American Bonding Co. of Baltimore v. State Savings Bank

• Decision Date: 07 May 1913
• Citation: 133 P. 367,47 Mont. 332
• Parties: AMERICAN BONDING CO. OF BALTIMORE v. STATE SAVINGS BANK.
• Court: Montana Supreme Court

133 P. 367

47 Mont. 332

AMERICAN BONDING CO. OF BALTIMORE v. STATE SAVINGS BANK.

Supreme Court of Montana

May 7, 1913

Appeal from District Court, Silver Bow County; John B. McClernan Judge.

Action by the American Bonding Company of Baltimore against the State Savings Bank. Judgment for defendant, and plaintiff appeals. Affirmed.

C. M Parr, of Hamilton, and Walsh, Nolan & Scallon, of Helena, for appellant.

W. D Kyle, Frank C. Walker, and Charles R. Leonard, all of Butte for respondent.

HOLLOWAY J.

From the first Monday of January, 1905, to the first Monday in January, 1909, W. E. Davies was the duly elected, qualified, and acting clerk of the district court of Silver Bow county. During a portion of that period W. P. Farrell was his chief deputy. The American Bonding Company of Baltimore was the surety on Davies' official bond. During the time Farrell was acting as deputy clerk he issued false and fictitious jurors' certificates, none of which bore the imprint of the official seal, and these certificates to the amount of $2,076 came into the possession of the State Savings Bank of Butte and were by it presented to the county treasurer and paid. The fraudulent character of the certificates having been discovered, the county made demand upon the clerk of the district court and the bonding company, his surety, to repay the amounts which the county had paid out on such certificates, and, this demand having been refused, action was commenced by the county and prosecuted to favorable judgment, which judgment was affirmed on appeal by this court. County of Silver Bow v. Davies et al., 40 Mont. 418, 107 P. 81. The bonding company having paid the judgment, which included the amount received by the State Savings Bank, took an assignment of any right of action which the county may have had against the bank, and thereupon commenced this action to recover from the bank the $2,076 which the bank had received from the county upon the fictitious certificates held by it. The complaint sets forth the foregoing facts somewhat more in detail and concludes by alleging that the bank has not repaid or returned to the county or to the bonding company the $2,076 or any part thereof. To this complaint a demurrer was interposed and sustained, and plaintiff, electing to stand upon its complaint, suffered judgment to be entered against it and appealed. The only question presented for our determination is: Does the complaint state a cause of action in favor of the bonding company and against the bank?

The facts concerning Farrell's peculations and the character of the instruments which he issued will be found detailed at length in Re Farrell, 36 Mont. 254, 92 P. 785, and in County of Silver Bow v. Davies et al., referred to in the statement above. Appellant insists that the certificates held by the bank were void, citing In re Farrell, above, and therefore the bank had no just claim against the county for their payment; that, having paid the bank the face value of the certificates, the county could have recovered back the money so paid in an action for money paid by mistake. To this extent appellant's contention may be conceded for the purposes of this appeal. It is further insisted that, since the county chose to proceed against the district clerk and the surety company, the surety on his official bond, to compel them to make good the county's loss, the surety company, upon paying the amount which the bank had received from the county, thereby became subrogated to the right which the county had to compel the bank to repay the amount which it had received. With this contention we do not agree. Furthermore, it must be conceded that, if the bank would have had a cause of action against the bonding company in case the county had refused to pay the fictitious certificates, then the bonding company cannot have a cause of action against the bank in this instance.

1. Assuming that the county of Silver Bow had a cause of action against the bank to recover back the money it paid out on the spurious certificates, it does not follow that by paying the county's loss the surety on the clerk's official bond became subrogated to the county's right. The doctrine of subrogation had its origin in the civil law. It has been adopted and invoked by courts of equity in order that justice may be done as nearly as possible. The application of the doctrine must therefore depend upon the circumstances of each particular case. When, therefore, this surety company seeks to be subrogated to the right which the county may have had against the State Savings Bank, it is necessary that something more be made to appear than that the bank could have been made to repay to the county the amount which it received upon the spurious certificates which it held. The surety company must show that as between it and the State Savings Bank, if either must suffer loss because of Farrell's peculations, in equity and good conscience the bank should be the one to lose. This is the rule recognized with practical unanimity. American Bonding Co. v Welts, 193 F. 978, 113 C. C. A. 598; United States Fidelity & G. Co. v. Title Guaranty & Surety Co. (D. C.) 200 F. 443. Does this complaint show such a state of facts? We think not. There is not any charge of negligence or wrongdoing on the part of the bank in purchasing the certificates. So far as the complaint discloses, the bank acted in perfect good faith and was following a common custom in dealing in these certificates without their bearing the impress of the...