Maryland Casualty Co. v. Citizens National Bank

Farr, J.

The action below was by the Casualty Company to recover from the National Bank the sum of $1,874, together with interest thereon, from the 14th day of March, 1919. The issues being joined upon the amended petition and the answer the cause came on to be heard upon an agreed statement of facts and resulted in a judgment for the defendant below, from which error is prosecuted here upon the single ground that the court erred in applying the law to the pleadings and the facts, or, in other words, that the judgment is contrary to law.

The agreed statement of facts reads as follows:

1. The Knox County order given by Green & Gettman to the Cashier of the defendant bank was for the final estimate on the road improvement contract of said Green & Gettman.

2. The plaintiff was surety on the bond of Green & Gettman for the performance of said contract.

3. That the material furnished by Coe & Buck-master, which was the basis of their suit against the Maryland Casualty Company, was used in the construction of such road improvement.

And the further facts important to a proper understanding of this issue are:

On or about the 5th day of December, 1917, Green & Gettman, contractors, completed a section of a state highway in Knox county, this state, and there was then due them on the final estimate for the completion of the work the sum of $4,933.81. At that time Green & Gettman were indebted to the defendant bank in the sum of $3,737.34, as evidenced by six promissory notes and an overdraft of $105.97, as set out in the answer, which notes were due at that time. On the above date the cashier of the bank went to Knox county for the purpose of collecting the sum due from the contractors, who, thereupon, delivered to the cashier a warrant upon the treasurer of Knox county in said sum of $4,933.81, which had been issued to the above-named contractors in payment of such fiua.1 estimate. Upon the receipt of same the bank discharged the indebtedness of the contractors to it in the above-named sum, and on the 7th day of December placed the balance, $1,196.47, to the credit of the firm. On the 6th of December, 1917, Green & Gettman issued a check upon the bank to Coe & Buckmaster in the sum of $1,874. This check was presented to the bank on December 12, 1917, and payment was refused for the reason, so it is said, that there were not sufficient funds to the credit of Green & Gettman to pay same. The check was given to Coe & Buckmaster in payment for materials used in the construction of the highway. Coe & Buckmaster sued Green & Gettman and the Casualty Company in the Court of Common Pleas of Knox county for the amount of the check and recovered judgment, which was paid in full by the Casualty Company, such company being the surety on the bond of Green & Gettman for the performance of their contract in the construction of the highway.

Thereafter, on the 7th day of August, 1920, the Casualty Company brought an action in the Court of Common Pleas of this county against the defendant in error bank for the purpose of recovering the amount paid by the company to Coe & Buckmaster in satisfaction of the judgment in Knox county.

It is urged here that the Casualty Company was / not only subrogated to the rights of Coe & Buck- / master, but by virtue of tbe provisions of tbe bond upon which it became surety for Green & Gettman was entitled to an equitable lien against any monies due Green & Gettman for the construction of tbe road.

When Coe & Buekmaster furnished material for tbe construction of tbe highway in question, if not paid tbe amount due them, they would have been entitled to perfect a material man’s lien against the same under favor of Sections 8376 to 8379, General Code, or probably under Section 8324 et seq., General Code, and to enforce tbe same upon tbe failure of Green & Gettman to pay for such materials; but if it be contended that no statutory lien could attach by reason of it being a “public contract,” then bow much less would it be possible to effectuate a lien without statutory authority. However, apart from tbe common-law liens of artisans and vendors, dependent upon possession, liens must rest in Ohio on clear statutory grounds, as they are creatures of statute, and this principle is sustained in the very well-considered case, In re Estate of Clark, 195 Pa., 520, 48 L. R. A., 587, decided by the Supreme Court of Pennsylvania. Practically to tbe same effect is the bolding in Ohio, Seebaum v. Handy, 46 Ohio St., 560, 567, and in In re Citizens Bank, 2 W. L. M., 121, 2 Dec. Rep., 230.

Therefore, being simply and only material men, it is clear that if Coe & Buekmaster desired to perfect a lien to protect their claim, it would be necessary to conform to tbe statutory requirements, and it is conceded that they did not do so. Evidently the Knox county judgment is tbe basis of this action, and, if so, tbe Casualty Company has no rights superior to those of Coe & Buckmaster; plaintiff and Coe & Buckmaster could not contract between themselves so that plaintiff could recover from any creditor money paid upon a valid debt. It is further claimed that the bank had no notice that the contractors were indebted for any materials used in the road, and under the circumstances there was no limitation on payments by the county because the money paid was the final estimate. No legal, but an equitable, lien upon the fund is claimed, therefore the Knox county authorities would have a right to make such payment to the contractors.

However, as above stated, it is insisted that in any event the Casualty Company was entitled to an equitable lien in the instant case because of its relation of surety to Green & Gettman, and as sustaining this view the case of Columbia Digger Co. v. Sparks, 227 Fed., 780, is cited. A careful examination of this case, however, discloses that quite a different issue was involved, which was determined upon the matter of the application of payments where the Digger Company received more money than the amount of a secured claim, applied it on an unsecured claim, and then brought suit against the surety for the amount of the secured claim. It was very properly held that it could not recover under such circumstances; that though the Digger Company might under certain circumstances elect as to the application of payments, it could not do so to the prejudice of a surety as to a fund arising from a contract upon which the surety was bound; that to do so would be wholly inequitable.

Such, however, is not the instant case, and while in the brief of plaintiff in error numerous oases are cited, upon examination of the same they are found not to be upon the point in the case at bar, in that they are based upon different facts. In the instant case the Casualty Company was the ordinary paid surety, which for a specified sum guaranteed the performance of the conditions of the contract, and therefore it would not be entitled ■ to any lien against the fund in the instant case - by the mere fact of its suretyship, or because it paid the amount due Coe & Buckmaster for materials furnished. The company would, however, be subrogated to the rights of Coe & Buckmaster against Green & Gettman for the amount due for the material furnished by Coe & Buckmaster and .used in the construction of the highway. There •being no equitable lien upon the fund in favor of ¡the Casualty Company, when the warrant for the j final estimate was delivered to the cashier of the - bank it received same with the right to apply it j upon the amount of money then due from the i contractors, and with the further privilege of I crediting the balance of the amount to the credit 'of the firm of Green & Gettman. And so it is held in Bank v. Brewing Co., 50 Ohio St., 151, 152, which is well upon the point in the instant case. We quote the syllabus:

“1. Money received by a bank on general deposit becomes the property of the bank, and its relation to the depositor is that of debtor, and not of bailee or trustee of the money.

“2. The check of such depositor for part of the sum due him, is not an assignment pro tanto, without acceptance by the bank.

“3. Where, at the time such check is drawn, or is presented, the drawer is indebted to the bank on past dne paper, it may treat the cross demands existing between them as compensated so far as they equal each other, and credit the demands accordingly; and, if there is not then sufficient balance standing to the credit of the drawer, payment of the check may be refused for want of funds.”

It becomes readily apparent that the rights of the Casualty Company cannot rise any higher than the rights of Coe & Buekmaster, whose claim it satisfied, and therefore subrogation will not aid the claim of plaintiff in error.

It has been well said that the doctrine of sub-1 rogation rests generally upon the principle that! one who for the purpose of protecting his own interests pays the debt or liability of another is entitled to and may enforce all the liens and securities of the party to whom he pays: 1 Brandt on Suretyship (3 ed.), Section 260; Eddy v. Leath, Admr., 16 O. C. D., 645, affirmed 74 Ohio St., 462.

He who asks subrogation must work out his 1 equities through those of the party to whose equities he seeks to be subrogated, and can have no equitv if such party has no equity. 37 Cyc., 430; 38 L. R. A., 152, 154.

A surety paying the debt of his principal can ¡; acquire no greater rights than the creditor had at the time of payment; can acquire no priority of lien which the creditor did not have. 37 Cyc., 429, 430; Jackson Co. v. Boylston Mut. Ins. Co., 52 Am. Rep., 728; Hill v. King, Exr., 48 Ohio St., 75.

Nor does the case of Crane Co. v. Pacific Heat & Power Co., 36 Wash., 95, 78 Pac., 460, upon authority of which Digger Co. v. Sparks, supra, was decided, determine the issue in favor of plaintiff in error, because there again it was a question of the application of payments. The vital issue determined in both of the above cases is that where a creditor has two claims, one secured and one unsecured, he has no right to apply money received to the unsecured claim and then collect the amount : of the secured claim from the surety. It is not . believed that a surety may be clothed with such rights as are claimed by plaintiff in error in the instant case, because if an equitable lien could be enforced against the bank in the instant case, then une could likewise be enforced against any other ^creditor to whom money was paid upon any valid-debt which was an outgrowth of the contract. Scarcely could such principle be sustained or justified; because it would endanger every scheme of (road improvement, and would, indeed, be an “upsetting theory.”

I The conclusion must be, therefore, that since the Casualty Company has no equitable lien under the circumstances of the instant case it has no right of action against the defendant bank. In view of the foregoing it follows that the judgment is not contrary to law, and it is therefore affirmed.

Judgment affirmed.

Pollock and Roberts, JJ., concur in the judgment.