Clinton County v. Smith

• Citation: 141 S.W. 1091,238 Mo. 118
• Parties: CLINTON COUNTY v. SMITH et al.
• Decision Date: 29 November 1911
• Court: Missouri Supreme Court

141 S.W. 1091

238 Mo. 118

CLINTON COUNTY v. SMITH et al.

Supreme Court of Missouri. Division No. 1.

November 29, 1911.

1. LIMITATION OF ACTIONS (§ 155)—PAYMENT BY PRINCIPAL—EFFECT ON SURETY.

Where defendant as a surety signed a bond conditioned upon the repayment of school fund money borrowed from a county, the principal and surety were joint payors, and payments by the principal stopped the running of the statute of limitations as to the surety.

2. PRINCIPAL AND SURETY (§ 149)—RIGHTS OF THIRD PERSONS—LACHES.

Where a bond with sureties, conditioned upon the repayment of school fund money borrowed from a county, was executed in favor of the county, delay in enforcing the bond against the principal short of the statutory period of limitations did not bar the right of enforcement against sureties, for they and the principal were joint obligors so far as the county was concerned, and the surety had the right to pay the obligation, and look to his principal for reimbursement.

Appeal from Circuit Court, Clinton County; John G. Park, Special Judge.

Action by Clinton County, to the use of township 54, range 30, against Elias T. Smith and E. C. Hall and another. From a judgment for plaintiff, defendant Hall appeals. Affirmed.

This was a suit brought by the relators against the appellants on a school bond, executed by E. T. Smith as principal and E. C. Hall and Daniel Smith sureties, to recover the amount due thereon. The bond was for $500, bearing 8 per cent. interest, and was secured by a mortgage or deed of trust upon certain real estate described in the pleadings.

The suit was brought after various payments of the principal and interest had been paid; also after the real estate had been sold under the deed of trust, and the proceeds thereof had been credited thereon. There was still due thereon at that time approximately the sum of $714.55. The trial was had before the court without the intervention of a jury, which resulted in a judgment for the respondents and against the sureties for the penalty of the bond, and 8 per cent. interest thereon until paid. E. T. Smith, the principal, was never served, and Daniel Smith suffered a judgment by default against him. After unsuccessfully moving for a new trial, and in arrest of judgment, Hall appealed to this court.

The bond sued on was in the following words and figures: "State of Missouri, County of Clinton. Know all men by these presents, that we, Elias T. Smith, as principal, and ___, as sureties, jointly and severally firmly bind ourselves and our respective heirs, executors and administrators to the county of Clinton, state of Missouri, in the sum of $500.00, to be paid to said county for the use and benefit of the school fund of township 54, range 30 of said county, to the payment whereof we jointly and severally bind our heirs, executors and administrators firmly by these presents. Sealed with our seals and dated the 1st day of September, A. D. 1890. The conditions of this bond are: That whereas, the said Elias T. Smith, principal, has this day borrowed from said county the sum of $500.00, belonging to the capital school fund of township 54, range 30 of said county, which said sum of money the said principal and sureties agree to pay to said county for the use and benefit of the said township school fund on or before the ___ day of ___, A. D. 18—, with interest thereon from the date hereof until paid at the rate of eight per cent. per annum, said interest to be paid annually on the ___ day of ___ of each and every year until the whole debt shall be paid off and discharged: Now, therefore, if the principal and sureties shall well and truly pay or cause to be paid the said sum of money borrowed and the interest thereon according to the tenor and effect of this bond, then this obligation shall be void; otherwise, it shall remain in full force. But it is expressly agreed and understood that all interest not punctually paid when due, shall, when due, be added to the principal and shall bear interest at the same rate as the principal until paid. And it is further agreed and understood as a condition of this bond that should default be made in the payment of the interest when due, or should the principal of this bond fail to give additional security hereunto when lawfully required, in either case both the principal and interest shall become due and payable." Then followed the signatures of the parties. While the bond is not dated, yet the petition stated and the evidence showed that the bond was executed on September 1, 1890.

Counsel for appellant Hall asked the following declarations of law, which were by the court refused:

"(1) The court, sitting as a jury, declares the law to be that under the pleadings and evidence in this case the finding must be for the defendant E. C. Hall.

"(2) The court, sitting as a jury, declares the law to be that under the evidence the liability of the defendant E. C. Hall on the instrument sued on was a collateral liability, and that the payment of part of the interest thereon by the principal, E. T. Smith, did not prevent the running of the statute of limitations as to the said defendant E. C. Hall.

"(3) The court, sitting as a jury, declares the law to be that if the court finds that the defendant E. C. Hall was surety on the bond sued on, and further finds that by the laches of the plaintiff or its agent, the county court, the said E. C. Hall was injured, then such surety should be relieved from liability to the extent of such injury, if any."

The court made a special finding of facts and gave certain conclusions of law, which were as follows: "I have carefully considered the defense based upon the statute of limitations. The bond is dated September 1, 1890, and the penalty of $500. Mr. Smith, the principal, on January 7, 1891, paid $13.30; February 3, 1892, $40; October 5, 1897, $70; October 7, 1903, $20; December 9, 1904, $20; April 3, 1906, $200; and the sale of the mortgaged premises produced a net credit on the bond of $192.20, December 5, 1906. Mr. Hall has paid nothing on the bond, and has never acknowledged the debt. In this case Daniel Smith's and E. C. Hall's signatures appear at the foot of the instrument after Elias T. Smith's, and, although the recitals do not show in what capacity Daniel Smith and Mr. Hall acted, they are, beyond question, not principals, but sureties; but, being sureties, signing the bond with their principal, and at the same time, they made the identical contract which he made, and, under the issues here, are bound to the precise extent to which he is bound. They are all payors and comakers. There is therefore no escape from the conclusion that this case is governed by Vernon County v. Stewart, 64 Mo. 408 , the 10-year limitation (section 4272, R. S. 1899) is not available to defendants, and the finding and judgment must be for plaintiff.

"Plaintiff has alleged that the amount due on the bond was on September 21, 1906, $714.55. A computation of principal, interest, and credits shows that on June 10, 1904, when action was brought, $685.92 was the amount of the debt. The best authorities are to the effect that the liability of the surety at the time recourse is had to the bond is limited to the penalty of the bond. If, after that, the surety fails or refuses to pay, he is liable for interest and damages for detention of the fund. 27 Am. & Eng. Ency. of Law (2d Ed.) 453; Brighton Bank v. Smith, 12 Allen (Mass.) 243, 90 Am. Dec. 144; Pa. Ins. Co. v. Swain, 189 Pa. 626, 42 Atl. 297; Folz v. Trust Co., 201 Pa. 583, 51 Atl. 297; Thomas Laughlin Co. v. Surety Co., 114 Fed. 627, 51 C. C. A. 247. Judgment, therefore, will go for the plaintiff for the amount of the penalty of the bond, with interest after service of summons, June 12, 1907, at 8 per cent. per annum, the contract rate, $538.55."

W. S. Herndon and E. C. Hall, for appellant. Lester B. Hooper, for respondent.

WOODSON, J. (after stating the facts as above).

1. Counsel for appellant make and discuss many legal propositions in their briefs, but, in the view we take of the case, it is only necessary to notice two of them, namely, the statute of limitations and the alleged laches of the plaintiff in not bringing its suit at an earlier date.

We will consider those questions in the order stated. The record shows that E. T. Smith, the principal in the bond, made the following payments at the dates stated, namely: January 7, 1891, $13.30; February 3, 1892, $40; February 6, 1893, $40; January 15, 1894, $40; October 5, 1897, $70; October 7, 1903, $20; December 9, 1904, $20; April 3, 1906, $192.20, the proceeds of the sale of the land under the deed of trust. This record shows that, instead of those payments being indorsed upon the bond, the clerk of the county court, whenever a payment was made, would give Smith, the principal in the bond, credit therefor on the records of the court.

From that course of dealing, counsel for appellant Hall seem to have reached the conclusion that Smith, the principal in the bond, was indebted to the county for the use of the school district on an open account, and that the bond sued on and executed by T. E. Smith and the sureties was only a collateral agreement to pay that account. Manifestly that is the view of appellant's counsel, as clearly appears from the second declaration of law asked by them. With all due respect for their ability and legal learning, we are constrained to take a different view of the transaction. The record nowhere shows that T. E. Smith was indebted to the county on account for any sum for any purpose, but it does show that he borrowed from the...