Rubey v. Watson

• Citation: 22 Mo.App. 428
• Parties: WEB. M. RUBEY, ASSIGNEE, ETC., Plaintiff in Error, v. B. F. WATSON ET AL., Defendants in Error.
• Decision Date: 24 May 1886
• Court: Missouri Court of Appeals

22 Mo.App. 428

WEB. M. RUBEY, ASSIGNEE, ETC., Plaintiff in Error,

v.B. F. WATSON ET AL., Defendants in Error.

Kansas City Court of Appeals, Missouri.

May 24, 1886.

ERROR to Macon Circuit Court, HON. ANDREW ELLISON, Judge.

Affirmed.

Statement of case by the court.

This action is based on a promissory note made by defendants and payable to F. C. Hardgrove, or order.

It was assigned for value, before maturity, to the Macon Savings Bank. The bank made a general assignment, under the statute, to plaintiff. The answer admitted the execution of the note, and that plaintiff is the assignee of the bank, and proceeded to set up the following as a defence thereto:

“And for a defence, off-set, and counter-claim to said action, defendant alleges that, at the general election held in Macon county on the _____ day of November, 1880, one James H. Cunningham was duly elected collector of the revenue within and for the county of Macon, and state aforesaid, and duly qualified as such, and gave bond in a large sum to the state of Missouri, for the faithful performance of his duties as such collector, and faithfully to account for all moneys that should come into his hands as such collector, with defendant, Benjamin F. Watson, and others, as his securities on said bond, which was duly approved by the county court of said county and the state auditor, whereby this defendant, and the other bondsmen, become and remain liable for all misfeasance, neglect, and other default of said Cunningham as such collector, and still so remain and continue.

That said Cunningham, after entering upon the discharge of his duties as such collector, from day to day, deposited large sums of the revenue, collected by him, in the Macon Savings Bank, to the credit of himself as such collector, and so continued until the fifteenth day of February, 1882, when said bank suspended payment, stopped business, and assigned to plaintiff for the benefit of its creditors, at which time said bank had and owed of the revenue so collected and deposited, as aforesaid, the sum of ____ dollars, which sum it refused to pay as it had agreed, by reason of said failure and refusal of said bank. That the said Cunningham became, and was a defaulter in said sum, and being wholly insolvent, was unable to pay the same, and this defendant, as bondsman, as aforesaid, became and was liable to pay said sum, and was compelled to, and, in fact, did pay the sum of ____ dollars, much larger than the sum of said note, with the interest thereon, being his part as bondsman, as aforesaid. That, to make said payment, defendant was compelled to use, and did use, the money he had provided to pay said note sued upon; and that, by said payment, said account owed, as aforesaid, by said bank, to said Cunningham, as collector, and to the revenue, became, and was, owing, and due, to this defendant, and his fellow bondsmen, and said bank and assignee, became, and were, liable to pay the same to this defendant and his fellow-bondsmen. That said bank is wholly insolvent, and cannot pay more than ten or fifteen cents on the dollar of its indebtedness, that said Cunningham is wholly insolvent, and cannot pay defendant anything on said money so paid by defendant, toward discharging said defendant so occasioned, as aforesaid. Defendant alleges and avers that he has at all times since the first deposit by said Cunningham in said bank, been in equity and good conscience an owner, and had an interest in said fund and account, and by said payment discharging said default, became, and now is, an absolute owner of said account, with his right, and title, and interest, relating back to approval of said bond, and that there is a mutual indebtedness existing thereby between plaintiff and this defendant. And defendant alleges and avers that he has the right to have his indebtedness in his account, as shown above, off-set, against the said note sued on by plaintiff.” The prayer was general relief, etc.

The cause was submitted to the court on the following agreed statement of facts:

“1. That J. H. Cunningham was duly elected and qualified as collector of revenue for Macon county, and was, on the date of the failure of the Macon Savings Bank, acting as such.

2. That defendant is and was one of the bondsmen of said Cunningham, from the beginning of his term.

3. That said bank failed February 15, 1882, having on deposit at current account, revenue (collected by Cunningham, and deposited in the name of J. H. C., Col'r.), a sum greater than the amount due upon the note sued on.

4. That said bank is insolvent, and cannot pay more than a small per cent. of said deposit.

5. That defendant has paid to Macon county, and other funds to which the money deposited aforesaid belonged, the amount equal to what is due upon the notes sued for, being compelled so to do by reason of the insolvency of said Cunningham.”

The court sustained the set-off, and found for the defendant; plaintiff brings the case to this court by writ of error.

DYSART & MITCHELL, for the plaintiff in error.

I. The facts set up in the answer constitute no defence to plaintiff's admitted right of action. The principal in the bond, and not the state of Missouri, was the principal of defendant. And the principal in the bond was simply a creditor of the bank, with respect to the public moneys deposited, as any other depositor. State ex rel. Cunningham v. Wilson, 77 Mo. 633; State v. Rubey, 77 Mo. 610. The claim of the state to the contrary was denied by the supreme court in the above cited cases.

II. There is no room here for the application of the doctrine of subrogation. In order to avail himself of the funds in the hands of the assignee of the bank, it would be necessary for defendant to pay off the bond, and take judgment against his principal, and then garnish the assignee for any dividend coming to his principal. For his principal was a creditor of the bank, and not a debtor; and the fund deposited was not a security for the payment of his principal's bond. State ex rel. v. Powell, 67 Mo. 395; State ex rel., etc., v. Moore, 74 Mo. 413.

III. The principal of defendant was only entitled to a pro rata dividend out of the assets of the bank, along with other creditors. The extent of defendant's claim for relief here cannot be greater.

IV. The entire bond was not paid by defendant as surety. A creditor has the right to hold all collateral until the whole debt is paid. Morrison v. Ins. Co., 18 Mo. 262; Hearne v. Keath, 63 Mo. 84.

SEARS & GUTHRIE, with B. F. STONE, for the defendants in error.

I. On the record proper, as here, there is only one question to settle: Does the answer state sufficient facts to entitle defendant surety to equitable subrogation to the rights of his principal against the assignee of the bank, and to have the deposit owing to his principal from the assignee set-off in payment of his (the surety's) note owing to the assignee--having been compelled to make good his principal's default, as being his surety on his official bond? and which default was occasioned by the failure of the bank to pay the deposit to his...