United States Fidelity & Guaranty Co. v. Yazoo City

• Decision Date: 02 January 1918
• Docket Number: 19585
• Citation: 116 Miss. 358,77 So. 152
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. YAZOO CITY
• Court: Mississippi Supreme Court

77 So. 152

116 Miss. 358

UNITED STATES FIDELITY & GUARANTY CO. v. YAZOO CITY

No. 19585

Supreme Court of Mississippi

January 2, 1918

Division A

APPEAL from the chancery court of Yazoo county, HON. O. B. TAYLOR Chancellor.

Suit by Yazoo City against the United States Fidelity & Guaranty Company. From a decree for the city, the defendant appeals.

The facts are fully stated in the opinion of the court.

Decree reversed.

Barbour & Henry, for appellant.

It is settled law, in regard to which the authorities all agree that a surety is entitled to stand upon the strict terms of his contract; to the extent, in the manner, and under the circumstances pointed out in his obligation, he is bound, and no further. The obligation is not to be extended by implication beyond the terms of the contract, which contract is said to be strictissimi juris. Lipscomb v Postell, 38 Miss. 476; Greer v. Bush, 57 Miss 575; Hall v. Lafayette, 69 Miss. 529; Lafayette v. Hall, 68 Miss. 719; Denico v. State, 60 Miss. 949; Robinson v. State, 47 Miss. 423; State v. Felton, 59 Miss. 402.

With the proposition settled, and, in fact, conceded by opposing counsel, that the defendant surety company's liability is not to be extended by implication beyond the terms of the contract, which contract is strictissimi juris, we hardly see how it can be seriously controverted that reversal in this case must follow. McCormick, the city clerk, could only receive the money in his official capacity as clerk, as alleged in the bill, if the law imposed that duty upon him. If he received it in any other way there is no liability upon the surety. It makes no difference, that the city officials, by neglect or oversight or concurrence, permitted, knowingly, McCormick to handle the street car funds. This course of dealing could not change the law of the city, which alone fixed McCormick's official duties as clerk, and which alone is evidenced by the ordinances of the city, solemnly enacted by the city council. See People v. Pennock, 60 N.Y.App. 421, hereinafter argued at length.

With the fact clearly established by the ordinances offered by the defendant that the duty to handle the fund in question was expressly fixed by law upon Rivers, and there being no law requiring McCormick, or even authorizing McCormick, as city clerk, to handle this fund, we call the court's attention to certain conclusions of the controversy raised in this case.

The case of Orton v. City of Lincoln, 41 N.E. 159, decided by the supreme court of Illinois, is directly in point, and conclusive here. In that case, the city clerk gave bond for the faithful discharge of the duties of his office, etc. Under the ordinance, the clerk was required to collect certain license fees, not including money from dramshop licenses. By an ordinance, dramshops were required to pay a license, and they were to be paid into the city treasury. The city clerk, one Starkey, collected the dramshop fees, and defaulted. There was judgment against his official bondsmen for the shortage. The court held that the ordinance did not authorize the clerk to collect the dramshop fees, and reversed the lower court, holding there was no liability. The court said:

"A surety is only to be held by the precise terms of his undertaking. His liability is strictissimi juris and cannot be extended by construction. . . . When they understood that the principal should account and pay over all money that came to his hands by virture of his office, the intendmant was that such money as should be received by the clerk in pursuance of law, and under the ordinances of the city, in his official capacity by virture of his office, was refered to, and not such money as he might elect to accept without right, and of which some other official was the legal recipient. Appellants were not sureties for moneys which, by virtue of the ordinances of the city, should have been paid the city treasurer. The mere officiousness of the clerk in the assumption of duties, or the negligence of other officers in the discharge of their duties, cannot extend the sureties' liability beyond the terms of their undertaking."

We also call the court's attention to the cases of Van Valkenburg v. Patterson, 47 N. J. L. 146; People v. Pennock, 60 N.Y.App. 421; San Luis Obispo County v. Farnum, 41 Cal. 445; Wilson v. State (Kansas) 72 P. 517; "Brandt on Suretyship & Guaranty, Par. 451; Cressey v. Gierman et al, 7 Minn. 398; McKee v. Griffin, 66 Ala. 211; San Joes v. Welch, 65 Cal. 358; People v. Cobb (Cal.), 51 P. 325; Nolley et al v. Calloway County Court, 11 Mo. 447; People v. Pennock, 60 N.Y. 421; Saltenberry v. Loucks, 8 La. Ann. 95.

A careful consideration of the principles declared by the decisions of our own court is equally conclusive here. Beginning as early as Walker's Report, page 260, this court has announced the principle in conformity with the principles set out in the cases reviewed above. Matthews v. Montgomery, 25 Miss. 150; Furlong v. State, 58 Miss. 717; Brown v. Phillips, 6 Smedes & Marshall, 51; Brown v. Mosley, 11 Smedes & Marshall, 354; Brooks Oil Company v. Weatherford, 91 Miss. 501.

Attention is called to the text in Vol. 4 of the American & English Encyclopedia of Law, page 681. This text is an accurate and condensed statement of the substance of the repeated holdings of this court, and of the courts of various states. 25 A. & M. Encyclopedia of Law, 728. The foregoing text emphasizes the argument that the case of Brooks Oil Company v. Weatherford, 91 Miss. 501, supra, is strongly persuasive here.

We therefore respectfully submit that, in this case, as it appears without controversy that there was no authority in law for the street car superintendant, Rivers, to pay this money to the city clerk, and as it affirmatively appears without controversy, that the law imposed the duty upon Rivers to collect the money and pay it direct into the city treasury, a reversal must necessarily follow.

Holmes & Holmes, for appellee.

Counsel for appellant are mistaken in the assertion that it is conceded by us that the appellee's liability under its contract is to be strictly construed, and that its contract is strictissimi juris. On the contrary, we respectively submit that the surety company's contract under the law, as now well settled, is to be construed most favorably to the party indemnified. The overwhelming weight of authority now supports the proposition that the rule of strictissimi juris, which was in force when private persons, without fee or premium, executed bonds, is not applicable to the contracts of surety companies who become sureties for profit, and it is well settled by the weight of authority that the contracts of surety companies are now to be construed by the courts like other insurance contracts, that is most strongly in favor of the party sought to be indemnified. It is said on page 47 of Vol. 14, R. C. L., as follows: "As to the construction to be given to the provisions of an indemnity or fidelity bond given by a surety company, which differs materially from the old bond of indemnity it is well settled that where the contract has been drawn by the surety and its provisions are susceptible of more than one construction, all of which are consistent with the objects for which the contract was executed, that construction must be adopted which favors the party indemnified."

It is also said in the note on page 513, of Volume 33, L. R. A. (N. S.) as follows: "The overwhelming weight of authority supports the proposition that the rule of strictissimi juris by which the rights of uncompensated sureties are determined, is not applicable to the contract of profit; that their business is essentially that of insurance; and that therefore their rights and liabilities under their contracts will be governed by the laws of insurance."

We beg most respectfully to direct the court's attention to the theory that McCormick received the money colore officii, and that his surety is therefore liable for the misappropriation. There is practically no conflict in the authorities, and little or no doubt, that a surety on an official bond is liable for the acts of the principal done virtute officii. There is, however, some conflict in the authorities on the question of whether a surety is liable on an official bond for acts of the principal colore officii. Our own court however, has definitely and positively adopted and approved that line of authorities which holds the surety liable for the acts of the principal done colore officii. State v. McDaniels, 78 Miss, 1, Lizana et al. v. State, 69 So. 292. In Lizana et al v. State, Supra, the court in recognizing the great contrariety of opinion on this subject says, speaking through Justice COOK: "Without regard to the rule in other jurisdictions, this court has held that official acts, like the acts in the present case, are actionable."

And then quoting from State v. McDaniel, supra, he says: "What the magistrate does colore officii, his sureties are liable for.

We take it from the authorities of our own court, therefore, that if McCormick received the money colore officii, the surety is liable. Let us see, therefore, if McCormick received the money colore officii. The distinction between the two classes of acts, that is, acts virtute officii and acts colore officii, is thus stated by PRATT J., in Peoples v. Schuyler, 4 N.Y. 187:

"Acts done virtute officii are where they are within the authority of the officer, but in doing them he exercises that authority improperly, or abuses the confidence which the law reposes in him; whilst acts done colore officii are where they are of such a nature that his office gives him no authority to do them."

The particular claim of the surety company in this case is that McCormick's...