Brooke v. Am. Sav. Bank of Muscatine

• Decision Date: 12 February 1929
• Docket Number: No. 38254.,38254.
• Citation: 207 Iowa 668,223 N.W. 500
• Parties: BROOKE ET AL. v. AMERICAN SAV. BANK OF MUSCATINE ET AL.
• Court: Iowa Supreme Court

207 Iowa 668

223 N.W. 500

BROOKE ET AL.

v.AMERICAN SAV. BANK OF MUSCATINE ET AL.

No. 38254.

Supreme Court of Iowa.

Feb. 12, 1929.

Appeal from District Court, Scott County; Wm. W. Scott, Judge.

Action to recover on a guardian's bond. Judgment was entered in favor of plaintiff against the Federal Surety Company in the sum of $23,030.70. The surety appeals. Affirmed.

On rehearing, superseding former opinion 216 N. W. 88.

De Graff, J., dissenting.Cook & Balluff and Harold Hodges, all of Davenport, for appellant.

Bollinger & Block, of Davenport, and Robert Brooke, of West Liberty, for appellees.

WAGNER, J.

In February, 1903, Kirk Milnes was appointed guardian of the property of Abel Milnes, Jr., an incompetent, and qualified as such guardian by giving bond in the sum of $4,000, which bond was signed by Abel Milnes, Sr., the father of the ward. The surety on the aforesaid bond died in February, 1919, and the ward inherited from his father the sum of $16,830, which amount was paid to the guardian subsequent to February 23, 1920, on which date the guardian executed and filed with the clerk of the district court a new bond in the amount of $25,000, with W. J. Moore and Joseph Kingsbury as sureties.

On October 13, 1923, the guardian executed another bond in the sum of $30,000, with the defendant Federal Surety Company, as surety, which bond on the 22d day of October, 1923, was filed with, and approved by, the clerk of the district court. At no time did Moore or Kingsbury, the former sureties, by petition, ask to be relieved from their obligation as sureties on the $25,000 bond. On October 24, 1923, there was entered of record in said guardianship the following order: “Now on this 24th day of October, 1923, it appearing to the court that Kirk Milnes, guardian of said Abel Milnes, Jr., Incompetent, having filed a surety bond in the sum of $30,000.00 executed by the Federal Surety Company, the same is hereby accepted. It is further ordered by the court that said guardian be, and he is hereby ordered to file a report with this court before the sureties on the old bond are by the court released.” On December 6, 1923, the guardian filed what is designated “Eighth Report of Guardian,” wherein he states that he has furnished a bond with the Federal Surety Company as surety, which bond has been accepted and approved by the clerk of the court, and that, in order to show the condition of the estate of his said ward at the date of the substitution of the said Federal Surety Company in place of his original bondsmen, he files this report of his doings in said estate since the date of his last report, to wit, the 14th day of April, and up to the date of the execution of said new bond, to wit, the 13th day of October, 1923. On the following day, there was entered of record the following order: “Now on this 7th day of December, 1923, this matter comes on for hearing upon the eighth progressive report of Kirk Milnes, guardian of Abel Milnes of unsound mind; and the court having examined said report and being fully advised in the premises, it is therefore ordered by the court that the final report under the old bondsmen and accounting up to October 13th be, and the same is hereby, approved.” On December 29, 1923, there was entered of record the following additional order: “Now on this 29th day of December, A. D. 1923, this matter comes on for hearing before the court for the release of old bondsmen, and it appearing to the court that the guardian having filed in this court on October 22d a bond of the Federal Surety Company, it is therefore ordered by the court that the old bondsmen, W. J. Moore and Joseph Kingsbury, be and they are hereby released and discharged as such.”

Kirk Milnes, the former guardian, died December 9, 1924, and the defendant American Savings Bank of Muscatine is the regularly appointed, duly qualified, and now acting administrator of his estate. Upon the death of Kirk Milnes, the plaintiff Robert Brooke was appointed guardian of the property of the ward, and with the authority of the court he brings this action to recover on the bond. Shortly after the commencement of this action, the ward died, and J. E. McIntosh was appointed and qualified as administrator of his estate, and he joins as a party plaintiff herein.

The case was tried to the court, without a jury, on an agreed stipulation of facts. At the conclusion of the trial, the court rendered judgment in favor of the plaintiff and against the Federal Surety Company in the sum of $23,030.70, with interest and costs. From this action of the trial court, the defendant Federal Surety Company appeals.

In the former guardian's written application to the appellant for the bond appears the following questions and answers: “Are you indebted to the estate?” “Yes.” “If so, give particulars.” “Mtg. of $18,000.00 described above.” At the time of the trial, the parties made the following concession: “That substantially all of the guardianship estate was appropriated to his own uses by himself (Kirk Milnes) before the 13th day of October, 1923, but this does not include a $1,000.00 Liberty Bond and the interest coupons attached thereto.”

On the merits of the case, the appellant's sole contention is that the bond upon which it is surety is a “substitute bond,” and that it is not liable for any defalcation or devastavit which occurred prior to the date of its execution.

[1] We will first inquire as to whether or not the bond executed by appellant as surety is or can be, under the law, a “substitute bond.” Unless the liability of Moore and Kingsbury on the former bond for future acts of the guardian was superseded by the liability of the appellant on the bond in suit, then there was no “substitute bond.” The former sureties, Moore and Kingsbury, were not relieved from liability for either the acts of commission or omission by the former guardian, unless they have been legally released or discharged. In Bookhart v. Younglove (Iowa) 218 N. W. 533, we said: “The object of a bond is security to those who are interested in the property settlement of the estate. The law requires the bond for their protection, and the parties interested acquire a vested interest in the bond which cannot be divested without their consent, except in the manner prescribed by law.” We further said, in Bookhart v. Younglove, supra, “It is generally held by the courts that, where the Legislature has provided a statute authorizing the release of sureties, its provisions must be strictly complied with, in order that the release may be effective. * * * ‘The courts have no power to waive compliance with the statute, but the surety, in seeking to avail himself of its benefits, must comply with its provisions. * * * The proceeding to release sureties is statutory and of a summary character, requiring no notice to the parties ultimately entitled to the fund, and the statute cannot be extended, by construction, to authorize the discharge of a surety on the application of the principal in the bond, in the absence of any provision in the statute authorizing it.’ * * * The courts generally declare that, where the statute provides that the surety may apply for the release, or contemplates that the initial step for obtaining release must be taken by the surety, the proceeding asking for his discharge must be on his petition.”

[2][3][4][5][6] In so far as the present litigation is concerned, the statutory authority for release of sureties on a bond is found in sections 1283, 1284, 1285, of the Code of 1897, and sections 1177a and 1177b of the Supplement to the Code of 1913, all of which statutory law is set out and referred to in Bookhart v. Younglove, supra. When the surety on a bond desires to be released, the first step toward obtaining jurisdiction for said relief is a petition by, or in behalf of the surety. It is conceded in the instant case that neither Moore nor Kingsbury petitioned the court for the discharge of the bond on which they were sureties, nor for the execution of the new bond sued upon herein. Therefore the requisite initial jurisdictional step toward the release of Moore and Kingsbury as sureties was never taken. The courts have no power to waive strict compliance with the statute. Clark v. American Surety Co., 171 Ill. 235, 49 N. E. 481. While it is true, as held in the Bookhart Case, that there may be a valid release of sureties on a bond as to interested parties consenting to the order of discharge, yet there can be no valid order of discharge of a surety by the court without strictly complying with the statutory authority or without the appearance by the interested parties and giving their consent to the order of discharge. In the instant case, the statutory authority was not complied with. The interested party was Abel Milnes, Jr., an incompetent, a person of unsound mind. On account of his disability, he could not appear and consent to the release of Moore and Kingsbury as sureties. The burden is upon the appellant to show that there is a valid release of Moore and Kingsbury before it has established the facts upholding its contention that the bond signed by it is a “substitute bond.” Under the record of this case, there has been no valid release or discharge of the liability of Moore and Kingsbury, sureties on the former bond, and we said in the Bookhart Case: “In the numerous authorities from other jurisdictions hereinbefore cited, it is held that where there is an attempt to procure the release of the sureties upon the first bond, without following statutory procedure or without the consent of the interested parties, a second bond voluntarily given under said conditions is only additional security.”

Taylor v. Taylor, 66 W. Va. 238, 66 S. E. 690, 19 Ann. Cas. 414, and Central Banking & Security Co. v. United States Fidelity & Guaranty Co., 73 W. Va. 197, 80 S. E. 121, 51 L. R. A. (N. S.) 797, are companion cases. Three surety companies signed successive bonds for the...