School Dist. of St. Joseph v. Security Bank of St. Joseph

• Decision Date: 07 April 1930
• Docket Number: 28422
• Parties: School District of St. Joseph v. Security Bank of St Joseph et al.; R. I. Bilby, James E. Strickler and Frank Frogge, Appellants
• Court: Missouri Supreme Court

26 S.W.2d 785

325 Mo. 1

School District of St. Joseph v. Security Bank of St Joseph et al.;

R. I. Bilby, James E. Strickler and Frank Frogge, Appellants

No. 28422

Supreme Court of Missouri

April 7, 1930

Rehearing Overruled April 7, 1930.

Appeal from Clay Circuit Court; Hon. Ralph Hughes, Judge.

Affirmed.

K D. Cross, M. E. Ford and Easton & McNeely for appellants.

(1) The first bond offered and admitted in evidence, signed by ten sureties, was dated October 28, 1925, and the second, signed by three sureties, was dated January 14, 1926. The transaction between the bank and the school board had been completed. The liability for loss had been fixed. The school board had been receiving its interest. All this was long before the execution of the bond signed by Bilby and Strickler, and even prior to the execution of the bond signed by Frogge. McFarland v. Heim, 127 Mo. 333; Williams v. Williams, 67 Mo. 661; McMahan v Geiger, 73 Mo. 145; Wilt v. Hammond, 179 Mo.App. 114; Hunter Land Co. v. Watson, 236 S.W. 670; Babst v. Ransdell, 294 S.W. 734; Allen West Co. v. Richter, 286 Mo. 691. (2) There was no consideration for the bond sued on. It also violates the inhibition of the statute. In requiring and accepting the bond, the school district attempted to become, as obligee therein, a party to (a) a contract not expressly authorized by law, for the statute, Secs. 11449, 11450, expressly requires a bond before the deposit is made, and (b) a contract not based upon a consideration wholly to be performed or executed subsequent to the making thereof. Sec. 2164, R. S. 1919. A contract so violating the statute is void in toto. Morrow v. Pike County, 189 Mo. 624. (3) The rule "strictissimi juris" must be applied, for sureties (especially personal sureties as distinguished from bonding companies) are "favorites of the law," and their obligation will be strictly construed and will not be enlarged or extended beyond the letter of the law. 32 Cyc. 73; 21 R. C. L. 799; State ex rel. v. Smith, 173 Mo. 407. "There is no equity against sureties." Trust Co. v. Tindle, 272 Mo. 699. (4) The security bank forfeited its bid and the money accompanying it by failing to give the required bond within ten days after notice of the acceptance of its bid. Secs. 11449, 11450, R. S. 1919. The bid of the Surety Bank was put in and accepted on August 10, 1925. The bank was notified of the acceptance of its bid on August 17, 1925. The ten days prescribed by Section 11449 expired not later than the 28th of August. No action was taken in compliance with the statute upon the failure of the bank to make the bond. On the contrary, the money remained in the depositary, three-eighths until September 2, 1925, when one-eighth was withdrawn, two-eighths until October 12, 1925, and thereafter one-eighth continuously until the close of the bank. The bank was, therefore, not a depositary under the regulations prescribed by the statute. The only conditions under which the deposit was held were those fixed by the parties acting independently of the regulations prescribed by statute. The money was not deposited on the faith of the bond. It had long been in the possession of the bank when the first bond was given on October 28th, and much longer when the second bond was given on January 14, 1926. The bonds were not given pursuant to any former promise or obligation to make a bond. There is no proof of any such promise, and since the statute was disregarded, the provisions of the statute cannot be read into the transaction. (5) Even if there had been an agreement to give a bond at the time the bid was made and accepted the delay in giving the bond was so great that the surety is not bound. Sawyer v. Fernald, 59 Me. 500. (6) The bond dated October 28, 1925, was in fact delivered and acted upon before the second bond was executed and, in such cases, although no acceptance is shown by the minutes of the board, it will be presumed to have been accepted. 4 R. C. L. 48, sec. 5. (7) This record contains no evidence that the deposit bid for was in the bank under a promise or agreement that an additional bond was to be furnished, and so there is nothing to bring this case under the exception. That, in such cases, no new consideration is necessary to support a second and subsequent bond. Montgomery County v. Auchley, 92 Mo. 126; Fullerton Lumber Co. v. Calhoun, 89 Mo.App. 209; Oberbeck v. Mayer, 59 Mo.App. 289. (8) Plaintiff's petition alleges "that before depositing any of said moneys in said depositary, defendants entered into and executed to the plaintiff, as sureties, a bond in the sum of one hundred thousand dollars, under and by virtue of which said defendants agreed that if the said Security Bank would safely account for all moneys," etc. There is an utter failure of proof as to such allegation of a consideration and whatever plaintiff's theory as to a consideration may now be it cannot here substitute a new theory or ask that a consideration be presumed. Allen West Com. Co. v. Richter, 286 Mo. 707; Roselle v. Beckmeir, 134 Mo. 392; Stripe v. Meffert, 287 Mo. 386; Gill v. Safe Co., 170 Mo.App. 483. (9) The two bonds, Exhibits 7 and 8, are not admissible in evidence under the pleadings. The petition counts upon a bond. The court received in evidence two bonds forming two separate causes of action. The error is obvious. (10) The recitals of the second bond do not make it retroactive as to consideration. The second bond, executed January 14, 1926, contains this provision: "This bond is supplemental to and coincident with a similar bond to the School District of St. Joseph executed by the Security Bank as principal and other sureties on October 28, 1925." This provision was inserted into this bond, apparently with the idea of doing two things, (a) making it part of the previous bond, and (b) as such, retroactive. The clause adds nothing to the bond. Its terms contradict themselves and reference must be made to the whole record to ascertain the true situation.

John C. Landis, Jr., and John C. Landis, III., for respondent.

(1) The relation between plaintiff, the school district, and the Security State Bank, the depositary of school funds, is that of debtor and creditor. Henry County v. Salmon, 201 Mo. 136; Brown v. Board of Commissioners (Kan.), 50 P. 888; Board of Commis sioners v. Am. Loan & Trust Co., 78 N.W. 113. (2) The sureties on the depositary bond stand sponsor for the faithful performance of the contract of the debtor, that is the bank, and when the debtor fails or refuses to pay, the sureties are liable. Henry County v. Salmon, 201 Mo. 136; U.S. Fidelity & Guaranty Co. v. Kansas, 81 Kan. 660; Talley v. State, 121 Ark. 41, 181 S.W. 330; Equitable Ins. Co. v. Board of Finance (Ind.), 117 N.E. 860. (3) The school district was under no legal obligation to exhaust its remedies against the principal, and even if its failure so to do was detrimental to the sureties and caused loss to the sureties, this fact, if it be a fact, is not available as a defense to the sureties on the bond. Carr v. Curd, 34 Mo. 513; Burge v. Duden, 195 Mo.App. 8; Roberts v. Jeffries, 80 Mo. 115. (4) Exhibits A and B on which suit was brought. McLeary v. Babcock, 169 Ind. 228. (5) The purpose of the giving of the depositary bond is for the benefit of the public and not for the sureties. Henry County v. Salmon, 201 Mo. 136, 153. (6) Statutes affecting the function, powers, duties and acts of school districts are not to be strictly construed and the reference as to time was directory and not mandatory. St. Louis County v. Sparks, 10 Mo. 122; State ex. inf. Carnahan v. Jones, 266 Mo. 191; State ex rel. Fleener v. Consolidated School Dist., 238 S.W. 819; State v. Bird, 244 S.W. 938; State ex inf. Simral v. Clardy, 267 Mo. 361; State ex inf. Gentry v. Lamar, 291 S.W. 467. (7) The bond was a valid and binding obligation on the defendants. (a) Appellants by failing to deny under oath the execution of the bond sued on confessed the execution thereof. Sec. 1414, R. S. 1919. (b) Execution being admitted, consideration is presumed and no evidence of failure of consideration was introduced by appellants. Sec. 2160, R. S. 1919. (c) A consideration is not by the common law necessary to the validity of a bond. Holdridge v. Allin, 1 Am. Dec. 63; Dorr v. Munsell, 13 Johns. 430. (d) A deposit of money in a bank is sufficient consideration to sustain the bond given by the bank for the payment of checks, drafts, etc., drawn against such deposit. Comstock v. Gage, 91 Ill. 328. (e) The letting of a contract to a person under condition that he should give a bond with sureties for its faithful performance forms a sufficient consideration to sustain the bond and the fact that the bond is not given until after the consideration passed does not make the bond without consideration. Smith v. Moleson, 148 N.Y. 241, 42 N.Y. 669; 26 N.Y.S. 653. (f) It is not necessary that the promisor should be benefited by the consideration. A benefit to a third person is sufficient. Robertson v. Findley, 31 Mo. 384; Fuller v. Dry Goods Co., 189 Mo.App. 514; Strode v. Transit Co., 197 Mo. 616; Green v. Higham, 161 Mo. 333; 13 C. J. 325. (8) All of the defendants signing the two obligations were co-sureties, whether the two written obligations were one bond or two bonds executed at different dates. 32 Cyc. 17; Weeds Sewing Machine Co. v. Maxwell, 63 Mo. 486; Peoples Lumber Co. v. Gillard, 136 Cal. 55.

Henwood, C. Davis and Cooley, CC., concur.

OPINION

HENWOOD

The plaintiff school district filed this suit, in the Circuit Court of Buchanan County, against the defendant bank as principal, and the defendants R. I. Bilby, James E. Strickler, Frank Frogge and nine other defendants, as sureties, on the bond of the bank, commonly known as a depositary's bond, in...