2 S.W.2d 1043 | Ky. Ct. App. | 1928
Affirming.
This action was instituted in the court below by the Fidelity Casualty Company of New York for the purpose of obtaining a judgment awarding it priority in the distribution of the assets of an insolvent state bank. The suit is grounded upon a claim that the appellant is subrogated to the rights of a guardian, for whom it was surety, and by reason of which suretyship it was compelled to pay to the wards the sum of $17,277.83, which had been lost by the guardian through the failure of the bank. The assumed right to which appellant claims subrogation is that of the guardian to preference in the distribution of the assets of the insolvent bank, now in process of liquidation by the state banking commissioner and his subordinates. The court below sustained a demurrer to the petition, and dismissed the action, from which judgment this appeal has been taken.
The facts out of which the case arises fully appear in the opinion of this court in Foley's Adm'r v. Robertson's Guardian,
The doctrine of subrogation is a creature of equity, and is applied only where it will work no injury to the rights of others having equal or superior equities, and will not overthrow or defeat legal rights. Probst v. Wigginton,
It is to be observed that a person who invokes the doctrine of subrogation must come into court with clean hands, and it will not be applied to a tortious transaction at the instance of one liable as a tort-feasor. German Bank of Memphis v. United States,
If it be conceded for the purposes of this decision that a surety on the bond of a fiduciary, who has without fault himself been compelled to pay for the default of his principal, is entitled to be subrogated to the rights of the cestui que trust against one who has wrongfully appropriated part of the trust estate (Farmers' Traders' Bank of Shelbyville v. Fidelity Deposit Co.,
A party claiming through subrogation must necessarily claim by virtue of a derivative right, and a derivative right presupposes an original right. If the right to which the surety claims subrogation does not exist, the foundation of the claim falls. Farmers' Nat. Bank v. Farmers' Traders' Bank,
It does not appear, from the facts alleged in the petition, that the wards ever possessed any lien on the assets of the insolvent bank, or were entitled to any preference in the distribution of the bank's assets. The appellant relies on cases from sister states, but upon a review of such authorities this court, in the case of New *34
Farmers' Bank, Trustee, v. Cockrell, Receiver,
Again, in the case of Smith, Banking Commissioner, v. Arnold, Master Commissioner,
"The law and a sound public policy will not favor preferences in the liquidation of an insolvent bank, and, in the absence of statutory provisions to the contrary, we see no reason why the funds deposited in the designated depository by the master commissioner and receiver, in obedience to the statute, should stand on any higher ground than the funds of the other depositors."
In the case of McAfee v. Bland, 11 S.W. 439, 11 Ky. Law Rep. 1, referring to a deposit by a trustee of trust funds, the court said:
"The fact that it was a trust fund in the hands of the assignee does not matter, inasmuch as he had a right to make the deposit, and the bank had an equal right to use it in the ordinary way in its business. The fund stood upon the same footing as any other general deposit."
In the late case of Farmers' Bank v. Bailey,
In view of these decisions, we are constrained to hold that the circuit court did not err in sustaining the demurrer to the petition in this case. The pleading is not so framed as to present the question whether the appellant has by subrogation any right to participate as a general creditor of the insolvent bank, and that question is not passed upon or precluded by this opinion. All that is now decided is that the appellant, on the present record, is not entitled, by subrogation or otherwise, to any priority in the distribution of the assets of the insolvent bank.
Judgment affirmed.