Bank of Toronto v. Hunter — 17 N.Y. Super. Ct. 646

Majority

p. 646

The Bank of Toronto v. William B. Hunter.

Headnote

1. Although at law, one who accepts a bill for the accommodation of the drawer, is regarded in favor of a tona fide holder as the principal debtor, yet as between such acceptor and the drawer, the former stands in the relation of surety, and in equity he is entitled, on payment of the bill, to be subrogated to the position of such holder of the bill, in respect to any securities of the drawer held by such holder to secure the payment thereof.

2. Hence, in an action against the accommodation acceptor by a non-resident holder of the bill, the drawers having become insolvent, the defendant may, under the Code, (which authorizes the Court to give equitable as well as legal relief in the same action,) put in an answer in the nature of a cross bill in equity, demanding such subrogation upon payment of the amount due to the plaintiffs.

(At Special Term, January 14th, 1860.

Before Woodruff, J.)

p. 647

Demurrer to the defendant’s answer. The plaintiff is a foreign corporation, doing business in Toronto, Canada. The action is brought against the defendant, as acceptor of a bill of exchange. The answer avers that the bill was accepted solely for the accommodation of a firm of Tisdale & Co., the drawers thereof, without any consideration, and this was known to the plaintiffs when they took the bilk That securities belonging to the drawers were lodged by the latter with the plaintiffs to secure the payment of the bill; that such securities are sufficient to provide for the payment of the bill, that the drawers of the bill are insolvent; that the defendant has offered, and he in the answer offers to pay to the plaintiffs the amount of the bill on a transfer to him of such securities; and the defendant prays, that on payment of the amount due to the plaintiffs, a transfer of such securities be made- for his indemnity, by way of subrogation to the rights of the plaintiffs in respect thereto.

Hinsdale, Swan and Sands, for the plaintiffs,

In support of the demurrer, cite Fentum v. Pocock, (5 Taunt., 192,) Murray v. Judah, ( 6 Cow., 484 ,) Grant v. Ellicott. ( 7 Wend., 227 .)

I. The acceptor is to be treated as principal, and not as surety.

II. The defendant should, before suit brought, have made an unconditional tender of the amount due, and filed an original bill after such tender. (Hayes v. Ward, 4 Johns. C. R., 123.)

III. The right of subrogation depends upon various conditions, and cannot be examined in this suit.

Wm. H. Leonard, for the defendant.

I. In equity, the defendant was surety merely, and the plaintiffs knew it.

II. The right of the defendant to subrogation is, in equity, clear, and the plaintiffs cannot divert the securities even with the consent of the drawers, so as to deprive defendant of indemnity.

III. No actual tender before suit brought was necessary. (Cherry v. Monro, 2 Barb. C. R., 618.)

Although at law the defendant is to be regarded as the principal debtor, as between him and the plaintiffs,

p. 648

yet as between himself and Tisdale & Co., the drawers of the bills, he stands in the relation of surety for such'drawers, and in respect of any securities belonging to the drawers held by the plaintiffs to secure the payment of the bills, his equity is the same as it would be if his suretyship appeared on the face of the bills.

If, in ignorance that the defendant was a mere accommodation acceptor, the plaintiffs have given any further credit to Tisdale & Co. in reliance on those securities, which should defeat the defendant’s prima facie 'equitable right of subrogation, it will be for the plaintiffs to set it up for that purpose; but, taking the facts as they are stated in the answer, to be true, I think the defendant’s right of subrogation to be clear. And as the principal debtors are insolvent, and the plaintiffs are a foreign corporation coming into our jurisdiction for the purpose of collecting - the debt, and whom, if the defendant first pays the bills he cannot reach by any process of our Courts, he would in respect of his right of subrogation be remediless, if he might not, by his answer, in the nature of a cross bill in equity, assert and maintain his claim to affirmative relief, under sections 150 and 274 of the Code.

There is no well founded objection to the determination of all the rights of the parties, legal and equitable, in relation to the same subject matter in one suit, and as the right claimed by the defendant to be subrogated to the position of the plaintiffs upon payment of the debt for which, in equity, he is surety only, is, I think, clear, the demurrer of the plaintiffs to his answer must be overruled, with costs; but with leave to the plaintiffs to withdraw the demurrer and reply, if so advised upon payment of the costs of the demurrer and proceedings thereon. ’ (Curtis v. Tyler et al., 9 Paige, 432; Wilkes v. Harper, 2 Barb. C. R., 338; Mathews v. Aikin, 1 Comst., 595; Pitts v. Congdon, 2 id., 354 ; Eddy v. Traver, 6 Paige, 521; Cherry v. Monro, 2 Barb. C. R., 618.)

Ordered accordingly.