Commissioners of Leonardtown v. Fidelity & Cas. Co. of New York

• Decision Date: 12 November 1970
• Docket Number: No. 94,94
• Parties: The COMMISSIONERS OF LEONARDTOWN v. The FIDELITY AND CASUALTY COMPANY OF NEW YORK.
• Court: Maryland Court of Appeals

Page 532

259 Md. 532

270 A.2d 788

The COMMISSIONERS OF LEONARDTOWN v. The FIDELITY AND CASUALTY COMPANY OF NEW YORK.

No. 94.

Court of Appeals of Maryland.

Nov. 12, 1970.

On 10 October 1949 the appellee, the Fidelity and Casualty Company of New York (the Surety Company) had written an official bond for Loker in the sum of $10,000, naming the Town as obligee. In 1966, after Loker's defalcations had been discovered, but before he had been convicted, the Town brought suit in the Circuit Court for St. Mary's County against Loker as principal and the Surety Company as surety on the bond. The case was removed to the Circuit Court for Calvert County, but trial was delayed pending the conclusion of the criminal proceedings. On 17 November 1969, the Town moved for summary judgment against Loker, which was unopposed, and judgment was entered in the Town's favor for $79,241.33. The case went to trial against the Surety Company on a stipulation of facts. From a judgment in the Town's favor against the Surety Company for $10,000 with interest from the date suit was brought and costs, the Town has appealed.

The threshold question is a narrow one: was the bond a cumulative one, in which case the Surety Company could be held for Loker's defalcations up to a limit of $10,000 in each of his one-year terms of office, or was the bond a continuing one, in which case the Surety Company's responsibility would be limited to $10,000, regardless of the total of the preculations which took place during the 14 years the bond was in force?

The resolution of this problem requires the recital of certain additional facts. Public Local Laws of St. Mary's County (1965) (the Statute) § 101 provides for the appointment of a Clerk and a Treasurer by the Commissioners of the Town:

'The said Commissioners may meet and adjourn from time to time as they shall see fit, and at their first meeting after each election shall choose from their own body a president, who shall preside at their meetings, vote on all questions before them and remain in office until superseded by the appointment of a new president or until after a new election of Commissioners. They may also appoint a clerk to their Board, who may be one of their members, also a treasurer, who may be one of their members, and one and the same person may act as clerk and treasurer. Any of the above-named officers shall be subject to removal by a vote of the majority of the whole number of Commissioners, and the Commissioners shall prescribe the duties of clerk and treasurer and fix their compensation by ordinance, when not otherwise prescribed by this sub-title.'

The immediately following § 102 of the Statute prescribes the duties of the Treasurer and requires that he give bond:

'The treasurer shall receive all moneys that may be collected for taxes, fees, fines or otherwise, by any law or ordinance directly or through the bailiff, collector or otherwise, and all such moneys shall be paid out only by order of the Commissioners. He shall subscribe to an oath for the faithful performance of his duties, and give bond to the State of Maryland in the sum of at least six hundred dollars, to be approved by the Commissioners, conditioned for the faithful discharge of his duties and such other condition as the Commissioners may prescribe, and his books shall be open to the inspection of the Commissioners and any taxpayer; and he shall, on or before the first day of May in each and every year, render a succinct and detailed statement of his receipts and disbursements for the fiscal year.'

It was stipulated that Loker was first appointed Clerk and Treasurer by the Commissioners on 3 August 1948, and was reappointed at their 1949 organizational meeting to serve for a term of one year. For some unexplained reason, he seems not to have got around to providing the required bond until 10 October 1949. When he did, he arranged for Bond No. 2247794 to be written by the Surety Company for a 'term of office beginning on August 31, 1949 and ending on August 31, 1950' in the amount of $10,000, which named the Commissioners of the Town as obligee. Thereafter, in about June of each year, Loker would submit his resignation to the Commissioners at their organizational meeting and would be reappointed. Before October of each year, commencing in 1950 and until 1962, a premium notice referring to Bond No. 2247794 would be sent by the Surety Company to the Commissioners of the Town. ¹ In each case, the notice bore the following legend:

'This premium is paid and is accepted upon the express stipulation that the liability of the Company under the bond herein described shall not be cumulative, and that in no event shall the aggregate liability of the Company for any one or more defaults of the Principal, during any one or more years of the suretyship under the said bond, as extended by this or any other extension of the term thereof, exceed the amount set forth in said bond or any existing certificate changing the amount of said bond.'

The annual premium of $100 was paid by the Town upon receipt of the notice.

An audit completed in September 1963 developed a discrepancy of some $10,000 in Loker's accounts, for which Loker acknowledged responsibility and made restitution. One month later Bond No. 2247794 was cancelled and Loker arranged to provide a new bond, No. F-177598, in the penal sum of $15,000, also written by the Surety Company for the year commencing 10 October 1963. In connection with the issuance of the new bond the Surety Company required a certificate from the Town that Loker's accounts had been examined and were found to be in good order. It was a further audit made in 1964, respecting years prior to 1963, that developed the enormity of Loker's peculations. Bond No. F-177598 was cancelled as of 1 July 1964 at the request of the Town, and is not at issue in this case.

That Bond No. 2247794 written by the Surety Company was at variance with the requirements of § 102 of the Statute is not disputed. The bond was in the penal sum of $10,000 which exceeded the statutory minimum of $600, presumably at the instance of the Commissioners, although the record does not reflect any formal action by the Commissioners. The Obligee named by the bond was the Commissioners, and not the State, as required under the Statute. Finally, Loker's term was stated to begin on 31 August, yet the anniversary date of the bond was 10 October, and neither date was consistent with the day in early June when Loker's successive one-year terms actually commenced. These discrepancies were not deemed material by the lower court, and the point was not pressed on appeal.

Whether an official bond is to be construed as cumulative or continuing rests largely on the circumstances of each case. Had Loker furnished a new bond each year, either of his own volition (absent an unambiguous provision to the contrary) or in compliance with a statutory mandate, the bond might have been regarded as cumulative. Had the bond been written for an indefinite term and renewal premiums been paid each year, the bond would be regarded as a continuing one, unless it was clearly otherwise provided.

However, when a fidelity bond is issued for a definite term and is periodically renewed by certificates which refer to and adopt the terms of the original instrument, particularly when the renewal notice, as the Surety Company's did, clearly provides that the premium is accepted for the renewal of...