Rubey v. Watson

Ellison, J. The question presented by the record is simply whether the answer sets up a defence in connection with the agreed statement which was filed and made a part of the record in the cause. From this answer and statement it appears that Cunningham, as collector, was a depositor in the Macon Savings Bank, of which plaintiff is assignee, to an amount greater than that due on the note in suit, and that the bank knew the deposit was revenue. That the bank suspended payments, made an assignment under the statute, and is now insolvent. That Cunningham is likewise insolvent, and that defendant, by reason of being on Cunningham’s official bond, has been compelled to pay to the different revenue funds, to which Cunningham was in default by his loss in the bank,' a sum at least equal to the note in controversy. This deposit was a credit in Cunningham’s hands, which he could have successfully used as an off-set in a contest between him and the bank, on any demand it might have held against him. Morse on Banks, 50, 31. The fact that the deposit was in his official capacity does not alter the rule. Ibid, 50; Muter v. Franklin Bank, 1 Paige, 444. He was responsible for it individually. While in assignments under the statute there is only a pro rata [434] distribution of the insolvent assets among the creditors, yet, where a creditor happens to be also a debtor of the insolvent, he may set off his claim on the insolvent, against the insolvent claim on him, dollar for dollar, and thereby, in this way, he has the advantage of the ordinary creditor. Such is the settled law. When a surety pays the debt of his principal he becomes subrogated to all the rights and remedies of the creditor connected with the debt. This is a fundamental principle. So, too, is a surety entitled to be subrogated to rights and privileges which may belong to the principal whose debt he has paid, in so far as these are connected with the debt. Common among such rights are those of set-off, and the benefit of any fund or collateral provided by the principal for the payment of the debt. ■Cunningham, defendant’s principal in the bond, had a fund which he set apart for the payment of the debt for which defendant was security. He kept that fund separate and apart from his own moneys. He deposited it with the bank for that purpose, and the bank received it with a knowledge of what it was and for what purpose it was intended. Defendant, as surety on the bond, under the principle above stated, had an interest in that fund. Sheldon on Subrogation, 90, 100; Horner v. Savings Bank, 7 Conn. 478-483-484 ; Rodes v. Crockett, 2 Yeager, 346; Johnson v. Bartlett, 17 Pick. 488. It, in effect, became his claim against the bank, and, as such, it is his right .to use it as an off-set to any claim the bank may have against him. The law turns it over to him in proportion to his payment. “ They (he) became at once, not by contract, but upon the principles of natural justice, the equitable owner of the fund.” Harrison v. Phillips, 46 Mo. 520, 528. Being the owner of the fund so set apart by his principal, as above stated, the bank having appropriated that fund, has become defendant’s debtor, and he may set off the debt in this action. It is no answer to this to say that this view places defendant in a better position [435] than other debtors of the bank, by allowing him in this manner to receive, perhaps, his full debt, when other eredjitors, equally as worthy, only receive a small pro rata. It results from his relation to the bank, which is that of both debtor and creditor. As before stated, it is law, not disputed anywhere, that when one is debtor and creditor of an insolvent institution, though it has made assignment, he may set off his credit against his debt. The fact that defendant has co-sureties, who might be entitled to an interest in the fund deposited in the bank, upon payment of anything, as such securities, need not be considered as standing in the way of the judgment in this case, as it is among the agreed facts that the sum lost by Cunningham in the bank, and that paid by defendant as surety, are-each greater than the note sued on. However, if this were not so admitted it would seem, from the case of Fulkerson v. Davenport (70 Mo. 541), that defendant’s interests and right in the fund might be ascertained, and, as ascertained, applied to Ms benefit in this action. The judgment is affirmed. Hall, J., concurs; Philips, P. J., concurs in the result.