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Page:Harvard Law Review Volume 1.djvu/339

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has obtained in a long series of cases in Connecticut, and as illustrating it we will refer briefly to a few of the more important ones.

In Thrall v. Spencer[1] the surety had parted with the security before his insolvency to the defendant, from whom the creditor sought to recover it, but the court held that the release was good. “The mortgage was not made to the holders of these notes, but to the accommodation indorser for his security.” “He (the indorsee) has lain still until the latter (the indorser) had parted with possession. . . . He therefore comes too late for relief.” And again: “The latter (the indorser) may well relinquish his pledge, provided he acts in good faith and without any fraudulent design before any claim is made on him for the property.”

In Lewis v. Deforest[2] an accommodation indorser retained on his insolvency a portion of the funds given him for his indemnity, and the court held that the unpaid indorsees might have the latter applied in discharge of the debt. Both principal and surety were insolvent, but the decision is in no sense dependent on the former fact. In this case another point of interest was passed upon. The indorser had from time to time taken up notes to an amount greatly exceeding the value of the security, which gave him the right to appropriate the latter to reimbursement and to add the amount so received to his general assets; but since he had failed to do so before insolvency, his estate was only allowed to claim against the security in competition with the note-holders, whereby the general creditors were prejudiced. See also Moore v. Moberly:[3] “To the extent that payment has been made by a surety, he would be entitled to occupy the place and enjoy the rights of a particular creditor, receiving his pro rata share of the indemnity and leaving the residue of his payment as a loss to be borne by himself.” Such a disposition of the mortgaged property can hardly have been contemplated by either party to the original transaction, nor is it fair under the circumstances that the note-holders should be paid at the expense of the other creditors of the surety.

In Homer v. N. H. Savings Bank[4] it appeared that the surety was indebted to his principal in an amount greatly exceeding the value of the securities given him for his indemnity. It was held

  1. 16 Conn. 139.
  2. 20 Conn. 427.
  3. 7 B. Mon. 299, 301. To the same effect are: Ray v. Proffet, 15 Lea, 517; Ijames v. Gaither, 93 N. C. 358; Kelly v. Herrick, 131 Mass. 373. See also Mr. Willard’s article in 14 Am. L. R. at 857.
  4. 7 Conn. 478.