Central Trust Co. v. Bank of Mullens

• Decision Date: 08 October 1929
• Docket Number: 6564.
• Citation: 150 S.E. 221,107 W.Va. 679
• Parties: CENTRAL TRUST CO. v. BANK OF MULLENS et al.
• Court: West Virginia Supreme Court

150 S.E. 221

107 W.Va. 679

CENTRAL TRUST CO. v. BANK OF MULLENS et al.

No. 6564.

Supreme Court of Appeals of West Virginia.

October 8, 1929

Submitted October 2, 1929.

Rehearing Denied Nov. 12, 1929.

Syllabus by the Court.

Where the surety on a bond of a bank given to secure to the state the payment of money deposited therein by the state at the rate of 3 per cent. has (upon the failure and insolvency of the bank) paid the state the money due her, together with interest at 3 per cent., it is error to decree to the surety the amount so paid with interest at 6 per cent. as a prior lien against the bank's assets. The lien decreed should be for the amount paid plus interest at 3 per cent.

Appeal from Circuit Court, Wyoming County.

Suit by the Central Trust Company, receiver, etc., against the Bank of Mullens and another. From an adverse decree, plaintiff appeals. Reversed in part, and remanded.

Brown, Jackson & Knight and Lon H. Kelly, all of Charleston, for appellant.

Hartley Sanders, of Princeton, for Fidelity & Deposit Company of Maryland.

LIVELY J.

The Bank of Mullens, prior to its failure, was legally designated as a state depository, and on April 17, 1926, executed a bond payable to the state in the proper penalty with Fidelity & Deposit Company of Maryland as surety, conditioned that it would repay the state's money deposited with it, together with 3 per cent. interest thereon. On April 20, 1927, the bank then being insolvent and now insolvent, was closed by the commissioner of banking, and Central Trust Company was appointed as receiver. On this date, the bank had state money amounting to $18,249.50. On April 11, 1928, the Fidelity & Deposit Company of Maryland, surety on the bond, paid that sum to the state in discharge of its obligation as surety and took from the state treasurer a written assignment of all the right, title, and interest of the state in and to the assets of the Bank of Mullens, and a subrogation to the surety of all the state's rights and remedies against the bank in respect to the money paid. The receiver instituted this suit for convening the creditors, ascertaining the indebtedness of the bank, priorities of the creditors, and for the winding up of the affairs of the insolvent. The Fidelity & Deposit Company intervened by petition setting up its suretyship and payment of its obligation as such in discharge of the bond, and claimed a preference against the assets of the bank by virtue of such payment to the state. The cause was referred to a commissioner before whom the Fidelity & Deposit Company proved its debt, claiming interest thereon at the rate of 6 per cent. per annum from date of payment to the state. The commissioner reported that the surety was entitled to 3 per cent., to which report the surety excepted on the ground that 6 per cent. was not allowed. By decree of February 27, 1929, the court sustained the surety's exception to the report and entered the decree complained of allowing 6 per cent. from the time the debt was paid; and it is from this decree that the receiver prosecutes this appeal.

There is no controversy of fact, and the issue is one of law clearly defined. Is the surety entitled to 6 per cent. interest as a preferred lienor? The surety affirms that it is so entitled, and the receiver denies. Thus the issue is made up. There can be no question of the right of the surety to be subrogated to the lien of the state which the latter holds against the bank. That lien extends, under the sovereignty doctrine (Woodyard v. Sayre, 90 W.Va 295, 110 S.E. 689, 24 A. L. R. 1497), to the assets of the insolvent bank in preference to other general creditors. The state had its prerogative right to preference and priority over other creditors for the state's money on deposit together with interest at the rate of 3 per cent. per annum until paid. To these rights and remedies of the state, the surety company is subrogated.

It is quite well established that the remedy of the surety against his principal is upon the implied contract between him and his principal that the latter would repay the surety whatever sum he was legally compelled to pay, and his measure of damages in such case is that sum together with legal interest thereon. Weimer, Wright & Watkins v. Talbot, 56 W.Va. 257, 49 S.E. 372; Butler v. Butler's Adm'r 8 W. Va. 674; Feamster v. Withrow, 9 W. Va. 296; McNeil v. Miller, 29 W.Va. 480, 2 S.E. 335; Faires v. Cockerell, 88 Tex. 428, 31 S.W. 190, 639 28 L. R. A. 528; Memphis, etc., v. Dow, 120 U.S. 287, 7 S.Ct. 482, 30 L.Ed. 595; Appleford v. Snake River Mining Co., 122 Wash. 11, 210 P. 26, 29 A. L. R. 268; Bushnell v. Bushnell, 77 Wis. 435, 46 N.W. 442, 9 L. R. A. 411; Holloman v. Oxford (Tex. Civ. App.) 168 S.W. 437. The surety's action is not on the original obligation between his principal and the creditor, but on the implied promise of the principal for reimbursement as above set out. Story Eq. Juris. § 499C. The scope of the doctrine of subrogation in suretyship includes the "immediate transfer, by operation of law, to the promisor in suretyship, of all of the rights of the creditor against the principal whenever the promisor pays the debt or satisfies the obligation." Stearns on Suretyship (3d Ed.) § 244. The cases of Shipman v. Bailey, 20 W.Va. 140, Pickens v....