Hampton v. Phipps
| Decision Date | 16 April 1883 |
| Citation | 108 U.S. 260,27 L.Ed. 719,2 S.Ct. 622 |
| Parties | HAMPTON, Adm'r, etc., and others v. PHIPPS |
| Court | U.S. Supreme Court |
The appellee, who was a complainant below, is the holder, and filed his bill in equity, on behalf of himself and the other holders of bonds, executed and delivered by Theodore D. Wagner and William L. Trenholm, to the amount of $710,000, and paid to creditors in settlement of the liabilities of two insolvent firms, in which they were two of the copartners. These bonds were dated January 1, 1868. The payment of the principal and interest of each of these bonds was guarantied, by writing indorsed thereon, by George A. Trenholm and James T. Welsman, who were sureties merely. These sureties entered into a written agreement each with the other, dated May 3, 1869, in which it was recited that, in becoming parties to said guaranty, they had agreed between themselves that the said George A. Trenholm should be liable for the sum of $400,000, and the said James T. Welsman for the sum of $310,000, of the aggregate amount of the bonds, and no more, and that each would be respectively liable to the other for the full discharge of the said sum and proportion by them respectively undertaken, and that each would take and keep harmless and indemnify the other from all claim, by reason of the said guaranty, beyond the amount or proportion respectively assumed, as stated; and it was thereby further agreed that, at any time when either of them should so require, each should, by mortgage of real estate, secure to the other more perfect indemnity, because of the said guaranty. Thereupon, and on the same date, each executed to the other a mortgage upon real estate of which they were respectively the owners, the condition of which was that the mortgagor should perform on his part the said agreement of that date. The guarantors, as well as the principal obligors, had become insolvent before the present bill was filed.
It also appears that, of the sum of $573,300 due on account of outstanding bonds, George A. Trenholm, one of the guarantors, had paid $108,454, leaving still due from his estate to make good the proportion assumed by him $214,532; and that the proportion for which the estate of James T. Welsman, the other guarantor, was liable, was $250,314, of which nothing had been paid The appellees claimed that the mortgages interchanged between the guarantors inured to their benefit as securities for the payment of the principal debt, and prayed for a foreclosure and sale for that purpose.
This was resisted by the appellants, one of whom, Hampton's administrator, as a judgment creditor of George A. Trenholm and James T. Welsman, claimed a lien on the mortgaged premises; the others, executrixes of James Welsman, deceased, being subsequent mortgagees of the same property.
A decree was passed in favor of the complainants, according to the prayer of the bill, and is now brought under reveiw by this appeal.
T. G. Barker and W. G. De Saussure, for appellants.
James Lowndes and A. G. Magrath, for appellee.
[Argument of Counsel from pages 261-263 intentionally omitted]
The facts upon which the controversy in this suit depends are as follows:
The ground on which the court below proceeded seems to have been that the mortgages given by the co-sureties, each to the other, were in equity securities for the payment of the principal debt, which inured to the benefit of the creditors upon the principle of subrogation. The application of the principle of subrogation in favor of creditors and of sureties has undoubtedly been frequent in the courts of equity in England and the United States, and is an ancient and familiar head of their jurisdiction.
It was distinctly stated, as to creditors, in the early case of Maure v. Harrison, 1 Eq. Cas. Abr. 93, where the whole report is as follows: 'A bond creditor shall in this court, have the benefit of all counter-bonds or collateral security given by the principal to the surety; as if A. owes B. money, and he and C. are bound for it, A. gives C. a mortgage or bond to indemnify him, B. shall have the benefit of it to recover his debt.' And the converse of the rule was stated by Sir WILLIAM GRANT in Wright v. Morley, 11 Ves. 12, where he said: 'I conceive that as a 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 to the benefit of all the securities the principal gives to the creditor.' And it applies equally between sureties, so that securities placed by the principal in the hands of one to operate as an indemnity by payment of the debt, shall inure to the benefit of all.
Many sufficient Maxims of the law conspire to justify the rule. To avoid circuity and multiplicity of actions; to prevent the exercise of one's right from interfering with the rights of others; to treat that as done which ought to be done; to require that the burden shall be borne by him for whose advantage it has been assumed; and to secure equaity among those equally...
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