Fidelity & Deposit Co. of Maryland v. Farmers & Merchants Nat. Bank of Nocona , 1938 Tex. App. LEXIS 385 ( 1938 )

DUNKLIN, Chief Justice.

W. E. Reynolds was duly elected as tax collector of Montague County, for two-terms of office, and gave his official bonds, as such, in favor of Montague County, with the Fidelity & Deposit Company of Maryland, as surety thereon. Those bonds were conditioned for the faithful performance of the duties of his office as assessor and collector of county taxes. The Farmers & Merchants National Bank of Noco-na was selected as county depository, as. provided in Chapter 2, Title 47, of the Revised Statutes, beginning with Article 2544 of that chapter, Vernon’s Ann.Civ.St. art. 2544 et seq.; and the bonds given by the bank, as such depository, as provided in Article 2547, were “conditioned for the faithful performance of all the duties and obligations devolving by law upon such depository, and for the payment upon presentation of all checks drawn upon said depository by the County Treasurer of the county, and that said county funds shall be faithfully kept by said depository and accounted for according to law.”

By Subdivisions 1 and 2 of Article 7261,, the tax collector is required at the end of each month to make reports to the commissioners’ cóurt of all tax collections made for the county, and the county clerk is required to examine the reports; certify to their correctness as regards names, dates and amounts, and to file the same with the commissioners’ court.

By Subdivision 3, it is also made the duty of the tax collector to immediately pay over to the county treasurer all taxes, collected for the county during the month, after reserving his commission for collecting the same, and take receipts therefor and file with the county clerk.

By Subdivision 4, the tax collector is required to appear before the court and make a summarized statement, showing the disposition of all moneys, both State and County, collected by him during the previous three months, and also show that all taxes paid the county had been paid over promptly to the county treasurer.

By Subdivision 5, the commissioners’ court is required to examine the report, and if found correct in every particular, to enter an order approving the same.

By Article 1709, the county treasurer is required to receive all moneys belonging to the county, from whatever source they may be derived, and pay and apply the same as required by law, in such a manner as the commissioners’ court of his county may require and direct; and by Article 2549, to deposit the same with the county depository.

Article 2554 reads as follows: “It shall be the duty of the county treasurer, upon the presentation to him of any warrant drawn by the proper authority, if there shall be money enough in the depository belonging to the funds upon which said warrant is drawn and out of which the same is payable, to draw his check as county treasurer upon the county depository in favor of the legal holder of said warrant, and to take up said warrant and to charge same to the fund upon which it is drawn. No county treasurer shall draw any check up»n the funds with said depository, unless there is sufficient money belonging to the fund upon which said warrant is drawn to pay the same. No money belonging to said county shall be paid by said depository, except upon the check of the county treasurer. It shall be the duty of such depository to make a detailed statement to the commissioners court at each regular term of said court, showing the •daily balances of the preceding quarter. In case any bonds, coupons or- other indebtedness of any county, by the terms thereof, are payable at any particular place •other than the treasury of the county, nothing herein contained shall prevent the commissioners court of any such county from causing the treasurer to place a sufficient sum at the place where such debts shall be payable at the time and place of their maturity.”

By Article 7249a, Vernon’s Ann.Civ.St, it is provided that on Monday of each week, the county tax collector shall pay over to the county treasurer 90% of all taxes collected by the County during the preceding week.

Article 7250 reads: “Except as to compensation due such tax collector as shown by his approved reports, tax money deposited in county depositories shall be paid by such depositories only to treasurers entitled to receive the same, on checks .drawn by such tax collector in favor of such treasurer.”

On the 26th of January, 1935, in Cause No. 8713, in the District Court of Montague County, Texas, which is not the case now before us on appeal, Montague County, for its own use and for the use and benefit of more than 100 of the trustees of different road districts of the County, recovered a judgment against the Fidelity & Deposit Company of Maryland, as surety on the county tax collector’s bond of W. E. Reynolds, for sums aggregating $8,050, and court costs, of which sum $7,397.48 represented taxes for which said Reynolds had failed to account. Said judgment was paid off and discharged by the surety on January 26th, 1935, the amount paid being $8,093.45.

That suit was against W. E. Reynolds, as tax collector, and the said surety on his bonds, but on motion of the plaintiff, Montague County, W. E. Reynolds was dismissed from the cause, and therefore no judgment was rendered against him. And the amount so paid on said judgment was prorated between the county and the several road districts represented by it in the suit.

After payment of said judgment by it, the said surety, Fidelity & Deposit Company of Maryland, filed suit in the Federal District Court for the Northern District of Texas, in Cause No. 325, in Equity, against W. E. Reynolds and the First National Bank of Bowie, Texas, and on December 14th, 1935, recovered judgment against both defendants for the sum of $2,855.13, which was paid off, by the defendant, First National Bank of Bowie, on March 7th, 1936. In the same suit the plaintiff, Fidelity & Deposit Company of Maryland, as plaintiff, recovered an additional judgment against W. E. Reynolds, alone, for the sum of $5,238.32, which has never been paid.

The Fidelity & Deposit Company of Maryland instituted' another suit in the District Court of Montague County, against the First National Bank of Saint Jo, Texas, and recovered a judgment against that defendant for the sum of $524.44, which was fully paid off and discharged on April 15th, 1936, the same day of its rendition.

The two suits last mentioned were instituted for the purpose of reimbursement, in part, or funds theretofore paid out by the surety company on the judgment rendered in Cause No. 8713, in the District Court .of Montague County, under the doctrine of subrogation to the right of the county to such recovery.

The aggregate of the amounts so recovered in those two suits was $3,379.57, which, deducted from the $8,093.45 paid on the judgment rendered against it in the first suit, above mentioned, left a balance of $4,713.88.

The suit now before us was instituted by the Fidelity & Deposit Company of Maryland against the Farmers & Merchants National Bank of Nocona, the county depository of Montague County, to recover that balance of $4,713.88, under the equity doctrine of subrogation.

After crediting the defendant with said balance, it still owes the county for unauthorized withdrawals from deposits in-favor of the county, some $15,656.27.

It is alleged in this suit that the county had the right to recover of the depository the amount still owing, and that the plaintiff, under the principles of equity, is sub-rogated to the same rights for the purpose of recovering $4,713.88, its net loss after collection of the two judgments in its favor, shown above.

Upon a trial of the case, judgment.was rendered in favor of .the defendant, from which the plaintiff has appealed, and the only question to be determined here is as to plaintiff’s alleged right of subrogation.

The collections made by the tax collector for the county belonged to the • county and were held by the defendant depository as its trustee and agent. If plaintiff had paid to the county the balance of the total amount for which the defendant depository is still accountable, under its obligation as county depository, then according to the well settled rule of decisions, it would have the right to recover of the defendant the amount it still owes the county, under the equity doctrine of subrogation. Rev.Civ.St. Art. 2549 (Vernon’s Ann.Civ.St. art. 2549), and art. 7250; State of Texas v. Middleton’s Sureties, 57 Tex. 185; Arbuckle v. State, 81 Tex. 191, 16 S.W. 876; Watson v. El Paso County, Tex.Civ.App., 202 S.W. 126; Austin v. Kiser, Tex.Civ.App., 277 S.W. 411; Kiser v. Austin, Tex.Com.App., 286 S.W. 1082; Leather Manufacturers’ National Bank v. Merchants’ Bank, 128 U.S. 26, 9 S.Ct. 3, 32 L. Ed. 342 ; 39 Tex.Jur., p. 759; Skipwith v. Hurt, 94 Tex. 322, 60 S.W. 423; United States Fidelity & Guaranty Co. v. Adoue & Lobit, 104 Tex. 379, 137 S.W. 648, 138 S.W. 383, 37 L.R.A.,N.S., 409, Ann.Cas. 1914B, 667; 60 C.J. pp. 714, 728, 740, 763.

But we have reached the conclusion that plaintiff is not in position to claim the right of subrogation unless and until it has paid to the county the amount still owing to it by the defendant as its county depository, because it is equally as well settled by the authorities that in order to successfully assert the right of subrogation, it is incumbent upon the claimant therefor to first pay to the creditor the full amount of the debt still owing by the defendant sought to be charged therewith. And since plaintiff in this suit has not paid to the county the. balance still owing to it by the defendant depository, or even any part of it, the trial court did not err in denying the right of subrogation asserted and refusing plaintiff the relief it sought.

39 Tex.Jur., par. 8, p. 761, reads: “It is-a general rule that a person is not entitled to be subrogated to the rights or securities of a creditor until the creditor’s claim against the debtor has been satisfied or paid in full. The reason given for this rule is that subrogation is an equitable right and will not' be allowed to the prejudice of the creditor; until the entire debt has been paid, there can be no interference with the creditor’s rights or securities which might prejudice or embarrass him in collecting the residue of his demand. Thus where land is conveyed subject to a mortgage, the vendor is in the position of a surety for the debt to be paid out of the land; and before he can be subrogated to the rights of the mortgagee to sue, the vendor must have paid the entire debt, and not merely the interest on the debt secured by the mortgage.”

That announcement is amply sustained by decisions there cited, including Fievel v. Zuber, 67 Tex. 275, 3 S.W. 273; Texas & St. L. R. Co. v. McCaughey, 62 Tex. 271; Cason v. Connor, 83 Tex. 26, 18 S.W. 668. To the same effect are the following authorities: 25 R.C.L., par. 6, p. 1318; Campbell v. Jones, Tex.Civ.App., 230 S.W. 710; Knaffl v. Knoxville Banking & Trust Co., 133 Tenn. 655, 182 S.W. 232, Ann.Cas. 1917C, 1181; Corinth State Bank v. First Nat. Bank, 217 Ala. 632, 117 So. 216; United States v. National Surety Co., 254 U.S. 73, 41 S.Ct. 29, 65 L.Ed. 143; McClure’s Ex’r v. King, 126 Ky. 675, 104 S.W. 711; National Surety Co. v. Salt Lake County, 8 Cir., 5 F.2d 34. See also many other decisions announcing the same rule cited in note in 32 A.L.R. p. 568.

We are of the further opinion that under the record in this case, the authorities cited above conclusively refute the argument advanced in appellant’s briefs, that it would have the right of subrogation for the amount sued for out of the larger amount due the county by the depository; especially so since .the county was not a party to this suit, and therefore neither it nor the -depository would be bound by a determination of the amount so owing. The authorities cited, such as 60 C.J. 721; 14 R.C.L., p. 1404; 95 A.L.R. 269 — to the effect that no one but the creditor can complain of such a pro tanto subrogation — are not necessarily in conflict with the decisions noted above, under the facts of those cases, which it is unnecessary to point out.

By reason of the conclusion expressed above, that appellant could not invoke the right of subrogation claimed without payment of the debts owing the county by the depository, and for which subrogation was ■sought, the judgment of the trial court is affirmed without a determination of the merits of other assignments of error-presented, because unnecessary.