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Page:Harvard Law Review Volume 1.djvu/342

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rity be more than sufficient or insufficient to meet the acceptances. In the latter case the bill-holders may prove for the deficiency (p. 452).

The rule laid down in Ex parte Waring, though of easy application, is technical in its nature and unsatisfactory in its results, for in case of a deficiency in the security the acceptor’s estate has no means of indemnifying itself for the amount paid on the subsequent proof. Thus, the very object for which the security was given is defeated. Then, again, the court admit that the bill-holders have no claim to the security through any right inherent in themselves, and yet it is ultimately handed over to them. If the creditors have no right to it, it would seem wrong that it should enure to their benefit to the prejudice of another. It is a confession of weakness on the part of the court to be driven to such a result, and that the problem admits of another solution is, we think, amply demonstrated by the case of The Royal Bank of Scotland v. The Commercial Bank of Scotland,[1] which brings us to the fourth and last subdivision of our topic.

According to the Scotch rule the surety has no right to the security except to indemnify himself for payments actually made, nor have the bill-holders any direct claim, though both principal and surety are insolvent; but if the surety’s estate pays a dividend for which it is reimbursed out of the security, a new general asset is created; thus, incidentally, in the winding up of the surety’s estate, all the creditors derive a certain benefit from the indemnity fund.[2] Whatever may remain of the latter goes back to the principal’s estate.

The facts of the Scotch case just mentioned were as follows: By agreement between A and B the latter undertook to employ his works in spinning yarns. All material at B’s works was to continue A’s property subject only to B’s lien for advances made by him. A and B became bankrupt. B was liable as acceptor

  1. 7 App. 366.
  2. The same rule obtains in Mississippi. Poole v. Doster, 59 Miss. 258. In studying the earlier cases (Bibb v. Martin, 22 Miss. 87; Bush v. Stamps, 26 Miss. 463; McLean v. Ragsdale, 31 Miss. 701; Carpenter v. Bowen, 42 Miss. 28; Osborn v. Noble, 46 Miss. 449) it must be constantly borne in mind that they are of three kinds, viz.: First, Where the security is given to secure payment of the debt. Second, Where the surety has a power to sell the security and apply the proceeds in discharge of his obligation as soon as his liability has become fixed. Third, Where the security is given merely for the surety’s indemnity. The remarks about subrogation only apply to the first two classes.