The County of Dickey v. Gesme

• Decision Date: 24 July 1924
• Citation: 199 N.W. 873,51 N.D. 272
• Court: North Dakota Supreme Court

199 N.W. 873

51 N.D. 272

THE COUNTY OF DICKEY IN THE STATE OF NORTH DAKOTA, a Municipal Corporation, Respondent, v. CHARLES L. GESME, Christ Bollinger and P. P. Moe, Appellants

Supreme Court of North Dakota

July 24, 1924

In District Court, Dickey County, Wolfe, J.

Action upon a depositary bond.

Defendants have appealed from a judgment in plaintiff's favor.

Affirmed.

F. J Graham and Jas. M. Austin, for appellants.

"Parties to the contract. It requires three parties to make a contract of person suretyship, (a) the one for whose account the contract is made, whose debt or default is the subject of the transaction, and who is called the principal; (b) the one to whom the debt or obligation runs, the obligee in suretyship called the creditor; (c) the one who agrees that the debt or obligation running from the principal to the creditor shall be performed, and who undertakes on his own part to perform it, called the promisor." Stearns, Suretyship, 3d ed § 5.

It also seems to be the general rule that a bond will be a nullity unless the obligee is named there. There must be a certainty as to the person to whom the obligation runs. Even proof of a delivery to a particular person, is not sufficient to supply the deficiency. Stearns, Suretyship § 121; Garrett v. Shove, 15 R. I. 538, 9 A. 901; Sacra v. Hudson, 59 Tex. 207; Preston v. Hull, 23 Gratt. 600; Pelham v. Grigg, 4 Ark. 141; People v. Pacific Surety Co. 50 Colo. 273, 109 P. 961, Ann. Cas. 1912C, 577.

The general rule is, that a bond must contain at least two parties--the obligor and the obligee--and a bond which does not contain the name of an obligee is void. Ann. Cas. 1912C, 578.

To constitute a valid administrator's bond, some person or officer must be named therein as obligee.

A writing purporting to be an administrator's bond, signed by principal and sureties, approved and filed by the probate court, in which no person or officer is named as obligee, is neither a statutory nor a common-law bond; it is simply a promise in writing made to no one, and is void. Tidball v. Young, 78 N.W. 507.

It seems, however, that if the surety signs by reason of the fraud of the principal as to the nature of the instrument of guaranty, he will be bound to the creditor only where his want of ordinary care and prudence made the deception possible. Spencer, Suretyship & Guaranty, § 55, p. 76; Page v. Krekey, 137 N.Y. 307, 21 L.R.A. 409, 33 Am. St. Rep. 731, 33 N.E. 311, and Walker v. Elbert, 9 Am. Rep. 548 and note thereto, 29 Wis. 194.

A depositary's bond is not binding until approved by the proper authority, but the approval of the majority of the officials named in the statute is sufficient where all have acted or been notified of the contemplated action. Notice of the acceptance of the security is not necessary where the undertaking recites a consideration, although that consideration is merely nominal. But no acceptance of a bond to take the place of a former one can be inferred where the proper officer, while diligently inquiring into the responsibility of the proposed sureties, learns, after the lapse of a few days, of the insolvency of the depositary. 18 C. J. p. 586, § 58 d, Approval and Acceptance.

T. L. Brouillard, and Lawrence, Murphy & Niles, for respondent.

Sureties in a revenue bond cannot defeat a recovery on the ground that they did not intend to be bound unless another shared the responsibility; where they did not inform the revenue officer of this condition, their omission to do so estop them from setting it up. Dair v. United States, 31 L.Ed. 491.

But the courts are now well-nigh unanimous that, if a surety clothes his principal with apparent authority to deliver a bond bearing no indication on its face that others are to sign it, and it is delivered to the obligee, and acted upon by him without notice of any condition, the surety is bound. Belden v. Hurlbut, 94 Wis. 562, 37 L.R.A. 855.

"That one who signs a bond, as surety, upon the assurance of his principal that he shall also have other responsible cosureties, which are never procured, and the bond nevertheless delivered is deceived and defrauded of his indemnity, no one can question. But whether he shall himself bear the loss, or visit it upon the obligee, is quite a different question. And it seems to us, upon principle, that where there is nothing upon the face of the paper indicating that other cosureties were expected to become parties to the instrument, and no fact brought to the knowledge of the obligee before he accepts the instrument calculated to put him on his guard in regard to that point, and which would naturally have led a prudent man, interested in the opposite direction, to have made inquiry before accepting the security, the fault cannot be said to rest to any extent upon the obligee." King County v. Ferry (Wash.) 19 L.R.A. 500-505.

A bond of an officer, which is presented to a county board, and approved by it, binds all parties who signed as sureties, notwithstanding that they may have signed the instrument conditionally, if the bond is perfect on its face, and the board possessed no notice of the conditional signing, and there was nothing to raise the duty of inquiry as to the manner of the execution of the bond.

The knowledge of one member of a county board, at the time of its approval by them, and of the conditional signing of a county treasurer's bond by the sureties, not shown to have been imparted to the board, is not knowledge of nor notice to the board of such fact. Stoner v. Keith County (Neb.) 67 N.W. 312.

If a creditor accepts a contract upon which there is one surety, he cannot be deprived of his security because the surety signed upon the condition, expressed to the principal alone, that the obligation should not be delivered until another had signed as cosurety. The estoppel against the promissory is clear; he should not be heard to assert a defense which works an injury to another, and which is based upon his own neglect in failing to communicate the condition to the creditor. Stearns, Suretyship 2d ed. pp. 159, 160.

And the burden of proof of notice to the obligee, as well as of a conditional delivery of the bond, rests with the surety alleging it. Gibbs v. Johnson, 63 Mich. 671; Choteau v. Suydam, 21 N.Y. 179.

And the plaintiff makes his case by proving the execution of the bond and introducing it in evidence. Gibbs v. Johnson, 63 Mich. 671.

And the burden rests with the party who has signed and delivered an instrument to establish that the delivery was intended to be in escrow, and that it was conditional upon other persons also executing it. Choteau v. Suydam, 21 N.Y. 179; Benton Co. Sav. Bank v. Boddiker, 45 L.R.A. 329.

The sureties can make no defense that could not be made by their principal, as is said in Patterson's Appeal, 48 Pa. 345. "The measure of his responsibility is the measure of theirs." And in McCabe v. Rainey, 32 Ind. 309, it is said: "Any act of the principal which estops him from setting up a defense personal to himself, operates equally against his surety." See also Seaver v. Young, 16 Vt. 658, and Charles v. Haskins, 14 Iowa 471; Boone Co. v. Jones, 2 N.W. 995.

When an action is brought against sureties on a bond or undertaking given in an action or upon appeal, the validity and force of the instrument depend upon its efficacy in performing the office of accomplishing the end or result contemplated by the parties at the time it was given. To same effect Carter v. Hodge, 5 Misc. 575; Hathaway v. Davis, 33 Cal. 161; Gardner v. Donnelly, 86 Cal. 367; Hanna v. Savage, 8 Wash. 432; Healy v. Newton, 96 Mich. 228; Moffat v. Greenwalt, 90 Cal. 368; Buchanan v. Mulligan, 125 Ind. 332; Hester v. Keith, 1 Ala. 316. Judge Elliott, in his work on Appellate Procedure, says: "Weight is attached,--justly as we believe,--by the better considered cases, to the fact that the bond has yielded the principal obligor beneficial consideration." Braithwaite v. Jordan, 5 N.D. 196, 31 L.R.A. 255.

Failure to approve a bond does not constitute a defense to the surety. Boone Co. v. Jones, 54 Iowa 699, 2 N.W. 987; Trustees v. Sheik, 119 Ill. 579, 8 N.E. 189; Mowbray v. State, 88 Ind. 324; Young v. State, 7 Gill & J. (Md.) 253; People v. Huson, 78 Cal. 154, 20 P. 369; Paxton v. State, 59 Neb. 460, 81 N.W. 383; Ramsey v. People, 197 Ill. 572, 64 N.E. 549; Deer Lodge County v. United States F. & G. Co. 42 Mont. 315, 112 P. 1060; Stearns, Suretyship, 3d ed. p. 248.

It is also claimed that there was no evidence of the filing of the bond, and hence no proof of its delivery to and acceptance by the board. But, as we have seen, the pleadings admitted its delivery, and there was, at least, an informal approval of it. Under these circumstances we think it must be held that the bond was accepted by the board, and became obligatory on its makers, even without an indorsement of filing. People v. Huson, 20 P. 371.

An official bond which is delivered to and informally approved by the board required to approve it, is accepted, and becomes obligatory without an indorsement of filing. Ibid.

A bond given under the statute by a bank as security for county funds deposited with it, which obligates it to "pay any and all deposits of the country which may be so deposited with it," is security for the current amounts due the country from the date of its taking effect, whether arising from deposits made after or before its acceptance. Brown v. Wyandotte County, 50 P. 888.

BRONSON, Ch. J. CHRISTIANSON, JOHNSON, BIRDZELL, and NUESSLE, JJ., concur.

OPINION

Statement.

BRONSON Ch. J.

This is an action to recover upon a depositary bond. Defendants have appealed from a judgment entered upon a verdict in plaintiff's favor. The material facts are:--Defendants were...