the principal debtor; in the former instance there can be no question of substitution proper, for the receipt of the surety’s securities by a creditor does not relieve the surety from liability in case the securities prove insufficient. The relief by substitution is never extended but on the assumption that the debt has been or is to be paid in full, so that further detention of the security is against equity.[1] Another objection to allowing substitution is to be found in the fact that, the security being for the indemnity of the surety, he has no right to it till he has been damnified by payment; the creditor’s remedies against the principal debtor, on the other hand, ripen as soon as there has been a refusal to pay. By subrogating the surety to the creditor’s remedies against his debtor, the burden is finally placed where it belongs, and therein lies the equity of the transaction. No such object is attained in doing the converse of this, the only result of which is to place the creditor in an advantageous position to which he can lay no claim. The burden in the latter case is not always placed where it belongs: if the securities are sufficient in value, the burden will take care of itself; if they are insufficient, the loss, as has already been stated, will fall, in part at least, on the surety.
The case of Morrill v. Morrill[2] affords a good instance of the common American doctrine. There an infant’s guardian executed a mortgage as security to a surety on his bond. It was held that the infant was entitled to its benefit for the amount due from the guardian. The language of the court is as follows: “When an assignment of securities is made by the principal to the surety for indemnity merely, an implied trust is raised in favor of the creditor, which he may enforce on the maturity of the debt, whether the surety has been damnified or not, and whether the surety or principal, either or both, are insolvent. The assignment of the security by the principal to his surety is an appropriation of funds for the ultimate discharge of the debt for which he is holden. The surety has a right to apply the security directly to the debt. If the surety pays with his own funds, he keeps his principal’s debt on foot against him and then applies the security to its payment. Thus in any event the funds of the principal are made to satisfy the principal’s debt, and this accords with the purpose of the principal when he gave the security. If the surety after assignment becomes
