Opinion
(December Term, 1833.)
Between creditors, whose equities are equal, he who has the legal title prevails. But where he who has the legal title had notice, at the time he advanced his money, of an equity in the other, he is postponed. As where a note was endorsed to A. by B. as a security, and A. made subsequent advances to B., some before and some after he had notice that the maker had an equitable set-off to the note, it stands as a security to A. only for advances made before notice.
THE facts in this case were that on 22 January, 1822, the plaintiff gave to the defendant Conner two promissory notes for $1,115 each, payable on January, 1825 and 1826. That in 1823 the defendant Cowen, in Georgia, became the surety of Conner for a debt due in that State, and that the latter, on 12 January, 1824, endorsed to him the notes above mentioned to indemnify him against his responsibility. On 9 August, 1825, Cowen was compelled to pay the debt for which he had thus become Conner's surety, amounting to $1,900.44. On 26 November following, he received from Conner $900, and on 4 May, 1827, he collected from the plaintiff $1,167.68, the net amount of the first note after deducting the costs of collection. On 12 August, 1823, the plaintiff became the surety of Connor in a replevy bond in this State, and afterwards was compelled to pay a large sum of money on that account, and also other sums as the surety of Conner, amounting to more than was due on the second note. From a letter of the defendant Cowen, dated in June, 1825, which was produced by the defendant Conner, it distinctly appeared that he then had notice of these payments of the plaintiff, and of the fact that he looked to the notes which he had given Conner for reimbursement. On 12 January, 1824, Conner sold to Cowen by deed of bargain and sale, with covenants of general warranty, a tract of land in Georgia. Upon this land the taxes for the preceding year were due, amounting to $9.18, which Cowen had been compelled to pay. (357) He had also been compelled, 4 March, 1824, to satisfy an execution against Conner, which was a lien upon the land at the time he purchased, and which amounted to $185. On 27 August, 1825, Cowen took an assignment of a note of Conner's for $200, dated 15 August, 1824, payable to Jackson Fitzpatrick or bearer, and due 25 December, 1825. He also held Conner's note for $217, payable to himself, dated 22 October, 1825, and payable 1 January, ensuing. On these two notes Cowen had obtained judgment in Alabama, where Conner had removed, executions upon which were returned nulla bona.
Badger for plaintiff.
Devereux for defendant Cowen.
An action having been brought by Cowen on the note of the plaintiff due 1 January, 1826, this bill was filed. The plaintiff insisted that the defendant Cowen had no right to collect that note except in satisfaction of the debt for which it was pledged, to wit, that of $1,900.44, which he alleged was paid. He prayed for an injunction, and that the money he had paid, as the surety of Conner, might be so arranged as to discharge the judgment, and for general relief.
The defendant Conner admitted all the allegations of the bill. Cowen insisted that he had a right to collect both notes and apply the money received to all claims which he had against Conner.
Neither Kerr nor Cowen has a lien upon the second note by virtue of any contract. Cowen, by the terms of his contract, was to collect the money upon both notes, indemnify himself for his liability as Conner's surety, and account to him for the surplus. As against Conner he has, however, the right, upon principles of natural equity, to retain so much of this surplus as will satisfy his other just demands. And Kerr has against Conner, on the same principles, the same right to be relieved from the payment of so much of the notes as will reimburse his just claims against Conner. As the legal (358) property in this second note has been vested in Cowen by the assignment, so far as the equities of the contending parties are equal, his legal advantage cannot be taken from him. In the opinion of the Court, his equity with respect to the claims which accrued to him before June, 1825, is equal to that of the plaintiff, and he ought to be allowed to collect so much of the second note as will satisfy these. But such is not the case with regard to the other claims founded on the notes whereon he has sued Conner and obtained judgments. When these claims originated Cowen knew of Kerr's equitable demands, and knew that his reliance for satisfaction was upon the debt which he owed to Conner. With this knowledge, Cowen could not in good faith contract with Conner, or purchase a demand against him, to the prejudice of this known equity of the plaintiff. On such sums as Cowen has advanced for Conner, and which the Court allows him to collect, and of the judgment against the plaintiff, he is entitled to interest at 8 per cent, which is the rate established by the law of Georgia. It appears from a calculation made on these principles that the balance due Cowen is $243.41.
The Court will decree that the injunction heretofore granted shall be dissolved as to the aforesaid balance of $243.41 and interest thereon at 8 per cent from 4 May, 1827, till paid, and the costs of the suit at law, and be made perpetual as to the residue of the said judgment; and that the plaintiff and the defendant Cowen respectively pay their own costs in this suit. And will also decree that the plaintiff may, at his option, either dismiss his bill against the other defendant, Conner, without prejudice, or have an account taken against the said defendant of what may be due from him to the plaintiff by reason of the premises, this option to be declared on or before 1 July next.
PER CURIAM. Decree accordingly.
Cited: Bank v. McNair, 116 N.C. 554.
(358)