Hyperlawhypertext legal database Boyd v. Finnegan 3 Daly (N.Y.) 222

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Boyd v. Finnegan

3 Daly (N.Y.) 222 Court N.Y.C.P. English

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p. 222
John Boyd v. John Finnegan, Impleaded, &c.

Headnote

An accommodation endorser of a bill or note is to be regarded as standing in the character of a surety, and as entitled, in the event of his paying his principal’s debt, to be subrogated to all the rights and remedies of the creditor. And any interference with such right of subrogation will relieve the surety.
A judgment creditor took the judgment debtor’s note, endorsed for accommodation by the defendant, as collateral, to secure the payment of the judgment. He subsequently, but before the maturity of the note, transferred it to the plaintiff for value. The latter having notice of the circumstances under which the note was given, paid the judgment, and procured it to be satisfied, without the knowledge of the accommodation endorser: Held, in an action on the note against the endorser that by such payment and satisfaction of the judgment, the indorser’s right of subrogation was prejudiced, and he was, therefore, discharged from liability on the note.
The right of subrogation is recognized by courts of law as well as by courts of equity.
Appeal by one of two defendants from a judgment of the First District Court.
The action was brought on a promissory note made by the defendant, McDonough, and endorsed by the defendant, Finnegan.
In March, 1867, one Samuel Shapter recovered a judgment against McDonough, and the note in this action was given to Shapter as collateral security for the payment of the judgment; Finnegan received no consideration for his endorsement.
p. 223
Before the maturity of the note the plaintiff, with notice of the foregoing facts, paid the judgment, and Shapter executed and delivered to him a satisfaction of the judgment, and transferred the note in suit.
Upon the close of the evidence, the court gave judgment against both defendants, from which judgment the defendant, Finnegan, appealed to this court.
John L. Lindsay, for appellant.
Thomas Cushing, for respondent.

Although the plaintiff testified on the trial, in the court below, that he took the note in suit in the regular course of business, it is obvious that at the time he paid the judgment, and the note was transferred to him, he knew that it had been given to and was held by the attorney of the judgment creditor as collateral security for the payment of the judgment. Mr. Johnston, the attorney, distinctly testified that he informed him of that fact, and the plaintiff failed to contradict him.

How in some respects there is, doubtless, considerable difference between an endorser and a surety, but still where one endorses a bill or note for the accommodation of another, he is to be regarded as standing in the character of a surety (Pitts v. Congdon, 2 N. Y. 354 ; Clason v. Morris, 10 Johns. 538 ; Wood v. Jefferson Co. Bank, 9 Cow. 206 ; Hayes v. Ward, 4 Johns. Ch. 126 ).

In the case at bar, the defendant, Finnegan, proved— as he had a right to do—(Carpenter v. King, 9 Met. 511 ; La Farge v. Herter, 11 Barb. 159 )—that he endorsed the note for the accommodation of the defendant, McDonough. And although it does not clearly appear from the evidence returned to us that the plaintiff had notice of that fact, yet I am inclined to think that the facts and circumstances in this case justify us in inferring that he had such notice, and hence, considering the endorser as being entitled to all the rights and privileges of a surety for the maker of the note (Hayes v. Ward, supra).

p. 224
Regarding Mm as sustaining that relation, I have no doubt that the judgment creditor could have recovered against him upon the maturity of the note; but I apprehend that in the-event of his paying the debt, he would in equity have been entitled to be subrogated to all the rights of the judgment creditor, not only in respect to the mortgage and any other independent collateral securities held by him, but also as regards the original judgment obtained by him against the principal debtor (3 Kent’s Com., 8th ed., page 169; Story’s Eq. Jur., 8th ed., § 499 and note; Goodyear v. Watson, 14 Barb. 481 ; Corey v. White, 3 Barb. 12 ; N. Y. State Bk. v. Fletcher, 5 Wend. 85 ; Matthews v. Aikin, 1 N. Y. 595 ; Hubbel v. Carpenter, 5 N. Y. 171 ; Clason v. Morris, supra; Flint v. Schomberg, 1 Hilt. 532). This right of subrogation is also recognized by courts of law, and any act impairing or interfering with it, which would relieve the surety from liability in equity, will also relieve him at law (Corey v. White, 3 Barb. 17 ; La Farge v. Herter, 11 Barb. 159 ; Storms v. Thorn, 3 Barb. 314 ; King v. Bahlwin, 2 Johns. Ch. 554 ). And as the plaintiff, with notice of the circumstances under which the note was given, did before maturity of the same, and without the knowledge or consent of the endorser, prejudice him by paying the judgment, and procuring the same to be satisfied, the latter, it seems to me, was discharged from all liability upon the note in question(La Farge v. Herter, supra; Wood v. Jefferson Co. Bk., 9 Cow. 206 ; Hayes v. Ward, supra). I therefore think that as to him the judgment should be reversed.

Judgment reversed.

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