upon the general principle of equity, that if a creditor have two funds to which he may resort for payment of his debt, he shall not by his will defeat another who has only one, but shall take to that, which paying him, shall leave another fund for another creditor (p). So if property belonging to the principal, and property belonging to the surety respectively, have been deposited with the creditor as a security for his debt, the surety, it would seem, may, in equity (upon submitting to pay to the creditor what shall be found to be justly due to him upon taking the accounts between him and the principal), insist upon the property of the principal being first applied in satisfaction of the creditor's debt (q). Again-If the principal, in a proceeding by the creditor, could claim in equity a right of set-off, the surety is entitled to the same benefit, inasmuch as a proceeding against the surety is in effect a proceeding against the principal, who must indemnify the surety (1); thus, if a bill of exchange is drawn. by D. upon A., which A. accepts for the accommodation of D., and D. discounts the bill with his bankers, who become bankrupts before its maturity, having in their hands at the time of their bankruptcy, the bill of exchange, and also a cashbalance of the drawer, the bill of exchange will be ordered to be given up in reduction of the cashbalance, leaving the drawer at liberty to prove for (p) Cottin v. Blane, 2 Anstr. 544; and see the observations of Lord Eldon, C., in Wright v. Simpson, 6 Ves. 714; in ex parte Kendall, 17 Ves. 514; S. C. 1 Rose, 71; and in Aldrich v. Cooper, 8 Ves. 382; and of Lord Thurlow, 326. (q) Aguilar v. Aguilar, 5 Madd. 414; Clinton v. Hooper, 1 Ves. jun. 173; S. C. 3 Bro. C. C. 201. (1) A debt due from the creditor to the principal, cannot be made the subject of a set-off under the stat. 2 Geo. 2, c. 22, s. 13, in an action brought by the creditor against the surety upon the guarantee. (See supra, p. 92.) the difference (r); for if an action had been brought against D., he would have had the benefit of a setoff, and he ought to have the same benefit if the action were brought against A., who being merely D.'s surety, would have to be repaid by D. (2). If the creditor is the purchaser of an annuity, and a power is reserved to the grantor to re-purchase it upon certain terms, the surety has the same right, and may become the purchaser of the annuity upon the like terms (s); or, if from inadequacy of consideration (t), or from any other cause, (r) Ex parte Hippins, 2 Glyn & Ja. 93; ex parte Hanson, 12 Ves. 346; ex parte Stephens, 11 Ves. 24; and see Bolland v. Nash, 8 B. & Cress. 105; Collins v. Jones, 10 B. & Cress. 777. (s) Capel v. Butler, 2 Sim. & S. 457. (t) See Underhill v. Horwood, 10 Ves. 209. (2) But if the bill so discounted had not been an acceptance for accommodation, D. who would then be the surety for its due payment by A., would not be allowed to set it off against the cash-balance in his bankers' hands (ex parte Burton, Franco and Corea, 1 Rose, 320); although it might happen, that in consequence of the bankruptcy of A. after the bankruptcy of the bankers, D. had been compelled to pay the bill, and thus had made it an existing debt as between him and the assignees of the bankers; for as between the bankers and D., there would not have been at the time of the bankruptcy mutual debts, nor had there been at any time between them mutual credit, for although D., by placing money in the bankers' hands, had given them credit, yet, on the other hand, the bankers, on discounting the bill, must be considered to have given credit to the acceptor of the bill, who was the person that ought to have paid it. (See Hankey v. Smith, 3 T. R. 507 n.) And if there has been mutual credit once constituted between the parties, it is not in the power of one party by his own act, to put an end to the mutual credit originally constituted, so as to deprive the other of his right to set-off, in the event of the former's bankruptcy (per Lord Tenterden, C. J., in Bolland v. Nash, 8 B. & Cress. 105); as where A. is the indorser of a promissory note or bill of exchange, made or accepted by B., and which at the time of a commission of bankruptcy issued against B., is in the hands of a third party, inasmuch as credit is considered to have been given to the maker of a promissory note, or the acceptor of a bill of exchange, by every person who takes the note or bill (Hankey v. Smith, supra); A., by taking up the note or bill (though subsequently to the bankruptcy), is remitted to his former state, and may make it an item of set-off for his own debt, against the estate of B. (Collins v. Jones, 10 B. & Cress. 777; contrà ex parte Hale, 3 Ves. 304.) the principal may claim relief in a court of law or equity, in respect of the annuity, the same relief will be given to the surety. Where the transaction between the parties is against public policy, equity will give the surety relief, though he himself was a party in the illegal transaction, the relief not being given for his sake, but for the sake of the public (u). A surety is not entitled in a court of law to the inspection of a deed in the possession of the creditor, to which the surety is not a party, though by the deed time may have been given to the principal debtor which would operate to the surety's discharge; the surety not having that interest under the deed which a court of law deems sufficient to entitle him to its production (v). If the surety, upon an action brought against him by the creditor upon the instrument of suretyship, pay money into court (w), or plead a tender (r), it is an admission of the contract declared on, and he cannot afterwards raise an objection as to the validity of the instrument, which otherwise might have been made by him. If the surety allow a verdict to be had against him at law, where he had a legal defence, a court of equity will not (although it has a concurrent jurisdiction with the court of law), grant the surety relief unless he had also a defence in equity, of which he could not have availed himself in a court of law (y); and even where the surety's defence is only in a court of equity, yet, if he allow a verdict (u) Lord St. John v. Lady St. John, 11 Ves. 526; and see the observation of Lord Eldon, C., in the Vauxhall Bridge Company v. Spencer, Jac. 64; and Smith v. Bromley, 2 Doug. 696 n. (v) Smith v. Winter, 3 Mees. & Wels. 309. (w) Gutteridge v. Smith, 2 H. Blk. 374. 15. (x) Middleton v. Brewer, Peake, (y) Greerside v. Benson, 3 Atk. 248; Ware v. Horwood, 14 Ves. 28; Eyre v. Everett, 2 Russ. 381; Gordon v. Calvert, 4 Russ. 581; Harrison v. Nettleship, 2 Myl. & K. 423; and see Lord Eldon's observations in ex parte Flint, 1. Swanst. 30. to be had against him at law, a court of equity will not, upon motion, grant him an injunction to stay execution, except upon the terms of paying the money into court (y): since it was the duty of the surety to have had recourse to a court of equity, and not to have allowed a judgment at law to have been had against him. But if the surety was, at the time when judgment was pronounced against him in the court of law, ignorant of the circumstances upon which his right to equitable relief is founded, a court of equity will, if it sees a probability of the surety's ultimately obtaining a decree in his favour, grant him an injunction to stay execution, without payment of the money into court (z). Proceedings by the landlord after judgment by default, in an action on a replevin bond, will be stayed at the instance of the sureties, upon paying into court the value of the goods distrained and costs, though the rent in arrear at the time of the distress made, exceeded in amount the value of the goods distrained (a). In Bleaden v. Charles, (b) P. had deposited with C., as a security for goods sold, a bill of exchange accepted by S., for which S. had received no value; P. afterwards paid for the goods, and asked for the restoration of the bill, but C. indorsed it for value to H., who sued S. and recovered; and it was held, that S. might recover of C. the amount of the bill in an action for money paid to the use of C., there being a privity between them arising out of the manner in which the bill was obtained, and deposited as a security; C. being apprised that nothing was due from S. to P. The 52nd section of the late Bankrupt Act, 6 Geo. (y) Mayhew v. Crickett, 2 Swanst. 185; S. C. 1 Wils. C. C. 418. (z) Blake v. White, 1 You. & Coll. 420. (a) Gingell v. Turnbull, 3 Bing. N. C. 881. (b) 7 Bing. 246. 4, c. 16, enacts, "that any person who at the issuing the commission shall be surety or liable for any debt of the bankrupt, or bail for the bankrupt, either to the sheriff or to the action, if he shall have paid the debt or any part thereof in discharge of the whole debt (although he may have paid the same after the commission issued), if the creditor shall have proved his debt under the commission, shall be entitled to stand in the place of such creditor as to the dividends and all other rights under the said commission, which such creditor possessed, or would be entitled to, in respect of such proof; or, if the creditor shall not have proved under the commission, such surety or person liable, or bail, shall be entitled to prove his demand in respect of such payment as a debt under the commission, not disturbing the former dividends, and may receive dividends with the other creditors, although he may have become surety, liable, or bail, as aforesaid, after an act of bankruptcy committed by such bankrupt: provided that such person had not, when he became such surety or bail, or so liable as aforesaid, notice of any act of bankruptcy by such bankrupt committed." To entitle the surety, therefore, to stand in the place of the creditor, as to dividends (c), and all other rights (d), (among which are included the choice of assignees, and the power to assent to, or dissent from, the allowance and confirmation of the bankrupt's certificate) (e), which such creditor possessed, or would be entitled to, in respect of (c) Ex parte Rushforth, 10 Ves. 409; ex parte Brook and Chatteris, 2 Rose, 334; ex parte Turner, 3 Ves. 343; Payley v. Field, 12 Ves. 435; ex parte Gee and Milnes, 1 Glyn & Ja. 330; and see Martin v. Brecknell, stated ante, p. 97. (d) Ex parte Rogers, 4 Deac. & Ch. 623; S. C. 2 Mont. & Ay. 153. (e) Ex parte Gee v. Milnes, supra; Browne v. Carr, 2 Russ. 600; S. C. 7 Bing. 508; Ratcliffe v. Gunson, 6 Madd. 193; ex parte Herbert, 2 Glyn & Ja. 66; ex parte Taylor, 1 Glyn & Ja. 399. |