W. F. Shawver Sons Co. v. Bd. Of Educ. Of Loudon Dist..
| Decision Date | 02 June 1936 |
| Docket Number | (No. 8243) |
| Citation | 117 W.Va. 531 |
| Parties | W. F. Shawver Sons Company v. Board of Educationof Loudon District et al. |
| Court | West Virginia Supreme Court |
Principal and Surety
The gratuitious indemnity furnished by a stranger for the express benefit of a surety, is not impressed with a trust in favor of the creditors of the principal debtor.
Appeal from Circuit Court, Kanawha County.
Suit by the W. F. Shawver Sons Company against the Board of Education of Loudon District, L. H. Baier, and others. From an adverse decree, last-named defendant appeals.
Reversed in part and remanded.
Mohler, Peters & Snyder, for appellant.
Brown, Jackson & Knight, Lon H. Kelly, and Herman Bennett, for appellee Board of Education.
Taylor & Taylor, R. E. O'Connor, L. E. McWhorter, Blue, Dayton & Campbell, W. E. R. Byrne, and H. V. Campbell, for other appellees.
Hatcher, President:
The primary question in this litigation is the responsibility of a surety's indemnitor to the creditors of the surety's principal.
R. A. Sutler contracted with a Board of Education to construct a school building, and The Equitable Casualty and Surety Company (hereinafter called Equitable) signed his contract bond as surety. Sutler's application to Equitable to become his surety covenanted that he would indemnify it "against any and all liability, loss, costs, damages, attorney's fees and expenses of whatever kind or nature" it might sustain by reason of executing his bond. L. H. Baier joined with Sutler in the indemni- tying covenant. After partially constructing the building, Sutler abandoned the contract, insolvent, and failed to pay for material furnished on the building, by W. F. Shawver Sons Company and others. Equitable became insolvent and also failed to pay them. In this suit, they were decreed recoveries (through the medium of a receiver for Equitable) against Barer, as the indemnitor of Equitable.
The materialmen rely on the rule in equity adopted in Bank v. Hart, 103 W. Va. 290, 137 S. E. 222, that a creditor may claim the benefit of a security given by the principal debtor to indemnify the surety. Both the rationale and the diction of the rule, however, require that the security be the property of the debtor. The security given in Bank v. Hart was a deed of trust on real estate belonging to the debtor. The decisions referred to in that case all relate to property of the principal which had been turned over to the surety. No authority has been cited by counsel for the creditors of Sutler, and none has been discovered by our search, which holds that the gratuitous indemnity furnished by a stranger for the express benefit of a surety, is impressed with a trust in favor of the principal's creditors. On the contrary, numerous decisions hold that such an indemnity does not inure to their benefit. This distinction is emphasized in Hampton v. Phipps, 108 U. S. 260, 264-5, 2 S. Ct. 622, 624, 27 L. Ed. 719, the leading case on the subject. There, the court, after vigorously defending the doctrine that when a debtor has placed an indemnity in the hands of his surety "it is conformable to the presumed intent" of the parties, that "the fund so appropriated" be administered as a trust fund for the creditors, made the following qualification: "All this * * * presupposes that the fund specifically pledged and sought to be primarily applied, is the property of the debtor, primarily liable for the payment of the debt; and because it is so, equity impresses upon it a trust which requires it should be appropriated to the satisfaction of the creditor. * * * The present case cannot be
brought within either the terms or the reason of the rule; for as the property, in respect to which the creditors assert a lien was not the property of the principal debtor, and has never been expressly pledged to payment of the debt, so no equitable construction can convert it by...
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Baler v. Alexander
...of Kanawha County to enter upon its records, as its own, the decision of this court in the case of the W. F. Shawver Sons Company V. Board of Education, 117 W. Va. 531, 186 S.E. 307, as required by Code, 58-5-29; and to set aside a decree of said court entered in said cause, on the 31st day......
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Baier v. Alexander
... ... of the W. F. Shawver Sons Company v. Board of ... Education, 117 W.Va. 531, 186 ... Education of Loudon District to construct a school building ... at Marmet, ... ...