The United States Fidelity & Guaranty Co. v. Poetker
| Decision Date | 24 June 1913 |
| Docket Number | 21,527 |
| Citation | 102 N.E. 372,180 Ind. 255 |
| Parties | The United States Fidelity and Guaranty Company et al. v. Poetker, Receiver |
| Court | Indiana Supreme Court |
Rehearing Denied October 15, 1913.
From Pike Circuit Court; J. H. Miller, Special Judge.
Action by Fred H. Poetker, receiver of the Peoples State Bank of Huntingburg, Indiana, against The United States Fidelity and Guaranty Company of Baltimore, Maryland, and another. From a judgment for plaintiff, the defendants appeal.
Affirmed.
Charles Martindale, for appellants.
Leo H Fisher, Robert W. Armstrong, E. A. Ely, Roby & Watson and Salsbury & Esarey, for appellee.
Appellee as receiver of the Peoples State Bank of Huntingburg Indiana, sued Charles Behrens, as principal, and the United States Fidelity and Guaranty Company of Baltimore, Maryland, as surety, to recover for a breach of the official bond of Behrens as cashier of the bank. A trial by jury resulted in a verdict against both defendants for the full penalty of the bond together with interest for delay in payment after demand, amounting in all to $ 28,500. From a judgment on this verdict the surety company appeals and presents numerous specifications of alleged errors in support of its claim that the judgment as to it is erroneous.
The Peoples State Bank was a banking corporation organized under the laws of this State and appellant was a foreign surety company which qualified and had been authorized to transact business in this State. It appears from the application for the bond that Behrens at that time was and had been cashier of the bank; that he had theretofore given a personal bond; that he had been ordered by the board of directors to procure a surety company bond; that his application was for a surety bond of $ 25,000 as cashier of the Peoples State Bank of Huntingburg, Indiana. The president of the bank was required in the application to answer numerous questions which answers the application stated were to be the basis of the bond applied for and renewals thereof. The bond was issued for a premium of $ 62.50 from March 1, 1902 to March 1, 1903, and provided that the representations and promises relative to the duties and accounts of the employe and other matters contained in the application and any subsequent representations or promises of the employer, thereafter required or lodged with the company, should constitute part of the basis and consideration of the contract. It was then provided: "That for the consideration of the premises, the company shall, during the term above mentioned or any substantial renewal of such term, and subject to the conditions and provisions herein contained, at the expiration of three months next, after proofs satisfactory to the company, as hereinafter mentioned, make good and reimburse to the said employer such pecuniary loss as may be sustained by the employer by reason of the fraud or dishonesty of the said employee in connection with the duties of his office or position, amounting to embezzlement or larceny and which shall have been committed during the continuance of said term, or of any renewal thereof, and discovered during said continuance or of any renewal thereof or within six months thereafter, or within six months from the death or dismissal or retirement of said employee from the service of the employer within the period of this bond whichever of these events shall first happen; the company's total liability on account of said employee under this bond or any renewal thereof, not to exceed the sum of twenty-five thousand dollars."
Following this, the prime condition of the bond, there follow many provisos tending to limit and guard the liability of the surety, requiring the employer to give notice to the surety, "at the earliest practical moment" of the "discovery of any act capable of giving rise to a claim hereunder"; requiring the claim for loss to be in writing; providing that any wilful misstatement or suppression of fact in any claim should render the bond void from the beginning; that it should have a right to ratable contribution with cosureties; that it should have a right to rescind under certain conditions and escape liability for subsequent acts of the cashier; that no suit should be brought on the bond for any loss after twelve months from the discovery of the loss; and numerous other provisions for the purpose of qualifying and avoiding liability. Following these there is a provision that none of the conditions or provisions of the bond shall be deemed waived unless such waiver is clearly expressed in writing; and a covenant on the part of the principal to save the surety harmless. The bond was signed by the principal and surety and accepted and approved in writing by the directors of the bank, and was subsequently filed in the office of the Secretary of State as required by law. Behrens continued as cashier and the bond was renewed annually for the years 1903, 1904, 1905 and 1906, and during this period of time there was lost to the bank through the unfaithfulness of Behrens in the discharge of his duties as cashier a sum far in excess of the penalty of the bond, and this resulted in its insolvency.
In the main the questions raised by appellant surety company are based upon the assumption that the bond which it executed for Behrens to secure to the bank the faithful discharge of his duties as its cashier is a common-law undertaking and that a recovery on it can be sustained only according to the numerous and intricate provisions and conditions contained in it, and the written application for it.
In behalf of appellee it is claimed that the bond must be held to be a statutory official bond legally of a character and with such conditions only as the statute provides. It must fairly follow, therefore, that if this underlying question is determined favorably to the contention of appellee most of the questions presented by appellant become immaterial and require no consideration.
It has been held by this court that State v. Richcreek (1906), 167 Ind. 217, 222, 77 N.E. 1085, 1086, 5 L. R. A. (N. S.) 874, 119 Am. St. 491, 10 Ann. Cas. 899.
In the exercise of this governmental power the General Assembly has enacted the following provision affecting banks organized under the laws of the State: * * *" § 3331 Burns 1908, § 2686 R. S. 1881, Acts 1873 p. 21, § 3. It will be noted that while this statute leaves the amount of the bond to be fixed at the discretion of the board of directors it is mandatory upon them to exact a bond from each of the officers named, and by its terms states the simple condition upon which it must be given in clear and unmistakable words, namely, that the officer will honestly and faithfully discharge his duties as such officer during his continuance in office.
Such a plain and simple obligation with the broad and comprehensive condition the statute requires, and one less direct and less burdensome for the surety does not satisfy it. A bond such as the one given in this instance, which is manifestly prepared with studied care to avoid all liability on the part of the surety, except such as might grow out of a loss that might occur to the one to whom the bond was given, even after he had exercised that close and relentless vigilance which makes stealing well-nigh impossible, certainly does not fulfill the requirements of the statute.
A bond of the character of the first named, appellant was authorized, by the provisions of our laws relating to surety companies, to execute in compliance with § 3331 supra, but not so one of the latter class. It is provided by § 1 of the act of 1897 (Acts 1897 p. 192, § 5728 Burns 1908), "That whenever any bond, undertaking, recognizance or other obligation is by any law of the state of Indiana, or the charter, ordinances, rules or regulations of any municipality, city government, common council, board of county commissioners, and savings bank, state bank or private bank, * * * required or permitted to be made, given, tendered or filed with surety or sureties * * *, such bond, undertaking, obligation, recognizance or guarantee may be executed by a company qualified to act as such surety or guarantor * * *; and such execution by such company of such bond, undertaking, obligation, recognizance, or guarantee shall be in all respects a full and complete compliance with every requirement...
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