American Bonding Co. of Baltimore v. Welts

ROSS, Circuit Judge (after stating the facts as above). [1,2] Subrogation'is a creature of equity designed to subserve the ends of justice, the application of which doctrine, therefore, depends upon the particular facts and circumstances of the case. Here the appellant was surety upon the bond of the county auditor, who became a defaulter and embezzler to the county’s loss, which loss the surety was called upon to and did make good at the end of a suit brought by the county to enforce such payment. The statute of the state under which the bond was given declares that: “Every official bond executed by any officer pursuant to law shall be in force and obligatory upon the principal and sureties therein to and for the state of Washington, and to and for the use and benefit of all persons who may be injured or aggrieved by the wrongful act or default of such officer in his -official capacity, and any person so injured or aggrieved may bring suit on such bond in his or her own name without an assignment thereof.” Section 8326, Bern. & Bal. Code. The obligation assumed by the .appellant for the faithful and honest official acts of the auditor was therefore not only for the benefit and protection of the county of Skagit, but for the benefit and protection of all others who might be injured by a breach of the conditions of that bond, among them, the treasurer and commissioners of the county. From the averments of the bills in these cases it is clear that the proximate cause of the county’s loss and of the resultant loss to the appellant was the malfeasance of the auditor, for whose official honesty and faithfulness the appellant had bound itself. To permit it to recoup a loss so sustained by means of subrogation [981] out of those for whose benefit, in part, the surety company t assumed the obligation, would be to put that doctrine to a use wholly foreign' to its nature. [3] Nor do we see any merit in the suggestion of counsel for the appellant that there is .a direct liability from the appellees growing out of the violation of duties owed directly to appellant and upon the faith of the performance of which it is averred appellant executed the auditor’s bond. What duty or obligation did the appellees or either of them assume towards the appellant in or by the bond executed by it to Skagit county? None such are alleged in either of the bills, and none such are suggested, or can be suggested, by appellant’s counsel, since no such duty or obligation existed. The fact that the treasurer and commissioners of the 'county had other and distinct duties required of them by law for the faithful performance of which they, too, were required to give bonds to the county did not enter into the considerations for and upon which the appellant’s undertaking was executed. There is therefore no ground for saying, as counsel tor the appellant do, that the latter became surety upon the auditor’s bond on the faith of the performance by the appellees of duties owing to the appellant and which the appellees violated. Without, therefore, considering the question of the statute of limitations earnestly insisted upon by .the appellees in support of the judgments of the court below, the judgment in each of the cases is affirmed.