Opinion
No. 29504.
February 8, 1932.
1. PRINCIPAL AND SURETY. New bond to qualify bank as depository for same class of county funds as covered by earlier bond and also for different class held not included under indemnity agreement applicable to earlier bond ( Laws 1912, chapter 194; Laws 1920, chapter 315).
The indemnity agreement executed by directors of bank prior to execution of depository bond in 1922 to qualify bank as depository for county's current funds under Laws 1912, chapter 194, did not apply to 1926 depository bond, because 1926 bond did not purport to be continuance, extension, enlargement, modification, change, alteration, or renewal of 1922 bond, nor was it a substitute for 1922 bond or any renewal thereof, as provided in indemnity agreement to make it applicable, since 1926 bond was executed not only to enable bank to qualify as depository for current funds of county, but also as depository for funds collected by sheriff and tax collector under Laws 1920, chapter 315.
2. PRINCIPAL AND SURETY. Under provision that indemnity agreement executed to procure earlier bond should cover subsequent depository bonds executed at instance of indemnitors, new bond held not included under indemnity agreement.
Though bank acted by and through its officers, the original bond and subsequent bonds were executed by director of bank, whose estate was sought to be held liable under the indemnity agreement "for and at the instance of" bank, not "at instance of indemnitors," and signers of indemnity agreement were liable thereunder as individuals, not as directors of bank.
APPEAL from chancery court of Coahoma County. HON. R.E. JACKSON, Chancellor.
Maynard, FitzGerald Venable and John W. Crisler, all of Clarksdale, for appellant.
The language of the indemnity agreement covers any renewals, substitutions, or any bonds or undertakings whatsoever, and in Clause 10 of the indemnity agreement specific reference is made to former and subsequent bonds or undertakings.
While it is true that a surety's obligation or contract cannot be changed without his consent, it is equally true that he may consent at the time he undertakes the suretyship for changes to be made. In the instant case, he agreed that changes should be made, both as to the amount of penalty as to the payee, conditions, etc.
In Article 10 the indemnitors agreed that they would be bound with respect to any bond or undertaking in the future which were executed for and on behalf of the indemnitors or what was clearly meant for the bank.
It is but natural that where bonds are to be renewed, or new bonds substituted, in order to avoid expense and trouble that the indemnity agreement should be so drawn as to cover substitution and undertakings or renewed undertakings, or any undertaking given to accomplish the same purpose as the original bond. In the instant case the indemnity agreement clearly refers and expressly states that it shall apply to all bonds in the future regardless of whether the new bonds increase the penalties, increase liabilities of the obligee or not.
The language of the indemnity agreement could not have been broader, and its intention is manifest. That intention was to protect the Maryland Casualty Company as long as it acted as surety for the bank as a county depository, or until the relation of principal and surety had been terminated. The parties in 1926 were the same as in 1922 and occupied the same relative positions to each other.
It is clear that the indemnitors meant to protect the Maryland Casualty Company, as surety for the Commercial Bank as a public depository. They even obligated themselves to pay annually in advance all premiums on said bond until evidence, satisfactory to the company, or termination of such liability shall be furnished the company at its Home Office.
Section 10 of the Indemnity Agreement means without equivocation that the covenants of the indemnity agreement cover the subsequent bond of 1926, which was executed for and at the instance of the officers and directors of the Commercial Bank.
Within the meaning of the indemnity agreement, the undertakings of 1923, 1924, 1925 and 1926 were continuances, extensions and renewals of the 1922 bond; and the indemnity agreement in express language provides for successive annual periods of the surety's liability by providing for annual premiums in advance; and the indemnity agreement in unambiguous language expressly stipulates that its covenants shall apply to all subsequent bonds; and the Maryland Casualty Company continued throughout these years in honest belief that it was protected by this indemnity agreement and had no notice from the indemnitors, or any of them, that the indemnity agreement was no longer in force, and no intimation that such a claim would be made.
G.E. Williams, of Clarksdale, for appellee.
When a new arrangement is made the rights and liabilities of the parties thereto are governed thereby and the old arrangement is of no further force or effect.
Fidelity Deposit Co. v. Wilkinson Co., 108 Miss. 883.
Acting on the principle that the undertaking of a surety is to receive a strict interpretation, the courts hold as to fidelity bond that where the principal's term of office is definite and fixed and is recited in the condition of the bond, or, if not recited, is fixed by law, the liability of the surety ceases with the termination of the time for which the employment or office is limited to be held.
21 R.C.L. Prin. Sur., Section 30.
If, when the bank had received its appointment for a subsequent term, the appellant had desired to be indemnified against loss on account of the bond it made, appellant should have requested such indemnity. Making no such request, the inference is that appellant was perfectly willing to make bond without indemnity.
The 1926 term of the bank as depository had no connection with the four previous terms. Just because the bank succeeded in getting the appointment from year to year, makes each succeeding term no less a new one. A bond executed for one term stands alone for acts committed during that term. Regardless of whether or not a new bond should have been executed for the three previous terms, when we come to the 1926 term we find a new bond was required.
Appellee had a right to stand upon the terms of his counterliability which confined his liability to money received under original bond and it is admitted that none was received under it.
Miller v. Stewart, 9 Wheat. 680, 6 L.Ed. 189.
The alterations caused by changing the bond over beyond the terms of the undertaking of the surety, extinguished his liability.
United States v. Freel, 186 U.S. 309.
The difference in the conditions of the 1926 bond over those of the bond for 1922 cannot be said to represent changes, and the obligations assumed under the 1926 bond had no relation to obligations assumed under the 1922 bond.
Cook County v. Harms, 198 Ill. 151.
While it is true, S.A. Corley was a director of the bank, yet he executed the indemnity agreement as an individual, and he was sued in his individual capacity. The 1926 bond was executed neither for him in his capacity as director, nor for him in his individual capacity. It was executed for the Commercial Bank.
On principle, it would seem that an officer of a corporation by virtue of his relation to the corporation, is not charged individually with knowledge possessed by other officers.
7 R.C.L. 658.
This is an appeal from a decree of the chancery court of Coahoma county, Miss., disallowing the contested claim of the appellant, Maryland Casualty Company, against the estate of S.A. Corley, deceased, for an asserted balance of five thousand eight hundred sixty-one dollars and thirty-one cents, due it as of November 6, 1930. The facts upon which the claim is based appear in the record in the form of an agreed statement, and are substantially as follows:
The Commercial Bank of Clarksdale, Miss., was appointed as depository of the current funds of the county of Coahoma for the year 1922, and qualified as such depository by executing a bond in the sum of twenty thousand dollars, with the Maryland Casualty Company as surety, conditioned to save the county harmless from any loss by reason of any default or failure of the said bank to properly perform the trust reposed in it by such designation. Before executing such bond, the appellant, Maryland Casualty Company, required the execution of an indemnity agreement, and on January 7, 1922, the directors of the bank, including the said S.A. Corley, executed this indemnity agreement, reciting that at the special instance and request of the said directors and indemnitors, and upon the express condition that it (the indemnity agreement) be executed, the appellant, Maryland Casualty Company, had executed, or was about to execute, the said bond. Among other provisions of this indemnity agreement were the following:
"Third, that the surety or sureties executing said bond shall have the right, and such surety or sureties are hereby authorized, but not required: (a) to adjust, settle or compromise any claim, demand, suit or judgment upon said bond, unless the Indemnitors shall request such surety or sureties to litigate such claim or demand, or to defend such suit, or to appeal from such judgment, and shall deposit with such surety or sureties satisfactory collateral, sufficient to pay any judgment or judgments, rendered or that may be rendered, with interest, costs, expenses and Attorneys' fees; (b) from time to time, to increase or decrease the penalty or penalties of said bond, to change the obligee or obligees therein, to execute or to consent to the execution of, any continuance, extensions, enlargements, modifications, changes, alterations or renewals of the obligation of suretyship assumed under said bond, and to execute any substitutes for said bond, with the same or different conditions, provisions and obligees, and with the same or larger or smaller penalties, it being hereby agreed that this instrument shall, in all its terms, apply accordingly: (c) to attach hereto, copy or copies of said bond, to fill up any blanks left herein, and to correct any errors in filling up any blanks herein, or in the description of said bond, or in said premium or premiums; it being hereby agreed that such copy or copies, when so attached, and that such insertions or corrections, when so made, shall be prima facie correct."
"Tenth, that these covenants as also all collateral securities or indemnity, if any, at any time deposited with or available to the Company, concerning any bond or undertaking executed for or at the instance of the Indemnitors or any of them, shall, at the option of the Company, be available on its behalf and for its benefit and relief, as well concerning any and all former or subsequent bonds or undertakings executed for or at the instance of the said Indemnitors or any of them as concerning the bond or undertaking for which such covenants, collateral securities or indemnity shall have been made, deposited or given; and, unless otherwise specially agreed, said collateral, securities or indemnity may be disposed of by the Company, for the purposes aforesaid, either at public or private sale, in the discretion of the Company, in an amount sufficient to save it harmless as aforesaid, without notice to the Indemnitors or any of them; and the Company may, for its own account, and in its own behalf, purchase the whole or any part thereof."
For the years 1923, 1924, and 1925 the said Commercial Bank was reappointed depository for the same funds as in 1922, while the Planter's National Bank was appointed as depository for the sheriff and tax collector's funds, and the appellant, Maryland Casualty Company, qualified as surety for the said Commercial Bank for each of said years by executing a certificate of renewal of the 1922 bond. In January, 1926, the board of supervisors of Coahoma county selected depositories for the year 1926, among others being the said Commercial Bank, which was appointed depository for the same funds as in the year 1922 to 1925, inclusive, and also for the sheriff's and tax collector's funds; and the bank qualified as such depository by executing a new bond in the penal sum of twenty thousand dollars with the appellant casualty company as surety, conditioned for the faithful performance of the trust reposed in it by said designations, and to save the obligee harmless from any loss from any default of the said bank. There was no default by the bank during the years 1922 to 1925, inclusive, but on the thirteenth day of December, 1926, while the bond executed by the appellant for that year was in full force and effect, the said Commercial Bank was closed for liquidation, and was liquidated by the state banking department. After the closure of said bank, the appellant paid to the county the amount of its liability on its bond, and, after receiving from the liquidating agent of said bank its proportionate part of the assets of the bank, there remained due it as of November 6, 1930, the sum of five thousand eight hundred sixty-one dollars and thirty-nine cents, for which amount it probated its claim against the estate of S.A. Corley, deceased, basing its claim on the indemnity agreement of 1922. The said S.A. Corley, who had died after the bank was closed for liquidation, was, at the time he signed the said indemnity agreement, and continuously thereafter until its closure, either an officer or director of said bank.
There appears to be but one question presented by this record for decision, and that is, Does the indemnity agreement of 1922 include an agreement to indemnify the appellee for liability on the 1926 bond? In deciding this question, it does not appear to us to be necessary to consider the question of whether or not the aforesaid renewal certificates executed by the said surety in 1923, 1924, and 1925 were, in view of section 758, Code 1930, effective to keep in force and effect for those years the bond executed in 1922. There were no defaults by the principal during any of these years, and the bond executed for 1926 does not purport to be a renewal of, or substitute for, the previous bond, which was originally executed in 1922, but it is an entirely new undertaking covering other, different, and increased obligations or liabilities.
The indemnity agreement, by section three thereof quoted above, confers upon the surety the right "from time to time, to increase or decrease the penalty or penalties of said bond, to change the obligee or obligees therein, to execute or consent to the execution of, any continuance, extensions, enlargements, modifications, changes, alterations or renewals of the obligation of suretyship assumed under said bond;" that is, of course, the bond of 1922. The agreement further granted to the surety the right to execute any substitute for the 1922 bond, "with the same or different conditions, provisions and obligees, and with the same or larger or smaller penalties," in which case it was provided that the indemnity should, in all of its terms, apply.
The bond executed by the appellant in 1926 does not purport to be a continuance, extension, enlargement, modification, change, alteration, or removal of its 1922 bond. Neither is it in any sense a substitute for the 1922 bond or any renewal thereof, all of which had, by their terms, expired before the execution of the 1926 bond. The 1926 bond was executed to enable the bank to qualify for a new term as a depository for the same class of funds as those covered by the appointment for the previous years, and also as depository for other and entirely different funds. For the years 1922 to 1926, inclusive, the Commercial Bank was appointed depository for the current funds of the county, under and by virtue of chapter 194, Laws of 1912; while in 1926, under the provisions of chapter 315, Laws of 1920, it was also appointed as a depository for the funds collected by the sheriff and tax collector. The appellant executed one bond to enable the bank to qualify under both designations, and we do not think any of the provisions of section three of the indemnity agreement can be construed to include an agreement to indemnify for liability on the new bond executed in 1926.
The only other provision of the indemnity agreement upon which a claim of liability of the indemnitors for any defaults occurring during the period covered by the 1926 bond could be based are found in section ten thereof, quoted herein, which provides that the agreement "shall, at the option of the company, be available on its behalf and for its benefit and relief, as well concerning any and all former or subsequent bonds or undertakings executed for or at the instance of the said indemnitors, or any of them as concerning the bond or undertaking for which such covenants, . . . shall have been made, deposited or given," etc. In order for this provision to be effective to create liability of the said indemnitors on account of the execution of the "subsequent" or 1926 bond, it must be determined that the 1926 bond was executed "for or at the instance of the said indemnitors." While it is true that the bank acted by or through its officers, still the 1922 bond, as well as all subsequent bonds, was executed by the appellee "for and at the instance of" the bank. The signers of the indemnity agreement assumed liability thereunder as individuals and not as directors of the bank, and the extent of their liability was not affected by the fact that they happened to be directors of the institution for whose benefit the bond was executed. We therefore conclude that no liability or obligation to save the appellant harmless from defaults of the principal in the 1926 bond arose under or by virtue of the provisions of section 10 of the 1922 agreement.
The decree of the court below will therefore be affirmed.
Affirmed.