Am. Bonding Co. Of Baltimore v. Am. Sur. Co. Of N.Y.

• Citation: 103 S.E. 599
• Parties: AMERICAN BONDING CO. OF BALTIMORE, MD., et al. v. AMERICAN SURETY CO. OF NEW YORK et al.
• Decision Date: 10 June 1920
• Court: Supreme Court of Virginia

103 S.E. 599

AMERICAN BONDING CO. OF BALTIMORE, MD., et al.

v.AMERICAN SURETY CO. OF NEW YORK et al.

Supreme Court of Appeals of Virginia.

June 10, 1920.

Appeal from Circuit Court, Fairfax County.

Suit by Caroline C. Gresham against the American Bonding Company of Baltimore Md., and the Fidelity & Deposit Company of Maryland, together with the American Surety Company of New York and others; the American Bonding Company and the American Surety Company contesting as to which was liable to complainant, the Bonding Company having been surety on the bond of her first guardian, and the Surety Company having become surety on the bond of her second guardian. From the decree, the American Bonding Company and the Fidelity & Deposit Company appeal. Affirmed.

Keith, McCandlish, Hall & Garnett, of Fairfax, and Allen A. Davis, of Baltimore, Md., for appellants.

R. R. Farr, of Fairfax, W. W. Millan, of Washington, D. C, and C. Vernon Ford, of Fairfax, for appellees.

PRENTIS, J. We think it unnecessary to recite the numerous pleadings or to attempt to summarize the mass of evidence which this voluminous record presents. It clearly shows that Caroline C. Gresham is entitled to recover the amount decreed in her favor by the trial court, and this is a controversy between the different sureties on the bonds of her successive guardians as to which is responsible therefor. Her original guardians were her mother, Fanny W. Gresham, and her brother, Curtis E. Gresham, who gave as surety the American Bonding & Trust Company of Baltimore, which changed its name to the American Bonding Company of Baltimore, hereinafter called the Bonding Company.

Fanny W. Gresham died in October, 1907, so that at that date Curtis E. Gresham became the sole guardian of the complainant. The last settlement of the guardianship account was made September 20, 1908, and it showed a balance of $3,645.30, due the infant as of September 1, 1900. At the November term, 1911, of the circuit court of Fairfax county, upon the application of the Bonding Company, the surviving guardian, Curtis E. Gresham, being then in default, insolvent, and unable to settle with an older sister of his ward, for whom he was also guardian, with the same surety, was removed, and Samuel W. Cockrell, of Washington, D. C, was appointed guardian of Caroline C. Gresham in his place and stead, and the American Surety Company of New York, hereinafter called the Surety Company, became his surety. The order of removal expressly provided that it should not affect any liability of the Bonding Company as surety which had accrued prior to that time, and this would doubtless have been true if it had not so specified.

The first guardian neither paid the amount then due nor settled his accounts, and died before this suit was instituted. The trial court held the Bonding Company, as his surety, responsible therefor, and dismissed itscross-bill, which sought to hold the new guardian and the Surety Company as his surety responsible for the loss.

These facts appear: Long before his removal as guardian Curtis E. Gresham owned a house and lot in the city of Washington, upon which he had executed two deeds of trust, one to secure $3,000, constituting the first lien, and the other to secure to his mother, who was his coguardian, $2,000, constituting the second lien thereon. He afterwards conveyed the property to his mother subject to the two liens; then she died and devised it to her daughter, the complainant. Gresham was also the executor of his mother's will, and instituted a suit in the circuit court of Fairfax county for its construction. In that suit there was a commissioner's report, and in response to the inquiry as to the interest of the infant defendant relative to the $2,000 lien on the property referred to the commissioner reported this:

"This $2,000 trust was put on the Ingleside property to secure the infant, Caroline C. Gresham, money due her by her guardian, and it is to her advantage to take the property subject to the said $2,000 trust."

The cause was heard at the May term, 1911, upon that report, which referred to many other matters, and a certain exception thereto, having no relation to this controversy, was sustained. In other particulars the report was confirmed, but the decree uses this language:

"The court * * * doth further establish that the estates of Fanny W. Gresham and C. E. Gresham are jointly and severally liable for the entire amount shown to be due by the said guardians' account. In other particulars the said report is confirmed. * * * "

Upon this decree the appellant bases the claim that the property in Washington city then and thereby became the property of the infant, Caroline C. Gresham; that it was a final decree, binding because never appealed from by her; and that it establishes a credit on the guardianship account for $2,-000, and. imposed upon the new guardian, who was appointed thereafter in November, 1911, the duty to take charge of the property and collect the rents therefrom. As it appears to us, the most casual consideration of this decree will show that none of these claims are justified. As to the title to the property, the court had no jurisdiction whatever, because the courts of Virginia have no jurisdiction over titles to real estate in the District of Columbia. The decree does not undertake to assert such jurisdiction or to direct any action whatever. The property had been devised to Caroline C. Gresham, subject to the liens, and, while it is claimed that at that time it was worth $5,300, there is no sufficient evidence in the record to sup port that view. In addition to this, it is shown that the estate of the testatrix was insolvent. That the decree should not be so construed is apparent from the fact that upon its face, instead of authorizing such a credit, it held the estate of the testatrix and the surviving guardian jointly and severally liable for the entire amount shown to be due by them, and in this amount was included the $2,000 which was due by her co-guardian, Curtis E. Gresham. The suit was brought for the construction of the will, had only remote connection with the guardianship account, and no provision whatever was made in the decree for the settlement of the prior lien of $3,000 which rested upon the property. Just what the decree did mean, so far as it affected the rights of this infant, may not be clear; but the then guardian did not construe it either as having any effect whatever upon the title to the property, or as the basis of a credit upon his guardianship account. The $2,000 involved was his personal obligation, which has never been satisfied.

We must not forget that the issue here involved is whether the Bonding Company or the Surety Company is primarily liable for the balance due. We do not now inquire as to the default, if any, of the second guardian, Cockrell, and the consequent liability of the Surety Company, because the primary liability for the loss which was then apparent rests upon Greshani and his surety, and until his account is settled and the assets with which he is properly chargeable are accounted for to Cockrell, the new guardian, in whole or in part, the liability of his surety, the Surety Company, as between it and the Bonding Company, for the defaults of Cockrell, the second guardian, if they exist, does not attach. Whatever their responsibility to the infant may be, they have incurred no obligation to the former guardian and his surety, which relieves them of their liability previously incurred, and never discharged.

As stated, Gresham, the guardian, owed his mother, his coguardian, $2,000, and had secured it by a second lien on the real estate, and this debt, which he alleged belonged to the infant, still remains unpaid. Gresham's surety, the Bonding Company, is here claiming that Cockrell and his surety, the Surety Company, should be held accountable for the loss of a debt which its principal, Gresham, owed to his ward and has never paid. The Bonding Company, surety, is pleading the default of its own principal and his failure to account for funds for which it, the Bonding Company, assumed responsibility. This Washington city property was sold to satisfy the debt of the prior lienor after the new guardian had been appointed, as the result of which Gresham's wife ultimately acquired the legal title thereto, and it was made subject to two new liens for similar amounts and priorities, respectively, that is, a firstlien of $3,000 and a second lien of $2,000, and Gresham sent the note of his wife for $2,000, secured by this second lien, to Cockrell in response to his request for settlement, who declined to accept it without the approval of court. The property was again sold several years afterwards, and did not yield enough to pay anything upon this second lien, and the substituted debtor, the wife of Gresham, denies her liability for the amount under a statute of the District of Columbia.

The only other effort at a settlement made by Curtis Gresham was the sending to Cockrell of nine other notes of his wife, aggregating $960, secured upon certain lots in the District of Columbia, which were already subject to a prior lien for $450. Nothing whatever has been realized on these notes, most of the lots have been sold to satisfy the prior lien, and the record shows that these notes never had any substantial value.

There is much confusion and conflict in the testimony, but there can be little doubt about the facts stated. These facts are controlling, and fully justify the decree under review. As between different and several sureties on successive guardianship bonds, there can be no liability upon the surety for the second guardian on the second bond until there has been a settlement and delivery to its principal of the assets, or some part of them, for which the first guardian was then liable. He and his surety must remain primarily liable therefor until his obligation is discharged....