Kerr v. Cowen, 17 N.C. 356, 2 Dev. Eq. 356 (1833)

Dec. 1833 · Supreme Court of North Carolina

17 N.C. 356, 2 Dev. Eq. 356

Alfred D. Kerr v. James Cowen and Charles D. Conner.

Between creditors, whoso equities are equal, he who has the legal title pra-vails. But where he who has the legal title, bad notice, at the time he advanced his money, of an equity in the other, he is postponed. As where a note was endorsed to A by B as a security, and A made subse. quent advances to B, some before, and some after he had notice that the maker had an equitable set off to the note, it stands as a security to A„ enly for advances made before notice.

The facts in this case were, that on the 22(1 of January 1822, the plaintiff gave to the defendant Conner, two promissory notes for the sum of g l 1,15 each, payable on the first of January, 1825 and 1826. That in the year 1823, the defendant Cowen, in the State of Georgia, became the surety of Conner, for a debt due in that Slate, and that the latter, on the 12th of January 1824, endorsed to him the notes above mentioned to indemnify, him against his responsibility. On the 9th of August 1825, Cowen was compelled to pay the debt for which he had thus become Conner's surety, amounting to $1900 44. On the 26th of November following, lie received from Conner, $900, and on the 4th of May 1827, he collected from the plaintiff $1167 68, the nett amount of the first note after deducting the costs of collection. On the 12th of August, 1823, the plaintiff became the surety of Conner, in a replevy bond in this State, and afterwards was compelled to pay a large sum of money on that account, and also, other sums, as the surety of Conner, amounting to more than was due on the second note. From a letter of the defendant Cowen, dated in June 1825, which was produced by the defendant Conner, it distinctly appeared,that he then had notice of these payments of the plaintiff, and of the fact that he looked to the notes which he had given Conner, for reimbursement. On the 12th of January 1824, Conner sold to Cowen by deed of bargain and sale, with covenants of general warranty, a tract of land in Georgia. Upon this land.the taxes for the preceding year were due, amounting to $9 18, which Cowen had been compelled to pay. He had also been compelled, March 4th 1824, to satisfy an execution against- Conner, which was a lien upon the land at the time lie purchased, and which ¡amounted to gl85. On the 2fth of August 1825, Cowen took an assignment of a note of Conner’s for §200 dated August 15th, 1824, payable to Jackson Fitzpatrick or bearer, and due December 25th 1825. He also held ,Conner’s note for $5217", payable to himself, dated October 22d 1825, and payable 1st of January ensuing. On these two notes Cowen had obtained judgment in Alabama, where Conner had removed, executions upon which were returned nulla bona.

An action having been brought by Cowen, on the note of the 'plaintiff, duo 1st of January 1826, this bill was filed. The plaintiff insisted that ■ the defend-" ant Cowen had no right to collect that note, except in satisfaction of the debt for which it was pledged, to wit: that of $1900 44, which he alleged was paid. Ho prayed for an injunction, and that the money he fiad paid, as the surety of Conner, might be so arranged as to discharge the judgment; and for general relief.

The defendant Conner admitted all the allegations of the bill. Cowen insisted that he had a right to collect both notes, and apply the money received to all claims which he had against Conner.

Badger, for the plaintiff.

Devereux, for the defendant Cowen.

Easton, Judge.

After stating tiic facts as above, proceeded: — Neither Kerr or Cowen, has a lion upon the second note by virtue of any contract. Cowen by the terms of his contract, was to collect the money upon both notes, indemnify himself for his liability as Conner’s surety, and account to him for tbs surplus. As against Conner, he has however, the right upon principles of natural equity, to retain so much of this surplus as will satisfy his other just demands. Ami Kerr has against Conner, on the same principles,- tiie same right to be -relieved from the payment of so much of the notes us will reimburse his just claims against Conner. As the legal property in tlii-s second note lias been vested In Cowen by the assignment, so far as the equities of the contending parties arc equal, his leg'al advantage cannot be taken from him. In the opinion of the court, his equity with respect to the claims which accrued to. him before June 1825, is equal to that of the plaintiff, and lie ought to he allowed to collect so much of the second note as will satisfy these. But such is not the case with regard to the other claims founded on the notes whereon he has sued Conner and obtained judgments.— When these claims originated, Cowen, knew of Kerr’s equitable demands, and knew that his reliance for satisfaction, was upon the debt which he owed to Conner.— With this knowledge, Coxoen could not in good faith contract with Comer, or purchase a demand against him,to the prejudice of this known equity of the plaintiff. On such sums as Cowen has advanced for Conner, and which the court allows him to collect, and of the judgment against the plaintiff, he is entitled to interest at eight per cent, which is the rate established by the law of Georgia. It appears from a calculation made on these principles, that the balance due Cowen is $243 41 cents.

The court will decree, that the injunction heretofore granted shall be dissolved as to the aforesaid balance of $243 41 cents and interest thereon at eight per cent, from the 4th of May 1827, till paid, and the costs of the suit at law, and be made perpetual as to the residue of tho said judgment; and that the plaintiff and the defendant Cowen, respectively pay their own costs in this suit. — * And will also decree that the plaintiff,may at his option either, dismiss his bill against the other defendant Conner, without prejudice, or have an account taken against the said defendant, of what may be due from him to the plaintiff, by reason of the premises, this option to be declared on or before the 1st day of July next.

Bkr Curiam. — Decree accordingly.