Pennsylvania Co. for Insurance on Lives and Granting Annuities

• Decision Date: 30 January 1899
• Docket Number: 257
• Citation: 189 Pa. 626,42 A. 297
• Parties: Pennsylvania Company for Insurance on Lives and Granting Annuities, Committee of the Estate of Robert Creighton, a lunatic, Appellant, v. Charles M. Swain
• Court: Pennsylvania Supreme Court

42 A. 297

189 Pa. 626

Pennsylvania Company for Insurance on Lives and Granting Annuities, Committee of the Estate of Robert Creighton, a lunatic, Appellant, v. Charles M. Swain

No. 257

Supreme Court of Pennsylvania

January 30, 1899

Argued January 18, 1899

Appeal, No. 257, Jan. T., 1898, by plaintiff, from judgment of C.P. No. 4, Phila. Co., March T., 1898, No. 1517, on verdict for plaintiff. Affirmed.

Assumpsit upon a bond of suretyship. Case stated.

The facts appear by the opinion of ARNOLD, P.J., which was as follows:

It is undoubtedly the law that interest beyond the penalty in a bond for the faithful performance of a trust may be recovered in addition to the penalty. But when shall the charge of interest begin? The defendant was surety for the committee of a lunatic, and gave a bond for $2,500, the condition of which was that the committee should well and faithfully execute the trust in all lawful respects. The account of the committee was filed October 24, 1894, and the report of the auditor thereon, which was filed February 15, 1895, and duly confirmed, established the fact that the committee had not well and faithfully executed the trust, and that by reason of the default of the committee, the estate of the lunatic has as early as January 2, 1890, lost a sum of money much larger than the amount of the bond. Demand was made upon the surety on October 18, 1897, for the principal of the bond and interest from January 2, 1890, the time of default by the committee. The defendant offers to pay interest from the time when the demand was made upon him, to wit: October 18, 1897.

In Boyd v. Boyd, 1 Watts, 365, which was a suit on a bond given to secure a judgment, it was said: "It is clear that interest may be allowed from the time of demand, or where there has been forbearance at the request of a defendant, or where, as here, the interest was given from the time of suit." In Com. v. Forney, 3 W. & S. 353, it was decided that the sureties on an administration bond may be discharged on payment of the amount stipulated in the bond. Nothing was said as to the time when the payment should be made. In the case of the New York Life Ins. Co. v. Seckel, 8 Phila. 92, it was said by SHARSWOOD, J "Beyond the penalty of the bond there can be no recovery against the sureties so far as the principal of the claim is concerned; but there is no reason why interest should not be allowed on the amount of the penalty from the date of the breach." When, therefore, is the date of the breach? In Hughes v. Hughes, 54 Pa. 240, the bond was for the payment of money at a certain time, the action was for the debt by the obligor, and not for the penalty of the bond, and it was held in an action against the administrator of the obligor, that a greater sum then the penalty might be recovered. Weikel v. Long, 55 Pa. 238, was an action on a bond to pay money to guardians. Judgment had been entered on the bond, and interest was allowed on the revival of it, because a judgment bears interest by express statute.

There is a greater difference in the amount which may be recovered in an action against a person for a debt due by him, and in an action on a bond given by him for the payment of the debt. This is shown in the case of the New Holland Turnpike Co. v. Lancaster Co., 71 Pa. 442, in which the turnpike company had given a bond for $4,000 conditioned to pay one third of the cost of building a county bridge. The bridge cost $16,500; the company was sued on its covenant to pay one third thereof, and a verdict and judgment entered against it for $5,500. The Court, SHARSWOOD, J., said: "It is to be observed that this is not an action of debt to recover the penalty, but of covenant on the agreement, of which the bond is evidence. It is not a mere bond in a penalty, on a condition to be void upon doing or not doing a collateral act, either by the obligor or a third party. Such is the usual case in official bonds with sureties, conditioned for the faithful performance of the duties of some office, or for accounting for money, or an ordinary private bond of indemnity, by sureties. In such cases it may be conceded that the penalty of the bond is the limit of liability on the instrument itself." In the case of U.S. v. Curtis, 100 U.S. 119, it was decided that interest on the amount claimed from the sureties of a paymaster was recoverable from the time of demand or notice, which in that case was the service of the writ. To the same effect is U.S. v. Poulson, 19 W.N.C. 500, a suit on the bond of a pension agent; Legget v. Humphreys, 21 Howard, 66, against the sureties on a sheriff's bond; U.S. v. Broadhead, 127 U.S. 212, on a bail bond on a criminal charge; Mower v. Kip, 6 Paige's Chan. 88; State v. Blankemore, 7 Heiskell (Tenn.), 638; Wetherill v. Com., 17 W.N.C. 104.

In order to provide ample security it is usual to require the bond to be made in double the amount of the fund to be paid to the committee or other person whose fidelity is intended to be insured, and if a less amount is required the surety ought not to be held to bear the consequences. The present practice in cases in which municipal or other corporations take land for public use is to take a covenant to pay the damages without naming any penalty.

It is well to observe that suit cannot be commenced or demand made upon a surety without first proceeding against the principal and fixing his liability: Com. v. Stub, 11 Pa. 150; and that the report of an auditor, confirmed by the court, is a sufficient foundation for a demand or action against a surety: Boyd v. Com., 36 Pa. 355. The surety is responsible for interest, not from the date of the defalcation by the principal, but from the time when demand may be and has been made on him.

We are of opinion that the defendant is liable for the interest only from the time of demand made upon him, to wit: October 18, 1897.

Error assigned was in entering judgment for plaintiff, with interest only from October 18, 1897.

Judgment affirmed.

John G. Johnson, for appellant. -- The case will present no difficulty if three well-settled principles of law in this state are kept in mind, viz:

1. When once the principal has actually committed a default, for which the surety is responsible, a cause of action immediately arises against the surety.

2. The measure of the surety's liability for such breach is the loss sustained by the creditor through the default of the principal debtor not exceeding the penalty of the bond.

3. The rule that judgment cannot be entered for more than the penalty has been repudiated in...