Stehle v. United Surety Co.

Briscoe, J., delivered the opinion of the Court. On the 16th of August, 1906, the plaintiff, Frederick Stehle, Jr., caused an attachment to be issued out of the Circuit Court for Anne Arundel County against the defendant, Samuel Jones. The attachment was laid in the hands of The Maryland Electric Railways Company as garnishee a corporation doing business in this State. The suit was instituted to recover the sum of three thousand one hundred and eighty-one dollars and fifty cents alleged to be due and owing from the defendant, to the plaintiff for work done and materials furnished for the B. & A. S. L. R. R. between stations Revell and Arnolds, in Anne Arundel County. On the 1st day of May, 1907, the garnishee appeared and pleaded, (1). That there was justly due. and owing to the accouut of Samuel Jones, the sum of four hundred and thirty-nine dollars and fifty-seven cents, as by an annexed account. (2). That the fund was held subject to the settlement of the question, whether Jones or his surety, the United Surety Company, is entitled to the fund attached in its hands. On the 12th of April, 1907, the appellee, the United Surety Company, intervened by petition, as claimant of the property attached, alleging in substance that it was a body corporate, *480 with its home office in the city of Baltimore, (i). That the money, goods and chattels, in the schedule annexed to the attachment issued in the case, at the time of the laying of the attachment were and ever since, have been, and now are, the property of the appellee corporation, (2). That it is entitled to the money, chattels and credits attached. And it prays judgment as to whether the plaintiff ought to have condemnation of the sum of money at issue, in the attachment, an'd returned therein as of the money, goods, chattels and credits of the defendant Jones. Issue was joined, and from a judgment on finding of Court, in favor of claimant, for assets, ($439.59) admitted by the garnishee with interest, this appeal has been taken. The controversy here it appears arises out of the contentions as to the meaning and proper construction of a bond executed by the appellee company, as surety, in favor of the garnishee company, guaranteeing the faithful performance of a contract between the railway company and the defendant, Jones, to do certain grading for the last named company be-, tween Revell and Arnold’s stations, in Anne Arundel County along the line of the road. The questions are presented by a single exception and that is, to the rejection by the Court of a prayer offered by the defendant at the conclusion of the case. The defendant by this prayer asked the Court to rule that there was no evidence in the case legally sufficient to entitle the claimant of the fund to recover the assets admitted to be due by the garnishee for the reason that the contract under which the plaintiff claims the assets is a contract of indemnity, and the plaintiff has offered no evidence of any loss or claim against which it is entitled to be or seeks to be indemnified. The vital facts of the case upon which the ruling was asked are practically undisputed and are as follows: On the 8th of June, 1906, the Baltimore and Annapolis Short Line Railroad Company, now the Maryland Electric Railways Company, contracted with the defendant Samuel Jones to do certain grading for the company between Revell and Arnold’s *481 stations, in Anne Arundel County, under a written contract set out in the record. By the contract the defendant was required to give bond and upon application the appellee became surety on this bond in favor of the railway company for the faithful performance of the work according to the terms of the contract. The bond was accepted by the company, and contains the following express condition, as applicable to this case. If the said principal shall voluntarily abandon said contract, or be lawfully compelled by the obligee to cease operations thereunder by reason of his non-performance of any of its terms or conditions, then the surety shall have the right in 'its option to assume the said contract and to sublet or complete the same, and if the contract shall be assumed .by the surety, then as such contract is duly performed, any reserve, deferred payments, and all other moneys provided by said contract to be paid to the principal shall be paid to the surety at the same time and under the same conditions as by the terms thereof, such moneys would have been paid to the principal, had the contract been duly performed by him. And if the said obligee shall complete or relet the said contract, then any forfeitures provided in said contract against the principal, shall not be operative as against the surety, but all reserves, deferred payments, and all other moneys provided in said contract which would have been paid to the principal had he completed the contract in accordance with the terms, shall be credited upon any claim the said obligee may make upon said surety. And the written application for the bond signed by the defendant, Jones, contains this provision: “And I do further agree in the event of any breach or default on my part of the provisions of the contract hereinbefore mentioned, that the United Surety Company, as surety upon the aforesaid bond, shall be subrogated to all my rights and properties as principal in said contract, and that deferred payments, and any and all moneys and properties that may be due and payable to me at the time of such breach or default, or that may thereafter become due mid payable to me on account of said contract *482 shall be credited upon any claim that may be made upon the United Surety Company, under the bond above mendoned.” It further appears the defendant Jones on or about the ioth of August, 1906, abandoned the work, under the contract. Subsequently in September, 1906, the appellee company, after notice of the defendant’s default, assumed the contract and completed the work, in accordance with its terms. The amount of assets confessed by the railroad company to be due and payable at the date (August ioth, 1906), of the discontinuance of work, for work done under the contract, was four hundred and thirty-nine dollars and fifty-seven cents. That the sub-contractor, Brian, had been paid in full, and the work, fully completed in accordance with its terms. The plaintiff, Stehle, in the attachment suit was a sub-contractor of the defendant, Jones, and testified that he had done part of the work under the contract between the defendant and the railroad company prior to the date it was sub-let by the appellee company to its sub-contractor, Brian, and there was due -him the sum of $3'181. 50 under this contract. It is obvious then that the fund here in dispute is claimed on the one hand by the attaching creditor, the plaintiff below, as the sub-contractor of the defendant, Jones, and on the other by the claimant, the appellee company, who as surety on the defendant’s bond, completed the original contract between the defendant and the railway company. The solution of the question it seems to us will be found in the contract itself, as evidenced by the provisions of the bond agreed upon by the parties themselves. The bond stipulates that if the principal shall "voluntarily abandon the contract, as was confessedly done in this case, then the surety shall have the right in its option to assume the contract and to sub-let or complete the same, and if said contract shall be assumed by the surety, then as such contract is duly performed, any reserve, deferred payments and all other moneys provided by the contract to be paid to the principal shall be paid tó the surety at the same time and under the same conditions as by the terms thereof, such moneys would have been paid to the principal, had the contract been duly performed by him. *483 Now according to the uncontradicted testimony the fund in question was due and payable at the time the contract was abandoned, and it is clear that upon the assumption by the appellee company of the contract and the completion of the work, all of the property and credits of the defendant under the contract passed to the surety company by express assignment to the appellee under the terms of the bond herein set out. Manifestly, the defendant, Jones, who abandoned the contract, could assert no title to the fund in dispute, because by the express terms of the bond, and according to the provisions of the agreement executed by him at the time of his application, he stipulated that upon his default the appellee company should be subrogated to all his rights and properties, as principal in the contract. It is difficult to see upon what legal or equitable principle the plaintiff as sub-contractor under Jones, could be placed in a better position as to this fund than the defendant himself, under whom he claims. Obviously, Jones uuder the admitted facts, could not set up, or claim title to the fund, because by the express terms of the contract, upon the default, and the assumption of the contract by the appellee, the title to all credits, securities, &c., vested in the appellee. The right of the surety in this case is not only “that of subrogation pure and simple, but a right to an assignment by the creditor,” under the plain provisions of the contract of surety-ship between the parties. The principle of subrogation, assignment and substitution, as applied to those standing in the relation of principal debtor and surety, has been fully reviewed by this Court, in a number of cases. In Orem, Ex'x., v. Wrightson, 51 Md. 34, this Court said, so soon as a surety pays the debt of the principal debtor, equity subrogates him to the place of the creditor and gives him every right, lien and security to which the creditor could have resorted for the payment of his debt. As between the principal debtor and the surety, it is in the nature of a purchase, by the surety from the creditor. It operates an assignment in equity of the debt and all legal proceedings *484 upon it, and gives a right in equity to call for an assignment of all securities, and in favor, of the surety, the debt, and all its obligations and incidents are considered as still subsisting. Brandt on Suretyship, &c., vol. 1, p. 611; Stump v. Warfield, 104 Md. 530. In the present case, the right of the surety company to the fund relates back to the date of the default by the defendant, and cannot be defeated by the defenses sought to be invoked on behalf of the plaintiff Nally v. Long, 56 Md. 567. Mr. Brandt, in his work on Suretyship and Guaranty, supra, says: “In cases where the person paying the debt or performing the obligation of another stands in the relation of surety or guarantor to the person whose debt or obligation has been performed, equity substitutes him in the place of the creditor or obligee as a matter of course, without any special agreement to that effect and without requiring any further showing to be made of circumstances entitling him to subrogation. ■ It has been said that the surety, upon the performance by him of his contract, is entitled to the original evidences of debt held by the creditor, and to any judgment in which the debt has been merged, as well as to all collateral securities held by the creditor. We, therefore, hold, according to the express contract of suretyship between the parties in this case, and upon the well settled doctrine of subrogation and substitution, applicable to the case, that the appellee company is entitled to the fund here in question. There was no error in the rejection of the plaintiff’s prayer, and as we approve of the finding of the Court below, the judgment will be affirmed. Judgment affirmed, with costs.