Crews v. Am. Sur. Co. of N.Y.
| Decision Date | 04 March 1941 |
| Docket Number | Case Number: 29048 |
| Citation | 1941 OK 73,188 Okla. 486,110 P.2d 1108 |
| Parties | CREWS et al. v. AMERICAN SURETY COMPANY OF NEW YORK |
| Court | Oklahoma Supreme Court |
¶0 BANKS AND BANKING--Action for damages against State Bank Commissioner and surety on official bond for damages caused by certain acts of willful misconduct in office by commissioner--Sufficiency of petition as against demurrer of surety.
In an action against the State Bank Commissioner and the surety on his official bond conditioned upon the faithful discharge of the duties required of his office by law, a petition alleging facts showing that plaintiffs suffered damage by reason of certain acts of willful misconduct in office on the part of said commissioner in direct violation of his fixed statutory duties, held sufficient as against demurrer of surety.
Appeal from District Court, Garfield County; O. C. Wybrant, Judge.
Action by Ralph Crews et al. against the American Surety Company of New York and another. From order sustaining demurrer to petition and dismissing action, plaintiffs appeal. Reversed and remanded.
Albert L. McRill, of Oklahoma City, and M. F. Priebe, of Enid, for plaintiffs in error.
Simons, McKnight, Simons, Mitchell & McKnight, of Enid, for defendant in error.
¶1 The plaintiffs in error instituted this action, as plaintiffs, in the district court. Demurrers to their petition, amended petition, and second amended petition were sustained in regular order.
¶2 One Charles G. Shull, a former Bank Commissioner for the State of Oklahoma, was designated a defendant in the amended petitions, in addition to American Surety Company of New York, who was surety on his official bond. The demurrers sustained to the plaintiffs' pleadings were filed on behalf of said surety company. Consequently, the term "defendant," as hereinafter used in our reference to the parties as they appeared in the trial court, will refer only to the surety company.
¶3 The plaintiffs, having elected to stand upon their second amended petition, have brought this appeal from the order of the trial court sustaining the defendant's demurrer to same and dismissing the action.
¶4 The general question presented for decision is whether or not said pleading states facts sufficient to constitute a cause of action in favor of the plaintiffs and against the defendant.
¶5 In the pleading before us, the plaintiffs pray for the recovery against Charles G. Shull of damages in the sum of $94,500 for losses totaling that amount which they are alleged to have suffered in the Farmers State Bank of Garber, Okla., by reason of said Bank Commissioner's alleged official misconduct, and on the theory that said conduct constituted a breach of his official bond, also seek judgment against the defendant as surety thereon.
¶6 The substance of plaintiffs' alleged cause of action may be comprehended from the alleged facts hereinafter related. Their losses consist of a debt in the sum of $32,000 and certificates of deposit in the sum of $62,500, which said amounts the Farmers State Bank owed an account they had in said bank prior to its reorganization and merger with the Garber State Bank on January 7, 1931. The merger and reorganization was effected in accordance with a plan formulated by Bank Commissioner Shull. A part of said plan was a proposal that plaintiffs release their debt of $32,000 against the Farmers State Bank and upon the reduction of the capital stock of said bank to $50,000 that they purchase said stock of the reorganized bank and create a surplus for it in the sum of $12,500 with their $62,500 in certificates of deposit.
¶7 It is further alleged that Shull, by or through C. J. Alexander, who was in said Bank Commissioner's office, submitted his plan of merger and reorganization to the plaintiffs in December, 1930, and advised them that when said plan was carried out said Farmers State Bank would be in a sound and solvent condition.
¶8 After the merger and reorganization described and while the Farmers State Bank continued to operate as reorganized, Shull had his assistant, Pennington, examine said bank in June, 1931, and February and December of the year 1932. As a result of said examination, Pennington caused loans and discounts aggregating approximately $200,000 to be marked off from the assets of said bank, and after requiring a further reduction of its capital stock, said Bank Examiner took charge of said bank as an insolvent institution.
¶9 Plaintiffs' second amended petition contains allegations to the effect that said bank was, and was known by Shull to be, insolvent both before and after its reorganization. It was further alleged that before said reorganization said Bank Commissioner knew that it would still be insolvent after having been reorganized according to his plan.
¶10 As we understand plaintiffs' pleading, Shull's wrongful conduct as Bank Commissioner consisted of: (1) Formulating and putting into effect an unlawful plan of reorganizing the Farmers State Bank, whereby he permitted and approved the reduction and issuance of stock in an insolvent bank and induced or caused the plaintiffs to purchase said void and illegally issued stock; to pay into said insolvent bank the sum of $12,500 as surplus, and to release their claim of $32,000 against said bank, with willful intent to defraud them; and (2) making, approving, and promulgating a report of an examination of said bank made by his assistant, J. D. Pennington, which showed a much smaller impairment in the capital of said bank than actually existed, and listed as doubtful assets of said bank $135,000 in unsecured and uncollectible notes that were, and were known by Shull and the examiner to be, worthless; and (3) permitting said bank to operate in an unsafe and insolvent condition.
¶11 Before considering the question of whether Shull's alleged wrongful conduct constituted a breach of his bond, the question of whether such a breach entitles the plaintiffs to bring suit on said bond should first be determined. In urging a negative answer to this question, the defendant attempts to invoke the principle that "in the absence of statute, a suit on a bond can be maintained only by the obligee named therein . . . ." See American Surety Company of New York v. Steen, 86 Okla. 252, 208 P. 212; United States F. & G. Co. et al. v. Krow, 184 Okla. 444, 87 P.2d 950. The plaintiffs do not attempt to contradict the rule asserted, and they recognize that the only obligee named in the bond herein sued on is the State of Oklahoma, but they maintain that there is a statute which (as alleged in their second amended petition) controls the matter in the present instance. The statute referred to is section 95, O. S. 1931 (12 Okla. St. Ann. § 76), which reads as follows:
"When an officer, executor or administrator within this state, by misconduct or neglect of duty, forfeits his bond or renders his sureties liable, any person injured thereby, or who is, by law, entitled to the benefit of the security, may bring an action thereon in his own name, against the officer, executor or administrator...
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