Bank of Commerce v. Lawrence County Bank

McCulloch, J., (after stating the facts.) The facts are undisputed. The Lawrence County Bank advanced money upon acceptances to the Culver Lumber & Manufacturing Company, while yet a going concern, which was used by the latter in paying off labor claims constituting liens upon lumber manufactured. The court decreed the debt to be a claim against the assets of the corporation with priority over the claims of other creditors. Was it proper to do so? The indebtedness to appellee was created before the assets of the corporation passed into the hands of a receiver — how long before, it does not appear. It was no more nor less than a loan to the corporation, and, regardless of the use made of the money, created no higher grade of indebtedness than that of any other creditor of the concern. The statutes of this State give no lien for money so advanced; and, .if it be conceded that enough is shown to have entitled the alleged claims of the laborers to priority as liens, by no stretch of equitable principles can appellee enjoy the right of subrogation because the funds so advanced were used in discharging laborers’ liens. Being a voluntary loan of money, it affords no grounds for application of the equitable doctrine of subrogation. If appellee’s contention be sound, then all claims against corporations for advances of money used in necessary operating expenses would be preferred, and the payment of equally meritorious claims prior in point of time would be postponed — the last coming first and the first last. We are not unmindful of the doctrine enforced by many courts in suits against railroad corporations to foreclose mortgages securing payment of bonds where preference is given to claims for operating expenses recently incurred. Fosdick v. Schall, 99 U. S. 235. This doctrine, even as applied to suits to foreclose mortgages on railroad property, is not without its limitations (Kneeland v. American Loan & Trust Co., 136 U. S. 89; Thomas v. Western Car Co., 149 Id. 95) ; but it has no application to the facts of this case, and will not warrant the giving of preference to appellee’s claim against the corporation for money loaned. Reversed and remanded with directions to enter a decree not inconsistent with this opinion.