American Surety Co. of New York v. Hill County

• Decision Date: 20 December 1924
• Docket Number: (No. 561-4043.)
• Citation: 267 S.W. 265
• Parties: AMERICAN SURETY CO. OF NEW YORK v. HILL COUNTY et al.
• Court: Texas Supreme Court

267 S.W. 265

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

(No. 561-4043.)

Commission of Appeals of Texas, Section A.

December 20, 1924.

Error to Court of Civil Appeals of Fifth Supreme Judicial District.

Action by Hill County and others against the American Surety Company of New York

and others. Judgment for plaintiffs was affirmed by Court of Civil Appeals (254 S. W. 241), and named defendant brings error. Affirmed.

O. L. Stribling, of Waco, and Phillips, Townsend & Phillips, of Dallas, for plaintiff in error.

Vaughan & Abney, of Hillsboro, and Sleeper, Boynton & Kendall, of Waco, for defendants in error.

CHAPMAN, J.

Prior to March 8, 1920, good roads districts Nos. 3, 6, 7, 10, and 12 in Hill county had voted road bonds in the aggregate of $904,000, and on dates ranging from September 8, 1919, to March 8, 1920, the commissioners' court of Hill county passed orders authorizing the issuance of said bonds.

Article 632, Revised Civil Statutes, which is a part of the special road law of Hill county, provides that such bonds when issued shall continue in the custody of and under the control of the commissioners' court, and that they shall be sold by said court at not less than their par value, and that the proceeds therefor shall be placed in the county treasury. The commissioners' court was unable to sell these bonds at par value.

On September 4, 1920, by order of the commissioners' court duly entered, the bid of Bibb & Hughes for all county work, to be paid for from the proceeds of sale of said bonds issued by said special road districts Nos. 3, 6, 7, 10, and 12, was accepted.

At and before the time when the bid of Bibb & Hughes for said work was accepted, and contract entered into, it was verbally understood and agreed between the commissioners' court and W. S. Bibb, Jr., that the road bonds would be delivered over to W. S. Bibb, Jr., without his paying any money therefor, and that he should sell them at discount and pay for the bonds in four equal installments, one to be paid when the bonds were sold, and one installment to be paid every four months thereafter, and that the prices of the road work in the contracts between Bibb & Hughes and the commissioners' court for the construction of the roads in said special road districts should be increased by the estimated amount of the discount at which said bonds could be sold, and the contracts for the road work in said special road districts should embrace an additional amount to cover the estimated discount at which said bonds could be sold. Various orders were spread upon the minutes of the commissioners' court in an attempt to make the transactions between the Commissioners' court and Bibb and Bibb & Hughes appear to be regular.

Before the commissioners' court would deliver the road bonds to Bibb they required of him a bond to protect them against any default on his part in payment for the bonds, and on September 15, 1920, this bond in the sum of $500,000 was executed by W. S. Bibb, Jr., as principal, and the American Surety Company of New York as surety.

On September 21, 1920, W. S. Bibb, Jr., for himself, and for the partnership of Bibb & Hughes, entered into a contract with the American Surety Company of New York, and consented to by the commissioners' court of Hill county, Tex., whereby, when the road bonds were delivered by the commissioners' court, they were to be under the joint control of W. S. Bibb, Jr., and the American Surety Company of New York, and the proceeds from the sale of said bonds were to be under the same joint control.

About November 3, 1920, all the road bonds were taken to Chicago by W. S. Bibb, Jr., and a representative of the American Surety Company of New York, where they were sold by Bibb at 82 per cent. of the amount of said bonds and accrued interest, and the proceeds placed in bank subject to the joint control of W. S. Bibb, Jr., and the American Surety Company of New York.

Hill county, on its own behalf, and for the use and benefit of the several special road districts, brought suit against Bibb & Hughes and the American Surety Company of New York for the conversion of the road bonds. Certain banks alleged to be holding portions of the proceeds of the sale of the bonds were also made parties. The case was tried with a jury. There was some conflict in the evidence as to whether, at the time Bibb made sale of the bonds, the representative of the surety company knew what he was getting for them. The facts were submitted to the jury upon special issues. The issues submitted to the jury were as to whether W. S. Bibb, Jr., in his dealings with the commissioners' court of Hill county with reference to the road bonds were representing the copartnership of Bibb & Hughes.

The defendant, American Surety Company, requested that the following issues be submitted to the jury which were refused: First, as to whether the surety company exercised dominion or control over the bonds or acquired or held possession of them in denial of, or inconsistent with, the rights of Hill county or the road districts. Second, as to whether the surety company, through any of its agents, had notice or knowledge prior to Bibb's sale and delivery of the bonds that he had possession of them for the purpose of selling them for less than their par value. Third, whether the surety company assumed joint custody of the bonds for the purpose of aiding Bibb to sell them at a price below par. Fourth, whether the surety company knowingly participated in the sale which Bibb made of the bonds.

The jury found that Bibb, in his negotiations with the commissioners' court of Hill county, was acting for the copartnership of Bibb & Hughes. No verdict affecting the American Surety Company was found by the jury. It was agreed that the market value of the bonds at the nearest point to Hillsboro, at which there was a market value, was 82 per cent. of their face value.

Judgment was rendered against the banks mentioned for the part of the proceeds of the bonds that they held and against Bibb & Hughes and the American Surety Company of New York for $461,437.53, based on par value of the bonds. The judgment provided that plaintiff take nothing against Bibb and the surety company on the bond. The Court of Civil Appeals of the Fifth District affirmed the judgment of the district court. 254 S. W. 241. The American Surety Company of New York, by proper assignments, has raised in this court the following issues: First, that there was no conversion of the bonds by the surety company under any aspect of the evidence; second, that the measure of damages in this case, if damages be allowed, is the market value of the bonds which was agreed to be 82 cents on the dollar and not the par value of the bonds as found by the court; third, that, the case having been tried with a jury, there could be no valid judgment rendered against the surety company without a verdict of the jury either independently found by the jury or directed by the judge upon which to base such a judgment; fourth, that the bonds in question were issued pursuant to and for the purpose of carrying out a corrupt and fraudulent agreement between the commissioners' court and Bibb, and were therefore void from their inception and incapable of conversion as such; fifth, assignments were also based upon the refusal of the trial court to submit to the jury the four special issues above set out requested by the surety company.

We will consider the issues in the order mentioned. As to the first issue, we quote this from the answer of the surety company:

"For special answer, if so required, this defendant says that the consideration for the bond in the sum of $500,000, attached as Exhibit D to plaintiff's petition, was that the commissioners' court of Hill county and R. T. Burns, county judge of said county, should deliver the custody and control of the road bonds of the special road districts Nos. 3, 6, 7, 10, and 12 in said county, referred to in plaintiff's petition, to W. S. Bibb, Jr., for sale in the market at a cash price less than the par value, with accrued interest, of the bonds, and that the said W. S. Bibb, Jr., would pay into the county depository of said Hill county the proceeds of said bonds sold at less than their par value in four equal quarterly installments from and after the date of the sale of said bonds in the market, and said bond was executed by this defendant as a surety to indemnify said R. T. Burns, county judge of Hill county, Tex., and his successors in office against pecuniary loss (not exceeding the penalty in said bond) that said county judge as employer might sustain by reason of any act or acts of fraud, dishonesty, forgery, theft, embezzlement, wrongful abstraction, and willful misapplication on the part of said W. S. Bibb, Jr., of the...