Amer. Surety Co. v. Multnomah County

• Decision Date: 18 May 1943
• Citation: 138 P.2d 597,171 Or. 287
• Parties: AMERICAN SURETY CO. OF NEW YORK <I>v.</I> MULTNOMAH COUNTY AMERICAN SURETY CO. OF NEW YORK <I>v.</I> CITY OF PORTLAND
• Court: Oregon Supreme Court

171 Or. 287

138 P.2d 597

AMERICAN SURETY CO. OF NEW YORK

v. MULTNOMAH COUNTY AMERICAN SURETY CO. OF NEW YORK

v. CITY OF PORTLAND

Supreme Court of Oregon.

Argued April 6, 1943.

Reversed May 18, 1943.

Appeal and error

1. On appeal from judgment dismissing complaint after sustaining demurrers, allegations in complaint will be treated as true.

Bills and notes

2. A transferee is chargeable with "notice" of infirmity of negotiable instrument when two circumstances co-exist, namely, that name of transferor is followed by words disclosing fiduciary relationship, and that instrument is transferred in payment of private debt owed by transferor to transferee.

Trusts

3. A trustee has duty not to mingle trust funds with his own funds.

Municipal corporations

4. When county treasurer in violation of his trust draws check upon county funds, affixing after his signature the words "county treasurer", and delivers check to payee in payment of private obligation, payee who accepts benefits thereof is chargeable with "notice" of trust relationship, has duty to make reasonable inquiry, and if no inquiry is made is charged with knowledge of what it would have disclosed.

Pleading

5. An averment of knowledge is not a "conclusion of law," even if source of knowledge is designated.

Subrogation

6. In action by surety on fidelity bond of treasurer of Marion county who drew county check to pay personal tax obligations to Multnomah county, which loss was made good by surety, allegation that check was drawn as "county treasurer" charged Multnomah county with "notice" of source of funds.

Subrogation

7. Where Multnomah county, to which Marion county's check was given in payment of Marion county treasurer's personal tax obligation, was put on notice concerning employment of trust funds, Multnomah county's conduct was "prima facie wrongful"

and hence Multnomah county was required to present affirmative defense in action by surety on treasurer's fidelity bond as Marion county's subrogee.

Evidence

8. The presumption of innocence cannot impair sufficiency of complaint charging guilt or participation therein.

Municipal corporations

9. A taxpayer may pay only the tax owing to a single municipal or quasi-municipal corporation.

Parties

10. In action by surety on fidelity bond of treasurer of Marion county as Marion county's subrogee, against Multnomah county which received Marion county's check in payment of treasurer's personal tax obligation, complaint was not demurrable for defect of parties defendant in that Multnomah county paid portion of taxes to other tax levying bodies, where such situation did not appear on face of complaint.

Parties

11. In action by surety on fidelity bond of treasurer of Marion county as Marion county's subrogee, against Multnomah county which received Marion county's check in payment of treasurer's personal tax obligation, complaint was not demurrable for defect of parties defendant, where demurrer did not name the parties who should have been joined.

Subrogation

12. A surety on Marion county treasurer's fidelity bond was not precluded, as Marion county's subrogee, from recovering from Multnomah county and city which received Marion county's checks in payment of treasurer's personal tax obligations, on theory that neither county tax collector nor city treasurer could accept anything other than money in payment of taxes, where checks were cashed by county and city.

Subrogation

13. In determining Multnomah county's liability to surety on fidelity of bond of Marion county treasurer who drew county check to pay personal tax obligations to Multnomah county, court could not hold as matter of law that inquiry would have failed to disclose treasurer's embezzlement.

Subrogation

14. Assignment is unnecessary where right of subrogation exists.

Subrogation

15. Where Marion county treasurer drew county check to pay personal tax obligations to Multnomah county, surety on treasurer's fidelity bond, which made good Marion county's loss, to prevail against Multnomah county on ground of subrogation was required to show that equities of surety were superior to those of Multnomah county.

Subrogation

16. A complaint by surety on fidelity bond of treasurer of Marion county alleging that Multnomah county knowingly accepted Marion county's check in payment of treasurer's personal tax obligations showed that Multnomah county was not a "holder in due course" and hence disclosed no equitable consideration which would defeat surety's right of subrogation.

Subrogation

17. Where treasurer of Marion county drew county check to pay personal tax obligations to Multnomah county, surety on treasurer's bond making good Marion county's loss was entitled by "subrogation" to maintain action against Multnomah county.

Subrogation

18. A surety on Marion county treasurer's fidelity bond was not precluded from maintaining action by subrogation against Multnomah county and a city which received Marion county's checks in payment of treasurer's personal tax obligations, on theory that bond also protected Multnomah county and the city and that their equities were equal or superior to those of surety, since under statute right to sue on bond accrues to person injured by misconduct, and Multnomah county and city participating in misconduct could not claim that they were injured thereby.

Counties

19. Where Multnomah county and a city received checks of Marion county drawn by its treasurer in payment of his personal tax obligations, and surety on treasurer's fidelity bond made good Marion county's loss, Multnomah county and the city could not escape liability to surety as Marion county's subrogee, on theory that Multnomah county tax collector and city treasurer were not their agents and that notice to them did not constitute "notice" to county and city of treasurer's fiduciary capacity, since county and city could not retain the money and disaffirm knowledge with which officers were chargeable, and county and city were chargeable with notice because records of officers were records of county and city.

Limitation of actions

20. Actions by surety on fidelity bond of treasurer of Marion county, as Marion county's subrogee against Multnomah county and a city which received Marion county's checks in payment of treasurer's personal tax obligations, were not barred by limitation, since Marion county would not have been barred.

Assumpsit, action of

21. "Assumpsit" is a form of remedy favored by courts, and is of equitable nature and embraces cases in which plaintiff has equity on his side.

Assumpsit, action of

22. Action of assumpsit being of an equitable nature admits of almost every defense to which a defendant is entitled.

Subrogation

23. An action by surety on fidelity bond of treasurer of Marion county as Marion county's subrogee, against Multnomah county which received Marion county's check in payment of treasurer's personal tax obligations, was an "action at law" and hence surety was not required to explain long lapse of time between earliest embezzlement and date of suit, but defendant was required to plead that surety was chargeable with laches.

Pleading

24. Laches not appearing on face of complaint must be set up by defendant.

Equity

25. Lapse of time does not necessarily imply "unreasonable delay" and mere delay does not constitute "laches" unless another is injured.

Equity

26. Full knowledge of all the facts concurring with delay for unreasonable time are essential elements of defense of "laches".

Subrogation

27. In determining whether action by surety on fidelity bond of treasurer of Marion county, as Marion county's subrogee, against Multnomah county which accepted Marion county's check in payment of treasurer's personal tax obligations was barred by "laches", court would not presume that Marion county or surety had knowledge of treasurer's defalcations.

Subrogation

28. In action by surety on fidelity bond of treasurer of Marion county, as Marion county's subrogee, against Multnomah county which received Marion county's check in payment of treasurer's

personal tax obligations, complaint was not demurrable on ground of "laches" where complaint did not disclose that Marion county would have been barred by laches if it had sued, and surety sued some nine months after making good the loss.

                  See 25 R.C.L. 1331
                  10 C.J.S., Bills and Notes, § 326
                

Before BAILEY, Chief Justice, and BELT, ROSSMAN, KELLY, LUSK, BRAND and HAY, Associate Justices.

Appeal from Circuit Court, Multnomah County.

JAMES W. CRAWFORD, Judge.

Actions by the American Surety Company of New York against Multnomah County and City of Portland to recover from defendants the moneys paid by plaintiff as surety on fidelity bond of the treasurer of Marion County who applied misappropriated funds to payment of personal tax obligations to Multnomah County and the City of Portland, wherein defendants filed demurrers. From a judgment of dismissal, plaintiff appeals.

REVERSED.

Nicholas Jaureguy, of Portland (Stott & Gooding, Cake, Jaureguy & Tooze, and Herbert C. Hardy, all of Portland, on the brief) for appellant.

Frank S. Sever, Deputy District Attorney, of Portland (James R. Bain, District Attorney, of Portland, on the brief) for respondent Multnomah County.

L.E. Latourette, City Attorney, of Portland (Alexander G. Brown, Deputy City Attorney, of Portland, on the brief) for respondent City of Portland.

The plaintiff brings two separate actions, the first against Multnomah County and the second against the City of Portland, a municipal corporation. The two cases have been consolidated for the purposes of briefs and arguments, and we will dispose of them in a single opinion, noting in the course thereof such distinctions between them as may appear to be material.

1. Demurrers to the amended complaints in both cases were sustained by the trial court. The plaintiff refused to plead further, the complaints were dismissed and the plaintiff appeal...