Court Opinion

ID: 3391835
Source: CourtListenerOpinion
Date Created: 2016-07-05 18:53:31.054221+00
Date Added: 2024-06-11T13:04:49.402454
License: Public Domain

Although the bill may show a right of action on the part of the Dantzler Company against Ernst  Ernst, either ex contractu
for breach of contract, or ex delicto for breach of duty arising out of the contract between those parties, I cannot see how the doctrine of subrogation can be resorted to in support of a right of action, either legal or equitable, on behalf of the Columbia Casualty Company against Ernst  Ernst. The contract between Ernst  Ernst and the Dantzler Company was not made for the benefit of the Casualty Company. Of course, upon payment to the Dantzler Company of the loss occasioned by the embezzlement of its funds by one of its employees, for whose fidelity to his trust the Casualty Company had executed a surety bond to the Dantzler Company to the extent of the amount named in the policy, the Casualty *Page 560 
Company became subrogated to the extent of such payment to any right of action which the Dantzler Company may have had against the defaulting employee whose faithfulness the Casualty Company had in effect guaranteed, but this right of subrogation did not extend to any cause of action the Dantzler Company may have had against the firm of accountants whom they had employed for some years to make an annual audit of the company's books. The Dantzler Company was under no obligation to the Columbia Casualty Company to employ Ernst  Ernst, or any one else, to audit their books. They apparently made this contract for annual auditing for their own benefit. The Columbia Casualty Company was in no way a party to the contract between the Dantzler Company and Ernst  Ernst, nor does it appear that, in writing the surety contract with the Dantzler Company, the Casualty Company were relying upon or had any knowledge of the fact that the Dantzler Company were employing Ernst  Ernst to make an annual audit of their books. See Ultramares Corporation v. Touche, 255 N.Y. 170, 74 A. L. R. 1139. Nor is there any question of conventional subrogation involved in this case.
Cases involving the right of insurance companies to subrogation to the rights of the insured party against tort feasors causing loss to the insured subject matter, are not in point here, as in those cases the liability of the insurance company is based on the destruction or damage to the subject matter of the contract, and there is a direct relationship between the subject matter of the contract and the tort of the third party. But here there is no direct relationship between the contract of suretyship entered into between the Casualty Company and the Dantzler Company and the contract for auditing services entered into between Dantzler Company and Ernst 
Ernst. So far as the Casualty Company *Page 561 
is concerned, its liability and its loss would have been the same if the Dantzler Company had never made a contract with Ernst  Ernst and had never had its books audited. There being no privity of contract, nor any duty owed by the auditors to the Casualty Company, the latter certainly had no right of direct action against such auditors.
Nor is there any showing of a right to equitable or legal subrogation; nor does the writer know of any rule of law under which the Casualty Company could have compelled the Dantzler Company to prosecute an action for damages against Ernst 
Ernst, and so, if the Dantzler Company saw fit to compromise or waive any claim they may have had against the auditors, the Casualty Company had no right to complain.
See in this general connection, 25 Rawle C. L. 1831; Marianna National Farm Loan Association v. Braswell, 95 Fla. 510,116 So. 639.
Furthermore, as pointed out by Mr. Chief Justice DAVIS in his opinion herein, the procedure here attempted to be put in motion, even if there was a right of subrogation, would deprive Ernst  Ernst of their right to a trial by jury.
I think, therefore, the order overruling the motion to dismiss the bill should be reversed.