Freaner v. Yingling

• Decision Date: 21 February 1873
• Parties: JOHN A. FREANER v. HENRY YINGLING, and Joseph Douglas and Levi Sanders, Trustee.
• Court: Maryland Court of Appeals

37 Md. 491

JOHN A. FREANER v. HENRY YINGLING, and Joseph Douglas and Levi Sanders, Trustee.

Court of Appeals of Maryland

February 21, 1873

Appeal from the Circuit Court for Washington County, in Equity.

In September, 1857, the appellee, Henry Yingling, sold to McCauley & Miller his stock of dry goods in Hagerstown, for which he took their promissory notes, with a mortgage on the stock of goods to secure the payment of the notes. These notes were indorsed by Yingling, and transferred to Hallowell & Co., of Philadelphia, in payment of his indebtedness to them. In April, 1858, McCauley & Miller dissolved partnership, the latter purchasing the interest of the former, and continuing the business for some years. Being desirous to substitute other notes for those of McCauley & Miller, the latter applied to Yingling, who, at his request arranged with Hallowell & Co., for such substitution. At first, the promissory notes of Miller, indorsed by the appellant, were sent to Hallowell & Co., but they were rejected and returned, with the request that Miller and the appellant should give their joint and several notes to Yingling, and that he should indorse them. This was done, and six notes so executed and indorsed were delivered to Hallowell & Co., and the notes of McCauley & Miller were surrendered. A short time afterwards at the instance of Yingling, Miller, to secure the payment of his notes, as they respectively fell due, with interest, executed a mortgage of his stock in trade, consisting of dry goods then owned and kept for sale in his store room in Hagerstown, or which might be kept for sale thereafter, together with the counters and store fixtures belonging to him. Four of the notes of Miller and Freaner were paid by Miller to Hallowell & Co., three of them with money received from the appellant, leaving unpaid the two notes which became due, one on the 1st of July, 1860 and the other on the 1st of January, 1861. Upon failure to pay these two notes, Hallowell & Co. sued Miller, and also Yingling as indorser. The appellant was a non-resident living in California. Judgment was obtained against Miller and Yingling confessed judgment 1st of January, 1863, paid it to Hallowell & Co., and had it entered to his use. Before that time, on the 29th of May, 1861, Miller had executed a bill of sale to Peter B. Small and others, conveying his stock of dry goods, and other personal property. Prior to the 12th of June, 1861, Miller, being indebted to Reigle, Moore & Co., of Philadelphia, shipped to them goods out of his store to the amount of over $1,400. It was in evidence that these goods were no part of the goods embraced in the mortgage from Miller to Yingling. Yingling was informed that this shipment of goods was taking place, but did not consider the goods in the store of Miller of sufficient value to go to the expense of foreclosing the mortgage. After doing business for nearly four years, with his stock of goods constantly changing by purchases and sales, Miller closed out his store in February 1862, before Hallowell & Co. obtained judgment either against himself or Yingling. In April, 1870, Yingling conveyed all his property by deed of trust, for the benefit of his creditors, to the appellees Douglass and Sanders. They having obtained possession by order of the court, of the two notes which were paid by Yingling, issued an attachment against the property of the appellant, to satisfy the indebtedness to Yingling, and levied upon the appellant's interest in the estate of his father, recently deceased.

The appellant thereupon filed a bill against the appellees, to restrain proceedings under the attachment, upon the ground that the appellee Yingling, holding the mortgage as security for the payment of the indebtedness therein mentioned, and with full knowledge of the inability or failure of Miller, the principal debtor, to pay the aforesaid two notes when they respectively fell due, stood by and saw and suffered him to sell and dispose of the mortgaged property, and permitted the same to be wasted and dissipated. The injunction was issued. The appellees filed their answer and testimony was taken. After hearing, the Circuit Court (Alvey, J.,) delivered the following opinion:

There seems to be some dispute or conflict in the testimony, as to some of the facts connected with the transactions involved in this case, but in the view that I have of the law applicable to it, those facts are not deemed very material. The main facts are few, and are free from all doubt or controversy.

Whether and to what extent the application of the principle invoked by the complainant may be affected by the fact that Yingling, immediately after the making of the notes, which were negotiable, and the taking of the mortgage, assigned them by the indorsement of the notes to Hallowell & Co., and was never again the holder of any of them, until recovery had against him as indorser of the two last of them, and payment of the judgment, I do not deem it necessary to determine. But laying all the facts connected with the indorsement of the notes, and the equitable assignment of the mortgage, out of the case, I shall treat it as if Yingling had continued to hold the notes and mortgage, with all the duties and obligations imposed upon him, that attach to and grow out of the relation of creditor and surety; for considering the case in this the most favorable aspect to the complainant, I am decidedly of opinion that he has failed to show any sufficient ground for the relief sought at the hands of this court.

The notes were made on the 6th of April, 1858, and the mortgage was given on the 17th of the same month. The mortgage refers to the notes, and was given as additional security for their ultimate payment as they became due. It formed, however, no part of the original transaction to which the complainant was a party, but was subsequently executed at the instance of Yingling himself, and as additional security for the notes, and therefore formed no inducement to the suretyship of the complainant.

It appears, that as some of the notes became due, the complainant remitted money for their payment, and it is not pretended that he ever applied or suggested to Yingling, before the filing of the present bill, to take from the possession of Miller the goods covered by the mortgage, and make them available for the liquidation of the debt. Indeed, from the relation that the complainant bore to the principal debtor, the latter being his brother-in-law, his manifest disposition to aid and assist him, and in view of the fact that he had himself provided for the payment of such of the notes as Miller was unable to take up as they fell due, it is more than doubtful whether he would have desired such a proceeding on the part of Yingling.

The goods have been disposed of by Miller, and he has received the proceeds of their sale, and if the complainant was not willing, or failed to become active, to prevent the disposition of the goods, he can hardly complain of the inactivity of Yingling. The fact of his being a non-resident cannot be allowed to change or modify the relative duties and obligations of the parties. The law is a fixed rule, having no reference to such a fact. It would have been very competent to the complainant to have stipulated for diligence and activity on the part of Yingling, if he had desired it. But having failed to make that a condition of his undertaking, he must take the law as it would be applied in any other case between parties occupying the relation of creditor and surety. And that law has placed within his reach and control ample remedy for his protection, and if he has not availed himself of it, the consequences of his neglect should fall upon no other person than himself. Now, as to the law of this case, there can be no question but that, upon satisfying the debt for which he is bound, the surety is entitled to the benefit of all securities, either of a legal or an equitable nature, which the creditor has or could have enforced against the principal debtor and those claiming under him. Indeed, the creditor is bound to preserve all such securities for the benefit and protection of the surety; and if he parts with any of them, or if the benefit of them be lost by his act, the surety will be exonerated to the extent to which he is prejudiced by the act of the creditor. And this right of the surety is the same, although he may not have known of the existence of the securities held by the creditor, or though taken subsequently to the date of the contract of suretyship.

It is equally the unquestionable law that a creditor cannot be compelled to resort in the first instance to the principal debtor, or to the securities which he holds for the debt before proceeding against the surety. Folliott v. Ogden, 1 H. Bl. 123; Wright v. Simpson, 6 Ves. 714. He is not deprived of his right to resort to the surety, says Burge, on Suretyship, 324, upon his personal security, because there has been provided a fund for the debt of the principal to which the creditor might have recourse for payment, but when the surety has paid the debt of the principal to the creditor, the surety may compel the creditor to proceed against the fund or pledge for his benefit. Nor is there any positive duty incumbent on the creditor to prosecute measures of active diligence; mere delay, therefore, on the part of the creditor, in the absence of some special equity, unaccompanied by any valid contract for such delay, will not amount to laches, so as to discharge the surety. 1 Story Eq. sec. 326; Wright v. Simpson, 6 Ves. 734; McLemore v. Powell, 12 Wheat. 554. The surety, if he desires to expedite payment, is entitled to pay the debt the moment it becomes due, and by that means put himself in the...