Strong and Delano vs. Daniel Wooster, 6 Vt. 536

The opinion of the court was delivered by Williams, Ch. J. — It appears in this case, that one Gilman was indebted to Mr. Bell in the sum of one hundred dollars, for which Mr. Bell held a certain lease as security, that Gilman owed on the lease thirty-six dollars back rent. To render tin's lease available, as a security for the one hundred dollars, Mr. Bell must have paid the rents due thereon; when he paid it, his debt would have been increased to one hundred and thirty-six dollars, and the lease would have been in his hands, security therefor. The plaintiffs undertook to pay the one hundred dollars to Mr.

Bell and hold the lease as security, and on a transfer from him, they would have been in the same situation, both as to the one hundred dollars, and the sum to be paid for rent. They however insisted on further security for the rent, The defendant, on the procurement, and at the request of Gilman, but on an indemnity from Mr. Bell, signed the note in question, and thereupon the plaintiffs paid the rents. The note, however, was only as a security “'or ^collateral security, for the sum thus paid.

The rents which they paid, were a claim against Gilman, and if the note had proved uncollectable or unavailable, in consequence of the insolvency of Wooster, they might have resorted to Gilman and held him reponsible therefor, and at any rate they might have held the lease as security, until' the same was paid. It appears that the plaintiffs then agreed with Gilman to hold the land in trust for him, and to pay him whatever the land sold for after paying themselves. It is not stated that they were to pay him whatever the land sold for, over the hundred dollars.

Such a contract would have.been unjust at least, and could not have been made without the consent of the defendant, or of Mr. Bell, if the fact of his having given an indemnity to the defendant, was known to the plaintiffs. The inquiry will here present itself, for whose debt did the plaintiffs pay the one hundred dollars and the thirty-six dollars ? There can be no doubt it was for Gilman’s debt, and the security which the plaintiffs held in the lease, would have been unproductive and unavailing, unless they had paid the thirty-six dollars.

The defendant signed the note of thirty-six dollars, as security to the plaintiffs for the repayment of thirty-six dollars, due from Gilman, thereby increasing the security of the plaintiffs. It is not found that Gilman placed any funds in the hands of Wooster, for the payment of the note, but on the contrary, that it was executed on Mr. Bell’s indemnity.

Both of these sums being chargeable on the land, both being the proper debts of Gilman, Wooster or Bell being only security to the plaintiffs, that the thirty-six dollars should be paid, it follows, that whenever the plaintiffs sold the land, they should apply the avails in satisfaction of both debts, and if they had not collected the note of Wooster when they did sell, they not only were at liberty, but bound in good faith, to apply the avails in payment, not only of the sum of one hundred dollars, but also of the thirty-six dollars, if there was more than enough to satisfy the first sum ; and they could not ionsistently with their duty, pay anything to .Gilman, while 'bis note remained unpaid. jn another view which may be taken of this case, it is also _ J ’ clearly with the defendant.

After all these transactions, and after ti10 contract between plaintiffs and Gilman, Mr. Bell disclosed t0 them the situation in which he stood, both to Gilman and ' Wooster; that though Wooster was nominally surety for Gil-man, he, Mr. Bell, was so in fact. They recognized him as such, and on his request, they promised that when the land was .sold, they would reserve out of the purchase money the amount of this note now in suit.

The plaintiffs then knew the situa- ■ tion in which they stood with Gilman, how far they were at liberty to make this promise and dispose of this fund thus placed in their hands, or whether they were restrained from making any such promises in consequence of any positive contract with Gilman. They also knew the situation of Mr. Bell, and with this knowledge made the promise on which Mr. Bell might and would rely.

This was effectually making the surety easy as to the eventual security of his demand, and preventing him from taking any further or other measures to obtain security of Gilman, if he was satisfied the property was sufficient for the purpose. Whatever might have been the obligation of the plaintiffs before, they could not after this promise, consistent with the duty which the law considers as incumbent ón a creditor in his. transactions and dealings with his debtor, and the surety of his debtor, either give up the land to Gilman or pay him the avails, without retaining sufficient to pay the debt.

And if they conceived themselves in danger of getting into any difficulty or controversy with Gilman, they ought at least to have given notice to Mr. Bell, and if he would have indemni-’ fied them against the claims of Gilman on them, which I apprehend he could very successfully have resisted, the plaintiffs would not have been justified in paying the balance to Gilman.

Having paid over this money to Gilman, which was more than sufficient to pay his note, and without giving any such notice as they were under obligation to do, both from their relation to him and defendant as creditor and surety, as well as from their positive engagement to Mr. Bell, they cannot call on this defendant for payment of this note. The judgment of the coun-. ty court is therefore affirmed.