Shillito Co. v. Henderson-Achert Lithographing Co.

DAVIS, J; Dempsey,J.,concurs; Smith J., dissents. It appears from the petition and the evidence that the Henderson-A chert Lithographing Company on the 24th day of September, 1889, brought a suit in attachment against the firm of Belford, Clarke & Company, a non-resident corporation, and attached a stock of books and merchandise then in the possession of the [26] John Shillito Company, as the property of Belford, Clarke & Company. A firm known by the name of the Book & Stationery Department Supply Company claimed to be the owner of said books and merchandise so attached, and on or about November 1, 1889, said Book & Stationery Department Supply Company brought suit in replevin against the HendersonAchert Lithographing Company, and also made the John Shillito Company defendant, to recover said goods so attached by the Henderson-Achert Lithographing Company. Said Book & Stationery Department Supply Company was also a non-resident corporation, and it became necessary to have resident bondsmen on said replevin bond. The Book & Stationery Department Supply Company had written a letter to one George B. Fox to become himself such bondsman, and also secure some other person to go on said replevin bond with him. This letter also requested the said George B. Fox to call and see the John Shillito Company, who had possession of said books; that said Book & Stationery Department Supply Company about the same time had also written a letter to James W. Dawson, superintendent of the John Shillito Company, about the same matter, which letter is as follows: “Chicago, November 1st, 1889. . “James W. Dawson, “Cincinnati, Ohio. “Dear sir: We hereby authorize you to hold of the stock and merchandise now in the stationery department of tne John Shillito Company, so much in amount as will be necessary to guarantee George B. Fox or whosoever he may have sign bond, against any loss by being a party to the bond given or to be given in the replevin suit of this company against tne Henderson-Achert Lithographing Company, and to hold such stock and merchandise until such time as said George B. ifox may notify you in writing that he has no desire for any further guarantee. “Tours truly, “The Book & Stationery “Department Supply Co. “ Per C. Higgins, “President.” By virtue of this letter and certain verbal statements made by James W. Dawson to George B. Fox that he would be safe in going on said replevin bond, and that he was amply protected, etc., thereupon said George B. Fox procured one George Fox to go on said replevin bond with him, ana both were accepted, and the books and merchandise were replevined and turned over to said Book & Stationery Department Supply Company. July 12,1890, a final judgment was rendered in favor of the Henderson-Achert Lithographing Company against Belford, Clarke & Company, in said attachment suit, and a judgment was rendered in its avor for the sum of $3,129.02 and costs. January 22, 1897, judgment in favor of the defendant in error herein and against the Book & Stationery Department- Supply Company, in said replevin suit, was rendered for the sum of 84,365.56' and costs, and that, after certain payments have been made thereon, there is still due to defendant in error the sum of $3,556.99, with interest on same from January 4, 1897. Belford, Clarke & Company and the Book & Stationery Supply Company are non-residents, and are admitted to be insolvent, and no suit has ever been brought on said replevin bond against said George B. Fox and George Fox. The only averment contained in said petition of the Henderson-Achert Lithographing Company as to the custody, care, etc., of said books and merchandise, or the proceeds thereof, by said John Shillito Company is as follows: “And the plaintiff further says, that the defendant, the John Shill-to Company, has realized from the sale of said stock of goods and other merchandise more than sufficient to pay the said judgment and interest and costs in case number 44378, but though duly requested refuses to pay t<>, or for the plaintiff, the balance due upon said judgment,or satisfy said judgment.” It would seem from'the averment in the petition that the Shillito Company had, at the commencement of this action, merchandise or credits of Belford, Clarke & Company, and of the Book & Stationery Department Supply Company, in its possession, but the evidence in the case shows, and it is admitted by counsel of the Henderson-Achert Lithographing Company, that before the commencement of this action, and before final judgment had been rendered in the replevin suit, that the Shillito Company had sold all the booKs and merchandise, and had remitted all of the moneys to the Book & Stationery Department Supply Company, and at the request of the Book & Stationery Department Supply Company, and without the knowledge, or consent of the said Geo. B. Fox. Judgment below was rendered in favor of Henderson-Achert Lithogarphing Company. Error is prosecuted to reverse the same. It is urged that the John Shillito Company held said books and merchandise or the proceed thereof as a L-usi fund for the benefit of the Henderson-Achert Lithographing Company, and that the plaintiff below was subrogated to the rights of the replevin bondsmen. On the other hand, it is contended that the same was only an indemnity to said bondsmen, and a matter personal to them. Were said books and merchandise or the proceeds thereof a trust fund or an indemnity, or were they a trust fund and an indemnity combined? It is clear that George B. Fox, the surety, and his principal, the Book & Stationery Department [27] Supply Company, could at any time agree to order the John Shillito Company to deliver said books or the proceeds to whoever they saw fit, but such an agreement was not entered into; but the principal, without the knowledge or consent of Fox (surety), makes a demand on the John Shillito Company for the books and proceeds, and the same are turned over to the principal by the John Shillito Company, and in doing this both the principal and he Shillito Company (stakeholder) violated their contract with Fox, and a right of action ripens in him for the breach whenever he is called upon for the payment of the judgment of the Henderson-Acher . Ltithographing Company. Maxwell & Ramsey, for the Plaintiff in Error. Wilby & Wald, for Defendant in Error. Suppose ' principal and surety had agreed to release the indemnity, could he Henderson Achert Lithographing Company by injunction prevent principal and surety from releasing the indemnity in the hands of surety? Certainly not, and for the reaon, the principal had given a replevin bond according to law, and the creditor in such case has to follow the security specially given to him in the event of his success to collect his debt. There is'not the slightest suspicion in the evidence or agreement that these books and merchandise ;or the proceeds thereof were to be held as indemnity or security with the intention that the same be finally applied to the payment of the debt of the Henderson-AchertLithographing Company. The distinction between eases where the creditor can be subrogated and where he can not is this: When the security is given with the intention that it shall be applied for the payment of the debt and be an indemnity to the surety, he (the surety) is a mere trustee for the creditor and holds same in trust, and substitution may be decreed; but where the creditor is to indemnify the surety only against he payment of the debt, as in the’^case at bar, it is personal to the surety, and there can be no substitution; the creditor can only] be subrogated in those cases where the surety is a mere trustee. There is no averment in the petition that the funds in the hands of the John Shillito Company was a trust fund for the Henderson- Achert Lithographing Company, and there is not a scintilla of eivdence that principal and surety ever contemplated or thought it was a trust fund for the benefit of the said Henderson-Achert Lithographing Company. The John Shillito Company were simply stakeholders for both principal and surety,and if the John Shillito Company misappropriated the fund or indemnities, or permitted either principal or surety to withdraw the indemnity without the consent of the other, it would be liable in damages to the party injured; but in case at oar Fox can not maintain an action either at law or in equity against the John Shillito Company, for the reason that he has not been damnified, andl the right of the Henderson-Achert Lithographing Company can not rise higher than Fox. 18 O., 35; 8 O. S., 1; Pratt v. Walworth, 15 C. C. R., 412. It is well settled that if a fund or pledge be in the hands of a surety forihis indemnity, the creditor may, if he "has no other remedy, compel the application of the same to his debt. Not only is this true of a fund in the hands of a surety as indemnity, but a creditor can follow the funds of the principal into the hands of a stranger, and if there are no priorities, compel the application of the same to the liquidation of his debt. In this case there is no fund, but a broken promise of the principal to the surety, and a violation on the part of the holders of the indemnity in permitting the principal to withdraw the same without the consent of the surety. This is a right personal to the surety, and the creditor can not be subrogated or substituted for said surety. Judgment of special^term is hereby reversed.