National Surety Co. v. Lyons

• Decision Date: 20 December 1926
• Docket Number: No. 7314.,7314.
• Citation: 16 F.2d 688
• Parties: NATIONAL SURETY CO. v. LYONS, County Treasurer.
• Court: U.S. Court of Appeals — Eighth Circuit

16 F.2d 688 (1926)

NATIONAL SURETY CO. v. LYONS, County Treasurer.

No. 7314.

Circuit Court of Appeals, Eighth Circuit.

December 20, 1926.

Rush C. Clarke and James G. Mothersead, both of Scottsbluff, Neb. (R. T. York and A. R. Honnold, both of Scottsbluff, Neb., on the brief), for plaintiff in error.

E. D. Crites, of Chadron, Neb. (F. A. Crites, of Chadron, Neb., on the brief), for defendant in error.

Before LEWIS, Circuit Judge, and MUNGER and FARIS, District Judges.

LEWIS, Circuit Judge.

The First National Bank of Harrison, Nebraska, was appointed depository of funds belonging to Sioux County in that State, and, as the State statute required, gave a bond with appellant as its surety, conditioned that the bank would keep all sums of money deposited with it by the treasurer of the county subject to his order and would pay the same over upon the written demand of said treasurer. The bond recited that the deposits should be subject to withdrawal by the county treasurer as the requirements of the county might demand, and that the amount on deposit might be increased or decreased from time to time as the treasurer might determine. The depository became insolvent at a time when there was on deposit with it funds to the amount of $35,395.70, and the county treasurer thereupon brought this action on the bond against the surety and asked judgment for damages in the full penal sum named in the bond ($30,000) and for a reasonable sum for plaintiff's counsel as attorney fees to be taxed as a part of the costs.

The answer alleged that the First National Bank of Harrison had an authorized capital of $50,000, that under the State statute the county treasurer was forbidden to make deposits in said bank in excess of 50 per cent. of the paid-up capital of the bank, that the statute made it criminal for him to exceed that limit and that appellant as surety was not liable in excess of that amount, to wit: $25,000.

A jury was waived and the case submitted to the court on an agreed statement of facts, which were substantially as they were stated in the pleadings. The court gave judgment for plaintiff in the sum of $30,000, the full amount named in the bond, found that $3,000 was a reasonable allowance as a fee for plaintiff's attorney in the cause and taxed that sum as a part of the costs against the defendant. To this action of the court objections were made and exceptions properly saved. The case was then brought here on writ of error, and counsel presents two questions, each one of law, as claimed error:

(1) Whether the surety was liable on the depository bond in excess of 50 per cent. of the paid-up capital stock of the bank — $25,000.

(2) Whether the plaintiff in the case (defendant in error here) was entitled to have an attorney's fee taxed as a part of the costs under the provisions of the Nebraska statute.

The first question is based on that part of section 6193, Comp. Stat. Neb. 1922, which reads:

"The treasurer shall not have on deposit in any bank at any time more than the maximum amount of the bond given by said bank in cases where the bank gives a guaranty bond, nor in any bank giving a personal bond more than one-half of the amount of the bond of such bank, and the amount so on deposit at any time with any such bank shall not in either case exceed fifty per cent. of the paid up capital stock of such bank."

The statute makes three limitations on the maximum of deposits, the third being cumulative of the other two; and they seem to be of equal importance. The statute also (section 6195) makes it a misdemeanor for the county treasurer to fail or refuse to do or perform any duty required of him by the statute. In view of the statute it is contended that the obligation of the surety on the bond was limited to $25,000, inasmuch as it was prohibited and made unlawful for the treasurer to have on deposit with the bank at any one time more than that sum; and it is claimed that the Supreme Court of the State has so construed the statute. If that be so we will, of course, follow the interpretation of the statute given to it by that court. It can hardly be said that the exact issue made in this case on the third limitation has been presented to that court, but it has considered this statute, the duties of the county treasurer under it and the obligation of a surety of the depository bank in several cases, and expressed its views on the purpose and effect of these limitations. In Cole v. Myers, 100 Neb. 480, 160 N. W. 894, the controversy was between two sureties, one for the depository bank and one for the county treasurer on his official bond, who had made an over-deposit, the total being $13,189.61. The bank's bond was in the penal sum of $10,000. It failed and the surety on that bond promptly paid to the county $10,000 as the amount of its liability, and to that extent procured an assignment of the deposit. Later the surety on the county treasurer's official bond paid the county the balance of the deposit, $3,189.61, took an assignment of that claim and also obtained assignment of the claim for the whole $13,189.61, which the county treasurer had filed with the receiver of the bank. In considering the respective rights of the two sureties to share in a dividend paid by the receiver on the whole amount of the deposit the court, in referring to the rights of the surety on the depository bank's bond said, after quoting the statute:

"The statute is by construction a part of the depository bond. Blaco v. State, 58 Neb. 557, 78 N. W. 1056. In entering into the contract of suretyship the surety had a right to assume that the treasurer would comply with the statute and limit his deposit to $10,000. The bond was given to protect legal deposits of county funds to the contractual and statutory maximum of $10,000 and not as security for an illegal deposit in excess of that sum."

The court further said in that case that the surety on the depository bond was not in any wise responsible for the wrongful act on the part of the county treasurer in making the excess deposit; and that the over-deposits were made in violation of law. That opinion was rendered in 1916. It will be noted that the court in that case said that the statute here relied upon is a part of the depository bond. We take that to be an announcement of the general principle that the law of the place where a contract is made becomes a part of the contract. That is, the contract is to be construed and its obligations determined according to the law of the place. 2 Williston on Contracts, § 516; Ogden v. Saunders, 12 Wheat. 213, 6 L. Ed. 606; Railroad Companies v. Schutte, 103 U. S. 118, 140, 26 L. Ed. 327; Tennessee Bond Cases, 114 U. S. 663, 688, 5 S. Ct. 974, 1089, 29 L. Ed. 281.

In Re State Treasurer's Settlement, 51 Neb. 116, 70 N. W. 532, 36 L. R. A. 746, the controversy was between the outgoing and incoming State treasurers. The former had made deposits in some of the depository banks in excess of the statutory limitation, and the latter, among other contentions, seems to have insisted that in the settlement between them the full amount of those deposits should be delivered to him in currency. He doubted whether the surety could be held at all for any amount in such instances. In considering the extent of liability of such depositories and their sureties on the bonds which they had given the court said:

"The depository law has fixed the maximum sum which the treasurer shall have on deposit in any bank at the same time at one-half of the amount of the bond executed by the bank. This is a limitation, not only upon the power of the treasurer to deposit, but restricts the bank from demanding a larger sum than one-half of the penal sum named in the bond. Were it not for this limitation, unquestionably a depository bank and the sureties upon its bond would be liable on the bond in case of a breach of its conditions, to the extent of the full penalty written in the bond. If the treasurer exceeds his duty by depositing a larger sum in a depository bank than he is authorized by law to do, it does not affect the liability of such bank and the sureties on its bond to repay to the State the sum deposited therein, in strict conformity to the requirements of the depository law, and the accretions thereof."

In State ex rel. v. People's State Bank of Anselmo, 111 Neb. 126, 196 N. W. 912, 198 N. W. 1018, it appeared that the county treasurer of Custer County had on deposit with the depository bank $44,000. Its capital stock was $15,000 and it became insolvent. The State had by statute provided for the creation of a guaranty fund from which depositors in failed State banks should be paid the amount of their claims, and the question was whether that fund was liable for payment of the amount deposited in the bank by the county treasurer in excess of 50 per cent. of the capital stock of the bank. The Act providing for that fund was held to have repealed the requirement of the statute with which we are now dealing, in so far as it exacted bonds from State banks as depositories. The attorney general conceded that the guaranty fund was liable for $7,500 of the $44,000 deposit, being 50 per cent. of the capital stock of the bank. He contended, apparently, that the guaranty fund stood in the place of the surety of the State bank under the prior law, and that $36,500 of the deposit having been made in the bank by the treasurer unlawfully, the guaranty fund could not be held for it. The trial court allowed the full amount of the deposit, to be paid out of the guaranty fund by the receiver. This action was reversed. The Supreme Court said:

"We are of the view that the provisions of section 6193, limiting the amount which a county treasurer may legally deposit in a bank to 50 per cent. of its paid-up capital stock, is still obligatory on the treasurer. This limitation was made for, and serves, a good purpose. If, then, the limitation is still effective, it follows as a matter...