Court Opinion

ID: 9650964
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:57:50.265397+00
Date Added: 2024-06-11T18:12:27.938757
License: Public Domain

WALLER, Circuit Judge
(concurring in part and dissenting in part).
.1 concur in the holdings of the majority opinion: (1) that Article 342 — 711 of the Civil Statutes of Texas did not prevent a recovery against the bank for failure of the Pipe Line Company to notify the bank in writing that certain of the endorsements were forged and unauthorized; (2) that the bonding company, generally speaking, stands in the shoes of the Pipe Line Company; (3) that since the cause of action here is one based on subrogation, and since subrogation will not be applied so as to allow recovery against the bank, where the bank was innocent of any complicity in the fraud committed by the bonding company’s principal, the equities of the situation are in favor of the bank, under the holding in our case of American Surety Company of New York v. Lewis State Bank, 5 Cir., 58 F.2d 559.
I also concur in the result because of the reasons set forth above, and if the case had been decided wholly upon those reasons, I would be in full concurrence. The opinion, however, goes further than seems necessary to a decision of the case and makes two pronouncements that, I think, are unsound and one of which will result in confusion and detriment.
The first is the statement that the Pipe Line Company, in calling upon the bonding company to carry out its contract with the Pipe Line .Company and make the latter whole for Beall’s dishonesty, thereby made *265an election of a remedy that is inconsistent with the judicial remedy of the bonding company in this proceeding against the employee — the surety company’s principal— for his forgery of the endorsements of the checks and his embezzlement of the proceeds therefrom, and against the bank, the custodian of the Pipe Line Company’s funds, for paying out such funds upon such false and fraudulent endorsements.
The second is the holding that: “Appellant had no right of subrogation as against the drawee bank, nor did it acquire by the assignment any cause of action against it.”
I think that the first holding is erroneous in two respects: (a) that it fails to observe the distinction between the Pipe Line Company’s contractual right to be paid by the surety company and judicial remedies available through court action; and (b) that even if the acceptance of a right due it under its contract had been the election of a remedy, or if it had been necessary for the Pipe Line Company to bring suit against the surety company — -which it did not do here — and it had at the same time brought suit against the defalcating employee and the negligent bank, the remedies would have been merely cumulative but not inconsistent, and even if inconsistent were permissive under Federal Rules of Civil Procedure, rule 8(e) (2), 28 U.S.C.A.
Moreover, a “remedy” is generally defined to refer to methods of procedure, or procedures in court, as distinguished from substantive or contractual rights.
In Young v. Staman, La.App., 200 So. 187, the Court held that a “remedy” is the means employed to enforce a right or redress an injury. See also Paulsen v. Reinecke, 181 La. 917, 160 So. 629, 97 A.L.R. 1184.
In Re Wynn’s Estate, 311 Ill.App. 190, 35 N.E.2d 702, 704, the Illinois Court of Appeals held that:
“The word ‘remedy,’ is always interpreted to refer to methods or procedure as distinguished from substantive rights. The term ‘remedy,’ is taken to cover forms of action, methods of procedure, rules of evidence, and ail other details of practice and procedure as distinguished from rules pertaining to substantive rights.”
In Bauer v. Neuzil, 66 Cal.App.2d Supp. 1020, 152 P.Zd 47, 48, it was held that:
“The term ‘remedy’ in legal sense signifies and is limited to judicial means or method for enforcing cause of action or right or redressing a wrong,”
In Vol. 2, Bouv.Law Diet, Rawle’s Third Revision, page 2870, remedy is defined as:
“The means employed to enforce a right or redress an injury.”
The law in Texas seems to be to the same effect.
In Thomas v. Western Union Tel. Co., 25 Tex.Civ.App. 398, 61 S.W. 501, 502, the Court of Civil Appeals of Texas said:
“By ‘remedy’ in this connection is meant such matters as the character and form of action, the admissibility of evidence, procedure, the mode of redress, limitations, execution of judgments, and the like. The right acquired, and the obligations created, and all matters pertaining to the essence of the contract, are determined by the lex loci contractus.”
thus showing a distinction in the mind of the Court between contractual rights and methods of redress.
In Town v. Inner Shoe Tire Co., 260 S.W. 1078, 1080, the Texas Civil Court of Appeals held that:
“ ‘A cause of action’ is distinguishable from the ‘remedy,’ which is simply the means by which the obligation or corresponding action is effectuated, and also-from the ‘relief’ sought.”
In Seamans Oil Co. v. Guy, 114 Tex. 42, 262 S.W. 473, 474, the Commission of Appeals of Texas said:
“While the courts of our state have not clearly recognized it, yet there is an important distinction between an, election of rights and an election of remedies. One is a choice between inconsistent substantive rights, while the other is a choice between forms of action or procedure.”
In 15 Tex.Jur., page 823, we find the same statement as that last quoted.
In 18 Amer.Jur., § 6, page 131, it is said:
“Often, what is spoken of in judicial opinions as a choice between remedies is in reality a choice of alternative substantive rights. The distinction is one not infre*266quently obscured, and yet it is important that it is heeded. An election between substantive rights goes, not to the form but to the substance, affecting some right selected. Whereas an election of remedies or forms of action or procedure does not necessarily involve a choice between existing substantive rights, since a form of action is but a means of administering justice, rather than an end in itself. The'doctrine of election of remedies applies in order to protect one from vexatious litigation, while the rule as to election of substantive rights has to do with the actual status of some property or contractual rights.”
In this case I think that the Pipe Line Company, in calling on the bonding company to make good the loss, was not pursuing a remedy but in the exercise of a substantive, contractual right, which right came into being by the wrongs of Beall, the employee, and by the bank’s “having wrongfully charged the amounts of said checks to the account of American Liberty Pipe Line Company.” There is nothing inconsistent in suing the perpetrator of the forgery and the bank that permitted it and who wrongfully charged the forgeries to its customer’s account. The suit here is one in tort. •
Before the adoption of Rule 8(e) (2) of Federal Rules of Civil Procedure, a litigant might not have asserted that a contract was void and at the same time asserted that the contract was valid without being guilty of fatal inconsistency. However, it seems now that this rule allows a plaintiff to “state as many separate claims * * * as he has regardless of consistency and whether based on legal or on equitable grounds or on both.”1
However, even though the rule still persisted against the filing of inconsistent remedies, and even if the Pipe Line Company could not have in one suit ratified the transaction as valid and in another suit claimed that the same transaction was fraudulent,2 we have no such situation in the present case. At all times the Pipe Line Company, as well as its subrogee and assignee, the bonding Company, have contended that the endorsements were forged and fraudulent. A proceeding seeking to compel an attorney to disgorge embezzled funds is not inconsistent with holding a bank upon a forged endorsement. Rosacker v. Commercial State Bank, 191 Minn. 553, 254 N.W. 824, 94 A.L.R. 551. See also Borserine v. Maryland Casualty Co., 8 Cir., 112 F.2d 409. There has never been any contention that Beall was without authority to draw checks. The contention is, and always has been, that he had no authority to forge endorsements, and that the bank “wrongfully charged” the amounts thereof to the account of the Pipe Line Company.
In 18 Amer.Jur. 136, Sec. 13, it is said:
“The doctrine of election of remedies being predicated upon the existence of coexisting and inconsistent remedies, it fol*267lows as a necessary corrollary that not every election of remedies is irrevocable, for two or more remedies are often given to redress the same wrong and are, therefore concurrent. It is well settled that the rule of conclusive election of remedies does not apply where the available remedies are cumulative and consistent. It is permissible to follow these remedies or reliefs independently, in some cases, to judgment, although only one satisfaction can be had.”
In the same volume, on page 135, Sec. 12, it is said:
“Two modes of redress are inconsistent if the assertion of one involves the negation or repudiation of the other, as where one of them admits a state of facts and the other denies the same facts or where the one is founded upon the affirmance, and the other upon the disaffirmance, of a voidable transaction.”
Since I deem erroneous the holdings of the majority that there was an election of remedies and that the so-called remedies are inconsistent, and since such holdings are contrary to the spirit of the Federal Rules of Civil Procedure, needlessly attempt to invoke a rule that has so often been condemned, and are not necessary to a decision in this case, I am withholding my concurrence to that portion of the majority opinion dealing with the election of remedies.
As stated hereinabove, I am also in disagreement with the statement in the main opinion that: “Appellant had no right of subrogation as against the drawee bank, nor did it acquire by the assignment any cause of action against it.” In addition to the above quotation the main opinion also states that: “It is self-evident that when the bonding company paid the Pipe Line Co. the amount of Beall’s embezzlement, there remained in existence no enforceable claim by the Pipe Line Co. against the drawee bank which the Pipe Line Co. could assign to appellant.”
The release and assignment in question contains the following provisions pertinent to the assignment:
“It is not intended by this agreement of settlement and release * * * to release any other person, firm, corporation, association or bank * * * on any cause of action which the said American Liberty Pipe Line Company may have against said person, firm, corporation, association, or bank, growing out of the dishonest or fraudulent act or acts of John H. Beall.
“In consideration of the above recited payment * * * American Liberty Pipe Line Company * * * does hereby assign and set over unto the said United States Fidelity and Guaranty 'Company * * * any and all claims, demands, and causes of action of whatsoever kind, which it has or may have against John H. Beall, or against the indorsers of forged indorsements placed on certain checks by the said John H. Beall, and against the First National Bank in Dallas on which said checks were drawn, * * *.
“And the said American Liberty Pipe Line Company hereby authorizes the United States Fidelity and Guaranty Company, in its own name, to proceed against the said John H. Beall or the First National Bank in Dallas, or any of the indorsers of forged indorsements on a series of checks drawn on the first National Bank in Dallas * * * for the collection of any and all claims, demands or causes of action which the said American Liberty Pipe Line Company may have against said John H. Beall, the First National Bank in Dallas, or said indorsers.”
Thus it is that in the settlement between the bonding company and the Pipe Line Company it was agreed that the cause of action against Beall and the several banks should not be canceled but should be transferred to the bonding company and continue in existence. There is no law against the making of such a transfer.
The majority opinion contains this statement, to which I cannot concur: “It is self-evident that when the bonding company paid the Pipe Line Co. the amount of Be-all’s embezzlement, there remained in existence no enforceable claim by the Pipe Line Co. against the drawee bank which the Pipe Line Co. could assign to appellant.” In making this statement the majority opinion fails to note that one of the legal incidents of the assignment of a cause of action is to provide for the continued exist*268ence of the claim, or debt assigned; that is to say, where one pays a debt for which he and others are liable and takes an assignment thereof as against others, the purpose and the effect of ths assignment is to continue the obligation in existence and to transfer it to the one who had paid the primary obligation of another. An assignment continues the same debt in existence 3 while subrogation creates a new right of action in the subrogee.4 The Texas case of Fenner v. American Surety Company, Tex.Civ.App., 156 S.W.2d 279, 288, is all the authority needed on this question. The Court there said:
“Upon the payment by appellee (the surety company) to the American National Bank of the amount of the loss sustained by it by reason of Lundelius’ breach of faith, as it was required to do by the terms of its fidelity bond, the bank assigned to appellee all of its rights in the premises, and appellee, by this assignment as well as in equity, was subrogated to the rights and remedies of the bank for the recovery, of its loss. * * * The bank, and therefore the appellee as its assignee and by virtue of its rights of subrogation, had the right to recover from anyone legally liable therefor the actual loss sustained by the bank.” (Emphasis supplied.)
In City National Bank of Houston v. Moody, 115 S.W.2d 745, the Civil Court of Appeals of Texas again held that where a surety has paid the debt of his principal, he has the election to pursue his legal remedies and may bring an action in assmnpsit or on the obligation applied by law in his favor for reimbursement by the principal, or the surety can prosecute an action on the very debt itself, and in either event the surety stands in the shoes of the original creditor as to any securities and rights of priority. See also: Patterson v. Fuller, Tex.Civ.App., 110 S.W.2d 1230; Phillips Investment Company v. Road District No. 18, Tex.Civ.App., 172 S.W.2d 707.
Indeed, the case relied upon by the majority, American Surety Co. v. Bank of California, 9 Cir., 133 F.2d 160, 165, points out the very distinction which I am seeking here to make between subrogation and assignment and calls attention to the fact that an assignment contemplates “the continued existence of the debt or claim assigned.” Here the parties expressly agreed to continue the existence of the obligation. The holding of the majority that when the bonding company paid the Pipe Line the amount of the embezzlement there remained no enforceable claim that the Pipe Line could assign would render invalid every assignment where the consideration was the payment of an antecedent obligation. Such a holding would mean that sureties or insurance companies would not be justified in paying an obligation until the same had been reduced to judgment and the judg*269ment assigned to them so as to be protected under Article 6248, Texas R.S.1925.5 Such a holding- will interfere with the settlement of personal injury cases where, as a part of the consideration, the right of action has often been assigned to the casualty company in order that it may, in turn, sue a third party. It is my thought that any assignment of a chose in action, made fairly and upon a valuable consideration, not only would not extinguish the obligation but would transfer it to the assignee, but that such an assignee could not then have sued in Federal Court on the assigned cause of action, under Sec. 41(1) [now § 1359], Title 28 U.S.C.A. The Pipe Line Company was a Texas corporation. The ‘bank and Beall were Texas citizens. The Pipe Line Company could not have brought the action here against Beall and the bank and, therefore, it could not assign to the surety company any right to bring such action in the Court below. See Claiborne Parish School Board v. Fidelity & Deposit Co. of Maryland, 5 Cir., 40 F.2d 577, and American Surety Company of New York v. Lewis State Bank, supra. The lower Court had jurisdiction under a suit for subrogation because subrogation is not an assigned cause of action but one that equity creates in behalf of one who has, in duty bound, paid the debt of another. Assignment is the continuation of the same action and, therefore, unless the assignor were a resident of a state other than that of the defendants, the assignee could not have maintained the action in the Federal Court under the statute in force at the date of filing the suit. It is not necessary in this case to pass upon the question of the validity of the assignment and I must dissent to- the far-reaching holding of the majority opinion that one who pays the debt of another and thereby discharges his own obligation cannot thereupon have assigned to him the right to sue such other.
I would affirm the case, but I would do so without further confusing the doctrine of election of remedies and without destroying the valid- rights of innumerable assignees, as I am fearful the majority opinion will do.
Rehearing denied; WALLER, Circuit Judge, dissenting.

 The adoption of Rule 8(e) (2) is probably in recognition of the statement in Friederichsen v. Renard, 247 U.S. 207, 38 S.Ct. 450, 452, 62 L.Ed. 1075, that:
“At best this doctrine of election of remedies is a harsh, and now largely ■obsolete rule, the scope of which should not be extended, * *
This statement was quoted with approval by this Court in Re Rose, D.C., 39 F.2d 242, 243, wherein Judge Hutcheson, speaking for the Court, also said:
“The doctrine of election has never been a favorite in equity, and is only applied with favor in cases where the •elements of estoppel are present, or where there is such inconsistency in the two claims as that the assertion of both ■of them amounts to stultification.”
In Nuveen v. Board of Public Instruction, 5 Cir., 88 F.2d 175, 180, this Court, speaking through Judge Sibley, said:
“An election of remedies may be spoken of when the true right of the litigant is plain and he is making a choice of paths to reach it; but what is most frequently called an election of remedies is really an election or choice of rights, language becoming confused by the ancient practice in law of testing all rights by the forms of remedy. The doctrine of election has been said not to be a favorite of equity, Friederichsen v. Renard, 247 U.S. 207, 38 S.Ct. 450, 62 L.Ed. 1075,

 Cf. Cary v. Hardy, D.C., 1 F.R.D. 355; Catanzaritti et al. v. Bianco, D.C., 25 F.Supp. 457; United States to Use and Benefit of Foster Wheeler Corporation v. American Surety Co., D.C., 25 F. Supp. 700.

 Sands v. Hill, 55 NX 18.

 See 6 C.J.S., Assignments, § 2, page 1051, wherein it is stated that:
“A release terminates and extinguishes the claim released, while an assignment merely transfers it, leaving it in full force and effect as to the party charged. Whether an instrument is an assignment or release is a question of intention as determined from the provisions thereof.
“Subrogation, however, differs materially from an assignment. Subrogation is the act of the law, depending not upon •contract, but upon the principles of equity, while assignment is the act of the parties, and depends generally on intention. So also subrogation presupposes an -actual payment and satisfaction of the debt or claim to which the party is subrogated, although the remedy is kept alive in equity for the benefit of the one who made the payment under circumstances entitling him to contribution or indemnity, while assignment necessarily contemplates the continued existence of the debt or claim assigned. Subrogation operates only to secure contribution and indemnity, whereas an assignment transfers the whole claim.”
In Texas there has been great diversity of opinion as to the right of a surety to be subrogated to the securities of a creditor as well as to the debt. The Supreme Court of Texas first adopted the rule that payment by the surety extinguished the primary obligation and that his only remedy against the principal was on an assumpsit, or on the implied promise of the principal to reimburse the surety, but this rule has been repudiated by later cases. See 39 Tex. Jur., page 796, Sec. 36.

 Art. 6248, Texas R. S. 1925, is as follows :
“When any person, being surety in any undertaking whatever, shall be compelled to pay any judgment, or any part thereof, or shall make any payment which is applied Upon such judgment by reason of such suretyship, the said judgment shall not be discharged by such payment, but shall remain in force for the use of such surety, and shall be considered as assigned to such surety, together with all the rights of the creditor thereunder to the extent of such payment with the interest thereon; and such surety shall be entitled to have execution thereon in the name of the creditor for the use of such surety against the principal debtor for the clerk, or court, as the case may be, and costs, which execution shall be issued upon the application of such surety to the clerk, or court, as the case may b,e, and shall bo levied, collected and returned as in other cases.”