American Bonding Co. of Baltimore v. Fourth Nat. Bank

• Decision Date: 27 October 1921
• Docket Number: 3 Div. 522.
• Citation: 206 Ala. 639,91 So. 480
• Parties: AMERICAN BONDING CO. OF BALTIMORE v. FOURTH NAT. BANK OF MONTGOMERY.
• Court: Alabama Supreme Court

91 So. 480

206 Ala. 639

AMERICAN BONDING CO. OF BALTIMORE v. FOURTH NAT. BANK OF MONTGOMERY.

3 Div. 522.

Supreme Court of Alabama

October 27, 1921

Rehearing Denied Nov. 17, 1921.

Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.

Bill by the American Bonding Company of Baltimore against the Fourth National Bank of Montgomery for subrogation and to hold the said Bank as trustee for certain funds. From a decree sustaining demurrers to the bill, complainant appeals. Reversed and remanded.

Stuart Mackenzie and Ball & Beckwith, all of Montgomery, for appellant.

Weil Stakely & Vardeman, of Montgomery, for appellee.

GARDNER J.

The bill in this cause is filed by the American Bonding Company against the Fourth National Bank, seeking to hold the bank accountable as trustee of certain funds of one Estelle Manegold, alleged to have been received by the bank from the guardian of said Estelle Manegold with knowledge of the trust character thereof, and alleging an active participation by the bank in the conversion of said funds by the guardian in the payment of an individual debt of the guardian to the bank. The American Bonding Company, as surety upon the bond of said guardian, was forced to make good the shortage of the latter, and seeks by the present bill to be subrogated to the rights of Estelle Manegold, the ward.

The original bill was before this court on decree on demurrers, and is found reported. American Bonding Co. v. Fourth Nat. Bank, 205 Ala. 652, 88 So. 838. The opinion upon the former appeal presents the salient facts set forth in the original bill, which will not here be repeated; a reference thereto being considered sufficient for that purpose. After setting out paragraphs 5 and 7, and stating other important facts alleged in the bill, the summary thereof was stated by the court on former appeal in the following language:

"As it appears from this statement of the bill, it is averred expressly that the loan was made to George Manegold, in the name of Joseph Manegold & Co., and that, to the actual knowledge of the bank, this company was but the trade-name-a commercial alter ego-under which George Manegold conducted his business. The necessary result from these averments is that the check by George Manegold, guardian, passing the trust fund to Joseph Manegold & Co., was in effect a conversion of that fund to George Manegold individually, with the knowledge of the bank, and that, when 'Joseph Manegold & Co.' gave the checks described to the bank to pay this Manegold loan, they were, to the knowledge of the bank, in effect the individual checks of George Manegold to the bank to pay the individual debt of George Manegold to the bank while so advised in the premises. Under the facts and knowledge averred, the process pursued was nominally indirect, circuitous; but this course contributed, in legal effect, nothing different had the process been direct, instead of circuitous, omitting the nominal interposition of 'Joseph Manegold & Co.' These acts, with the knowledge the bank is averred to have had, characterized the bank a participant, to its advantage, in the misappropriation of the trust fund to the extent it was thus absorbed, and so notwithstanding it is not specifically alleged in the bill that the bank entertained such design when the loan was thus made."

The majority of the court were of the opinion that the averments of the bill constituted the bank a trustee in invitum, a trustee of a constructive trust, and that as such it was entitled to the benefit of the statute of limitations, and it was upon this point only that the court was divided.

Upon this appeal it is insisted by counsel for appellee that the bill shows Estelle Manegold had a plain and adequate remedy at law for money had and received, and that, as the funds here sought to be recovered have been commingled with other funds and cannot be identified, there is therefore no occasion for resort to a court of equity. Ellison v. Moses, 95 Ala. 221, 11 So. 347; Nixon St. Bk. v. First St. Bk., 180 Ala. 291, 60 So. 868, among other authorities.

Whether or not this insistence has merit as applied to Estelle Manegold we need not stop to inquire. Complainants to this bill seek relief upon the principle of subrogation, which is an equitable doctrine enforceable alone in that jurisdiction. Ex parte Brown, 58 Ala. 536; Sheldon on Subrogation, §§ 1-4; Dothan Gro. Co. v. Dowling, 204 Ala. 224, 85 So. 498.

Upon the former appeal in the expression of the views of the majority it was expressly stated that the bill did not pretend to charge any fraud or concealment such as would relieve the case from the bar of the statute of limitations. After affirmance of the decree, the complainant amended the bill by the addition of paragraph 8 1/2, which will be set out in the report of the case; and it is insisted that the averments in this additional paragraph sufficiently show such a fraud or concealment as to bring the case from without the bar of the statute. The court below sustained the demurrer to the bill as amended, and the question presented by the additional paragraph is one of prime importance upon this appeal.

Counsel for appellee insist that the averments of fraud are not sufficient under our decisions, and add nothing to the case made by the original bill, quoting the oft-repeated assertion in our decisions that-

"Ignorance of right in the party complaining, there being no more than passiveness, mere silence, on the part of his adversary, cannot be ingrafted as an exception on the statute of limitations, without a destruction of its wise policy, and without an encouragement of mere negligence." Underhill v. Mobile Fire Ins. Co., 67 Ala. 45.

And the expression found in Van Ingin v. Duffin et al., 158 Ala. 318, 48 So. 507, 132 Am. St. Rep. 29:

"In the absence of a fiduciary relation between the parties, imposing the moral and legal duty to disclose, there must be some act or conduct calculated to mislead or deceive or to lull inquiry."

We do not understand the averments of paragraph 8 1/2 come within the influence of these authorities. It is expressly averred that Estelle Manegold did not know at the time, and does not know as yet, of the facts alleged which constituted the bank a participant in the breach of trust, and that previous to filing the bill against the guardian and surety on his bond she made inquiry of the bank as to the disposition of the funds constituting the trust estate, and was informed that the guardian had had an account in the bank, which was long since closed, and that was all the bank knew about it.

Under section 4852, Code 1907, where one seeks relief on the ground of fraud which is barred by the statute, the cause of action will not be considered as having accrued until the discovery by the aggrieved party of the facts constituting the fraud after which he must have one year within which to prosecute his suit. This statute being a mere affirmation and application to legal remedies of...