First Virginia Bank-Colonial v. Baker

Decision Date11 March 1983
Docket NumberNo. 801487,BANK-COLONIAL,801487
Citation225 Va. 72,301 S.E.2d 8
PartiesFIRST VIRGINIAv. Margaret B. BAKER, Clerk of the Circuit Court of Henrico County, and Globe Indemnity Company. Record
CourtVirginia Supreme Court

Paul S. Bliley, Jr., Richmond (Browder, Russell, Morris & Butcher, P.C., Richmond, on briefs), for appellant.

Joseph P. Rapisarda, Jr., Asst. County Atty., Henry H. McVey, III, Richmond (William G. Broaddus, County Atty., McGuire, Woods & Battle, Richmond, on briefs), for appellees.

Before CARRICO, C.J., and COCHRAN, POFF, COMPTON and THOMPSON, * JJ. POFF, Justice.

This is a plaintiff's appeal from a final order sustaining a demurrer and pleas of the statute of limitations and sovereign immunity and dismissing the motion for judgment with prejudice. Our review is based upon the facts as pleaded and stipulated by the parties. The chronology of events is important.

Plaintiff First Virginia Bank-Colonial (the bank) agreed to loan Ramez M. Zahralddin and his wife $133,000 to be secured by a second deed of trust on their property. The title examination disclosed a deed of trust recorded February 13, 1973, securing payment of $33,250 to Heritage Savings and Loan (Heritage). The bank closed the loan and recorded its deed of trust on May 12, 1976.

On August 8, 1978, the bank learned for the first time that the Zahralddins had executed an additional deed of trust on their property, securing payment of $27,000 to the Small Business Administration (SBA). That lien, recorded September 28, 1973, was not discovered in the bank's title examination because one of the deputies in the office of the clerk of court had indexed the instrument on the wrong page of the grantor's index book.

The bank foreclosed under its deed of trust September 25, 1978. The net proceeds of sale amounted to $43,759.90. The bank paid Heritage $32,500 in satisfaction of its first lien and SBA $8,259.90 in satisfaction of its second lien.

On December 21, 1979, the bank filed a motion for judgment against Margaret B. Baker, Clerk of the Circuit Court of Henrico County (Baker), and Globe Indemnity Company (Globe), claiming damages "jointly and severally, in the sum of $8,259.90 with interest thereon from September 25, 1978". The bank alleged that the damages claimed were the "direct and proximate result of the negligence of the Defendant Baker or her duly appointed employees" and that "the defendant Globe as surety" was liable on its "Public Employees Blanket Bond".

Baker filed pleas of the statute of limitations and sovereign immunity. She also filed a cross-claim against Globe seeking indemnity "[i]f judgment is rendered against Baker". Globe filed a plea of the statute of limitations and demurred to the bank's motion for judgment and to Baker's cross-claim. As grounds for the demurrers, Globe alleged that its bond was an indemnity bond and that it was not liable "until the defendant, Baker, who is the insured under the bond has suffered a loss by the payment of funds".

In its final order dismissing the bank's motion for judgment, the trial court ruled that the bank's cause of action accrued on September 28, 1973, when the indexing error occurred; that it was time-barred by the five-year limitation prescribed by Code § 8-24; and that "even had the cause of action arisen on May 12, 1976 as the plaintiff contends it would still be barred by the one-year limitation prescribed by § 8-24" because "the damage suffered by the plaintiff was not of the nature that survived at common law". The court ruled that "the plea of sovereign immunity ... is well taken because the negligence alleged by plaintiff was committed not by Baker, but by one of her subordinates". Finally, the court sustained Globe's demurrers "because the bond upon which the defendant Globe is surety is an indemnity bond and does not provide a direct right of action for the plaintiff."

We consider first whether, as the bank contends, the trial court erred in sustaining Globe's demurrer to its motion for judgment. The underlying question is whether the bank had a direct right of action against Globe on its bond.

The "Public Employees Blanket Bond", posted pursuant to Code § 15.1-41, identified Globe as "Surety", County of Henrico, Virginia, and Commonwealth of Virginia as "Obligee", and the clerk of the circuit court as "Insured". The bond recited that "[t]he Surety ... agrees ... to indemnify the Obligee for the use and benefit of the Insured for ... [l]oss caused to the Insured through the failure of any of the Employees ... to perform faithfully his duties ...." An employee is defined as "a person while in the employ of the Insured ... who is not required by law to furnish an individual Bond ... and who is a member of the staff or personnel of the Insured". A rider provides that "[t]he attached bond ... shall also indemnify those officers of the Insured who are required by law to give individual bonds".

We agree with the trial court that this is an indemnity bond. 1 The bank's assertion of a direct right of action against Globe presupposes that it is a contract of surety. But a surety contract is a tripartite agreement among a principal obligor, his obligee, and a surety. The surety makes a direct promise to perform the obligation in the event the principal obligor fails to perform. As between the principal obligor and the surety, the ultimate liability rests upon the former, but the obligee has a remedy against both.

Where the bond is a joint and several obligation conditioned on the principal's performance of a contract, the principal's breach of contract gives rise to a remedy by action against the principal for the breach of the contract, and a remedy by action against the surety for the penalty of the bond. The remedies are not inconsistent, but are merely cumulative; both may be pursued at the same time until the plaintiff's damages are satisfied. Stated differently, a creditor's right to proceed against the surety exists independently of his right to proceed against the principal.

74 Am.Jur.2d Suretyship § 135 (1974) (footnotes omitted). See also Restatement of Security § 82 (1941).

Typically, a contract of indemnity is a bilateral agreement between an indemnitor and an indemnitee in which the indemnitor promises to reimburse his indemnitee for loss suffered or to save him harmless from liability. But the indemnitor makes no promise to perform the obligation undertaken by his indemnitee. And, although a stranger to the contract may have some consequential interest in the subject matter of the indemnity, he is not in privity with the indemnitor and has no standing to sue directly on the contract. See generally 41 Am.Jur.2d Indemnity § 41 (1968).

We hold, therefore, that the trial court properly sustained Globe's demurrer to the bank's motion for judgment, and Baker agrees. 2

The trial court sustained Baker's plea of sovereign immunity on the ground the indexing error was made by one of her deputies. But the negligence underlying the bank's claim was misfeasance of a ministerial duty, and the cloak of sovereign immunity does not cover such torts. See Hoggard v. Richmond, 172 Va. 145, 157, 200 S.E. 610, 615 (1939). Hence, Baker as principal was liable for the tort committed by her agent unless, as Baker contends, public officials are exempt from the doctrine of respondeat superior.

Denying the existence of such an exemption, the bank cites Stuart v. Madison, 5 Va. (1 Call) 481, 482 (1798). There, this Court said that "a Clerk [of court] and every other officer is answerable for all official acts of his deputy". 3 In support of the exemption, Baker relies, inter alia, upon City of Richmond v. Long's Adm'rs., 58 Va. (17 Gratt.) 375 (1867), where this Court held that a city was immune from liability for the negligence of the officials of a hospital created under the powers of its charter. In the course of its rationale, the court made collateral comment upon the liability of public officials for the conduct of their subordinates.

[Public] officers are held responsible for their own acts in the abuse or transgression of their authority, or in default of proper and reasonable care in the choice of their agents or in the superintendence of them in the discharge of their allotted duties. But it is now firmly established that the doctrine of respondeat superior does not apply to them.

Id. at 378. See also Sawyer v. Corse, 58 Va. (17 Gratt.) 230, 240-41 (1867).

We reaffirmed this principle, Baker says, in Lawhorne v. Harlan, 214 Va. 405, 200 S.E.2d 569 (1973). It is true that we noticed City of Richmond and Sawyer in our opinion in Lawhorne, but our rationale was grounded primarily upon sovereign immunity for the performance of discretionary duties rather than upon exemption from the doctrine of respondeat superior as Baker seems to believe. Id. at 407, 200 S.E.2d at 572.

We are of opinion Lawhorne, City of Richmond, and Sawyer are distinguishable from the case at bar. But insofar as they may be considered inconsistent with the rule in Stuart, those cases are expressly overruled.

Our decision to reaffirm the rule in Stuart rests upon the balance we strike between conflicting public-policy concerns. In City of Richmond, the exemption from the doctrine of respondeat superior was justified "on grounds of public policy lest the public service should suffer by subjecting public officers to a responsibility for subordinates, whom they must employ, and who are seldom under their immediate control." 58 Va. (17 Gratt.) at 381.

Public service is a privilege and an honor. Yet, we recognize that a public official bears myriad heavy burdens. In the discharge of his public trust, he necessarily must delegate many of his official duties, discretionary and ministerial, to subordinates. It is virtually impossible for him to maintain constant surveillance and supervision over the manner in which those duties are performed. Consequently, Baker reasons, to hold a...

To continue reading

Request your trial
81 cases
  • Riddick v. Watson
    • United States
    • U.S. District Court — Eastern District of Virginia
    • 25 November 2020
  • McDonald v. Dunning
    • United States
    • U.S. District Court — Eastern District of Virginia
    • 25 March 1991
    ... ... Civ. A. No. 90-691-A ... United States District Court, E.D. Virginia, Alexandria Division ... March 25, 1991. 760 F. Supp. 1157 ... There, police first searched plaintiff, then brought him to a magistrate at the ADC. The ... been deprived of a right `secured by the Constitution and laws.'" Baker v. McCollan, 443 U.S. 137, 140, 99 S.Ct. 2689, 2692, 61 L.Ed.2d 433 ... breach") (footnotes omitted); see also First Virginia Bank — Colonial v. Baker, 225 Va. 72, 301 S.E.2d 8 (1983) (holding clerk of county court ... ...
  • Patterson v. City of Danville
    • United States
    • Virginia Supreme Court
    • 7 July 2022
  • Thorsen v. Richmond Soc'y for the Prevention of Cruelty to Animals
    • United States
    • Virginia Supreme Court
    • 2 June 2016
  • Request a trial to view additional results
1 books & journal articles

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT