Scanland v. Settle

• Decision Date: 31 December 1838
• Citation: 19 Tenn. 169
• Parties: SCANLAND v. SETTLE ET AL.
• Court: Tennessee Supreme Court

19 Tenn. 169

SCANLAND

v.SETTLE ET AL.

Supreme Court of Tennessee.

December Term, 1838.

John Burris, Jr., being indebted on account to Settle, Whitley, and Smith, merchants and partners in trade, in the sum of $205.37 1/2, to secure the payment thereof, executed three several promissory notes with the complainant's intestate, William Locke, as surety, dated December 21, 1822 payable one day after date. Besides those notes he owed the defendants several other sums of money. To secure the whole, on the 7th of April, 1827, he executed a deed, conveying certain real and personal property to a trustee, not stipulating for any delay. But the trustee never acted; the property remained in the hands of Burris, and he disposed of some portions of it. Locke died in 1833, and early in 1834 the defendants sued the complainant, his administrator, in Jackson County Court, and at August session, 1834 recovered judgment for $344.06 debt and damages besides costs. To enjoin this judgment, the complainant, on the 3d of November, 1834, filed his bill in Jackson Circuit Court, afterwards transferred to the Chancery Court at Livingston, charging that the property mentioned in the deed was an ample indemnity and security for the demand of the defendants against Burris; that the deed had been taken to indemnify Locke, and discharge him from liability, and that such was its legal effect; that the defendants had collusively permitted Burris to dispose of, and enjoy the property mentioned in the deed, but that there yet remained a sufficient amount of it subject to the control of the trustee and the defendants to pay and discharge the judgment and costs: praying for a perpetual injunction against the judgment, and in case that should be refused, that the Court would cause the trust to be executed, and the property mentioned in the deed, or such part of it as remained undisposed of, and subject to the control of the defendants, to be sold, and the proceeds applied to the discharge of the judgment, and for general relief.

The answer of Settle, the acting partner of the defendant's firm, admitted that the trustee had not acted; that Burris had retained the property, and had disposed of some part of it but without any collusion on part of defendant, who had been merely passive. The other answers were to the same purpose. The injunction was dissolved, and the money collected from the complainant.

On the hearing, on the 5th of January, 1837, before Chancellor Williams, he ordered the injunction to be made perpetual; that the defendants should repay complainant the amount collected of him, and also the costs. The defendants appealed in error.

The cause was heard in the Supreme Court at December term, 1837, when the Court reversed his Honor's decree so far as it released Locke's estate, and pronounced a decree that complainant should be substituted, in consideration of the money paid by him as Locke's representative, to the rights of Settle, Whitley, and Smith, and that the land in the deed of trust mentioned should be sold to satisfy the same. The land was accordingly sold, and the commissioner's report was read and confirmed at December term, 1838.

F. B. Fogg, for complainant.

A. Cullom and Campbell, for defendants.

Green, J. delivered the opinion of the Court.

The bill in this case alleges that one Burris, being indebted to the defendants in the sum of about $208, he executed to them his bonds, with Locke, the complainant's intestate, as his surety. In 1827, the defendants took a deed of trust from Burris, for a tract of land, a negro, and all his personal property, to secure the payment of certain debts therein specified as due them, including the debts for which Locke was surety. Defendants permitted Burris to retain possession of, use, and waste the personal property mentioned in the deed of trust; and in 1833, having died intestate, suits were brought against the complainant, his administrator, and judgments obtained. The bill charges, that “there is a sufficient portion of the property named in said deed of trust, now in the county, subject to the control of and sale, by the said Settle, Whitley, and Smith, and the said Thomas Smith, trustee, to pay and satisfy said judgment and costs.”

The complainant prays that the estate of Locke be released from liability, and the defendants be compelled to resort to their deed of trust to make their debt.

The chancellor decreed in favor of the complainant, and enjoined the judgment against him, from which the defendants prosecute this appeal.

We are unable to find any authority, upon which this decree can be supported. The chancellor seems to have placed his decree upon the ground that the defendants, by taking the deed of trust, including all the property of Burris placed Locke, the surety, in a worse situation than he would have been in had the deed not been made. But this, we think, is a mistaken view of the subject.

The deed does not stipulate for any delay to sue on the notes, nor is it a legal consequence that there should be any delay. So that the facts do not justify us to put the case upon the ground of a stipulation for delay upon a good consideration, without the knowledge or assent of the surety, whereby he would be discharged. Nor can the mere fact that the deed was taken as an additional security for the debt discharge the surety. It is true that the surety, on paying the money, would be entitled to be substituted to the rights of the creditor, and to have the benefit of the deed of trust. 1 Story's Eq. sec. 502. But this very right of substitution shows that the surety is not discharged; for, if discharged there would be no need of the substitution. So far from the fact of a creditor taking a deed of trust or mortgage from the principal debtor as an additional security being prejudicial to the surety it is for his benefit, it is for his indemnity, as though he had taken it himself. Having paid the money, he can avail himself of it, as though it had been executed to him as an indemnity for his suretyship. It is unreasonable, therefore, that an act no way injurious, but highly beneficial to the surety, should operate to release him from his liability to the creditor.

But it is said that where a creditor takes collateral security, and, by any act of his own, puts it out of his power to make an assignment of such security to the surety who may have paid the debt, such surety would be discharged. 1 Story's Eq....