MELLETTE FARMERS'ELEVATOR CO. v. H. Poehler Co.

• Decision Date: 11 February 1927
• Citation: 18 F.2d 430
• Parties: MELLETTE FARMERS' ELEVATOR CO. v. H. POEHLER CO.
• Court: U.S. District Court — District of Minnesota

18 F.2d 430 (1927)

MELLETTE FARMERS' ELEVATOR CO. v. H. POEHLER CO.

District Court, D. Minnesota, Fourth Division.

February 11, 1927.

Cobb, Wheelwright, Hoke & Benson and Claude G. Krause, all of Minneapolis, Minn., for the motion.

H. V. Mercer and Elias J. Lien, both of Minneapolis, Minn., for receiver.

JOHN B. SANBORN, District Judge.

The Fidelity & Deposit Company was the surety on a $25,000 grain shippers' bond given by the H. Poehler Company, as a commission merchant, for the protection of such shippers as should do business with the company. The company became insolvent, and a receiver was appointed by this court. Suit was brought upon the bond, for the benefit of the obligees, against which the surety company defended. Judgment was entered against it for the full amount of the bond and interest, in all about $30,000. In the same action, the claims of the grain shippers who were within the protection of the bond, were determined, the total claims aggregating over $100,000. The surety company has paid the obligees pro rata upon their claims the full penalty of the bond and interest, so that they have received from this source about 25 per cent. of the moneys due them.

Having paid the full amount of its bond, the surety company now asks leave to file its claim against the H. Poehler Company, as a general creditor, in the receivership proceedings, on the ground that it was a creditor at the time of insolvency, and that the amount which is due it is now fully determined.

The receiver takes the position that the surety company has no right to file a claim until the claims of the grain shippers are paid in full, and that they never will be paid in full in this receivership.

"A surety is any person who, being liable to pay a debt, is entitled, if it is enforced against him, to be indemnified by some other person who ought himself to have paid it before the surety was compelled to do so." Wendlandt v. Sohre, 37 Minn. 162, 33 N. W. 700.

When a contract of suretyship is made, there arises, in the absence of an express agreement, an implied contract that the principal will indemnify the surety for any payment it may be required to make under the contract of suretyship. This implied agreement comes to life when a contract of suretyship is made; from that time on the relation of debtor and creditor exists between the principal and the surety. The payment of the money under the contract by the surety merely fixes the amount of damages for which the principal is liable, and relates back to the time the contract was entered into. Rice v. Southgate, 82 Mass. (16 Gray) 142; Griffin v. Long, 96 Ark. 268, 131 S. W. 672, 35 L. R. A. (N. S.) 855, Ann. Cas. 1912B, 622; 32 Cyc. 250; Stearns on Suretyship (3d Ed.) 507, § 280; Kimmel v. Lowe, 28 Minn. 265, 9 N. W. 764; 21 R. C. L. 1097, § 134; Smith v. Young, 173 Ala. 190, 55 So. 425; In re Stout (D. C.) 109 F. 794. In the last case, Judge Philips says:

"The implied contract or obligation was, therefore, raised by law between the surety and the principal that the latter should indemnify the former, `and this implied contract took effect from the date of the surety's signing the note, and not merely from the time he paid the money; the payment in such case relating to the inception of the implied liability.' Berry v. Ewing, 91 Mo. 397, 3 S. W. 877."

In 21 R. C. L. 1097, appears this statement: "On payment of the principal debt, the surety becomes a simple contract creditor of the principal, and is entitled to maintain the common-law action of indebitatus assumpsit for money paid, laid out and expended, or, as it has been more frequently stated, under such circumstances the surety is entitled to maintain an action against the principal...