Wait v. Homestead Bldg. Ass'n
| Decision Date | 01 June 1915 |
| Docket Number | 2698. |
| Citation | 85 S.E. 637,76 W.Va. 431 |
| Parties | WAIT v. HOMESTEAD BUILDING ASS'N ET AL. |
| Court | West Virginia Supreme Court |
Submitted January 27, 1915.
Syllabus by the Court.
The fidelity bond of an officer or agent of a private corporation, conditioned generally for faithful performance of the duties of his office or employment, is construed to cover defaults in such duties as are annexed to the office or employment at the time of the execution thereof and such additional ones as shall be subsequently annexed to it in the exercise of corporate power.
The sureties are deemed to have known such additional duties could and might be annexed, and to have contracted with reference thereto.
Interpretation of an ambiguous by-law of a private corporation is a function within the province and power of the board of directors, and in so far as such power affects the liability of the sureties of an officer or agent of the corporation, they are deemed to have been cognizant of it, and to have contracted with reference thereto.
No formality is essential to the devolution of power or authority upon a corporate officer by the board of directors or to their construction of an ambiguous by-law. Such results may arise from conduct and methods of transacting business.
By-laws of a building association requiring weekly meetings of the board of directors for the purpose of receiving dues and other demands from the stockholders and attendance of the treasurer thereat, but not expressly inhibiting him from receiving dues at other times and places, is ambiguous and subject to construction by the directors and officers of the corporation.
The authority of the treasurer of an association operating under such a by-law to receive dues, premiums, interest, and fines for and on its behalf, at times and places other than those of the weekly meetings, is established by proof of his having done so for a long period of time, with the knowledge and acquiescence of the board of directors.
Mere constructive notice to a corporation of a default on the part of an officer or employé imposes no duty upon it to give notice thereof to his sureties or dismiss him from its service. Nor does such notice impose duty to make the default known to persons who are about to become his sureties in a subsequent bond.
Admission of a shortage by the treasurer of a corporation to directors and other officers thereof, accompanied by an explanation exculpating him from personal fault and dishonesty, and followed by his representation that he had fully made it good, is not sufficient to prove the directors and officers had reason to believe the treasurer fraudulently procured persons to become his sureties in bonds subsequently given by him to guarantee faithful performance of his prospective duties as such treasurer.
A settlement of such default is not inferrable from mere payments on account thereof and representation by the defaulting officer that he had fully made up the shortage.
A loan of money to the defaulting officer, secured by a deed of trust and credited on his shortage, is not an extension of time releasing the sureties in his bonds.
Bonds given annually by a corporation officer annually elected and conditioned for faithful performance of duty during the term and until the election and qualification of a successor hold only during the terms and for reasonable times thereafter.
It is not error to dismiss out of a suit to wind up a corporation and enforce liability of the sureties of the treasurer the settlement of the accounts of the trustees in an assignment made by the treasurer for the benefit of his creditors.
A demurrer to so much of a bill as applies to a bond, liability on which is barred by the statute of limitations, is properly sustained.
Appeal from Circuit Court, Wood County.
Suit by Bettie C. Wait, executrix, etc., against the Homestead Building Association and others. From decree for plaintiff the defendant Union Trust & Deposit Company appeals. Reversed in part and remanded.
F. P. Moats, of Parkersburg, for appellant.
V. B. Archer, of Parkersburg, for appellee Bettie C. Wait.
Reese Blizzard, of Parkersburg, for appellee J. T. Peadro.
William Beard, of Parkersburg, for appellee Abram Smith.
W. M. Straus, of Parkersburg, for appellees Straus and Smith.
The complainant on this appeal is the special receiver appointed in the cause of Lamp v. Homestead Building Association, instituted under the circumstances and for the purposes disclosed in the opinion of this court, filed on the appeal in that cause, and reported in 62 W.Va. 56, 57 S.E. 249. The decree complained of now was made and entered in the cause of W. H. Wolfe v. Homestead Building Association et al., the purpose of which was the relief of said Wolfe as surety on several bonds given by Fischer as treasurer of the association. With leave of the court, the special receiver intervened in that suit and filed an answer and cross-bill, for the purpose of holding Fischer and his sureties to alleged liabilities for defalcations on his part, amounting to something like $70,000. By elaborate pleadings which it is unnecessary to set forth in detail the issues just indicated were fully developed, and a great deal of testimony taken. Pending this suit Wolfe died testate, and Bettie C. Wait was appointed the executrix of his will. Fischer made an assignment for the benefit of his creditors to W. M. Straus and Abram Smith, trustees. He afterwards died, and J. T. Peadro qualified as the executor of his will. Straus and Smith were sureties in some of the bonds as well as trustees in the assignment. The decree appealed from relieves the estate of Wolfe and the other sureties from liability on the five bonds, each in the penalty of $10,000, and perpetuates an injunction restraining and inhibiting the defendants from prosecuting any suit or suits against him or his estate on said bonds, and, according to Fisher, his trustees and executors, the benefit of the statute of limitations denies all relief against them.
As will appear by reference to the opinion in Lamp v. Building Association, the Homestead Building Association was organized in 1874, and did business until early in the year 1905. In January of that year an auditing committee was appointed, and, upon their report, the stockholders adopted a resolution to discontinue the association and surrender its charter and franchises. They also adopted a resolution appointing the Commercial Banking & Trust Company trustee for the purpose of winding up its affairs under the orders and direction of the board of directors then in office. The occasion of the dissolution was the revelation of insolvency of the association due to the alleged defalcations of the treasurer.
The fidelity bonds given by Fischer were dated, respectively, June 29, 1894, May 27, 1895, August 16, 1898, June 2, 1899, and July 12, 1900. Another bond alleged to have been given by him in June, 1896, has not been established by the evidence, and it is not disclosed that any bond was given in 1897. One of the grounds upon which the trial court absolved the sureties from liability, receipt of money from stockholders at Fischer's private place of business, his shoe store, and at times other than the dates of the meetings of the board of directors, relieves as to all of them, if good as to any, for this practice obtained throughout the whole period of his service as treasurer. This defense is founded upon the rule requiring strict construction of the contract of suretyship in favor of the surety; the by-laws of the association, prescribing the duties of the treasurer, being regarded as part of the contracts. They made it his duty to "receive all moneys as soon as paid into the association," giving proper receipts therefor, "pay all orders drawn on him" and signed by prescribed officers, deposit the moneys received by him in some bank in Parkersburg, W. Va., and be present at all meetings of the board of directors. They further prescribed stated meetings of the board of directors to be held each week, at such place as they should appoint, "for the purpose of receiving from the stockholders their weekly dues, interest, premiums, fines, etc." The condition of each of the bonds was that the treasurer should "well and truly perform the duties of the said office of treasurer of said association during his term of office or until his successor be duly elected and qualified," and "well and truly comply with the laws and constitution of the said association" in that behalf made and provided. All were made payable to the association by its corporate name.
That the building association itself is not liable to stockholders for dues paid to its treasurer or other collecting agent, at a place other than that prescribed by the by-laws, is the expressed opinion of some of the courts. Morrow v. James 4 Mackey (D. C.) 59; Sachs v. Duckworth B. & L. Ass'n, 6 Ohio Dec. 254. From the digest of these cases, found in the note to Louchheim v. Building Ass'n, 3 Ann.Cas. 728, this view seems to have been carried into actual decision. Though not necessary to the disposition of the case, it was stated as a ground of the decision in Van Wagenen v. Savings Ass'n, 88 Hun (N. Y.) 43, 34 N.Y.S. 491. Lack of a provision in the by-laws inhibiting payment or receipt of dues, except at the weekly meetings, justified payment elsewhere, in an action between a stockholder and the association, in the opinion of the court in Schutte v. B. & L. Ass'n, 146 Pa. 324, 23 A. 336. The provision of the association constitution relied upon in that case was very general and indefinite in its terms, however, and the court construed it as merely fixing "the amount of the dues, and when...
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