Court Opinion

ID: 5222813
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:37:53.69415+00
Date Added: 2024-06-11T08:27:32.632038
License: Public Domain

Kellogg, J.
(dissenting):
This is an appeal hy R. Grant Johnston, the petitioner, from an order made at the- Albany County 'Special Term July 13, 1911, denying his motion asking that certain-moneys be applied upon a judgment held by him against the Jamestown Exposition Excursion and Steamboat Company, which order appointed a referee to take proof of the facts and report them to the court, with his opinion thereon.
April 5, 190% the exposition company applied to the surety company for the issuance of three contract bonds, one of '$1,500 to Fred S. Jenks -on account of the propeller Ossining, -one of $2,500 to R. Grant Johnston on account of the propeller Verona, and one of $5, 000 to Edward T). Booz on account óf the steamboat Gen: J. A. Dumorib. in consideration of the issuance of the bonds it paid the premium or fee of $90 in advance, and also one-half the amount of said bonds, namely, '$4,500, as an indemnity to the said surety company. The application was granted April 19, 1907, and the contract bonds were given. They were of substantially equal tenor except as to the name of the obligee and of the boats and the amounts. By the Johnston bond the exposition company as principal, and the surety company as -surety, became held and bound unto ‘him in *509the-sum. of $2:,500:. The bond' recited that whereas the principal had entered inte a contract for the hiring of the propeller Verona for seven months from May 1, 1907,. as provided in the charter party thereto annexed, the condition of the bond was that if the principal would well and truly indemn ify and save harmless the said obligee from all pecuniary loss resulting from the breach of any of the- terms, covenants and conditions of the said contract on the part of the principal to be performed, then the- obligation, to be void, otherwise to remain in full force and effect in law,, arid provided that the bond was issued subject to conditions therein named, one of which was “ That in no event shall the surety he liable for a- greater- sum than the penalty of this bond, or subject to any suit, action or other proceeding: thereon that is instituted later than the 1st day of January,, 1908.”
The exposition company defaulted in the-performance of each of the charter parties and bonds,, and on account thereof the surety company was required to pay April 29, 1907, $850 in settlement of the Id-ability on the Jenks bond, and about August 21,. 1908,. $3,250 .on account of the Booz bond, together with $279-.60' costs: and expenses thereon,, an action having- been timely brought in Virginia against said company thereon.
On the 24th day of July,. 1908-,. said Johnston brought an action against the surety company on. account of the breach of said charter party and bond, claiming that there was due him thereon. $2,814.72. December 1, 1907,. in which action, among- other defenses,, the surety company interposed the defense that under the conditions of the bond no action or proceeding could be brought against it after January 1, 1908, and that the said action is- barred by that provision in the bond, and that no recovery can he had against the defendant on said bond, which action was duly tried and the complaint dismissed on the ground that the action could mot be maintained, not having been brought prior to January 1,1908,. as provided in the bond, with S64-..41 costs against the surety company., Thereafter said Johnston, April 2:8, 1908, brought action, against the exposition company and served the proper papers purporting- to attach the $1,250 paid on account of the Johnston bond, and in said action recovered judgment December 10,1908,. against said *510exposition company for $2,951.26, and issued execution therefor to the sheriff of New York county. In the proceedings entitled above an order was duly made declaring the surety company insolvent on the 6th day of January, 1909, and in marshaling the assets of said company the said Johnston has filed his petition asking that the' $1,250 deposited by the exposition company with the surety company to indemnify said surety company on account of the issuance of said bonds, be paid to him or applied on such judgment and execution in his behalf, upon which the order, appealed from was made. " The appellant upon this appeal urges that as matter of law he is subrogated to the said fund and entitled to its payment without a reference, the respondent claiming that the $4,500 was received by it on account of the issuance of the three bonds and that it has paid on account thereof more than the said $4,500, and that there are no funds in its hands in which the appellant is interested, but that if there are the order of reference is proper to determine the amount.
The condition in the bond that an action or proceeding to enforce it must be brought before January 1, 1908, has been adjudged by a decision remaining unreversed to prevent' a recovery against the surety company on the bond, and by this proceeding it is sought by indirection to accomplish what the appellant failed to recover by direct action. The filing of his petition must be deemed the commencement of an action to enforce the bond, and the condition of the bond referred to is as fatal to this application as it was to the action. The fair meaning of the bond is that if January 1, 1908, lapses without the bringing of an action or the taking of some proceeding to enforce it, that the obligee has no further benefits therefrom. If the surety company was not liable to him upon the bond he cannot be subrogated to its rights as to the $1,250 which it retained to indemnify it under the bond, so long as the surety company has any valid claims against said fund.
There is nothing mysterious about the doctrine of subrogation; “it is purely an equitable right, and being an equity it is subject to the rules governing equity.” (6 Pom. Eq. Juris. § 9220.)
“ Subrogation is an equitable right, and not a legal one, and *511can be enforced only in equity. It will not be enforced when it would be inequitable to do so, or where it would work injustice to others having equal equities.” (Makeel v. Hotchkiss, 190 Ill. 311; 83 Am. St. Rep. 131.)
This money was received by the surety company to indemnify it, and while there is an indebtedness due it arising out of the same transaction in which the money was received, it would not be equitable to turn it over to the petitioner who was not a party to it and for whose benefit it was not taken. Such action would be most inequitable to the surety company and its creditors, and that is a sufficient reason why equity will not apply the doctrine of subrogation in the premises.
It is evident that if the fund remained in the hands of the surety company and belonged to the exposition company it was subject to attachment; but the attachment was subject to any claims which the surety company had against the moneys. And it is apparent that at the time the attachment was issued claims had accrued against the surety company greater in amount than the moneys in its hands on account of the exposition company. Viewing the appellant, therefore, as merely an attaching creditor, without any claim against the moneys superior to the rights of the surety company as a creditor of the exposition company, it is apparent that he is not entitled as against it to these moneys. While three bonds were issued to different parties, they were issued under one contract and practically for one consideration. The $4,500 was received as a result of one transaction and the three parts of the transaction formed such a whole that the surety company could not be required by the exposition company to deliver up any of the money while the exposition company was in default upon any of the bonds in an amount which might use up the entire amount. In my judgment the appellant has no claim upon the fund by attachment or otherwise superior to the rights of the surety company therein. While this attachment was levied before the termination of the litigation in Virginia, it is evident that the breach of the bond occurred before the issuance of the attachment, as it is fair to assume that the breach of the Booz bond occurred about the time the other two were breached. The appellant had the right to have his motion *512detenzáneá according to his legal rights. He could not be chargeable with the expense of a reference if Ms motion had no-merits, and! is^ therefore,, aggrieved by the order of reference.
The order should, therefore, be' modified! by striking therefrom the provision as- to- a reference, and asso-modified affirmed, without costs to either party.
Order affirmed, without costs.