United States Fidelity & Guaranty Co. of Baltimore, Md., v. U.S.

• Decision Date: 04 February 1907
• Citation: 150 F. 550
• Parties: UNITED STATES FIDELITY & GUARANTY CO. OF BALTIMORE, MD., v. UNITED STATES.
• Court: U.S. Court of Appeals — Ninth Circuit

150 F. 550

UNITED STATES FIDELITY & GUARANTY CO. OF BALTIMORE, MD., v. UNITED STATES.

United States Court of Appeals, Ninth Circuit.

February 4, 1907

M. S Gunn, for plaintiff in error.

Carl Rasch, U.S. Atty.

Before GILBERT, ROSS, and MORROW, Circuit Judges.

GILBERT Circuit Judge, after stating the case as above, .

The undertaking of the surety was that the principal should at all times 'honestly account without fraud or delay' for all public moneys and property coming into his hands as such agent. Under section 8 of the act of July 4, 1884 (23 Stat. 97, c. 180), the presentation of vouchers, accounts and claims, containing material misrepresentations of fact in regard to the amounts due and paid, was not an accounting. The statute vested the accounting officers with no discretion as to such vouchers. It made it their plain duty to reject them. The law as to accounting, not having been complied with, the matter was left as if no account whatever had been rendered. The plaintiff in error contends that the rejection of an account upon the grounds set forth in the act is the imposition of a penalty, and that the decision of the court below requires the plaintiff in error to pay the sum of $10,489.50 upon a rejected account; whereas the actual loss to the United States did not exceed $2,000 and cites the rule that the measure of damages to which the surety on an official bond is bound, in the absence of any statutory rule is just compensation for the injury actually sustained.

The rejection of an account in compliance with the expressed language of the statute is not the imposition of a penalty. It is but the enforcement of a statutory rule of accounting. Nor is the present action an action to recover a penalty. It is an action to enforce a liability arising out of contract. Section 3624 of the Revised Statutes (U.S. Comp. St. 1901, p. 2418) provides as follows:

'Whenever any person accountable for public money neglects or refuses to pay into the Treasury the sum or balance reported to be due to the United States, upon the adjustment of his accounts the first Comptroller of the Treasury shall institute suit for recovery of the same.'

Every one who becomes surety for an Indian agent, enters into his contract of suretyship with a view to the statutes which may affect his liability, the provisions of which he is presumed to know, and which become as much a part of his contract as if they were embodied in the bond. Smythe v. United States, 188 U.S. 177, 23 Sup.Ct. 279, 47 L.Ed. 425; Alexander v. United States, 57 F. 832; 6 C.C.A. 602; Pond v. United States, 111 F. 995, 49 C.C.A. 582. The plaintiff in error finds argument in support of his contention in the language of the act itself, wherein, after providing for the rejection of false and fraudulent claims and vouchers, the words are added: 'That the foregoing shall be in addition to the penalties now prescribed by law,' and reasons that from the use of these words Congress considered the section as penal in its character. The words so used do not justify that inference. The statute does not say that the foregoing shall be in addition to other penalties. It says, in effect, that the indebtedness resulting from the rejection of such accounts shall not take the place of or affect the penalties which have been prescribed by law, in punishment of malfeasance in office. It treats the obligation to pay as a debt due the United States. The act in express terms provides that the amount due shall be recovered 'in the same manner as other debts due the United States are collected. ' The answer admits that each of the vouchers, accounts, and claims, amounting in the aggregate to $10,489.50, was subject to objection, for the reason that it contained false items, but alleges that the false items amounted in all to no more than $2,000. If that was the extent of the falsification of the vouchers by the Indian agent, he had his plain remedy by presenting true vouchers as to all matters in the account for which he was justly entitled to credit. As early as March 9, 1903, he was notified of the rejection of his account, and the reason therefor, and, between that date and the commencement of the suit, he had five months within which to file corrected vouchers. This he failed to do, and neither he nor his surety can complain of the rejection of the whole account. It is a natural conclusion, but one that is not essential to support the judgment herein, that the whole of the account was fraudulent.

It is contended that the affirmative defense shows that the bond was extorted from the Indian agent under color and pretense of law, and under color of the office of the Secretary of the Interior, and is therefore void and of no effect. The defense, as pleaded, falls short of showing that any influence or pressure was brought to bear upon the agent or his surety to induce the execution of the bond, or that either he or the surety objected to the form of the bond as prepared, or executed the same under protest. In United States v. Hodson, 10 Wall. 395, 19 L.Ed. 937, it was held that if a bond is open to objection, the objection should be made when the bond is presented for execution; that if executed under constraint, the constraint will render it void; but that, where it is voluntarily entered into, and the principal enjoys the benefit which it is intended to secure and a breach occurs, it is too late to raise the question of its validity. But the plaintiff in error contends that the only condition in an Indian agent's bond, authorized by law is that provided by section 4 of the act of June 30 1834, c. 162, 4 Stat. 735, which requires the agent to give a bond 'with two or...