American Surety Co. v. First Nat. Bank

• Decision Date: 19 June 1919
• Docket Number: 3 Div. 394
• Citation: 203 Ala. 179,82 So. 429
• Parties: AMERICAN SURETY CO. OF NEW YORK v. FIRST NAT. BANK OF MONTGOMERY.
• Court: Alabama Supreme Court

82 So. 429

203 Ala. 179

AMERICAN SURETY CO. OF NEW YORK v. FIRST NAT. BANK OF MONTGOMERY.

3 Div. 394

Supreme Court of Alabama

June 19, 1919

Appeal from Circuit Court, Montgomery County; Leon McCord, Judge.

Action by the First National Bank of Montgomery against the American Surety Company of New York. Judgment for plaintiff, and defendant appeals. Reversed and rendered.

Stuart Mackenzie, of Montgomery, for appellant.

Steiner Crum & Weil, of Montgomery, for appellee.

MAYFIELD J.

Appellant was surety on the official bond of one Garland Kirven, a notary public and ex officio justice of the peace at Linden Marengo county, Ala. Kirven was also an attorney at law, and was, as such, engaged in negotiating loans. In this capacity he often acted as a broker, bringing the parties together and in a way representing both parties--borrower and lender. For this purpose he also acted as abstracter of titles and attorney to pass on titles. In this capacity he applied to one J.E. Brasfield for a loan to one D.W. Johnson, whom Kirven claimed to be a client of his, but who was in fact a fictitious person, and had no existence, except in the fraudulent fiction of Kirven's mind.

Brasfield having no knowledge of the fraud or fiction, agreed to make the loan to D.W. Johnson, provided sufficient security was given. Kirven forged notes and a mortgage on certain lands in Marengo county, purporting to be signed by D.W. Johnson, and payable to Brasfield, evidencing and securing the loan by Brasfield to Johnson, which notes and mortgage were accepted by Brasfield, who, believing them to be genuine and valid, made his check payable to the fictitious person, D.W. Johnson, for $2,500, in consideration thereof, and drawn on the Robertson Banking Company, of Demopolis, Ala. Brasfield sent this check to Kirven as the agent or attorney of the fictitious client, D.W. Johnson. Kirven then, for some reason, wrote appellee bank at Montgomery, Ala., with whom he had theretofore done business, that his fictitious client, whom he represented as residing near Linden, Ala., desired to open an account with the appellee. Appellee accepted the offer, believing the statements in Kirven's letter to be true. Kirven then sent appellee the check in question, purporting to be indorsed by the payee, D.W. Johnson, but which was in fact indorsed by Kirven, who also made out and sent with the check the signature card, purporting to be the signature of the fictitious payee, D.W. Johnson. The appellee bank accepted the same as a deposit, believing the check indorsements and signature card to be genuine and valid, and entered on its books an account with the fictitious person, D.W. Johnson, crediting him with the amount of the check, $2,500, and indorsed the check, guaranteeing all prior indorsements thereof. Appellee then forwarded the check to the drawee bank for collection, and it was in due course paid and charged to the account of Brasfield, the drawer of the check. In the course of time the account of the fictitious depositor in the bank of appellee was balanced by checks drawn against the account. These checks purported to be signed by the fictitious depositor, D.W. Johnson, but in fact were signed by Kirven, the same forger of the original note and mortgage, indorser of the check, and the signature card.

Before, or about the time of, the discovery of these forgeries and frauds on the part of Kirven, he committed suicide. When the mortgagee discovered the forgery and fraud of his notes and mortgage, and that his check was payable to a fictitious person, he brought suit against the payee bank, the Robertson Banking Company of Demopolis, and recovered judgment as for his loss and damages. See report of this case in 79 So. 651. Appellee bank, having indorsed the check and guaranteed prior indorsements thereof, which included the forged one by Kirven, acknowledged its liability to the Robertson Banking Company, and paid the loss and damages of the payee bank.

Kirven, who committed all the frauds and forgeries before stated, also, as notary public and ex officio justice of the peace, certified to the acknowledgment of the fictitious maker of the mortgage to Brasfield, which, of course, was false and fraudulent on his part as such officer. Appellant being surety on his (Kirven's) official bond, appellee brought this action against it as such surety to recover damages on account of such fraudulent acts on the part of Kirven as notary public and ex officio justice of the peace.

The original counts of the complaint first declared in the name of Brasfield for the use and benefit of appellee bank. Demurrers being sustained as to these counts, the complaint was amended by striking out the name of Brasfield as nominal plaintiff, and declaring in the name of appellee bank alone. Demurrers to the complaint as amended being overruled, the appellant pleaded the general issue and two special pleas--one, in substance, that plaintiff's loss was not the proximate result of the official wrong of the notary Kirven; the other, that plaintiff's loss was the proximate result of its own negligence. Demurrers were sustained to the special pleas, and the trial had on the general issue, on an agreed statement of facts, resulting in judgment for appellee.

Opinion.

The legal effect of official bonds in this state, for what purpose and for whose use and benefit they are executed, is in a large measure regulated by statute. Section 1500 of the Code is as follows:

"Legal Effect of Official Bond.--Every official bond is obligatory on the principal and sureties thereon--

"1. For every breach of the condition during the time the officer continues in office, or discharges any of the duties thereof.

"2. For the faithful discharge of any duties which may be required of such officer by any law passed subsequently to the execution of such bond, although no such condition is expressed therein.

"3. For the use and benefit of every person who is injured, as well by any wrongful act committed under color of his office as by his failure to perform, or the improper or neglectful performance of those duties imposed by law.

"4. The words, 'For the use and benefit of every person injured,' as used in subdivision 3, shall include all persons having a direct and proximate interest in the official act or omission, and all persons connected with such official act or omission by estate or interest."

To actions on official bonds the rule of law has been applied, as it is in many other kinds of actions, that only such damages are recoverable as are the natural and proximate consequence of the wrongful act complained of as injurious. Irion v. Lewis, 56 Ala. 190, 192; Bullock v. Ferguson, 30 Ala. 227. The law does not attempt to make reparation to all parties to the remotest degree, who are injured by a wrong committed by an officer; it is only the proximate injury, and not the remote ones, which the law endeavors to compensate. The remote ones it classes as damnum absque injuria. Dale v. Grant, 34 N.J.Law, 143, 149; Murphree on Official Bonds, § 468.

Mr Murphree says as a general rule a public officer, and a fortiori his surety, "is liable only to the person to whom the particular duty is owing." And the author adds that it is by no means sufficient to show negligence on the part of the officer and an injury to the plaintiff; it must be shown, also, that such negligence and consequent injury constituted a breach of some duty which the officer owed the plaintiff. This rule of course is and may be modified by statute to some extent; but so far as we know no statute has attempted...