Citizens' Bank Of Colquitt v. Am. Sur. Co. Of N.Y.

• Decision Date: 14 April 1932
• Docket Number: No. 8692.,8692.
• Citation: 164 S.E. 817,174 Ga. 852
• Parties: CITIZENS' BANK OF COLQUITT . v. AMERICAN SURETY CO. OF NEW YORK.
• Court: Georgia Supreme Court

174 Ga. 852

164 S.E. 817

CITIZENS' BANK OF COLQUITT .

v.AMERICAN SURETY CO. OF NEW YORK.

No. 8692.

Supreme Court of Georgia.

April 14, 1932.

Syllabus by the Court.

1. While the statute (8 Park's Code, 1922, Supp. § 1440(e) requiring county superintendents of schools to give bonds does not provide the conditions thereof, section 278 of the Civil Code of 1910 provides that all official bonds must be "conditioned, in all cases in which a different condition is not provided, faithfully to discharge, the duties of such office during the time he continues therein or discharges any of the duties thereof." The bond of the officer in this case was properly so conditioned, and was an official bond, and not a voluntary or common-law bond.

2. By statute (Civ. Code 1910, § 291, subd. 4) every official bond is obligatory upon the principal and surety thereon, "for the use and benefit of any person who is injured, as well by a wrongful act committed under color of his office, as by his failure to perform, or by the improper or neglectful performance of those duties imposed by law." This statute became an integral part of the bond of the county school superintendent.

(a) Sureties are chargeable with knowledge of the law, and are held to have executed official bonds with reference thereto.

(b) A statute providing that official bonds shall be for the benefit of persons injured by the principals must be read with the conditions of such bonds obligating the officials to well and truly perform the duties of their office, and refers to such liabilities as arise within the proper intendment of the obligation.

(c) If a person has been injured and has suffered damage by any wrongful act committed by an officer under color of his office, he can sue such officer personally or upon his official bond, and recover the amount of the damage.

(d) Color of office is "a pretense of official right to do an act, made by one who has no such right."

(e) Where the county superintendent of schools, in his official capacity, falsely and fraudulently certified as true and correct a resolution purporting to have been passed by the county board of education, and to authorize the negotiation of a loan of money to suchboard, no such resolution having in fact been passed by the board, and where that officer presented to the bank that resolution and a note for the loan, the note purporting to be signed by the president of the board, the signature of that officer being a forgery by the superintendent, and where the note was actually signed by the superintendent, and where, upon the strength of such resolution and note, the bank, in good faith and relying thereon, made a loan to the board, for which the bank delivered to the superintendent its cashier's check, payable to the order of the board, on which that officer in his official capacity indorsed in the name of the board and received the money thereon, which he did not apply-to the benefit of the board, but fraudulently converted to his own use, in consequence of which the bank lost the fund so loaned, because the loan was not authorized by the board as required by law, in consequence of which the bank could not recover on the note given therefor in the name of the board, such improper acts of the superintendent, done" under color of his office, in obtaining the loan, and his failure to apply the proceeds to the benefit of the board, rendered him and the surety on his bond liable to the bank for the loss of the funds so obtained.

(f) The surety cannot set up as a matter of defense that the bank could, by the exercise of due care, have discovered the improper and fraudulent acts of the principal, and thus have saved itself from loss.

BECK, P. J., and ATKINSON, J., dissenting.

Certiorari to Court of Appeals.

Action by Citizens' Bank of Colquitt against the American Surety Company of New York. Judgment for plaintiff was reversed by the Court of Appeals (44 Ga. App. 57, 160 S. E. 546), and plaintiff brings certiorari.

Judgment of Court of Appeals reversed, and case remanded with directions.

H. A. Wilkinson, of Dawson, and N. L. Stapleton, of Colquitt, for plaintiff in error.

Martin, Martin & Snow, of Macon, for defendant in error.

HINES, J.

This case is in this court upon the grant of the writ of certiorari to review the judgment of the Court of Appeals in American Surety Co. v. Citizens' Bank, 44 Ga. App. 57, 160 S. E. 546, 547. This bank brought suit against Otho Benton as principal, and the American Surety Company of New York as surety, upon the official bond of Benton as county school superintendent of said county. In its petition the plaintiff makes this case: On January 6, 1925, and at all times hereinafter stated, Benton was the duly qualified, elected, and acting county superintendent of schools for such county. He, as principal, and said company as surety, executed his official bond as such officer, as required by law, in the sum of $10,000. The condition of this bond was that Benton would "faithfully discharge all and singular the duties required of him by virtue of his said office." On or about March 6, 1928, the superintendent procured from the bank a school loan in the principal sum of $5,000, evidenced by a promissory note of said date, due December 31, 1928, with interest from date at 8 per cent. This note purported to be properly executed as required by law, and was accompanied by a certified copy of a resolution purporting to be that of the county board of education, which was in due form and in legal terms, and authorized the loan. Benton represented that said resolution had been passed by the county board of education and entered upon the minutes of the board. He as county school superintendent of said county certified this as a true and correct copy of the resolution so entered upon the minutes of the board of education. Said loan, upon the representation so made by the superintendent, was approved by the bank, and its cashier's check for the amount thereof, payable to the Seminole county board of education, was delivered to said superintendent. Benton was then the treasurer of the county board of education, the custodian of its funds, and the proper officer to receive its funds. Said check was indorsed in the name of the county board of education by Benton in his official capacity as superintendent, and the proceeds thereof were received by him in that capacity. The sum of $500 was paid on said note, and the payment of the balance thereof was extended by note to March 1, 1929. This extension was made upon the same representations, facts, and circumstances as the original loan. The bank acted in good faith, relying upon Benton's representations as such officer. All of said representations were false and fraudulent, and the funds thus procured by Benton were appropriated to his own use, and not used for the benefit of the county school board. Benton was, by virtue of his office as secretary of the county board of education, the custodian of its minutes, and the only officer authorized by law to certify the same. He was the custodian of the funds of said board, the only officer authorized to indorse checks, receive, and hold same, the only officer required by law to sign its notes and procure school loans; and in this matter he acted solely in his official capacity. The bank's funds were so procured by him while acting in his official capacity and under color of, and in the name of, his office. The resolution authorizing said loan, and the signature of J. T. Goree, as president of the county board of education, to the note given for said loan were forged by Benton. Petitioner prayed for judgment for the loss sustained by it, the balance due on the principal of saidnote of $4,500, interest thereon at 8 per cent. from March 1, 1929, $1,000 attorney's fees expended in this behalf, and $200 costs.

The surety company demurred upon the grounds: (1) The petition set forth no cause of action. (2) It is insufficient as a matter of law against the surety. (3) The plaintiff is not a proper party to maintain the suit. (4) Plaintiff cannot maintain an action on the bond. (5) Benton was not discharging the duties of his office in the execution of the note and in borrowing the money from plaintiff. (6) The resolution and the note executed by Benton, to which the name of J. T. Goree, president, was signed, is a forgery; and whatever loss the plaintiff sustained, if any, was by reason of its own negligence. (7) The law under which said bond was given contains no provision as to the condition of the bond of the officer, and is for that reason null and void, and the bond given under said law is null and void. This defendant demurred specially upon various grounds. The judge overruled the demurrer, and the surety company excepted. The Court of Appeals held that the judge erred in overruling the demurrer. The plaintiff in the petition for certiorari excepts on the ground that this judgment of the Court of Appeals is contrary to law. Plaintiff specifically excepts to the holding of that court that "a bank, when dealing with a county superintendent of schools and making a loan to the county board of education through him as the board's agent to negotiate the loan, was chargeable with notice of the fact that the county board of education had not, by resolution as required by law, authorized the loan, and that therefore any representations made by the county superintendent of schools to the bank with reference to his authority to make the loan and receive the money were not true, and that a certificate signed by the county superintendent of schools as secretary of the county board of education, certifying to the passage of the resolution by the board, authorizing him to obtain an advancement of money for and in behalf of the board, " whereby he obtained said funds, would not render his surety on said bond liable for the funds so procured upon said loan, and which became a loss to the bank. To this holding plaintiff...