#### W. E. LIVERMAN v. F. L. W. CAHOON.

(Filed 11 October, 1911.)

Notes — Joint Makers — Payment by One — Indorsement to Maker— Cancellation — Implied Promise to Pay — Limitations of Actions.

The payment of a note by one of two of the makers, with indorsement thereof without recourse to himself, cancels the note, and entitles him to recover one-half the amount thereof upon an implied promise to pay by the other obligor; and when there is no promise made not to plead the statute of limitations, action should be brought within three years or recovery will be barred.

Walker, J., dissenting; Brown, J., concurs in the dissenting opinion.

*188Appeal by plaintiff from O. II. Allen, J., at Spring Term, 1911, of TYRRELL.

Tie facts are sufficiently stated in tie opinion of tie Court by Mr. Chief Justice Clark.

E. F. Aydlett and T. H. Woodley for plaintiff.

I. M. Meekins and M. H. Tillett for defendant.

Clark:, C. J.

On 21 June, 1904, tie plaintiff and tie defendant Caioon executed a joint note under seal at sixty days to Join W. Sykes for $600, witi interest from date. Tiis bond was secured by ciattel mortgage on certain logs. It fell due 21 August, 1904, and was paid by tie plaintiff by cieck for $606.90, dated 27 September, 1904. Tiis action for contribution was begun 25 October, 1910, and tie defendant pleaded tie statute of limitations.

Tie plaintiff testified tiat wien tie bond fell due tie defendant said ie was not prepared to pay it, and asked tie plaintiff “to take up tie note and bold tie same until ie could pay iis part of it, which would be in a short time; tiat tiis was all tiat was said to iim by Caioon about paying tie note.” Tiat ie paid tie note and tiat it was tien indorsed by tie obligee as follows:

“Pay tie witiin note to W. E. Liverman, without recourse on me. 27 September, 1904. J. W. Sye:es.”

Tie judge instructed tie jury tiat if they believed all tie evidence to answer tie issue as to tie statute of limitations “Yes.” Plaintiff excepted. Yerdict and judgment accordingly. Plaintiff appealed. Tiis presents tie only point in tie case. Tie chattel-mortgage security cuts no figure, as tie logs were tie joint property of tie obligors and have doubtless long since been used.

In Sherwood v. Collier, 14 N. C., 381, Chief Justice Ruffin said: “A payment by any one of two or more jointly, or jointly and severally, bound for tie same debt, is payment by all. It is true that if payment be not intended by tie purchaser, there is a difference, but tiat can only be by a stranger, or by using tie name of a stranger, to whom an assignment can be made *189when jointly liable. Tbis is upon tbe score -of tbe intention, and because tbe plea of payment by a stranger is bad upon demurrer. If tbe assignment of a joint security be taken to tbe surety bimself, there is an extinguishment, notwithstanding the intention; because an assignment to one of his own debt is cm absurdityTbis case bas been often cited and approved. See Anno. Ed.

Here tbe payment was made by one of tbe principals, and not even by a surety, and there is no security to be assigned. Tbe evidence makes out simply a payment by one of tbe joint obligors and a request by tbe other to bold up tbe note “until be could pay bis part of it, which would be in a short time.” Tbis request implies no more than a promise by tbe defendant to pay bis half which tbe law raised from tbe fact of payment without any express promise. There was no promise not to plead tbe statute if delay was given, as is held necessary, Hill v. Hilliard, 103 N. C., 34; nor, indeed, was there any promise to delay given by plaintiff.

Tbe indorsement of tbe note to tbe plaintiff, one of tbe obligors, by tbe creditor, in no wise altered tbe fact that it was a payment and that tbe note was canceled thereby. Tbe plaintiff could not bold tbe note and sue upon bis own obligation which be bad already paid. He was entitled to recover of tbe defendant one-balf of tbe sum be bad paid. Such action should have been brought within three years. Tbe plaintiff not having done so, is barred by tbe statute of limitations, which has been pleaded by tbe defendant. Tbe instruction of bis Honor was correct.

No error.

Walkek, J.,

dissenting: Tbe bond in tbis ease was executed by Liverman and Gaboon, as joint obligors, on 21 June, 1904, and they promised to pay tbe sum of $600 to John W. Sykes on 21 August, 1904. When Liverman gave bis check to Sykes tbe latter indorsed tbe note to Liverman without recourse.

Tbe plaintiff, W. E. Liverman, testified as follows: When tbe note fell due tbe said Gaboon came to me and said that tbe note was due, and wanted to know if I would not arrange to *190take it up aud pay it; said be was not prepared tben to pay it, and asked me to take it up and bold tbe same until be could pay bis part of it, wbicb would be in a short time; tbis was all that was said to him by Gaboon about paying tbe note; be, tbe plaintiff, told J. W. Sykes, after tbe conversation with Gaboon, be would pay it if be, tbe said Sykes, would indorse tbe note to him; Caboon knew be was going to pay tbe note and take it up; be got him to take it up and bold it until be could pay bis part. All of tbis was known to Sykes. Witness paid tbe note by check to Sykes, on 27 September, 1904, in tbe sum of $606.90,-wbicb covered tbe face value of tbe note and interest accrued; tbe defendant Gaboon has not paid any part of tbe note.

Tbe court instructed tbe jury that, if they believed tbe evidence, they should answer tbe issue as to tbe statute of limitations, “Yes,” wbicb was done, and plaintiff appealed from tbe judgment upon tbe verdict. So that if, in any view of tbe evidence, tbe plaintiff was entitled to recover, notwithstanding tbe plea of tbe statute, there was error, and tbe judgment should be reversed. I do not deny that, under tbe old system of pleading, practice and procedure, tbis Court held that in order for a surety or person secondarily or equally and jointly liable with another to pay a debt to recover, at law, against tbe principal, cosurety or coobligor, for tbe latter’s ratable part of any sum paid by him to tbe creditor in satisfaction of tbe debt, be must have bad tbe note or evidence of tbe debt assigned to a third party for bis use and benefit; and I am aware that it was said in Sherwood v. Collier, 14 N. C., 381, that tbis was put on tbe ground that a plea of payment by a stranger was bad on demurrer. Tbis is a fiction, pure and simple — a refinement of tbe ancient law — for tbe fact remained that tbe person secondarily or jointly liable paid tbe whole of tbe debt to tbe creditor, and tbe latter was, therefore, fully paid and satisfied, and assignment to a “dummy” or “man of straw” did not alter tbe fact. It is almost retrogressive, and certainly not progressive, to apply such a rule at tbis late day, when even tbe doctrine as to tbe unity of husband and wife, wbicb takes from her tbe right *191to contract, is about to disappear. Is this not one of the fossilized doctrines of the common law which is not suited to this age and our present enlightened ideas?

I regret to say that ours was among the very' few courts in this country, or in England, that required such an assignment, under any circumstances, and those courts elsewhere that did require it gave quite a different reason from that stated * by Judge Ruffin for so doing. It was said by them to be necessary because, by paying the debt, the surety or joint obligor did not acquire the legal title to the note, and, therefore, could not sue upon it at Iww, and either of two courses was open to him: he might have the note assigned, that is, the legal title, by the payee to a stranger, and then sue at law upon the note, or he could proceed in equity, when, if necessary, that court would require the payee to properly assign the note so as to enable the surety or joint obligor to recover at law. But most of the courts held that a court of equity did not consider an assignment as necessary, and, therefore, would proceed to administer justice according to the very right of the matter, as in equity the plaintiff could sue upon an equitable title, or, at least, as equity considers that as done which should be done, it would treat the note as assigned without any formal transfer thereof. It was glso held that if it had been necessary to sue in equity upon the legal title and to have a formal assignment for that purpose, or to make the payee a party, the court would compel the payee of the note to permit the use of his name in the suit, or to execute an assignment, with proper indemnity to him against costs.

But whatever the procedure under the system prevailing prior to 1868, it is very certain that in that year, by Constitution and statute, a fundamental change was effected in common-law methods, and all forms and useless fictions -were abolished and a new and more enlightened procedure was installed in its place. Many of the quaint, queer, and impractical notions of ancient times which were found to be unsuited to our civilization, and which often defeated the right and sustained the wrong, perished with the demise of John Doe and Richard Roe, and the sometimes perplexing fiction of lease, entry, and ouster *192ceased to complicate the action o£ ejectment and confound the pleader, so that a good title can now be vindicated by a simple statement and proof of the facts.. Those forms and fictions are even now of historical value as evidence of the growth and development of the law, and as such deserve the greatest respect and reverence, but they no longer have any place in our present and more rational system of jurisprudence, which has simplified all methods of pleading, practice, and procedure. The spirit of reform, which was aroused in the early part of the last century and which brought to the leadership of the movement for a radical change in the technical and artificial system of the law and of special pleading some of the greatest statesmen, publicists, and lawyers of England and this country, has at last wrought such a reversal of those methods of procedure as to do away with the necessity of having both a judge and chancellor to try and decide one case separately and in sections, and a person aggrieved, or one seeking subrogation, may now assert his rights in one action, without regard to forms or fictions, and may recover upon a simple statement of the facts and the merits of his claim (Calvert v. Peebles, 82 N. C., 334), if he is the real party in interest — that is, the party having the beneficial right. Even a court of equity, as formerly constituted, would not send a plaintiff to a court of law to prosecute his case there, after giving him the legal title, but would proceed itself to award full relief. The rule is thus stated by the text-writers and is supported by the authorities: “Equity jurisdiction, having rightfully attached to a controversy, will be made effective for the purpose of complete relief, though it may involve the adjudication of purely legal questions.” Fetter on Equity, p. 13 (5); Simmons v. Hendricks, 43 N. C., 84. Or, as put in the graphic language of Lord Nottingham: “Where this Court can determine the matter, it shall not be a handmaid to other courts, nor beget a suit to be ended elsewhere.” The rule rests on the principle that equity prevents multiplicity of suits. Jesus College v. Bloom, 3 Atk., 262, 263; Turner v. Pierce, 34 Wis., 658; Eastman v. Savings Bank, 58 N. H., 421; McGear v. R. R., 133 N. Y., 16. It will give a money judgment, if necessary to full relief. “A court of equity adapts its *193relief to tbe exigencies of tbe case in band. It may restrain or compel tbe defendant; it may appoint a receiver or order an accounting; it may decree specific performance, or order tbe delivery to tbe plaintiff of specific real or personal property ; or it may order a sum of money to be paid to tbe plaintiff, and give bim a personal judgment therefor.” Murtha v. Curley, 90 N. Y., 378; Sprinkle v. Wellborn, 140 N. C., at p. 177. In tbe ease last cited, at p. 178, it is said: “Tbe administration of tbis relief is eminently proper under tbe reformed procedure, where tbe rights of parties are settled and determined, in one action, tbe distinction between actions at law and suits in equity having been abolished. 1 Pom. Eq. Jur., sec. 242.” Tbis just and beneficent rule, which formerly prevailed in courts of equity, has now become tbe fundamental principle of our present system of pleading and procedure, so that one judge and one action are now sufficient for tbe adjudication of all rights, legal and equitable — cases being decided upon their merits and not brought to tbe ordeal and test of vain and useless technicalities, so ancient as to be hoary with tbe age of centuries; tbe resultant rule, and tbe material one, being that a party may now recover upon an equitable title, as our courts administer both legal and equitable rights. Farmer v. Daniel, 82 N. C., 153; Condry v. Cheshire, 88 N. C., 375.

Shall we halt in tbe march of tbis progressive reform in pleading and procedure and allow a defendant to escape tbe payment of an honest and meritorious claim upon a flimsy technicality? But let us see what tbe law of tbis case was formerly and is now. I will not consider here tbe express agreement of Gaboon to pay bis share and to permit tbe plaintiff, when be paid all, to succeed to tbe rights, of every kind, in' tbe note possessed by tbe creditor at tbe very time of tbe payment ; but will show by principle and tbe overwhelming weight of authority that, under tbe righteous doctrine of subrogation, Liverman is entitled to recover in tbis action, and Gaboon cannot take refuge behind tbe statute of limitations and escape tbe payment of bis just and equitable share of tbis debt. Sheldon in bis work on Subrogation, sec. 1, says that “It is a doctrine *194primarily of equity jurisprudence, although, its principles are now often applied in courts of common law, especially in those States in which equitable remedies are administered through the forms of law. It is a substitution, ordinarily the substitution of another person in the place of a creditor, so that the person in whose favor it is exercised succeeds' to the rights of the creditor in relation to the debt. More broadly, it is- the substitution of one person in the place of another, whether as a creditor or as the-possessor of any other rightful claim. The substitute is put in all respects in the place of the party to whose rights he is subrogated. It has been adopted from the civil law by courts of equity. In this country, under the initial guidance of Chancellor Kent, its principles have been more widely developed and its dpctrines more generally applied than in England. It is treated as the creature of equity, and is so administered as to secure real and essential justice without regard to form, independently of any contractual relations between the parties to be affected by it. It is broad enough to include every instance in which one party pays a debt for Avhich another is primarily answerable, and which, in equity and good conscience, should have been discharged by the latter.”

What more of authority do we need? Bispham says that “the equity of subrogation springs naturally out of the two equities, just considered, of contribution and exoneration, and is, in fact, one of the means by which those equities are enforced. . . . This equity of subrogation is one eminently calculated to do exact justice between persons who are bound for the performance of the same duty or obligation, and is one, therefore, which is much encouraged and protected.” Bispham Equity, secs. 335, 336. And again in Sheldon on Subrogation, sec. 2, it is said to be defined “as that process by which another person is put into the place of a creditor, so that the rights and securities of the creditor pass to the person who, by being sub-rogated to him, enters into his right. It is a legal conception, by force of which an obligation extinguished by a payment made by a third person is treated as still subsisting for the benefit of this third person, who is thus substituted to the *195rights, remedies, and securities of another. The party who is subrogated is regarded as entitled to the same rights, and indeed as constituting one and the same person with the creditor whom he succeeds.” This statement of the doctrine closely resembles our case and fully embraces it within its terms. “Whenever, to protect his own rights, one not a volunteer pays or satisfies a debt for which another is primarily responsible, he is substituted in equity in place of the creditor, and may enforce against the person primarily liable all the securities, benefits, and advantages held by the creditor. Like contribution, subrogation rests on principles of equity and justice, and may be decreed, though no contract or privity of any kind exists between the parties.” Fetter on Equity, p. 254, sec. 170. It applies as between coobligors, says Sheldon, as well as between principal and surety and between sureties and others secondarily liable, and where a joint maker or surety of a note has paid the debt which ought, in whole or in part, to have been paid by another, he is entitled not only to the rights, but to all the remedies, of the creditor by way of subrogation. Sheldon, sec. 3. “This right of subrogation among parties severally bound as principals has been denied; but the usual rule is that one of several joint debtors will, as against his eodebtors, ordinarily be subrogated to the securities and means of payment of the common creditor whom he has satisfied, so as to enable him to recover from his codebtors, by means thereof, their proportional share of the indebtedness which he has discharged; and this, as in other cases of subrogation, arises rather from natural justice than from contract. Each joint debtor is regarded as the principal debtor for that part of the debt which he ought to pay, and as a surety for his codebtors as to that part of the debt which ought to be discharged by them.” Sheldon, sec. 169, and many cases cited in the notes. See especially Sterling v. Stewart, 74 Pa. St., 445; Moore v. State, 49 Ind., 558; R. R. v. Walker, 45 N. C., 575; Duobin v. Kuney, 19 Oregon, 71; Shropshire v. His Creditors, 15 La. Ann., 705; Boyd v. Boyd, 3 Grattan, 113; Martin v. Baldwin, 7 Ala., 925; Goodall v. Went *196 worth, 20 Me., 322; Sumner v. Rhodes, 14 Conn., 135; Chipman v. Morrill, 20 Cal., 131; Young v. Vough, 21 N. J. Eq., 325.

Those cases decide that joint debtors or coprincipals, as between themselves and their creditors, are each liable for the whole debt, but as between themselves, each is liable only for his proportion thereof, and, as to the rest, each is surety for the others, or, to express it a little differently and more exactly, where several parties execute a joint note for a debt owing by them, each is, as to his own proportion, a principal, and as to the share of each of the other makers a cosurety — a concrete example, they say, being this: Where a note is signed by three persons, each is principal for one-third, and a cosurety for the other two-thirds; and all of the said cases agree that if any one of the coprincipals performs the whole duty and pays the entire amount, he is at once subrogated to all the rights and remedies of the principal, and is clothed with the same, without impairment or prejudice, and in the sense that he takes the creditor’s place as between himself and the principal who is in default; so that he can sue, just as the creditor could have done, if the debt had not been paid;- and this is so whether the obligation arose out of contract or by operation of law. Dobbins v. Rawley, 76 Va., 537.

The doctrine is so clearly and strongly stated by Chief Justice Brickell, in Owen v. McGehee, 61 Ala., 440, that a review of the authorities would not be near complete without the addition of his words: “It is a principle of equity, having its foundation in natural justice, that when one discharges more than his just portion of a common burden, another who received the benefit ought to refund to him a ratable proportion. The principle applies not only to the relation of principal and surety, but to that of original cocontractors, and whenever parties stand in a relation in which equality of burthen is equity between them — when one ought not to bear the burthen in ease of the others, ‘as all are equally bound and are equally released,’ says Judge Story, ‘it seems but just that in such a case all should contribute in proportion toward a benefit obtained by *197all, ■upon tbe maxim qui sentit commodwm sentire debet et onus; and tbe doctrine has an equal foundation in morals, since no one ought to profit by another’s loss when be himself has incurred a like responsibility. Any other rule would put it in the power of the creditor to select his own victim, and, upon motives of mere caprice or favoritism, to make a common burden a most gross and grievous personal oppression.’ 1 Story’s Eq., sec. 493.”

Some of the above-cited cases also hold that a suit in equity to enforce contribution by way of subrogation is far different from the action of assumpsit at law, founded upon the implied promise of the defaulting coprincipal to refund what has been paid to his use and for his ease and benefit, and that the two actions are governed by different principles, and that as the one who pays is completely substituted to all the rights and remedies of the creditor, without any assignment, which if necessary at all, is only required at law, the statute does not bar unless the note itself, which has been paid, is barred, or in those States which have a statute similar to ours (Eevisal, sec. 399) providing for-a special limitation of ten years as to all actions for relief not otherwise provided for in the statute, that the equitable action is governed by the latter section and not by the three-years statute relating to express or implied contracts. Chipman v. Webster and other cases supra,.

In Batchellor v. Lawrence, 99 E. C. L. (C. B., N. S.), 543, Justice Byles, who wrote the English treatise on Bills, when commenting upon and construing the mercantile law amendment act (19 and 20 Yict.,-ch. 97, see. 5), which gave the creditor paying a debt the right at law to an assignment of the note to himself or a trustee, and the right “to stand in the place of creditor and to use all his remedies and, if need be, his name, upon proper indemnity,” in any action or proceeding brought for the purpose of obtaining indemnification from any co-obligor or codebtor, for any advances made by him beyond his share of the liability, said: “It must be remembered that one who is liable jointly with others stands in the position of surety for their proportion of the debt, and, if he pays the whole, is *198entitled to call upon tbem for contribution. In all rational systems of law, where a surety pays the debt be is entitled to the benefit of all securities and remedies which the creditor held. Such is the law of France, where law and equity are blended. ... In England, prior to the passing of this act, a surety or codebtor, who had been compelled to pay the debt for which he was liable, could not obtain the benefit of any securities held by the creditor without having recourse to a court of equity, and not always then. The section in question, I think, meant to afford the party at least the same remedy at law as he would have had in equity. This it does in two inodes: first, by enacting that he shall be entitled to have the securities assigned to him; secondly, by taking away the technical difficulty that before existed to his making the security available at law, viz., that the remedy was taken away by payment. As to the first, it is clear that the provision applies not only to persons who stand in the position of sureties, but also to joint debtors. ... I think a ‘codebtoP who pays the entire debt is a surety in the sense in which that word is used here.”

But the doctrine for which I contend as having existed in courts of equity before the change in our system, and even extended by many illustrious courts to cases at law,-to avoid circuity of action, is most admirably stated by Judge Johnson, for the Court, in Lidderdale v. Robinson, 12 Wheaton (25 U. S.), 594: “That a surety who discharges the debt of the principal shall, in general, succeed to the rights of the creditor, as well direct as incidental, is strongly exemplified in those cases in which the surety is permitted to succeed to those rights, even against bail, who are themselves in many respects regarded as sureties. 2 Vern., 603; 11 Vesey, 22. That such would be the effect of an actual assignment made by the creditor to the surety, or to some third person for his benefit, no one can doubt. But, in the cases last cited, we find the court of equity lending its aid to compel the creditor t'o assign the cause of action, and thus to make an actual substitution of the sureties, so as to perfect their claim at law. This fully affirms the right to succeed to the legal standing of their principal; and after establish*199ing that principle, it is going but one step further to consider that as done which the surety has a right to have done in his favor, and thus to sustain the substitution without an actual assignment. And accordingly we find the dictum- expressed in Robinson v. Wilson, 2 Madd. Rep., 434, in pretty general terms, 'that a surety who pays off a specialty debt shall be considered as a creditor by specialty of his principal! If the parties in this cause be considered as claiming under assignment from the holder of the bill, and each as assignee of the claim against his coindorsee, according to the actual state of their respective interests, there can be no doubt of the priority here claimed. This subject has undergone a very serious examination in the courts of the United States, and in cases in which, as in this, satisfaction had been made by the surety without taking an actual assignment of the debt.” Is this not conclusive as authority?

The same rule is declared and supported by irresistible logic and unanswerable argument in Tyrrell v. Ward, 102 Ill., 29. Justice Walker, for the Court, said: “There is not the slightest question, under the evidence in the case, that at the time Worth-ington recovered his judgment the property in controversy was incumbered by legal, valid, and just liens, to nearly, if not quite, the sum of $40,000, and it is fully as clear that they were discharged and satisfied by Smith with the money of Bayard advanced for the purpose, and as a part of the loan of $50,500 which Hayes had effected for this very purpose. It is equally certain that it was the intention of Bayard, Smith, and Hayes to pay and discharge these liens, to render the trust deeds to ' Smith effective, and to make them a prior lien to all others in favor of Bayard. This was their clear and unmistakable purpose. All pretense that it was done for any other purpose is excluded by the testimony. Then, what effect did such a payment thus made have on the rights of the parties? Manifestly it subrogated Bayard to all rights of the prior lien-holders, precisely as they were held by them. When paid by Smith for Bayard, they were transferred to him, and equity must treat the transaction as an assignment to Bayard, as fully so as had *200a formal assignment been made and indorsed on tbe papers evidencing these debts and liens. This, every consideration of justice and good conscience demands. It would be highly inequitable and unjust to defeat the intention of the parties, and visit so heavy "a loss on Bayard, when he advanced the money expressly to remove these prior liens and perfect his own. Justice and authority not only sanction, but demand, that Bayard should be subrogated to all their rights.”

In Parsons v. Briddock, 2 Vernon, 608, cited with approval in Lidderdale v. Robinson, supra, the chancellor thus stated the law: “The principal in a bond, being arrested, gave bail, and judgment is had against the bail. On a bill by the sureties, who had been sued on the original bond and paid the money, the court decreed the judgment against the bail to be assigned to them, in order to reimburse them what they had paid, with interest and costs.” And in Cottrell’s case, 25 Pa. St., 294, it was held that “subrogation being founded in principles of equity, may be enforced where there is no contract for a transfer of the security,” and the Court, in its opinion, states this equitable principle with great force and conciseness: “Subro-gation is founded on principles of equity and benevolence, and may be decreed where no contract or privity of any kind exists between the parties. Wherever one not a mere volunteer discharges the debt of another, he is entitled to all the remedies which the creditor possessed against the debtor. Actual payment discharges a judgment or other encumbrance at law, but, where justice requires it, we keep it afoot in equity for the safety of the paying surety. These principles, settled in numerous cases, which will be found collected in 2 Wharton’s Digest, 612, are decisive against this appellant.”

This covers our ease in every aspect of it and shows conclusively that a court of equity, in such matters, disregards forms and seeks to enforce the rights of the parties according to their substance and real merits, which is but a foreshadowing, many years ago, of the spirit and purpose of our present liberal system of pleading and procedure. The case of Robinson v. Wilson, 2 Maddock’s Ch., 569 (approved in Lidderdale’s case), *201was decided without regard to any statute, but upon a well-recognized doctrine of equity, that a surety who pays off a specialty debt of the principal shall be considered as a specialty creditor of the principal. It was also held in Wright v. Morley, 11 Vesey Ch. Rep., 42, that the surety, or coprincipal who have the same right, as we have seen, may proceed in equity against his codebtor, when he has paid the whole debt, for the payment of his share or part of the liability, without any assignment from the creditor or as if an assignment had been made, and he will have precisely all of the rights and remedies of the creditor that he would have had if the formal assignment had been made. If the specialty is not barred, he is not barred.

I will now refer to two cases, which are much alike, one decided in an English court, Parsons v. Biddick, which has already been cited, but which is more fully reported in 11 Yesey Ch. Rep., at p. 22, and the other decided by this Court (Carter v. Jones, 40 N. C., 196), which is a very strong instance of the application of this equity. It is said that, “The principal had given bail in an action. Judgment was recovered against the bail. Afterwards the surety was called upon and paid, and it was held that he was entitled to an assignment of the judgment against the bail; so that, though the bail were themselves but sureties, as between them and the principal debtor, yet, coming in the room of the principal debtor as to the creditor, it was held that they likewise came into the room of the principal debtor as to the surety. Consequently, that decision established that the surety had precisely the same right that the creditor had, and was to stand in his place. The surety had no direct contract or engagement by which the bail were bound to him, but only a claim against them through the medium of the creditor, and was entitled only to all his rights. There are other cases establishing the same principle.”

In Carter v. Jones, supra, it was held that where a guarantor had paid the entire debt, he was fully subrogated in equity to the rights and remedies of the creditor to whom he had paid it, as against the debtor and his sureties, and that a court of equity, *202 if not a court of law, would regard the transaction as a sale and assignment of tbe note to tbe paying guarantor. Tbis is a strong and irresistible statement of tbe law in favor of tbe paying debtor. He is considered as a purchaser of tbe note, and . entitled to sue upon it, for equity, as it is said, disregards forms and seeks to do justice, according to tbe very right of tbe matter.

It is suggested in Sherwood v. Collier, 14 N. C., 381, tbe sheet anchor of tbe majority, because Judge Ruffin said it involved an absurdity for tbe debtor to sue himself, that tbe debt was paid and be could only sue on tbe promise, implied from bis payment, that be should be reimbursed. But tbe plaintiff does not sue himself, at least under our present system. He Simply sues his. debtor, who has failed to comply with bis promise to pay bis ratable part, tbe plaintiff having already paid bis, and having satisfied tbe debt, as between debtor and creditor, all left due being that which, in equity and good conscience, comes to him by tbe default of bis coobligor. Tbe obligation of tbe paying debtor has been satisfied and there is nothing due save what bis defaulting fellow owes to him, and for tbis be must sue tbe latter, being under no obligation, as between them, to pay any part of it; but bis codebtor being under tbe duty, in law and equity,- to pay to bis faithful co-principal that part of tbe debt be promised to pay. Equity then steps in and compels tbe defaulter to do justice without regard to tbe mere forms of law or tbe legal title.

It is not to be denied that courts generally have held, at common law and under tbe statute, that a surety, or coobligor— which is tbe same thing — who pays off a specialty debt is to be considered, in equity at least, and in all respects, as a specialty creditor of bis principal. Tbis was so held in Robinson v. Wilson, 2 Maddock’s Ch., 569. There is an implied contract between tbe principal and tbe surety, or between coprincipals, that if one of them shall pay more than bis share, tbe other shall be entitled to an assignment of tbe bond or other security, or shall have, in law and equity, precisely tbe same remedies as tbe creditor would have if tbe debt bad not been paid to him. Robinson v. Wilson, supra; Barrows v. McWhann, 1 Dess Eq. *203(S. C.), 409. In tbe last cited ease, wbicb is very much in point, tbe Court beld tbat, in order to preserve and protect tbe right, legal and equitable, of tbe paying coobligor, an assignment would be decreed, or tbe court would proceed as if it bad been made, and tbat tbe limitation of seven years as to tbe implied promise did not apply, but tbat in regard to equitable actions; and it was further beld tbat in order to enforce this clear equity tbe court would order any payment or satisfaction of tbe debt entered upon tbe record to be canceled, and would decree tbat tbe obligor, who has paid bis part and also tbe share of bis eoobligor, should stand literally in tbe shoes of tbe creditor, as to bis legal and equitable rights, and with tbe priority and full privilege of a specialty creditor in every regard, if tbe debt wbicb be paid was evidenced by an instrument under seal. Drake v. Coltrane, 44 N. C., 300. This was more distinctly and sharply decided in Stokes v. Hodges, 29 S. C. (11 Rich. Eq.), 135, it having been ruled tbat tbe paying debtor should be considered as a specialty creditor, as to rights and remedies, in all respects; and is this not in accordance with a just and perfectly fair consideration of tbe rights of him who has borne, not only bis own share, but tbe share of others equally liable ?

In tbe case of Howell v. Reams, 73 N. C., at marg. p. 393, Judge Bynum says: “Tbe cosurety who pays tbe bond debt for wbicb tbe other is equally bound shall be deemed a bond creditor in tbe administration of tbe estate of tbe deceased cosurety. Tbe same bond which, makes them tbe bond debtors of tbe obligee, by force of tbe statute binds them mutually to contribution. In carrying out tbe beneficial purposes of tbe statute there can be no reason why they should not occupy tbe same relation to each other tbat they do to tbe principal, instead of becoming by tbe same act of payment tbe bond creditors of tbe principal and only tbe simple contract creditors of each other.”

But however tbe law may have been before tbe adoption' of our Code system, it cannot be successfully contended tbat now there is any reason for adding to or upholding tbe old and technical . rule prevailing in courts of common-law jurisdiction. We have jurisdiction both in law and equity and can decree *204according to tbe equitable merits of tbe case, without resorting to two courts. Tbis doctrine is well settled in Dunlop v. James, 174 N. Y., 411, as follows: “In modern times courts of law bave dealt witb subrogation as they would witb assignments, and, wben tbe right of action to which tbe plaintiff asks to be subrogated is a legal right of action, a court of law may treat a plaintiff who is entitled in equity to subrogation as an as-signee, and allow him to maintain an action of a legal nature upon tbe right to which he claims to be subrogated.” In Bledsoe v. Nixon, 68 N. C., 521 (cited in the opinion of the Court), Judge Rodman strongly intimates that the harsh rule by which a surety or coobligor who pays off a bond must bring his action within three years on the implied promise, is confined solely to courts of law, and does not apply to the equitable remedy. This was so held because the right of the obligor, who pays the entire debt, to recover from his coobligor, equally bound for the debt, depends at law, without an assignment, upon the implied promise, which being a matter arising out of contract, is barred in three years; but not so where the obligor elects to sue in equity, for in that case the ten-years statute applies, as the right is not based upon contract, but arises out of equitable principles, and it has been so expressly held in States having statutes like ours. Zuellig v. Hemerlie, 60 Ohio St., 27 (71 Am. St. Rep., 707); Neal v. Nash, 23 Ohio St., 483. And so it was held in McAden v. Palmer, 140 N. C., 258, that section 399 of the Revisal, providing that actions for equitable relief, or in cases where the cause of action is equitable in its nature, shall be brought within ten years after the cause of action accrues, applies to all actions of an equitable nature; and the very next section of The Code (Revisal, sec. 400) not only permits but requires that all actions shall be brought by the real party in interest, thereby abolishing forever the necessity for suing in the name of a nominal plaintiff to his use.

But the express agreement of the parties in this case is to be considered. Can any one doubt that what they meant was that the plaintiff should pay the whole debt and rely, not upon the defendant’s implied promise to reimburse him, but upon the *205note itself and tbe latter’s obligation thereunder to pay? In other words, that by the express contract the plaintiff should take the place of the creditor in the note as to the defendant’s share of the obligation, and be entitled to all of the creditor’s rights and remedies. In a case exactly similar, it was held that the obligor, who paid all of the debt, was entitled in law and equity to the rights of the creditor in the note, to the extent of the defaulting obligor’s part, and with reference to this the Court said: “Whatever may formerly have been held as to the effect of the transaction as above stated, the recent decisions of this Court, paying more regard than formerly to the intention of the parties and to the equities of the case, have determined that the payment, or,, as it may rather be called, the advance to the creditor by one of two joint obligors of a sum equal to the entire demand, under such an agreement as is above stated, does not extinguish the entire obligation, but may leave it in force as furnishing a remedy for doing justice to the obligor who has made the advance. In other words, one coobligor is allowed to purchase the remedy of the obligee against the other obligor, and to enforce it at law in the name of the obligee for procuring contribution or full payment, as he may be entitled to the one or the other.” Smith v. Latimer, 54 Ky., 75.

Is not this ease directly in point,- and is it not in consonance with justice and right? If it has never received the sanction of the law in this State, and I think it has, is it not quite time that we were accepting it as the true and only just doctrine?

I again quote from that case, at p. 79, as it so clearly and strongly states the only true principle, and with direct application to the facts of this case: “As it is an obvious principle of equity long recognized and enforced as such, that the payment of an obligation by one who is a mere surety, whether so originally or made so by subsequent facts, entitles him to subrogation to the rights of the obligee for his own indemnity, though there be no agreement to that effect, we do not see why an express agreement to the same effect, made at the time of payment, and therefore entering into and qualifying that fact, may not be regarded and enforced by a court of law. The case *206of assignments of cboses in action, which though once considered hy courts of law as wholly inoperative against the assignor, have, under the influence of equitable principles, come to be respected and enforced hy those courts in actions in the name of the obligee, affords an example, and, by analogy, a precedent for the advances towards equity made by this Court in giving effect to agreements between the holder of a note or bond and one of the obligors, with respect to the consequences of a payment made hy him.”

¥e must consider that the obligor or surety, who pays the debt, has three remedies against his coobligor:

1. He may sue in assumpsit on the implied promise, or, in this case, on the express promise, when, three years inaction will be a bar.

2. He may sue on the specialty, when ten years is the limit.

3. He may sue upon his equitable cause of action, his right being founded solely upon the equity, when ten years will bar under Revisal, sec. 399.

It is true, Judge Ruffin says, in Sherwood v. Collier, the idea . that a man can sue himself or receive an assignment of his own debt involves an absurdity, but it does not apply to this ease. He is not suing himself, as the cases I have cited clearly show, but is proceeding by action on the specialty, or hy the equitable action to recover from the defendant his fair proportion of the joint- liability — that which he promised to pay, and which he should be made to pay. It is something this plaintiff does not owe, but which is owing to him by the defendant. We should not he subtle or astute to apply the statute in this case and bar the action, for if there ever was a just claim, this is one, and we cannot deny the relief the plaintiff seeks, even if we should proceed under the hoary principles of the ancient law, which existed in the days of the “learned Mr. Tidd,” when a litigant’s success depended more upon the comparative wits of the opposing special pleaders than upon the real merits of the case.

It cannot be doubted that the request of the defendant to the plaintiff, that the latter pay the money to the creditor and hold the note until he could pay his share, and the indorsement with *207 out recourse, meant but one thing, that the plaintiff, should be substituted not only to all the rights in, but to all the remedies upon the note which belonged to the creditor — that he should step into his shoes. It was not intended that the note should be satisfied as between the coobligors, but kept alive for the plaintiff’s benefit. Why indorse without recourse, if the note was not to be kept afoot ?

We must not forget that Sherwood v. Collier was an action at law — “debt upon a bond” — and 'Judge Ruffin, a great chancellor, was not deciding what would have been the right of the plaintiff in equity.

It may be said that Sykes was not a party to the express agreement, but this makes no difference. Equity will compel him to assign or to become a party for the purpose of protecting the obligor, who has paid him, giving him, of course, adequate indemnity against costs. How is he hurt by this course ? and, under the former practice, it was quite a-usual one. But Sykes did know of the arrangement and assented to it, as the testimony of Liverman shows. It must be taken as true, as the judge charged peremptorily, that the claim was barred. In Davison v. Gregory, 132 N. C., 389, Justice Connor, speaking for the Court, observes the distinction we have made, and says that while, at law, the paying obligor must have the legal title to the specialty in order to sue, in equity this rule is very different, for there he is considered as having acceded by subrogation to all the rights of every kind that the creditor had before the payment and to all his securities, “without a formal assignment,” citing and approving Carter v. Jones, supra; York v. Landis, 65 N. C., 535; Holden v. Strickland, 116 N. C., 185; to which may be added Wilson v. Bank of Lexington, 72 N. C., 621, and Neely v. Jones, 16 W. Va., 640, both citing and approving Carter v. Jones, supra. Commenting upon the last-named in Neely v. Jones, supra, the Court says that the headnote is not justified by the decision actually rendered, and, moreover, is not supported by the authorities (and I fully concur in that criticism) ; but the Court further says that this Court was right in holding that the surety or coobligor should, *208in equity, if not at law, be regarded as a purchaser of tbe note, or so much thereof as was not his just share of the liability, as against the other and defaulting obligor. The case is a valuable one and decides, after unanswerable reasoning, all that is necessary to support my position. It holds that if there is an express or implied agreement for an assignment of the specialty to be gathered from the nature of the transaction, it would amount to an equitable assignment, though no formal assignment was ever executed. The creditor in the transaction simply retires and the paying obligor steps into his shoes, fully clothed and panoplied with all his rights, remedies, and powers of every kind and description. He becomes himself the creditor pro tanto of his defaulting coobligor. This is the modern, if not the ancient doctrine, backed by an immense weight of authority. Cuyler v. Ensworth, 6 Paige, 32; Ohrem v. Wrightson, 51 Md., 34; Lumpkin v. Mills, 4 Ga., 343; Townsend v. Whitney, 75 N. Y., 425; McDaniels v. Lee, 37 Mo., 204; N. B. I. v. Hathaway, 134 Mass., 69.

In Mason v. Pierron, 63 Wis., 239, it was said: “The courts of this country, however, have very generally adhered to the ancient rule, and hold that although the lien or obligation be extinguished at law by the payment of the debt, yet, for the benefit of the surety, it continues in equity in full force. The cases which illustrate the above propositions are very numerous in, both countries. A great many of them will be found cited in Story’s Equity Jurisprudence, in the notes to sections 492, 493, 495, 496, 499, a, b, c; 3 Pom. Eq. Jur., secs. 1418, 1419, and notes.” The same statement of the law will be found in Cuyler v. Ensworth, supra: “According to the modern doctrine on this subject, the surety, by the mere payment of the debt, and without any actual assignment from the creditor, is, in equity, subrogated to all the rights and remedies of‘the creditor for the recovery of his debt against the principal debtor or his property, or against the cosureties or their property, to the extent of what they are equitably bound to contribute.” So in N. B. I. v. Hathaway, supra, the Court held that the paying obligor “should be allowed to use the creditor’s name, or the *209security tbe creditor has obtained, to enforce tbe right wbicb be bas against tbe cosurety by reason of tbe payment wbicb be bas made on bis account.” And, finally, in McDaniels v. Lee, supra, tbe Court said: “It is a well-settled principle in courts of equity tbat wben tbey once acquire jurisdiction over tbe subject-matter tbey will retain it until full justice bas been done between tbe parties. Wben a party is forced to come to tbem for relief, tbey will not grant a part of bis remedy, and drive him to a court of law for tbe balance; but tbey will retain jurisdiction of tbe cause until full and ample justice bas been done.”

We could cite cases almost without number to tbe same effect, and, wben tbe question is properly considered, there is no discordant note. Tbe case of Neal v. Nash, 23 Ohio St., 483, expressly bolds tbat where it is understood tbat tbe payment shall not operate as a satisfaction, but tbe note shall be kept alive for tbe benefit of tbe paying debtor, or, if necessary, tbat an assignment shall be made of it, tbe debtor may sue directly upon tbe note or in equity, and under a Code like ours, though prescribing six instead of three years, on express or implied contracts, as tbe limitation, it was held tbat tbe six-years statute did not apply, but tbe ten years, tbe action being for equitable relief.

There is no conflict whatever between tbe views herein expressed and tbe case of Tripp v. Harris, 154 N. C., 296. Tbe authorities cited in tbat case related to actions at law, and in Tripp v. Harris it was simply held tbat tbe paying debtor was subrogated to all rights of tbe creditor in tbe mortgage or collateral security, wbicb was sufficient for tbe decision in tbe case. If there are any expressions in tbe cases cited wbicb seem to be tbe other way, tbey may be accounted for upon tbe ground tbat tbe distinction between tbe rights of tbe paying debtor in a court of law and in a court of equity bas not been kept in mind, and, besides, tbey were mere dicta. Every case in wbicb it is said tbat tbe law requires a formal assignment to be made was an action at law and not a suit in equity.

Tbe same reason for bolding tbe note to be paid applies *210equally to the collateral security, for it was given to secure the note, or debt represented by it, and not the new debt arising out of the implied promise of the surety or coobligor to reimburse the party who paid the money for him. The principal debt must be kept on foot in order to save the security for the benefit of him who paid the money, and he must be subrogated to the same rights and the same debt the original creditor had. It is far better and more logical to hold that an equitable right in the note passes to the paying debtor, by virtue of the payment, which the law will make effectual by treating the assignment as having been made, or compelling the creditor to assign to a person designated by the debtor, who paid the money for his use and benefit. Any other doctrine will work great injustice, which the law 'Seeks to avoid.

My conclusion is that the judgment should be set aside and a new trial awarded for the error of the judge in his charge as to the statute of limitations.

Justice BkowN concurs in dissenting opinion of "Walker, J.