State v. Citizens' Nat. Bank Of Philippl, C. C. No. 476.

• Decision Date: 21 November 1933
• Docket Number: C. C. No. 476.
• Citation: 171 S.E. 810
• Court: West Virginia Supreme Court
• Parties: STATE. v. CITIZENS' NAT. BANK OF PHILIPPl et al.

171 S.E. 810

STATE.

v.CITIZENS' NAT. BANK OF PHILIPPl et al.

C. C. No. 476.

Supreme Court of Appeals of West Virginia.

Nov. 21, 1933.

Syllabus by the Court.

Code 1931, 45-1-1 and 2, giving a surety the right, upon notice, to require that a creditor proceed promptly against the principal debtor, under penalty of forfeiture of the creditor's right to proceed against said surety, is limited to the protection of the sureties against any infringement of rights which the creditor or the sureties may have against the principal debtor. It was not designed to give protection to a surety against another surety.

HATCHER, J., dissenting.

Certified from Circuit Court, Kanawha County.

Action on motion for judgment by the State against the Citizens' National Bank of Philippi and others. The State's demurrer to the pleas of defendants was overruled, and the ruling certified for review.

Ruling reversed.

Homer A. Holt, Atty. Gen., and R. Dennis Steed, Asst. Atty. Gen., for the State.

Frank Lively, of Charleston, Wm. T. George. Ware & Ware, and Talbott & Talbott, all of Philippi, and Arthur S. Dayton, of Charleston, for defendants.

WOODS, Judge.

This is an action on motion for judgment of the state of West Virginia against the Citizens' National Bank of Philippi, a corporation, and sureties on a depository bond. The sole question certified is whether the pleas filed by the sureties present a defense to the action against them. The circuit court of Kanawha county overruled the state's demurrer to the pleas.

The defendant bank, on April 30, 1931, executed its bond with the usual collateral condition to the state as a depository for state funds, with E. R, Dyer, K. G. Lodge, A. G. Waddell, W. D. Zinn, R. E. Talbott, George Waddell, and H. G. Mundy, as sureties. The bank was declared insolvent on October 22, 1931. Demand was thereupon made on the principal and sureties for payment. Thereafter the state, by the Attorney General, served due notice on the principal and sureties that a motion would be made in the circuit court of Kanawha county on December 14, 1931, for a judgment against them under and by virtue of the conditions of said bond. On December 10, 1931, three of the sureties, Lodge, Zinn, and the executors of Dyer, deceased, by their attorney, H. J. Wilcox, notified the Attorney General in writing that they would resist any attempt to have the case continued (information having reached them that motion for judgment would be postponed), and insisted that it be heard as stated in the notice and judgment taken against all of said defendants on the return day, and that, in the event of the state's refusal to take judgment, they would deny liability on the bond if any of the signers of the bond should become insolvent between the said 14th day of December, 1931, and the day upon which judgment should be taken, by reason of the fact that such insolvency would increase their liability thereunder. The Attorney General, on December 12, 1931, answered that the Board of Public Works had ordered that the action be not further prosecuted, and that the case was not docketed and would not be heard on December 12, 1931. The claim, however, was not abandoned, for the present notice of motion was served on the several signers of the bond and filed in the circuit court on December 12, 1932, nearly one year after the return day of the notice to which we have heretofore referred.

The pleas, which are based on Code 1931, 45-1-1 and 2, after setting up notice and failure of the state to proceed, aver that, since the former dismissal, some of the signers of the bond as sureties have become insolvent and that the estate of Dyer had been settled up and discharged from liability by the inaction of the state.

The statute relied on provides: "§ 1. The surety, guarantor or indorser (or his committee or personal representative) of any person bound by any contract may, If a right of action has accrued thereon, require the creditor (or his committee or personal representative), by notice in writing, forthwith to institute suit thereon; and if he be bound in a bond with collateral condition or for the performance of some collateral undertaking, he shall also specify in such notice the breach of the condition or undertaking for which he requires suit to be brought.

"§ 2. If such creditor or his committee or representative shall not, within a reasonable time after such notice, institute suit against every party to such contract who is a resident In this State, and not insolvent, and prosecute the same with due diligence to judgment and by execution, he shall forfeit his right to demand of such surety, guarantor or indorser or his estate, and all his cosureties and their estates, the money due by any such contract for the payment of money, or the damages sustained by any breach of the collateral condition or undertaking specified as aforesaid. But the conditions, rights, and remedies against the principal debtor shall remain unimpaired thereby."

The Attorney General claims that the statute is limited to the protection of the sureties against any infringement of rights which the creditor or the sureties may have against the principal debtor; or, in other words, the statute gives no protection to a surety against another surety.

The letter, which the defendants claim to be a proper notice under the statute, required the state to immediately proceed. In the article on "Principal and Surety, " 50 C. J. 178, § 288, it is stated: "Under statutes giving a surety a right on general terms to compel action by the creditor by giving him written notice and discharging him from further liability on the creditor's refusal or failure to comply, insolvency of the principal at the time notice was given by the surety, or so soon thereafter as to make an action futile, or at the time the surety contract was entered into, is an excuse for creditor's noncompliance and the surety is not discharged." In accordance with this provision, it is contended that our statute gives no protection to a surety against another surety, by requiring the creditor to bring suit against the sureties, but that it is limited to a surety's requiring the creditor to bring suit against the principal debtor. It will be noted that Lodge, Zinn, and the executors of Dyer, deceased, in the letter written on their behalf, had advised the state that, in case the latter failed to proceed and any of the cosureties should become insolvent between the 14th day of December, 1931, and the day upon which judgment was actually taken, they would deny liability on the ground that they had been released by reason of the state's inaction, whereby such insolvency had been permitted.

It may be well for us to look to the history of the statute now under consideration. The original statute in the Virginias was enacted by the General Assembly of the mother state in 1794. 1 Rev. Code (1819) c. 116, § 6, p. 461. Section 8 of the chapter cited provided that sections 6 and 7 should not be construed as to...