
    
      W. W. Lang, ad’mr. et al. v. H. C. Brevard et al.
    
    Columbia,
    Nov. 1849.
    The surety is not discharged by the omission of the creditor to record the mortgage of the principal debtor, which was executed for the purpose of securing tire payment of the debt.
    If the creditor do a% ad injurious to the surety, or omit to do an act, when required, which equity and his duty to the surety enjoin it upon him to do, and which omission is injurious to the surety — in either case, the surety will be discharged.
    
      Before Johnston, Ch. at Kershaw, June, 1849.
    The bill in this case was filed by the administrator of Alfred Brevard against the distributees of Dr. Brevard, praying for leave to sell the real and personal estate of the intestate, in order to pay his debts, and for leave to account before the Commissioner for his administration of the estate. By order of the Court the whole estate was sold upon a credit, and the proceeds of sales delivered to the administrator to pay the debts of the intestate. At June Term, 1848, an order was passed injoining the creditors from suing the administrator at law, and permitting them to file petitions in this cause, praying that the debts duo them might be paid, and requiring the Commissioner to report all debts due by the intestate, on sealed instruments, and the balances due thereon. Under these orders, the President and Directors of the Bank of the State of South Carolina filed their petition, and showed that on the 26th of July, 1836, J. W. Cantey executed his bond to the petitioners for the sum of thirty thousand dollars, payable in four equal annual instalments, with interest payable annually, with several personal sureties thereon, among whom was the intestate, Dr. Alfred Brevard. That the following amounts were still due upon the bond, to wit: $1189 40, with t interest from 7th February, 1848; also, $4000, with interest from 24th September, 1845 ; and the petitioners prayed that the said amounts should be paid to them out of the estate of the intestate. This petition was referred to the Commissioner to report upon, and on the reference the following facts were proved, to wit:—
    
      Thomas Salmond. — On 26th July, 1836, J. W. Cantey executed his bond to the Bank, conditioned for the payment of $30,000, in four equal annual instalments from the date, with interest, with ten sureties on the bond, of whom Dr. Alfred Brevard was one. The balances due on the bond were,— $1189 40, with interest from 7th February, 1848, together with $4,000, with interest from 24th September, 1845, which latter sum arose from the sale of the Hobkirk house, the proceeds of which had been credited by the Bank on the bond, but which, by a decree of the Court of Errors afterwards, had been declared to be properly applicable to other persons, as hereinafter stated.
    J. W. Cantey was frequently called on for payment of the bond. At the date of the bond, J. W. Cantey executed two mortgages to the Bank to secure the payment of the bond, one for 72 negroes, the other for 23 acres of land, on which was located the Hobkirk dwelling house of J. W. Cantey. The whole mortgaged property was sold on the 7th February, 1842. The mortgage on the 23 acres of land was recorded on 1st March, 1841. On the 8th April, 1837, J. "W. Can-tey executed a mortgage of the same land to John A. and William E. Ross, in consideration of their lending their two notes of $3000 each, to be discounted at bank for the benefit and use of J. W. Cantey, which mortgage was recorded on 23d May, 1837.
    At the time of the sale of the land, it was agreed on between the Bank and Messrs. Ross, that a good title should pass to the purchaser, and the contest should be had for the proceeds of sale, in the same manner as if the contest was for said land.
    It was admitted that in the bill filed by Messrs. Ross against the Bank, it was decreed by the Court of Errors that Messrs. Ross were entitled to the proceeds of the sale of the land, on the ground that the mortgage executed by J. W. Cantey to the Bank was not such mortgage as is registered by the charter without being actually registered — and ought to have been recorded within the time prescribed by law for other mortgages — and not being so recorded till after the junior mortgage to Messrs. Ross was recorded, the junior mortgage took precedence.
    
      J. W. Cantey proved, (whose testimony was excepted to on the part of the Bank,) that he borrowed $30,000 from the Bank in 1836, on bond — that Dr. Brevard was one of his sureties. He told his sureties that he would mortgage pro-1 perty amply sufficient to secure the loan, and told them what property it was. Thinks he told Dr. Brevard so. Dr. B. had formerly been surety for him on the security of a mortgage. Does not remember whether he told him that the mortgage would be given to the Bank or the sureties.
    
      Cross examined — Does not think he named the sureties in the application to the Bank for the loan. He promised to secure the debt by bond and security, and perhaps by mortgage of property. He was determined to secure them and his sureties — he intended a mortgage from the first — -does not remember that Dr. Brevard required a mortgage — is satisfied that he told Brevard he would mortgage property — does not recollect whether the bond and mortgage were sent to the Bank for approval — thinks the bond and mortgage were sent down at same time to bank — does not know whether there was any understanding between the Bank and Dr. Brevard.
    
      Thomas Salmond — Sent word to A. F. Peay, one of the sureties, that the mortgage was not recorded in Alabama — • Peay, at his own expense, had it recorded there. This was some time after the execution of the mortgage, to wit: on -. Peay got the mortgage from the parent Bank. Knows nothing of the loan to J. W. Cantey. It was refused at first — got through Col. Butler.
    Sixty four of the negroes were in Alabama at the date of the mortgage, as stated therein, and remained in Alabama till brought here by the Bank in January, 1842.
    Mr. DeSaussure presented a paper whereby the parties to the bond agreed to the sale of the Hobkirk House at public sale, and that the proceeds should be held subject to litigation, which it is admitted was shown to W. W. Lang, administrator of Dr. A. Brevard, on 7th February, 1842.
    The Commissioner rejected the claim of the Bank for four thousand dollars, with interest from the 24th Sept. 1845, on the ground that the Bank, by laches in not,,recording their mortgage in due time, had lost the proceeds of the sale of the Hobkirk house, and to that extent the sureties were discharged, and found a balance of $1134 28, with interest from 7th February, 1848, to be due on the bond ; and as there were seven solvent sureties on the bond, he recommended that the estate of Dr. Brevard do pay one seventh part thereof, to wit, $162 05, with interest from 7th February, 1848.
    
      Exceptions of the Bank.
    
    1. Because the petitioners are entitled to a decree against the estate of Dr. A. Brevard, one of the sureties on the bond to the Bank executed by J. W. Cantey, as principal obligor, for the whole balance, found to be due on the said bond by the Commissioner, to wit, $1134 28, instead of one-seventh thereof.
    2. Because the petitioners are entitled to a decree against A. Brevard, surety on said bond, for the further sum of $4000, with interest from 24th September, 1845, being the amount still due on said bond ; it having been adjudicated that the proceeds of the sale of the Hobkirk house, mortgaged to the Bankto secure the payment of said bond,-belonged to Messrs. Boss, and the Bank has been decreed to pay the said amount to them.
    3. Because the mortgage of the Hobkirk house, executed to the Bank, was so executed for the safety of the Bank, and not of the sureties.
    4. Because there was no privity of contract between the Bank and the said sureties respecting said mortgage.
    
      Exceptions by administrator of A. Brevard.
    
    1. Because neither the estate of A. Brevard nor his administrator is in any way liable to the payment of any balance due on the bond executed to the said Bank by J. W. Cantey, as principal obligor, with the name of the said Alfred Brevard as one of the several sureties thereto.
    DECREE.
    Johnston, Ch. On hearing the report of the Commissioner upon the petition of the Bank of the State of South Carolina, said report bearing date 11th instant, and the exceptions put in thereto, — '
    It is ordered that the first exception on the part of the said Bank be sustained, and that all the other exceptions, on both sides, be overruled.
    The Bank of the State of Carolina moved to reverse the decree of the Chancellor, so far as the same overuled the second, third and fourth exceptions to the Commissioner’s report filed by said Bank, on the, same grounds alleged against the report of the Commissioner.
    The complainant, W. W. Lang, ad’mr., moved to reverse the decree of the Chancellor, so far as the said decree overruled the exceptions filed by said complainant to the report of the Commissioner on the petition of the Bank of the State of South Carolina, and so far as the said decree sustained the exceptions of the said Bank to the same report/—
    1. Because the estate of Alfred Brevard is not now liable for any balance which may be found due on the bond given by J. W. Cantey to the President and Directors of the said Bank, although the said Alfred Brevard was a surety to the said bond, the said complainant, administrator, not having had due and legal notice, or any notice whatever, of the existence of the demand of the Bank against his intestate.
    2. Because the said Bank failed to perform its part of th"e contract'under the said bond with the surety thereto, and that the surety is therefore discharged from any further liability , on the bond.
    1McC. Ch. R. 107.
    1 McC. Ch. R. —
    3. Because the said Bank has varied said contract with the surety, and the surety is therefore discharged from any further liability on the said bond.
    4. Because in contracts which are.founded on some statutory power, and in which the legislature has imposed the necessity of a surety or sureties being joined, the requisitions of the statute must be strictly pursued, in order to make the surety or sureties liable — that the contract with the said surety on the bond aforesaid, is a contract founded on some statutory power, in which the legislature has imposed the necessity of sureties being joined — that in the said contract, the Bank has not pursued the requisition of the statute, and the surety, therefore, to the said contract, is no longer liable, nor is his administrator, the said complainant.
    
      J. M. DeiSaussure, Solicitor lor the Bank.
    
      Chesnut, Solicitor for complainant.
   Curia, per

Dargan, Ch.

The only question which I deem it necessary to discuss in this case, is whether the complainant’s intestate, (Alfred Brevard) as the surety of James W. Cantey, has been discharged by the laches of the Bank, in not recording the mortgage of the said Cantey, for the tract of land on Hobkirk Hill; which mortgage was executed for the purpose of securing the payment of the debt for which the complainant’s intestate was liable as surety.

If the question here raised were res integra in our courts, it might well be considered a debateable one. Even in that case, however, upon a careful collation and review of the English and American authorities, I think I should be led to the same conclusion to which I am constrained by the solemn adjudications of our own tribunals. This case is no way to be distinguished, by the most critical comparison, from that of Hampton v. Levy, where the identical question was made, upon precisely the same state of facts, and where, after the same course of argument here urged, the decision of the Court was, that the surety was not discharged by the omission of the creditor to record the mortgage of the principal debtor. The case of Smith v. Tunno, is, if not a stronger case, one equally as strong against the surety. There Gibbes, the Master in Equity, selling property under a decree in Chancery, took no mortgage at all; though it was a part of the published conditions of the sale, that in addition to personal security, a mortgage of the premises would be required; and if the conditions were not complied with in a month from the day sale, the property was to be resold at the risk of the first purchaser. And it was not shewn that the surety sanctioned, or was aware of, the waiver of or omission to take a mortgage, jn pursuance 0f the conditions of the sale. The surety in ' such a case might with great force and plausibility exclaim, non lime infender a veni. But on application to this Court, he was held not to be discharged. And if an omission to take any mortgage, when it was a part of the stipulation that one should be taken, does not discharge the surety, it is difficult to perceive why the omission to record a mortgage actually taken, could have that effect. Certainly the interests of the surety are less jeoparded in the latter case, inasmuch as, at the date of these occurrences, an unrecorded mortgage would have prevailed against a subsequent judgment, or any other incumbrance, except a subsequent mortgage duly recorded.

17 Johns. Ch. R. 384.

13 Johns. Ch. R. 154.

The prominent and well defined’distinction, that pervades all the cases that may be deemed authoritative on this subject, is, that the surety will be discharged by any acts on the part of the creditor of a positive character, whereby the remedy against the principal debtor is lost; so that payment cannot be enforced against him. Such would be the case where on the part of the creditor, there was a destruction, abandonment, or waiver of counter securities. If the creditor, for a consideration, and by a binding stipulation, gives time to the principal debtor, without the consent or concurrence of the surety, the latter will be discharged, though the principal debtor is perfectly solvent. This is not only a positive act on the part of the creditor, but it is a new contract, to which the surety is no party. For acts of mere passive sufferance, omission, and delay, the surety will not be discharged. And this rule is the more reasonable, inasmuch as a surety thus aggrieved, has the remedy in his own hands ; and by various-alternative modes of proceedure, may redress himself. He may convert the passive indulgence and delay of the creditor, into a positive wrong, by demanding that he proceed to the collection of his debt. If the requisition be not complied with; in a reasonably diligent manner, and the principal becomes insolvent, it will afford ground for relief. The doctrine here asserted is not involved in this case, and has never been judicially recognized by the Courts of this State. But it is fully affirmed in the well considered cases of King v. Baldwin, and Paine v. Packhard, The judgment in the case first cited, was the result of much elaborate consideration, and ^ Principle involved was this : “Where the creditor did an act injurious to the surety, or omitted to do an act, when required, which equity and his duty to the surety enjoined it upon him to do, and which omission was injurious to the surety, in either of these cases the surety would be discharged.” — And accordingly, in that case the creditor was adjudged to have lost his claim against the surety; having refused or omitted, at the request of the surety, to proceed against the principal. I am authorized to say, that a majority of this Court are prepared to adopt the principle of this decision, and to extend similar relief to a surety under the like circumstances.

2 Bro. 578. 17 Johns. 384.

Another remedy, which a surety might have against a too indulgent creditor, would be, on the quia timet doctrine, to file a bill in this Court, both against his principal and the creditor, and to compel the latter to accept payment, or to proceed to the recovery of a judgment. Nesbit v. Smith, King v. Baldwin. Or, the surety might, in consistency with the terms of his own contract, pay the debt of his principal, and bring an action at law against him, to recover the amount. In the case we are considering, Alfred Brevard, if he had been himself active and vigilant, might have easily discovered that the mortgage was not recorded. He might have demanded that the mortgagee should have it recorded ; or that it should be delivered to him for that purpose. If this legitimate demand were refused, and injury had resulted to the surety, from the non-registry of the mortgage, he would have been entitled to relief. In not pursuing this course, he has not himself been vigilant, and the maxim vigilantibus and non dormientibus, &c. applies.

I will not say that there might not occur a case of outrageous neglect on the part of a creditor, in omitting to recover his money from the principal debtor, in which the surety would be exonerated. It is not difficult to conceive of cases in which the neglect would be so gross as to amount to a fraud upon the surety. In an instance of this kind, he might be relieved. In the present case, the omission of the Bank to record, cannot in any possible light be regarded as a criminal or culpable neglect.

It has been the opinion of some lawyers eminent for their learning, that the Bank charter dispensed with the necessity of registering mortgages to the Bank. A distinguished jurist, who long and ably presided over the affairs of that institution, was of this opinion and acted upon it. And the Bench itself, of the present day, are not unanimous on the question. The Bank must therefore stand acquitted of any gross neglect, or of any intention to do that which was not becoming and just towards the sureties of Geni. Gantey. There is then nothing presented in the case made by the sureties which entitles them to relief in this Court. And considering the various remedies which the surety himself possesses, against the passive indulgencies and omissions of the creditor, the rule that refuses him exoneration for such passive indulgen-cies and omissions, is neither unreasonable nor severe.

It would seem that the complainant, as administrator, not anticipating that this specialty debt of the Bank would be presented, has applied assets to the payment of simple contracts; and that there will now be a deficiency of assets to pay all the debts, including this claim of the Bank, hereby adjudged to be legal. If, upon a future investigation, it should appear that previous to an application of the assets to simple contract debts, he duly and legally, as required by law, advertised for creditors to present their demands, and paid away the assets before he received notice of this claim, he will not be required to pay the claim of the Bank out of his own estate. In such case, the Bank will be entitled to a decree for the whole balance due upon the bond, to be paid out of assets, quando accederint, and in the mean time, to take what remains in the hands of the administrator, applicable to the debt. The question as regards the liability of the administrator out of his own estate, is reserved, and it is ordered that the Commissioner report the evidence upon this part of the case.

It is ordered and decreed, that so much of the Ciicuit decree as disallows the claim of the Bank for four thousand dollars and the interest, be reversed. It is also ordered and decreed, that the said Bank of the State of South Carolina do recove]', as well the sum of four thousand dollars with interest from the 24th September, 1845, as the sum of eleven hundred and thirty-four dollars 28-100, with interest from the 7th February, 1848, allowed by the decree. It is also ordered that the Circuit decree be affirmed in all respects.wherein the same is not modified by this appeal decree, and that the appeal in all other respects be dismissed.

The whole Court concurred.

Decree modified.  