisfied out of
the moiety of one of them. They had no privity as sureties
with him. Clark was the debtor, and they were not sureties
for Clark. A~ between the purchasers, an equity existed for
contribution. This right to contribution, however, could not
connect itself with the lien of the creditor so as to give a pri-
ority, by virtue of that lien, against intermediate incumbrancers.
If Gearhart in this case had mortgaged his moiety of the land
purchased to his own creditor, the judgment creditors of Brown
could acquire no superiority of right over Gearhart's creditors
by resorting to Baldy's judgment.
A surety who was bound to Baldy for the debt of Clark,
would be entitled to subrogation and to the legal advantage
which that would give against subsequent incumbrancers, but
no such advantagf'. could be extended to the sureties (as they
impliedly were), on the purchase, for each other. Suppose an
express agreement had existed between the joint purchasers
and Clark, the vendor, that they should be held as sureties for
each other, and that each had given security to Clark, they
would be entitled to be subrogated to the rights of the vendor,

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but they would thereby acquire no claim in equity to the prior
lien of Baldy. Clark's judgment creditors would take pre-
cedence of the creditors of Brown in reference to any security
in the hands of Baldy.
Atwood 1 was indebted to the State of Connecticut for a sum
of money secured by mortgage on land. Atwood conveyed
the land mortgaged to Cunningham, who, for a valuable con-
sideration, agreed, by an instrument in writing, to pay two
thousand dollars of the mortgage debt, and indemnify and save
harmless Atwood therefrom ; and it was also agreed between
Atwood and Cunningham, that this mortgage, to the amount of
two thousand dollars, should be chargeable upon the land con-
veyed by Atwood to Cunningham ; but Atwood acquired
thereby no actual lien upon the land. The interest of Cun-
ningham in the premises was afterwards transferred to Vincent
by the levy of an execution in his favor against Cunningham. It
was held by the court, that Cunningham, by his agreement with
Atwood, assuming the payment of two thousand dollars, as
between himself and Atwood, became the principal debtor,
and that Atwood, whose bond was still outstanding at the treas-
ury, stood as his surety to the State, and that the principle appli-
cable to this position of the parties was well settled : the surety
was entitled to the benefit of all the securities which were availa-
ble for his advantage. The land mortgaged, in this case, was the
primary fund for the payment of the debt. Vincent, the cred-
itor who acquired the land by the levy of execution, stood in
the place of the debtor, and represented him in reference to the
debt. But though the agreement made between Atwood an,d
Cunningham bound the latter and those who were in privity
with him, Atwood still continued the principal debtor on the
mortgage, and he could not become a surety thereon, so as to
be entitled to be subrogated to it. If Atwood had paid the
debt, and Cunningham thereafter had conveyed the land to a
bona.fide purchaser, Atwood could have set up no claim against
him as subrogated to mortgage. If he acquired no lien on the
land at the time of the conveyance to Cunningham, he would
be without remedy.

1 Atwood"· Vincent, 17 Conn. R. 575.

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R. & M., being owners of land, executed a mortgage thereon

to secure their bond to P. In 1839, they conveyed the land to
Barrington, who, by the deed, assumed the debt; but R. & M.
continued to pay the interest on the mortgage debt until 1844,
when they procured an assignment of the bond and mortgage
to Oakford as their trustee. He obtained judgment, with inter-
est from 1839. A sale was made by the sheriff, and the ques-
tion arose on distributing the proceeds. The court were of
opinion, that when Barrington made the debt his own, the rela-
tion of principal and surety was established as between them
and Barrington, though they continued liable to P. as principal
debtors. '\So viewed," said the court, "the case is the ordinary
one of payment of the debt of a principal by his sureties, which,
under the familiar equity, entitles them to be substituted for
the creditor." But, though, as between the vendors and the
purchaser, the latter became the principal debtor, he was
not a party to the original debt. The vendors, therefore, being
themselves the principal debtors, could not be subrogated
to the rights of the creditor. The case, however, was distin-
guished by the circumstance, that an assignment had been
made by the creditor to a trustee. The mortgage was thus
kept alive, and against the fund in court the equity of the ven-
dors was plain.1
To the cases which have been decided on this subject may be
added a case 2 determined, in supposed accordance with the
principles of the civil law, by the Supreme Court of Louisiana.
Baldwin purchased certain lots of land from Kohn, and gave
him a mortgage to secure the payment of his notes given for
the price. Baldwin afterwards sold the land to Green, who
assumed, in favor of the vendor, the payment of the notes given
by him to Kohn. · Green sold the land to Thompson, the de-
fendant; but Green did not pay and. take up Baldwin's notes
to Kohn, as stipulated in the act of sale by the former, conse-
quently the original promisor was obliged to pay them as they
became due ; and it was held, that, as against the purchaser,
the debtor was subrogated to the mortgage of the creditor, and

1 Morris v. Oaksford, 9 Penn. State, R. 498.

2 Baldwin v. Thompson, 6 Louisiana R. 474.

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SUBROGATION IN FAVOR OF A SURETY. 93
that the debt was not extinguished by the payment made by
the debtor. In this, as in other similar cases, the mortgagor
sold the land without requiring any security, and afterwards
sought to avail himself of the lien of the mortgage, by procuring
himself to be subrogated to the creditor, after payment of the
debt.
It has been seen that, under the Roman law, as well as by
the common law, when a debt is paid by a surety, who is him-
self bound as ~ debtor, an actual cession of actions by the cred-
itor at the time of payment, is necessary to give the benefit of
subrogation to the surety. Where, as under the modern French
code, as well as in some of these United States, the lttw pro-
vides that, by the mere effect of payment by the surety, he shall
be subrogated, as of right, to the creditor, it would seem that,
on principle, as representing the creditor, and substituted in his
place by positive law, he must prevail against subsequent pur-
chasers, even with notice. Such purchasers acquire the prop-
erty which has been given aa security, subject to the rights of
the surety. But where, as in most of these United States,
under the system of the common law, the surety is held to be
subrogated by operation of law, there is no absolute charge in
favor of the surety on the property given by the principal
debtor to the creditor as security.
. The right of the surety is an equitable one. If the creditor
has not made to him a cession of actions, the debtor, on pay-
ment by the surety, may sell the security, if personal, to a sub-
sequent purchaser, who, if without notice, in virtue of his legal
right, will prevail over the surety. The consequence is, that
subrogation by operation of law, in favor of a surety, is little
more than an equitable remedy concurrent with the action· of
assumpsit against the debtor and his privies. But, as in every
case where subrogation by operation of law is properly held to
exist in favor of a party who, being liable as surety, has paid
the debt, he might have acquired, by a cession of actions in due
form, the absolute right of the creditor, and thus have acquired
all the advantages which belonged to the creditor, as legally
entitled to hold the securities against subsequent purchasers. ·
It is, therefore, important to discriminate between cases proper
for subrogation; where the surety may thus acquire the legal

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94 SUBSTITUTED LIABILITIES.

right, and other cases, where he may, indeed, as against the

principal debtor, be entitled to relief, but in which, having only
an equity, he cannot prevail against subsequent purchasers.
Such are cases where a party may be entitled to have securi·
ties marshalled, or where property held as security, has been
sold to a purchaser who has agreed to pay the debt, and on
whose default the principal debtor has been compelled to pay
the debt, and thereupon seeks to be subrogated to the action of
the creditor and his lien upon the security.
In such cases, circumstances may often render a resort to the
equitable jurisdiction necessary, for the relief of those who have
a jrist claim to the interposition of the court, but who cannot
establish a right of substitution to the lien of the original cred-
itor against subsequent purchasers.
The marshalling of assets and securities takes place between
parties who have equal rights, and it is exercised in regulation
of the right of legal resort to securities, so as to provide for the
satisfaction, as far as possible, of each incumbranc~r.
The question, whether one incumbrancer shall be substituted
for another, is very different from that, whether one person shall
be substituted for another as creditor. A surety has an abso·
lute right, by subrogation or otherwise, to stand in the place of
the creditor in regard to the security. Whether one security
shall be substituted for another, under the doctrine of marshal-
ling, depends upon equitable considerations.
It has been held, in equity,1 that if a creditor has the security
of two funds, another creditor who has a lien on one of them
only, may compel the former to resort to the other for payment.
But if A. has a lien on two funds, B. and C., and D. has a lien
only on C.; if D. pays the debt of A., he acquires the lien of the
creditor against C., but he is a stranger to the creditor, except
so far as the debt is a prior incumbrance on C., and therefore
cannot be subrogated generally to the debt of A., so as to ac-
quire a lien on the fund D. He is not in the position of a
surety, and, though he might have been entitled to have the
securities marshalled in his favor, he had no right to demand
subrogation, and must take his place, after payment, subse-

l .Aldrich v. Cooper, 8 Ves. 391.

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 SUBROGATION IN FAVOR OF A SURETY. 95
quent to intervening incumbrancers. He is not 1:mbrogated by
law, generally, and he could not claim a cession of actions.
In another case,1 Lord Eldon said," It.was never said, that
if I have a demand against A. and B., a creditor of B. shall
compel roe to go against A. ; without more ; as if B. himself
could insist, that A. ought to pay in the first instance ; as in
the ordinary case of drawer and acceptor, or principal and
surety; to the intent that all the obligations arising out of
these complicated relations; may be satisfied: but if I have a
demand against both, the creditors of B. have no right to com-
pel me to seek payment from A., if not founded on some equity
giving B. the right, for his own sake, to compel me to seek
payment from A." But if we suppose that A., as principal, and
B., as surety, are bound to me for the payment of a debt, and
that A. mortgages Blackacre to me as security, and B. mort-
gages Whiteacre ; and that B. also mortgages Whiteacre for
his own proper debt to C. ff B. pays the debt for which he is
1mrety, he has a right to be subrogated to the creditor; but C.,
the creditor of B., though he may discharge my debt, which is
a charge upon the land of B., has no claim whatever to be sub-
rogated to me as creditor of A. and B. In regard to my claim
against A., he is a mere stranger, and cannot therefore offer
payment with demand of subrogation ; but as B., on his own
account may, as surety, require A. to pay the debt, he is within
the distinction above stated by Lord Eldon, and C. may require
the securities to be so marshalled, as to throw my debt upon
A.'s land, that he may avail himself of the security provided by
B. for his own proper debt. But before proceedings are insti-
tuted for thus marshalling the securities, A. may sell the security
subject to my debt, and thus defeat the equity of C., to have
the securities marshalled in his favor. 2 So, as the equity of C.
depends upon the right of B. to insist that the principal debtor
should pay, in the first instance, B., by waiving his own right,
on payment of the debt, may defeat the equity of C.; but the
right of the surety B. to be subrogated, cannot, after payment
by him, with a cession of actions, be defeated by a sale of the

1 Ex parte Kendall, 17 Vesey, 513. See Dorr v. Shaw, 4 Johns. Ch. R. 17.
2 Racster v. Barnes, 1 Y. & C. C.R. 401. But see Conrad v. Harrison, 3 Leigh,
532.

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96 SUBSTITUTED LIABILITIES.

security. The right of B. will prevail against subsequent pur-

chasers, with or without notice. The equity of C. to require
the marshalling of securities, is only such as may prevail in the
arrangement of securities which have not been disposed of at
the time of the commencement of proceedings in equity for
that purpose. The very basis of the equity for marshalling is,
that it cannot prejudice concurrent rights, whilst the lien of the
surety may always be rendered absolute; and this marks the
distinction between subrogation and the marshalling of secu-
rities.
If A. is the drawer of a bill of exchange, and B. is the ac-
ceptor, and A. mortgages Blackacre as security for the pay-
ment to the holder, and B. also mortgages Whiteacre to him ;
afterwards A. mortgages Whiteacre for his own debt to C.,
C. may, under the doctrine of marshalling, require the creditor
of both to resort to the securities of B., the acceptor, because A.
may demand, as between himself and B., that he should pay
the bill ; but before proceedings are had for the marshalling of
the securities, B. may execute a second mortgage, which will
prevail against this equity, and if B. is entitled, by way of set-
off or compemiation, to claim that his liability to the drawer
has been extinguished at any time before the proceedings are
commenced, that will render C.'s claim ineffectual.
The right to demand the aid of a court of equity for the
marshalling of securities, does not constitute a lien upon the
land or other property. In that respect, it differs from the right
of a surety to demand subrogation, which is an absolute charge
during the existence of the debt. That the equitable right to
have securities marshalled, is not a charge upon the property
before the commencement of proceedings in equity, is evident
from the consideration that the parties have not constituted a
lien upon the property by express agreement. A debtor, in
mortgaging certain parts of his property for the security of his
debt, whilst leaving certain other portions unincumbered, could
have had no other object than to preserve the right of disposing
of it freely. If a person who is the owner of two parcels of
land, and having mortgaged them both to one creditor, after-
wards suffers a judgment to another creditor, which judgment
constitutes a lien upon both parcels, and then the debtor

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 SUBROGATION IN FAVOR OF A SURETY. 97

mortgages one of the parcels of land to the last-mentioned

creditor, on his agreement to relinquish the lien on the rest of
• his property; the object of this agreement is to give the debtor
a full power to dispose of the land not mortgaged ; and yet, if
the debtor becomes a bankrupt without having sold or incum-
bered the land, an equity will nevertheless exist between the
two mortgage creditors, to have the securities marshalled for
the benefit of that creditor who has a mortgage on one tract
only. There is here no lien in favor of the second mortgagee,
for it has been expressly relinquished; and yet, if the debtor
has not exercised his right to sell or incumber the land which
was left to his free disposal, as bet\'\reen the two mortgagees, the
securities will be marshalled so as to throw the :first mortgagee
upon the land not included in the second mortgage. The
equity of marshalling is not exercised on the footing of a lien
in favor of the second mortgagee, but upon the ground of a just
distribution of existing securities.
The first mortgagee and the mortgagor had the absolute right
of .disposing of the land which was alone mortgaged to the
latter. It would be strange, indeed, if from the relative claims
of the two mortgagees, a restriction on the rights of property
should result which was not created by the agreement of the
parties.
If A. has a right to go upon Blackacre and Whiteacre, and
B. has only a right to go upon Whiteacre, having both the
same debtor, A. may be required to •take payment from
Blackacre, if that is sufficient to satisfy his debt ; but this
equity is lost if the debtor executes a second mortgage of
Blackacre to C. If afterwards B., by a cession of actions from
the prior creditor, is subrogated to his rights, he cannot exclude
C., because B. acquired merely a right which was subject to the
interest of the second mortgagee of the tract which had no
other incumbrance than the first mortgage to A.
In a case already cited,1 the Supreme Court of Pennsyl-
vania applied the· principles of the doctrine of subrogation as
taking effect by operation of law, where the rules which deter-
mine the marshalling of securities were properly applicable.

1 Lathrop & Dale's Appeal, l Barr, R. IH2.

9

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98 SUBSTITUTED LIABILITIES.

The Bank of Pittsburgh in this case had a judgment and lien

against Lewis Peterson, Peter Peterson, and James T. Kincaid,
upon which ·they sued out an execution, took the separate.
estate of Lewis Peterson, and by a sheriff's sale thereof, made
the amount of their judgments. The next judgment and lien, in ·
the order of time, was in favor of the Monongahela Navigation
Company against Lewis and Peter Peterson, which company
claimed to be subrogated to the rights of the Pittsburgh Bank
under their satisfied judgment. The i;iext judgment and lien
in order, was in favor of William Speer against the real estate
of the two Petersons, but not against Kincaid; a subsequent
judgment was in favor of Sylvanus Lathrop, upon which the
real estate of the Petersons and of Kin.caid were taken in
execution and sold also under a prior levy under the judgment
of the Pittsburgh Bank. The question was stated by Kennedy,
J., as follows: " Will a subrogation of the Monongahela Navi-
gation Company and William Speer, respectively, to the rights
of the Pittsburgh Bank, entitle them to receive· the money in
court; that is, the Monongahela Navigation Company to
receive, first, as much of it as will satisfy their judgment, and
next, William Speer .the residue of it, towards satisfying his
judgment pro tanto." The decree of subrogation was opposed,
on the ground that the Pittsburgh Bank, having sued out execu-
tion on their judgment, and made the amount thereof, by a
seizure and sale of the property of one of the defendants in it,
had no right or cla~ under or by virtue of it to which any
person could be subrogated, or from which any possible benefit
could be derived, and that the judgment, having become thus
satisfied, had become extinct, and the same as if it never existed.
The court held that the Monongahela Navigation Company
were entitled to be subrogated to th«f rights of the Pittsburgh
Bank, and to have their judgment satisfied out of the moneys
arising from the sale ; and next, that Willam Speer was, upon
a like principle, entitled to receive the residue of the money
towards payment of his judgment.
Whatever equity the Monongahela Company might have
had, by reason of the circumstance, that the judgment in their
favor was against two only of the three parties who were bound
by the judgment in favor of the Pittsburgh Bank, or for any

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 SUBROGATION IN FAVOR OF A SURETY. 99
other equitable consideration, to have the judgment of the bank
so marshalled as to enable the Monongahela Company to recover
their debt against their judgment debtors, or whatever equitable
claim William Speer might have had, whose judgment was
against all the parties, it is very clear that neither had any
claim by subrogation. All the parties were separate and
independent creditors, and each had a distinct incumbrance.
'!'here was no privity between the first judgment creditor and
the second or third creditor which rendered the relation of the
subsequent creditors analogous in any respect to that of a
surety. The judgment of the first incumbrancer had been paid
and satisfied, but not by the subsequent creditors. They did not
and could not claim to stand in the place by virtue of any real
or imaginary assignment of the debt. If either of the two
subsequent incumbrancers had paid the debt, he might have
claimed to stand in the place of the first judgment creditor, and
to exercise his legal rights, but such was not the fact. It would
appear that the only purpose of the second judgment creditor,
who had a claim against the Petersons only, was to have the
judgment of the bank, which had been satisfied from the estate
of Peterson, revived for the purpose of being marshalled so as
to make it a charge on the estate of Kincaid. If such an equi-
table right could be established, being a mere equity, it could
not, like a right by subrogation which on a cession of actions
is legal, prevail aver subsequent bona.fide purchasers.
It did not appear that any inequitable result was wrought
by giving the second judgment creditor a right by subroga-
gation, rather than a mere equitable right by a decree under
the law of marshalling assets; but suppose that, in this case,
Kincaid, after the judgment in favor of the Pittsburgh Bank,
and satisfaction of the execution thereon from the estate of the
Petersons, ·had sold his private property (which was by agree-
ment bound by partnership debts) to a bona fide purchaser.
The second judgment creditor, if entitled to subrogation, would
have prevailed over such a purchaser, whereas, if a decree had
been made for marshalling the debt of the Pittsburgh Bank so
as to make it a charge on the property of Kincaid, the equity
and legal right of the purchaser must have prevailed. 1

1 In the case of Williams v. Washington, 1Deverenx,Eq.R.137, which was treated

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100 SUBSTITUTED LIABILITIES.

In another case,I decided by the same court, the facts were

as follows: In 1839, Gwin obtained a judgment against David
Miller and Isaac Neff, the latter being a surety for Miller. In
1843, Isaac Neff's land was sold by the sheriff. Jane Smith at
that time held a judgment against Isaac Neff, John and Jacob
Neff, the two latter being sureties for Isaac. They resisted the
claim of Gwin to the proceeds of Isaac Neff's land, on the
ground that he was but a surety, and there was land of Miller
out of which satisfaction could be had. But the court decreed
against them, and accordingly Gwin's judgment was paid; and
in consequence of that, the judgment of Jane Smith was not
reached by the fund. Jane Smith, having been paid the amount
of her judgment, assigned it to John and Jacob Neff; and they
claimed to be subrogated as against Miller to Gwin's judg~
ment, to the extent that that judgment had excluded Jane
Smith from the proceeds of Isaac Neff's land. The claim to
be subrogated was resisted by subsequent judgment creditors
of Isaac Neff, who had attached the debt thus due by Miller to
Neff.
" The peculiarity of the question before us," said the court,
" is, that one creditor, having a joint and several incumbrance
against the estates of two distinct debtors, claimed and received
the amount of that incumbrance from the separate estate of one
of the debtors, and thus defeated the claim of a lien creditor of
the latter. It is then the case of two funds belonging to differ-
ent debtors, and not an instance of a double fund belonging to
a common debtor. Under such circumstances, a court of equity
will not, in general, compel the joint creditor to resort to one of

by the court as arising nnder the doctrine of subrogation, the bill was in behalf of the
surety of a creditor, who, having a lien upon certain property of the debtor, sought to
be substituted to another creditor who had a prior specific lien upon other property,
but recovered satisfaction from that which constituted the only secnrity of the former.
It was conceded by the court, that such relief might have been given, if application
had been made in time. But the court held, that, after the creditor had resorted to the
fund not charged with double liability, it was too late for the exercise of the equitable
principle, as against a third creditor who had obtained an assignment of the special
fund. The surety could have no higher claim than the creditor to whom he sought to
be subrogated, and the right of the creditor was a mere equity, liable to be defeated by
an assignment to a bona.fide purchaser.
1 Neffv. Miller, 8 Barr, R . 347.

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 SUBROGATION IN FAVOR OF A SURETY. 101

his debtors for payment, so as to leave the estate of the other

debtor for the payment of his separate and several debt, for, as
between the two debtors, this might be inequitable ; and the
equity subsisting between them ought not to be sacrificed
merely to promote the interest of the separate creditor. Nor will
chancery, for the same reason, substitute the several to the
place of the joint creditor, who has compelled payment from
the estate of the debtor of the former. But where the joint
debt ought to be paid by one of the debtors, a court of equity
will so marshal the securities as to compel the joint creditors to
have recourse to that debtor, so as to leave the estate of the
others open to the claims of his individual creditors ; or, if the
joint creditor has already appropriated the latter fund, it will
permit the several creditors to come in pro tanto, by way of
subrogation, upon the fund which ought to have paid the joint
debt."
The principles, said the court, that have been brought to
view, are of easy application in this instance. Here is a surety
whose money has been applied in payment of the debt of his
principal, to the exclusion of his own proper creditors. The
court therefore held, that the judgment· creditors of the surety
had an equity to be subrogated to the creditor against the fund.
The decision of the court in this case was rested upon the
subtle distinction made in Ex parte Kendall, 17 Vesey, 520,
under the doctrine of marshalling assets, &c., which may
always be defeated by a conveyance to subsequent purchasers,
but it in fa~t came within the doctrine of subrogation strictly.
If the surety had paid the debt before judgment, he might have
demanded a cession of actions, and then have acquired the
right to stand in the shoes of the ,creditor, as the surety had
a .clear right in equity to the fund in the hands of the court,
and this fund was charged in favor of the judgment creditors
of the surety.
In determining the question, how far the right of a surety to
be subrogated to the actions of the creditor is absolute, it is
important to consider the character of the right of the surety.
Is it a mere equity, o.r is it a legal right? Is it subject to a prior
equity, or does it supersede an equity which might otherwise
9•

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have existed between the debtor and credit.or, if their rights

alone were concerned?
So far as the rights of a surety depend upon contract, they
are certainly absolute ; whether the contract is express or
implied. If Titius borrows money of Mrevius, and Caius
agrees to become surety for Titius, and Titius, on his part,
agrees to place property in the hands of Mrevius, as security,
who, on his part, agrees to receive the property and to apply
the avails thereof in satisfaction of the debt when received
by him, and further agrees with Caius, the surety, that if
thereafter the surety shall pay the debt, he will, by a cession
of actions, subrogate him to his actions and securities, there is,
in such a case, an express tripartite contract. If Caius, the
surety, is afterward compelled to pay the amount due, he has
not only his action of assumpsit against the principal debtor,
and perhaps an action against the creditor if he refuses to
perform his contract, but he has an absolute right of subroga-
tion, and a lien upon the security which cannot be defeated by
a conveyance to a purchaser without notice. The right is an
absolute one, though it may be necessary to require the aid of
a court of equity for eHforcing it.
So, when the security is received by the creditor at the time
of making the loan and receiving the guaranty of a surety,
there is an implied contract which binds the creditor in like
manner, and constitutes a lien also in favor of the surety.
Where it is, therefore, said, as it often has been in the dis-
cussions of this subject, that the right of the surety to ~ubroga­
tion rests not upon contract, but upon principles of natural
justice, that m:ust be understood as true of cases where the
contract of suretyship is n~t created expressly, and cannot be
implied ; for when there is such a contract, that is the founda-
tion of the right, and the contract of suretyship itself may be
specially modified by the parties. It may be agreed that the
principal debtor shall have the right to dispose of the property
held for security, as agent for both the creditor and surety, as
well as for his own advantage, and that the contingent results
of the sale may be bound for the debt in like manner as the
specific property pledged. In such cases, the surety would
have no absolute lien upon the security.

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 SUBROGATION IN J!AVOR OJ! A SURETY. 103
•
So, when property has been pledged as security, and the lien
upon it is expressly released to enable the debtor, by disposing
of it, to pay the debt or to provide for his other necessities,
there is no doubt that, even if it is returned to the creditor as
security, it ceases nevertheless to be held under the contract,
and may be disposed of by the debtor. If, by express agree-
ment between the debtor, creditor, and surety, after the creditor
on. a loan has received one hundred shares of bank-stock as
security, it is agreed between the parties that fifty shares of the
bank-stock shall be returned to the debtor, to be disposed of by
him as discharged of the lien, and the debtor, failing to make
sale of the property, afterwardd pledges it to the creditor for a
further advance of money and also for the former debt, there
can be no doubt that the fifty shares thus pledged are dis-
charged from the original lien created by the contract of
suretyship, and yet, if they remain in the hands of the creditor
until the first debt is paid by the surety, he will, on grounds of
natural justice and equity, be entitled to be subrogated to the
creditor for all the securities remaining in his possession.
It is to be observed that, though in equity the rule - equality
is equity-is a fundamental maxim of the court, the object and
effect of the claim to subrogation is to gain a preference over
other creditors, and it is commonly exercised for that purpose
after insolvency. The equity of a surety to gain a preference over
other creditors by means of a lien on property received by the
creditor as security, over and above that provided by the contract
of suretysbip, whether express or implied, is not very obvious.
But it certainly would be a great stretch of the principle on
which relief by subrogation is founded, if it were construed to
give the surety a lien on a security obtained after the debt was
contracted, and the contract of suretysbip was entered into, in
restraint of the debtor's power of disposing of the property,
when there could have been no consideration on the part of the
surety for such an extension of the terms of the contract.
It seems to have been held, in certain cases decided in the
English Court of Chancery, that the surety has no right to
require that the creditor shall retain, for the benefit of the surety,
such securities as be may have taken from the principal debtor
after the contract of suretyship, but that the creditor may sub-

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104 SUBSTITUTED LIABILITIES•
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sequently part with that security without releasing, wholly or
in part, the surety.
It is a well-established rule,1 that, by virtue of the con-
tract of suretyship, the surety (as between himself and the
creditor) is entitled to the benefit of every mortgage or other
security held by the creditor, whether he knows it is held by
him, or does not know that it is held by him at the date of the
contract. By intendment of law, the surety is supposed to
have contracted his liability in reference to all existing securi-
ties. His right is, therefore, by contract, to be substituted to
the creditor's remedies and securities on payment of the debt.
In a case before the Vice-Chancellor of England,2 it was held
by him that there was no instance in which, when the security
was given subsequent to the debt, the surety had a right to
insist on the benefit of that security.
The Vice-Chancellor, in effect, decided that, though the
surety was absolutely entitled to the benefit of the securities
held at the time of the original contract of suretyship, because
it was a part of the contract, the position of the surety
should not be altered; yet, that he was only entitled to such
securities received by the creditor after the contract, as remained
undisposed of, on payment by the surety, or on his putting
himself in active motion.
In a later case,s on a bill in chancery, relief was sought for
the estate of the plaintiff's testator from his liability as surety,
on the ground that, after the plaintiff's testator had become
surety to the creditor on a bond taken from the principal debtor,
the creditor had taken a deposit of certain title deeds as secu·
rity for the bond debt and interest; that the executor of the
creditor had allowed the deeds to be taken by the principal
debtor, upon his undertaking to return them ; but that the
debtor, instead of doing this, had sold and conveyed the prop·
erty constituting such security to a purchaser, without notice of
the lien, whereby the same was lost, and the'plaintiff's testator's
estate deprived of the benefi~ thereof.

1 Dering v. Earl of Winchelsea, 2 Bos. & Pul. 270; Mayhew v. Crickett, 2

Swanst. 185.
~Wade v. Coope, 2 Sim. R. 155.
8 Newton v. Chorley, 10 Hare, R. 646. •

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 SUBROGATION IN FAVOR OF A. SURETY. 105

The ground taken in support of the surety's absolute lien

on the security taken by the creditor after the debt was con·
tracted, wlfs, that there is an engagement as between the prin-
cipal debtor and the surety, that, if the principal debtor at any
time thereafter places securities in the hands of the creditor, the
surety, as against the debtor, is entitled to the benefit of those
securities, and, therefore, the creditor, knowing that to be the
equity of the surety against the debtor, whenever by any chance
the debtor has securities which come into his hands, he is
bound by that knowledge and understanding at the time the con-
tract is entered into, and bound to retain, for the benefit· of the
surety, those securities that so come into the hands of the debtor.
The question was regarded by the court as a nice one, and
the real question and difficulty in the case was said to be,
whether the additional equity claimed will or will not be
imported into the contract of suretyship.
There is a class of cases, said the Vice-Chancellor, affirming •
this proposition, that, although the security is taken under the
original cQntract, yet, if the surety satisfy the cretlitor his debt,
and the creditor has in his hands securities for the debt which
have been given him, whether at or after the original contract,
the surety then becomes entitled, on paying off the creditors, to
stand in the shoes of the creditor, and to have the benefit of
every security which the creditor then holds. That arises
upon a different principle of equity from what may be consid-
ered to be the equities under the original contract. It arises,
he said, from this, that the party who pays off any person who
holds a mortgage or other security, is entitled to have the
benefit of all the securities that person so holds, in respect to
the debt which he has paid off; he has discharged the liability
for which the security is held, and he is entitled to call for an
assignment from that party of the securities he so holds.
But "It has never yet been held," said the Vice-Chancellor,
"that a party entering into a contract of suretyship, places
himself in such a position with regard to the principal debtor
as to entitle him to say to the creditor, I have a right to all
securities, past, present, or to come, against the principal
debtor; whenever you find yourself in the position of holding
securities, hold them for my benefit ; you are not to damage

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me by any dealing with them. It has not been so held, and

Wade v. Coope is an authority the other way."
The distinction which is made, in this case, between securi-
ties which constitute in part the subject of the contract of
suretyship at the time the contract is entered into, and securi-
ties which afterwards come into the hands of the debtor, would
seem to be well founded .• The right of the surety to the benefit
of securities which the debtor has by an express or implied
· agreement appropriated to the debt, is absolute and cannot be
varied, but the nature of the creditor's lien upon securities sub-
sequently placed in his hands, must depend upon the agreement
between the debtor and creditor alone. The surety is a stranger
to it. A debtor may place in the hands of the creditor, prop-
erty which shall constitute additional security for the existing
debt, and also for future loans. He may, by agreement, reserve
to himself the disposition of the property ; then, if loans are
• subsequently made, or if the property is sold by the debtor, the
lien of the creditor for the existing debt will be \lot an end; but
if, before the property is disposed of, the surety paya the debt
or sets himself in motion, he has a claim in equity, to the
benefit of those securities which remain in the hands of the
creditor. He has this equity not on the ground of contract,
but on general principles of natural justice and equity.
If, in the last-cited case decided by the Vice-phancellor of
England,1 the question had been considered in reference to the
right of the surety to be subrogated to the actions of the cred-
itor on payment, the ground for the distinction stated by the
court would have been more apparent. When security is
received at the time of making the contract of suretyship, the
right of the surety to subrogation on payment, rests upon
contract, though it is often stated as resting upon a higher and
more comprehensive principle, namely, that of natural justice
and equity, and it is so stated because there are cases of subro-
gation where the right is not founded on contract, but depends
. upon that higher principle. Now, when, after the contract of
suretyship is made, the debtor places additional security in the
hands of the creditor, the surety on paying the debt is, under

l Newton v. Chorley, 10 Hare, R. 646.

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 SUBROGATION IN FAVOR OF A SURETY. 107
the contract, entitled to be subrogated to the action of the
creditor, and, being thus subrogated by a cession of actions, in
exercising the rights of action, he acquires his lien upon all
existing securities. If neither the creditor nor the surety had
put himself in motion, the debtor might have freely disposed
of' the additional security ; tut when either of them moves,
the security becomes fixed with the lien, and the debtor's
right of disposition is at an end. In effect, therefore, subro-.
gation takes effect by contract- the contract for a cession of
actions, - against securities existing in the hands of the credi-
tor whenever they may have been received.
The right of the surety to securities taken after the making
of the contract of suretyship, may J:>e likened to the equity of a
creditor who has only one security, under the doctrine of mar-
shalling, as against another creditor who, besides that security,
has· other additional securities sufficient for the satisfaction of
his debt. As we have seen,1 the equity for marshalling secu-
rities is merely a rule of the court of chancery for arranging
existing assets and seourities which remain undisposed of, with
a view to the equal advantage of all at the time when proceed-
ings are commenced for marshalling. The right of marshalling
does not constitute a lien upon the land which follows it into
the hands of a purchaser, with or without notice; So the right
of a surety to the benefit of a security given by the debtor to
the creditor, after the making of the contract of suretyship, is a
mere rule of the court di!'lposing of existing securities for the
indemnity of the surety. There is no lien in favor of the
surety, upon tlie property given as security without any con-
sideration from the surety, which can restrict the right of the
creditor and debtor to convey it absolutely. Such an abso-
lute lien might be prejudicial to the parties, and certainly no
agreement can be implied from the original contract of sure-
tyship which can extend the charge to securities afterward
placed in the hands of the creditor.
In the case decided by the Vice-Chancellor,2 the bill sought
relief on the ground that the creditor had done an act which

1 Racster v. Barnes, l Younge & C. C. R. 401.

2 Newton v. Chorley, 10 Hare, R. 646.

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prejudiced the surety. The additional or supplemental security

in that case consisted of a certain rent evidenced by title-deeds,
and the act claimed to be injurious to the surety was the
giving up the title-deeds by which the rent was created. The
supposed injury consisted in depriving the surety of the means
of establishing his right to the security, as well as in the relin-
quishment on the part of the creditor of property appropriated
to the payment of the debt, which property, but for the alleged
relinquishment of it, might have rendered recourse to the surety
unnecessary. But the case was discussed by the Vice-Chan·
cellor, as if the wrongful act had consisted in a transfer or dis-
position of the property, by which the lien of the creditor was
lost. Such, however, was Jl6)t the fact. The creditor gave up
the title-deeds on the promise of the party who received them
to return the deeds, and, for aught that appears in the case, the
creditor had, at the time of the bringing of the bill, an existing
right to the security, and might by a proper action have re-
claimed the title-deeds, or recovered the amount of the rent
from the wrongdoer.
If the rent had constituted the sectlrity given to the creditor
at the time of the loan, it would seem that the surety, on
payment of the debt, would have been entitled to a cession of
the creditor's rights of action, and that when thus subrogated,
or by a decree of the court, he would have been entitled to
claim th~ rent, and would have the benefit of the creditor's
action against the party who had taken the deeds. Such, at
any rate, would have been the rule of the civil law. If, on
paymerit by the surety, the question had presented itself in
this form, on the right of the surety to subrogation, against
a party not an innocent purchaser, the right must have been
sustained, but the court proceeded on the ground, that if the
surety was entitled absolutely to the benefit of the supple-
mental security, he was entitled to claim that no impediment
or obstruction of his right should be interposed by an act
of the creditor, and that the consequence of such an act was
the release of the surety. On the assumption that the surety
had by contract a lien on the security, he was authorized to
claim relief on account of the difficulty and embarrassment
which the act of giving up the deeds would cause him.

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In a case 1 decided by a court whose jurisprudence is based

substantially upon the civil law, it was held that there is a
privity between the surety of a debtor and the creditor (upon
the idea, as it would seem, of an express or an implied contract),
which· compels the latter to preserve all his rights against the
debtor unimpaired, when he intends t.o look t.o the surety for
payment. This obligation on the part of a creditor is a corol-
lary, it was said, of the right of subrogation which the law has
established in favor of the surety who pays the debt of his
principal. If the creditor fails to comply with this obligation,
or does any act which destroys or impairs this right of subro-
gation to his mortgages or privileges, he thereby releases the
surety. Where the vendor, therefore, of slaves sold together,
received from the purchaser a note for the price indorsed by a
third person as surety for the paymebt, and subsequently
purchased from the vendee a part of the slaves, it was held that
the vendor's privilege or lien and the surety's right of subroga-
tion to it were indivisible; that the latter existed entire a11 to all
the sla".es for the full amount of t.he debt, and that it could not
be divided and restricted t.o certain slaves for certain amounts
at the will of the original vendor, and that by such repurchase,
the indorser was discharged.
Notwithstanding the doctrine which seems so well estab-
lished, that any act of the creditor which injuriously affects the
surety, constitutes a release of the fUrety, because he is enti-
tled to claim that it shall be strictly performed ; it does not
follow, e converso, that a change which may have the effect to
discharge the surety, absolutely puts an end to the right of
subroga.tion. If the creditor does any thing which makes the
condition of the surety worse than it would have been under
the contract ; if he changes the character of the security, or if by
a purchue on the substitution of his own liability, he makes
what is termed in the civil law, confttsion by such substitution ;
or, if he pays the price and thus substitutes the value of the
security for the security itself, the surety has indeed his election
to consider himself discharged, but the creditor cannot take
advantage of his own wrong, or avail himself of a privilege

l Hereford "· Chase, l Robinson, R. 212.

10

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which was designed for the surety. If in the above case

decided by the Supreme Court of Louisiana, after the creditor
had purchased a part of the property given as security, the
surety had paid the debt, he would have been entitled to claim
from the creditor substitution to all his existing rights of
action. He might claim such of the property as remained
undisposed of, and he might proceeQ. against creditors by a bill
in equity, or by equivalent process at the civil law for the value
of the property purchased.
If the creditor bas actually conveyed the security, the ques-
tion may arise whether the lien still continues in favor of the
surety as against purchasers.
If the creditor is in possession of property which he has
acquired as security for a debt, and being thus apparently the
true owner, conveys the security to another without notice, on
principles of equity,1 the purchaser will hold against the cred-
itor himself and also as against a surety who, having· paid a
debt for which he was bound, was entitled to demand a cession
of actions and subrogation, and yet has not by such cession
acquired the right, but relies on his equitable subrogation by
operation of law.
But notwithstanding the creditor may have conveyed the
property held as seomity, to an innocent purchaser who has
against him a valid title, if the surety on payment of the debt
is sub.rogated to the credi,tor's rights of action expressly or by a
decree of court, the creditor's attempt to convey personal secu-
rity and thus discharge it of the lien of the surety will be ineffect-
ual, because the right of the surety is absolute and cannot be
discharged by any act of the creditor. It is true, the question
whether the surety is entitled to be subrogated or not, is an
equitable one, but it is to be determined upon equities arising
between himself and the creditor. When he is subrogated to
the creditor, his right is legal, and he must, therefore, prevail
over a naked equity and a subsequent legal title.2

1 Basset v. Nosworthy, reported Temp. Finch, 102; and cases cited in l White &
Tudor's Leading Cases in Equity, 49.
2 In the case of McLung v. Beirne, 10 Leigh, R. 394, a judgment was rendered for
a debt with interest and costs, and on the same day an appeal was allowed; the judg-
ment being affirmed, the surety in the appeal bond paid a sum in satisfaction of the

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The same principle applies to a sale of the security by the

concurrent act of the debtor and creditor. The surety who
has established his right to subrogation, cannot, in respect to
property held under the contract of suretyship, be superseded
by their joint act.
A very differdnt rule would apply to legal subrogation, or
subrogation on an imaginary assignment. The purchaser
would have a prior right, and must prevail against a surety
who has not acquired a right at law.
Though the release by a surety of his lien upon the security
may be effectual as against himself, it cannot prevail against
his co-surety.
Where· B. and W. were sureties for G., and the latter, to
secure them, gave the sureties a lien on two negroes ; 1 B.
afterwards consented to cancel this lien, and that G. should
constitute another lien by way of security on all his personal
estate for the payment of certain debts, one of which was the
debt for which B. and W. were sureties. G.'s personal estate
proved insufficient to pay the debts, and· an execution was
levied on the property ot B. He filed ~s bill to stay proceed-
ings and for general relief. The court said: " Admitting that
B. consented, that upon the execution of the second deed of
trust, his own lien on the negroes should be ~eleased, he did
not release, nor was he competent to release it, as it related to
W., the co-surety who was no party to the transaction. As to
W., therefore, the said deed was in full force."
The court was of opinion, that even if W. had been no
party to the judgment sought to be enjoined, nor to the
execution, it would be competent to B., after paying off the
same, to resort to him as a co-surety for contribution of a

judgment, and within a year after the aftirmance, filed a bill to charge real estate
aliened by the debtor, between the date of the original judgment and the date of the
judgment of aftirmance. The court held that it was not net-essary, to entitle the
surety to subrogation, that he should have been a party to the judgment. Having
paid off the amount due upon it to the party to whom he was bound by the appeal
bond, he had a right to demand the cession of every remedy the creditor had for the
recovery of his demand from his debtor.
In this case, the right w the surety would have prevailed if merely equitable,
because the conveyance by the debtor was after the institution of proceedings, and the
purchaser held, subject to prior equities.
1 West v. Belcher, 5 Manford, R. 187.

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moiety thereof; and that for the purpose of preventing circuity

and getting payment. out of the proper fund, it would be also
competent to him, as standing in the place of W., to go for such
moiety against the negroes conveyed by the deed.
The court was further of opinion, that under that hypothesis,
it would be competent for B. to stand in the p'lace of W., and
charge . the negroes for the whole sum ; nothing being more
consonant to natural justice, than that the proper debts of
every man should be paid out of his own estate in ease. of
sureties, and that tkat property of the party in particular,
should be subjected tO the debt, which was bound therefor by
a specific existing lien. These principles would avail, it was
said, to B., supposing him to have released for himselfr his own
proper lien created by the first deed.
It has been held that the discontinuance of legal proceedings
by a creditor against the debtol', which, if pursued, might ha>e
resulted in the satisfaction of the claim as against the surety,
doos not exonerate the surety ; 1 and yet, if the surety after the
commencement of proceedings by the creditor had paid the
debt and required a cession of actions, he would .have been
entitled to claim the benefit of an attachment under which the
goods of the principal debtor had been seized. The creditor,
it would seem, might discharge process which was not com-
menced at the instance of the surtny, if it is done in good faith
and in pursuance of an arrangement for the satisfaction of the
debt; and yet, the surety on payment would be entitled to be
subrogated to all existing actions of the creditor, and to all
liens and securities acquired by the creditor and continuing in
his hands at the time of payment. It was no part of the cred-
itor's duty to bring the suit and attach the property of the
debtor under the original contract of suretyship, and acting in
good faith, he might discontinue the action on the same prin-
ciple that he would be justified in parting with security after·
ward acquired, as in the case above cited.2
Unless the creditor was put in motion by the surety, he had
a clear right to relinquish the property attached.a

1 Montpelier Bank v. Dixon, 4 Vermont R. 599.•

2 Newton v. Chorley.
8 See alao, Executors of Baker v. Marshall, 16 Vermont R. 522.

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The general rule that a surety who pays a debt has an equity
to be subrogated to any security which the creditor may have
against the principal debtor, is to be understood as having
reference to securities specifically charged in reference to that
debt alone. If the same security is held by the creditor on
account of other debts, the principle applies that the debtor, on
payment, may make application of the money (and, in his de-
fault, the creditor) to any existing debt; and the surety, on pay-
ment of the debt for which he is bound, will have no right to
require the .benefit of a security which has been appropriated
to another debt.
In a case decided by the Supreme Court of Massachusetts,1
judgments on executions issued were recovered on notes of
hand given by Thompson, and indorsed by French. After the
levy of the executions, the right in equity of French to redeem
the lands which had been taken in execution, was also taken in
execution and sold at public auction to Brown, and by him,
before the suit was commenced, was duly assigned to the
plaintiff. It appeared that at the time this note was taken by
the defendants, on a loan made to Thompso~ certain other
promissory notes were pledged to the defendants by Thompson,
as collateral security for the payment of the notes indorsed by
said French, and other notes due from Thompson to the
· defendants. After the defendants recovered judgment against
. French, they collected a further sum on one of said collateral
securities, which they had applied towards payment of certain
notes of Thompson indorsed by French, due to them, but in
no part towards the payment of the said judgment against
French. The question submitted to the court was whether the
defendants were bound by the principles of equity to apply the
money collected towards payment of the same judgment. The
court recognized the rule of equity, that a surety who has
been compelled to pay the debt of the principal, is entitled to
the security given by the principal to the creditor ·as a rule
founded on natural justice and equity.
The notes pledged, said the court, were given as collateral
securities for all loans which had been or might thereafter be

1 Richardson v. Washington Bank, 3 Mete. 536.

10•

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obtained. This was the express language and the obTious mean-
ing of the ttansfer, and no other construction could be given to
it. The court were further of opinion, that the defendants
were not 'bound first to apply the money derived from the
security to the payment of the loan obtained at the time the
security was given, as it did not appear that it was the inten-
tion of the parties to give any priority or preference to any
particular loan or debt; and that there was no rule of law or
equity, by which the defendantR were bound to appropriate the
moneys collected on the collateral security to the payment of
one loan rather than another.
" The general rule," said the court, " is, that when there are
several debts, the debtor may direct to which debt any pay-
ments shall be appropriated ; and if he fails to give any
direction, then the election devolves on the creditor. In the
present case, no such direction was given by Thompson. We
think, therefore, that the defendants had an undoubted right to
apply the moneys collected on the collateral securities, in ihe
manner they have done." ·
In this case, the security was not provided specifically for
the debt on which the indorser was bound, but for all debts for
which the principal was, or might become, liable. The surety
had no claim to the security until after the creditor had been
paid the whole amount due to him. Further, in this case
the purchasers of the equity of redemption for the lands levied
upon, did not acquire, by purchase, the right of the indorser to
the security. The equity of the indorser, if it existed at all,
was personal, and would have remained in him after the iraf\s·
fer of the right of redemption. This equity of redemption was
purchased subject to the debts. If the purchaser had prevailed,
he would have gained the land for which he had paid nothing
to the indorser, and would have deprived the bank of the
security .stipulated for.
What the effect of the general doctrine of the application of
payments in reference to the rights of the surety might be,
the circumstances of this case made it unnecessary to consider.
The creditor cannot so dispose of a security as to deprive the
surety of his eqhitable right of recourse to it ; but the right of
the surety as against the creditor, is merely equitable, and

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cannot prevail over a legal right and an equity which is not
inferior. The general principle being, that the remedy of the
surety who has not acquired a specific lien upon the security
for his indemnity, is merely the action of assumpsit against the
party for whom he has become charged ; there seems to be no
rule which prevents the creC!litor from making application of
the funds derived from personal security, according to the
principles which regulate the application of payments. When
a creditor has two notes against his debtor, one bearing intertist,
the other for the payment of the principal alone, and has in hi.s
hands property for the security of the note bearing interest, the
avails of which security he must apply to the debt with interest,
when received by him generally in payment; if the creditor,
after the making of the two notes, receives the guaranty of a
third person as surety for the note not bearing interest, his duty
to make such an application of the fund held as security resting
upon the implied agreement between himself and the debtor,
which is the foundation of the law as to the application of
payments, would not be controlled by the simple equity of
the surety, whose relation to the fund is founded upon an
agreement subsequently entered into. That equity is subordi-
nate to the legal rights of the principal parties.
If the debtor, on the provision of security for several classes
of debts, makes no specific appropriation of the security to
any one debt, the rules which govern the appropriation of
payments seem to be applicable. Any security given by the
debtor at the time of a loan would come within the contract of
suretyship, and be specifically charged with a lien in favor of
that debt, unless it was e.xpre.13sly agreed that it should be held
by the creditor as security for other debts. According to the ·
analogous rules on the application of payments, the debtor who,
subsequently to the loan, provided security sufficient in amount
only for a part of the debts, would have a right to appropriate
the security to any one of his debts, and its acceptance by the
creditor, binds him to the conditions appointed by t~e debtor. If
the debtor makes no appropriation of the security, the same
reason which exists for permitting the creditor to make the
application of payments in such a case, apply. 'fhe creditor
may be generally authorized to dispose of the security and apply

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the avails on account, and as he may at his election apply the

payments, he may also in like manner appropriate the se-
curity.
If the appropriation is made neither by the debtor nor the
creditor, the appropriation of the security undoubtedly devolves
upon the court according to rules of equity and justice in
reference to payments under the same circumstances.1
Whatever may be the right of a surety to whom a cession of
actions has been made by a creditor, or on his refusal by a
decree of the court, when he is not by such a subrogation put
in the place of the creditor, the right to subr~gation being a
mere equity, unless founded on a cession of actions, it cannot
be granted to the prejudice of a prior equity. 2
Watkins obtained a judgment against Johnston as principal,
and Walters as his surety. Watkins sued out a garnishment
upon that judgment against Field (the complainant), alleging
that the judgment remained unsatisfied, and that Field was
indebted to Johnston, &c., which was executed upon Field on
the 2d day of May, 1843. Judgment was rendered against the
complainant by such garnishee, June 9, 1846.
The garnishment was prosecuted for the benefit of Walters
as the surety, who, on the 21st of November, 1844, paid the
amount due (on the judgment) to Watkins, the respondent,
who gave to Walters a receipt in full of the debt, and interest
due upon the judgment. The court were of opinion that when
Walters paid to Watkins the original judgment, it was ex-
tinguished at law as between Watkins, in whose favor the
judgment was obtained, and Johnston and Walters the de-
fendants therein; that Watkins, having paid the original judg·
ment before final judgment was rendered upon the garnish-
ment, had Field known that fact and interposed it as a defence,
the court of law could have rendered no judgment against him
in favor of Watkins for the debt which he owed to Johnston.
The court proceeded upon the ground that the debt was

i The cases on the subject of the application of payments, are collected in l

American Leading Cases, 268, by Hare & Wallace.
2 Aldrich v. Cooper, 2 White & Tudor's Leading Cases, American Notes, Vol. II.
pt. 1, 214.

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extinguished by the payment which was made by the surety,

although when payment was received by the judgment cred-
itor, that was eupposed to operate as an assignment and
transfer to the sUlety of the judgment, and of all beneficial
interest which the creditor had therein. But the court were of
opinion, that though, as be'ween the principal debtor and
creditor, the judgment was extinguished at law; yet, as between
the surety and the principal debtor in equity, it was regarded
as still in force, and that the surety might, in a court of equity,
reimburse himself out of the property on which the judgment
constituted a lien in preference to junior incumbrances. But
as it appeared that Field, the garnishee, was surety for Johnston
on another and different debt which he bad been. compelled to
pay (greater in amount than the debt in question), before
Walters paid the judgment of Watkins, the court held that as
Walters and Field had equal claims to be protected in equity
from loss, they could not compel Field to surrender up to
Watkins an indemnity which he held in his own hands. ·
The question really was, whether at the time of the process
of garnishment against Field, the amount to be regarded as
his actual indebtedness to John~ton was the same which
remained after deducting his equitable claim as surety on the
debt which he had paid, or the original debt, without compen-
sation or set-off; and clearly in equity, the actual debt was
only that which might remain after all equitable deductions.1
Where property was cqnveyed to a trustee for the security
of two distinct debts to different creditors, and afterwards the
debtor executed a. deed of trust to another trustee of a part of
the property conveyed to the first trustee, and also of other
property in trust for one of the creditors to whom a new note
was given; it was held that a surety on the substituted note,
who was also an indorser on the bill of exchange for which it
was given, had no claim, on p~ment of that note, to be subro-
gated to the security given to the first trustee.
W. Garrard, in 1836,2 executed a deed of trust to Lassiter,
as trustee, to save Taylor, Mason & Co. harmless, by reason

1 Newton v. Field, 16 Arkansas R. 216; Eppes v. Randolph, 2 Call, R. 125.

2 Houston v. Bank of Huntsville, 25 Alabama Rep. 250.

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of their acceptance of two bills of exchange, - one drawn by

him, and sold to the Huntsville Bank (the defendants in error),
the other drawn by W. Arnett in favor of H. Garrard, and
indorsed by him and Dillahunty to the Decatur Bank, but
solely for W. Garrard's accommo,dation. In 1837, a statute
was enacted authorizing the extension of indebtedness to the
banks. Afterwards, in 1838, W. Garrard availed himself of
this law of 1837, and thereupon the said W. Arnett, the drawer
of the bill, executed his note, payable in three yearly instal-
ments, with Dillahunty and W. Garrard as sureties, and took
up the bill of exchange held by the Decatur Bank. At the
same time W. Garrard, who was the real principal, executed a
deed of trust to J. H. Arnett, embracing a portion of the prop-
erty contained in the first trust deed to Lassiter, with other
property not included in that deed, and with provisions varying
from those contained in the first deed. There was no payment
of the bills above- mentioned, except by the substitution of the
notes. Dillahunty paid a portion of the last-mentioned notes to
the bank of Decatur, and thereupon sought to be subrogated to
the security which the first deed afforded to the bank. The
court held that he was not entitled to such subrogation, pro-
ceeding upon the ground that the giving of the note by Wil-
liam Arnett, with Dillahunty and W. Garrard as sureties, and
the execution of the trust deed by Garrard to J. Arnett, and the
surrender of· the bill of exchange by the Decatur Bank to the
drawer, was an absolute extinguishment of all liability on the
part of Taylor, Mason & Co. as acceptors. This substitution
of the notes for the bill was, as to these acceptors, held to be a
payment by Garrard, and therefore, that he was, according to
the very terms of the trust deed, discharged from all further
obligation to them in respect to its payment. . There was, there-
fore, no existing debt to which the sureties on the notes could,
upon equitable principles, claim to be substituted. As on
the new arrangement and change of securities, the sureties on
the original debt seem to have acquiesced in leaving that por-
tion of the security omitted in the second deed of trust, to pay
the balance due on the bill to the Huntsville Bank, it certainly
would have been unjust to deprive Taylor, Mason & Co., or the
Huntsville Bank, of the full benefit of this security, in favor of

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parties who had voluntarily cancelled the original demand, by

assuming the payment on the faith of a new and different secu-
rity. But if these equitable considerations had not existed in
the case, it is very clear that, as between principal and surety,
the renewal and change •of the securities wrought no actual
payment, the surety would have been entitled to subrogation ;
and if a balance had remained, after satisfying the Huntsville
Bank, the surety would have had a just claim to it.
The case was regarded as similar to an earlier case,1 decided
by the same court, where the principal debtor died, and, after
his death, his administratrix and sureties on the original
demand made, from time to time, new notes, taking up and
cancelling or extinguishing the old. Finally, the sureties were
compelled to pay the debt ; and the question was whether they
should not be subrogated to the rights of the creditor, and be
reimbursed out of the estate of the original debtor. The court
said there was nothing in the record from which it could be
inferred that the creditor (the bank), did not intend to discharge
the intestate's estate from all liability to pay the note of which
he was a joint maker ; and held that they could not, against
the direct allegation of the bill, suppose that there was a con-
tinuing liability. The creditor, then, could not at law or in
equity, have charged the estate of the intestate in the hands of
his administratrix, and the surety, whose claim was deduced
through the creditor, could not look to any source of reimburse-
ment of which the latter might not have availed himself. The
other creditors of the estate might allege an equity fot.nded
upon th'e frequent renewals, to leave the estate to be adminis-
tered in satisfaction of their debts.
These and other cases show that the right of subrogation is
not an abso\ute one, but may be controlled by a countervailing
equity, growing out of agreements implied in the transactions
to which the creditor and surety are parties.
In many cases the right to subro'gation is determined by the
nature of the surety's interest. He may have a legal est.ate
which will render it unnecessary for him to come into a court
of chancery for relief, and thus have a preference which equity

1 Brown v. Lang, 4 Alabama R. 50.

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120 SUBSTITUTED LIABILITIES.

would not interpose to give him against another party who has
an equal equity. ·
Under the Roman law, a party who, being liable for another's
dues to the fisc, was compelled to make payment, was, as has
already been observed, entitled to a~y privilege or preference
provided by law for the State, and he was subrogated to the
fisc, payment in such a case not being regarded as the extinc-
tion of the debt.
The same reasons which prevail in England against the sub-
rogation of the surety, on payment of a specialty to the privi-
lege of a bond creditor in ordinary cases of private indebted-
ness, where no express provision is made by law, would seem
to exist against the subrogation of a surety to the rights and
privileges of the public treasury, so as to give a surety, on pay-
ment, the preference which is given by law to the sovereign
over private individuals. The effect of payment would seem
to be, to reduce the surety to the rank of a simple contract
creditor; but the practice of the Court of Exchequer,1 when a
surety pays a debt due from any defaulter to the crown, is to
allow him to stand in the place of the crown, and to give him
the benefit of the prerogative process against the principal.
In the United States, where a preference is given to the
government for any dues to the United States, the principle has
prevailed that a surety on payment shall be subrogated to the
United States and to the preference given to the government
over private citizens who are also creditors.
In \he State of Louisiana it was held that a surety fjm a cus-
tom house bond, who paid its amount to the United States
(while the code of 1808 was in force), became thereby subro-
gated to the rights of the United States against the principal,
for priority of payment out of the property of the principal.2
In the State of New York it was held that the right of sub-
rogation exists in favor o( a surety who pays a bond to the
United States, and the preference to which the United States
may be entitled by law may be preserved in favor of the surety
by whom payment of the bond has been made, as against a

1 Regina v. Salter, 1 Hurlstone & Norman's Rep. 274, and cases cit.ed.
2 West v. CreditorB, 3 La. An. Rep. 529.

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 SUBROGATION IN FAVOR OF A SURETY. 121
subsequent assignee with notice ; but the government, it was
said, cannot hold the sureties liable on bonds for duties, and at
the same time retain the goods on which duties were payable,
as additional security, after proceeding against the surety. 1
The same rule would apply to debts in favor of the State
government, for which a preference had been created by law,
and a surety on such a debt would, on payment, be entitled to
subrogation. But the principle does not extend to statutory
liens created in favor or'certain ~reditors for reasons of policy.
The statutory lien which is given in the State of Missouri
for stores and supplies, furnished to the master of a steamboat,
does not extend by subrogation to a surety of the master, on a
note given for such supplies, who pays the note at maturity.
If the party, said the court, might, by a legal assignment of the
favored debt, succeed to this right of the original creditor, they
•
were not aware of any legal principle upon which they could
hold that the payment made by the surety, instead of extin-
guishing th~ debt, with all its accessory obligations, had the
effect of continuing in force the statute remedy, and of substi-
tuting, in reference to it, the surety in the place of the original
creditor.2
.It was held by the Supreme Court of the United States,s
that the same right which belongs to the government attaches
to the claim of an individual who, as surety, has paid money
to the government. ·
The plaintiffs, at the request of Shelton & Co., executed
bonds to the collector of customs for the payment of duties on
the goods. The United States collected the debt from the
plaintiffs, Shelton & Co. being also indebted, though not bond·
debtors, for the duties ; it was held that, on general principles of
equity, the party who was really the surety would be subro-
gated to the right of the United States, and have every prefer-
ence that the United States would be entitled to. In this case
the relation of the plaintiffs, not appearing upon the bond, was
established by extrinsic evidence and relief given against the

1 Dias v. Bouchaud, ii> Paige, R. 445.

2 Hays v. The Steamboat Columbus, 23 Missouri, 232.
8 Hant.er v. Unit.ed States, 5 Pct.ers, R. 182.
11

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122 SUBSTITUTED LIABILITIES.

true debtor on principles of equity, though the plaintiff was not

within the provision of the statute for sureties on making pay-
·ment.1

~
As the effect of subrogation is a transfer of the creditor's
gbt of action to another who has acquired a right to stand in
he place of the creditor and. exercise his rig,hts, ther.e is a man-
fest propriety in the rule, that th_e right !Q _~uch_i;;ll.P~titution
~nly be acq!!ired by full paym~µt. ,
A surety is entitled to indemnity from his principal against
whom he has recourse by a direct action at law. By subroga-
gation he seeks to acquire the advantage of standing in the
shoes of .the creditor, and exercising his legal rights, among
which is the right to sue, and, as a consequence, the securities
are claimed.
• What is sought by subrogation is not a mere indemnity,
the right to this he already enjoys, being entitled to his action
of assumpsit against his principal, whose debt he has paid in
part; but a transfer of the creditor's action, and because, on full
payment, equity subrogates the surety to the creditor's entire
right of action, it has sometimes been claimed that, on the
same principle, subrogation ought to take place in his favor, to
a certain extent, for a partial payment.
No injustice is done to the surety by withholding subroga-
tion on partial payment. The surety is a debtor, and bound
like his principal to full payment. He has no right in respect
to the creditor, e!Q_eet q,11.f~lJ _ p&fo.rID~nce, but is regarded as
himself in default. In regard to the debtor, his direct cause of
action is a sufficient remedy.
It would be impr11-cticable to give a surety who has made
part payment, a right of subrogation to be exercised distinctly
from the creditor. To substitute him to the entire right of the
creditor would be·absurd as well as unjust, and the law does
not sanction a division of rights of action. In a case where
the question was considered, the court said: 2 " It would not
subserve the ends of justice to consider the assignment of an

1 Enders v. Brune, 4 Randolph, 438.

2 Hollingsworth v. Floyd, 2 Har. & G. 91. See also, Swan v. Patterson, 7 Mary-
land, 167.

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 SUBROGATION IN FAVOR OF A SURETY. 123

entire debt to a surety as effected by operation of law, when:

he had paid but a part of it, and still owed a balance to the
creditor, and the court would not countenance such an anom·
aly as a pro tanto l!ssignment, t.he effect of which could only b~
to give distinct interest.sin the same debt to both creditor and
surety."
"Neither in law nor in chancery," said the court in another·
case,1 "could a surety call for an assignment from a creditor,.
or be clothed by mere operation of law with the right of an
assignee, unless he had, by paying the entire debt, wholly satis·
fied the claim of the creditor."
In a case decided by the Supreme Court of Pennsylvania,2
it was said," Until the creditor shall be wholly satisfied, there
• ought, and can be, no interference with his rights or his securi·
ties, which might, even by bare possibility, prejudice or embar!i
rass him in any way in the collection of the residue of hit1
claim."
And, in another case,s the court say the rule is adopted, not
only for the benefit of the plaintiff, but the defendant also ought
not to be subjected to the inconveniences which must arise
from the trial of several rights in one action, and the rendition
of several and distinct judgments.
By the rule in question, it is not to be understood that, if the
ereditor has been fully satisfied from any quarter, the surety ie
not, in certain cases, entitled to the aid of chancery for the
recovery of inqemnity for partial payment, as against a security
in the hands of the creditor. The design of the rule is to pre·
vent substitution to the rights of the creditor who has not been
fu1ly satisfied. ·
The right of subrogation cannot be enforced by a surety until
the whole debt is paid.4 But this being done, it was said, the
same principle of equity which substituted the surety, on pay·
ing the whole debt, in place of the creditor, will equally extend.
_and apply to the surety paying a part, pro tanto, to the extent

1 Neptune Insurance Company "· Dorsey, 3 Maryland, Ch. Rep. 338.

2 Kyner v. Kyner, 6 Watts, 227.
B Bank of Pennsylvania v. Potius, 10 Watts, 152.
• Hardcartie v. Commercial Bank, 1 Harrington, R. 374.

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124 SUBSTITUTED LIABILITIEl!I•.

of his payment. The c~se referred to, as one proper for equita-
ble relief is that where full payment has been made by some
other person, or perhaps the case where, after part payment
has been made by the surety, full paymen~ of the residue has
been made by the debtor himself.
It may be that between the credifur who has obtained secu-
. rity, and a subsequent creditor who has no lien thereon, there is
collusion to prevent a surety on the debt thus secured, who has
made part payment from having recourse to the security; this
a court of equity would prevent, so far as was consistent with
the debtor's right of transfer.
We may suppose the case of a surety who being bound in
that character for a debt which is partially secured by a mort- •
gage on land of the debtor : if the surety purchases the equity
of redemption, and pays the value of the land to the creditor,
as against subsequent creditors who have obtained a lien upon
the land, the suret.y may be entitled in equity to relief, under
circumstances which may arise, and have a right to stand in
the place of the creditor. The significance of the rule under
consideration really is, that, as against the original parties to
the debt, their relative rights and liabilities shall not be varied
by partial payment when made by the surety.
The lien of an executor for his own debt on administration,
is not permitted to prevail against the equitable right of the
surety to subrogation as against the testator or intestate.
Carnes and others were sureties for Banks . in a bond to
Warrington for 4,000l., which was accompanied with a warrant
of attorney to confess a judgment thereon, which was accord-
ingly done, and judgment entered up against all the parties to
the bond. The principal in the bond became a bankrupt, and
also several of the sureties, leaving a considerable sum due on
the judgment. The complainants had been obliged to pay a
very large sum on this balance; and Brown, another of the
sureties, had paid a part, after which payment Brown had
become insolvent. Carnes died without paying any thing on
the judgment. The defendants, the acting ad~inistrators of
Carnes, who was also a large bond creditor on his estate, but
as surety only for Banks, paid out of the assets which came to
his hands the balance due on the judgment, and had satis-

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 SUBROGATION IN FAVOR OF A SURETY. 125
faction entered thereon, and most of tlte remaining assets were
sold and applied toward payment of his own debt. The court
held that the administrator could be in no better situation,
than Carnes himself would have been had he then been before
the court; be was,• therefore, decreed to contribute, notwith-
standing his legal advantage.I

NOTE. - ·The right of surety on payment to subrogation, has been extended

in England by recent legislation. It is enacted by the Mercantile Law Amend-
ment Act, 1826, 19 & 20 Viet. c. 97, sect. 5, that "Every person who, being
surety for the debt or duty of another, or being liable with another for any
debt or duty, shall pay such debt or perform such duty, shall be entitled
to have assigned to him, or to a trustee for him, every judgment, specialty,
or other security which shall be held by the creditor in respect of such debt·
or duty, whether such judgment, specialty, or other security shall or shall not·
be deemed at law to have been satisfied by the payment of the debt or the
performance of the duty ; and such persons shall be entitled to stand in the
place of the creditor, and to use all the remedies, and, if need be, and upon a
proper indemnity, to use the name of the creditor, in any action or other pro:.
ceeding at law or equity, irt order to obtain from the principal debtor, or any
co-surety, co-contractor, or co-debtor, as the case may be, indemnification for
the advances made or loss sustained by the person who shall have so paid such
debt or performed such duty ; and such payment or performance so made by
such surety, shall not be pleadable in bar of any such action or proceeding by
him: provided always, that no co-surety, co-contractor, or co-debtor shall be
entitled to recover from any other c<H!urety, co-contractor, or co-debtor, by the:
means aforesaid, more than the just proportion to which, as between those par-
ties themselves, such last-mentioned person shall be justly liable."
Although this act provides t . the surety shall be entitled to subrogation to
the creditor's rights of action and to his securities, in effect, such subrogation is·
not wrought at once by operation of law simply by the payment of the debt or·
the performance of the duty, by the surety. Some actual assignment or cession
of actions by the creditor, or a decree of court, is contemplated as necessary at'
the time of payment. Some act is neceasary on the part of the surety to show·
his agreement to subrogation. The right to sue in the name of the creditor is
given, if needed, and on a proper indemnity, showing that some agreement re-
specting the terms of the assignment is necessary at the time of payment:
Therefore unle~s subrogation is express and ma.de on payment, it cannot have
effect.

1 Burrows v. McWhan, l Dessausure, R. 4-19.

11 •

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 •
CHAPTER V.

SUBROGATION IN FAVOR OF A SURETY FOR A SURETY.

WHERE sureties are of the same class, and equally bound for
their principal, they are entitled to contribution from each
other, and when one of them pays the whole debt to his cred-
itor, he may be subrogated to the creditor's actions and securities,
but only to carry into effect the principle of equality of contri-
bution. He may avail himself of the creditor's right of action
against co-sureties, but only on deducting his own share; but
it is otherwise, when a party is a surety of a higher class, a
surety to the creditor, for the principal and his sureties, not a
co-surety. In such a case, the original sureties and the debtor,
are all in regard to him as principal debtors. They have no
claim as against him to contribution, but, on the other hand,
such surety has a right to be subrogated to every right of action
against them and the principal and all the securities, for the
purpose of indemnity.
In the following case,1 a party, by aaranteeing payment by
principal and surety, became a guara"Rtor for the principal and
surety, and not with the latter. A note was made by one
Howe as principal, and Snow and the plaintiff as sureties.
After the note was signed by the principal and surety, the
defendant charged himself as guarantor by indorsement on the
note. The action was for contribution on behalf of a surety on
the note against the guarantor ; but the court qeld that the
sureties were in effect principals, so far as regards the guaran-
tor, and that the law raised no implied promise on the part of
a guarantor to contribute in the case of a surety's paying the
note as it does on the part of a co-surety.

1 Longley v. Griggs, 10 Pick. R. 121.

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 SUBROGATION IN FAVOR OF A SURETY FOR A SURETY. 127

A person, it was held,1 may subject himself to liability as

surety for a debtor and his sureties, so as to have a superior
equity to such sureties ; as where a judgment had been recovered
against the princi~al debtor and his sureties, and a third person
agreed with the creditor to become surety for the payment of
the debt. Judgment having been recovered against one Sey-
mour, on a note, it was partly paid and satisfied, and Ely, the
defendant, agreed to indorse the note of Seymour, for the re-
mainder of the principal and interest of the judgment, as further
security for that part of the debt; and that for Ely's protection
and indemnity, in case he should be compelled to pay that note,
he might have the benefit of all the securities held by the bank
which had discounted the.original note. The second surety in
respect to whom the former sureties were to be regarded as the
principal debtors, it was held, was entitled to enforce satisfaction
of the judgment for his own benefit and protection. The new
sdrety derived his right from the creditor, and acquired the priv-
ileges of the creditor, as against both the debtor and the former
sureties. There was nothing in this arrangement that would
have prevented the previous sureties from paying the debt and
thus discharging the liability of the new surety, in which case
they would be authorized to ask for an assignment of all the
securities which the creditor held for their indemnity.
When a party, interested in the estate of a deceased person,
becomes dissatisfied in relation to the solvency of the sureties,
and requires new security which is given, the new security, it
was said by the court,2 is only collateral to the former. Such
is the very nature and purpose of the new ~urety's undertaking
to make good any loss arising from the former's insolvency-
to be the surety of a surety. If, therefore, said the court, the party
entitled should recover from the old surety to the full extent of
the penalty of the bond, the collateral security must be dis-
charged, and the old surety would have no right of contribu-
tion against the new surety. But when it is the surety himself,
who becomes dissatisfied with his responsibility, and seeks to
be relieved, it is otherwise. The Court of Probate cannot sub-

1 La Grange v. Merrill, 3 Barb. Eq. Rep. 625.

ll Field v. Pellot, 1 McMullen, Eq. Rep. 369.

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 128 SUBSTITUTED LIABILITIES.

stitute' a ~w surety, so as to dischatge the formet from his

contract. But there is nothing to forbid its requiring a nevi
surety, who as between the sureties themselves, shall be the
primary one, leaving the former only collatera).. When a new
surety comes in, a former surety may be, in respect to him, the,
principal, or if such is the intention, he may become the prin-
cipal surety. In each case, it is the real surety, who may be
entitled, under circumstances, to subrogation, and not the part)li
who js in regard to him in the position of a principal.
George Shoemaker had given his not.e to the Philadelphia
Loan Company, with ') iathan Nathans as his indorser ; this
note was sued, and separate judgments obtained against the
.m aker and indorser, and execution was issued on the judgment.
against the principal, upon which his real estate was about to
· be sold, when Pott & Co., the defendants, gave their note to
the plaintiffs as collateral security for the judgment. By reason
of the acceptance of this note, as security, and the suspending
of the sale of the principal's property, the original indorser had
been compelled to pay the debt, and it was held that he was
entitled to have an assignment. of the judgment on the note
thus given, to indemnify him for such payment. The case wa~
decided on the ground, that the interposition of the second
surety, having been the means of involving the first in the ulti-
mate liability to pay, there was a preponderance (}f equity in
favor of the first surety, who was entitled, therefore, to the ben--
efit of the new security. But, in truth, the parties who came
in as volunteers, and by assuming the liability of the principal
debtor, discharged the property taken in execution, placed
themselves in re~pect to the surety, in the position of the debtor.
They had, therefore, no higher equity, as to the surety, than the
debtor himself, whose debt they assumed.1
The same principle applies to liabilities assumed by bail, and
others, who become sureties in the course of judicial process,
for the principal debtor. If they become charged upon their
undertakings for the benefit of the debtor, they are regarded in
law as representing the debtor, and in that capacity are liable
to the creditor, and to the original sureties for the debtor.

1 Pott11. Nathans, l Watfll &1 Berg; R. 155.

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 SUBROGATION IN FAVOR OF A SURETY FOR A SURETY. 129
In a case,1 where a debtor of the Huntington Bank gave his
note for one thousand dollars, with two indorsers, the note not
having been paid at maturity, the bank sued the promissor, and
obtained judgment against him, and also sued the indorsers,
and obtained judgment against them ; the principal gave abso·
lute bail to obtain a stay of execution, after which the bail were
sued, and judgment obtained against them. It was claimed
that as against the bail who stood in the relation of surety, but
not in privity with the indorser who actually paid the debt of
the principal, that there was no equity for subrogation; but
it was held that the surety who had ~been obliged to pay one
half the debt, was entitled to have an assignment of the judg-
ment agf!.inst the principal and the bail, to enable him to in·
dem~ify himself for the amount thus paid. "Privity,'' said
Gibson, Ch. J.," is perhaps ·essential to a claim for contribution,
}?ut is certainly not essential·to the right of subrogation." Re-
ferring to the case of Parsons v. Briddock, 2 Vernon, 608, he
says: " That though both parties stood in the relation of surety
towards the principal, they nevertheless stood in an equal
equity between themselves, because the bail had so identified
himself with the principal, as not to be distingui:o;hed from
him." In this case, the bail interposed to procure a personal ad·
vantage to the principal, and to the detriment of the surety,
who, but for this, might perhaps have been exonerated. Sub-
rogation was therefore decreed against the bail, for the full
amount paid by the surety.
Bing, the defendant, had executed a bond with one Watkins
as surety, but that fact did not appear upon the face of the
bond. On a suit against Watkins and Bing,2 Watkins only
was arrested. Smith gave bail for Watkins, and was subjected
to the payment of a large part of the debt, the action was
brought against Binf9o recover this. At the trial, Bing offered
evidence that he was only surety for Watkins. 'l'he court held
that Smith, the bail, could acquire through Watkins no right
against a third person which Watkins himself did not enjoy.

1 Barnes v. Huntington Bank, 1 Penrose & Watts, R. 395.

s Smith v. Bing, 3 Ohio, R. 33.

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130 SUBSTITUTED LIABILITIES.

By becoming bail for the principal, he gained no right against

the sureties.
In a case l where a party (Fagg) became a surety upon an
injunction bond by reason of which he became liable for the
claim against his principal (Fretwell), one Draffin stood in
the character of a surety for the principal in a bond to Millet,
but no part of the debt was justly due from him. His land,
however, was bound for the debt to Miller, and on this ground
the defendant claimed a right to be subrogated to the creditor,
not only against the principal, but all others liable for the debt,
for which was cited 1 Pothier on Obligations, part 2, ch. 6, art.
3, (427), where the general doctrine is stated as to the right of
a surety to subrogation. But the court were of opinion that as
no part of the debt was justly due from Draffin, the defendant
had ».o claim to subrogation against him, citing another pas-
sage from Pothier,2 where the right is more strictly qualified, 11;1:1
follows : " That all those who are bound for a debt for others
or with others, by whom they oogkt to be discharged, either
wholly, or in part, have a right, upon payi11g, to demand a ces-
sion of the actions of the creditor against the other debtors."
The debt was justly due from the principal in the bond,
and not from Draffin, the surety. As against him, there·
fore, the defendant had no right to be subrogated to the claim
of the creditor. But the defendant, by becoming surety for the
principal debtor 'on the injunction bond, became absolutely
liable for him in that character, as bail would be on the ground
of representation ; and if the creditor had actually resorted to
the bond of Draffin for satisfaction, he, on the contrary, would
have had a right to be subrogated to the claim of the creditor,
against the surety of him from whom the debt was due, on the
game principle by which the bail was held liable for the pri-R~
cipal debtor, in Parsons v. Briddock, su4
In another case,3 the principal in a bond assigned a claim to
a trustee, to idemnify his sureties in the bond, in trust that he
should collect the amount, and apply the proceeds to the dis·

1 Douglas "· Fagg, 8 Leigh, R 588.

~ Pothier on Obligations, part 3, ch. I,§ 2, (520).
1 Givens v. Nelson, 10 Leigh, R. 382.

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 SUBROGATION IN FAVOR OF 4 SURETY iOR A SURET,Y. 131
eharge of the bond. Suit was brought upon the bond, and the
sureties contributed, ratably, to its payment. One of the sure·
ties obtained a decree agaim•t the principal, for the amount
which he paid, and upon this decree sued out a ca. sa. which
1;>eing executed on the principal, he gave a bond to the sheriff
with sureties, that he should not depart from the rules or
bol?-Jlds of the prison, &c. This condition was broken, and the
bond being thereby forfeited, the sureties thereon became Hable.
The claim assigned to the trustee being afterwards collected by
him, it was held by the court that the surety who obtained the
security of the bond for the prison limits, was bound to pro·
ceed thereon against the sureties in that bond, and could only
come upon the trust-fund for any deficiency in his recovery
from them, and that those sureties could have no right to resort
to the trust-fund for their reimbursement, except to the extent
of any surplus that might remain after the full indemnification
of the original sureties. In this case the imreties were of dif.
ferent classes, and the surety of the party imprisoned stood in
the place of his priniipal. So far from this surety having a
right to be subrogated to the securities of the creditor against
the original sureties, they, as representing the creditor, had
a right to prosecute all his remedies against those who had
assumed liabilitieR in relief of the debtor. If property on
which execution has been levied, said the court, instead of a .
. sale under the execution, is restored to the de.,tor on the inter-
position of a friend as a surety in a forthcoming bond, and his
responsibility stands in place of the satisfaction thus inter•.
cepted, and on this responsibility he is charged and compelled
to pay, it i~ reasonable that payment should produce the same
effect as if satisfaction had been had from the sale of the
property levied on. So the taking of the body in execution,,
though it be not a satisfaction, yet tends to satisfaction, and
the sureties in the bond, by becoming bound as such, withdraw
the debtor from prison, and enable him by escape from the
limits, to deprive the creditor of his Hen on the body. Their
obligation holds the place of that lien.
Judgment was recovered against the principal obligor in a
bond and against two of the three sureties, but not against the
third, and a,fier•facias having been sued out on the judgment,

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and levied on the property of the principal, he gave a bond for

the forthcoming of the property in which the sureties against
whom judgment had been recovered, together with another
person, joined him as surety. The execution awarded on this
forthcoming bond was levied on the goods of one of the
sureties in this bond, who was also a surety in the original
bond ; it was held that this surety had no right to contribution
from the third co-surety in the original bond. In becoming·
parties to a bond for the property taken on execution, they
assumed a new liability for which they had no claim upon the
original surety who was not a party to that bond. They
received the property which might have satisfied the debt,
and by their own act prevented such satisfaction. In this case
the third person, who, together with the original sureties, became
bound as a surety for the forthcoming of the property levied
upon, was compelled to pay the debt on the execution which
was awarded on the forthcoming bond, and it was held that he
was co-surety with the two other sureties for the principal in the
forthcoming bond, and that he was not sut"ety for those sureties
as well as the principal, and that therefore he was entitled to
contribution only from the two other sureties, and not to full
indemnity from them as principals. The court assumed that
the surety for a principal debtor may siand in the relation of
principal to a supplemental surety, where such is the intention;
but here the bond was a distinct engagement which determined
the. liability of the parties. If the surety in this bond, who
was compelled to pay the debt, was surety, for the principal
and the two original sureties, this should have appeared upon
the bond. The principal received the property, and the implied
agreement, on his part, was with all the sureties, for the de-
livery or to account, and the implied agreement between the
sureties was for a contribution. If the undertaking had been
that the third surety should be bound for the original sureties,
and they for the principal, this should have constituted the sub-
ject of a special provision.I
Wigginton, deputy of Lane, sheriff of the county of Fairfax,

1 Langford v. Perrin ; Perrins v. Ragland, 5 ~tt, R. 552.

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gave a bond to his principal, Lane, for the faithful discharge of
the office of deputy-sheriff, with five sureties; but Lane, not
being satisfied with this security, Wigginton, and three other
persons as his sureties, gave a second bond to Lane with like
condition, but on the second bond there was a memorandum
indorsed and signed by Lane at the time of its execution, that
Lane should not. resort to the second bond for indemnity for
the misconduct of the deputy in office, so long as the sureties
in the first bond should be residents in the State, and it should
appear that he could be indemnified without recourse to the
sureties in the second bond. Lane, the sheriff, recovered judg-
ment on the first bond, against the sureties therein bound, for
the amount of damagea sustained by him by reason of the
deputy-sheriff's misconduct in office. It was held that the
sureties in the first bond had no right to contribution from the
sureties in the second bond. The intention of the parties to
the second bond was to be bound not as co-sureties, but only if
the other sureties did not pay, that is, as surety for the sureties,
not as co-sureties with them. The express contract of the
parties determined the extent and nature of the obligation.I
Walker became surety for the defendant Frazer on an appeal
from a judgment in a case in which Vaudry was bail; the
judgment having been affirmed, Walker paid its amount. In
the mean time Howe, the plaintiff, had obtained judgment on
the bail bond executed by Vaudry in the original suit against
Frazer. It was held that the surety who had thus paid for his
principal was legally subrogated to all the rights of the creditor,
and consequently to those against Vaudry as bail of the de-
fendant. " The reason," said the court, "for saying that the
subrogation is implied in favor of the party who becomes last
bound, is, that he was induced to undergo the responsibility,
because the principal's solvency was guaranteed by the person
who first bound himself for him. This reason appears cogent,
the person who first binds himself gives credit to the principal
and would wrong him, who, under faith of this, superadds his
responsibility if the former declines to comply with his engage·

1 Harrison v. Lane, 5 Leigh, R. 414; Craythome v. Swinburne, 14 Vesey,

160.
12

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134 SUBSTITUTED LIABILITIES.

ment to satisfy the debt if the principal does not." The bail
here represented the principal, and the subsequent surety be-
came bound for both as principals.1
Although it is recognized as a rule of equity in the courts of
Kentucky 2 that a surety who has paid the debt, has, as to the
person and property of the debtor, a right to take the place of
the creditor, so far as to have the same preference over
general creditors that the creditor would have had, and may
have the benefit of any mortgage, lien, or other collateral
security that the creditor has ; and though, in general, a court
of equity will require the creditor to transfer all such securities
to the surety who pays the debt or permit him to use the
creditor's name to make them available ; yet this principle will
not be applied to defeat an interest acquired and held by a
third person, when that interest, though subordinate to that of
the creditor, is prior in date to the undertaking of the surety;
it was therefore held, that a party who first comes in as a
surety in an obligation incidental to the prosecution of the
legal remedy against the person of the debtor, was, pri,ma facie,
to be considered as trusting to his principal only, for whom
alone he is sur.ety, and that he had no right to be subrogated
to the creditor's remedies against a prior surety or incumbrance.
The creditor may resort to the person of the debtor in relief of
the surety, and he who becomes bound as bail, or otherwise, in
discharge of the debtor, represents him, and can have no claim
to be indemnified as against the surety.a

1 Howe v. Frazer, 2 Robinson, R. 424.

2 Patterson v. Pope, 5 Dana, R. 241.
8 "Suppose an individual," said the court, "to procure a credit for another, not by
becoming his surety in form, but by giving a mortgage on his own property, to secure
the debt of the other. The creditor, instead of proceeding upon the mortgage, pro-
ceeds against the debtor, and in the course of that proceeding, the debt is replevied
(under the peculiar process of the State of Kentucky), and if ultimately paid by the
replevin surety, would he be entitled to go back, for his indemnity, upon the mort-
gaged property of the stranger, which the creditor had sought to relieve, by coercing
the debt from the debtor himself? Or, if a creditor take a mortgage from the debtor
himself, and afterwards, upon a further advance of money, takes a second mortgage
upon the same land for its security, would the replevin surety, who might pay the first
debt, be substituted to the benefit of the creditor under the first mortgage, so as to be
preferred to the same creditor's right under the second mortgage 1 Or if the second

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 SUBROGATION IN FAVOR OP A SURETY FOR A SURETY. 135
Although, in general, a person who becomes bound for the
defendant in an action at law, in any stage of legal process,
may subject himself to the liabilities of the party for whom
he is bound, in exemption of a prior surety for the debt;
still it is true that the debtor himself, is personally liable ;
the bail and other sureties who have put themselves in the
place of the debtor, have no resort to the sureties in the
bond or debt which was the subject of the action, but they
may claim that the property of the debtor which has been set
apart as security for the debt, shall be appropriated for its
payment. Such a surety will be entitled to claim that
the principal and the sureties in the original bond, are in
respect to him as principals, and that he is entitled to stand
in the place of the creditor, whom he has paid, and have the
benefit of any mortgage or other security as against a subse·
quent incumbrancer, though he may have become such before
the responsibility was assumed by the bail or other surety for
the relief of the p·erson of the debtor during the pendency of
judicial process, though it is otherwise in regard to a surety
who has received property of the debtor on the assumption of
responsibility for that.

NOTE. - If property is conveyed by the principal debtor as security for the

surety; the creditor may, under certain circumstances, be entitled to the benefit
of s1:1ch security. It may be regarded as a trust for the security or payment of
the debt, and to render the security available for the satisfaction of the debt,
the creditor may have relief in equity against one of several sureties to whom
property has been conveyed by the principal for his individual security.
When the principal debtor has given security to a surety for a debt instead
of the creditor himself, it has been said that the creditor has a right to be sub-
rogated to the surety ; this is incorrect. Bibb v. Martin, 14 S. & M. 8 7. Sub-
rogation is a right of substitution to the creditor's cause of action. Although a
creditor may be entitled to claim that a surety to whom property has been
conveyed by the principal debtor, is a trustee for him and that he has a lien
upon the security thus given, his right does not depend upon subrogation, and
his remedy is direct against the surety and his assignees. If a co-surety pays
the debt, he may be entitled to stand in the creditor's shoes and be subrogated

mortgage was taken by a different creditor, would he be postponed to a replevin surety

who had paid the first debt 1 "

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136 SUBSTITUTED LIABILITIES.

to his remedies against the surety who has, on.his individual account, received
security from the debtor.
It has been held, in many cases, that if the principal convey property by a
deed of trust expressly for the benefit of one of the sureties only, the other
sureties have an equity to come upon it, to the same extent that he may.
The ground on which this rule rests is that in respect to the principal all the
sureties are entitled to indemnity alike, and it is inequitable that one of them
should be preferred by him. West v. Belches, 5 Munford, R. 187; Hindsill v.
Murray, 6 Vermont, R. 136.
If the security is given to a surety for a contingent liability which never be-
comes abso!pte, neither the other sureties nor the payee can claim the benefit
of the security. Where an indorser is discharged from default in giving
notice, security given to him cannot be made available to subsequent indorsers.
Agnew v. Bell, 4 Watts, R. 36.

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 CHAPTER VI.

SUBROGATION UNDER NEGOTIABLE INSTRUMENTS.

THB principles which govern the doctrine of subrogation are

applicable t.o bills of exchange and negotiable notes, so far as
such instruments derive their efficacy from the common law.
As between the original parties t.o a negotiable note, the prin-
ciples of equity and natural justice which require that a surety,
who has been subjected t.o liability for the debt of his principal,
shall have recourse against the true debtor, and the security
which he has provided for the credit.or, is fully applicable.
But the law which renders the parties to a negotiable instru-
ment liable t.o the indorsee on an assignment qualifies such
liability by special rules on which it is made t.o depend. Thus,
an indorser who is bound in effect, as surety, for the payment
of a negotiable note, is entitled to notice of non-payment by
the maker. If the notice required by law is not given, the in-
dorser is discharged. The security in his hands, if the rules of
law have .not been complied with, ceases t.o be charged for the
debt and may be transferred or charged by the owner with
other debts.
If we suppose the case of a second indorser who has been
charged with liability and paid the note, but who has, by
neglect, lost his recourse against the first indorser who held
security for the debt, it is clear that the liability of the first in-
dorser cannot be revived by a cession of actions from the
payee. The indorser is discharged by law, and even if the
security remaining in his hands would in equity be chargeable,
it ceases t.o be so after a sale or transfer. The rules of law
requiring notice of non-payment are established in reference to
such cases, and are designed for the protection of commerce.
As against the maker, the case is very different where the
12•

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creditor has obtained security for the payment of a negotiable

note, and has received payment from the indorser who is sup-
posed to have lost his recourse by neglect to gh·e notice of non-
payment by the maker. The indorser is in the condition of a
surety, and in that character he has a right to be subrogated to
the creditor against the maker and to his lien upon the secu-
u"tY· •
In a case decided by the Supreme Court of the State of New
York,1 the action was brought on a promissory note, by indorsees
against an indorser. The note, before it became due, had been
discounted by the Chemical Bank on the indorsement of the
plaintiffs who, having been duly notified of its non-payment by
the maker, paid it and took it up as indorsers. At the maturity
of the note the notary of the bank demanded payment of it,
and the next day, after making suitable inquiry to ascertain
the residence of the first indorser, being told that he resided at
one or the other of two places, sent notice to him at both
places. The first indorser, however, never received notice, but
resided at a different place, and the plaintiffs knew that fact.
It was held by the court that the plaintiffs, who paid the bank,
stood in the shoes of the bank, in respect to which the notice
was sufficient, and were subrogated to its rights.
The case afterwards came before the Court of Appeals 2 by
whom it was decided that though inability to discover the
residence of the first indorser excused the proper service of
notice by the bank, this excuse was not available to the second
indorsers who knew the residence of their indorser, and that
the defendant was discharged by their neglect to give notice.
It is observable that though this was treated by the Supreme
Court as a case of subrogation, the action was not in the name
of the bank, and there had been no cession of actions. The
action was in the name of the second indorser by whom pay-
ment had been made against the first indorser, who, as against
the second indorser, was excused by neglect of notice of non-
payment by the maker.
The inability of the bank to give the notice which was a

l Beale v. Parish, 24 Barb. R. 243.

~ Beale v. Parish, 6 Smith, R. 407.

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 SUBROGATION UNDER NEGOTIABLE INSTRUMENTS, 139

sufficient excuse to them, was, in its nature, personal, and could

not operate in favor of the second indorser, who was bound to
give notice to prior parties. Notice from the holder would
have been sufficient for all the indorsers; but his inability to
give the notice would not excuse notice from a party who was
enabled to give it and from whom it was required by law.
A different question would have been presented if, after pay·
ment by the second indorser, a cession of actions had been
made in his favor by the bank. Or, if on a bill in equity he
had sought to be subrogated to the right of the bank.
The indorser was, indeed, in the position of a surety for the
maker, but his liability was qualified by the principles of law
applicable to negotiable paper. In effect the contract of surety·
ship was an agreement to be bound not absolutely in that
character, but provided a demand should be made duly on the
maker at the. time and place of payment, and that on failure of
payment, notice should be given to the indorser. The law pre·
sumes that such notice is needed by the indorser for his own
security. It is a condition of the contract on which the liability
of the party depends. If by reason of the non-performance of
this condition, the first indorser is discharged, it is clear that
the second indorser has no equitable claim to be subrogated to
the action of the holder whose claim on the first indorser for
the default of the maker has not been discharged.
Where security has been provided for the contingent liability
of the indorsers of a note holden by a bank against the maker,
and the indorsers have, by the !aches of the bank, been dis-
charged from liability, the holder cannot claim to be subrogated
to such security on the alleged ground that the security was
provided for the satisfaction of the indorsers. Being discharged,
their lien on the security is at an end.I
The right of an indorser to be subrogated to the ~reditor in
payment, is the same as that of any other surety, except so far
as it is modified and controlled by the law merchant, or by
positive regulation of statute.
But in a case where a judgment was obtained against the
maker and four successive indorsers, and the property of the

• l Hopewell v. Cumberland Bank, 10 Leigh, R. 206

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third indorser had been seized by the sheriff on execution, and

he had paid the money to the sheriff, Mr. Justice Cowen held,
at a special term, that the judgment was thereby extinguished;
and he denied the motion made by the indorser for leave to sue
out an execution on the judgment against the prior parties.
The decision was placed upon the ground of a payment by a
surety, who has no remedy against his principal but for money
paid, or to be subrogated in the place of the creditor by a court
of equity. " The very reason," said Mr. Justice Cowen, "why
chancery performs the office of subrogation, in favor of a surety
who has paid, is because the debt being extinguished, a court
of law cannot do it." l
In another case the last indorser purchased and took an
assignment of the judgment rendered on a note, against the
maker and indorsers, and sought to enforce it out of the real
estate of an antecedent indorser. Mr. Justice Jewett, on the
application in behalf of a junior judgment creditor of that in·
dorser, held that the assignment of the judgment operated as
an extinguisbment of it, and directed a perpetual stay of the
execution. " At law," said the court, "it is well settled that
payment of a judgment to the plaintiff or the owner, by the
defendant, or by one of several defendants, extinguishes it, al-
though such payment be made by a defendant who is a mere
surety. A court of law substitutes such surety in the place of
the plaintiff, and allows him to take execution upon such judg-
ment~ The judgment is regarded as extinguished against all.
An assignment by the plaintiff or owner of a judgment, to one
of several defendants in the judgment, works the same conse-
quence." 2
In a subsequent case 8 the two preceding cases were ques-
tioned. The court said, that " the contract which the law
implies between principal and surety, is different from that
raised between the maker and successive indorsers of commer-
cial paper. A principal and his surety could always be sued
jointly, at common law, when they were parties as such to the
same instrument. The maker and indorser of a promissory
1 Ontario Bank v. Walker, 1 Hill, R. 652.
2 The Bank of Salina v. Abbott, 3 Denio, R. 181.
1 Corey v. White, 3 Barb. 12.
•

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 SUBROGATION UNDER NEGOTIABLE INSTRUMENTS. 141

note could not, at common law, be joined, for the reason that
their contracts are separate and different from each other.
They can only be joined by statute." The statute preserves
the right of the respective parties amongst themselves, as it was
before.1 ·
The court were of opinion that courts of law should so
exercise their jurisdiction as to protect, by subrogation, the
rights of a surety. ·
The general rule is, that a mere volunteer or stranger cannot,
by making himself party to an obligation for the payment of a
debt, acquire, as against the original debtor, a right to be sub·
rogated to the actions of the creditor. ·
In a case decided by the Court of Appeals of Maryland,2
Rebecca Dorsey mortgaged certain real estate to the Neptune
Insurance Company to secure an indebtedness of eight thou-
sand dollars. After a decree for a sale the company conveyed
their interest in the mortgage to the Baltimore Life Insurance
f',,ompany. Rebecca Dorsey, the mortgagor, conveyed her
equity of redemption to Edward H. Dorsey, who thereafter
mortgaged his interest in the property to John Patterson to
secure a debt.
Afterwards Edward H. Dorsey passed to the Baltimore Life
Insurance Company his three promissory notes indorsed by
James Swan for $443.M, tteing the amount of interest due on
the mortgage. These notes were paid by Swan at maturity,
and the property having been sold, and the proceeds being
more than sufficient to pay the mortgage debt, Swan insisted
that to the extent of the notes so paid by him, he was entitled
to be subrogated to the Baltimore Life Insurance Company, and
that his claim should be preferred to that of the subsequent
:mprtgagee. The court were of opinion that the equitable
assignmebt pro tanto in favor of a surety cannot be effected
unless he has paid the entire debt of the creditor. But the
court were also of opinion that as Swan, the surety, never
became the surety of the original principal debtor, but only of

1 See Act o( April, 1832, § 7.

s Swan v. Patterson, 7 Maryland, R. 164•

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the assignee of the equity of redemption, the right of sub-

stitution claimed could not be maintained, but that the holder
of the claim must rank as a simple contract creditor only.
But there is one case in which a stranger or volunteer may,
by making himself party to a debt, under the commercial law,
acquire a right to subrogation, namely, where he accepts a bill
of exchange SU'[Yf'a protest, for the honor of some party to the
bill.1 .
Payment, say!:! Chitty,2 may be made by any one for the
honor of the drawer or any of the indorsers, but it is always
made aft& protest, and is therefore called payment · supra
protest, and no person should pay in honor of another, before
the bill has been protested for non-payment. Although, with
respect to other debt!:!, a stranger who has no interest in them,
does not, by paying them, entitle himselt to the rights of a
creditor, unless he have the consent of the debtor to such pay-
ment, yet., with regard to bills of exchange, a stranger, who
pays them after protest, acquires all the same rights that the
holder of the bill had, although no regular transfer of the bill
was made to him.a
In a case' at Nisi Prius,4 Lord Kenyon was of opinion that
where a bill is taken up for the honor of any one whose name
is on the bill, the party who does so is to be considered as
an indorsee paying full value for tl\e bill, and, as such, entitled
to all the remedies to which an indorsee would be entitled, that
is, to sue all the parties to the bill, and he therefore directed the
jury to find a verdict for the plaintiff. The party who inter-
venes to make payment for the honor of any party to a bill is
entitled to subrogation, but in order that it may have effect,
it is always required that payment should be made after
protest, because it is only when the refusal of the debtor is

1 Burr v. Smith, 21 Barb. 262. Where, after a note bad become due, a stranger
paid it, hut declined cancelling it and took it away with him, nothing being said about
burying it; it was held to be payment and satisfaction of the note, so as to prevent a
suit being brought thereon by a person receiving it from the stranger.
2 Chitty on Bills, 408. See also, Pothier, Tr. du Contrat de Change.
5 Chitty on Bills, 409.
4 Mertens v. Winnington, I Esp. 112.

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 SUBROGATION UNDER NEGOTIABLE INSTRUMENTS. 143

regularly shown by protest, that payment for the honor of a

party to the bill can be useful to him.I
It is provided, by the French Commercial Code,2 that he
who pays a bill of exchange, by intervention or for 'the honor
of a party to the bill, shall be subrogated to the rights of the .
holder, and be charged with the performance of the same duties
and formalities to which he was bound; that, if the payment
by intervention is made for the honor or on account of the
drawer, all the indorsers shall be Hberated; that if it is made
for the honor of an indorser, subsequent indorsers shall be
liberated.· In this respect the code of commerce derogates
from the civil code,8 which provides that an obligation may be
performed by a third person who has no interest therein, pro-
vided that such third person acts on behalf of and in discharge
of the debtor ; or if he acts in his own name, that he shall
not be subrogated to the rights of the creditor.
This modification of the general law was prompted by
weighty motives, and had for its object to engage the friends
of the drawer and indorsers, to render them this service and to
preserve, by this means, commercial honor and credit.4 A
stranger, says Pothier,6 has not only an action against the
party to a bill, for whose honor he has accepted it, but the law
subrogates him to all the actions which the holder had against
those who were charged by the bill, the Ordonnance of 1673
providing expressly that by means of payment, he becomes
subrogated to all the rights of the holder of the bill, although
he may have had no assignment thereof, subrogation, or order.
It is not, therefore, necessary that on payment he should have
required subrogation, this being a case in which subrogation
takes effect by operation of law.
Although a stranger may intervene and pay a bill for the
honor of a party to it, the practice is not unattended by incon-
veniences, as· such intervention may be made for the purpose of

15 Masse, Droit Commercial, No. 168.

9Art. 159.
a Code Napoleon, Art. 1236.
• 2 Locre, Esprit du Code de Commerce, p. 237.
6 Pothier, Tr. du Contrat de Change, No. ll3.

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144 SUBSTITUTED LIABILITIES.

gammg an unfair advantage. It is, therefore, says Locr~,1

re.quired by law that payment should be made after formal
protest.
And hr a case/.! decided by the Supreme Court of Louisiana,
where a stranger to a negotiable note paid the note and then
caused it to be protested, Porter, J., said that payment
for the honor of the indorser did not confer a right of action,
unless the honor of the indorser was then in such a situation
that this measure became necessary for its preservation, but the
honor of the parties to the note could not in reason, or by law,
be in any way affected until a protest for non-payment. Hence
any step on behalf of that honor, previous to the protest of the
instrument, was premature ; it was discharging an obligation
before any existed.
Indorsers of negotiable instruments are not to be regarded
as co-sureties. The security which is provided for an indorser
is not, unless such is the express agreement, to be appropriated
as a fund for the security of the debt to which a subsequent
indorser has a claim in equity; but merely as security for the
individual indorser. Levy procured the plaintiff, Gomez,s to
accept a bill of exchange for $5,000, payable to one Clark,
whose indorsement, as well as the plaintiff's acceptance, was for
the accommodation of Levy. The bill was discounted at the
Bank of Cape Fear. When the bill wa~ drawn, Levy executed
a bond to Clark, the indorser, with a condition to be void in
case Levy should indemnify him against loss as surety. To
secure this bond Levy executed a mortgage upon his property.
The whole of Levy's property was afterwards conveyed to
Lazarus and McRae; with notice of the mortgage to Clark,
and it was provided in the deed, that out of the property thus
conveyed, so much of the debt of Levy should be paid as was
indorsed by Clark. Afterwards Levy, with Gomez and Clark
as his sureties, gave a joint note to the bank, the holder of the
bill for the amount thereof. Gomez paid the whole of this
note, and by a bill in equity sought the benefit of the fund

1 Vol. 2, p. 240.
~ Holland v. Pierce, 14 Mart. R. 499.
a Gomez v. LazarDB, 1 Devereux, Eq. R. 205.

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created for Clark's indemnity and obtained an assignment from

him, and also from the bank, of all their interest in the
property. Gomez, by his acceptance, became a principal as to
Clark and the bank, but his acceptance being for the accommo-
dation of Levy, as between Levy and himself, he was only a
surety. The question was, whether Gomez was entitled to be
subrogated to the security provided for Clark. The case was
decided according to the rules of priority, as applicable to
commercial paper. Gomez stood prior in obligation to Clark,
whose liability was to arise only upon the default of the
former. He could not claim the security upon being subro-
gated to the rights of the creditor (the bank), for th.e creditor,
upon receiving payment from him, was bound to assign all its
obligations and means for enforcing payment from those who
stood prior and equal in obligation to him, and not from those
who stood posterior to him. The indorser undertook that the
acceptor would pay. The parties were, therefore, held not to
be in any sense co-sureties. If the secutity had been specifi-
cally appropriated for the payment of the debt, instead of being
provided for the mere indemnity of the indorsers, the decision
would have been different.
Where A as surety, signed the note of B, payable to C, and
it was indorsed by C, at the request and for the accommodation
of B, there being no contract between A and C whereby they
agreed to become sureties of B, it was held that A had no
right to contribution from C. The order of liability, arising
upon the face of the transaction, was regarded as the rule of a
court of equity, as well as at law, in fixing the relation of prin-
cipal and surety, and that of co-surety and supplemental surety;
though the relation may be varied by contract, whatever may
be the form of the security.I

1 Smith v. Smith, 1 Devereux, Eq. R. 173.

13

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 CHAPTER VII.

SUBROGATION AS BETWEEN PARTIES WHO HOLD A FIDUCIARY

RELATION TO EACH OTHER.

A GUARDIAN, whose duties to a minor ward may extend over

many years, and regard all bis transactions during the time
of his minority, trustees, who have continuing duties and
liabilities to the persons interested in the trusts, and partners,
who have a community of property as well as of liabilities, do
not, in general, by the payment of any single debt, acquire
against the party wp.o was previously bound therefor, a right
of subrogation. .Their rights and liabilities depend on a final
settlement of accounts, and the liability of the principal grows
out of the relation, and is direct.
Renussons 1 says, that if the guardian pays in quality of
guardian, he extinguishes the debt of the minor. He is not
regarded as having made payment from his own funds, but
rather from the funds of the minor, for, until he has rendered
account, it cannot be known whether he is creditor or debtor
of the minor ; that depends on the settlement of the account
to be made when the minor attains the age of majority.
Therefore, having made payment as guardian, he extinguishes
thereby the debt. The payment made by a debtor, as debtor,
extinguishes the debt, and if the minor has no funds in the
guardian's hands, who has made payment from his own funds,
he has only an action to recover what he has paid for the minor
as guardian, habet tantum contrariam actionem tutel<e, and . a
right to make it a charge in his account. He has not suc-
ceeded to the hypothecation of the creditor, and he cannot
retain the proceeds thereof against his ward.

l Renussons, ch. 9, No. 23.

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 SUBROGATION AS AFFECTING TRUSTS. 147
It makes no difference if, at the time of payment, the
guardian has stipulated for subrogation, for he makes pay·
ment ih quality of guardian for the minor and as debtor ; a
debtor, by payment, extinguishes the debt. He cannot stipu·
late for subrogation against himself. In like manner, if he
declares that he makes payment as a stranger, he is incapable
of subrogation. He really pays in his quality of guardian, and
his declaration. is without effect.
In . France, according to Renussons, when the guardian has
in his bands no funds of the minor, by the consent of such
relations of the minor as are by law entitled to direct, the
guardian may pay the debt of the minor from his own funds
and acquire the right of subrogation. In this country, where
the same general rule prevails, it is probable that where the
guardian had no property of the ward within his control, he
might pay the debt against him from his own funds, and by
the authority of a court of probate, acquire the right of subro·
gation. Such action of a court of probate would be considered
as equivalent to a general settlement of accounts, and as
ascertaining the liability of the minor. The guardian who,
under such authority, made payment from his own funds,
would, by subrogation, acquire a right to the security as
against the. minor.
It remains to be examined, sayR Renussons,1 what action a
guardian, who has paid his pupil, may have against the other
guardians as jointly liable with him, and whether he is subro·
gated by operation of law (plein droit), to the pupil or ward,
whom he has paid, without having required or stipulated for
subrogation in making payment.
They ·are, it is to be observed,2 held responsible for each
other's defaults, and if, after the guardianship is ended, one of
the guardians is sued by the ward to account and pay what is
due, he may demand that the liability shall be divided between
himself and the other guardians.
By the civil law, when a ward has several guardians, and in

1 Rennssons, ch. 9, No. 23.

~ Ibid. No. 24.

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148 SUBSTITUTED LIABILITIES.

an action against one of them has recovered for the whole

amount, the guardian against whom there has been such
recovery, if he pays the ward, may receive a cession of 'actions
against the other guardians who have not been condemned,
The action is not extinguished, but the guardian who has paid
may sue in the name of the ward, for the part due from them,
and it would seem that he might sue for the whole amount,
when the debt has been lost by their default ; b,ut a cession of
actions was necessary as subrogation did not, in such cases,
take effect as of right.
In a case 1 which occurred in the State of Mississippi, a
guardian, who had failed to bring an action against a former
guardian, and who was, therefore, held liable to the ward, was
substituted to the right of the ward against the former guardian
who was in default.
Boyles, the first guardian, misapplied· eight hundred dollars,
the property of Blackwood, the ward. Orr, being afterwards
appointed guardian in the place of Boyles, died without hav-
ing taken any steps against the former guardian. Alexander
was Orr's executor, and also succeeded him as guardian. He
failed to proceed at law against the first guardian, and Black-
wood sued him and recovered judgment for such neglect.
Alexander paid the judgment, and it was transferred to a trus·
tee for his benefit. Smith, the surety of the first guardian on
his bond, was sued for the indemnity of Al~ander. It was
held by the court, that the right of action in favor of the ward
was transferred by law, which substitutes the agent, &c., who
has been guilty of neglect, to the action of the party injured.
But in this case, by the assignment of the judgment recovered
against Alexander, a transfer took place, which was equivalent
to a cession of actions, and it would have been more regular
if the action against the surety, on the first guardian's bond,
bad been brought by Alexander in the name of the ward.
There had been no recovery against the other guardians, be·
cause there was no joint liability; the subsequent guardian
was not liable for the former guardian's acts, but only for hiao

1 Alexander v. Smith, 4 Sneed, Miss. R . 482.

 SUBROGATION .AS .AFFECTING TBUSTS. 149

own default in not proceeding against him at law. Having sat-

isfied and taken a transfer of the judgment recovered against
him, the guardian might, as subrogated to the ward, have
brought an action on the bond in his name. The judgment
was transferred to the guardian to prevent an extinguishment
of the cause of action, and to enable him to recover from the
party who was justly liable; but even if there had been no
such cession, subrogation would probably have been held to
take effect by operation of law.
A trustee, whose liability and duty growt out of a single
debt, may be held liable as an agent to his principal for any
default relating to that single subject, and may, on payment,
be entitled to subrogation, but the liability of a general trustee
is not thus regarded. He is not ordinarily called upon to
account for each several transaction, and he is not subrogated
to the rights of the original creditor for any default as on pay-
ment and satisfaction made by himself, because the creditor
preserves his own rights of action. The trustee is not subro-
gated because, though by his default he may have laid a foun-
dation for future personal liability, he is not actually fixed with
liability, and the debtor continues liable directly to the creditor
himself.
The principle of subrogation does not apply to transactions
between partners.t Where partners borrow money to be used
in the business. which they are jointly carrying on, it becomes
a partnership fund, and however they may stand on the
security given to the lender, they are accountable to each
other as partners; The relation of principal and surety can ·
have no place between them. It does not alter tae case that
the partner received the proceeds of the note. The possession
of one is, in law, the poi:;session of both. The subsequent
loan of the fund to a third person does not change their rela-
tions. Even the misapplication of a partnership fund by one
of the partners cannot make the other a surety if he was not
l;!O before. And if a partner, after paying a partnership debt,
.might be substituted to the rights of the creditor as against his

1 Bailey 11. Brownfield, 20 Penn. R. (8 Harris), 41.

13•

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150 SUBSTITUTED LIABILITIES.

co-partner, still, as injustice might be done by allowing the

surety to be subrogated without first accounting to his co-
partner for the profits of the busi~ess in which they were .
jointly engaged, there must, therefore, it was said, be a resort
to some process in a court of law or of equity, by which, on a
final settlement of accounts between partners, the balance due
to one of them may be ascertained.
The same principle extends to dormant partners whose lia-
bilities in respect to subrogation are the same as those of osten-
sible partners. When there are ostensible partners, and also a
dormant partner, and a promissory note is taken from the
known partners, an action upon such an instrument may be
brought against all the partners, and a surety who, as such,
pays the money on it, is entitled t:o the usual remedies of
sureties against all. He may be subrogated to the remedy-0n •
the contract, or he may have his action for money paid for the
use of the partnership, and the promissory note so taken and
signed by the ostensible partnets and their surety is competent
evidence. 1

1 Hill v. Voorhies, 22 Penn. R. (10 Hnrris), 68 .

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 CHAPTER VIII.

OF THE RIGHT OF SUBROGATION IN FAVOR OF INSURERS TO

THE RIGHTS OF ACTION OF PARTIES INSURED.

THE right of subrogation exists in favor of an insurer who

has been subjected to liability and made payment on a policy
of insurance, on the happening of the loss, to all actions
against the person by whose negligence ~r wrong the loss was
caused.
In a case before the King's Bench,1 Lord Mansfield said,
" every day the insurer is put in the place of the insured. In
every abandonment it is so. The insurer uses the name of the
insured."
The plaintiffs were insured by the Springfield Mutual Fire
Insurance Company, against a loss by fire on a dwelling-house
near the railroad track of the defendants.2 The action was
trespass on the case (founded on Stat. 1840, ch. 86), to recover
the amount of Jl loss which the plaintiffs sustained by fire,
alleged to have been communicated to their dwelling-house by
a locomotive engine of the defendants. The insurers requested
the plaintiffs to commence a suit against the defendants to
compel payment by them of the plaintiff's loss, and offered to
indemnify the plaintiffs from costs and to save them harmless,
in reference to said suit. The plaintiffs refused to commence
a suit, as requested, but demanded the amount of their loss of
the insurance company, who paid the same, first notifying the
defendants that they did not intend thereby to relinquish any
claim which they might have against the defendants for the

1 Mason v. Sainsbury, 3 Doug. 63. This case was approved of in Clark 11.
Blything, 2 B. & C. 254.
ii Hart v. Western Railroad Corporation, 13 Met. R. 99.

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152 SUBSTITUTED LIABILITIES.

amount, in their own or in the plaintiffs' names. The insur-

ance company, in the name of the plaintiffs, then brought the
action to recover the amount paid by the company to the plain-
tiffs. After the action was commenced the plaintiffs executed
a release to the defendants, of any claim which they might
have against them on account of the loss declared upon in the
action. The court were of opinion that the owner and the
insurer were, in respect to the ownership and the risk incident
to it, in effect, one person, having together the beneficial right
to an indemnity provided by law for those who sustain a loss
by that particular cause, that if, therefore, the owner demands
and receives payment of that very loss from the insurer, as he
may by virtue of his contract, there is a manifest equity in
transferring the right to indemnity, which the owner holds for
the common benefit, to the assurer. If the owner first applies
to the insurer and receives the whole loss, he holds the claim
against the railroad company in trust for the insurer. " When
such an equity exists," said the court, " the party holding the
legal right is conscientiously bound to make an assignment, in
equity, to the person entitled to the benefit; and if he fails to
do so, the cestui que trust may sue in the name of the trustee,
and his equitable interest will be protected." In regard to the
right of the insurance company to sue in the name of the
assured, we think the cases fully affirm the position, that by
accepting payment of the insurers, the assured do implicitly
assign their right of indemnity from a party liable to the
assured. It is in the nature of an equitable assignment, which
authorizes the assignee to sue in the name of the assignor for
his own benefit; and this is a right which a court of law will
support, and will restrain and prohibit the assignor from de-
feating it by a release." It is observable that the court' fully
sustain the doctrine of subrogation by operation of law. So
that no actual cession of actions is necessary from the party
who, having a claim against another for a debt, or for indem-
nity for a wrong receives satisfaction from a third person
who is collaterally liable, but payment itself, operates in equity
as an assignment.
In the Supreme Court of Maine, it was decided that'where
property is wilfully burned by a third person, no action can be

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 SUBROGATION IN FAVOR OF INSURERS. 153
maintained against the wrong doer for the money paid by the
insurer in his own name.I On this subject a difference of
opinion existed in England. An insurance company having
paid the insured the amount of loss, sued the Hundred ; it was
held by Lord Mansfield and Buller, J., Willes and Ashurst
dissenting, that the office was not entitled to recover.2 Buller,
J., said: " The insurer, it is said, stands in the place of the
insured. But how 1 To use his name subject to all his disad·
vantages. A right of action cannot be transferred. Can the
insurer bring an action immediately on the loss occurring 1 If
he can, it must be a vested interest; if not, he cannot by
payment subsequent, which is his own act, entitle himself."
Ashhurst, J., said: ': The insurer may also bring an action in
his. own name, because when he has paid, he is damnified."
Willes, J.: " If the insurer had an original right, he may elect
to sue in his own name or in that of the insured." Lord Mans·
field said: "The assignee must sue in the name of the
assignor by which the defence is not varied. There is no
instance of an action in the name of the insurer, while number·
less actions have been brought by owners of ships when many
of them must have been insured." Judgment was rendered for
the defendant and unanimously affirmed in the Court of
Exchequer Chamber. There is a distinction between the case
of an insurer and that of a co-debtor. It cannot be said that
the claim is extinguished by the necessary effect of payment
made from a debtor. 'l'he insurer is not like a surety, a debtor,
and it is true that when he has paid, he is damnified. The
case is distinguished from that of a co-debtor in another re-
spect; a cession of actions is not necessary. The right of the
insurer results from the wrong. ·
There can be no doubt that the assurer is entitled in equity a
to be subrogated to the right of action of the assured on pay-

1 Rockingham Mutual Fire Insurance Company v. Bosher, 39 Maine, R. 253. To

the same effect is Conn. Mutual Life Insurance Company v. New York and New
Haven Railroad Company, 25 Conn. 265.
2 The London Assurance Company v. Sainsbury, 3 Doug. 245.
a The equity does not arise out of the contract of insurance, but from alf the cir-
cumstances of the case. Kernochan v. The New York Fire Insurance Company,
3 Smith, R. 428.

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ment, and to sustain, in the name of the assured, any action to

which he was entitled by reason of the loss, and it seems to have
been generally understood that as the right of action existed in
favor of the party sustaining the injury, the action could only
be brought in his name; but a different rule prevailed in a case
decided by judges of great eminence in the Privy Council,
where the action brought in the name of the party subrogated,
was sustained against him who had caused the loss to the
assured. A church in Lower Canada,1 having been in great
part destroyed by a fire which was occasioned by the negli-
gence of the respondents' servant8, and being at the time
insured by a policy effected by the cure upon the church and
sacristy ; the cure and, one of the marguiliers-en-charge, by a
notarial instrument, transferred to the appellants, the " Quebec
Fire Insurance Company,'' who had granted the policy, in
consideration of the payment by them of part of the amount of
the damage sustained by such fire, the right to sue and claim
from the respondents the amount so paid. It was held that this
constituted a valid subrogation of the debt due to the insurers
according to the French law prevailing in Lower Canada; and
that an action brought in the name of the insurers, upon the
notarial act against the respondents, might be supported ; that
the subrogation might be made by the cure, &c., as persons who
had a power to give a discharge, though they could not cede or
assign by way of sale, any of the rights of the church without
further authority; and that although the plaintiffs had already
paid the amount of the loss absolutely, this payment, which by
virtue of the contract in the case was indemnity, was not such
a payment as extinguished the debt, as it was supposed to do
in the case of a surety paying the debt of his principal, and
that, therefore, there might be a subrogation afterwards. This
case is important, as an instance of a cause of action founded
partly upon a claim originating in the acts of the party subro-
gated to the creditor (or party to be indemnified), and partly
on the original right of action in the creditor himself, and
differs alike from cases where the mere right of the creditor

l The Quebec Fire lnsuracen Company v. St; Louis, 7 Moore, P. C. Cases, 286.

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 SUBROGATION. IN FAVOR OF INSURERS. 155
passes by assignment, the action being in the name of such
creditor, and from cases where the subrogated party proceeds
upon a right of action in his own name, founded on the equity
resulting from the satisfaction of the claim of the former
creditor. The nature of the subrogation in such cases is well
explained by Pardessus.1 The right of an insurer who has
paid the amount insured on a fire insurance, to recover the
same from an incendiary or from· a neighbor who by his negli·
gence communicated the fire to the premises, which he regards
as inconte1:1tablc, exists not in virtue of a legal subrogation, for
the insurer who has paid, has not done so by reason of his
being bound with or for the author of the wrong, but is founded
upon those equitable considerations which it is the duty of
courts to apply to all cases which they are required to decide
in the absence of legal provision. In the instance, for example,
of an incendiary, there can be no question that the owner of
the house burnt, may recover from him the amount of damages
thus caused. The precaution which he has taken to insure
himself cannot discharge the wrongdoer from liability. On
the other hand, it would not be just that the assured already
indemnified by the assurer should receive indemnity also from
the incendiary. Therefore, it is to the assurer that the indem-
nity is due. By the effect of the insurance, he has become the
party interested, that the property insured shall not be sub-
jected to the damage insured against. The injury which that
property has suffered, has fallen upon him. He is the true
party injured, and he alone has a right to reparation. With
what justice, says this writer, can it be refused him. There
is more of subtlety than of good sense in the idea that he does
not found himself upon a subrogation to the rights of the
insured. It is not indeed a case of legal subrogation. It is a
case where the rule applies, that no one can free himself from
the duty to repair the damage which he has caused, nor be
enriched at the expense of another.2
Other French writers have considered the claim of the
assured as absolutely extinguished by the payment made by

1 Droit, Commerc. No. 595.

~ 2 Alazet, 391, No. 480.

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156 SUBSTITUTED LIABILITIES.

the insurer and therefore incapable of assignment, because a

right which a man cannot exercise himself, he cannot assign to
another. It must indeed be conceded that in the case stated
by Pardessus, the right supposed to exist by subrogation in
the insurer, is not distinguishable in this respect, from that of a
surety who pays the debt 8.nd claims to be subrogated to the
creditor by operation of law; and the case of the Quebec
Insurance Company v. St. Louis, must have proceeded upon
the ground that a satisfaction which absolutely extinguishes
the creditor's right of action, gives at law a new cause of action
to the party in whose favor an equity results by payment, and
that a right equivalent to that of subrogation, exists by opera-
tion of law. Mr. Baron Parke, who delivered the opinion of the
Privy Council, said that "the payment of the amount of the loss
by the insurance company, which in this case, by virtue of the
contract, is indemnity, is not such a payment as extinguishes
the debt, as it does in the case of a surety paying the d11bt of
his principal, and, therefore, there might be a subrogation
afterwards." It is certainly true that upon the principles
recognized in the case of Hart v. The Western Railroad Cor-
poration, above cited, payment by the insurance company
would not extinguish the claim of the injured party against the
wrongdoer, but the very foundation of the action brought by
the Quebec Insurance Company was, that the claim for wrong
had been satisfied. Suppose that St. Louis, the wrongdoer
in this case, with a view to provide indemnity for possible loss,
had bound himself to pay a certain sum, in the event that a fire
resulted from the exercise of his business, giving as security a
mortgage on land, and that .the Quebec Insurance Company
having authority so to do, had become sureties for him as
principal on the bond. On the ordinary principles of subroga-
tion, as understood in France and most of the United States,
the surety on payment and satisfaction of a loss when it hap-
pened, would be entitled to an assignment of the claim of the
injured party, and might bring an action in his name. Pay-
ment in such a case would not have extinguished the action.
But if the surety had paid and satisfied t.he claim, and had
afterwards resorted to the actio mandati in his own namei the
very foundation of the action would have been the extin-

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 SUBROGATION IN FAVOR OF SURETIES. 157

guishment of.the original cause of action, and the surety must

have eounted upon it. The case supposed differs from that
which was heard before the Privy Council, in the circumstance
that there was no privity in the latter case between the insu-
rance company and the defendant, by whose negligence the loss
was caused. If the insurers, after paying the loss, had brought
an action in the name of the party insured, it would have been
an ordinary case of subrogation, where privity is not necessary,
the right resting upon natural justice and equity. But the
action having been brought in the ~ame of the insurer, it was
necessary for him to show satisfaction of the debt and to
establish the liability of the wrongdoer by the effect of the
assignment of the cause of action. This was not indeed a case
of subrogation; if, in the case supposed, the insurance company
had, as sureties, paid the loss on the insolvency of the principal,
they might, by a cession of actions, have acquired the right of
the obligee and would have been considered purchasers as at
the Roman law of the name (nomen), and so would have been
entitled to sue in the name of the obligee, and as succeeding to
his place. Or they might exercise their legal remedies and
resort to the action mandati or negotiorum gestorum, or the
action of assumpsit at the common law; but the only mode in
which the surety could prosecute his · remedies against the
security given by the principal, was by bringing an action
in the name of the obligee. Such was not the course taken by
the plaintiffs, the insurers, in the Quebec Fire Insurance
Company v. St. Louis. The action was brought by the in-
surers in their .own name, and to sustain that action, it was
necessary to allege that the plaintiff had assumed and satisfied
the loss, and that by reason thereof, a new liability had arisen
against the wrongdoer. There appears to have been an
attempt to combine the principle of subrogation with the
legal remedy by action, which a surety, or one who may be
said to stand in the relation of surety, acquires by satisfying a
debt or liability with which another is justly chargeable. But
the absence of privity between the insurer and the author of
the loss, would seem to be an insurmountable objection to any
action in the name of the insurer against the party who has
caused the loss paid by the insurer. Though the insurer has
14

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158 SUBSTITUTED LIABILITIES.

paid and satisfied the loss, as between himself and the insured,
accor~ing to the terms of his contract, there was no express
engagement on the part of the wrongdoer, and none can be
implied to reimburse the insurer, and the satisfaction of the
loss cannot, when made by a stranger, be alleged as the founda-
tion of liability to an a'Ction ex contractu. The French writers
are not agreed on the question whether the assurer in such a
case may be subrogated to the rights of the party assured,
it being affirmed by Toullier 1 and others, and denied by
Duranton, Massee,2 &c.; ~mt Toullier, whilst admitting the
right of subrogation, states that the action must be brought in
the name of the assured.

1 Toullier, Vol. VII. No. 75.

2 Duranton, Vol. XII. No. 181; MaSs~e, Vol. V. No. 254.

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 •

CHAPTER IX.

OF SUBROGATION IN FAVOR OF A LEGATEE.

WE have seen that by the Roman law, where •the testator

bequeathed or devised property to a person which was hy·
pothecated to a creditor, as it was the presumed intention
that the heir should pay the debt and leave the property un-
iucumbered to the object of the testator's bounty, the legatee
might pay the debt himself and obtain frqm the creditor a
cession of actions for the purpose of proceeding against the
heir as subrogated to the rights of the creditor, and that if the
creditor had refused to make cession· of actions and subroga·
tion, it might be decreed by a court. The same right of subro·
gation in favor of a specific legatee, and also in favor of one to
whom land has been specifically devised, exists at the common
law.
It was held by Lord Chancellor Macclesfield,1 that if the
testator by his will give a lease, or a house, or any specific
legacy, and leaves a debt by mortgage or bond, in which the
heir is bound, the heir shall .not compel the specific legatee to
part with his legacy in ease of the real estate ; but though the
creditor may subject this specific legacy to this debt, yet the
specific or any other legatee shall, in equity, stand in the place
of the bond creditor or mortgagee, and take as much out of the
real estate as such creditor, by bond and mortgage, shall have
taken from his specific or other legacy.
It was held by Lord Chancellor Talbot,2 that though the
heir shall always prevail to have the personal estate applied to
the payment of .debts when no prejudice is done to simple

1 Tipping v. Tipping, I Peere Wms. R. 729.

2 Lutkins v. Leigh, Cas. Temp. Talbot, 53.

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• 160 SUBSTITUTED LIABILITIES.

contract creditor!! or Jegatees, yet the widow and the legatees

would have had a right to apply to the Court of Chancery, and
to stand in the room of the mortgagee, if he faJl upon the
personal estate, that being the proper fund for the legacies, and
to have so much of the real estate as he had of the personal.
On these authorities it wat1 held by Mr. Chancellor Wal-
worth,1 that as between a legatee, either pecuniary or speeific,
and the heir at law, if a debt chargeable both on the real and
personal estate is paid by the executor out of the personal
property, in the first instance, the legatee will be permitted to
stand in the place of the original creditor pro tanto, and may
recover the amount of his legacy, or to the extent of the per-
sonal estate so appropriated, out of the real estate descended to
the heir, and that if the debt is a specific lien upon the land,
as in the case of a mortgage, the legatee may, in some cases,
stand in the place of the mortgagee who has exhausted the
personal estate, even as against the devisee. .
In Culpepper v. Astou, 2 Cases in Chancery, 115, the Lord
Chancellor held that when the trustees has sold land appointed
or conveyed to pay debts, the heir i8 entitled to have the lands
after the debt is paid, but'that a purchaser buying the land is
not concerned, whether there be sufficiency or not ; if he buy
and pay, though there were sufficiency to pay the debts out of
the personal estate, that yet he should hold the lands against
the heir, and the heir must take his remedy against the trustee;
and so if the matter rests in account between the heir and
trustee, his purchaser is safe, though the money is misspent by
the trustee. It is otherwise when there is lis peudens between
the heir and trustee to have an account.
When the executor has authority to sell land for the pay-
ment of debts, in a case where land is mortgaged for a debt,
and a legacy is given by the will equal in amount to the
mortgage debt, if the executor sells the land mortgaged to pay
the debt charged upon it, and afterwards misapplies the money,
and the mortgagee recovers the debt from the property which
turns out to have been sufficient to pay the debts, the legatee

1 Mollan 11. Griffith, 3 Paige, R. 405.

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•

has a right to stand in the place of the mortgagee. Can the

purchaser hold against the legatee? It would seem that if the
legatee has, by a c\ssion of actions, become regularly subro·
gated to the mortgagee, he may hold against the purchaser.
The purchaser prevails against the heir, in virtue of his legal
estate, but the estate of the mortgagee, to which the legatee is
subrogated, is •prior in time.1
The right of the legatee to hold against the purchaser, seems
to depend in this case upon the fact that he is legally subro-
gated to the mortgagee and represent8 him, so that, in truth, the .
question is merely one of priority. If the legatee has a mere
equity, that it would seem could not prevail against a purchaser
without notice, who "relied upon the authority given to the
executor by the will.

1 Culpepper 11. Aston, 2 Cases in Chancery, 115.

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 •

CHAPTER X.

SUBROGATION IN FAVOR OF A STRANGER.

IT was a subject of much discussion at the civil law, whether

it was necessary for a surety to stipulate for subrogation with
the debtor and procure his consent, or whether it was sufficient
for the surety to stipulate with the creditor alone for that pur·
pose. On the one hand it was said, that though it is true that
where there is a change in the person of a creditor, and a
stranger is to become the new creditor, the debtor is principally
interested in the change, yet the surety is not such a stranger
that the accepting of a surety implies a request to the surety
on the part of the debtor to pay the debt for him, and that,
therefore, there is no necessity to require anew his consent to
subrogation; that it is reasonable that the surety should have
the privilege of discharging himself by payment of the creditor,
and that in doing so, he should stipulate for subrogation to his
rights. On the other hand, it was said that though it is true
that the .surety has become such at the implied request of the
debtor, the law gives him the actio mandati, and not a right to
subrogation unless it is expressly stipulated for, and that that
stipulation ought to be made with the debtor, who has the
principal interest in the matter; that the creditor who has no
other intention than to recover payment, thereby extinguishes
the debt, and that he cannot transfer to another a right which
is extinguished.1 But it has generally, under the civil law, been
considered sufficient, in conformity with usage, for the surety
to stipulate for subrogation with the creditor, as the surety
cannot, in any just sense, be regarded as a stranger, and his

l Renussons, Ch. 6, No. 31.

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 SUBROGATION IN FAVOR OF A STRANGER. 163

rights arise from his liability as a debtor to tl:ie creditor h.im-

self.
By the civil law, a stranger might, of his own proper motion,
pay the amount due from a debtor, without the authority of
the debtor himself. This was the case where payment was
made on the account of the debtor, that is for the purpose of
discharging him, and to extinguish the debt. It is otherwise,
when it is the purpose of the stranger to make payment on .his
own account, and be su~rogated in place of the creditor, to
acquire his debt and exercise his rights. 1 In that case, he has
no right to offer payment on his own account, for the purpose
of recovering from the creditor a cession of actions and subro-
gation. He has, then, no right to offer payment without the
authority anq express consent of the debtor, and the creditor
may with justice refuse to receive the payment which is offered
to him. A stranger is permitted to pay another's debt, it is said,
from motives of humanity, to benefit the debtor, and be there-
fore ought not to be admitted to do this for his own advantage,
and for the purpose of acquiring the rights of the creditor. It
wonld be unreasonable to give a stranger the right, without the
consent of the debtor, to offer payment of the debt to the cred-
itor merely, that he may be subrogated in place of the creditor
and acquire his rights. This would be to coerce a creditor to
sell his debt contrary to bis mind. A creditor cannot be con-
strained to receive payment of his debt except by the debtor,
or on account of the debtor, or from a creditor of the debtor
himself, or by a purchaser from the debtor in possession of the
property charged. He cannot be constrained by a stranger who
intends to make payment on his own account and acquire the
debt and be subrogated in the place of the creditor. To be
admitted to this right, the stranger must acquire the authority
and consent of the debtor. Therefore if a stranger makes
payment on his own account without the consent of the debtor,
although the creditor has been content to receive payment of
the debt, the payment will operate only to liberate the debtor,
and the stranger, who may have paid for the debtor, will not. be

1 RenW110ns, Ch. 10, No. 4.

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164 SUBSTITUTED LIABILITIES.

subrogated to the rights of the creditor, but will have only a

personal action to be reimbursed for that which he has paid for
the advantage of the debtor. He can, at the civil law, maintain
the action negotiorum gestonim, to recover the money which he
has paid. So if a stranger has made payment of the debt,
having the authority and consent of the debtor so to do, this
payment will operate only to discharge the debtor. The
stranger will have indeed an action to be indemnified for what
he has paid for the debtor by his .request, and also for his
services, but he cannot claim in that case subrogation to the
rights of the creditor. 'l'he debtor, in giving another authority
to make payment for him, has only the intention to procure his
own discharge from the debt, and to extinguish all liability
thereon, and he who has made payment, has had no intention
to acquire the rights of the creditor, nor to acquire his debt,
since he has made no stipulation to that effect with the debtor.
His only claim upon the debtor is in virtue of the mandate and
authority. He has an action for his indemnity, but can assert
no claim to the rights of the creditor which have been dis-
charged and extinguished by payment. But if the debtor ~ho
has given his authority and consent to a stranger to make
payment for him, has agreed that he shall be subrogated to the
rights of the creditor; the stranger who afterwards makes the
payment will be subrogated if the payment is made with the
express declaration of the subrogation in the release made by
the creditor.
A stranger who desires to be subrogated to the rights of a
creditor, ought to stipulate expressly for subrogation; and this
may be made in different modes. For example, says Re-
nussons,t Mrevius, a stranger, lends money to Titius to pay
a debt of 4,000l., which he owes to Sempronius, by an obliga-
tion made with a notary; and Mrevius, who lends his money,
desires to be subrogated to the rights and securities of Sempro·
nius. Mrevius may, by one and the same notarial act, lend the
money to Titius, the debtor, and, at the same time, make pay·
ment to Sempronius, who will hold Tit.ins discharged. The

l Renllllsons, Ch. 10, No. 13.

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 SUBROGATION IN FAVOR OJI' A STRANGER. 165

act must state that Sempronius has received the sum of 4,0001.
·from Titius, who was debtor by a former act, and that the same
has been lent and furnished by Mrevius, and that Titius, who is
present, consents that Mrevius shall remain subrogated to the
rights and securities of Sempro.nius. Or this may be done at
different times by two separate acts. For example, Mrevius,
who is a· stranger, may pass the first act by which· he lends to
Titius the sum of 4,0001., and promises to pay the amount in
discharge of Semprortius to whom he was indebted by a former
act, and stipulate that in making payment to Sempronius, he
shall remain subrogated to his rights and securities. He is,
therefore, to make payment to Sempronius .and receive from
him a discharge, in which he must declare that he makes pay-
ment for and in discharge of Titius, who had agreed to subro-
gation to him by a former act.
Or if Mrevius, who is bound to pay the 4,0001. to Sempro-
I nius in discharge of Titius, cannot make payment to him
because he is not present or for some other cause, he may
deliver the money to an agent with a power of attorney,
authorizing him to make payment to Sempronius, the creditor,
in discharge of Titius. And in this case, the attorney making
payment must cause it to be stated in the writing of discharge
that he makes payment as attorney for Mrevius, for, and in
discharge of the sum of 4,0001., in pursuance and execution of
a former act by which Titius had consented to subrogation in
favor of Mrevius. But,if the attorney does not execute the
mandate of Mrevius, but dissipates or embezzles the funds, or if
he pays on his own account and not as attorney, Mrevius will
not be. subrogated. He will only have the action mandati to
recover the money which he had placed in the hands of his
attorney. •
A person who has lent money to a debtor for the purpose of
discharging a debt, may, as we have seen, be subrogated by the
debtor to the creditor's rights, and if the party who has agreed
to advance the money for the purpose, employs it himself in
paying the debt and discharging the incuntbrance on land given

• for its security, he is not to be regarded as a volunteer. He is

not, after such an agreement with the debtor, a stranger in rela-
tion to the debt, but may in equity be entitled to the benefit of

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166 SUBSTITUTED LIABILITIES.

the security which he has satisfied, with the expectation of l'e-

ceiving a new mortgage or lien upon the land for the money paid.
A mortgaged land to B for a debt of about $2,000, A
being indebted to C for about $20,000. C recovered judgment
for this amount, and levied on the land subject to the mort-
gage.1 Afterwards C paid the debt thus secured by mortgage,
and caused the mortgage deed to be discharged of record.
The plaintiff bad lent the money to C, to enable him to redeem
the mortgage ; C gave bis note to the plaintiff for the amount
of the money thus lent, and relying upon the validity of the
title acquired by the levy of execution in his favor, gave him a
mortgage of the same land to secure the payment of the note,
instead of procuring a transfer of the mortgage from B, to the
lender of the money on payment. The levy of the execution
for the debt of $20,000 having been adjudged to be defective,
the plaintiff sought relief either by repayment of the money
advanced to redeem the mortgage, or by a surrender of the \
lands themselves. The court were of opinion that the payment
by C, made with money borrowed from the plaintiff, of the
mortgage to which the land which had been levied upon was
::mbject was not voluntary, and that after the levy of execution
was decided to be void, the plaintiff was entitled to equitable
relief. The agreement between the debtor and the party who
advanced the money, gave him an equitable claim to subro-
gation, which should have been regularly made I?y a transfer of
the mortgage on payment.
•
A factor of the debtor who pays the debt, is presumed to
have acted as agent for the debtor, and, therefore, by payment,
to have extinguished the debt. He cannot, by payment, acquire
a right to legal subrogation, 'and if there is no agreement for
exp1ess subrogation, he is regarded as a mere volunteer.
Where the factor of a person who was indebted with the
defendants on two promissory notes, gave his acceptance for
drafts which, when paid, were to be in full for the amount due
on the notes, and the acceptances were duly paid to the cred-
tor (the Carrollton Bank), and the notes delivered up by the
f

1 Paine v. Hathaway, 3 Vermont, R. 212.

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 SUBROGATION IN FAVOR OF A STRANGER. 167
bank to the factor, and subsequently transferred by him to the
plaintiff who claimed the payment of the notes from ~he de-
fendant, under the allegation that, on payment of the drafts by
the factor, the notes were delivered to him for the expres~
purpose that he might be subrogated to the rights of the bank,
and enjoy the same recourse which the bank might have exer-
cised against all the parties to the notes until their final pay-
ment, it was held that the factor was not entitled to be subro-
gated. There was no express conventional subrogation, and
there was no legal subrogation, because the whole transaction
consisted in the payment of the debt by one who from his
relation must be presumed to have extinguished the debt, and
not to have had the design to keep it on foot against the
principal or his surety. 1
If the party in this ·case did not act as representing the
debtor, he was a volunteer, and whatever recourse he may have
had against the debtor, he could not, as a stranger to the debt,
be subrogated by law. If he advanced his own money to pay
the debt, at the request, express or implied, of the debtor, he
might have been expressly subrogated by him with effect, on
the same principle that the lender is 1mbrogated who pays the
creditor on an agreement with the debtor for subrogation.
Although the law gives to a debtor the privilege of pro-
curing another to be substituted in the place of the creditor
who is then bound to receive the amount due, subrogation
does not in such a case take place by operation of law.
It was held in Louisiana,11 that a party who furnishes money
for the payment of a debt, does not acquire the rights of a
creditor who is thus paid. The legal claim belongs not to any
one who may pay a debt, bµt only to him wha, being bound for
it, discharges it. A stranger who pays a debt, if he shows no
conventional subrogation, cannot claim the benefit of legal
subrogation.
The purchaser of land seized and exposed to sale on an
execution issued upon a judgment by which the debt is dis-
charged, is not subrogated to the rights of the judgment cred-

1 Harrison 11. Bisland, 5 Robinson, R. 204.

2 Nolt.e & Co. v. Their Creditors, 7 Martin, R., N. s. 602.

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168 SUBSTITUTBD LIABILITIES.

itor. Such an act, said the court,t cannot be distinguished

from payment made to the creditor without a sale of the
debtor's property, by a person not having an interest to dis-
charge the debt. Subrogation does not arise in favor of a
purchaser on a forced sale. ·
Where a purchaser executed a mortgage on property pur-
chased, to secure the payment of a bill drawn in favor of the
vendor for the price, one Toledano, a third person, and the
acceptor of the bill paid it at maturity, without any assignment
from the creditori and it was held that .the mortgage ceased to
have any operation against other mortgage creditors.2 If it was
intended that Toledano the acceptor, it was said, should have
the benefit of this mortgage on paying the draft., there should
have been a special agreement to that effect in the notarial act.
Whatever secret equities may have existed as between the
parties, as the public were to act upon the record as it stands,
the party, as against subsequent mortgages, was to be regarded
as paying his own debt. If the acceptor paid the draft from
his own funds, he might be regarded as a new creditor making
a loan to the debtor for the purpose of being subrogated to the
former creditor, if such an intention was manifested, but this
could only be by express subrogation. .On a loan of money to
pay off an existing debt to another creditor, it depends upon
the agreement whether the lender is to be substituted to a
former debt and its securities. There is no equity between the
parties as on ·a contract of suretyship from which a legal right
to subrogation could result.

l Childress v. Allen, 3 Louisiana, R . 477.

' 'Salaun v. Realf, 4 La. Apn. R. 576.

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 CHAPTER XI.

OF THE NATURE OF THE RIGHTS ACQUIRED BY

SUBROGATION.

WHEN property is specifically bound as security for a debt

in favor of a creditor, the surety on payment acquires by sub-
rogation, on a cession of actions or a decree of court, the
same right, and may exercise the same privileges as were en-
joyed by the creditor himself; therefore, there can be no con·
veyance to a purchaser which will divest the right of the surety.
In a case heard in the English Court of Chancery,1 where in
consideration of a sum of money advanced by Bowker to Bull,
the latter, together with his wife and daughter, conveyed
certain land in mortgage to Bowker, the deed to whom con-
tained a power of sale by him; in case of default of payment of
the sum secured or the interest. There was also a proviso,
that as between Bull on the one hand, and bis wife and
daughters on the other hand, Bull should be primarily liable to
the payment of the money lent, and also that the hereditaments
of which he was seised in fee should be primarily liable to the
same. Bowker afterwards obtained a mortgage from Bull for
a further sum, and a question was whether he was entitled to
consider himself as mortgagee of the land for the latter sum
also. The Vice Chancellor, Lord Cranworth, held that the
mortgagee, Bowker, must be postponed to the children of Bull,
who, according to w~at appeared on the face of the deed, were
mere sureties for the father. " It is quite clear," said the Vice-
Chancellor, "that a surety, paying off the debt of his principal,
is entitled to a transfer of all the securities held by the creditor,

l Bowker v. Boll, 15 Jurist. 4, 20 Law Joomal, 47.

15

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170 SUBSTITUTED LI.ABILITIES.

in order that he may make them available against the debtor

as the original creditor might have done. On these grounds,
he said, the daughters were certainly entitled, on paying off the
first mortgage, to have all the securities made over to them, in
order to enable them to reimburse themselves out of the father's
separate property comprised in that deed, whatever portion
of the mortgage debt they might have been obliged to pay;
and that this was a demand certainly prior in point of date to
the last mortgage. It was urged at the bar, on behalf of Bow-
ker, that this right of a surety is only a potential equity, which,
though it may be assented to by the party himself, cannot bind
third persons ; but I cannot, said his Lordship, agree to this.
The equity gives to the surety a right to call for the transfer of
the securities, and so binds those securities, into whatever
hands they may come, with notices of the change.
_Perhaps in a case like this, where the foundation of the claim
for relief was not a legal right, but a mere equity, the secu-
rities would only be bound in the hands of a party to whom
they came with notice ; but where a party has been subrogated
by a cession of actions to the legal rights of the creditor, or
where, on payment by the surety, subrogation takes effect
by operation of law, the suret)' stands in the place of the
creditor, clothed with the legal right, and must prevail even
against a later incumbrancer with notice.
The mortgagee, it was held, could only make his subsequent
security available by redeeming the securities in the ordinary
way.
But there is a distinction between cases where the security
is dubject to a general charge only in favor of the creditor, and
those cases where the charge on the security is specific, and
the surety is regarded as having an absolute lien upon it for his
indemnity.
A surety, who had paid and satisfied a judgment recovered
against the principal, brought his bill claiming to be subrogated
to the rights of the judgment creditor, and the benefit of the
judgment against a purchaser of personal property. 1 The

1 Dozier v. Lewis, 27 Mississippi, R . 679.

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 NATURE OF RIGHTS ACQUIRED BY SUBROGATION. 171

court Jield that though the surety, paying the debt of his
principal, was entitled to the benefit of all the security and the
lien of the creditor, he could not extend the lien or security
beyond their effect and operation in the hands of the creditor ;
and that a judgment conferred a mere right of satisfaction out
of any property of the defendant then held or ~ubsequently
acquired, which operated as a charge upon the property from
its date and empowered. the creditor to have it taken in execu-
tion. As against a purchaser, this right depends upon the
fact that the property shall be actually taken in execution ; and
if that is never done, the creditor's .claim is nothing more than
a debt of record. A purchaser would be entitled to hold the
property. A surety had no right to claim that such a pur-
chaser is to be held as a trustee and accountable for the value
of the property. The judgment creditor had no claim upon the
property as a trust, and the surety, seeking to be subrogated to
the rights of the creditor, would, therefore, acquire no right to
the judgment as a lien, because the creditor had none. In this
case the charge was not specific, and, therefore, the equity was
indeed merely potential, and not absolute as it would have
been if the property had been actually taken in execution.
When a surety is expressly subrogated on payment by the
creditor to his rights, he may exercise all the legal remedies of
Ruch creditor as assignee.I Norton and Soule had both signed
a joint and several note to one Abbot for the proper debt of
Soule only. Norton being in fact only his surety, though not
named in that character in the note, Soule, to secure the
payment of the debt, mortgaged his land to Abbot, the deed to
be void on his payment of the money. Soule being afterwards
sued for the balance, was taken in execution and discharged
upon taking the poor debtor's oath. After this, Norton agreed
with the creditor to pay him the amount of his judgment if he
would assign that and the execution to him, which was done
accordingly. Having also obtained an assignment of the
mortgage, he brought his writ of entry as assignee to have
possession of the land against Soule who had always remained

l ;Norton v. Soule, 2 Greenleaf, R. 341.

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in possession. It was contended that the payment ~ade by

Norton must be considered as having satisfied and extin-
guished the original debt. and of couree extinguished the mort-
gage and completely defeated the estate claimed in virtue of it.
The court were of opinion that the payment by the surety had
not, necessarily, the effect to extinguish the original demand,
and sustained the action. The decision which gave the surety,
to whom the mortgage had been assigned, an action at Jaw as
subrogated to the creditor, may be regarded as conformable to
the real equity of the case and the intention of the parties.
The right of a surety to be subrogated to an equitable lien of
a creditor, would seem to rest upon the same ground as in the
case of a legal charge upon the land by mortgage or other-
wise. Such a lien exists on a sale of land in favor of the
vendor for the purchase-money.· It was held in a case 1 where
the sureties of a purchaser had made payment for the land
which the vendor had agreed to convey on receiving the pur-
chase-money, that the sureties were entitled to the security.
Where the creditors had a right, in the first instance, to
enforce payment either by resorting to the reserved lien on the
land or to the sureties of the purchaser, it was held that as they
had elected to make their debt out of the sureties, these would,
as against the purchaser, be equitably entitled to enforce the
lien for reimbursing the sum from which they would have been
exonerated, had the creditors, as in conscience they ought, said
the court, resorted to that instead of the peraonal 8ecurity.2
If the law, from motives of policy or otherwise, gives the
creditor the right of affirming a sale which constitutes the
consideration of a note signed by a surety, or rescinding it at
his option, the privilege which the law gives to the creditor,
may be exercised by the surety who has made payment.
Where, as in Louisiana, the creditor has, in certain circum-
stances, a right to require a rescission of a sale on payment by
the surety, he is subrogated to the vendor's right, and may
require a rescission of the sale.
•

1 Kleisen v. Scott, 6 Dana, R. 137.

~ Burk v. Chrismah, 3 B. Monroe, R. 56.

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 NATURE OF RIGHTS ACQUIRED BY SUBROGATION. 173

" The rescission of the sale," said Martin, J.,1 "is a means of
securing the payment which the vendor, the creditor of the
prke, hhs ; this right is an accessory of the claim, and would
pass by the sale or transfer of it." " The subrogation has, in
our opinion," he adds, ·" the same effect."
It is observable, that in this case the action was not in the
name of the original creditor, but in the name of the indorser.
The plaintiff claimed the right of rescission as a consequence
of subrogation. The action, in the name of the assignee, was
sustainable on the same principle as the action of ejectment in
the name of the surety, who had acquired a right to be subro-
gated in the above case of Norton v. Soule. It was incident
to the right gained by subrogation.
Where an indorser on notes given for the price of property
purch:ised by the maker, is compelled to pay them, he will be
subrogated to the right of the creditor to maintain an action
against a subsequent purchaser of the property, to rescind the
sale as simulated and fraudulent. The creditor might have
attacked the sale because it was made while he was. a cred-
itor, and as the conditional liability of the indorser existe<j
at the date of the sale, it was just that when he subsequently
was•compelled to pay, he should be considered as standing in
the place of the creditor and subrogated to his right to main·
tain the action.2
In the State of Louisiana,s it is held that subrogation,
wheiher legal or conventional, invests the person in whose favor
it takes place, with all the rights, actions, privileges, and mort·
gages of the creditor against his debtor. One who has paid
the debt due to a plaintiff and been expressly subrogated to his
rights, may take out execution against the defendant. Such
an express subrogation is equivalent to an authority to use the
plaintiff's name in prosecuting the suit for the recovery of the
debt. Whenever a party has become subrogated to the cred-
itor's rights, it would seem that any action that is brought on
a cause of action existing in behalf of the creditor before subro-

1 Torregano v. Segnira's Syndec. 2 Martin, R., x. s. 162.

llGroves v. Steel, 2 La. Ann. R . 480.
• King v. Dwight, 3 Robinson, R. 2.
10·

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174 SUBSTITUTED LIABILITIES.

gation, must be in the name of the creditor except in peculiar

circumstances; but the creditor's right of property, or his lien
or interest in the security, passes to the party subrogated;
therefore, every right incident to property may be exercised by
him in the same manner and to the same extent as the creditor
might have done before subrogation. He may sue in his
own name for injuries done to the security. The effect of
subrogation is to clothe him with the rights of an assignee.
Where, on payment by a surety, an express cession of actions
is made to him by the creditor, there is .no anomaly in regard-
ing him as standing in the place of the creditor as an assignee.
He is then clothed with the rights of the assignee, and may
sustain such actions as are incident to a right of property thus
acquired. When subrogation takes effect by operation of law,
the law gives to it the effect of an assignment which may even
be supposed, as in Pennsylvania.
The circumstance that a surety is a co-defendant with the
principal in a judgment against them both, cannot, upon his
paying it, preclude him from being subrogated so as to have
the benefit of it for the purpose of obtaining payment from the
principal or out of his property, and such a surety becomes by
such payment subrogated to all prior liens, and to all the r1ghts
and securities of the creditor as if he were a purchaser, either
against the principal debtor or his co-sureties.1 The imaginary
assignment made in such cases of the security, enables the
siirety to apply it by direction of the court, in a way to cast the
burden on those who ought to bear it.2
In a case before the Supreme Court of the United States,s
it was held to be an established rule of equity, to compel a
creditor t.o assign the cause of action on payment by a 8Urety,
and thus to make an actual substitution of the sureties, so as
to perfect their claim at law. · This, the court said, fully
affirmed the right to succeed to the legal i;tanding of the prin-.
cipal, and after establishing that principle, it was going but one
step further to consider that as done which the surety has a

1 Erb's .Appeal, 2 Penrose & Watts, R. 296.

~ Croft v. Moore, 9 Watts, 451.
8 Lidderdale v. Robinson, 12 Wheaton, R. 594.

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 NATURE OP RIGHTS ACQUIRED BY SUBROGATION, 175

right to have done in his favor, and thus to sustain the substi-
tution without an actual assignment
The right acquired by a creditor in the security given for a
debt, results from contract, and, together with his liability, may
be qualified by the terms of the agreement. He may charge
himself with variou3 duties in regard to the security. He may
bind him11elf, as mortgagee, to receive and account for the mesne
profits of land, or he may, as bailee, assume all the duties and
liabilities of an agent in disposing of personal property. As
the law was originally understood, the equitable right of a
surety being founded upon a cession of actions, depended upon
an express contract. What is the nature of the right which
the doctrine of subrogation by operation of law gives to the
surety as a consequence of payment 1 The only legal contract
which can be implied between the surety and his principal, is
that of indemnity. The right of subrogation is merely an
equity. It may be greatly for the advantage oJ the surety. to
resort to his principal for reimbursement, rather than as subro-
gated to the creditor to assume the liabilities which may result.
from the possession of the security. Doell subrogation, by
operation of law, necessarily transfer the security to the surety
on payment by him 1 It seems impossible to give this
effect to legal subrogation. On payment, the surety has an
option to resort to his principal or to become substituted to the
creditor's rights. Some act, therefore, is neces!!ary, on the part
of the surety, to manifest his election and to show his accep-
tance of the right which the law gives him. This has been
repeatedly decided in the State of Pennsylvania, in regard to
the bar of the statute of limitations which takes effect unless
the surety does some act showing his intention to put himself in
the place of the original creditor. 1

1 Although, in the State of Pennsylvania, snbrogation takes effect by operation of

lnw in a proper case, some act seems to be necessary on the part of him who is en·
titled to it, to manifest his election to avail himself of this equitable right. The legal
remedy .o f h surety having been lost in a case (Rittenhouse v. Levering, 6 Watts &
Serg. R. 190), by reason of the bar of the statute of limitations, the surety claimed the
equitable right of subrogation which was not within the operation of the statute, and
only affected by the presumption of payment arising from lapse of time. The conrt
held that where the surety has done no act before his claim is barred at law, mani-

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176 SUBSTITUTED LIABILITIES.

If the surety, after payment, neither resorts to his action

against his principal, nor takes any steps to be substituted to
the creditor's rights, what then becomes of the creditor's lien?
The creditor, being paid, has no further interest in the property.
By his contract he is directly responsible only to the principal
debtor, and he must deliver possession to him unless, at the
time of payment by the surety, he asserts his right of subro·
·gation. The very effect of payment is to restore the property,
if personal, to the debtor, unless some act is done by the
surety in assertion of his right, and this act must be shown to
have been taken at the time of payment, just as a cession of
actions to be effectual must be made at the time of payment.

festing his intention to put himself in the place of the original creditor, and thereby
sobrogate himself to his rights, the remedy is only for mqney paid; that where he
hllB omitted to bring suit in proper time, or to do some acts equivalent thereto, he
cannot afterwards be subrogated to the rights of the creditor. " The error," said the
court, "on this head, arises from the assumption that ipso fa.cto, on payment of the
money, the surety is subrogated to the rights of the creditor; whereas, the remedy is
not prinidfacie on the boml, but for money paid; although the surety may, if he
chooses, invoke the aid of the equitable principle of subrogation." .The court were of
opinion that the right of sureties would be barred by analogy in equity, when the
legal right was barred at law. In Fink v. Mahaffey, 8 WatUI, R. 384, after the lapse
of ten years, and when the legal remedy of the surety, who had been subjected to the
payment of the debt, was barred by the statute .of limitations, and after verdict against
the surety in an action at law, application WllS made by the surety to the court to be
substituted in the place of the plaintiff in the original judgment which he had paid, to
enable him to recover it from the principal who was the surviving defendant. The
court held that as the doctrine of subrogation was one of mere equity, it could not be
enforced at the expense of a legal right.
The opemtion of the statute of limitations is to be considered in regard to the
creditor's right of action, and also to the surety's right of recourse against his principal
on payment, or to equitable relief by subrogation. If the creditor has commenced a
suit against the surety before the time of limitation, bot recovers judgment after that
time, it may be said that the surety cannot be subrogated with effect to an action at
law which is barred; but a court of equity would undoubtedly give relief to the surety,
on the ground that the creditor's action againet him was brought within the time of limi-
tation. As against the principal, the equitable right of the surety would, by analogy
to the claim at law originating in his .favor by payment, he barred when the direct
action was barred. Where subrogation takes effect by operation of law, some act may
be necessary on the part of the surety to show his election as to the acceptance of sub-
rogation at the time of payment, so as to preclude the claims of subsequent purchasers
or iucombrancers ; but as between the surety and his principal, it will be sufficient if
that election is manifested at any time before the direct action in his favor is barred,
for the equitable remedy will be barred in analogy to the bar at law.

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 NATURE OF RIGHTS ACQUIRED BY STJBROGATION. 177

The power of the creditor to transfer, ceases by payment. If

the surety has afterwards any lien on the security, it must be
on property in the hands of the debtor. This would seem to
be impossible, because it passes to the debtor discharged of the
creditor's lien by the act of payment, and the surety is subro-
gated, if at all, to a lien of the creditor.
Those cases in which it has been held that where the surety
has omitted to bring suit in proper time, that is, within the
time of limitation, he cannot afterwards be subrogated, are not
to be understood- as affirming that the surety has his election
to be subrogated at any time before the bar takes effect, but
merely as deciding that, as between the parties, the action for
the debt is barred. But suppose that after the debt is paid by
the surety, who at the time of payment declined to receive the
security, the debtor, who has received possession, assigns it to a
purchaser with notice, can the surety, as against the purchaser,
claim within six years his right of subrogation 1 If so, the
proprietary right is suspended in favor of an equitable lien
which is contingent upon the election of the surety. Such,
however, is not the character of a lien ; without possession, it
has no validity as agaillst creditors or purchasers.
It may be that if the security remains in the hands of the
parties, the surety will, in some cases also, be entitled to relief in
equity; but if the creditor, to whom land has been mortgaged
for the security of a debt, on receiving payment from a surety
who then disclaims the right of subrogation, makes a new loan
on a second mortgage of the same land, and the surety, on
• failing to recover from his principal, seeks relief in equity
against the property in the hands of the. creditor, he will, on
principles of equity, be postponed to the mortgage on the new
loan. By his disclaimer, the creditor has been induced to make
a further loan, and the surety has lost his priority.
When subrogation is construed by courts to take effect by
operation of law, this construction is made in reference to an
agreement existing between contracting parties. In the con-
tract of indebtedness, the surety is a debtor, and from the very
nature of the case h~ can have no legal right under the contract.
The law does not make payment by the surety equivalent to a

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 178 SUBSTITUTED LIABILITIES.

cession of actions, for that would be to change the scope of the

contract. It merely provides that a formal agreement shall be
unnecessary. The effect of the contract of suretyship between
the parties is, that if payment shall be made by the surety, the
principal debtor shall be liable to him in a proper action, and
that he shall at his option have the right to sue in the name of
the creditor, or have also the creditor's lien on the security
given by the debtor. The law does not so change this contract
as to make subrogation absolute on payment, but in effect it
provides that the surety shall, on payment, have an optional
right. The law, in providing for subrogation independently of
any act of the creditor, contemplates some act by the debtor
manifesting his option at the time when the interest of the
creditor is about to cease by payment. At the time, therefore,
when a cession of actions would be effectual, if necessary, some
act of acceptance on the part of the surety is required to es-
tablish his legal right. Subrogation, whether express or by
operation of law, requires the agreement and consent of the
surety. Practically, then, there is little difference between the
two kinds of subrogation, except that the law presumes the
cession of actions when it takes effect by operation of law.
Under each system, the equitable lien of the creditor can only
pass to the surety when he determines his election and becomes
a party to subrogation. The surety has his election between
i:mbrogation and a direct recourse to the principal on payment,
and the election to be subrogated must be made at the time of
payment. Subrogation by operation of law cannot, it would
seem, take effect on a presumed acceptance by the surety, a
presumption requiring a disclaimer to prevent that effect. This
would be to substitute a new contract, a contract of bailment
or agency, with uncertain advantages, and, perhaps, onerous -
duties for an equity which is to be called into aCtion by the
surety when subjected to liability.
Under each system, the right which passes to the surety is a
mere lien. Being such, the surety has only that right in the
property which the creditor has in a pledge, and it can only be
made the subject of a set off, when on a final decree of a court
of equity the avails of the property are to be disposed of on a
0

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 NATURE or RIGHTS ACQUIRED BY SUBROGATION. 179

settlement of all demands between the parties, as in a case

where. the debtor was pennitted to set off a debt due from the ·
surety to him on another account. I
It has been held in Pennsylvania,2 that a creditor of the
surety, who has a lien by a judgment on the property of his
debtor, acquires no lien thereby on the property to which the
latter has been subrogated by law. The interest of the surety
is regarded as a mere lien, and his right is such as may at any
time be divested by the debtor for whom he is bound, or has
made payment ; and yet, in this same case, an assignment to a
creditor Of the surety was held to be effectual. It might be
held such as an agreement to transfer the amount due from the
debtor to the surety, or there might properly be an assignment
of the pledge as a lien. When a surety has paid a debt for
which he was bound in that character, an assignment of the
security may be made to him by the debtor in satisfaction of
· his consequent liabilities, and the surety will thereby acquire
an abs~lute right to the property; but no such right is acquired
by an assignment from the creditor, nor can it result from that
imaginary assignment which the law supposes, on payment by
the sUPety. Nothing passes in such a case but a lien.

1 Netf11. Miller, 8 Barr, 347.

' Harrisburgh Bank 11. Gorman, 3 Barr, R. 300.

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•
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 INDEX.

A.
ACTION,
remedy in favor of surety by, 44, 66.
subrogation of surety, a right to creditor's action, 101.
may be brought in name of insurer as subrogated to insured, 151.
may be brought in name of party Aubrogated, 158.
right of, barred by statute of limitations, 175, n.
ACTIONS, CESSION OF,
debtor who has any recourse to exercise may require, 9.
whether made to surety or to a third person, 65.
effect of, as a transfer of legal interest, 75.
whether necessary to subro:ration, 75.
formerly necessary in New York, 75.
AGREEMENT,
express, necessary for subrogation by the Roman law, 48 1 67.
what words are sufficient for subrogation, 67.
necessary for a stranger to have express subrogation, 10, 167.
depends on, whether on a loan there will be substitution, or not, 164.
APPROPRIATION OF PAYMENTS, 114.
ASSIGNMENT,
of a debt, how subrogation differs from, 7.
to a third person for consideration as affecting subrogation, 68.
formerly necessary in New York, 75.
party subrogated has the privileges of an assignee of the debt, 79, 174.
subrogation on an imaginary, 79.
doctrine of equitable assignment, 81. '
established rule in equity to compel an, 174.

c.
CONTRIBUTION,
rule of, when there are several purchasers at different times, 26-40.
sureties equally bound entitled to, from each other, 126.
cannot compel their sureties to contribute, 131-188.
16

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 182 INDBX.

CREDITOR,
subrogation not depending on consent of, 10.
against subsequent, 11.
in favor of a subsequent against a lint, IS.
of creditor in possession, 14.
in favor of a prior, to rights of subsequent, 19.
of simple contract creditor without lien, 19.
of subsequent against common debtor only, 20.
evicted from property. accepted in payment, the debt revives against prin·
cipal and sureties, 25.
must preserve his rights against debtor nnimpaired, 109.
any act of, altering the contract, discharges surety, 109.
may have benefit of securities given to surety, 135, n.
surety expressly subrogated may exercise rights of, 171, 174.
right of, to affirm or rescind a sale, exercised by surety, 172.
compelled to assign in equity, 172.
right ot; in the security for the debt, 17 5.

D.
DEBTOR,
subrogation may be effected by act of, 11.
in favor of joint, 41.
a judgment, subrogated as against second judgment creditor, 81.
paying subrogated to purchaser of security, who has covenanted to pay, 84.
may substitute one creditor for another, 163.
DELEGATION,
distinguished from subrogation, 7.

E.
EQUITY,
subrogation, a claim to equitable relief, 52, 93.
reduced to proceedings by bill in, 78.
equitable right of subrogation subordinate to prior equity, 116.

G.
GUARANTOR,
not liable to contribute as a co-surety, 126.
GUARDIAN,
generally not entitled to subrogation, 146.
whether paying out of bis own funds would give right of subrogation, 147.
liability divided between several, 14 7.
subrogated to right of ward against former, 148.

H.
HONOR,
payment of bill, for the honor of drawer, may entitle a party to subroga-
tion, 142.

•
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......
 INDEX. 183

I.
INSURERS,
subrogation in.favor of, 151.
INDORSERS,
right of, to subrogation, 137.
liability, though that of surety, qualified by law merchant, 189.
of negotiable paper, subrogated to payee, 189.
when first indorser liable on subrogation of second, 187.
right of, to subrogation protected in a court of law, 140.
not co-sureties in respect to securities, 144.

L.
LEGAL PROCESS,
effect of discontinuance, 112.
LIEN,
nature of surety's lien on securities, 10 7.
of surety effectual on property conveyed after subrogation, 110.
distinction between conventional and legal subrogation in regard to, 110.
release of, by co-surety, 111.
of execution postponed to equity of a surety, 124.
of executor does not prevail against surety's right, 124.
distinction between general and specific, 169.
on real estate whether absolute or potential, 170.
of surety on judgment not executed, 170.
right of surety to be subrogated, an equitable, 172, 178.
'LEGATEE,
subrogation in favor of, 159.
of, against real estate, 160.
LIMITATIONS, STATUTES OF,
right to subrogation barred by, 175, n.

M.
MARSHALLING,
of securities as distinguished from subrogation, 88-96.
equitable right of, distinguished from legal right of subrogation, 94-99.
right to, does not constitute a lien upon property, 96.
MORTGAGE,
mortgagor subrogated against land as a primary fund, 87.
last parcel of an estate conveyed in parts, liable for the debt, 31-37.

N.
NOTICE,
want of, enables purchaser to bold against surety, 110.

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 184 INDEX.

P.
PARTNER,
ettbrogation does not apply to transactions between, 149.
surety entitled to subrogation against d0rmant, l~O.
PART PAYMENT,
. does not entitle surety to subrogation, 122.
__.-PAYMENT,
among co-debtOl'!J a discharge of the debt, 72.
the exception in favor of sureties, 73.
full, nece!!Sary to gain rights of subrogation, 122.
in the quality of guardian extinguishes the debt, 146.
by factor of debtor, 162.
by stranger, 166.
PLEDGE,
whether it continues bound to surety on payment, 48.
PRIVITY,
not necessary to subrogation, 129.
PURCHASER,
&ubrogation of, paying a debt charged on the thing, 21.
limited to part purchased, 25, 31.
subrogation against, who covenanted to pay the debt, 84.
without notice will hold against surety, 110.
subrogation does not arise in favor of, on forced sales, 163.

R.
RELEASE,
by sarety of his lien, not operative against C<HJurety, 111.

s.
STRANGER,
right of, to &ubrogation, 165.
payment by, of another's debt extinguishes it, 166.
with consent of debtor gives subrogation, 166
must expressly stipulate for su~rogation, 167.
(See VOLUNTEER.)
SUBROGATION,
' defined, 7.
con°ventional and legal, 7.
distinguished from delegation, 7.
from assignment, 7.
civil law terms for, 1.
not depending on consent of creditor, 8, 10.
of a subsequent incumbrancer, 8.
by operation of law, 8, 16.
from law and express agreement, 91 10.

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 IN-DEX. 185
SUBROGATION,- Continued.
a stranger must contract with debtor, 10.
by the act of debtor alone, 11.
to prejudice of subsequent creditors, 11.
a surety may stipulate for, 11.
to privileged debt, 12.
not a transfer or sale of a debt, but a cessien of actions, 12.
in favor of subsequent against first creditors, 18.
of creditor in possession, 14.
depending on intention at common law, 17.
in favor of a prior to rights of subsequent creditor, 19.
of subsequent creditor against common debtor only, 20.
in favor of purchaser paying a debt charged on the thing, 21.
of a part purchaser limited to parcel purchased, 2fl, 81.
of a joint-debtor, 41.
of a surety, 43.
at the civil law, a surety must stipulate for, 4.3.
doctrine of Copis v. Middleton considered, 46-55.
of surety, how effected in England, 48.
under modern French law, 52, 64.
regarded as a claim to equitable relief, 52, 98.
former rule in courts of equity, fl8.
of surety as of right, the American rule, 55 1 n.
according to Dumoulin, 63.
formal terms to express, 67.
in the English chancery, 68.
rule in Massachusetts, 68.
in North Carolina, 69.
in Alabama, 72.
in New York, 74.
assignment formerly necessary in New York, 75.
by operation of law in New York, 77, 80.
reduced to an equitable proceedini:t by bill in favor of surety, 78.
on an imaginary assignmP-nt of securities, 79.
of surety of judgment debtor as against a second judgment creditor, 81.
in Pennsylvania, 82.
of those standing in situation of sureties, 88.
a legal rii:tht the foundation of, 84.
of debtor paying the debt against purchaser of the security who bas cov-
enanted to pay, 84.
of mortgagor against the land as a primary fund, 87.
distinguished from marshalling of assets, 88-96.
examples of improper application of doctrines of, 97.
of surety, whether a mere equity or a legal right, 101.
depending on c~ontract, is absolute, 102.
does not extend to securities taken after the contract of surety-
ship, 108-107.

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186 INDEX.

SUBROGATION,- Continued.
extends to all held at date of contract whether known or not, 104.
not affected by a change which discharges surety, 109.
refused sometimes against an innocent pnrchaser of the security, 110.
a lien on property conveyed after surety bas been subrogated, 110.
cannot be superseded by joint act of debtor and creditor, 111.
release by a surety of his lien affects bis right only, 111.
not that of a c<H1urety, 111.
general rule of, applies to securities specifically charged with the debt,
113, 117.
cannot be granted to prejudice a prior or countervailing equity, 116, 119.
to privileges of the State under the Roman law, 120.
to prerogative process, of party paying for a defaulter to the crown, 120.
in favor of a surety paying a United States bond, 120, 121.
applies to debts of a State government, 121.
a surety of a ship-master on note for supplies not subrogated to statutory
lien, 121.
right to, only acquired on full payment, 122.
of surety prevails over lien of executor for his own debt, 124.
extended by recent legislation in England, 125, n.
in favor of a surety for a surety, 126. .
•may have a superior equity to other sureties, 127, 131.
in favor of sureties who become bound in course of legal proceedings, 128.
privity not essential to right of, 129.
ofa creditor to securities given to a surety, 135, n.
under negotiable instruments, 137.
right of indorser to, 137.
alfected by the law of negotiable paper, 139.
a volunteer cannot acquire the right to, 141.
may where a bill is accepted supra protest, 142.
may under French code when be pays by intervention, 148.
indorsers not co-sureties in respect to, 144.
between parties who hold a fiduciary relation to each other, 146.
guardians paying single debts not entitled to, 146.
of guardian to right of ward against a former guardian, 148.
a general trustee not entitled to, 149.
of a trustee, the liability growing out of a single debt, 149.
does not apply to transactions between partners, 149.
nor dormant partners, 150.
of surety against dormant partner, 150.
in favor of insurel'tl to rights of action of parties insured, 151.
action may be brought in name of party subroh~ted, 153.
in favor of a legatee, 159.
of legatee against real estate, 160.
not of a factor of" debtor. 162.
belongs to party who is bound for the debt, 163.
not to any who may pay, 163.

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 INDEX. 187
SUBROGATION,- Continued.
does not belong to a purchaser on a forced sale, 163.
on a loan to pay debts depends on agreement, 164.
in favor of a stranger, 165.
with consent of debtor, 166.
must expressly stipulate for, 167.
the nature of the rights a<'quired by, 169.
right of surety to, not divested by a conveyance, 169.
a right in equity if property is not specifically bound, 171.
if express, surety may exercise rights as assignee, 171, 174.
to an equitable lien, l 72.
to creditor's right to affirm or rescind a sale, 172.
rule of, in Louisiana, 178.
in equity, the creditor is compelled to assign, 174.
surety must elect bis remedy by, 175.
right to, barred by statute of limitations, 175, n.
difference by law between express and implied, 178.
right of surety to, a mere lien, 178.
SURETY,
may stipulate for subrogation with debtor or creditor, 11.
subrogation against sureties, 25.
in favor of a, 48.
must stipulate for subrogation at the civil law, 48.
intention of, to be subrogated not presumed, 44.
supposed to rely on the action mandati, 44.
doctrin.e of Copis v. Middleton considered, 46-55. '1
when payment by, extinguishes a bond debt, 66.
subrogation of, regarded as a claim to equitable relief, 52.
subrogated as of right on payment, 55, n.
entitled to every remedy the creditor bas, 59.
of judgment debtor subrogated as against second judgment creditor, 81.
subrogation of those standing in the position of, 88.
a mere equity or a legal right, 101.
rights of, which depend on contract, absolute, 102.
entitled to all securities held by creditor at date of contract, 104.
whether he knew of them or not, 104.
not to those taken after contract, 108-105.
creditor's rights must be kept unimpaired for benefit of, 109.
released by any act of creditor altering bis condition, 109.
lien of, good against property conveyed after bis subrogation, 110.
when subrogated cannot be superseded by joint act of debtor and cred-
itor, 111.
release by, affects bis right. only, 111.
not that of co-surety, 111.
general rule of subrogation limited to securities specifically appropria-
ted, 118, 117.

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188 INDEX.

SURETY,- Continued.
paying a debt due the fisc,' under the Roman law, subrogated to State, 120.
by the English practice, given the benefit of prerogative process, 120.
paying a United States bond subrogated, 120.
of a master on note for supplies not subrogated to statutory lien, 121.
full payment by, to acquire right of subrogation, 122.
right of, prevails over lien of executor for his own debt, 124.
subrogation in favor of the surety for a surety, 126.
may ha,·e a superior equity to common sureties, 127, 181.
bound in course of legal proceedings subrogated, 128.
on a bail bond represents the debtor, 128.
same on injunction bonds, 180.
cannot obtain contribution from co-surety, 121-188.
creditor may have the benefit of securities given a, 185, n.
entitled to subrogation against dormant partner, 150.
right not divested, by a conveyance of property specifically bound, 169
expressly subrogated may exercise the rights of assignee, 171, 174.
right of, an equitable lien, 172, 1 78.
subrogated to creditor's right to affirm or rescind a sale, 172.
must make an election of his remedy, 175.

T.
TRUSTEE,
right of, to subrogation, 149.
a general, not entitled to, 149.
whose liability grows out of a single debt may have, 149.

v.
VOLUNTEER,
cannot acquire right to subrogation, 141.
except where he accepts a bill for the honor of one of the parties, 142.
factor of a debtor, a mere, 162.
(&e STRANGER.)

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