United States Fidelity & Guaranty Co. v. Shields , 157 Ky. 371 ( 1914 )

Opinion op the Court by

Chiep Justice Hobson—

'Affirming.

Mathias Higgins was appointed receiver of the Campbell Circuit Court in January, 1904, and executed a bond with the United States Fidelity and Guaranty Company as his surety in the sum of $10,000. The bond, after setting out his appointment, reads as follows:

“Now, therefore, the condition of this obligation is such that if the said Mathias Higgins shall correctly and faithfully discharge all the duties of receiver of the Campbell Circuit Court and shall account for all monies received and pay and deliver the same when and as ordered by the court for one year from the 31st day of January, ¡A. D. 1904, then this obligation shall be void, otherwise to be and remain in full force and effect.”

In that year Higgins as receiver, under an order of • the court, took charge of certain real estate in the case of John Shields et al. v. Henry Shields, then pending, and as such collected from the former receiver, on March 9, $360.50; he also collected, or should have collected, during that year rents from the property amounting to something over $200, and paid out about $80, so that there was a balance in his hands, or that should have been in his hands, of $558.51. At the expiration of the year he executed bond with the Illinois Surety Company for a period of one year, and after the expiration of the time for which that bond was executed he continued to act as receiver and collect the rents of the property until he was ordered by the court to pay over the amount in his hands to his successor. At that time a settlement was made from which it appeared that he owed the estate something over $700, for which judgment was given against him, and on appeal that judgment was affirmed by this court. (See Higgins v. Shields, 151 Ky., 227.) This suit was brought against the Hnited States Fidelity and Guaranty Company to recover the money in his hands during the year covered by the bond it executed. The circuit court sus- . tained a demurrer to the defendant’s answer and gave judgment against the defendant. It appeals.

1. The defense set out in the answer is this: After January 31, 1905, Higgins continued to act as receiver, collecting the rents and paying out. money from time to time; that he so paid out $1,296.99, and that these disbursements should be applied as payments on the money which first came to his hands on the ground that as between debtor and creditor, where payments are made by the debtor and no application of the money is indicated, the payment will be applied to the oldest items in the account. But it will be observed that Higgins did not pay out after January 31, 1905, more money than he received after that date; in fact, he was farther behind when he settled than he was on that date. He received the $558.51 during the term of the bond, and his default occurred during that time. His subsequently collecting other money and paying it out in no manner affected the liability of the surety which had accrued during the year covered by the bond. The rule applied between debtor and creditor in the application of payments has no application as between the sureties in different bonds; for each should answer for the default during the term of his bond. It would be unjust to the surety in the second bond to allow the payments made by the principal during- that term out of money that he collected during that term to be applied to pay a default occurring during the term of the first bond. (See Crawn v. Com., 10 Am. S. Rep., 844, and notes; School District v. Hubbard, 80 Am. St. Rep., 271.)

2. The plea of the statute of limitations is unavailing. The plaintiffs had no cause of action against the receiver while he held the fund subject to the order of the court. He had never settled his accounts or made a report to the court, and until the court determined to whom the money was to be paid, no action could be brought. The seven years ’ statute bars an action against the surety after seven years from the time the cause of action accrued. But the statute does not begin to run until the cause of action accrues. Here the cause of action did not accrue until shortly before this action was brought. The cause of action against the surety accrues at the same time as it does against the principal. (McGovern v. Rectanus, 139 Ky., 365.)

Judgment affirmed.