People's National Bank v. Corse

Mr. Justice Williams

delivered the opinion of the Court.

The United States let a contract for the erection of a post office building in Springfield to Corse, who executed a bond to the government, with the New England Casualty Company as surety. This bond guaranteed the performance of the contract, and contained a clause to the effect that the contractor should promptly make payment to all persons supplying labor or materials in the prosecution of the work contemplated by the contract.

Corse borrowed money of complainant bank, which was used to pay for such labor and material. The bank filed a bill of attachment on the ground that Corse was a nonresident of the State, and caused a lot of materials to be attached, which materials were at the time stored near the public building, then in course of construction, and in railway cars, unloaded at the time, as the property of Corse. It had been ordered by and consigned to him.

*723 The surety company in that cause filed its petition of intervention to set up its claims, and executed a replevy bond in a sum equal to the value of the material for the release of the same from the levy of the attachment. The contentions, outlined below, were so far ruled in favor of the bank by the chancellor as that a recovery on the bond for its amount was allowed.

One of the claims of the surety company is that it is entitled to be subrogated to the right of the United States, it having completed the building and complied with the contract of its principal, Corse.

A claim of the appellee bank is that the surety must fail, because the bank was itself entitled to look to the bond and to appellant as surety thereon, on account of the fact that it advanced money to contractor Corse which went to pay for materials wrought into the building. This is not maintainable. Money furnished by a'bank for the specific purpose of paying for materials or labor is not thereby placed within the protection of the provisions of such a bond. United States, for use, etc., v. Rundle, 107 Fed., 227 , 46 C. C. A., 251 , 52 L. R. A., 505; Illinois, Surety Co. v. City of Galion (D. C.), 211 Fed., 161 . And see Hardaway v. National Surety Co., 211 U. S., 552 , 29 Sup. Ct., 202, 53 L. Ed., 321 , affirming 150 Fed., 465 ; 80 C. C. A., 283 . These decisions proceed upon principles recognized in our cases. McDonald v. Railroad, 93 Tenn., 281, 290 , 24 S. W., 252 ; Smith v. Neilson, 13 Lea (81 Tenn.), 461.

The equity of the surety company, entitling it to subrogation, is held superior to that of such a volun *724 teer who had advanced money to the contractor. Henningsen v. U. S. Fidelity, etc., Co., 208 U. S., 404 , 28 Sup. Ct., 380, 52 L. Ed., 547 , affirming 143 Fed., 810 , 74 C. C. A., 484 .

The main contention of the surety for error in the chancellor’s decree is that, under the federal statute, the bank could not by its attachment gain a lien on or title to the property levied on which would he superior to appellant’s right of subrogation to the priority of the United States.

This claim is based on sections 3466 and 3468 of the Revised Statutes of the United States (U. S. Comp. St. 1913, sections 6372, 6374), as follows:

“Sec. 3466. Whenever any person indebted to the United States is insolvent, . . . the debts due to the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.”

“Sec. 3468. Whenever the principal in' any bond given to the United States is insolvent, . . . and . . . any surety on the bond . . . pays to the United States the money due 'upon such bond, such surety . . . shall have the like priority for the recovery and receipt of the moneys out of the estate and effects of such insolvent . . . as is secured *725 to the United States; and may bring and maintain a snit npon the bond, in law or equity, in his own name, for the recovery of all moneys paid thereon.”

It is urged that Corse was insolvent, and that the attachment by the bank was based on.his nonresidence, which is claimed to be the equivalent of the term ‘ ‘ absent debtor” in section 3466.

If the words ‘‘absent debtor” may be-construed to mean nonresident (Den v. Deaderick, 1 Yerg. [9 Tenn.], 125, 135, and Camman v. Bridgewater, etc., Co., 12 N. J. Law, 84, holding the terms not to be synonymous), and not merely to imply a resident who has removed himself from his home, we think, it clearly established that the United States did not Iiave priority, or a prior claim to the property, that prevented the bank’s attachment taking precedence.

The right of the United States to priority does not rest, as does that of the States, upon any prerogative of sovereignty, but is based exclusively on acts of Congress. United States v. State Bank, 6 Pet. (31 U. S.), 29, 8 L. Ed., 308 ; Re Devlin (D. C.), 180 Fed., 170 .

The federal courts have held that the above statute does not create a lien on the property as such. U. S. v. Hooe, 3 Cranch (7 U. S.), 73, 2 L. Ed., 370 ; Beaston v. Farmers’ Bank, 12 Pet. (37 U. S.), 102, 9 L. Ed. 1017 .

When the statute was enacted, the effect of an attachment of any goods of a debtor was, in some of the States of the Union, to cause a distribution among all *726 creditors, through the medium of a trustee for the benefit of all creditors. Prom an early day, the statute here involved was construed to operate to give priority to the United States only where by the law the property of the debtor was, upon being attached, thus sequestered for distribution among all of his creditors ; and where, as in .this State, the attaching creditor fixes a lien upon the property (subject to be perfected by judgment later entered) that inures to his. own benefit, and where only the property attached is affected, the United States has no priority that overrides the lien of the attachment. Watkins v. Otis, 2 Pick. (19 Mass.), 88; U. S. v. Williamson, 5 Dillon, 275; U. S. v. Canal Bank, 3 Story, 79 , 25 Fed. Cas., No. 14,715; Beaston v. Farmers’ Bank, supra; note to State v. Foster, 29 L. R. A., 226, 234; 29 Cyc., 750.

If it be conceded that appellee would have a right to be subrogated to the priority of the United States upon payment of the principal debtor’s obligation, under the statute or the common-law rule that he who pays the debtor’s debt to the sovereign succeeds by subro-gation, to the priority of the latter, the relief asked by the intervening petition must be denied for that there is here no right to priority in the United States.

The intervener and appellant contends that the chancellor was in error, in rendering a money judgment against it on the bond without providing, in the alternative, for a return of the property replevied, so far as it was not wrought into the building.

*727 In this there is a failure to distinguish a replevin bond in an action of replevin (Code, Shannon, sections 5131-5144) and a replevy bond snch as this (Code, Shannon, section 5269), which makes no provision for a return of the property affected,

In event of its being cast in the suit, a decree incorporating a judgment against the casualty company on the replevy bond for the debt, without any provision for a return of any part of the property, was therefore the correct one. Gibson’s Suits in Chancery (2d Ed.), sec. 886.

We are of the opinion that the chancellor properly decreed, on the above contentions of the casualty company, in favor of the bank. Affirmed.