erty, he shall be entitled to receive from the proceeds, if sufficient, the full amount of his debt and costs, deducting there from the dividends received from the bankrupt's estate, and the surplus to be paid over to the assignee. If the creditor shall decline to proceed in the said suit, then he shall authorize and allow the same to be carried on by the assignee at the expense and for the benefit of the bankrupt's estate; and that out of the property or money which shall be obtained under and in virtue of the suit, he shall, after the expenses thereof are deducted, be entitled to receive the full amount of his debt, beyond the dividends received by him, out of the proceeds, if sufficient, and the surplus, if any, shall belong to the assignee for the benefit of the bankrupt's estate. And either party shall be at liberty to apply to the court from time to time for further directions in the premises.

SECTION 4.—SUBROGATION

MUSGRAVE v. BAILEY et al.

(Supreme Court of Pennsylvania, 1896. 172 Pa. 629, 33 A. 705, 51 Am. St. Rep. 765.)

FELL, J. This proceeding is founded upon a petition by Samuel Musgrave, one of the sureties on a replevin bond, for subrogation to the rights of the plaintiff in the judgment. An answer was filed by the appellant, the plaintiff, in which he averred that the judgment had not been fully paid, and in which he stated other supposed equitable grounds in denial of the right claimed. A separate answer was filed by the defendants, in which they alleged that they had transferred their property and business to the cosurety, J. C. Dicken, to secure him and Samuel Musgrave from any loss they might sustain by reason of the bond, and that from the management of their business an amount had been realized by Dicken more than sufficient to cover the payment made by Musgrave. It was agreed by both sureties that the amount due the defendants from the management of the business should be credited by Musgrave on account of the money which he had paid. The issues thus raised were referred to a commissioner. The terms of the reference do not appear from the record, but it is stated, in the appellee's history of the case, that the commissioner was "to take testimony and find the facts in issue by the petition and answers." The commissioner, having taken and considered the testimony, reported that the defendants, after the allowance of all proper credits, were indebted to the petitioner in the sum of $872.70, and to this amount subrogation was ordered by the court.

A large part of the testimony has not been brought up with the record. From an examination of what appears we see no reason to doubt the correctness of the conclusion reached, either as to the obligation to account, or as to the amount due. The issue raised by the answer of the plaintiff seems to have been wholly ignored. Whether any testimony was taken under this issue we are not informed. None appears with the record. Its omission would be ground for the affirmance of the order if there was a finding and report by the commissioner. Neither has been made. In the whole proceeding, as it is presented, no

reference is made to this issue, from the time it is raised by petition. and answer until it is finally disposed of by the order making absolute the rule to show cause why subrogation should not be allowed. Its importance may have been an afterthought, but the issue is one which cannot now be disregarded. It is distinctly raised, and is the subject of an exception to the report of the commissioner and of a specification of error.

Subrogation rests upon purely equitable grounds, and it will not be enforced against superior equities. Unless the surety pays the debt in full, he is not entitled to subrogation; and until this is done the creditor will be left in full possession and control of the debt and the remedies for its enforcement. Dering v. Earl of Winchelsea, 1 White & T. Lead. Cas. Eq. 120; Kyner v. Kyner, 6 Watts, 221; Bank v. Potius, 10 Watts, 148; Hoover v. Epler, 52 Pa. 522; Allegheny Nat. Bank's Appeal (Pa. Sup.) 7 A. 788. The settlement of the account between the sureties and the defendants fixed the amount of the liability of the latter, and the extent of the right to indemnity, but it did not affect the right of subrogation, which will never be allowed to the prejudice and injury of the creditor.

The judgment is reversed, and the record is remitted to the court of common pleas, in order that there may be a finding upon the issue raised by the answer of the appellant.

SECTION 5.-WAIVER OF RIGHTS BY SURETY

PARSONS v. WASHINGTON CONST. & BLDG. CO. et al.

SAME v. PACIFIC SURETY CO.

(Supreme Court of Washington, 1912. 69 Wash. 595, 125 P. 954.) Action by J. C. Parsons against the Washington Construction & Building Company and another. From a judgment for plaintiff, defendant Pacific Surety Company appeals.

FULLERTON, J. On July 25, 1910, the respondent, Parsons, and the defendant Washington Construction & Building Company entered into a contract, by the terms of which the defendant agreed to erect a building for the respondent at the city of Spokane, according to plans and specifications agreed upon, for the contract price of $21,079. By the terms of the contract, the building was to be completed on or before November 15, 1910, under a penalty of $10 per day for each and every day its completion was delayed beyond that time. To secure the faithful performance of the contract, the contractor executed a bond to the respondent, with the appellant Pacific Surety Company as surety, in the sum of $10,600. The bond contained a number of stipulations in addition to those found in the contract, the performance of which it was intended to secure, among which was a stipulation to the effect that the surety should be immediately notified of any breach of the contract by the contractor, or of any act on his part or that of his agent or employés which might involve a loss for which the surety might be liable, immediately after the occurrence of such act shall come to the knowledge of the owner, which notification "must be given in writing

to the president of said surety, at its principal office in San Francisco, California." The bond also contained conditions to the effect that the owner would notify the surety before making the last payment on the contract; and the contract provided that a certain percentage of the amount of the installments due the contractor should be withheld until the final completion of the contract. The surety company, at the time of the execution of the bond, was represented by one H. W. Newton, its attorney in fact, who resided in the city of Spokane.

The contractor defaulted in the performance of his contract, leaving the building in an incomplete condition. The owner notified the surety of the default, and demanded that the surety complete the building itself. On its refusal so to do, the owner partially completed the building himself at a cost exceeding the contract price, and after a delay of a month beyond the time fixed in the contract for its completion. This action was brought to recover the excess cost paid for the construction of the building, alleged to be the sum of $422.60, the sum of $300 as demurrage for failure to complete the building by the time agreed upon in the contract, and for omissions in the plans made by the contractor in the sum of $114.50. The respondent recovered in the court below for the full amount claimed, and the surety company appealed.

The appellant contends, first, that it is not liable upon the bond in any sum, because of breaches of the conditions thereof by the respondent himself; and, second, that if the court adjudges it to be so liable it is not liable in the sum found due by the trial judge. It bases its claim of nonliability on the fact that the respondent did not give notice in writing to the president of the surety company, at its principal office in San Francisco, Cal., of the defaults made by the contractor in the performance of the building contract; that he did not withhold, when making the installment payments on the contract, the percentage he was permitted to retain under the terms of the contract; and that he did not notify the company before making the last payment to the contractor under the contract. But we think there was a subsequent modification of the contract with respect to the matters here mentioned. It is gathered from the evidence that the contractor was unable to pay the materialmen, who were furnishing materials for the construction of the building, out of the estimates certified to him by the architect from time to time, and that they threatened to file liens upon the uncompleted building, unless they were paid; that to meet these demands it was agreed between the contractor and the respondent that the respondent would pay all such claims as should meet with the approval of the surety company; that the contractor thereupon made out written statements of the amount due the several materialmen, presented them to H. W. Newton, who marked them "Approved" over the name of the surety company, signed by himself as its attorney in fact. The claims were thereupon presented to respondent, who paid to the several materialmen the amounts stated therein to be due them. This form of making payments extended over a considerable period of time, and practically onethird of the contract price of the structure was paid in this manner. It is plain, therefore, that if the attorney in fact approving the bills had authority to represent the surety company in this behalf there was a waiver of the several conditions of the bond thought to have been violated by the respondent.

On this latter question, we think it is fairly shown by the record that the attorney in fact did have such authority. The evidence on which the

conclusion rests is somewhat involved, and need not be reproduced here. It is sufficient to say that the agent was the accredited representative of the surety company for the city of Spokane; that he was its attorney in fact; that he executed in name of the company the bond which gave rise to the controversy; and that the surety company has not questioned his general authority, other than by mere denials in its pleadings. On the trial it contented itself with the case made by the respondent.

As to the amount of the recovery found by the courts, we are content with the amount allowed as paid in excess of the contract price, and the amount found necessary to a completion of the building, but we think the court erred in making an award for demurrage. As we read the record, the respondent did not inform the agent at Spokane of the fact tha the contractor did not complete the building within the time named. in the contract until some days after he had actually breached the contract in that respect. This we held, in Monro v. National Surety Co., 47 Wash. 488, 92 P. 280, would relieve the surety company from liability. on the demurrage clause in the contract, although not from its liability. for other obligations, not connected with this particular clause or affected thereby. Heffernan v. U. S. Fidelity, etc., Co., 37 Wash. 477, 79 P. 1095; Trinity Parish v. Ætna Indemnity Co., 37 Wash. 515, 79 P. 1097; Denny v. Spurr, 38 Wash. 347, 80 P. 541.

We have not overlooked the fact that the appellant contends that an item of $232.45 was paid by the respondent without either the certificate of the supervising architect, or the approval of the surety company's agent. But, while it is true the claim was not indorsed or approved by the agent, we think it clear from the testimony that it had its approval in fact. The essential requirement was that it be approved, not that it be approved in any particular manner.

The judgment is reversed, and the cause remanded, with instructions to enter a judgment in favor of the plaintiff below for the amount demanded in his complaint, less the sum of $300 sought to be recovered for delay in the completion of the building.

MOUNT, MORRIS, ELLIS, and PARKER, JJ., concur.

CHAPTER III

RIGHTS OF SURETY AGAINST COSURETY

Section

1. Right to Contribution.

2. Amount Recoverable.

SECTION 1.-RIGHT TO CONTRIBUTION

GROSS v. DAVIS et al.

(Supreme Court of Tennessee, 1889. 87 Tenn. 226, 11 S. W. 92, 10 Am. St. Rep. 635.)

CALDWELL, J. This is a bill for contribution among sureties. In April, 1860, John G. Enochs was qualified as clerk of the county court of Franklin county, with Gross, Henderson, Colyar, Slatter, and others as sureties on his official bond. After the close of the war, several suits were instituted against him and his sureties. One of those suits finally resulted in a decree in this court against the defendants for about $800, besides costs. The others were successfully defended. Gross paid the greater part of the decree mentioned, including $130 court costs. The other part of that decree was paid by Davis, as personal representative of Slatter, who had died. Enochs, the principal, and all the sureties, except those above named, were insolvent when the present proceedings were commenced, and for that reason were not made parties.

In his answer Davis set up the fact of the payment made by him on the decree, and insisted that the estate of his intestate was thereby discharged from further liability. Henderson claimed, in his answer, that he had paid for himself and cosureties more than $1,000 in fees to lawyers, for defending the several suits brought against them and Enochs. Colyar made no defense, and decree pro confesso was taken against him. The chancellor adjudged that Gross was entitled to recover from Davis, Henderson, and Colyar each one-fourth of the sum he had paid, with interest; making the recovery against each of the three $210.06. He then adjudged that Davis was entitled to a credit on the recovery against him by the amount of one-fourth of the sum which Davis had paid, with interest. That credit being $48.04, the net balance of the recovery against Davis was $162.02. Nothing was allowed Henderson on account of attorney's fees claimed to have been paid by him. Both Davis and Henderson have appealed.

The decree is erroneous. It proceeds upon the idea that every surety who has paid a part of the joint liability may recover from each of his cosureties his proportional part of the sum so paid. As applied to a case where the whole liability has been discharged by one of several sureties, the rule adopted by the chancellor is correct; but it is not applicable when more than one of the sureties have made payments on the joint indebtedness. In the latter case, all payments must be added together, and the aggregate divided equally among the sureties. To il