Luikart v. Buck
| Decision Date | 23 December 1936 |
| Docket Number | 29768 |
| Citation | 270 N.W. 495,131 Neb. 866 |
| Parties | E. H. LUIKART, RECEIVER OF BANK OF OTOE, APPELLANT, v. SCHUYLER H. BUCK ET AL., APPELLEES |
| Court | Nebraska Supreme Court |
APPEAL from the district court for Otoe county: DANIEL W LIVINGSTON, JUDGE. Affirmed.
AFFIRMED.
Syllabus by the Court.
1. Subrogation is of two kinds--legal and conventional. Legal subrogation is allowed in cases where one who pays the debt of another stands in the situation of a surety and is compelled to pay the debt to protect his own rights. Conventional subrogation arises when one pays the debt of another, under an agreement existing at the time of the payment with either the debtor or creditor that the person paying it shall be subrogated to the rights of the creditor.
2. To entitle one to subrogation his equity should be strong and his case clear. The person seeking subrogation must act fairly and equitably and be free from fault. It will not be allowed where he would derive an advantage or establish his claim through his own negligence or from his own wrong doing or from the wrong doing of another under whom he claims.
3. The object of subrogation is the prevention of injustice. It is designed to promote and accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who, in justice, equity and good conscience, ought to pay it.
4. " The doctrine of subrogation applies where a party is compelled to pay the debt of a third person to protect his own rights or to save his own property." Cole v. Malcolm, 66 N.Y. 363.
5. The doctrine of subrogation is not available to one who pays his own primary obligation.
6. Bank receiving deposit, under circumstances which create a trust in favor of the owner of the deposit, is primarily liable to the owner of such fund.
7. Trust funds in an insolvent bank are not the property of the bank and are not assets of the bank, distributable to its depositors or creditors.
Appeal from District Court, Otoe County; Livingston, Judge.
Action by E. H. Luikart, Secretary of the Department of Trade and Commerce, and receiver of the Bank of Otoe, Otoe, Nebraska, against Schuyler H. Buck and others. From a judgment dismissing the action, the plaintiff appeals.
Affirmed.
Moran & James, F. C. Radke and Howard L. Holtzendorff, for appellant.
W. W. Wilson, Allen Wilson and I. D. Beynon, contra.
Heard before GOSS, C. J., GOOD, EBERLY, DAY and CARTER, JJ., and MESSMORE, District Judge.
In this action plaintiff seeks to be subrogated to the rights of School District No. 78 of Otoe county on the official bond of the district's treasurer and for a money judgment against the principals and sureties on such bond. A demurrer to plaintiff's amended petition was sustained by the trial court. Plaintiff elected not to further plead, and the action was dismissed. Plaintiff has appealed.
The facts pleaded and relied upon to support plaintiff's alleged right of subrogation, as they appear in the petition, are: Moneys belonging to the school district and in the possession of its treasurer were deposited in the Bank of Otoe, which became insolvent, and the district was awarded a claim against the receiver of that bank for a trust fund, payable out of the assets in the hands of the receiver before the claims of depositors and of general creditors of the bank. This claim was duly adjudicated and paid by the receiver as a trust fund. Plaintiff now alleges that Buck, the treasurer, withdrew $ 894 while the bank was a going concern and embezzled the amount, and that the bank having paid the entire deposit, including the $ 894, is entitled to be subrogated to the rights of the school district against Buck and his bondsmen, on the theory that the district had open to it an action upon the bond of the treasurer, as well as a claim for a trust fund against the insolvent bank; that it elected to pursue its remedy against the bank for the trust fund, and the receiver having paid it is, in equity, entitled to be subrogated to the rights of the district and to recover on the bond of Buck the sum of $ 894.
Subrogation is of two kinds--legal and conventional. Legal subrogation is allowed in cases where one who pays the debt of another stands in the situation of a surety and is compelled to pay the debt to protect his own rights. Conventional subrogation results from an agreement of the parties that the persons paying will be subrogated. 2 Story, Equity Jurisprudence (14th ed.) 110, sec. 706; State v. Citizens' State Bank, 118 Neb. 337, 224 N.W. 868; State v. Holdrege State Bank, 110 Neb. 814, 195 N.W. 120. The record presents nothing that would in any wise indicate the applicability of the doctrine of conventional subrogation. In the following discussion reference is made solely to legal subrogation.
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